Millicom International Cellular S.A. (TIGO) Q3 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, and thank you for standing by. Welcome to today’s TIGO Q3 2019 Results Conference Call. At this time, all participants are in a listen-only mode. After the presentation there will be a question-and-answer session. [Operator Instructions] Also, I must advise that the call is being recorded today Thursday, the 24th of October 2019.And without any further delay, I would now hand over the call to your first speaker today, Michel Morin. Thank you. Please go ahead.

Hello everyone. And welcome to our third quarter call. As usual, we’ll be referring to some slides which are available on our website. And if you turn to slide two, our Safe Harbor disclosure is there. We will be making forward-looking statements, which involve risks and uncertainties and which could have a material impact on our results.And on slide three, we define some non-IFRS metrics that we will also be referring to throughout this presentation. You can find the reconciliation tables in the back of the earnings release and on our website.So, with those disclaimers out of the way, let me turn the call over to our CEO, Mauricio Ramos. Mauricio?

Thanks, Michel. And a good day to everyone. Thanks for joining us today on the call. I’m heart fully [ph] joining you today from Honduras on one of our site trips. And as usual I’m here with Tim Pennington, our CFO.On slide four, you see how much strategic process we have made this year. We continue to successfully divest out of Africa reallocate that capital to Latin America, particularly to Cable. We listed the company in the U.S. and we will soon be a 100% free float company.And more importantly, our operating free cash flow has also continued to increase steadily towards a medium term target of around 10%. So our long-term strategic plan organic and inorganic is well on track, and delivering on the operating cash flow growth that it was meant to achieve. I am therefore happy and confident about our long-term and direction of travel.But since this is also a quarterly call, let me address the obvious on slide five and get it out of the way. Our Q3 revenue and EBITDA results were weakened that I had planned for. July and August were indeed quite weak, but September came back, yet not strong enough to make up for a good quarter.The key source of the short term disappointment is largely prepaid mobile, which is more sensitive to changes in the economy and in competitive intensity. In Paraguay, the economy has indeed been contracting, and this has no doubt put some additional pressure on the prepaid market which remain quite competitive as well in the quarter.In Bolivia, price competition in prepaid has picked up this year, ahead of Presidential elections which are now in the middle of the final stages we hope. But the personal side of the mobile story is that postpaid continues to perform well across most of our markets and we'll talk about that later on.The second challenge we faced in Q3 was in B2B. Let me be clear. Our B2B business is actually performing really really well in its underlying core strength this year, especially in the SMB segment. So the declining B2B that you see on this slide is because we're comparing against stellar performance last year in Colombia and Panama. I'll talk about it more later, but keep in mind in both on these conferences; B2B is about a third of our total revenue.Finally, our home business continues to grow nicely in the quarter, up 7%. So the key takeaway from this quarter is that prepaid was impacted by a weak macro and tough competition in a couple of markets. But we do expect that these challenges will pass, and in the meantime, we continue to deliver strong showings [ph] in our subscription businesses, both mobile and cable, consistent with our long term strategy.This is why you see me as upbeat and complacent as ever, about our medium term plan. As I said a couple of minutes ago, I do like our direction of travel and the progress we're making in our strategic direction.Indeed on Slide six, you can see that we had a very strong Q3 in our strategic KPIs actually a record quarter. In Mobile, we added more than 850,000 4G customers in the quarter. This was an exceptionally strong quarter for 4G adoption across all our markets, on postpaid in particular, has been very very strong for us. We added another 500 points of presence and a ton of additional capacity to our 4G network, which by the way now cover almost 70% of the population in our markets, which equates to recovering the vast majority of the urban population in our markets.And in cable, we added a quarter of a million homes or HFC homes in terms of build, maintaining a run rate of about a million homes built per year. And more importantly, we added a record 99,000 cable customers in the quarter.And you can see more clearly the good momentum that we have in our cable business on Slide seven. Penetration rates for broadband are low in our markets, and there's a lot of pent-up demand for reliable and affordable broadband and Pay TV, and that is key to our premise, the premise of our business plan in the medium term.So we're leveraging our strong brand and our mobile market leadership to create a unique, high growth cable business. Every quarter, and every year, for the past four years has seen an acceleration in our cable made outs. That's what you see on the chart on the left on this page.And as I said last quarter, the key metric to watch now is our network penetration rate. We've been creating a build machine and we've also been adding now our sales machine to the cable business and that is why you see that the network penetration up, the rate is up more than 2 percentage points over the past year. And note that this is happening in the middle of a large and multi country's -- network built of about $1 million [ph] per year.Now, you guys all know that nothing drives cable cash flow more than network penetration rates. She's [ph] what we've been achieving at our focus arm [ph]. This is simple cable one to one economics. Indeed, the improving attrition of our cable network is one of the main drivers of our operating cash flow growth this year. Simply said, our long term driving to postpaid in mobile and into cable is delivering and on track.Now, I’ll take a few minutes to talk about some of our markets on a country by country basis, starting with Bolivia on Slide eight.Bolivia has been a great success story over the past four years for us. When I joined Millicom in early 2015, we had less than a 100,000 customers in cable in Bolivia. And many of these were actually on an old MMVS network. We have made a significant commitment to deploy capital in the country, and today, we have about 500,000 cable customers, a state of the art HFC network. It passes about 1 2 million pounds, sustainment the ARPU of about $30 and consistently growing on revenue.And we have also strengthened our mobile business in Bolivia. In 2018, we grew both subscribers and ARPU. And in 2019 growth in mobile indeed -- mobile revenue indeed began to slow down. Our main competitor has reduced pricing drastically, and we have all of them to defend our market share.And you can see on the right, that we have been successful in doing just that. Our subscriber base and this is a key point, has remained stable. Of course, the price to pay for that has been rapid accurate erosion this year. But the key to long term is to sustain that subscriber stable market share.Now we view this as a short term dislocation. Bolivia has a good industry structure, and these aggressive pricing is probably impacting our competitors as much as it impacts us. So we expect that the market will correct itself soon enough.Now let's turn to Paraguay on Slide. In Paraguay, we’re number one in every category. And we have many tools there to defend their key position. I want to make three key points about what's going on in Paraguay.One, our home business has been growing steadily every quarter. It is a healthy grower, a subscription business, and it is very strategic to our long term fixed mobile convergence strategy in Paraguay. And it has continued to grow quite well. That continues to expand HFC network to move towns and to cross-sell broadband to our larger Pay TV customer base.Second point I want to make is, that the real challenge has been in mobile. As competition began to intensify more than a year ago, and has been hired by the economic turmoil. We did give that increasing competition some time to play out, to protect the industry, but a couple of quarters ago we said enough is enough, and started aggressively defending our market share and position. And we have succeeded now in doing that.Please look at the net ads these last quarter. We have a very strong customer intake during the quarter. There should be no surprise there, because we've risen up to the challenge and we're fighting back. We do have the best brand, the distribution network is unparalleled. We have plenty of spectrum and a superior network, a growing cable network that excludes for something. So we took some short term pain, and we are indeed very encouraged to see some signs of ARPU civilization on a sequential basis beginning to emerge as our subscriber intake was very strong also during the quarter.The last point I would make on Paraguay is that unfortunately the economy has been under a lot of pressure recently, and this has certainly not helped particularly in the prepaid segment of the mobile market, which is more sensitive to the economy. The good news is that the macro forecast for next year are more positive as the political turmoil begins to settle down.Now let's look at Colombia on slide 10, big picture. We really have turned this business around from where we were a couple of years ago, and we're now growing in all segments. Both service revenue and EBITDA have been growing low single digits, steadily now for a couple of years, and not steady positive growth. We know that we can still do better than this, but there are no quick fixes, and we know that we are definitely on the right path in Colombia.And you can see this on the third chart, with growth accelerating in our two largest businesses; mobile and home. And as I mentioned earlier, B2B is actually performing very well in Colombia. But the challenge we face is that 2019 was an exceptionally strong year because of our large and profitable global brand contract related to the elections.Now this was not really a one-off because we do get these kinds of contracts every so often, but it does make our B2B business a bit longer from quarter-to-quarter. We continue to have a really strong B2B business in Colombia. It is just that we had an exceptional 2018 and that makes the math kind of funky.So do look as a lumpiness of B2B and you can appreciate that we have a steadily improving business in Colombia.Let's move on to Panama on slide 11, where also I give you some color there. This is of course our newest market. We have updated about 2 billion of capital to Panama. And we are now the largest telecom service provider in the country and number one across all segments. I know that some of you are a bit concerned. Services revenue growth has been challenging this year. But take a look at chart on the left. It shows that our revenue has been quite stable since we took control of the business.So the challenge we have is, that we're competing against an exceptionally strong performance in 2018 and in Q3 in particular. And we do see a pause in government spending during the transition to the new government. Of course, we knew all of this when we bought the company. So there are no major surprises here, which is why our EBITDA and operating cash flow are growing and trending ahead of our plan.On the top right chart, you see that our HFC customer base has been very stable, and that we have been cross-selling more services to our cable customers as you would expect us to do. And this is driving our ARPU slightly higher. We've also been working to improve the return profile of our smarter DTH business. And this is why you're seeing a decline of about 10,000 DTH customers since the beginning of the year. We simply want to be very disciplined in our capital spend and make sure that every business has the kind of return to our path that we wanted to have.Now finally, big pictures. The keys to the Cable Onda owned acquisition story for you to keep in mind are one; the integration is on track, two; synergies and efficiencies have turned out to be better than we had anticipated. And as a result, the operating cash flow for the Cable Onda business is running about 10% up ahead of our plans for this year.And three, we had no hiccups, and the integration of the mobile business is marching along according to plan. This is actually a perfect Segway into Slide 12 to update you on the status of the rest of the acquisitions that we undertook earlier this year. This was a methodic and strategic effort to redeploy capital out of Africa in order to create a consistent footprint throughout Latin America, with leading fixed and mobile operations in all of our nine countries in the region, and to create a consistent and continuous presence and footprint in Central America, while driving a strengthened industry structure across all of our markets.As I just said Panama is closed, both on fixed and mobile. It is still early days, but so far, so good. Nicaragua closed in May. The macro environment in Nicaragua is challenging, but it is clear, that we bought a very high quality asset with a very strong market position, and I'm very confident in our team's ability to execute our strategy, which is now in place, and to deliver on the synergies that lie behind our acquisition plan.And finally, Costa Rica as we’ve said all along on track to close in November, just as we planned. So when you look at this page, you can see that in the space of a year, we signed, got approval for, and closed all of these four transactions. And we already have 2020 budgets for all of this. So we will start 2020 just within a year of these acquisitions operating all of these properties. No hiccup so far, but just for them for [Indiscernible] all the operations. We're onto execution now, and we know that there's a ton of focus to deliver the synergies that we have promised.Now let me turn the call over to Tim to go over the financials for the quarter.

Thank you, Mauricio. So I'm going to start by picking up on a few of Mexico's remarks on the economy. And look first at the operating environment and then of the reported group numbers followed by the familiar review of the Latam segment.So let me start by turning to Slide 14. The title of this slide says it all. And many of you will have listened to the Oxford Economics view of the long term prospects for our markets. You'll have heard a very positive outlook, supported by very positive demographics and significant catch up potential.However, what has changed is the short term outlook. There it's very clear, there's a very clear regional slowdown possibly reflecting global trends and possibly local political events. We see GDP growth downgrading in many of our Latam markets in the last six months.Now on slide 15, you can see that our business profile has changed with the acquisitions in Panama and Central America. We are reducing our exposure to more volatile economies and currencies.In Q3, more than 50% of group revenue was generated in Central America, which traditionally has maintained more stable currencies, supported by substantial U.S. dollar missing states. And in fact, if I roll forward to the end of next year, we'll expect Central America revenues to be around 55% with Africa below 5%.Okay, let me now turn to the group numbers on slide 16. And if you recall, we treat Guatemala and Honduras as JV's in the group reported P&L. Service [ph] revenue increased by 10.8% that's largely on acquisitions and that more than offset weakening currencies.Operating profits however, was 15% lower and again this largely reflected acquisitions, namely higher expenses and higher amortization charges. And we also had an IFRS 16 impact. And finally, they were lower gains on sales than we had a year ago, also there the contribution from Guatemala and Honduras was stable.On slide 17 as usual there are a few moving parts below the line. The biggest being the revaluation of Jumia, the African e-commerce business.So let's move on to discussing the Latam segments. And on slide 18, before driving into the operating performance, just a reminder on how we get to the key financial metrics for the Latam segment.So turning to Latam service revenue on slide 19, overall it was up 9%, again that's largely on acquisitions. And that was partially offset by adverse effects movements. Our organic growth was 1% as Mauricio said weaker than we were hoping for, and largely on challenges in the mobile prepaid section across several markets. This led to a 1.7% drag from the mobile business and with a slight drop in B2B on the top of com that dampened a very strong 7.2% growth in the home business.We can break that down by country on the next slide, Slide 20. I think Mauricio had covered much of the drivers here. I would just add that in Colombia, we saw particular weakness in the mobile wholesale sector. And please note that, we've now disconnected a major wholesale customer, and that will have an impact on us in Q4.In Paraguay, we continue to see challenges in fact, the quarter there that was a positive deferred revenue adjustment, which is part of the headline revenue.Last, in Central America, Guatemala, Honduras, and Costa Rica all performed reasonably well and in line with our plan. And in El Salvador, it was pleasing to see sequential improvement.Now on slide 21, the Latam EBITDA as was noted was lower than expected, but even so, we tracked lower even though we tracked lower, it was on lower revenue growth. Costs have been well controlled, and you can see that in the margin, the margin remains robust even adjusting for IFRS 16. And we have a strong margin. So let's take a look at the individual countries on slide 22 now.But in the main performance in Central America was robust. Margins remained strong, and as I said, we saw a welcome return to positive growth from El Salvador. The challenges fell mainly in South America, Paraguay. The headline was flattened by some one-off adjustments, but the margin was maintained.In Bolivia, the impacts that hit the top line filtered down to EBITDA and in Colombia, where we took a large part of that provision on that wholesale customer. So we slipped into negative growth. That said, the margin has been maintained, and even in markets where we saw increased challenges, and it was based on the performance in the -- but were based on the performance in the quarter it's clear that we cannot get the group's close targets for this year.And we also had to revise these downwards in the face of the tougher macro and competitive environment; we had been re-directing the business to maintaining market share and maintaining margins and hitting our cash flow targets.And this is what we see on Slide 23. Latam OCF was again strong in Q3, up nearly $100 million to $363 million and up 10% organically and up 34% on a reported basis. I also want to look at the equity free cash flow on Slide 24.Now the equity free cash flow is the cash flow before spectrum, M&A and dividends. Now in short, our equity free cash flow is around $140 million lower than last year, but this is almost entirely driven by the impacts associated with acquisitions. We have around $47 million of additional one-off cost so far hitting the operating cash flow, plus we've incurred the full financing costs for these acquisitions. And we can see that we have financing costs up $118 million.And of course we have not yet benefited from the associated cash flows from these acquisitions. So if you adjust to these items, the equity free cash flow is largely in line with last year. And that's why we remain confident as we expect these acquisitions to be strongly cash generated.Now let me end as usual on our net debt on slide 25. Net debt at the end of the quarter stood at $7.1 billion after finance leases and $5.8 million in net financial debt. The increase reflects the purchase of the Panama mobile business during the quarter. Leverage ended the quarter at 2.63 times on a fully consolidated basis, and 3.14 times on a proportionate basis.And finally, the closing on Telefonica and Costa Rica should add approximately $550 million in the rest of the year which we intend to fund with debt, and that will take our proportionate leverage to around 3.25 times.And with that, let me pass back to Mauricio to wrap up.

Thank you, Tim. Let's look a little bit ahead. As I said at the start of this call, a lot has happened in just this year, so much so that it would be easy to overlook the fact that our shareholder structure is also undergoing a significant transformation, as we've shown on slide 27.Kinnevik, our largest shareholder is executing plans to distribute its entire 37% stake in Millicom to its institutional shareholders. And I want to take the opportunity to personally thank Georgie, the Stenbeck family and everyone at Kinnevik for their longstanding support to Millicom and particularly for this report that they have given us and this management team over our tenure in the last four years.But as many of you know, Kinnevik on strategy has taken them in our direction that is different from ours, and that presents us at Millicom with some short term challenges, as well as some important long term deposits.In the short term, this distribution is a very significant increase in supply of this stock, and this would indeed add volatility to our stock price. But this is a temporary dislocation, for investors willing to take a longer term view the end game is first, the stock that will be significantly more liquid and one of only two companies in Latin America with 100% treatable.Second, a company with a strong corporate governance framework with both the U.S. and Sweden listings, a single class of stock, and compensation structure that outlines management and shareholders significantly. And I can tell you that as a management team, we are all very excited about the opportunities that lie ahead to this company and work 24/7 seven days a week.And also for the benefit of the Kinnevik shareholders we’ll soon receive Millicom shares. Please allow me to remind everyone of the opportunity we are pursuing on Slide 28. First, as you would expect for our country's broadband penetration, rates are still very low. Only 35% of our mobile customers are on 4G, we keep adding strongly, and there are 3.4 HFC or cable customers that we currently have, growing as fast as they are only represent around 10% of the total households in our footprint. So it is still very early days for broadband adoption in our markets.Second, the macro outlook for our market is less volatile than for the rest of the Latin American region. Even if we get hiccups here and there on any given quarter. Our populations in the markets we operate are younger. The middle class is expanding rapidly, and digital adoption continues to be very fast. And third, this is why we have actively deployed capital against this opportunity from Africa into Latin America, significant both organically and inorganically to strengthen our position and improve the industry structure in our markets as you have seen us do over the last twelve months.So we have a unique opportunity to build broadband networks, to meet these pent up demand, and that is exactly what we have been doing, hence you can see on Slide 29. We have been investing consistently to build 4G networks, and state-of-the art cable fiber networks.For many of our customers, this is their first time using broadband. So we want to deliver an excellent customer experience, and we track NPS scores closely. This is one of the metrics that actually sits within our compensation plan. We're doing all of these while maintaining our capital density, reasonably healthy and stable, and our CapEx increasingly success-driven and variable in nature.This is one of the main reasons why we remain confident in our ability to generate healthy operating cash flow growth, the metric that within the most important going forward. As you can see on the right hand part of Slide 30, we have been deploying capital consistently and increasingly to build 4G networks instead of the IT cable fiber networks. It is a simple enough story, and we have been having subscribers for 4G and cable consistently every quarter on to those networks.Our capital intensity in this is stable and healthy and increasingly success driven. And this is one of the main reasons why we remain confident in our ability to generate healthy operating cash flow growth, as you can see on the right hand part of Slide 31.This is a slide that sums up our organic growth strategy, from building networks to adding customers. This is what I call the show the money number, that operating cash flow that is now getting close to 10%. This is what the management team is focused on and this is how we're compensated. We're getting there because we keep costs under control because we're getting better and better at capital spend efficiency and procurement, because Cable Onda is delivering on operating cash flow growth because we have synergies ahead of us and because the cable network penetration rates are increasing, just overall and more efficient use of capital spend. This is how we view the long term opportunity for Millicom.And on that note, we're very ready for your questions.

Ramona [ph] if you can open up for questions, please.

Thank you. Ladies and gentlemen, we're now beginning question-and-answer session. [Operator Instructions] Our first question is from the line of Mathieu Robilliard. Thank you, please go ahead.

Yes, good morning thank you. First question was on the 2019 guidance. So quite simply over the nine months, you did 2.2 organic growth and 1% in service revenue in Q3, you are pointing to about 2% for the full year. So I guess, you're expecting a re-acceleration of service revenue growth in Q4 compared to Q3. Maybe if you could elaborate a little bit on the drivers for VAT. I think in the past you'd mentioned, that in Colombia, you could have a big B2B contract potential announced today, that you will disconnect the customer, maybe that B2B Colombia is not such a strong contributor, anyway that's the first question?The second question is with regards to Nicaragua. You highlight that some tough macro trends there, and I was wondering if that meant that revenues were down year-over-year in Nicaragua? And then finally in terms of Bolivia and Paraguay, obviously you're trying to protect market share, and are succeeding in doing that. You're using price it seems as a way to fight back. What are the other tools that you can use to protect yourself against the competition? And will Bolivia eventually follow the route of Paraguay for a few quarters? A few questions, I'm afraid. Thanks.

All right, Mathieu that's a handful, but thank you because they're all very very good questions. I tried to take notice if I can answer them all, and maybe I'll leave that 2019 guidance delivered towards the end to wrap up with that.Let's start with Nicaragua. Honestly, we've only among [ph] the asset for a little bit, and the macro in Nicaragua indeed has been significantly weakened because of the political turmoil. I think once the political turmoil and stability subsides, and whether that happens, short term or medium term, it's very difficult with all things political to determine, the macro will come back strongly. And the flipside positive to that is, as I said on the call, we did buy a really good asset with big market shares, significantly strong market position. It strength our cable build, because it gives us the ability to blanket the country with mobile while we build, and more importantly, and I think this is key. We have although it's early on, found some interesting opportunities to make more efficient use of the spectrum, and gain on procurement.So whereas indeed the economy has been hit, and indeed we should expect that it's going to be tougher on the top line, we do see upside significantly on the operating cash flow, because there's spectrum efficiencies and because there's consuming upside there.With regards to Bolivia and Paraguay, and what's going on there, and other tools. So listen, I see there's a similarity here in our time to react to economic downturns or political motivations, behind increased competition particularly in prepaid. We try to let the market work through those, but if it doesn't, we react very very strongly as you've seen us do. And both in -- and we do that by basically making it very very clear that we'll take the short term pain, and we're never ever going to let our market positions be eroded for the long term.And when we do fight back, we fight back with decisiveness, and we fight back strongly, not just from price, and I'll go into the second part of your question in a minute not just on price, but certainly on price. And the immediate effect you see, within a couple of months, is that our subscriber intake recuperates and that has happened both in Bolivia and in Paraguay where quite clearly I can sit here and say we haven’t lost an inch of market share in other country simply because we fought back.Now we have a very long project. So both in Bolivia and in Paraguay we have significant spectrum positions, very important spectrum positions. We’re not lacking in lower high bands. We have deployed significantly extensive cable and mobile networks in both Paraguay and in Bolivia. We’ve actually just increased capacity in both events. In both, we have exclusive soccer content and we have a heightened, significantly long popularity of our distribution network.And we have the ability to basically deploy our mobile network on top of our cable network, which gives us the lowest cost of production on our mobile base [ph] and allows us to speak to the consumer on a holistic basis including our content.So our took kit is pretty extensive and goes beyond just pricing. And certainly it allows us to defend our market position for the long term. And Bolivia has obviously more of a political backdrop to what you see hopping today. So while it clears the North ones, the political stability and we hope it does returns to the country, we’ll see the industry going back to it’s normal stage.Now Bolivia in particular is a healthy industry. Bolivia is a – we have a significant market position and the same is true for Paraguay. With regards to what’s going on on guidance, I’m going to pass it over to Tim for a little bit more detail in our second.There’s puts and takes there. We have seen our subscribers come back in Bolivia and Paraguay, and that's positive. We hope that on the back of that, there'll be stability. But of course Bolivia remains somewhat dependent on what happens with the political situation. Obviously over the last week or so, it's been difficult for us to sell given the instability politically there, that may stay for a little longer or not in the long term, it will certainly go away.And we see indeed contracts out of Colombia, and a strong part of the second year as we usually have. Anything else on this fourth quarter team that you like to add.

I would add, I mean, look, we are forecasting the year end will be stronger than the year-to-date on EBITDA. And therefore, we got more visibility on EBITDA at the moment, Mathieu. And so the revenue where we expect both the strong EBITDA, the comp is a little easier. And we've got some kind of good kind of things coming through in the fourth quarter, particularly B2B and we’re a little bit more cautious on revenues simply for the reasons that Mexico outlined, and the reason is that when you are questioned, a little bit more uncertainty now on Bolivia and you know kind of the macro environment is a little more challenging. So it's been a tad more cautious on the revenue outlook. But I think the message of this is, that you know to the extent that we found our environment has changed, we kind of change tack and make sure that we maintain the market share, we maintain the margin, we maintain the cash flow, and that's really what you've seen coming out of the Q3, and what you will probably see coming out of Q4.

Thank you very much.

Our next question is from the line of Lena Osterberg. Thank you. Please ask your question.

Hi, yes hello. I have three questions, please. First of all, looking at the Mobile ARPU you now down 4.5% year-over-year. So I was wondering how much of this do you believe is related to say temporary measures for defending your market share in Bolivia and Paraguay, where you could possibly if the climate improves raise prices again, or how much of this will be there for another 12 months, because it's a permanent price cut?And then the second question is on Guatemala, here I understand Claro [ph] is now in the process of migrating telephonic customers. Do you know how far they have come in that process, and do you expect that competitive pressure will ease once they have finished that migration?And then finally on Colombia. You mentioned a couple of times now that you will have a negative impact from disconnecting one of your wholesale customers, if you maybe could say what the reason is for disconnecting them, and how much you expect in terms of impact on a full year basis, and if it will be a full quarter impact or not?

All right. So the mobile ARPU. Lena and thanks for the additional questions that help us provide all this color. It is indeed largely prepaid, if not entirely prepaid. And Tim can correct me. This is not 100% correct. That isn't hesitating not to say that, or I don't hesitate to say that is because, our postpaid business, which is the other side of course of what's in Mobile, quietly has been growing very very nicely, and very very stable. I think, I alluded in my remarks or we put it somewhere in the release that our postpaid business in mobile has indeed been growing its revenue mid-single digits.And that’s on the back of volume. We're adding somewhere around 250,000 on a yearly run rate basis postpaid subscribers. Do you know that that's what we're driving the business towards subscription cable on postpaid? Past two or three years ago, that number was negative, and we've sustained now seven quarters of consistent postpaid gains in subscribers or about 50,000 to 75,000 per quarter. And that mobile revenue is on postpaid is growing.So it is entirely prepaid, and prepaid is very sensitive to macro and to competition. It's less resilient than a subscription business. When it will subside, depends on factors that we don't fully control, whether it's the economic factor being Paraguay or the political situation in Bolivia, or some additional competition that may have come out of those countries or other countries. But eventually it will subside, whether it's next quarter or two quarters from today. And when the industry structures return to their stable equilibrium levels, indeed ARPUs will come back.If you look at the chart that we showed for Bolivia prior to this location, ARPU had been going up. If you were to look at the Paraguay situation, you would see -- you would see the same thing. So just hold your breath on that, and you'll come back.A little bit on Guatemala, which I think it's important. It's been very quiet, because it's been a great performer, and continues to be a great performer. We have indeed as you very well know, seen that in the midst of undertaking their integration process, competition in there has placed aggressive data offerings. We believe this is aimed at protecting their combined market share in the context of the integration process.It actually makes sense for them to do so, to protect the market position in the middle of integration process, and prevent us from attacking that market position. But we've been busy ourselves in investing in the network, and in the commercial distribution popularity, to protect our market share, particularly from that increased allowance on data. And although revenue growth has slowed down there, you see that it's still pretty solid. And we have not lost an inch market share in Guatemala.And that's because I think the key thing about Guatemala is to keep in mind the big picture here for the long term. This is now a two play market, which is significantly better on a number of fronts, than a three player market, including access to spectrum, including stability, and including the ability to get a return on investments. But not only is it a two play market, it's a 60:40 market share and people take, which is just about the healthiest the more stable market share distribution you can possibly have. Competitors have made a meaningful investment and are undergoing this integration.So I would expect that although this is a protective measure over the long term, they're going to be focused on getting our return on their investments just as much as we are. Now there is increased risk, during this transition period. We know that. But the flipside of that, I think, and we need to be cautious about that. That's what you see in my tone [ph] but I also see in Guatemala for the longer term, that the political landscape seems to be improving significant. We have had a clean and clear transitioning power and a government that seems to be doing and saying all the right things.So whereas we may have some short term uncertainty, I think the long term outlook in Guatemala remains increasingly positive. And lastly on the Colombia MVNO situation, the answer is very simple. We disconnected an MVNO that was simply not paying the bills, that we hosted. And there is no more to it than that. When and if they pay, we will reconnect them. And the loss of that revenue has an effect on our numbers in this quarter. It does have an effect on our outlook for the rest of the year. And that's why you've seen us correct that. And the comment I'll make is that of course, this is MVNO revenue is not part of our strategic design going forward, and perhaps part of what's going on here is that the industry structure in Colombia simply needs to be reshaped and because, there's just no room or for everybody. Anything else Tim?

I would just add on. I mean, we disclosed in the earnings release, we took a $5 million debt charge in the third quarter for that, and we know that wholesale contracts. There was no revenue impact actually in the fourth and the third quarter. We were still booking revenue, we’ll stop booking revenue and effectively with it -- with effect from the end of October. So again this September, so there will be no revenue in the fourth quarter. I can't be specific on the amounts of impact on that plane, but we’ve given you the bad debt charge. But I give you some sort of help.And you know we will take it up. This is – will be a ready one in EBITDA impact force in Q4. I think just picking up….yes go on.

How long before you start talking about that chart. How many months of lost revenue?

You know kind of essentially the bad debt charges now done. We’ve provided most if not all of that. So what happens from now on is we stop recognizing anything income, there won't be any income coming because we stop them on the networks. So, essentially there shouldn't, there shouldn't be an impact for us other than the absence of that revenue and hence the absence of that EBIDTA into Q4 and onwards.

Why don't we figure out how many months of revenues that would have been, if you could provide, when do you start to book about that short term? How many months late payments do you have to have for you to go to bad debt?

Well, it's round -- it's round about 90 days. That 90 days non-payments that we go then.

Okay. Thank you.

Our next question is from the line of Johanna Ahlqvist. Thank you. Please ask your question.

Yes. Two questions, if I may. The first one actually relates to Africa with Tanzania. And if you can give us any update on sort of what's happening there. I know you mentioned that this process is taking longer than expected, and I guess if you do not see sort of proceeds from Tanzania in the sort of foreseeable future, would you expect that -- I mean would you consider to cut dividends to deleverage faster than you currently are?And then my second question, now I guess you touched upon this topic before, but you mentioned that September is better than August and July. And I'm just wondering, if you relate, referred to the competitive climate, or macro, or if it's sort of general comment? Thank you.

Yes, and so I'm going to start with the last one, because that's the one that's more present in my mind. The answer is very simple. We had subscriber intake come back in prepaid, you've seen the numbers or we’ve alluded to the numbers. And with those renewed revenue, and we've been able to therefore stabilize the markets, where we had the most competition. And as a result of that, September came back from subscriber interest. So that's I think the key reason for that.It just wasn't as strong as we had hoped it would, and therefore my comments before. On Africa, I think you know indeed we've said before, that Tanzania you should just you know take a deep breath and allow us to do in Tanzania as we've done everywhere else. We're going to have to pick our timing, and our movement to do that.In the meantime as you saw, the IPO of HTA was accomplished, and so was the HBO [ph] or the IPO of Jumia. So those are assets that now said a little bit more liquid, and well within our Treasury Department to determine what to do with them, and what the right time frame for that is.So I want to address the more important point, I think you made just to not live it sort of about their high timing. Regardless of Africa, and Africa has never factored into our decision making around our capital structure, and our dividend or leverage policy because we've always known that as much as we're allocating capital into Africa into Latin America. The timing and our ability to execute could as we have been on it, we've never fully controlled.So it's never been part of our core plan or we’re going to be super clear on that. We've never said that money is going to come in on quarter A of year A and it’s going to be allocated to A, B or C. It's always been outside of our planning, because we don't control it. And that continues to be true.But I think the most important point here that I want to -- I don't want to leave that hanging there is that going forward, we actually have on our capital remuneration by Barclays leverage, all of which is part of your question, a pretty good problem to solve going forward regardless of Africa. If we were to execute on Africa sooner, than this problem would be sooner and better. And that is that, we have operating cash flow that is growing. We're getting pretty close to that 10% growth rate that we have targeted and I've been alluding to.As Tim remarked, even if our equity free cash flow dips this year, we knew that, and it's coming as a result of the financing and the integration costs of the acquisitions, on the back of which we have synergies, procurement savings, and a significantly improved operating cash flow for profit [ph]. And even throughout this year, our equity free cash flow remains pretty solid for the year. We’ll soon go back to that.So what we really have is a pretty good problem on how to allocate that increasing availability free cash flow, regardless of Africa. Now, so because I don't want to leave the question hanging, we have not changed either our leverage policy, nor our dividend, or capital remuneration policy, and we see no reason to do so on the back of the delay on Tanzania.

Crystal clear. Thank you.

Our next question is from the line of Stefan Gauffin. Thank you. Please ask your question.

Yes. A couple of questions on Colombia. You have reported quite good growth in mobile, but there is a large subscriber net lost in Q3, 2019. Is there a change in a competitive landscape in Colombia?And then secondly, also, you've stated in the report that home growth in Colombia was impacted by promotional campaigns this quarter. How should we think about that going forward? Is that continuing into Q4 next year? Thank you.

Yes. So as I -- as I said and thank you for the question. I think the key thing about Colombia is that all the lines of businesses are growing mobile, cable and B2B is a healthy growth [ph] if you back the spectacular 2000 NP [ph] that we had. So as we said here, we're in a far better place than we were a couple of years ago, when Colombia was a little bit of a headache for us. Now it is growing healthily. And by the way, we keep making significant progress on margins, just about every quarter.Mobile for us, when you look at the entire subscriber base, you miss out on the and that’s just the way we reported it. It's not -- not something that you would necessarily view. It's largely the effect of us moving our subscriber base into the “Unlimited plans” that are more of a subscription nature by definition. And our focus has been significantly to move those subscribers to those plans, because the lifetime value is higher. The churn is lower, the cost to serve is much smaller, and we basically regained more during the market. And that has given us tremendous amount of postpaid growth in Colombia on the mobile business, which is on the back of our underlying growth in Colombia.And it's also helping us position ourselves for a combined postpaid world in mobile, with our increasing pushed on cable. We had a record year, a record quarter sorry, in Cuban made ads in Colombia at just short of 50,000 net ads on cable Colombia this quarter, which is pretty fantastic. So I don't see any concerns on the volume in Colombia. Despite that promotional activity, we added 46,000 which you've seen ads in Colombia, which is pretty meaningful. So it's not taken away from our ability to continue to grow in Colombia. So you know there's a lot that remains to be fixed in Colombia, but it's certainly a country that's beginning to work for us.

Okay. Thank you.

Our next question is from the line of Henrik Mawby. Thank you. Please ask your question.

Hi, good afternoon. Can you hear me?

Yes, well.

Yes. so good question from the previous speakers. But I guess coming back to Bolivia. I mean, judging by the comments in the report it seems like ARPU is dropping mid-teens I believe. How should we think about this? Is there still a large base that can spin down and is this sequentially or are you seeing it leveling out now or should we expect it to continue in the coming quarters?And then a similar question on Paraguay. It's also there quite a dramatic deterioration in the ARPU and Mobile, but you allude to it stabilizing at least Q3 over Q2. But I – you know reading the comments and hearing what you say about macroeconomic environment and Paraguay getting another hit, is it still stable now in October, or should we be concerned that it takes another round down? Thank you.

Yes. Listen, I'm a little bit more optimistic on Paraguay. Or let me rephrase that. There a lot local visibility on what may happen in Paraguay, Honduras than Bolivia. And in Paraguay indeed you've heard us say that we're regaining subscriber intake and this about prepaid we're talking about by the way, B2B, postpaid and the cable business remains very, very solid. We have seen their subscriber intake come back in Paraguay. And as a result of that we're now stabilizing market share positions if not gaining. So the volumes are stable and we have begun to see ARPUs stabilize in Paraguay. And that's just a result of us fighting back. So I don't imagine that the industry there wants to continue to spin down the ARPU or in they are no market share gains to be attained. We have a fair amount more of a comfort level there if you will. The economy has been negative for a couple of quarters, but that's been a result obviously of the situation in Argentina, but also if that drops that occurred there earlier in the year. Rate has come back and hopefully Argentina will stabilize. Just about everyone is speaking of renewed economic growth in Paraguay next year. So every single forecast that I've seen differs in the amount of positive growth that will occur in Paraguay next year. But everyone is positive as opposed to negative where we are today.So with a moderate degree of optimism I think both the industry and prepaid will be more stable going forward. And the economy will come back. Bolivia is similar in the industry situation i.e. we've fought back as we've shown you. And as a result of that the market share is completely stable at this point in time. And as I said during my remarks, this is hurting others as much as it's hurting us if not more. And we haven't given up an into market share nor will we. The reason why it's a little bit more difficult to predict when, I think we have the same concern is because there's a fair amount of uncertainty for Bolivia as we speak right now on the political situation. So going to be a little bit more cautious and when Bolivia is going to turn around. Having said that, it is a country that remains macro solid, it's going through a democratic process that has puts and takes here and there. But more importantly, it's an industry that's demonstrated the ability of global fixed to mobile. So when it's a matter of question mark, but its no doubt it's going to come back.

Yes. I would emphasize that Henrik. I mean I think we just showed it, although we didn't put numbers on that you know kind of you're right year-on-year our ARPU declines round about 12%, but you see them flattening off, so sequentially ARPU decline in Q3 was somewhere in the two to just a bit north of 2%. So I'm not sure we're going to call that as the bottom, but I think we've taken a big step down. And the other point I would make is that also in Bolivia it was been an historically relatively healthy and as you know we expect that to continue to be the case relative to the average in the group as a whole.

I think that's a big thing here -- the big thing is that when you have macroeconomic dislocations or political turmoil prepaid gets hit. And if you add a little bit of competition or if you have some competition in there this political and macro turmoils only heightened that segment of the marketplace. And that's one of the big reasons why we've got pinned our future into more and more subscription, more and more fixed mobile and more and more B2B precisely so that we isolate ourselves from these orderly hiccups. It does not take away from the long term, but due process to you know takes from rain as we're going through what we deem to be a long term outcome.

Understood. And maybe one more question while I have you on the line here. On Africa cost came in quite substantially below my expectations. Is there anything temporary natured in those costs or it seems like you're just bringing it down quite handsomely?

Well, I'd like to take a round of applause on it, but I suspect IFRS 16 is the answer to that particular question. But we perhaps thinking…

I should -- I have made the adjustment, but I still think it will come down but…?

Look, let's talk about the trend, Henrik, you know effectively we no longer have a long-term based around Africa team because we no longer have an Africa position. What we have is a couple of portfolio positions, HTA and junior and a single country position. So that does not require a London based headquarter.

Thank you.

Our last question is from the line of Peter Nielsen. Thank you. Please ask your question.

Yes. Thank you. Yes. You may actually Michel just have answered the question. You seem to have or you have maintained your medium term ambitions. But as Tim said earlier there has been a number of downgrades to GDP forecasts in the near term. I'm just going to ask how sensitive you believe you are to those and perhaps just partly answered it mobile issue, but I mean how sensitive do you think you are in terms as your ability to leverage on the revenue growth that may be into higher EBITDA growth. If you give any more color. You just indicated you primarily see this as a prepaid issue. Is that correct? And is this anything else to add on that subject? Thank you.

Great question and perhaps that has fully allows me to sort of wrap up a little bit of what I think is a long term view here. A straightforward, no hesitation answer to your question is no. There is no reason for us to change our medium term guidance outlook view. As I said to in the prepared remarks I remain as confident as I had ever been on a long term plan. And remember, just couple of months ago I put ton of my own personal money behind this plan. And the reason for that is the underpinning of our strategy here is low penetration broadband rates across all markets whether it's 4G or cable, fixed broadband and the ability to generate better industry structures with the cable deals that were put in place which underpinned our mobile business but helps us reach into this penetration rates. And that has not changed because there's been an economic slowdown in [Indiscernible] country at quarter over there.The second underpinning to our story is this growing middle class. We are expecting that over the course of the medium term outlook the middle class in our markets will grow by about and by that we mean those over $20,000 income per year will grow by about 6.5% and about half of the population in our markets is sits between the high teens and early 20s. We have a young population that's adopting digital in the midst of improving industry structure that we ourselves are driving like we did in Central America. So the underlying secular macroeconomic industry structure drivers to our plan remain there. What's going on here? This is like when you set out to run a long marathon. If you guys are runner or like technology so you're going on a long trip. And you have a clear cut way in which you're going to run the marathon, you know you want to get there in given time and you come an accident on the road or block road here and it starts raining on you. You know that all of that's been passed and you know that you want have finished you know that you're going to strong because you are trained and you have a plan and you believe in what you're doing.So a slow order here or there, a correction to games on any given year does not take away from the fact that our pace in this marathon is pretty good. Our strategy is solid and our capital discipline I believe is unmatched and strong. We're allocating capital exactly when needs to be allocated and this long term plan underpins, the way I describe is as solid as I ever was. So perhaps just a long way of saying we remain confident in our medium term outlook. And if you're hanging, longing uphills you'll see it come through next year.

Okay. Thank you.

No further questions at this moment. Please continue.

Well, I think that was probably a good way for us to finish the call. So thank you everyone for joining. Do take a look at our long term prospects and we'll continue to do what we do pretty well, which is drive broadband penetration in these markets. Thanks.

So that does conclude our conference for today. Thank you all for your participating. You may all disconnect.