Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Millicom Q4 to 519 results conference call. At this time of participants on listen only mode. After the speaker presentation. There will be a question answer session to ask a question during the session you when each press star one the telephone I must advise you that this conference is being recorded today.
She was say the 25th at February 2020, I would now that's on the corner, which you will host today Michel Morin. Please go ahead.
Hi, everyone and welcome to our fourth quarter results conference call as usual were referencing some slides which are available on our website.
Please turn to slide to our safe Harbor disclosure.
We will be making forward looking statements and these involve risks and uncertainties and these could have a material impact on our results.
And then on slide three we define the non I afresh metrics that we will be referring to throughout the presentation. You can find reconciliation tables in the back of our earnings release as well it's on our website, so with those disclaimers or the way I'll turn the call over to our CFO, Tim Pennington Tim.
Thanks, Michelle so I'm going to give you a very quick introduction to the group's financial performance and then rich here will take you through why 2019 was a transformational yet.
Okay. So starting on slide five with the Q4 headlines for the group and be aware they see I first presentation, treating Guatemala, Honduras as equity associates.
In more detail on slide six this is a summary of the group reported piano for the full year 2019, and the results have been significantly affected by M&A, Hi, fresh 16, and fair value adjustments.
Revenue was up almost 10% year on year, mostly from acquisitions, whilst operating profit was down again, mostly because of the swing and other non cash operating items.
Below the line financial expenses were up on higher debt to fund acquisitions and I have fresh 16.
I didn't more than offset it was more than offset by a fair value gains arising from the hideous Thomas IPO, where we sell some shares but we still own about 16%.
[laughter] discontinued operations reflect the set of Chad and we ended with he P. S a $1.48.
So we don't let me turn over to mature.
Thank you, Tim and good day everyone.
I went out for an afternoon around early this January and my mind started reflecting on all the things we accomplished as a team in 2019.
By the time I finished around it was clear that 2019 was a year in which our transformation began take real shape.
In each of the quadrants on slide eight you can see to four building blocks of our transformation.
I will touch on each of these pillars into next year's lights, but the key message here that we ended the year in a much much stronger position done we started with <unk>.
We they saw it got from I read a ton of strategic Optionality ahead of us.
Let's start first strategic development and positioning on slide nine.
We continue to reallocate capital out of Africa, We sold shot for Gosh, We list at both H.T. and Julia and to go there very key steps to facilitate monetization of our remaining non core assets in the near future.
We're not totally done yet of course.
One or the days in which our execution ability on this front was still to be tested every year, we have made substantial progress reallocating capital.
Indeed, and more importantly, we have allocated over $3 billion in acquisitions to complete our footprint in Central America.
Two thirds of this investment went into a.
Our growing stable and dollar economy, where we bought both the leading cable company and the leading mobile operator, we're now number one in Panama integration is on track and acquisition is ahead of plan a steam will speak to you about second.
The remaining capital went to out mobile to our cable business as it Nicaragua and Costa Rica.
The result of this we now have fixed and mobile in all our nine markets in Latin America number one or number two positions in all markets.
Very pleased with these very active kaka relocation it has given us strengthen markets timing I contiguous market presence and carmaker I've talked to fixed mobile convergence in every market on the ramp up for Fiveg sometime in the future.
Turning to slide 10 to talk about the second building block, our enhanced shareholder liquidity and strong governance.
During 2019, we listed our shares are not stuck in the U.S. and tip, our longstanding listing on NASDAQ stock.
And we assist that shouldn't be can exiting their 30 year investment in millicom as result of these two events as we enter into Twentytwenty won the trading volume of our shares is increasing significantly to we're not one of only two companies in Latin America that has a free float of 100% with a large base of shareholders more.
Less equally divided now between the U.S. on Europe, and three our governance strengthened as we are now Sox compliant and trade on two major stock exchanges.
Now please turn to slide 11 for a recap of the key progress we have made operationally.
This is a third building block under one I wish to spend the most time Warner.
Many of you will actually remember the slide the news on the right hand column of this slide which we have updated to show you where we are in our journey.
We're no longer our prepaid mobile voice company over 60% of our revenue is now subscription on 40% escape.
Overcome our legacy mobile voice problem, our Fourg data centered networks now cover 70% of population on our state of the our cable network now Pos is 12 million homes.
Because we're now largely a subscription business not a prepaid one we have turned customer centric not just sales driven and now our high NPS scores help support our strong brand name recognition.
We're also no longer geographically youre strategically dispersed work effectively Latin America, now and with clear operational focus on nine key countries.
Clear fixed mobile convergence positions in other then.
As we said from day, one where he cash flow focused management team because we're also large owners of millicom.
We're now at 8% operating cash flow growth this year, and we'll talk more about our cultural strength and growth in a minute.
Now, let's look at some of the for the points in more detail beginning on slide 12 with focus on our 2019 progress.
Our mobile business, we continue to drive fourg adoption across our footprint, we have been adding as part of our strategy about 3 million Fourg users every year since 2015, when this management team took over.
2019 was actually our strongest year on record with more than 3.3 million forging at odds on an organic basis.
Yet still less than 40% of our customers are on Fourg. So there's still plenty of growth potential as we continue to pretty darn penetrate our own customer base.
2019 was also significant because we added 1 million net mobile users overall to our base on organic basis as I said earlier, our brand has been strengthen as I've been our market positions on market shares and as a result, our customer intake overall not just fourg is strong again, we added.
1 million mobile users organically this year on an organic basis overall.
And on Slide 13, you can see that we have been making important progress on the postpaid or subscription side of our mobile business. We highlighted some time ago. Our focus on this segment, it's time to show you the outcome.
This is a third consecutive years since our tenure in which we have grown our postpaid base. We're now consistently adding about 300000 net adds to our subscriber base on a yearly basis on growing.
As a result, our postpaid subscriber base has become now a key driver of the growth in our business.
2019, we generated more than 20% of our Latin American service revenue from mobile postpaid and when you add the store cable business, our subscription based businesses generated more than 60% of our revenue.
As you can see on slide 14 in Q4 of 29 team we sold for two key spectrum deficiencies in our portfolio unsecured valuable spectrum and some other on in Colombia.
As a result, we now have ample spectrum on a very good mix of both low and high band frequencies.
Country, we're creating.
Importing some other on Colombia, our deficient spectrum positions historically made it more expensive for us to provide quite into services that our customers expect so this spectrum acquisitions are not only a strategic but they're also a driver of cost efficiencies for both countries and as you can imagine where of course, putting the newly acquired spectrum to work for us right away.
And while we're in the topic of spectrum, whereas impediment were not spectrum deficient or disadvantage, we're already in discussions with the government about acquiring a dollar the rest of spectrum and we expect it will be awarded sometime in 2022, those would like us apply for it.
Now moving on to slide 15, the point here is extremely simple our residential cable business is delivering justice promise I am just as we expected.
In 2019, we added more than 900000 homes passed to the network. We added over 350000, new customer relationships and in the middle of a multiyear and sustained cable network build our cable penetration actually moved higher again in 2019, which as you.
No it's key to driving cable profitability.
Bringing all of this together on slide 16, you can see the key component of our organic growth in Twentys 19.
Our prepaid mobile mobile business had a challenging year as you all know I'm decline, just a bit less than 1% largely due to political turmoil in Bolivia competition and part of wine.
About our postpaid although business is now a strong pillar of growth as I mentioned before our bid a bit business actually had a good year. It looks flattish in 2019, but that is simply because 2013 was such a great growth year due to some extraordinary contracts and our home residential keyboard business continues to be just on.
Fire growing 8.4% in 2019 I recollect the days when we told you this was going to happen.
Now please turn to slide 17 talk about the fourth and final building blocks for transformational year.
We spend a lot of time when this quarterly calls talking about our financial and operational CPI, but theres a lot more to make our performance be what it is we talk a lot more about these accomplishments in our integrated annual report, which will be published later this year.
Just to take a look at that report on here are some of the key highlights.
First and foremost R 22000 Plaza employees and our entire board. He is a line on our strategic purpose that's my job.
We feel that digital highways or connect people improve lives and helped develop our communities.
This purpose is well known by 22000 employees defines what we do it inspires us to keep on doing it we are building a fundamental digital infrastructure that will allow our development communities during the digital economy of the 21st century.
Building this digital highways, both our business opportunity on our social responsibility and we are equally excited by both tasks. It is indeed, a privilege to drive a business with a purpose that it's also its investment opportunity.
And as one of the largest implores in their markets. We worked very hard to foster a positive. We're pleased that embraces diversity on improved labor relationships in our markets.
The last couple of years, we've taken our strong corporate culture to the next.
With extensive internal branding around a sign that it.
It is this equal life block the sanctity group that mix is different and that helps attract and retain our great talent.
You can see the fantastic results of these efforts in a great place to work ranking and scores. We are now at top 25 days to work in Latin America on our scores continue to improve on a yearly basis.
Another way, we helped develop our communities while driving results is by delighting our customers two years ago Reincorporated net promoter score into our incentive compensation plans, because we wanted to affect behavior and become a more customer centric company were becoming a subscription company, which by definition is.
Customer centric company.
Our progress in this area, it's very impressive and we've talked to continue to expand our NPS system to eventually measure of performance across all our customer touch points and competitively against our competition.
And finally, we have made more great strides towards advancing our social responsibility agenda. We completed our first GNS assessment and we issued our first sustainability bond. This year and we have received multiple recognitions for some of our flagship corporate responsibility programs, specifically around try rights and connected woman and again please.
We'll take a look at our integrated report, where a lot more than just good cash flow.
So when you look at 2019, it truly what a transformational year for medical I want to take a moment to thank the numerous teams that have worked tirelessly to make this happen on to our board for its continued support it.
Now let me assure you this transformation is translating into cash flow on slide 18.
The last part of this slide has a key message we continued to invest heavily in Edwards and customer acquisition to drive organic growth. We built almost another million homes passed into the network. We continued to invest in our IP transformation, we continued to significantly expand our Fourg mobile network and we can.
Nick to 350000, new cable customers added over 300000 postpaid subs on all of these while keeping a watchful eye on deficiency and the efficacy of our spend as I've said, often when we make our capital allocation decisions, we start to by making sure that were fully funded our topics plans and then.
This business in my view Capex comes first.
Focusing on the efficacy of our capex by leveraging our increased scale significantly by driving Capex synergies from our company owned acquisition, we delivered 8.3 operating customer growth going on or bonding bases in the year.
8.3% operating cash flow growth on an organic basis. This year and are also you have margin actually grew another 80 basis points to close at an impressive 21.2%, including the effects of high for Essex team I address extent actually mix that number the higher.
On Slide 19, you can see how the operating cash flow flowed on the part here is intended through to a strong equity free cash flow of almost $180 million in 29 team I want to make three key points on this slide one when we took over running this beautiful company. We immediately turned around its equity free cash flow profile every.
Year during her tenure, we have delivered strong equity free cash flow.
Two.
Free cash flow has been steadily growing and we.
We knowingly on purposely deep into our free cash flow pocket.
Team to finance on integrated the strategic and transformational acquisitions, we have undertaken.
We do expect that our cash flow growth will resume after 2020, when we complete integrations and I'd like to synergies from the acquisitions that we have made.
So as you look at our 2019 numbers on beyond make no mistake, we are now stronger operationally and strategically customer growth profile is more promising than ever with that let me turn it over to team over the quarter in detail.
Thanks Michelle.
I guess, we the key financials for the Latam segment, starting on slide 21, with Latam service revenue.
So in Q4, we saw a 14.2% increase in Latam service revenue, reflecting the acquisitions in Panama, Nicaragua underlying organic growth was 2.3% in line with affiliate growth rate of 2.2%.
Cable was once again the drive of all of the organic growth up 8% and that was offset by 2.7% decline from mobile reflecting weaker prepaid revenues in several markets.
Thanks impact was a bit more stable in the core tools.
So breaking this down by country of operational Slide 22 has the main highlights on this slide is that Colombia grew very strongly this quarter up 6.3% all business lines performed well and this frankly is our best performance in more than two years.
Go into more detail on Colombia, Panama, Bolivia, Powerplay in a few slides.
Turning to EBITDA on slide 23, overall, we were up almost 23% on the year ago against largely M&A offset by modest FX strikes plus some positive impacts from my first 16.
Fysixteen added 2.6 percentage points to the EBITDA margins, but that 38.5% thats, excluding guy Fysixteen, we continue to show progression on a year ago.
And you can see on slide 24 in most markets. We made solid progress notes that the organic growth rate shown here our normalized for FX for high for 16 and also other factors like like FX actually you're looking at like for like growth rates.
And on this basis, you can see that most of our operations may progress in particular, we saw El Salvador, posting a second consecutive quarter of positive EBITDA growth, we still have a few challenges, but we're feeling much better about the outlook. Following the recent spectrum auction results and retail mentioned as well as the upcoming market consolidation.
Now both delivery on Guatemala, though a little bit more muted than in previous quarters, Bolivia due to the social disruptions surrounding presidential elections in November and Guatemala, because as high a handset costs and more investment in network and sales and marketing.
I'll just posted a loss noncash adjustment last year, which isn't repeated this year, which is why there is such a big swing that I.
I didn't kind of mouth, the proceeds slanted by fairly easy comparison to the transition quota. We acquired company owned during Q4 last year, if you recall, but we'll see on the next slide that we see slide 25 that we've exceeded our first year targets for company owned.
If I when we bodes company on the we set asked an ambitious target for EBITDA of $184 million in 29 team and the cash flow target of $98 million.
Im happy to report that we've exceeded both targets and in particular with 7% of of our cash flow targets.
Exceeding our capex targets by finding additional synergies mostly relating to purchase savings coming from all greater scale.
In Bolivia, which is slide 26, we did face major challenges in Q4 with a fairly well publicized disruptions around the presidential election. This had a significant impacts on our business. We actually saw a number of weeks of no unlimited trading which has had a material impact on Q4 numbers.
We have however seen things settle down our business is gradually returning to normal levels.
I think it's worth reflecting at this time that in the last two years all home business in Bolivia has doubled we now have more than half million homes connected in mobile nearly 60% to our customers a 40 smart phone data users and loss of revenue growth slowed in the last quarter. The margin is creeping up even as we defend our strong mobile market position.
So we're confident that where emerging from this period of increased volatility in much better shape.
Now whilst in Paraguay, which is on slide 27, we are starting to see signs of recovery GDP growth has 10 posted a fat we've posted mobile games for that for two consecutive quarters now I.
Meanwhile, the margin remains robust at 46.8%.
Subscription businesses sustaining healthy growth and and although we do still have some work to do in Paraguay.
Why does remain an important country for us.
Finally, turning to Columbia on Slide 28, where are we seeing solid trends. Some time now these are beginning to be reflected in the financials.
Home continues to be the driver we saw good growth in HSC customer relations up now to 1.4 million and our home revenue grew mid single digits.
Mobile also did well in the fourth quarter with solid customer netapps in both prepaid and postpaid.
Well be at mobile revenue growth slowed in Q4 because of lower wholesale revenue.
And as you can see from the slide B to B rebounded strongly in Q4, although not enough to support so very strong 2018 performance on full year basis.
So organically revenue grew 6.3% and in fact, if I look at the underlying performance studies HSC, excluding Copa mobile excluding wholesale revenues how quarter, who is every bit as good as that of the competition.
Okay, and I want to turn and look at the full year numbers for Latam segments in that some page on slide 29.
See here service revenue of 5.5 billion up 9% 2.4 billion of EBITDA up nearly 18% again on the M&A in Fysixteen was Capex was held at $1 billion.
Capex control has benefited the cash flow as we'll see on the next couple of slides.
This slide 30 as usual Lcs studies EBITDA less Capex bridge to compare 2019 with 2018 materialize as talked about this but I just wanted to repeat the organic hosea growth of 8.3% still it's not about target yet, but we're making very good progress in that direction.
And turning to our equity free cash flow on slide 31, and to recap equity free cash flow results handful operating cash flow after tax interest and minorities. It excludes spectrum and M&A. So in other words. He is our recurring cash flow before sale to distribution.
And again ratio has talked about this and but I just want to make a few additional points. Yes at 179 million. This is below recent years and yes, there's no but we wanted to be but note that this year that was sizable impacts from M&A costs and financing fees, we had a higher than usual working capital movements, which was impacted by new businesses.
We also had adverse timing differences on capex. So in short we remain completely focused on driving equity free cash flow I'm confident in the future.
So finally on the slide 32, we ended the year with $7.2 billion in net financial obligations that is $5.9 billion of financial debt and 1.4 billion in lease obligations.
This translates to a leverage ratio of 2.76 times on a consolidated basis and 3.19 times on a proportionate basis I. Please note that this is the first quarter that we've started to calculate leverage to include the impact of high for 16, and this sense about 2.2 times to the calculation. So if we adjust flash.
16, we would've had leverage is just over three times as the year end comparable to the flat quarter.
On a pro forma basis, Costa Rica is now expected to close in the near future.
We that will add a further $570 million of net debt.
And take proportionate leverage a little bit higher.
So with that let me hand back to Mircea to wrap up.
Thank you Tim.
So now about the future.
Let's start with our outlook on slide 34.
As you know our investment opportunity is predicated upon young and growing populations in our markets increases.
Leasing digital adoption on the back of low broadband penetrations and a growing middle class in economies with continued GDP growth.
These are clear and consistent trends over the medium term, even if there may be political unrest or a macro downturn in one or two of our markets in any given year bucking did we saw in 2019 and to tap into these opportunity we have been building state of the our networks consistently adding customers and revamping organic revenue growth.
Hi, I'm done we controlled costs to drive operating leverage and improved cash flow generation as you have seen this is our simple strategy.
Is working given in 2019 with clear challenges in Bolivia, and product right, we drove 8.3% operating cash flow growth.
Because ours is a strategic long term vision, we are indeed investing for the meat and on long term, we like the momentum we now see in the business and to keep this mid term and strategic focus we will move away from providing the very specific guidance before the year as some of you may have come to expect we're doing these while maintaining and risk.
Confirming what bullishly, so our midterm outlook.
Ambition is for service revenue to grow mid single digits for EBITDA to grow mid to high single digits on for operating cash flow growth to be about 10%.
A key point here is very simply we remain very committed and very bullish about our outlook on about our midterm guidance.
And that is why on slide 35, we are reaffirming the total shareholder remuneration amount, we provide to our shareholders while improving the mechanism we used to do so.
The new mechanism has two components one today, we're announcing a 500 million dollar buyback program that we plan to execute over the next three years.
We may actually look to increase this into future, depending how much faster, we can grow our equity free cash flow.
And two we will be proposing a dividend of one dollar per share at our next shareholder Assembly.
This mix implies a total shareholder remuneration of at least $800 million over the next three years, which is basically the same amount we would distribute if we continue to be everything out and dividends at a rate of two point $64 per share.
We think this approach is more shareholder friendly because it continues to provide our shareholders with an attractive yield and it is a very high return investment as we firmly believe that equity free cash flow will regain its growth trajectory after that M&A integration period, just undergone as you know members of the management on a significant amount of starting the.
Company and were partly compensated on total shareholder return so we wouldn't be making this change we weren't absolutely convinced that this will enhance total shareholder return over the long term kind of not bullish node. We're excited about our Luke I am quite ready for your questions.
Thank you as a reminder, if you do have a question on today's call. Please press star wondering your telephone.
That star one topic question, if you wish to cancel this request please press the husky.
First question comes from the line of Marcelo Santos.
Please ask your question.
Hi, good morning, Thanks for taking the questions.
Could you please discuss a little bit more the current environment team believe you're already seeing some kind of normalization.
Going forward or is something that we should expect more in the mid term.
And the second question is about.
Service revenue growth Tom.
I want to provide the specific guidance, but.
Yes.
Could we expect some kind of improvement in 2020 versus just doesnt deal on local currencies do there is two questions. Thank you.
All right.
Our OLED 10 figure out how we transfer number two without backtracking on that no no annual guidance, which we think is absolutely the right thing.
Sorry about that.
But in Bolivia few bits and pieces Marcel on thank you for the question.
We did go through.
Through a couple of months in fourth quarter in which the political situation that you're very familiar with.
Did not allow us to sale or service either customers or the network. So it was pretty difficult for a couple of months.
From a operational point of view it is getting back to normal.
Back selling back activity service in the network and where backup connecting subscribers.
On January in particular as being very stable as you know looking into the future.
The next round of elections are in May.
So although things are stable now.
I couldn't quite put out a crystal ball that allows me to exactly tell how those elections are going to.
The civil unrest may or may not be and that's part of the reason we want to be very cautious because these things do pop up a one way or another every now and again.
So things are back on track back to normal, but we're not out of the woods, yet and we remain very vigilant as to what may happen on the elections in may and on the right after the elections.
I do want to point out that despite this hiccup in Bolivia, My personal view is that the country has turned out to be very resilient and his institutions and has been dealt with this institutional crisis.
In.
I had a stable manner and we hope that continues.
And I'll hand, it over to team on the second part of your question.
Yes, and the question was the outlook for service revenue growth in Latam and Twentytwenty and said, we want to move away from quarterly guidance and focus on the mid terminal mid east to get to mid single digits on our revenue growth.
Yeah, we take Q4 2019 as the indicator of what might happen in 2020.
We saw and as I said in my remarks at a very very strong performance from Columbia.
We feel that a lot of the actions we've taken as the last two years is starting to be seen now in the financial results.
So with the 700 spectrum that should aid all mobile business can we remain positive on the outlook in Colombia, Guatemala and has always been and remains very strong business continues to grow with system to folks into the fourth quarter.
And.
I mentioned El Salvador, where we've had a tough time of last few years. Then we started to see sequential growth in most of the metrics apart from revenue in El Salvador, but hopefully that will start to see that improve and twentytwenty.
The opportunities we have in Panama Nicaragua.
Surrounding the acquisitions, we believe give as a good outlook clearly it's early days for us the integration. So far is going very well, but it remains early days in terms of just exactly how far we can push that business food, we'll be looking probably primarily at.
Hey, it has synergy extraction doing 2020.
And Bolivia as rich I was just say it ended the year with a relatively muted and sort of flat lining on this revenue growth, which did dampen has been a driver for us for while.
And so kind of we.
Crossing our fingers, but we think we'll start seeing Bolivia coming back in Twentytwenty with strong performance.
Before mr. revenue.
And of course, Paraglide, which has dragged us through 2019.
We will be getting sat see some signs out more rational pricing and in that market and again, we've made investments and repositioned our business. So.
So I don't want it sort of kind of oversell twentytwenty on the revenue side and on the salads I think we feel we've taken the right.
The right moves and.
As I said on Q3 will continue to focus on maintaining our market share. So the maybe market. So we have to move either pricing investment et cetera to preserve that but generally we feel positive on our outlook.
Same et cetera, that's actually better color guidance.
That's correct.
Thank you very much.
Next question comes from the last spring next.
Next question comes from the line of Frederic Little from Dumps Bank. Please ask your question.
During my question.
Let's just go coming back to your thoughts for for sort of not really providing a twentytwenty guidance and if you can sort of more specify sort of the mid term where that this so we can sort of try embraced as in the.
In a sensible way them, so thats really one parts and then on on the.
The way you will now distribute cash to shareholders in one part in dividends and also then one part and share buybacks over three years will that be sort of the share buyback program will that be.
Evenly distributed throughout these three years or is it more and opportunistic situation, where you can use it. When you are feed you have sort of the situation to do so on how would that work. Thank you.
Sure.
I'll take.
The first part of the question. If you will now that maybe address little bit of the rationale on the buyback and that team walk you through.
Hey, I would call it the mechanics, perhaps the more to the inner workings of the buyback.
So listen on on the guidance.
We want to as a management team to be focused on our investors to be focused on our long term opportunity.
And we are solidly and bullishly, making progress towards our long term.
What we've done today is we put it out there again very very clearly so our midterm guidance is very robust is actually very detailed when you look at it both on the service revenue growth on the EBITDA growth.
Our commitment to operating cash flow growth. So it's very solid mid term guidance.
Very specific.
Items and it is perfectly consistent with what we deem to be the investment opportunity, which is predicated on digital adoption growing GDP growing middle class and low broadband penetration. So theres perfect consistency between the opportunity. This strategy that long range plan and as a result that we termed.
Which is very specific.
So we're confirming and will initially so that midterm guidance.
The reason why we are making moving away if you will from the.
Yearly guidance is precisely so we focus on the long term there are.
Hiccups on a yearly basis that come from either macro political turmoil or one given competition more may here or there and those do not move away from the long term guidance.
One as a management team to always be able to make the right calls for the long term and I'd be very transparent with you. So given any given quarter. We've won two more aggressively defend market share we don't want to be straight jacketed bound by a quarterly guidance moment, we want to be able to the right thing.
For the business in the long term Conversely on this has happened in the passage recall 2018.
We have a ton of momentum.
Keep in order, we want to drive net acquisitions, we don't want that additional subscriber acquisition capex to take away from us doing the right thing, which is investing in the business. So we're doing this for the purposes of having very very strong flexibility to take the opportunities to grow faster or defend market.
Share for the long term, if we need be not be straitjacketed into short term quite the opposite very very open to do the right thing for investors and long term.
Thank you think and.
We haven't really defined medium term, specifically, but I think most people would view it as three to five is not anything we would disagree with that.
That period.
I think on the on the buyback the distribution of have.
Cash buybacks I think this is an important point, we want to get across.
This is a long term program.
View ourselves a self pay because here, we intend to be in the markets consistently and we don't get into backend Frontend, we simply going to continue to be present in the market buying back stock.
That's our view off of how these programs are successful in that setting our view of the way we want to proceed with this.
With this program.
Okay. Thank you could get to have a follow up just Tim.
On the synergy side, you mentioned in Panama, you've done a little bit better there. That's good I'm sorry could you elaborate on on that wouldn't have most I mean, you're still have one piece the coming in here in Q O Q1, but have you sort of found.
And then you areas, where you could tap and then do more of synergy work in May bump date.
Datacenters and all that stuff is there anything adding to your picture when it comes with synergies are you do you feel that youre regional climb if.
That's fair.
Yes, Jim Thanks for the question because.
But obviously the synergies we've captured so far have come out a company owned or anti when we did the deal we didnt, specifically say that the synergies in that daily in fact, we worked very show that would be synergies and deal because we didnt have any multicolor conditions and believe we found them principally through basically better buying I mean, we did we just a bigger bye.
And therefore, we've been able to extract relocate synergies outsold the procurement side.
Now the telephonic piece, we've where we did have been market consolidation in all three markets.
Quantities, Panama, we gave guidance at the time that we expected to be able to extract $30 million to $40 million of Opex savings on the run rate basis $3 million to $5 million in Capex.
And we expect flights and revenue savings as well.
Kind of we haven't really made just also notice in the sense of these businesses only being in our portfolio now for.
I don't know kind of three to six months or so.
[music].
Thanks.
And what we've seen we remain very confident about extracting those synergies and I think you will see that is coming through in kind of 2020 2021 loosely periods, we expect to bring those out.
Okay. Thank you very much.
Thank you.
Our next question comes from the line of Kevin ROE from ROE equity Research. Please ask your question.
Thank you on Colombia, you mentioned in the press release price increase in the home business in the fourth quarter could you share. Some additional color on that was was that any different than than prior price increases and its magnitude and any potential impact on churn here in the new year it.
Also in Colombia, There you mentioned the government contract secured in Q4.
Anything else you can share on that it's duration its materiality for Colombia in the fourth quarter and Tim.
Big picture for.
Latin America for 2020 are there any new regulatory or tax issues, we should be monitoring for the new year.
Okay, all right I'll take the first part of the first Kevin. Thanks for your question on Colombia.
The key difference this time around on the price increases in Colombia.
Is that we didn't lead we fall.
And that's very significant because.
Well the challenger out the dominant in our market and as a result Haas following is very significant.
I think thats very relevant so we believe this will be stickier.
Price increases.
On the second thing I would add which is less relevant for sure is that we took the opportunity reshuffle up little bit our lineup our programming lineup and we took ways from analog channels. So we didn't see the full benefit of the price increases because we took advantage of the opportunity to re shuffle around our analog or takeaways from out of channels. Another.
No Thats always.
Troublesome for consumers.
Thats with regards to Colombia, we do see Columbia, becoming.
More rational and we do see our competitors and this is across fixed on mobile our competitors focused on returning capital investments made it's no longer the cutthroat environment that we saw some two or three years ago.
No I mean, it's being followed as well on the mobile slide didn't specifically called this out.
Basically, we followed and moving prices on the entry level postpaid plans and also.
The most popular prepays and the top ups again prices moved up so again positive signs that analysts, who we want to sort of get the stream is going just yet but it's.
It's been.
And in terms of than regulates we tax to latch on for 2020, we didn't have anything we've got particular concerns about on the horizon.
Obviously.
We remain vigilant because.
The mall the governments that.
In the countries, we help rates remain sort of shorts have cash and so we remain vigilant, but we don't see what we know we don't have visibility on anything at this point in time, and Frank and will be expecting anything would be.
Terrific and.
That's helpful and any color on the yeah the government contract.
Yes, it before Tim goes back on that you May recall me, saying, Kevin at some point over the last 18 months.
We should be on the Luca for a number of.
Presidential elections in our market.
Those are largely in the rear view mirror or now with the exception of Bolivia, which basically cost plus point into Twentytwenty.
So with the exception of Bolivia were more in the clear from political turmoil unusually surrounds political elections in these countries than we were in 2019.
Yes, let that contract the contract we mentioned in the fourth quarter was another election contracts I said, one off so that doesn't dusted, but make a couple of observations one as these things seem to be repeating unknowns necessarily suggest it will be the election contracts in 2020 to 22 anyway.
Yes.
These are happening regularly and secondly, and again this is just internal and stuff I'm seeing more now be to be request, the big ticket and transactions that were bidding them.
I think we'd becoming a much more credible player in that market I think it's I think it at the fact that we have committed to the long term that.
Some of the other big players have not being able to do that as helping us so kind of again, we remain optimistic this will be an area.
That will start to see.
And sustain progression.
20 and 21.
Following on that Tim Thats Super helpful that B to B market in Colombia, how big It is is the market growing and what's your current share in your view.
How long is a piece of string.
Well I think we face a consultants lunch.
I'll answer that question and I'm not sure I've got it the answer to take the mine.
You can go back Kevin I'm looking at Michelle hitting anxious at my answer you can do some pretty.
Yes, you can imagine.
This is figuring out what I'm going to say you can go back and sort of normalize our beauty business over the last few years. If you can do the math and you'll soon realize that yes, 2019 as I said on the call. This show kind of flattish, but thats because 2019 was great.
And our bid the business there on a normalized basis is actually net grower.
We believe quite a or an engine of growth into the future on a normalized basis, meaning any given year may be one way or another but on a normalized this is a steady grower.
And because we have a strong position now in Colombia.
And were positive for the long term there, but also in Panama and B to B and a continuous footprint our Central America, we're getting a lot of traction with nationals on limited Tina and those were the big tickets that team was referring to.
That's helpful. Thank you Lisa Thats helpful. Thank you very swiftly.
Our next question comes from the line of Soomit Datta. Your line is open from New set New Street Research. Your line is open. Please ask your question.
Yes.
A couple questions. Please one just getting back to the buyback.
I wonder why not frontend load to buy back to a greater degree.
I would imagine you think you'll shows a fairly.
Inexpensive at this point you will leverage is projected to full.
From the from the 3.19 times level at the end of 2019.
And so it seems kind of a sort of attractive proposition I wonder why you are a bit more cautious about doing that please maybe liquidity is affected I'm not sure. If you've done some work on that but that will be interesting skus and thoughtful it.
And then just secondly on Colombia, and Youre talking about price increases I think on fixed but also on mobile. However, there is a new entrant.
I think this week it was confident the spectrum position, so that'll be coming into the market.
When we sold them in Chile, they took advantage of higher prices.
Unbilled business pretty successfully so what are your general thoughts on on the new entrant in Colombia is it.
Dangerous time to be putting at prices that full thank you.
I'm not going to hit ended this submits high and a half.
Being holding mercy impact like Wildhorse is now the floodgates open.
Thank you submit [laughter]. Thank you guys you're doing my my bidding for me.
Listen on the buyback.
I don't think its news to anybody that.
We strongly believe I strongly believe that our equity free cash flow growth profile is becoming stronger and stronger as I said 2019, and 2020, our years in which we use some of that strength to strengthen the business operationally and strategically, but as the synergies and a good prospects of these are.
Decisions come through our equity free cash flow profile on its growth become very very interesting and that is the perfect scenario. The perfect moment to actually give more on that equity free cash flow and aperture basis to our shareholders and we think this is that perfect time for us to launch this buyback program.
And the reason we are putting into fourth.
And we're giving their sales three years.
Sure It which we think its sensible.
There are no specific huge constrains, one way or the other we just like to give ourselves plenty of time to execute and there are obviously market restrictions that we need to abide died.
Colombia.
I think I'll tackle that whole thing on Colombia on your question Summit I think it's better if we just talk about.
The spectrum situation in Colombia, and how this stick manner and we may not get a second question are there going actually on Colombia.
So there's two or three elements to Columbia, one the 700 and the actual spectrum that we got.
As we've said to the authorities and then obviously, we're very committed to Colombia, we've been investing heavily.
Well its HFC deployment in over 30 locations, a fourg network dynamic over 70% of inflation and revamping our in Colombia, and the benefits of that you've begun to see we're growing services revenue of 6% and EBITDA is 6% and we've become the second largest telecom provider on our well on our.
Hey to improving our position there and we've done all of these we that since you Handicap, we had no low bands.
At a cost disadvantage, which we've quantified to everyone, meaning that we have to put up 30% more sites than our competitors just to cover the same population area and even then we were faced with inferior indoor coverage because of the spectrum we had.
And we were unable to even serves some key non urban areas because of the spectrum we had.
In these auction we bought two blocks of 20 megahertz on 700, So thats 40, megahertz altogether, which makes it the largest holder of 700 megahertz spectrum in Colombia. So we know sense, we've reversed our spectrum position in Colombia, and we've sold for the cost disadvantage for the lack of in port reporting feeder indoor penetration.
And we will have access to new areas. So we're very happy with how we come out of this spectrum situation.
But we're not happy with.
Is with the way the aftermath of the auction was.
In public about this.
Because we believe a competitor was giving.
A.
Ex post.
Advantageous.
In addition that was not within the rules of the game.
Competitor boxed out after the auction on some of its commitments and yet it was allowed to keep that low frequency that were allowed to return the high frequency bands and there were allowed to keep the low frequency bands. So they come in with a frequency handicap, but they are yet to change that rules of the game.
It is not just who aren't happy with this is the entire industry and all the players in the market.
The rules are the game, how being disappointingly changed.
With regards to.
Warm coming into the market we welcome.
Any new competition.
Into the market from a regulatory point of view you know that in the past we posted a number of NVNO.
Many of them actually not succeeded.
But we've been open producer.
And we just we look forward to doing what we do best build network service, our customers and focuses on giving service we have superior networks now.
First mover advantage on the spectrum, and we look forward to making Colombia quite successful as rehabbing the past.
Just a quick follow up is a if that's possible to assess some appeal process you are pursuing with industry in Colombia or is it just.
Done deal.
So we've got our spectrum, we're ready to rock'n'roll. We're building. We're happy about is a matter of fact, we've been getting ready for a number of years. So as we speak here. Our spectrum has been delivered to us where our industry is below the in putting out stuff. So what's stopping holding us back and as I said, we have first mover advantage.
That is going to be key Tom.
Regulatory issues around the way to things turn out in that auction. So I do believe and we've been forceful and publicly that you should expect us to defend Youre right. Our rights piece of either Colombian authorities and the legal manner in which these auction was changed exposed.
Okay clear thanks.
Our next question comes from the line of Pizza Nielsen from a BJ. Your line is open. Please ask your question.
Thank you very much.
Two quick ones left please first one on what smaller.
Obviously, you've spoken about quite similar briefly here today, but also in in previous calls, perhaps developing and then maybe differently than originally expected in the near term how are you seeing Guatemala at developing a post the merger etcetera and then just quickly could you share any discussing how you see the roadmap for fall.
For de leveraging going forward given that you are significantly above your target for leverage and you're maintaining a high level off of shareholder distributions. How how do you view of how should we view the roadmap for de leveraging tool that target. Thank you.
Sure I'll take the first one on that.
Same handle the deleveraging.
It's been just about a year actually.
Scenes.
Landscaping Guatemala changed.
In the long term you change for the better as you've heard me say a number of times.
Because the market structure became effectively a very good market structure for investment on a very good market structure for consumers in the long term.
Because two players in as more market, both of which have the where we feel on the focus to invest for the long term such a great market structure for the long term for consumers and four investments, but as you can imagine there's some adjustments that need to happen during the first year.
The realignment of the new competitor.
On some nervousness in our teams in Guatemala around how to protect our market share and protect the market from the possibility. So we've invested heavily throughout this year, both in network and in Opex distribution service levels et cetera, and Guatemala to make sure that we face a new reality with sustained.
I can share and a growing business.
Hi, foreign large although there's been some nervousness that's the way it's made up if you look at the full year results for Guatemala.
Not one quarter and or the other fundamental remains very very strict very very strong theres been a lot more noise and really any change in trend in reality, it's a stronger market into the future.
As we expected we're seeing our competitors behave very rationally.
Hi, this might some nervousness hearing some hiccups here and we do expect that he will remain a very good market for continued investment going forward.
It remains one of our fastest growing I mean, the numbers are quite clear and most profitable businesses and that did not change in 2020, and we don't expect to change into the future.
And on the roadmap for deleveraging nothing Peter we said at the time that seem to have an organic story on de leveraging.
We.
Scott I want to do.
Good.
Last year next year, probably 21 in terms of getting the synergies out of the acquisitions, but we've made a lot of investments in the rest fell business, we expect to organic growth, we expect synergies to come through.
I think and on top of that in twin team 19, we also made a little bit of progress on some of the residual assets.
Helios Talison the age Umea Stakes come closer to liquidity through that are ipos.
So kind of I'm not sure I would expect too much in 2020, but beyond that we expect to start to see de leveraging taking place.
Okay. Thank you very much both.
Our next question comes from the line of Lena most of the from Carnegie. Your line is open. Please ask your question.
Hi.
A question.
Free cash flow.
Yes.
Jason.
Yes.
Sure.
Correct.
The acquisition.
In the late.
This is going very well.
In the life.
Yes.
Okay.
So what should we expect.
Right.
I wanted also Paul.
There are some other assets up for sale.
You.
Oh Boy mall.
Yes.
So far.
Okay.
And I was wondering when you were going to ask your question and I was hoping was going to be around equity free cash flow.
So.
Got it seems that Michelle it gets a little and just what I answer those questions I want I asked him to tackle number one.
The.
And.
Yes, I mean.
They know that Theres lot of noise in the equity free cash flow 18, and 29 team.
I think it's sort of kind of easy one to deal with US we had about $54 million of one off charges that we wouldn't typically expect to see those are detailed in the back of the earnings release and that reduced our operating and free cash flow.
And we'll say so working capital add some more time in fact quite significantly higher than we typically have parts of that is my technical just to do with the introduction of the balance sheet business is coming in and into it.
The paid so base, hoping to do with just timings of cash flows and in fact, we also had a timing difference on.
Capex around about $100 million in the.
Cash capex was about $100 million highs and balance sheet, Capex, which again effects our equity free cash flow.
Then the fight the final piece of complexity was that in the net financing charges clearly we put in place a financing structure for the acquisition for the EBITDA for the cash flow that we didnt actually haven't when we put the financing.
In place so we carried a much high level of debt and cash and also we incurred sort of frontend fees and.
And it kind of we had to take out a bridge loan, which we didnt number bonds and the period.
It's difficult for me to quantify that figure and Michelle will get upset with me if I try to but suffice to say, we we didn't see underlying that our equity free cash flow was particularly different from previous years.
But there was a lot of noise in relating to those factors of just just like.
Okay.
Right.
Yes.
Oh, sorry gone.
Yes.
Yes, you are probably have some more acquisition licensee.
Okay, well, but other than that.
Fair to assume that underlie.
Roughly flat.
We are adjusting overwhelms that.
That could probably maybe leverage tracking as well before we barking senior financial.
Interest expense lower.
So I'm not expecting any kind of M&A related and fees coming through into Q on but let me take this opportunity just took about the integration costs. When we did chameleon, we I'm sorry, the telefonica rashness so.
I mentioned that we expect about $100 million of integration costs, we will probably see about 50 million of them during 2020.
Thats sort of more or less while current plans for this year. So that will be additionally, if you like part of it will be covered by synergies that we extracting the but clearly run may synergies will come through.
Probably 21 22.
Okay.
Yes.
The other question.
In addition said.
Our.
Sorry.
I'm going to sit down so.
Yes.
Huh.
Branding.
Okay.
Alright, well yet.
Thank you for being so diplomatic and the way you phrased. The question later excellent.
Of course, we have been reading the papers and cores, we've been listening to banquette pitches year, and there and everybody has an I'd our another.
But I want to be Super clear to you when everybody here.
Well, we have said in the past remains absolutely true our focus remains on integrating that for assets that we bought in the last 18 months.
Putting over $3 billion of capital reallocation into Central America.
Which if you look at our market conference over 50% of our Mark top and more importantly, we are to that I, keeping the synergies that we're driving into the business, where I see that cost profile that does acquisitions beyond our strategic nature is giving us into the future underpins everything that we've talked about today, including a new shareholder remuneration.
One approach so rest assure that our focus including our commitment to delivering overtime remains completely consistent with precisely this strategic approach.
Okay. Thank you.
Our next question comes from the line of Stephan Golsen from Dnbi. Your line is open. Please ask your question.
Yes Hello.
Couple flow just trying to.
On the started a little bit more.
The slip a little bit wobble in pockets in the quarter.
If you can help.
If you strip out the new beat to be contracting close out what could have both food the service revenue growth in.
In the quarter as can be also for bill maybe I'd just on the side. If you can say well the so this revenue growth or in December off to the political turmoil ended thank you.
I know so I've got the answer the first question Stephanie.
In a sense, we took a view while ago not to kind of post adjusted numbers, one way or the other we clearly show the good with the bad than in Q3.
We were down because of.
Prior year, we had very good one off this year, we're a little bit up and.
I guess.
So I would I so as it comes because I don't really look at the and the numbers excluding they so excluding that the thing I would say that this thing. This is quite important yes, I said it and the call if I looked at the underlying numbers for mobile kind of mobile headline first didnt look fantastic, but the whole of the.
The impact was to do with.
The wholesale had revenues and what we mean by they sell basically the people that Romano network Bambinos and.
The AMD that the wholesale customers.
And I look in postpaid look of prepaid they were growing every bit as fast as seen at where the competition all of the principal competitor who is growing.
I did the same analysis for and HFC because of HSBC, we still have gotten some copa that we selectively dth would have been of and then looking to pure HFC growth rates again, very consistent way sort of in a market leading growth that so yes, we did have and positive momentum this quarter.
With the election contract and but I still think underlying we will.
We are beginning to see very strong momentum now coming into Colombia.
Now instead of an unbelievable, which I think it's important to US is an important part of our growth I don't know that Michelle again, we allow me to give you a december specific growth numbers for revenue is looking at me with us sticking his hand, but I can tell you. This if you look at our mobile customer now.
For the quarter.
They are positive.
And there are significantly positive.
Thats, a telling sign of what's going on there and if you look at our HFC net customer adds in Libya for for the quarter. There are also positive.
As positive, obviously, where a year ago.
The year, but they're also positive despite the fact that it was a couple of months in which we couldn't sell or service. So quite clearly Bolivia is normalizing.
And what we see today in the marketplace. These are normal economies.
Going back to normal are.
Concern or if you will our caution you simply because the elections, having gone through smoothly, yet and that's where I want to keep an eye out for that.
Hi, just follow up.
Colombia.
You had a very solid mobile subscribing, taking the quarter or are there any particular recent today semi.
And just a competitive activity or something.
I.
I've been calling Columbia out for few quarters now signaling that we think the economy is getting stronger.
We were going to reap the benefits of all the deployments in capital expenditures that we've been doing.
You also have the continues investment we've made on service levels.
Churn reduction and on the mobile business in particular that new product.
Which is significant and all of that is trickling into better performance caught on top of that we simply have.
An industry that is getting fresh air.
Growing as a whole.
Im sure Youve looked at the results from our competitors and you will see that they too are growing.
And as a result of that we just have a more stable environment in Colombia.
If you think it's beginning to shake out now some of the marginal players in the markets all either exiting it's all around.
No not.
Participating significantly in there.
I think we are long term play I think consistently that we will continue to consistently be that I think that chosen I think that.
Partially will address what are the earlier questions on new entrants that.
I mean, if you look and we haven't actually said this but I'm sure you realize stepping that up.
We lost some of the.
Avondale revenue.
And that 6% growth would have been much better we not lost revenue as you know I can tell.
Declared bankruptcy late last year, and we were basically their tenant.
Our results are actually in reality.
Effected or would have been better so directly.
Yes, hey, thanks.
Yes.
Yes.
Just last question. Please. Thank you on the last question comes from the line of Hana Chris from SCB. Your line is open. Please ask your question.
Thank you.
One question the sign to pinpoint the.
It could to treat test of a bit but im just wondering what do you view on on the Capex for Latin America in transit when the I guess since you sort of well on the Colombian spectrum and just wondering if you see a need to the probably that's already in twentytwenty in that they should expect somewhat higher capex run rate for.
But twentytwenty and my second question relates to.
He had wheels and that you mean.
Just wondering.
Have any sort of look.
On the two and when those to those expire thank you.
Yep.
On the Capex.
This is up.
A very good attempt to getting us to give you. Some some our guidance for 2020, what I'll do is I'll try to give you. Some color John I think there will be very helpful. I'll try to do it on a long term basis, rather than on given specific year on I think that would be most helpful for you.
We expect that we will remain.
Over our mid term at right around 1 billion dollar or $1.1 billion of Capex on a yearly basis holiday.
But within that.
You must understand that Colombia.
The 700 in particular has two significant elements to it one.
As we deploy the network, we also get cost savings in the network sites, because we will be able to reduce the size Austin and where we would've otherwise hot because to 700 is more efficient and number two.
These.
Spectrum acquisition comes with very long term.
Payment terms and rollout over the additions are diffused overtime and as a result of that we don't expect that Colombia with John Spike in our Capex in 2020.
We remain we believe that will remain within that one to 1.1 billion over our midterm guidance more importantly, we believe these will continue to be increasing this success driven because it's more focused on the age of seeing it adds on is more focused on capacity rather that coverage as I've said a number of.
Times, and we do believe sat in the medium term as we said a number of times, our capital intensity will move towards 15% from where it is today at around 70%. So there you go I'm, giving you a ton or color still within the medium term outlook, which is the way we managed the business and on HD and Jimmy.
I will pass it onto our Africa expert [laughter].
Technically I think you answered the look upon tulia and we're still in line on hasty a bank slow completion.
I think comes out in April.
But I think what I said.
On my remarks is we've moved one step closer towards one notices.
What we've clearly said our non crosses into long term.
Thank you very much right.
Thank you to all of you for your very very good questions in for hearing is out today I want to repeat everything we've said I hope that tone and the demeanor of these.
Todd gives you an idea that we remain super bullish and Super confident on our growing equity free cash flow and our new total shareholder remuneration program, which we think is an improvement on the power mechanism on an operational basis. This year, we haven't said it lightly but we are out new records for total subs.
Our postpaid and Fourg I'm very solid near record HFC unit I told that didn't go unnoticed, Colombia is very strong on revenue and EBITDA growth what came out I remains solid and company owned.
As far as we can see is ahead of plan on operating cash flow and we remain very bullish both defending our fixed leadership and gaining market share on mobile. So overall, we're pretty bullish, particularly about our equity free cash flow growth into the pro into the future.
Strategic moves we've made over the past 18 months, both on the shareholder remuneration now.
Acquisition. So we look forward to what we think is a solid future you hope we hold many of you will continue to join us for the right. Thank you.
That does conclude today's conference. Thanks, everyone is participated in today's call you may now disconnect.
[music].