Liberty Latin America Ltd. 10-K

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS See the Glossary of defined terms at the beginning of this Annual Report on Form 10-K. The following discussion and analysis, which should be read in conjunction with our consolidated financial statements, is intended to assist in providing an understanding of our results of operations and financial condition and is organized as follows: • Overview. This section provides a general description of our business and recent events. • Results of Operations. This section provides an analysis of our results of operations for the years ended December 31, 2022 and 2021. • Liquidity and Capital Resources. This section provides an analysis of our liquidity, consolidated statements of cash flows and contractual commitments. • Critical Accounting Policies, Judgments and Estimates. This section discusses those material accounting policies that involve uncertainties and require significant judgment in their application. Unless otherwise indicated, operational data (including subscriber statistics) is presented as of December 31, 2022. A discussion regarding our financial condition and results of operations for the year ended December 31, 2021 compared with the year ended December 31, 2020 can be found under captions entitled “ Results of Operations ” and “ Liquidity and Capital Resources ” in the section entitled “ Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our annual report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022, which is available free of charge through the SEC’s website at www.sec.gov or the Company’s website, https://investors.lla.com/financials/sec-filings. The Company’s website and the information contained therein, or incorporated therein, are not intended to be incorporated into this Annual Report on Form 10-K. Overview General We are an international provider of fixed, mobile and subsea telecommunications services. We provide, A. residential and B2B services in: i. over 20 countries across Latin America and the Caribbean through two of our reportable segments, C&W Caribbean and C&W Panama; ii. Puerto Rico, through our reportable segment Liberty Puerto Rico; iii. Costa Rica, through our reportable segment Liberty Costa Rica; iv. Chile, through our reportable segment VTR through September 30, 2022; and B. through our reportable segment C&W Networks & LatAm, (i) B2B services in certain other countries in Latin America and the Caribbean and (ii) wholesale communication services over its subsea and terrestrial fiber optic cable networks that connect approximately 40 markets in that region. At December 31, 2022, we (i) owned and operated fixed networks that passed 4,327,000 homes and served 3,819,500 RGUs comprising 1,734,100 broadband internet subscribers, 958,700 video subscribers and 1,126,700 fixed-line telephony subscribers, and (ii) served 8,169,500 mobile subscribers. During 2022, we completed an organizational change with respect to our C&W operations whereby management of certain subsidiaries of C&W, which primarily operate our subsea and fiber optic cable networks, now report directly to the chief operating decision maker of Liberty Latin America and no longer report to the former C&W Caribbean and Networks segment decision maker. As a result, the aforementioned subsidiaries of C&W are now a separate operating and reportable segment, herein referred to as the C&W Networks & LatAm segment. In connection with this change, we have restated our segment presentation for all periods to separately present (i) C&W Caribbean and (ii) C&W Networks & LatAm. II-4 Transactions Claro Panama Acquisition. On September 14, 2021, we entered into a definitive agreement to acquire América Móvil’s operations in Panama in an all-cash transaction based upon an enterprise value of $200 million on a cash- and debt-free basis. On July 1, 2022, we completed the acquisition of Claro Panama, which was financed through a combination of debt and existing cash. Chile JV. On September 29, 2021, we entered into an agreement with América Móvil to contribute the Chile JV Entities to América Móvil’s Chilean operations to form the Chile JV that will be owned 50:50 by Liberty Latin America and América Móvil. In October 2022, we completed the formation of the Chile JV and made a balancing payment to América Móvil totaling $76 million. The transaction did not trigger a change of control under VTR’s debt agreements, and was not subject to Liberty Latin America or América Móvil shareholder approvals. Beginning in October, we have accounted for our 50% interest in the Chile JV as an equity method investment. Strategy and Management Focus From a strategic perspective, we are seeking to build or acquire broadband communications and mobile businesses that have strong prospects for future growth. As discussed further under Liquidity and Capital Resources—Capitalization below, we also seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. We strive to achieve “organic” revenue and customer growth in our operations by developing and marketing bundled entertainment, information and communications services, and extending and upgrading the quality of our networks where appropriate. As we use the term, organic growth excludes FX and the estimated impact of acquisitions and disposals. While we seek to increase our customer base, we also seek to maximize the average revenue we receive from each household or business by increasing the penetration of our video, broadband internet, fixed-line telephony and mobile services with existing customers through product bundling and up-selling. For information regarding our expectation with regard to property and equipment additions as a percent of revenue during 2023, see Liquidity and Capital Resources—Consolidated Statements of Cash Flows below. Competition and Other External Factors We are experiencing significant competition from other telecommunications operators and other communication service providers in all of our markets. The significant competition we are experiencing, together with macroeconomic factors, has adversely impacted our revenue, RGUs and/or ARPU in a number of our markets. For additional information regarding the revenue impact of changes in the RGUs and ARPU of our reportable segments, see discussion below . Results of Operations The comparability of our operating results during 2022 and 2021 is affected by acquisitions, a disposal and FX effects. As we use the term, “organic” changes exclude FX and the impacts of acquisitions and disposals, each as further discussed below. In the following discussion, we quantify the estimated impacts on the operating results of the periods under comparison that are attributable to acquisitions and disposals. We (i) acquired (a) América Móvil’s operations in Panama in July 2022, (b) 96% of Broadband VI, LLC’s operations in the USVI effective December 2021, (c) Telefónica’s operations in Costa Rica in August 2021, and (ii) disposed of the Chile JV Entities in October 2022 in connection with the formation of the Chile JV. With respect to acquisitions, organic changes and the calculations of our organic change percentages exclude the operating results of an acquired entity during the first 12 months following the date of acquisition. With respect to disposals, the prior-year operating results of disposed entities are excluded from organic changes and the calculations of our organic change percentages to the same extent that those operations are not included in the current year. Changes in foreign currency exchange rates may have a significant impact on our operating results, as VTR, Liberty Costa Rica and certain entities within C&W have functional currencies other than the U.S. dollar. Our primary exposure to FX risk, prior to the formation of the Chile JV, was to the Chilean peso, as a significant portion of our revenue was derived from VTR. For example, the average FX rate (utilized to translate our consolidated statements of operations) for the U.S. dollar per one Chilean peso depreciated by 17% for the nine months ended September 30, 2022, the period prior to the formation of the Chile JV in October 2022, as compared with the corresponding period in 2021. The impacts to the various components of our results of operations that are attributable to changes in FX are highlighted below. For information concerning our foreign currency II-5 risks and applicable foreign currency exchange rates, see Item 7A . Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Risk below. For information regarding foreign currency risk, see Item 1A. Risk Factors above. The amounts presented and discussed below represent 100% of the revenue and expenses of each segment and our corporate operations. As we have the ability to control certain subsidiaries that are not wholly-owned, we include 100% of the revenue and expenses of these entities in our consolidated statements of operations despite the fact that third parties own significant interests in these entities. The noncontrolling owners’ interests in the operating results of (i) certain subsidiaries of C&W and (ii) Liberty Costa Rica are reflected in net earnings or loss attributable to noncontrolling interests in our consolidated statements of operations. We are subject to inflationary pressures with respect to certain costs and foreign currency exchange risk with respect to costs and expenses that are denominated in currencies other than the respective functional currencies of our reportable segments. Any cost increases that we are not able to pass on to our subscribers would result in increased pressure on our operating margins. Year Ended December 31, 2022 as Compared with Year Ended December 31, 2021 Consolidated Adjusted OIBDA On a consolidated basis, Adjusted OIBDA is a non-U.S. GAAP measure. Adjusted OIBDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance. Adjusted OIBDA is also a key factor that is used by our internal decision makers to determine how to allocate resources to segments. Our internal decision makers believe Adjusted OIBDA is a meaningful measure because it represents a transparent view of our recurring operating performance that is unaffected by our capital structure and allows management to (i) readily view operating trends, (ii) perform analytical comparisons and benchmarking between segments and (iii) identify strategies to improve operating performance in the different countries in which we operate. We believe our Adjusted OIBDA measure is useful to investors because it is one of the bases for comparing our performance with the performance of other companies in the same or similar industries, although our measures may not be directly comparable to similar measures used by other public companies. Adjusted OIBDA should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and other U.S. GAAP measures of income or loss. A reconciliation of total operating income, the nearest U.S. GAAP measure, to Adjusted OIBDA on a consolidated basis, is presented below for the periods indicated. Year ended December 31, 2022 2021 in millions Operating income $ 94.1 $ 67.3 Share-based compensation expense 93.5 118.1 Depreciation and amortization 910.7 964.7 Impairment, restructuring and other operating items, net 619.2 665.0 Consolidated Adjusted OIBDA $ 1,717.5 $ 1,815.1 II-6 The following table sets forth organic and non-organic changes in Adjusted OIBDA for the period indicated: C&W Caribbean C&W Panama C&W Networks & LatAm Liberty Puerto Rico Liberty Costa Rica VTR Corporate Intersegment eliminations Consolidated in millions Adjusted OIBDA for the twelve months ending: December 31, 2021 $ 482.9 $ 200.1 $ 264.3 $ 580.9 $ 80.2 $ 259.6 $ (52.9) $ — $ 1,815.1 Organic changes related to: Revenue 55.1 5.0 28.0 (4.1) 17.5 (89.7) 0.6 (7.0) 5.4 Programming and other direct costs (8.1) (2.8) (6.1) (19.6) (0.9) 15.0 — 6.1 (16.4) Other operating costs and expenses 8.0 (15.1) (7.8) (33.9) (7.5) 4.4 (19.2) 0.9 (70.2) Non-organic increases (decreases): FX (2.7) — (2.1) — (1.6) (18.4) — — (24.8) Acquisitions/disposition, net — 1.6 — 15.1 47.0 (55.3) — — 8.4 December 31, 2022 $ 535.2 $ 188.8 $ 276.3 $ 538.4 $ 134.7 $ 115.6 $ (71.5) $ — $ 1,717.5 Adjusted OIBDA Margin The following table sets forth the Adjusted OIBDA margin (Adjusted OIBDA divided by revenue) of each of our reportable segments: Year ended December 31, 2022 2021 % C&W Caribbean 37.2 34.7 C&W Panama 29.4 35.2 C&W Networks & LatAm 61.3 61.2 Liberty Puerto Rico 36.6 40.1 Liberty Costa Rica 30.5 31.0 VTR (a) 25.7 33.0 (a) During October 2022, we contributed the Chile JV Entities into the Chile JV. As such, subsequent to September 30, 2022, VTR is no longer included in our consolidated results of operations and is no longer a reportable segment. Adjusted OIBDA margin is impacted by organic changes in revenue, programming and other direct costs of services and other operating costs and expenses, as further discussed below. The decrease in Adjusted OIBDA margin for C&W Panama is due in part from the inclusion of Claro Panama operations following the Claro Panama Acquisition, which generates a lower Adjusted OIBDA margin compared to legacy operations. We incurred in aggregate $26 million of integration costs during the year ended December 31, 2022 in our Liberty Puerto Rico, Liberty Costa Rica and C&W Panama segments. During the year ended December 31, 2021, we incurred $16 million in our Liberty Puerto Rico and Liberty Costa Rica segments. The decrease in the Adjusted OIBDA margin for VTR is primarily related to a decline in revenue, RGUs and ARPU resulting from significant competition in Chile. II-7 Revenue Most of our segments derive their revenue primarily from (i) residential fixed services, including video, broadband internet and fixed-line telephony, (ii) mobile services and (iii) B2B services. C&W Networks & LatAm also provides wholesale communication services over its subsea and terrestrial fiber optic cable networks. While not specifically discussed in the below explanations of the changes in revenue, we are experiencing significant competition in all of our markets. This competition has an adverse impact on our ability to increase or maintain our RGUs and/or ARPU. Variances in the subscription revenue that we receive from our customers are a function of (i) changes in the number of RGUs or mobile subscribers during the period and (ii) changes in ARPU. Changes in ARPU can be attributable to (i) changes in prices, (ii) changes in bundling or promotional discounts, (iii) changes in the tier of services selected, (iv) variances in subscriber usage patterns and (v) the overall mix of fixed and mobile products during the period. In the following discussion, we discuss ARPU changes in terms of the net impact of the above factors on the ARPU that is derived from our video, broadband internet, fixed-line telephony and mobile products. The following tables set forth the organic and non-organic changes in revenue by reportable segment. Year ended December 31, Increase (decrease) Increase (decrease) from: 2022 2021 FX Acquisitions (disposition), net Organic in millions, except percentages C&W Caribbean $ 1,436.8 $ 1,389.9 $ 46.9 $ (8.2) $ — $ 55.1 C&W Panama 642.7 568.1 74.6 — 69.6 5.0 C&W Networks & LatAm 450.8 431.9 18.9 (9.1) — 28.0 Liberty Puerto Rico 1,470.1 1,449.7 20.4 — 24.5 (4.1) Liberty Costa Rica 441.3 258.5 182.8 (4.3) 169.6 17.5 VTR 450.6 787.5 (336.9) (72.4) (174.8) (89.7) Corporate 22.2 21.6 0.6 — — 0.6 Intersegment eliminations (99.4) (92.4) (7.0) — — (7.0) Total $ 4,815.1 $ 4,814.8 $ 0.3 $ (94.0) $ 88.9 $ 5.4 C&W Caribbean . C&W Caribbean’s revenue by major category is set forth below: Year ended December 31, Increase (decrease) 2022 2021 $ % in millions, except percentages Residential revenue: Residential fixed revenue: Subscription revenue $ 484.3 $ 473.4 $ 10.9 2.3 Non-subscription revenue 32.6 34.6 (2.0) (5.8) Total residential fixed revenue 516.9 508.0 8.9 1.8 Residential mobile revenue: Service revenue 314.5 300.2 14.3 4.8 Interconnect, inbound roaming, equipment sales and other 67.9 63.9 4.0 6.3 Total residential mobile revenue 382.4 364.1 18.3 5.0 Total residential revenue 899.3 872.1 27.2 3.1 B2B revenue 537.5 517.8 19.7 3.8 Total $ 1,436.8 $ 1,389.9 $ 46.9 3.4 II-8 The details of the changes in C&W Caribbean’s revenue during 2022, as compared to 2021, are set forth below (in millions): Increase (decrease) in residential fixed subscription revenue due to change in: Average number of RGUs (a) $ 16.9 ARPU (b) (3.6) Decrease in residential fixed non-subscription revenue (1.7) Total increase in residential fixed revenue 11.6 Increase in residential mobile service revenue (c) 16.2 Increase in residential mobile interconnect, inbound roaming, equipment sales and other (d) 4.0 Increase in B2B revenue (e) 23.3 Total organic increase 55.1 Impact of FX (8.2) Total $ 46.9 (a) The increases are primarily attributable to higher average broadband internet RGUs. (b) The decrease is primarily due to lower ARPU from broadband internet and video services, partially offset by higher ARPU from fixed-line telephony service. (c) The increase is attributable to the net effect of (i) higher average numbers of mobile subscribers, mostly due to growth from fixed-mobile convergence efforts and increases in sales initiatives, and (ii) declines in ARPU as a result of certain pricing strategies. (d) The increase is primarily attributable to higher inbound roaming traffic. (e) The increase is attributable to higher revenues from (i) fixed and managed services, primarily due to broadband internet services-related growth, (ii) mobile services, driven by higher average numbers of subscribers, and (iii) certain non-recurring B2B contracts. C&W Panama. C&W Panama’s revenue by major category is set forth below: Year ended December 31, Increase (decrease) 2022 2021 $ % in millions, except percentages Residential revenue: Residential fixed revenue: Subscription revenue $ 102.8 $ 87.9 $ 14.9 17.0 Non-subscription revenue 7.3 9.5 (2.2) (23.2) Total residential fixed revenue 110.1 97.4 12.7 13.0 Residential mobile revenue: Service revenue 218.6 176.4 42.2 23.9 Interconnect, inbound roaming, equipment sales and other 49.5 44.5 5.0 11.2 Total residential mobile revenue 268.1 220.9 47.2 21.4 Total residential revenue 378.2 318.3 59.9 18.8 B2B service revenue 264.5 249.8 14.7 5.9 Total $ 642.7 $ 568.1 $ 74.6 13.1 II-9 The details of the changes in C&W Panama’s revenue during 2022, as compared to 2021, are set forth below (in millions): Increase (decrease) in residential fixed subscription revenue due to change in: Average number of RGUs (a) $ 13.5 ARPU (b) (3.2) Decrease in residential fixed non-subscription revenue (2.5) Total increase in residential fixed revenue 7.8 Decrease in residential mobile service revenue (c) (0.7) Decrease in residential mobile interconnect, inbound roaming, equipment sales and other revenue (d) (5.2) Increase in B2B revenue (e) 3.1 Total organic increase 5.0 Impact of an acquisition 69.6 Total $ 74.6 (a) The increase is primarily attributable to higher average broadband internet and video RGUs. (b) The decrease is primarily due to lower ARPU from (i) fixed-line telephony services, as customers shift to lower priced plans and (ii) video services, mainly due to customer discounts. (c) The decrease is primarily due to the net effect of (i) lower ARPU from prepaid mobile services, mainly attributable to lower recharging activity, and (ii) higher average numbers of postpaid mobile subscribers. (d) The decrease is primarily attributable to lower interconnect revenue due to lower call volume. (e) The increase is primarily due to increases in the volume of certain projects. C&W Networks & LatAm . C&W Networks & LatAm’s revenue by major category is set forth below: Year ended December 31, Increase 2022 2021 $ % in millions, except percentages B2B revenue: Service revenue $ 113.7 $ 109.0 $ 4.7 4.3 Subsea network revenue 337.1 322.9 14.2 4.4 Total $ 450.8 $ 431.9 $ 18.9 4.4 The details of the changes in C&W Networks & LatAm’s revenue during 2022, as compared to 2021, are set forth below (in millions): Increase in B2B service revenue (a) $ 9.7 Increase in B2B subsea network revenue (b) 18.3 Total organic increase 28.0 Impact of FX (9.1) Total $ 18.9 (a) The increase is primarily attributable to (i) higher B2B connectivity revenue and (ii) growth in managed services. (b) The increase is primarily due to (i) an increase associated with revenue recognized on a cash basis for services provided to a significant customer, (ii) higher affiliate revenue, (iii) the net negative impact of (a) lower amortized prepaid capacity and operating and maintenance revenue driven by the cancellation of prepaid capacity contracts in prior periods, and (b) higher revenue associated with the recognition of deferred revenue and penalties upon the termination of prepaid capacity contracts, and (iv) a net increase in lease capacity revenue, resulting from customer growth, partially offset by service disconnections and lower revenue from existing customers due to price erosion. II-10 Liberty Puerto Rico. Liberty Puerto Rico’s revenue by major category is set forth below: Year ended December 31, Increase (decrease) 2022 2021 $ % in millions, except percentages Residential fixed revenue: Subscription revenue $ 457.3 $ 438.2 $ 19.1 4.4 Non-subscription revenue 22.1 19.3 2.8 14.5 Total residential fixed revenue 479.4 457.5 21.9 4.8 Residential mobile revenue: Service revenue 448.0 480.8 (32.8) (6.8) Interconnect, inbound roaming, equipment sales and other 268.4 253.5 14.9 5.9 Total residential mobile revenue 716.4 734.3 (17.9) (2.4) Total residential revenue 1,195.8 1,191.8 4.0 0.3 B2B revenue 220.6 220.4 0.2 0.1 Other revenue 53.7 37.5 16.2 43.2 Total $ 1,470.1 $ 1,449.7 $ 20.4 1.4 The details of the changes in Liberty Puerto Rico’s revenue during 2022, as compared to 2021, are set forth below (in millions): Increase (decrease) in residential fixed subscription revenue due to change in: Average number of RGUs (a) $ 23.3 ARPU (b) (13.9) Increase in residential fixed non-subscription revenue 0.6 Total increase in residential fixed revenue 10.0 Decrease in residential mobile service revenue (c) (32.8) Increase in residential mobile interconnect, inbound roaming, equipment sales and other (d) 14.9 Increase in B2B revenue (e) 0.2 Increase in other revenue 3.6 Total organic decrease (4.1) Impact of an acquisition (f) 24.5 Total $ 20.4 (a) The increase is primarily attributable to higher average broadband internet RGUs. (b) The decrease is primarily attributable to lower ARPU from broadband internet and video services, which includes the impact of credits issued to customers during 2022 as a result of Hurricane Fiona. (c) The decrease is primarily due to (i) lower ARPU from mobile services, primarily resulting from higher contract asset amortization driven by increases in handset sales and subsidy levels, and (ii) a decline in the average number of prepaid mobile subscribers. (d) The increase is primarily due to higher volumes of handset sales. (e) The increase is primarily due to the net effect of (i) higher revenue associated with data services, and (ii) lower revenue from equipment sales. (f) The impact of an acquisition includes FCC revenue related to the BBVI Acquisition. II-11 Liberty Costa Rica . Liberty Costa Rica’s revenue by major category is set forth below: Year ended December 31, Increase (decrease) 2022 2021 $ % in millions, except percentages Residential revenue: Residential fixed revenue: Subscription revenue $ 137.6 $ 138.5 $ (0.9) (0.6) Non-subscription revenue 5.1 6.2 (1.1) (17.7) Total residential fixed revenue 142.7 144.7 (2.0) (1.4) Residential mobile revenue: Service revenue 195.1 72.7 122.4 168.4 Interconnect, inbound roaming, equipment sales and other 64.8 27.1 37.7 139.1 Total residential mobile revenue 259.9 99.8 160.1 160.4 Total residential revenue 402.6 244.5 158.1 64.7 B2B service revenue 38.7 14.0 24.7 176.4 Total $ 441.3 $ 258.5 $ 182.8 70.7 The details of the changes in Liberty Costa Rica’s revenue during 2022, as compared to 2021, are set forth below (in millions): Increase (decrease) in residential fixed subscription revenue due to change in: Average number of RGUs (a) $ 14.6 ARPU (b) (10.4) Decrease in residential fixed non-subscription revenue (c) (1.0) Total increase in residential fixed revenue 3.2 Increase in residential mobile service revenue (d) 11.2 Increase in residential mobile interconnect, inbound roaming, equipment sales and other 0.1 Increase in B2B revenue (e) 3.0 Total organic increase 17.5 Impact of an acquisition 169.6 Impact of FX (4.3) Total $ 182.8 (a) The increase is primarily attributable to higher average broadband internet RGUs. (b) The decrease is primarily due to (i) lower ARPU from video services and fixed-line telephony and (ii) the impact of product mix. (c) The decrease is primarily due to a discontinued Costa Rica government-sponsored assistance program that provided computer equipment to low-income households offset by an increase in sales of inventory to employees and third-parties. (d) The increase is primarily attributable to higher postpaid average mobile subscribers. (e) The increase is primarily due to higher average broadband service revenue. II-12 VTR. VTR’s revenue by major category is set forth below: Year ended December 31, Decrease 2022 2021 $ % in millions, except percentages Residential revenue: Residential fixed revenue: Subscription revenue $ 392.3 $ 685.1 $ (292.8) (42.7) Non-subscription revenue 8.9 14.9 (6.0) (40.3) Total residential fixed revenue 401.2 700.0 (298.8) (42.7) Residential mobile revenue: Service revenue 25.8 48.0 (22.2) (46.3) Interconnect, inbound roaming, equipment sales and other 2.9 7.3 (4.4) (60.3) Total residential mobile revenue 28.7 55.3 (26.6) (48.1) Total residential revenue 429.9 755.3 (325.4) (43.1) B2B revenue 20.7 32.2 (11.5) (35.7) Total (a) $ 450.6 $ 787.5 $ (336.9) (42.8) (a) The amounts for the 2022 period reflect the revenue of VTR for the period from January 1, 2022 through the October closing of the Chile JV. The details of the changes in VTR’s revenue during 2022, as compared to 2021, are set forth below (in millions): Decrease in residential fixed subscription revenue due to change in: Average number of RGUs (a) $ (22.2) ARPU (b) (55.5) Decrease in residential fixed non-subscription revenue (0.9) Total decrease in residential fixed revenue (78.6) Decrease in residential mobile service revenue (c) (7.8) Decrease in residential mobile interconnect, inbound roaming, equipment sales and other revenue (2.5) Decrease in B2B service revenue (0.8) Total organic decrease (89.7) Impact of disposition (174.8) Impact of FX (72.4) Total $ (336.9) (a) The decrease is primarily attributable to lower average broadband internet and video RGUs. (b) The decrease is primarily due to lower ARPU from broadband internet services, mainly associated with (i) increased competition that generally resulted in (a) the churn of higher-ARPU customers and (b) the addition of lower-ARPU customers, and (ii) strategic initiatives implemented during 2022. Higher discounts and lower-ARPU customers related to video and telephony services also contributed to the decline in ARPU. (c) The decrease is primarily due to (i) lower ARPU from mobile services, mainly associated with strategic initiatives implemented during 2022, and (ii) lower average numbers of mobile subscribers. Programming and other direct costs of services Programming and other direct costs of services include programming and copyright costs, interconnect and access costs, equipment costs, which primarily relate to costs of mobile handsets and other devices, and other direct costs related to our operations. Programming and copyright costs, which represent a significant portion of our operating costs, may increase in future periods as a result of (i) higher costs associated with the expansion of our digital video content, including rights associated with ancillary product offerings and rights that provide for the broadcast of live sporting events, (ii) rate increases or (iii) growth in the number of our video subscribers. II-13 Consolidated. The following tables set forth the organic and non-organic changes in programming and other direct costs of services on a consolidated basis. Increase (decrease) from: Year ended December 31, Increase (decrease) Acquisitions (disposition), net Organic 2022 2021 FX in millions Programming and copyright $ 360.3 $ 441.4 $ (81.1) $ (20.2) $ (42.8) $ (18.1) Interconnect 350.3 347.2 3.1 (5.7) 20.8 (12.0) Equipment and other 499.9 425.8 74.1 (1.7) 29.3 46.5 Total programming and other direct costs of services $ 1,210.5 $ 1,214.4 $ (3.9) $ (27.6) $ 7.3 $ 16.4 C&W Caribbean . The following table sets forth the organic and non-organic changes in programming and other direct costs of services for our C&W Caribbean segment. Year ended December 31, Increase (decrease) Increase (decrease) from: 2022 2021 FX Organic in millions Programming and copyright $ 85.9 $ 92.8 $ (6.9) $ (0.6) $ (6.3) Interconnect 119.8 118.5 1.3 (1.6) 2.9 Equipment and other 84.9 73.8 11.1 (0.4) 11.5 Total programming and other direct costs of services $ 290.6 $ 285.1 $ 5.5 $ (2.6) $ 8.1 • Programming and copyright: The organic decrease is primarily due to the (i) the expiration of certain programming content during the first half of 2022, and (ii) the positive impact associated with the reassessment of a content-related accrual during 2022. • Equipment and other: The organic increase is primarily due to (i) higher capacity fees incurred in connection with the purchase of wholesale services from C&W Networks & LatAm, (ii) higher costs associated with certain non-recurring B2B contracts and (iii) higher volumes of handset sales to B2B customers. C&W Panama. The following table sets forth the organic changes in programming and other direct costs of services for our C&W Panama segment. Increase (decrease) from: Year ended December 31, Increase An acquisition 2022 2021 Organic in millions Programming and copyright $ 18.5 $ 14.9 $ 3.6 $ 1.0 $ 2.6 Interconnect 63.8 60.3 3.5 7.6 (4.1) Equipment and other 125.1 111.6 13.5 9.2 4.3 Total programming and other direct costs of services $ 207.4 $ 186.8 $ 20.6 $ 17.8 $ 2.8 • Programming and copyright: The organic increase is primarily due to RGU growth. II-14 • Interconnect: The organic decrease is primarily due to lower call volumes. • Equipment and other: The organic increase is primarily due to (i) higher volumes and unit costs of handset sales and (ii) higher costs associated with certain non-recurring B2B contracts. C&W Networks & LatAm. The following table sets forth the organic changes in programming and other direct costs of services for our C&W Networks & LatAm segment. Year ended December 31, Increase Increase (decrease) from: 2022 2021 FX Organic in millions Interconnect $ 45.6 $ 45.4 $ 0.2 $ (0.8) $ 1.0 Equipment and other 14.4 10.3 4.1 (1.0) 5.1 Total programming and other direct costs of services $ 60.0 $ 55.7 $ 4.3 $ (1.8) $ 6.1 • Equipment and other: The organic increase is primarily due to lower amounts of capitalizable costs associated with licenses, as part of a migration into contracts with shorter terms and more cloud-based arrangements. Liberty Puerto Rico . The following table sets forth the organic changes in programming and other direct costs of services for our Liberty Puerto Rico segment. Increase (decrease) Increase (decrease) from: Year ended December 31, An Acquisition 2022 2021 Organic in millions Programming and copyright $ 109.7 $ 109.0 $ 0.7 $ — $ 0.7 Interconnect 84.3 97.2 (12.9) 2.7 (15.6) Equipment and other 248.4 213.2 35.2 0.7 34.5 Total programming and other direct costs of services $ 442.4 $ 419.4 $ 23.0 $ 3.4 $ 19.6 • Interconnect: The organic decrease primarily relates to lower roaming expense due in part to (i) lower rates and (ii) the positive impact from the renegotiation of a certain roaming agreement during the fourth quarter of 2021. • Equipment and other: The organic increase is primarily associated with (i) higher sales volume, (ii) an increase related to lower of cost or market adjustments on equipment-related inventory, and (iii) equipment-related integration costs . II-15 Liberty Costa Rica . The following table sets forth the organic and non-organic changes in programming and other direct costs of services for our Liberty Costa Rica segment. Increase (decrease) from: Year ended December 31, Increase (decrease) FX An acquisition Organic 2022 2021 in millions Programming and copyright $ 33.9 $ 35.9 $ (2.0) $ (1.5) $ — $ (0.5) Interconnect 32.8 14.5 18.3 0.2 17.4 0.7 Equipment and other 39.9 17.4 22.5 0.3 21.5 0.7 Total programming and other direct costs of services $ 106.6 $ 67.8 $ 38.8 $ (1.0) $ 38.9 $ 0.9 VTR . The following table sets forth the organic and non-organic changes in programming and other direct costs of services for our VTR segment. Year ended December 31, Decrease Increase (decrease) from: 2022 2021 FX A disposition Organic in millions Programming and copyright $ 113.5 $ 188.8 $ (75.3) $ (18.1) $ (43.8) $ (13.4) Interconnect 21.9 28.7 (6.8) (3.5) (6.9) 3.6 Equipment and other 3.2 11.1 (7.9) (0.6) (2.1) (5.2) Total programming and other direct costs of services $ 138.6 $ 228.6 $ (90.0) $ (22.2) $ (52.8) $ (15.0) • Programming and copyright: The organic decrease is primarily due to the net effect of (i) lower average subscribers, (ii) lower content rates, (iii) the positive impacts associated with the renegotiation of certain content agreements, (iv) the positive impact associated with the reassessment of an accrual associated with video-on-demand content-related costs during 2022, and (v) an increase related to a settlement associated with a programming contract during 2022. • Interconnect: The organic increase is primarily due to (i) higher rates and (ii) higher national leased capacity. • Equipment and other: The organic decrease is due to lower volumes of equipment sales. Other operating costs and expenses Other operating costs and expenses set forth in the tables below comprise the following cost categories: • Personnel and contract labor-related costs, which primarily include salary-related and cash bonus expenses, net of capitalizable labor costs, and temporary contract labor costs; • Network-related expenses, which primarily include costs related to network access, system power, core network, and CPE repair, maintenance and test costs; • Service-related costs, which primarily include professional services, information technology-related services, audit, legal and other services; • Commercial, which primarily includes sales and marketing costs, such as advertising, commissions and other sales and marketing-related costs, and customer care costs related to outsourced call centers; II-16 • Facility, provision, franchise and other, which primarily includes facility-related costs, provision for bad debt expense, franchise-related fees, bank fees, insurance, vehicle-related, travel and entertainment and other operating-related costs; and • Share-based compensation expense that relates to (i) equity awards issued to our employees and Directors and (ii) certain bonus-related expenses that are paid in the form of equity. Consolidated . The following table sets forth the organic and non-organic changes in other operating costs and expenses on a consolidated basis. Increase (decrease) from: Year ended December 31, Increase (decrease) Acquisitions (disposition), net Organic 2022 2021 FX in millions Personnel and contract labor $ 597.7 $ 575.1 $ 22.6 $ (10.9) $ 1.4 $ 32.1 Network-related 311.4 324.2 (12.8) (11.4) 1.7 (3.1) Service-related 209.7 196.5 13.2 (4.5) 4.1 13.6 Commercial 226.0 229.4 (3.4) (8.9) 18.9 (13.4) Facility, provision, franchise and other 542.3 460.1 82.2 (5.9) 47.1 41.0 Share-based compensation expense 93.5 118.1 (24.6) (1.3) (2.0) (21.3) Total other operating costs and expenses $ 1,980.6 $ 1,903.4 $ 77.2 $ (42.9) $ 71.2 $ 48.9 For additional information regarding our share-based compensation, see Results of Operations (below Adjusted OIBDA) discussion and analysis below. C&W Caribbean . The following table sets forth the organic and non-organic changes in other operating costs and expenses for our C&W Caribbean segment. Year ended December 31, Increase (decrease) Increase (decrease) from: 2022 2021 FX Organic in millions Personnel and contract labor $ 204.6 $ 206.7 $ (2.1) $ (0.9) $ (1.2) Network-related 142.4 155.5 (13.1) (1.0) (12.1) Service-related 72.7 66.5 6.2 (0.1) 6.3 Commercial 45.7 48.8 (3.1) (0.5) (2.6) Facility, provision, franchise and other 145.6 144.4 1.2 (0.4) 1.6 Share-based compensation expense 20.1 28.2 (8.1) (0.1) (8.0) Total other operating costs and expenses $ 631.1 $ 650.1 $ (19.0) $ (3.0) $ (16.0) II-17 • Personnel and contract labor: The organic decrease is primarily due to the net effect of (i) a decrease resulting form lower bonus-related achievement levels and (ii) an increase as certain employee bonuses that were granted on a cash-basis in 2022 and recognized as personnel costs, as compared to grants of share-based awards for certain employee bonuses in 2021 that were recognized as share-based compensation. • Network-related: The organic decrease is primarily due to the net effect of (i) lower network-related maintenance costs, mainly driven by the renegotiation and cancellation of certain vendor contracts as well as lower overall spending, (ii) lower capacity charges associated with the use of C&W Networks & LatAm’s subsea network and (iii) higher utility costs. • Service-related: The organic increase is primarily due to professional services and IT-related expense. • Commercial: The organic decrease is primarily due to (i) lower call center volumes and (ii) lower marketing and sales costs. C&W Panama. The following table sets forth the organic changes in other operating costs and expenses for our C&W Panama segment. Increase (decrease) from: Year ended December 31, Increase An Acquisition 2022 2021 Organic in millions Personnel and contract labor $ 77.6 $ 69.8 $ 7.8 $ 6.0 $ 1.8 Network-related 47.8 37.6 10.2 9.0 1.2 Service-related 15.1 14.8 0.3 1.4 (1.1) Commercial 27.2 19.6 7.6 9.8 (2.2) Facility, provision, franchise and other 78.8 39.4 39.4 24.0 15.4 Share-based compensation expense 4.3 4.0 0.3 — 0.3 Total other operating costs and expenses $ 250.8 $ 185.2 $ 65.6 $ 50.2 $ 15.4 • Facility, provision, franchise and other: The organic increase is primarily driven by higher bad debt expense, primarily driven by a factoring arrangement and an increase in underlying rates used to compute the expected credit loss. C&W Networks & LatAm. The following table sets forth the organic changes in other operating costs and expenses for our C&W Networks & LatAm segment. Year ended December 31, Increase (decrease) Increase (decrease) from: 2022 2021 FX Organic in millions Personnel and contract labor $ 43.6 $ 44.3 $ (0.7) $ (2.6) $ 1.9 Network-related 43.3 45.8 (2.5) (1.1) (1.4) Service-related 4.5 3.7 0.8 — 0.8 Commercial 1.4 1.0 0.4 — 0.4 Facility, provision, franchise and other 21.7 17.1 4.6 (1.5) 6.1 Share-based compensation expense 3.4 4.6 (1.2) — (1.2) Total other operating costs and expenses $ 117.9 $ 116.5 $ 1.4 $ (5.2) $ 6.6 • Facility, provision, franchise and other: The organic increase is primarily due to higher bad debt provisions and travel-related costs. II-18 Liberty Puerto Rico . The following table sets forth the organic changes in other operating costs and expenses for our Liberty Puerto Rico segment. Increase (decrease) from: Year ended December 31, Increase (decrease) An acquisition 2022 2021 Organic in millions Personnel and contract labor $ 162.2 $ 142.1 $ 20.1 $ 1.9 $ 18.2 Network-related 51.7 47.8 3.9 0.2 3.7 Service-related 45.0 41.6 3.4 1.4 2.0 Commercial 46.5 52.5 (6.0) — (6.0) Facility, provision, franchise and other 183.9 165.4 18.5 2.5 16.0 Share-based compensation expense 7.3 6.4 0.9 — 0.9 Total other operating costs and expenses $ 496.6 $ 455.8 $ 40.8 $ 6.0 $ 34.8 • Personnel and contract labor: The organic increase is primarily due to the net effect of (i) higher salaries and other personnel costs, including the impact of higher amortization of deferred commissions associated with certain accounting in connection with the AT&T Acquisition, (ii) an increase in charges allocated from our Corporate operations, and (iii) lower bonus-related expenses. • Network-related: The organic increase is primarily due to the net effect of (i) incremental expenses incurred in operating the network as a result of the impacts from Hurricane Fiona, (ii) lower costs related to the termination of the transition services agreement entered into with AT&T associated with network maintenance and licenses, and (iii) an increase in network-related integration costs associated with the AT&T Acquisition. • Service-related: The organic increase is primarily due to the net effect of (i) an increase in charges allocated from our Corporate operations and (ii) lower costs associated with the termination of the transition services agreement entered into with AT&T associated with commissions and software licenses. Service-related integration costs associated with the AT&T Acquisition are expected to continue to grow in future periods. • Commercial: The organic decrease is primarily due to the net effect of (i) lower marketing costs, mainly driven by rebranding-related integration costs associated with the AT&T Acquisition incurred during 2021, (ii) higher amortization of deferred commissions associated with certain accounting in connection with the AT&T Acquisition, and (iii) lower call center costs driven by both volume and rates. • Facility, provision, franchise and other: The organic increase was impacted by the net effect of (i) an increase in rent expense, driven by purchase accounting adjustments associated with the AT&T Acquisition that were recorded during 2021, (ii) an increase in bank-related fees associated with certain services being provided under a transaction service agreement, (iii) a decrease in bad debt expense resulting from lower expected credit loss rates established during 2022, (iv) higher facility-related costs, including security costs and maintenance costs resulting from the impacts of Hurricane Fiona, and (v) a decrease resulting from a payment made during the second quarter of 2021 to settle certain 2011 property tax claims. II-19 Liberty Costa Rica . The following table sets forth the organic and non-organic changes in other operating costs and expenses for our Liberty Costa Rica segment. Increase (decrease) from: Year ended December 31, Increase FX An acquisition Organic 2022 2021 in millions Personnel and contract labor $ 27.5 $ 19.9 $ 7.6 $ (0.6) $ 7.8 $ 0.4 Network-related 33.2 18.1 15.1 (0.4) 11.9 3.6 Service-related 23.1 11.3 11.8 (0.4) 10.3 1.9 Commercial 53.0 25.1 27.9 (0.2) 26.3 1.8 Facility, provision, franchise and other 63.2 36.1 27.1 (0.1) 27.4 (0.2) Share-based compensation expense 2.2 1.1 1.1 — 0.8 0.3 Total other operating costs and expenses $ 202.2 $ 111.6 $ 90.6 $ (1.7) $ 84.5 $ 7.8 • Network-related: The organic increase is primarily due to higher maintenance-related costs. • Service-related: The organic increase is primarily due to higher information technology-related project costs. • Commercial: The organic increase is primarily due to higher third-party sales commission costs. • Facility, provision, franchise and other costs: The organic decrease is primarily due to the net effect of (i) higher bad debt provisions, (ii) lower rental expenses, (iii) lower telecommunications costs and (iv) higher collection-related fees. Included in the increase from an acquisition in the table above are significant integration-related costs, associated with the Liberty Telecomunicaciones Acquisition. VTR . The following table sets forth the organic and non-organic changes in other operating costs and expenses for our VTR segment. Year ended December 31, Decrease Increase (decrease) from: 2022 2021 FX A disposition Organic in millions Personnel and contract labor $ 41.8 $ 61.1 $ (19.3) $ (6.8) $ (14.3) $ 1.8 Network-related 55.7 83.2 (27.5) (9.1) (19.4) 1.0 Service-related 24.0 37.0 (13.0) (4.0) (9.0) — Commercial 52.2 82.4 (30.2) (8.2) (17.2) (4.8) Facility, provision, franchise and other 22.7 35.6 (12.9) (3.7) (6.8) (2.4) Share-based compensation expense 7.6 10.9 (3.3) (1.2) (2.8) 0.7 Total other operating costs and expenses $ 204.0 $ 310.2 $ (106.2) $ (33.0) $ (69.5) $ (3.7) • Personnel and contract labor: The organic increase is primarily due to the net effect of (i) higher salaries and other personnel costs due to the effect of inflation and (ii) lower bonus-related expenses. • Commercial: The organic decrease is due to the net effect of (i) lower sales commissions, (ii) lower call center activity and (iii) higher marketing and advertising costs, primarily related to a commitment to sponsor a music festival that was postponed during each of the past two years due to COVID-19. • Facility, provision, franchise and other costs: The organic decrease is primarily due to the net effect of (i) lower operating lease rent expense as a result of ceasing the amortization of our right of use assets in connection with held II-20 for sale accounting of the Chile JV Entities, as further described in note 8 to our consolidated financial statements, and (ii) higher bad debt provisions. Corporate . The following table sets forth the organic and non-organic changes in other operating costs and expenses for our corporate operations. Year ended December 31, Increase (decrease) 2022 2021 in millions Personnel and contract labor $ 40.5 $ 31.5 $ 9.0 Network-related 0.7 — 0.7 Service-related 25.3 21.3 4.0 Facility, provision, franchise and other 27.6 22.1 5.5 Share-based compensation expense 48.6 62.9 (14.3) Total other operating costs and expenses $ 142.7 $ 137.8 $ 4.9 • Personnel and contract labor: The organic increase is primarily attributable to (i) higher salaries and other personnel costs, mainly resulting from higher staffing levels in our operations center in Panama and (ii) the net impact of (a) an increase as certain employee bonuses that were granted on a cash-basis in 2022 and recognized as personnel costs, as compared to grants of share-based awards for certain employee bonuses in 2021 that were recognized as share-based compensation, and (b) a decrease resulting form lower bonus-related achievement levels. • Service-related: The organic increase is primarily due to an increase in professional services related to centralization efforts. • Facility, provision, franchise and other: The organic increase is primarily due to an increase in travel-related costs. Results of operations (below Adjusted OIBDA)—2022 compared to 2021 Share-based compensation expense (included in other operating costs and expenses) Share-based compensation expense decreased $25 million during 2022, as compared to 2021, primarily due to (i) lower grant-date fair values driven by lower average share prices during 2022, and (ii) a change in the bonus structure, whereby certain employees whose bonuses were paid in the form of shares during 2021 were granted on a cash-basis during 2022. For additional information regarding our share-based compensation, see note 15 to our consolidated financial statements. Depreciation and amortization Our depreciation and amortization expense decreased $54 million or 6% during 2022, as compared to 2021, primarily due to the net effect of (i) declines of $128 million at VTR, as we ceased recording depreciation expense during the third quarter of 2021 when we began accounting for the Chile JV Entities as held for sale, (ii) increases at Liberty Costa Rica and C&W Panama resulting from the Liberty Telecomunicaciones Acquisition and the Claro Panama Acquisition, respectively, and (iii) increases in property and equipment additions. II-21 Impairment, restructuring and other operating items, net Year ended December 31, 2022 2021 in millions Impairment charges (a) $ 563.8 $ 609.2 Restructuring charges (b) 34.3 33.0 Other operating items, net (c) 21.1 22.8 Total $ 619.2 $ 665.0 (a) Amounts primarily consist of goodwill impairment charges associated with certain reporting units within the C&W Caribbean segment. (b) Amounts include employee severance and termination costs related to certain reorganization activities and contract termination and other related charges, primarily at (i) C&W Panama and C&W Caribbean during 2022 and (ii) VTR and C&W Caribbean during 2021. (c) The 2022 amount includes direct acquisition costs, primarily related to the Chile JV Transaction and the Claro Panama Acquisition. The 2021 amount includes direct acquisition costs, primarily related to the Liberty Telecomunicaciones Acquisition, and a gain on the disposition of certain B2B operations in our Liberty Puerto Rico segment that was completed in January 2021. Interest expense Our interest expense increased $29 million during 2022, as compared to 2021. The increase is primarily attributable to the net effect of (i) the negative impact of FX, (ii) higher weighted-average interest rates and (iii) lower average outstanding debt balances, primarily as a result of the formation of the Chile JV in October 2022. For additional information regarding our outstanding indebtedness, see note 9 to our consolidated financial statements. It is possible that the interest rates on (i) any new borrowings could be higher than the current interest rates on our existing indebtedness and (ii) our variable-rate indebtedness could increase in future periods. As further discussed in note 5 to our consolidated financial statements and under Item 7A. Qualitative and Quantitative Disclosures about Market Risk below, we use derivative instruments to manage our interest rate risks. Realized and unrealized gains or losses on derivative instruments, net Our realized and unrealized gains or losses on derivative instruments primarily include (i) unrealized changes in the fair values of our derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii) realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized gains on derivative instruments, net, are as follows: Year ended December 31, 2022 2021 in millions Cross-currency and interest rate derivative contracts (a) $ 404.3 $ 565.4 Foreign currency forward contracts (13.5) 25.8 Weather Derivatives (b) (31.4) (27.1) Total $ 359.4 $ 564.1 (a) The gains during 2022 and 2021 are primarily attributable to the net effect of (i) changes in FX rates, predominantly due to changes in the value of the Chilean peso, prior to the formation of the Chile JV, relative to the U.S. dollar, and (ii) changes in interest rates. These amounts include losses associated with changes in our credit risk valuation adjustments of $4 million and $41 million, respectively. Included in the 2021 credit risk valuation adjustment is a net loss of $30 million related to the Chile JV Entities. II-22 (b) Amounts represent the amortization of premiums associated with our Weather Derivatives. For additional information concerning our derivative instruments, see notes 5 and 6 to our consolidated financial statements and Item 7A. Qualitative and Quantitative Disclosures about Market Risk below. Foreign currency transaction gains or losses, net Our foreign currency transaction gains or losses primarily result from the remeasurement of monetary assets and liabilities that are denominated in currencies other than the underlying functional currency of the applicable entity. Unrealized foreign currency transaction gains or losses are computed based on period-end exchange rates and are non-cash in nature until such time as the amounts are settled. The details of our foreign currency transaction losses, net, are as follows: Year ended December 31, 2022 2021 in millions U.S. dollar-denominated debt issued by a Chilean peso functional currency entity $ (181.1) $ (249.3) Intercompany payables and receivables denominated in a currency other than the entity’s functional currency (7.2) (48.4) Other (a) (6.0) (21.9) Total $ (194.3) $ (319.6) (a) Primarily includes (i) third-party receivables and payables denominated in a currency other than an entity’s functional currency, (ii) U.S. dollar-denominated debt issued by a CRC functional currency entity and (iii) cash denominated in a currency other than an entity’s functional currency. Gains or losses on debt modification and extinguishment, net Our gains or losses on debt modification and extinguishment generally include (i) premiums or discounts associated with redemptions and/or repurchases of debt, (ii) the write-off of unamortized deferred financing costs, premiums and/or discounts and/or (iii) breakage fees. We recognized gains (losses) on debt extinguishment, net, of $41 million and ($57 million) during 2022 and 2021, respectively. The gains during 2022 are associated with the buyback of certain VTR debt at fair value prior to the formation of the Chile JV. The losses during 2021 are primarily associated with refinancing activity at C&W, Liberty Puerto Rico and VTR. For additional information concerning our losses on debt modification and extinguishment, see note 9 to our consolidated financial statements. Gain on Chile JV Transaction In connection with the Chile JV Transaction, we recognized a pre-tax gain during 2022 of $169 million. For additional information, see note 8 to our consolidated financial statements. Other income or expense, net We recognized other expense, net, of $28 million and $42 million during 2022 and 2021, respectively. The expense during each year primarily relates to impairment of a cost method investment. Income tax benefit or expense Liberty Latin America was formed as a corporation in Bermuda and, therefore, the “statutory” or “expected” tax rate for the 2022 and 2021 tax years is 0%, as we are exempt from income taxes on ordinary income and capital gains. However, a majority of our subsidiaries operate in jurisdictions where income tax is imposed at local applicable statutory rates. For additional information, see note 13 to our consolidated financial statements. We recognized income tax expense of $87 million and $173 million during 2022 and 2021, respectively. II-23 The income tax expense attributable to our loss before income taxes during 2022 differs from the amounts computed using the statutory tax rate, primarily due to the detrimental effects of (i) permanent tax differences, such as non deductible goodwill impairment and other non-deductible expenses, (ii) effect of rate changes (but which are nearly entirely offset by valuation allowance), (iii) changes in uncertain tax positions, (iv) inclusion of withholding taxes on cross-border payments, (v) expiration of deferred tax assets (which are entirely offset by valuation allowance), and (vi) tax effect of the enactment of a Barbados Pandemic Contribution Levy. These negative impacts to our effective tax rate were partially offset by the beneficial effects of (i) net decreases in valuation allowances, (ii) permanent tax differences, such as non-taxable income, (iii) jurisdictional rate differences, and (iv) effect of tax credits. The income tax expense attributable to our earnings before income taxes during 2021 differs from the amounts computed using the statutory tax rate, primarily due to detrimental effects of (i) net increases in valuation allowances, (ii) permanent tax differences, such as non deductible goodwill impairment and other non-deductible expenses, (iii) expiration of deferred tax assets (which are entirely offset by valuation allowance), and (iv) inclusion of withholding taxes on cross-border payments. These negative impacts to our effective tax rate were partially offset by the beneficial effects of (i) jurisdictional rate differences, (ii) changes in enacted tax rates (but which are nearly entirely offset by valuation allowance), and (iii) permanent tax differences, such as non-taxable income. Net earnings or loss The following table sets forth selected summary financial information of our net loss: Year ended December 31, 2022 2021 in millions Operating income $ 94.1 $ 67.3 Net non-operating expenses $ (209.5) $ (381.8) Income tax expense $ (86.5) $ (173.3) Net loss $ (201.9) $ (487.8) Gains or losses associated with (i) changes in the fair values of derivative instruments and (ii) movements in foreign currency exchange rates are subject to a high degree of volatility and, as such, any gains from these sources do not represent a reliable source of income. In the absence of significant gains in the future from these sources or from other non-operating items, our ability to achieve earnings is largely dependent on our ability to increase our aggregate Adjusted OIBDA to a level that more than offsets the aggregate amount of our (i) share-based compensation expense, (ii) depreciation and amortization, (iii) impairment, restructuring and other operating items, (iv) interest expense, (v) other non-operating expenses and (vi) income tax expenses. Due largely to the fact that we seek to maintain our debt at levels that provide for attractive equity returns, as discussed under Liquidity and Capital Resources—Capitalization below, we expect that we will continue to report significant levels of interest expense for the foreseeable future. Net earnings or loss attributable to noncontrolling interests We reported net losses attributable to noncontrolling interests of $26 million and $50 million during 2022 and 2021, respectively. Liquidity and Capital Resources Sources and Uses of Cash As of December 31, 2022, we have three primary “borrowing groups,” which include the respective restricted parent and subsidiary entities of C&W, Liberty Puerto Rico and Liberty Costa Rica. Our borrowing groups, which typically generate cash from operating activities, held a significant portion of our consolidated cash and cash equivalents at December 31, 2022. Our ability to access the liquidity of these and other subsidiaries may be limited by tax and legal considerations, the presence of noncontrolling interests, foreign currency exchange restrictions with respect to certain C&W subsidiaries and other factors. For details of the restrictions on our subsidiaries to make payments to us through dividends, loans or other distributions see note 9 to our consolidated financial statements. II-24 Cash and cash equivalents The details of the U.S. dollar equivalent balances of our cash and cash equivalents at December 31, 2022 are set forth in the following table (in millions): Cash and cash equivalents held by: Liberty Latin America and unrestricted subsidiaries: Liberty Latin America (a) $ 23.5 Unrestricted subsidiaries (b) 133.0 Total Liberty Latin America and unrestricted subsidiaries 156.5 Borrowing groups (c): C&W (d) 536.2 Liberty Puerto Rico 72.3 Liberty Costa Rica 16.0 Total borrowing groups 624.5 Total cash and cash equivalents $ 781.0 (a) Represents the amount held by Liberty Latin America on a standalone basis. (b) Represents the aggregate amount held by subsidiaries of Liberty Latin America that are outside of our borrowing groups. All of these companies rely on funds provided by our borrowing groups to satisfy their liquidity needs. (c) Represents the aggregate amounts held by the parent entity of the applicable borrowing group and their restricted subsidiaries. (d) Includes $89 million and $51 million of cash held by operations in C&W Panama and C&W Bahamas, respectively. Liquidity and capital resources of Liberty Latin America and its unrestricted subsidiaries Our current sources of corporate liquidity include (i) cash and cash equivalents held by Liberty Latin America and, subject to certain tax and legal considerations, Liberty Latin America’s unrestricted subsidiaries, and (ii) interest and dividend income received on our and, subject to certain tax and legal considerations, our unrestricted subsidiaries’ cash and cash equivalents and investments. From time to time, Liberty Latin America and its unrestricted subsidiaries may also receive (i) proceeds in the form of distributions or loan repayments from Liberty Latin America’s borrowing groups upon (a) the completion of recapitalizations, refinancings, asset sales or similar transactions by these entities or (b) the accumulation of excess cash from operations or other means, (ii) proceeds upon the disposition of investments and other assets of Liberty Latin America and its unrestricted subsidiaries and (iii) proceeds in connection with the incurrence of debt by Liberty Latin America or its unrestricted subsidiaries or the issuance of equity securities by Liberty Latin America. No assurance can be given that any external funding would be available to Liberty Latin America or its unrestricted subsidiaries on favorable terms, or at all. As noted above, various factors may limit our ability to access the cash of our borrowing groups. Our corporate liquidity requirements include (i) corporate general and administrative expenses and (ii) other liquidity needs that may arise from time to time. In addition, Liberty Latin America and its unrestricted subsidiaries may require cash in connection with (i) the repayment of third-party and intercompany debt, (ii) the satisfaction of contingent liabilities, (iii) acquisitions and other investment opportunities, (iv) the repurchase of debt securities, (v) tax payments or (vi) any funding requirements of our consolidated subsidiaries. During 2022, the aggregate value of our share repurchases was $169 million. For additional information regarding our Share Repurchase Programs, see note 17 to our consolidated financial statements and above Part II—Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . Liquidity and capital resources of borrowing groups The cash and cash equivalents of our borrowing groups are detailed in the table above. In addition to cash and cash equivalents, the primary sources of liquidity of our borrowing groups are cash provided by operations and borrowing availability under their respective debt instruments. For the details of the borrowing availability of our borrowing groups at December 31, 2022, see note 9 to our consolidated financial statements. The aforementioned sources of liquidity may be II-25 supplemented in certain cases by contributions and/or loans from Liberty Latin America and its unrestricted subsidiaries. The liquidity of our borrowing groups generally is used to fund capital expenditures, debt service requirements and income tax payments. From time to time, our borrowing groups may also require liquidity in connection with (i) acquisitions and other investment opportunities, (ii) loans to Liberty Latin America, (iii) capital distributions to Liberty Latin America and other equity owners or (iv) the satisfaction of contingent liabilities. No assurance can be given that any external funding would be available to our borrowing groups on favorable terms, or at all. For additional information regarding our cash flows, see the discussion under Liquidity and Capital Resources—Consolidated Statements of Cash Flows below. Capitalization We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. When it is cost effective, we generally seek to match the denomination of the borrowings of our subsidiaries with the functional currency of the operations that support the respective borrowings. As further discussed under Item 7A. Quantitative and Qualitative Disclosures about Market Risk and in note 5 to our consolidated financial statements, we also use derivative instruments to mitigate foreign currency and interest rate risks associated with our debt instruments. Our ability to service or refinance our debt and, where applicable, to maintain compliance with the leverage covenants in the credit agreements of our borrowing groups is dependent primarily on our ability to maintain covenant EBITDA of our operating subsidiaries, as specified by our subsidiaries’ debt agreements ( Covenant EBITDA ), and to achieve adequate returns on our property and equipment additions and acquisitions. In addition, our ability to obtain additional debt financing is limited by incurrence-based and/or maintenance-based leverage covenants contained in the various debt instruments of our borrowing groups. For example, if the Covenant EBITDA of one of our borrowing groups were to decline, our ability to support or obtain additional debt in that borrowing group could be limited. No assurance can be given that we would have sufficient sources of liquidity, or that any external funding would be available on favorable terms, or at all, to fund any such required repayment. At December 31, 2022, each of our borrowing groups was in compliance with its debt covenants. We do not anticipate any instances of non-compliance with respect to the debt covenants of our borrowing groups that would have a material adverse impact on our liquidity during the next 12 months. At December 31, 2022, the outstanding principal amount of our debt, together with our finance lease obligations aggregated $7,975 million, including $227 million that is classified as current in our consolidated balance sheet and $6,868 million that is not due until 2027 or thereafter. At December 31, 2022, $7,571 million of our debt and finance lease obligations have been borrowed or incurred by our subsidiaries. Included in the outstanding principal amount of our debt at December 31, 2022 is $223 million of vendor financing, which we use to finance certain of our operating expenses and property and equipment additions. These obligations are generally due within one year, other than for certain licensing arrangements that generally are due over the term of the related license. For additional information concerning our debt, including our debt maturities, see note 9 to our consolidated financial statements. The weighted average interest rate in effect at December 31, 2022 for all borrowings outstanding pursuant to each debt instrument, including any applicable margin, was 6.4%. The interest rate is based on stated rates and does not include the impact of derivative instruments, deferred financing costs, original issue premiums or discounts and commitment fees, all of which affect our overall cost of borrowing. The weighted average impact of the derivative instruments, excluding forward-starting derivative instruments, on our borrowing costs at December 31, 2022 was as follows: Borrowing group Decrease to borrowing costs C&W (1.30) % Liberty Puerto Rico (0.49) % Liberty Costa Rica (1.57) % Liberty Latin America borrowing groups (0.98) % Including the effects of derivative instruments, original issue premiums or discounts, including the discount on the Convertible Notes associated with the instrument’s conversion option, and commitment fees, but excluding the impact of financing costs, the weighted average interest rate on our indebtedness was 5.7% at December 31, 2022. II-26 We believe that we have sufficient resources to repay or refinance the current portion of our debt and finance lease obligations and to fund our foreseeable liquidity requirements during the next 12 months. However, as our debt maturities grow in later years, we anticipate that we will seek to refinance or otherwise extend our debt maturities. No assurance can be given that we will be able to complete refinancing transactions or otherwise extend our debt maturities. In this regard, it is difficult to predict how political, economic and social conditions, sovereign debt concerns or any adverse regulatory developments will impact the credit and equity markets we access and our future financial position. Our ability to access debt financing on favorable terms, or at all, could be adversely impacted by (i) the financial failure of any of our counterparties, which could (a) reduce amounts available under committed credit facilities and (b) adversely impact our ability to access cash deposited with any failed financial institution, and (ii) tightening of the credit markets. In addition, any weakness in the equity markets could make it less attractive to use our shares to satisfy contingent or other obligations, and sustained or increased competition, particularly in combination with adverse economic or regulatory developments, could have an unfavorable impact on our cash flows and liquidity. Consolidated Statements of Cash Flows General. Our cash flows are subject to variations due to FX. For further information, see related discussion under Item 7A. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk below. Consolidated Statements of Cash Flows—2022 compared to 2021 Summary. Our 2022 and 2021 consolidated statements of cash flows are summarized as follows: Year ended December 31, 2022 2021 Change in millions Net cash provided by operating activities $ 868.8 $ 1,016.2 $ (147.4) Net cash used by investing activities (1,122.6) (1,268.6) 146.0 Net cash provided (used) by financing activities (29.2) 426.6 (455.8) Effect of exchange rate changes on cash, cash equivalents and restricted cash (2.3) (12.5) 10.2 Net increase (decrease) in cash, cash equivalents and restricted cash $ (285.3) $ 161.7 $ (447.0) Operating Activities. The decrease in cash provided by operating activities is primarily due to (i) a decrease resulting from an increase in cash paid for taxes and interest, (ii) an increase related to lower derivative-related payments, and (iii) a decrease associated with a decline in Adjusted OIBDA and related working capital change. Investing Activities. Our cash used during 2022 primarily includes the net effect of (i) capital expenditures, net, as further discussed below, (ii) the Claro Panama Acquisition and BBVI Acquisition and (iii) cash outflow upon the disposition the Chile JV Entities. Our cash used during 2021 primarily includes (i) capital expenditures, as further discussed below, and (ii) the Liberty Telecomunicaciones Acquisition. The capital expenditures, net, that we report in our consolidated statements of cash flows, which relates to cash paid for property and equipment, does not include amounts that are financed under capital-related vendor financing or finance 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. In this discussion, we refer to (i) our capital expenditures, net, as reported in our consolidated statements of cash flows, and (ii) our total property and equipment additions, which include our capital expenditures, net, on an accrual basis and amounts financed under capital-related vendor financing or finance lease arrangements. II-27 A reconciliation of our property and equipment additions to our capital expenditures, net, as reported in our consolidated statements of cash flows, is set forth below: Year ended December 31, 2022 2021 in millions Property and equipment additions $ 816.3 $ 855.9 Assets acquired under capital-related vendor financing arrangements (161.1) (100.5) Changes in current liabilities related to capital expenditures and other 4.9 (19.1) Capital expenditures, net $ 660.1 $ 736.3 The decrease in our property and equipment additions during the year ended December 31, 2022, as compared to 2021, is primarily due to decreases in CPE-related additions and product and enabler additions which were partially offset by baseline additions. During the year ended December 31, 2022 and 2021, our property and equipment additions represented 17.0% and 17.8% of revenue, respectively. We expect the percentage of revenue represented by our aggregate 2023 property and equipment additions to be approximately 16%. The actual amount of the 2023 consolidated property and equipment additions may vary from expected amounts for a variety of reasons, including (i) changes in (a) the competitive or regulatory environment, (b) business plans, (c) our expected future operating results and (d) foreign currency exchange rates and, (ii) the availability of sufficient capital. Accordingly, no assurance can be given that our actual property and equipment additions will not vary materially from our expectations. Financing Activities. During the year ended December 31, 2022, we used $29 million of cash from financing activities, primarily due to $170 million associated with the repurchase of Liberty Latin America common shares, partially offset by (i) $98 million of net cash received related to derivative instruments and (ii) $61 million of net borrowings of debt, which include the impact of $48 million of cash used to extinguish debt at VTR. During 2021, we generated $427 million of cash from financing activities, primarily due to the net effect of (i) $617 million of net borrowings of debt, (ii) $75 million related to payments of financing costs and debt redemption premiums, (iii) $63 million associated with the repurchase of Liberty Latin America common shares, (iv) $48 million in payments related to distributions to noncontrolling interest owners, primarily in C&W Bahamas and C&W Panama, (v) $47 million related to the contribution from a noncontrolling interest owner, as further described in note 17 of the consolidated financial statements, and (vi) $43 million related to derivative payments. Off Balance Sheet Arrangements In the ordinary course of business, we may provide (i) indemnifications to our lenders, our vendors and certain other parties and (ii) performance and/or financial guarantees to local municipalities, our customers and vendors. Historically, these arrangements have not resulted in our company making any material payments and we do not believe that they will result in material payments in the future. II-28 Contractual Commitments The following table sets forth the U.S. dollar equivalents of our debt and certain other contractual obligations and commitments as of December 31, 2022. Payments due by period Total Less than 1 year 1-3 years 3-5 years More than 5 years in millions Debt (excluding interest) (a) $ 7,966.1 $ 226.0 $ 876.1 $ 2,877.1 $ 3,986.9 Operating leases 702.6 104.5 183.7 146.5 267.9 Other (b) 60.2 45.8 7.8 2.8 3.8 Total (c) $ 8,728.9 $ 376.3 $ 1,067.6 $ 3,026.4 $ 4,258.6 Projected cash interest payments on debt and finance lease obligations (d) $ 2,590.0 $ 510.7 $ 939.0 $ 918.3 $ 222.0 (a) Subsequent to December 31, 2022, we refinanced certain debt of our Liberty Costa Rica borrowing group. For additional information, see note 9 to our consolidated financial statements. (b) Amounts primarily represent (i) guaranteed minimum commitments associated with (a) programming fees under multi-year contracts typically based on a rate per customer or stated annual fee and (b) our customer premise equipment and mobile handset device contractual obligations, and (ii) finance leases, excluding interest. (c) The commitments included in this table do not reflect any liabilities that are included in our December 31, 2022 consolidated balance sheet other than debt, finance lease obligations and operating lease obligations. Our liability for uncertain tax positions, including accrued interest, in the various jurisdictions in which we operate ( $51 million at December 31, 2022) has been excluded from the table as the amount and timing of any related payments are not subject to reasonable estimation. For additional information regarding our liability for uncertain tax positions, see note 13 to our consolidated financial statements. (d) Amounts are based on interest rates, interest payment dates, commitment fees and contractual maturities in effect as of December 31, 2022. These amounts are presented for illustrative purposes only and will likely differ from the actual cash payments required in future periods. In addition, the amounts presented do not include the impact of our derivative contracts. For information concerning our debt and finance lease obligations, operating leases and commitments, see notes 9, 10 and 19, respectively, to our consolidated financial statements. In addition to the commitments set forth in the table above, we have commitments under (i) derivative instruments and (ii) defined benefit plans and similar agreements, pursuant to which we expect to make payments in future periods. For information regarding projected cash flows associated with our derivative instruments, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk—Projected Cash Flows Associated with Derivative Instruments below . For information regarding our derivative instruments, including the net cash paid or received in connection with these instruments during 2022, 2021 and 2020, see note 5 to our consolidated financial statements. For information regarding our defined benefit plans, see note 14 to our consolidated financial statements. II-29 Critical Accounting Policies, Judgments and Estimates In connection with the preparation of our consolidated financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Critical accounting policies are defined as those policies that are reflective of significant judgments, estimates and uncertainties, which would potentially result in materially different results under different assumptions and conditions. We believe the following accounting policies are critical in the preparation of our consolidated financial statements because of the judgment necessary to account for these matters and the significant estimates involved, which are susceptible to change: • Impairment of property and equipment and intangible assets (including goodwill); and • Fair value measurements in acquisition accounting. For additional information concerning our significant accounting policies, see note 3 to our consolidated financial statements. Impairment of Property and Equipment and Intangible Assets The aggregate carrying value of our property and equipment and intangible assets (including goodwill) that was held for use comprised 74% of our total assets at December 31, 2022. When circumstances warrant, we review the carrying amounts of our property and equipment and our intangible assets (other than goodwill and other indefinite-lived intangible assets) to determine whether such carrying amounts continue to be recoverable. Such changes in circumstance may include (i) the impact of natural disasters such as hurricanes, (ii) an expectation of a sale or disposal of a long-lived asset or asset group, (iii) adverse changes in market or competitive conditions, (iv) an adverse change in legal factors or business climate in the markets in which we operate and (v) operating or cash flow losses. For purposes of impairment testing, long-lived assets are grouped at the lowest level for which cash flows are largely independent of other assets and liabilities, generally at or below the reporting unit level (see below). If the carrying amount of the asset or asset group is greater than the expected undiscounted cash flows to be generated by such asset or asset group, an impairment adjustment is recognized. Such adjustment is measured by the amount that the carrying value of such asset or asset group exceeds its fair value. We generally measure fair value by considering (i) sale prices for similar assets, (ii) discounted estimated future cash flows using an appropriate discount rate and/or (iii) estimated replacement cost. Assets to be disposed of are recorded at the lower of their carrying amount or fair value less costs to sell. We evaluate goodwill and other indefinite-lived intangible assets (primarily cable television franchise rights and spectrum licenses) for impairment at least annually on July 1 and whenever facts and circumstances indicate that the fair value of a reporting unit or an indefinite-lived intangible asset may be less than its carrying value. When evaluating impairment with respect to goodwill and other indefinite-lived intangibles, we first make a qualitative assessment to determine if the goodwill or other indefinite-lived intangible may be impaired. In the case of goodwill, if it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value, we then compare the fair value of the reporting unit to its respective carrying amount. A reporting unit is an operating segment or one level below an operating segment (referred to as a “component”). Goodwill impairment is recorded as the excess of a reporting unit’s carrying value over its fair value and is charged to operations. With respect to other indefinite-lived intangible assets, if it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying value, we then estimate its fair value and any excess of the carrying value over the fair value is also charged to operations as an impairment loss. When required, considerable management judgment is necessary to estimate the fair value of reporting units and underlying long-lived and indefinite-lived assets. We typically determine fair value using an income-based approach (discounted cash flows) based on assumptions in our long-range business plans. With respect to our discounted cash flow analysis used in the income-based approach, the timing and amount of future cash flows under these business plans require estimates of, among other items, subscriber growth and retention rates, rates charged per product, expected gross margins and Adjusted OIBDA margins and expected property and equipment additions. The development of these cash flows, and the discount rate applied to the cash flows, is subject to inherent uncertainties, and actual results could vary significantly from such estimates. Our determination of the discount rate is based on a weighted average cost of capital approach, which uses a market participant’s cost of equity and after-tax cost of debt and reflects certain risks inherent in the future cash flows. During 2022 and 2021, we recorded $555 million and $605 million, respectively, of goodwill impairments related to C&W Caribbean. During 2020, we recorded goodwill impairments of $174 million and $99 million related to C&W Panama and C&W Caribbean, respectively. A hypothetical increase/(decrease) of 0.1% in the discount rate used in the goodwill impairment assessment that resulted in our 2022 goodwill impairment charges would have resulted in an increase/(decrease) of II-30 approximately $15 million in aggregate to the goodwill impairment. For additional information regarding certain impairments recorded during 2022, 2021 and 2020, see notes 6 and 7 to our consolidated financial statements. Fair Value Measurements in Acquisition Accounting The application of acquisition accounting requires that we make fair value determinations as of the applicable valuation date. In making these determinations, we are required to make estimates and assumptions that affect the recorded amounts, including, but not limited to, expected future cash flows, market comparables and discount rates, remaining useful lives of long-lived assets, replacement or reproduction costs of property and equipment and the amounts to be recovered in future periods from acquired net operating losses and other deferred tax assets. To assist us in making these fair value determinations, we may engage third-party valuation specialists. Our estimates in this area impact, among other items, the amount of depreciation and amortization and income tax expense or benefit that we report. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain. A significant portion of our long-lived assets were initially recorded through the application of acquisition accounting. For additional information, including the specific weighted average discount rates we used to complete certain nonrecurring valuations, see note 6 to our consolidated financial statements. For information regarding our acquisitions and long-lived assets, see notes 4 and 7, respectively, to our consolidated financial statements. II-31