Q3 2022 Millicom International Cellular SA Earnings Call
Yes.
[music].
Hello, everyone. Thanks for connecting to our video conference to discuss our third quarter 2022 results.
Before we begin please take a moment to review the safe Harbor disclaimer on slide two of the presentation, which is available on.
Our web site, along with the earnings release.
During the presentation, we will be referencing non <unk> measures and we define these on slide three and we provide reconciliation tables to the nearest <unk> metric in the earnings release as well as on our website.
I will now turn the call over to our CEO Mauricio Ramos for his prepared remarks Mauricio.
Good morning, and good afternoon, everyone. Thank you for joining US today are key message is that we are on track.
To meet our organic <unk> growth target of approximately 10% for this year.
To generate solid equity free cash flow in 2022 were in line with our budget for the year to.
To invest about $1 billion in Capex. This year, which is also consistent with our long term targets.
We're also on track on our key projects to highlight and crystallize value for our infrastructure on PD to cards and <unk>.
On truck on reducing our net debt with net debt down in this quarter and despite the tougher macro.
And we're on track also on our social on ESG initiatives with meaningful extraordinary recognitions will address later today.
So Mike.
The macro environment is indeed, much Tucker and yet remain not totally very broadly on track.
And this is because one we entered this period of increased macro volatility from a position of immense strength our.
Our networks have been modernized and expanded.
We have increased our customer base with sustained or larger market shares our Sunday ego culture ease of its strongest point ever.
Brian positioning has strengthened as a result in just about all of our markets.
And two because our business, particularly its cash flow is extremely resilient, we show that to you in spades during the pandemic.
Despite the weakened macros long term demand for our products is still very much there in broadband penetrations are still very low.
And three because we do volatility and challenging environment quite well.
Continue to invest wisely through those circumstances and always we take on the opportunity to become more and more efficient.
Indeed earlier this year right. After we could perceive as development is happening we started out a new long term efficiency project to protect our targets.
It is called Everest is already underway and Sheldon will discuss it later on this call.
And lastly, because of the currencies in South America, and believe our most of our cash flow compounds.
Stem around have helped very very well, even despite the strengthening dollar.
Now please turn to slide five for the financial highlights of the third quarter were so more detail on how we are staying on track.
Services revenue grew two 7% during the third quarter. This is a solid outcome in a tougher macro environment.
Q3 was also a good quarter in terms of operating cash flow with organic growth accelerating.
Five on an adjusted basis.
Year to date. This is right in line with the way we had budgeted the year and also with the long term plans that we communicated to you at the beginning of this year.
Now there are some shifts in the way we are achieving our growth and this is consistent with the general trends we've seen our markets.
Throughout the year Kids went back to in person learning at school.
<unk> have been returning to the office.
As a result mobility has resumed and consumers are creating their mobile blasts or getting a prepaid phone or their kids and their families. All of this you can see on the strong performance of our mobile business. This year.
<unk> cited that spending on pay TV in residential services ASIC slowdown and this is a phenomenon that is happening just as the global economy is growing and consumers are feeling the effects of higher inflation.
So our read is that this recommendation of demand post pandemic is largely driving the temporary slowdown in our own business.
These ebb and flow well settled and the growth in our home business will continue to be driven by its long term drivers low current penetration broadband rates population growth middle class formation in digital adoption by a very young population today.
And finally <unk> continues to perform very well and we will expand on this in a minute.
So let's go in detail line by line first.
Let's start with our mobile business on slide seven our prepaid base continues to grow and most importantly to serve as the base for us to.
Migrate our best prepaid customers to postpaid we do these upgrades to postpaid with selective segmentation based on consumption reloads on payment history of which we have a ton and this is working we have now added nearly 1 million postpaid customers across our footprint over the past year.
More than half of these were upgraded from prepaid and the growth in postpaid is widespread across all of our markets.
Our postpaid still accounts for only 15% overall mobile customer base, but it now contributes 35% of our mobile revenue and is growing about 10% organically.
When we upgrade prepaid customers to postpaid threshold is lower churn, a slightly better or better customer lifetime value and better network consumption patterns. So as we articulated in our strategy some time ago.
Sprint is now becoming an important growth driver for us.
More short term notice during the quarter, we implemented price increases in many of our markets you don't see that quite yet in the financial numbers of course, there's a natural lag or delay for that to flow through into the numbers.
<unk> point is that this increases our reconstructive enterprising and will position us to close this deal with stronger momentum in mobile and also set us up for 2023.
Now, let's talk a bit more about hormones.
As I said, a few moments ago, there is some ebb and flow and our net add numbers this year.
This is caused by one the pandemic ebb and demand this year, which already addressed to the more difficult macro environment with inflation industry. It's not quite obvious there should be no surprise 'twenty, one and three we ourselves are choosing to remain disciplined on price during the quarter, we implemented price increases in most of our markets for home.
And we continue to charge installation fees, even if some of our competitors do not.
<unk> net adds in the short term it builds a much better and stronger business for the long run and as I said earlier. It is the long term drivers of demand that will drive the business and keep it robust into the future and these are low broadband penetration rates digital adoption by your own population and household formation.
Debacle of economic growth.
Once the ebbs and flow of the pandemic subside, we expect that we would be at a long term run rate of about 300000 net adds per year.
Assistant with our average and the reason two years.
Because of this we have now re ramped our build machines.
Cable is already on almost 2 billion revenue business for us.
Long term growth this quarter as a result, we have built a quarter over 1 million homes and have started our greenfield fiber deployments. We also entered into key additional content agreements, we signed the deal with Televisa, maybe as shown to distribute fixed plus their over the top platform. This will leave our company.
Customers in South America access to great content, including the Spanish Soccer League La Liga which is medical.
Content that helps drive demand and as you can see on slide nine. This agreement is just one more piece of the puzzle as we continue to position our flagship Tivo supports some of issues, China home personal care most of our markets and the core of the offer we have exclusive TV rights to many of the local soccer leagues in our markets.
This is a cost effective way to build scale position of our brand and driving increased convergence and loyalty from our customers.
We presented on that 360 basis available both at home and around all of our customers and we are now using our Unix sports content platform to support our ESG efforts on our communities win win partnership with industrial play automatically.
Now a brief moment to highlight our strong performance in B to B on slide 10.
Despite the weaker economy, our growth and we need to be as continued to accelerate hitting almost 6% organically in the quarter. This growth is driven by very robust demand for digital services.
Which grew 35% and are approaching 20% overall <unk> revenue.
As you likely recall, we revamped our long term strategy particular business just before the pandemic and it is not working this strategy is encompassed by a clear customer segmentation approach. The addition of digital cloud and cyber security services to our connectivity offering.
Strategic alliances with worldwide players and a clear focus on our well trained commercial distribution team.
Execution is not panning out to be solid I want to publicly congratulate the to go business in today plus of course raise the bar for them to deliver even more.
Let's now look at two of our largest markets starting with what came out on the left and.
In Guatemala, both service revenue and EBITDA was down slightly year on year in Q3, as you know we gain a very significant amount of mobile market share before and during the pandemic and what our competitor was undertaking M&A integration efforts in the country.
No surprise, then that our competitor now wants to recover some of that.
For those of you have followed US you know that we would always take the longer term view.
For these reasons, we have been investing to sustain our gains by increasing the competitiveness of our product offerings by enhancing our sales and marketing spend and by continuing to invest in our network.
This may mean, a bit of short term b on it certainly will give us sustained long term game. Meanwhile, we continue to grow nicely in home and <unk> in Guatemala.
Our re launching our people money business now.
Now all of this may not be obvious to you, but this is all pretty much as we had expected and had actually budgeted for this year.
In fact, our results here today in Guatemala.
About 1% below budget on so this is in line with what we had budgeted for in Colombia continued to deliver very robust performance with mid single digit service revenue and EBITDA.
This was driven by mobile service revenue was up 40% in the quarter.
This is both volume on our driven.
Not growing in Colombia.
This is more than offsetting the softer trends, we're seeing in home as we discussed previously and Colombia is as a result growing overall on all the way down to OCI growth.
And finally in Panama, we are seeing continued strength in our mobile business, which grew 9%.
This is a market that is in the process of consolidated from four players.
Two players and by the way as you know this is becoming the norm in Central America.
The point is that we still have a lot of opportunity to increase our scale in mobile in Panama.
Meanwhile, <unk> had a solid Q3 in Panama with growth of 5% and they are continuing to successfully protect and nurture our market leadership position in home or.
We're driving larger scale and continued margin expansion in Panama, which is already one of our better cash flow producers.
We told you at the beginning of the year that we expect topics for this year to land at about $1 billion.
And we are on track for that.
What's really important is what's within that envelope.
We have rolled out about 500 physical sites and over 3500, New radio base stations this year.
This is about 18% more than we did last year.
Today, our population coverage for <unk> will reach 79% by the end of the year across the board.
76% last year.
Most importantly, we have also completed this year the mobile network modernization scene, Abboud us Paraguay, and Colombia with five <unk> compatible radios with based networks in all of our countries have now been modernized over the last three to four years and by the end of the year all of our mobile core networks will be <unk> ready.
We have also now launched <unk> in Guatemala, as you know and we have commission sites for building early next year also by year end, we will have rolled out about 250000, new home passes either an HFC or ft th, including numerous.
And as a result, our network with Pas about $13 3 million homes by the end of the year handle these around 800000 will already be fiber to the home fiber deployments now activity in all our countries. This.
This year, we will also complete our fiber connectivity project from Bolivia, Paraguay.
Ours will be as a result, the only redundant fiber connecting the two auctions through existing terrestrial routes. This car is important cost efficiency savings going forward. This year, we will also finalize and complete our telco cloud project. This project is the connection of our <unk> tier three data center facilities across both countries with our own.
Cloud solution.
With this we can host in house, our IP Pico business on telco needs all in our own cloud infrastructure.
This project has been in the making for the last four years and will allow us to cost efficiently add capacity to absorb the traffic growth that we continue to see on our network and we're glad to see it finalized this year.
Now for those of you who like ratios. These old man's quite simply said a healthy 17% capex acceleration is expected for the year.
Now please turn to slide 13 for an update on our plan to carve out our towers and our chief of money.
Yes.
In towers, we have not continued to work with our financial and tax advisors on the business separation.
As a result, we are now well advanced and prepaying, the master lease agreements, which we expect we will finalize in Q4. This will in turn allow us to start transferring assets to the new legal entities in the first half of 2023 or as we had planned on.
Tebow money, we continue to expand on and execute on our development plan, our new options now live in the Buda is on media and we will be rolling it out in the remaining countries in Q4.
For the past several weeks, we have been piloting nano lending Paraguay, although it's only early days. The early results are very promising.
We've also started rolling out our new merchant platform across the board and we are now signing up retailers of all sizes.
One of them into it as a major food delivery company that now accepts steger money in four of our markets.
This is a ton of color and a ton of detail, but seem to give the strong message that we are continuing to make good progress on these two strategic projects and that they are on track.
Before I turn the call over to Sheldon to go over the financials I want to take a moment to thank each and every one of our 20000 employees up to you.
We have jointly undertaking a major transformation over the past years together, we have redefined our footprint with over $6 billion of M&A.
Creating 2 billion all of our cable business modernize our networks and increase our customer base.
Behind all of these transformational either to most last initiatives, we have undertaken as a team.
One our dry to define our strong sense of purpose as a company to build digital highways that connect our customers and improve our communities.
And two to strengthen our unique and strong culture starting to tivo.
Now I would say this because it is these two pillars that are driving one the continued high rankings on our ESG strategy continues to deliver which you can see all on this page and to a recognition. This year was the second best place to work in all of Latin America.
The best place to work worldwide and it is this team that is delivering and we will deliver the targets on results and we have promised to you and to all of our stakeholders.
That let me turn it over to Sheldon.
Thank you Mauricio.
Before we review the financials, let me recap the macro context on slide 16.
As you would expect inflation in our markets has increased over the last 12 months in line with global trends and reaching an average of about 8% in September of 2022.
And on the right you can see the GDP growth expectations have been coming down with growth of 4% and our projected for our markets in 2022 slightly faster than the three 2% and the IMF is projecting for the global economy.
The IMF also projects in 2023 will be another year of slower growth, but it is interesting to see that our margins are expected to grow faster on average than the rest of the world, which I think is testament to the resilience of the countries where we operate.
Now, let's look at our Q3 performance beginning on Slide 17 service revenue was $1 3 billion for the quarter, that's up 35% year on year through the Guatemala acquisition.
Excluding the acquisition and the impact of FX organic growth was two 7%.
Our mobile business grew slightly more than 3% and contributed more than two thirds of the overall growth in the quarter.
And all of them of our growth came from postpaid which continues to perform strongly and grew just shy of 9% year on year.
We continue to reap the benefits from the additional investments we've made in some of our mobile business is over the last couple of years, especially in Colombia.
FX detracted from our revenue growth this quarter largely due to the Colombian peso depreciated, 12% on average during the quarter compared to a year ago.
Like many currencies globally. The Colombian peso has continued to weaken compared to the U S. Dollar since the end of the quarter for many of our other currencies like the Guatemalan quetzal have remained relatively stable.
Drilling down further on slide 18 to the service revenue by country.
Mauricio has already talked about Colombia, Panama, and Guatemala, So I won't cover those again here.
Elsewhere, our performance in most of our other markets was solid.
No Salvador, Nicaragua maintained their strong momentum with growth of about 6%.
Paraguay grew for the sixth consecutive quarter and was up 2% with solid performance in mobile and <unk>.
Under us, which we don't consolidate we're showing steady improvement and was up 2% this quarter.
<unk> was down 6%.
As we felt the impact of a change in regulation on our mobile overage rates that went into effect in August .
This affected our mobile business, while our home <unk> business continued to grow both year on year and sequentially.
Okay, turning to EBITDA on slide 19.
EBITDA of $539 million was up 53% year on year due to the consolidation of Guatemala.
Organically EBITDA was down one 9%, but this was impacted by a one off of about $7 million this quarter related to the early termination of a software contract.
Excluding this effect EBITDA declined <unk>, 6%.
Other factors impacting EBITDA. This quarter included about $6 million of incremental investments related to the carve outs of our tivo money and tower businesses.
Looking at EBIT da margins on slide 20.
Adjusting for this one off this quarter margins were broadly stable. Despite the investments in our carve outs and the tougher macro situation.
Energy costs were up about 17% on average during the quarter and we have also seen an increase in employee wages, which we have largely been able to offset with efficiencies.
On the flip side, we have been able to put through some price increases across our markets, especially in our postpaid at home subscription businesses, but also in prepaid in some markets.
We're very encouraged by the competitive response to our pricing action and we are hopeful that the full benefit of these price increases will be more visible in our Q4 results. When we will see a full quarter effect of these actions and as we take additional steps to offset the impacts from high inflation in our markets.
In addition, I want to share with you that we are putting the final touches on a very broad based efficiency program called project Everest now we've been working on for the past several months.
We expect the program will be a key pillar of our EBITDA and OCI growth next year and over the next several years as targeted savings ramp up.
I plan to share more detail on this project when we report our Q4 results.
Now looking more closely at the EBITDA performance by country on Slide 21.
Aside from Colombia, Panama, and Guatemala, <unk> already talked about.
Nicaragua and led the group with EBITDA growth of more than 13% as they had an easy comparison due to the catch up of municipal tax payments in Q3 of last year.
El Salvador grew just shy of 4% maintaining the solid performance that we've come to expect in the last couple of years.
Paraguay EBITDA was down two 7%, mostly due to some phasing of opex related to our soccer rights and our marketing campaigns. This is expected to normalize in Q4.
Olivia EBITDA declined three 7% and the revenue impact from the regulatory change drop straight to the EBITDA line.
Finally, Honduras, which is not consolidated grew three 5% as the business is starting to show signs of improvement.
Moving to slide 22.
You can see how our operating cash flow as EBITDA less capex compared to the previous year.
<unk> more than doubled to $286 million in Q3 due to the consolidation of Guatemala.
Adjusting for this M&A and also from the one off charge in this quarter organic growth would have been four 5%.
As expected this was an acceleration compared to the growth we reported in both Q1 and Q2 of this year.
On Slide 23, you can see our usual net debt bridge.
Net debt is down almost $830 million year to date, including about $100 million during the third quarter, which came from equity free cash flow contribution during the quarter.
And from the benefit of the effect of the weaker currencies of our local currency debt.
So we ended Q3, just shy of $6 billion net debt that's.
That's down almost $833 million since the start of the year, reflecting the rights offering and net debt to EBITDA. After leases was 303 times. If we include lease obligations of just over $1 billion. Our leverage was at three two times at the end of Q3 down slightly from $3 one four times.
At Q2.
Finally on slide 24, I want to close out by highlighting that we have a very well position debt profile. During this rising interest rate environments.
We have very few maturities in the next 24 months. So we do not have to be active in this current market repricing our deaths.
Our $600 million revolving credit facility is undrawn, thereby providing significant liquidity.
And 82% of our debt is at fixed rates or swaps or fixed.
Now please turn to slide 26 and talk about the outlook.
As we've outlined today the business continued to perform well in Q3, and even though conditions have gotten tougher our results year to date are broadly in line with expectations. We had when we prepared our budget almost one year ago.
And this is why we are reaffirming our targets today.
As you can see on slide 26, we remain on track to deliver organic operating cash flow growth of about 10% in 2022.
As Richard mentioned earlier, we are maintaining healthy levels of investments through the business in 2022, but the phasing of our investments is different this year compared to 2021.
Given our target capex of about $1 billion for the year. This means that capex in Q4 should be much lower than the record level of Capex that was spent in Q4 of last year.
And on Slide 27, we want to remind you that our equity free cash flow is seasonal in nature.
A it usually coming in Q4 and that is our expectation also again for this year.
We now expect full year 2022 equity free cash flow should land between $150 million to $200 million.
This is right in line with our budget and is consistent with our target of generating between $800 million to $1 billion during.
During the 2022 through 2024 period.
With that we are now ready to take your questions.
Thanks, Alan Thanks, Mauricio So we'll now go to the Q&A portion of the call.
If you would like to ask a question. Please E mail us at investors at Millicom Dotcom.
And we will take the first question now from Stefan <unk> at Dnb.
Stefan.
Okay.
Yes Hello.
How are you.
Im fine.
<unk>.
So.
A couple of questions.
Let's see if I can spotlight my video as well.
So.
First of all.
Can you talk about which markets and products you have implemented price increases for.
When was this done and what magnitude of price increases.
Perhaps more importantly, what was the market reaction and how has.
Your competitors responded have they followed you or.
Yeah.
Any flavor of this would be way to helpful.
And you said you had two questions, yes, I can take the second one.
Directly here.
<unk>, some 200 million to $250 million in equity free cash flow in Q4.
In order to reach our targets.
Looking at the seasonality.
Q4, if you stay a strong quarter in terms of net working capital last year, you had 100 million and Thats working capital release.
Yeah.
But I mean, it's clearly more needed in order to reach your target. So any flavor on what you see for cash flow generation for Q4.
So why don't we go backwards because I think the second one is super mathematical under the history of <unk>.
In all of our prior years, and which we've actually done more in the fourth quarter then.
This year.
So I'll ask show them to walk you through that one.
Then I'll take on the pricing quantity necessary.
Sure.
Yes, so I think as.
As I talked about in the past and you picked up just on your comments. There there is a large seasonality into our to our cash flows as a company a lot of its working capital related.
I mentioned <unk>.
We spent a lot sort of in Q1 on working capital and you've got the big outflow that's related to amount of prepayments for the year.
Software and regulatory fees.
And the like we built up inventories kind of in the year for handsets and the like which in Q4 is probably one of our biggest sales quarters for the year. So those inventories get depleted.
At that point in time.
So you see a big swing and you've seen that historically and so it was a big outflow in our working capital is that.
Basically comes back in Q4, I think what is also a bit more pronounced this year is the phasing of our Capex in Q4 last year was it was a very large capex quarter for US you can see as I highlighted in our slides.
This year's Q4, capex can be upwards of about $100 million less than in prior years. So so there is just the phasing of kind of our of our Capex spend is going to actually just benefit us as well from a cash flow timing perspective.
As we as we move through the year. So so that's all going to essentially come to fruition here in Q4, and Thats, where you see a large cash inflows coming in to achieve our 2030 to 200 range that you just talked about.
It's the nature of the business as you very well know we tend to book our Capex.
Q4, eight in Q1 and taxes are paid in Q1 most of the payments are paid during the first half of the year. So that's the nature of the business. It happens every year and this year is consistent with prior years I think the difference. This year is it becomes a little bit more obvious to you because we're not consolidating but smaller.
And because we're giving new equity free cash flow guidance. So you are seeing what we see every year just nominal uptick manner.
So.
For that pretty mathematical.
On the price increases and what we're seeing in the market how much of that space.
I'm going to try to keep it somewhat summary, because it's nine markets basically three lines of business as prepaid postpaid home and are not including Adobe and Microsoft with us So matrix about its supply base. So we can give you some more color offline.
I think the big the big market, where things are moving towards price, where construction is Columbia.
And that is true.
Both.
He's adding postpaid where you've seen our philosophy to grow out in Colombia around.
Around 6%.
Monopoly stake so thats given us in Colombia.
The gains and also price increases.
And Oracle pickup in Colombia, so the overall are putting Columbia reconstructing significantly.
As.
We expect that it would eventually happen.
The situation today is one in which Columbia on mobile is growing about 42% because of our portfolio.
James.
We're also seeing prepaid price reconstruction in Paraguay.
Market, what we're seeing.
<unk> decreases stake the moats everywhere else is still to be determined.
Where there are the price increases will stick or not and as you know the nature of prepaid is when do they is pretty much on a daily weekly basis. Let me also play with commissions in other ways.
Woods periods of both of those trials.
We have on postpaid.
Over the year of price increases.
Just about and I'm, just looking at a target to make sure that our own speak out of school in just about every market with the exception of a pattern.
Olivia we need on postpaid very early in the year, we may do something later.
This year or early next year, but thats still to be determined on how the market plays out.
Colombia, we did something in the middle of Q3.
Sticking on postpaid in Colombia.
Everyone seems to be formally including all of the other competitors on postpaid in Colombia.
On Panama, we haven't done any spot market on a volume.
Don.
Increases in postpaid.
That is largely because our largest competitor is.
Doing price increases until early next year. So we don't want to create too much of a price gap differential there.
Hi.
People are have until early next year.
One of the home.
We have to.
Taking price increases.
In most of our markets.
Hubs.
We gave you some detail on these.
Those are hard to say are sticking.
Then the wholesale price increases.
Because we've been ourselves more price discipline that we stand by our competitors.
Not I mean, we've had installation costs in the market, whereas others may have.
While Rob on that regard.
Because we sell in our prepared remarks stops definitely the right and correct thing to do.
Long term.
As I said on the prepared remarks, with reducing hall is going through a bit of an M because of getting flow back towards the off because of the economic situation.
Wanted to preserve a very healthy.
On installation cost scenario for the long term.
That's the long and short of that.
Hi.
That's perfect. Thank you.
Our next question is going to come from Marcelo Santos Jpmorgan.
Hi, good morning, Thanks for taking my questions.
The first question is on the lineup the price increase over the first.
Tebow operating markets, where it has a very good market structure tubular who's number one two and there are a few competitors, but when we see inflation is running at eight and you're growing your organic revenues.
<unk> revenues of $2 seven.
What's the main gap here is this only macro is there could you just try to breakdown. This gap in how this should follow going forward. That's the first question. The second question is if you could dig a little deeper and believe these regulatory changes, but what happened and what how should this progress going forward. Thank.
Thank you.
So yes.
Youre absolutely right.
So thats a very good.
Good point.
It allows us to point out that.
Uh huh.
So on the back of our environment.
Do not.
He meets visible.
And <unk>.
The first right of way is coming back these are.
But you don't do it through the entire base waiting cohort, so that theres a lag effect.
Point number one.
Number two is there is price elasticity of demand I E. No context docking station every penny that you pause on May come back to you with perhaps some downgrades and they came back to you with some softer demand and as a result without the reasonable price elasticity are going to continue because.
That's the reality.
So the long term of values that you will eventually pass through I think the short term in the context of an inflationary environment. It will take a longer season, because there is some price elasticity of demand.
The third effect is that.
Headed throughs.
Those are two player markets they see the opportunity to just wait it out.
Few months, maybe two months of the quarter and you couple of quarters.
<unk>.
A little longer to react to the price increases they may have better results to human nature of individuals and management teams, but it doesn't change the long term right.
A couple of quarters of dislocation long term equity.
So those are the three reasons on why there is a lot.
E element to the price increases flowing into the P&L.
Lucy.
Yes.
Conversation, yes, so I believe it was on the market.
But I mean, just as well.
Okay.
So the actual situation that <unk> changes and believe that this is a prepaid model by the way.
And the last one of the countries in which we have consumers. However.
Octave equal.
Right they are consuming there.
Prepaid balance on a promotion on occupancy or not.
They use that up.
We'll have <unk>.
That gets consumed.
Practices, which are higher.
Alright. Thanks.
The industry continued to do this until about couple of months ago. When the regulators said, we don't want to stop doing that right. So when you come out charge when someone's auto based specific prepaid plan.
Yes.
There always has to be.
One of your existing market.
The state owned company.
I was doing the exact same thing.
Perfect.
But.
The regulators said don't do that so what that does is it takes out some of our high pricing.
And as a result of that we see a step change in our revenue now.
That will wash out obviously eventually a local entrepreneur more rates.
One time.
Loss of revenue, because we will no longer.
In the middle of the quarter, yes in the middle of the quarter. So this quarter you will see a partial impact on.
On a going forward basis of course.
Reconfiguring our offerings to help mitigate as much of that is.
As possible and there'll.
There'll be a period of time is for plastic customers sort of.
Moderates a bit to the new to the new to that new environment, we expect overtime to mitigate a lot of the loss, but I think we'll have some impact here and a bit more pronounced even probably in Q4 in Bolivia, because well have a full quarter's impact of that until we know until we see some mitigation happens more towards a course of 2023.
And welcome Chris.
We don't Miss the sort of big higher story unfolds.
Indeed mobile you believe is going to cause some short term.
Most of the regulatory out of quarters, our competitor a remains very <unk>.
<unk> is getting in its pricing we.
We don't believe that envelope that long term pricing capacity or our competitor exists.
It really run it.
Quite a long time.
If at some point it will run out of us.
Because they can't continue.
In the meantime, our home business.
Continues to grow and.
And we continue to be very bullish on it as you know it created a dismissal of Q4, we will reveal the loss.
Seven years up today.
It's actually bigger in terms of the revenues on the overall business in Bolivia, we see a lot of run rate.
We restarted later this year and will continue into.
Into next year are building both IMMU.
Are you seeing.
Maybe half a million homes can still be built fiber equilibrium and we see a lot of our growth opportunities better or occupancy that are based in Bolivia has been up 7% year on year.
With employee R&R people business.
Part of the acreage.
<unk> been.
We deployed our tier three data center.
Educate dominate gets capacity because it's really kicking in single business in Bolivia.
So we started to build and we think that it will be will be an increasing driver of our overall revenue.
Revenue of only one which is already more than half of the business. So that gives you the entire picture of what's happening.
Despite the regulatory changes.
In social policy pricing by competitors.
Thank you fair enough. Thank you thanks a lot.
Thank you Marcello.
Alright, and then where can I go now to some at that time at New Street research.
Yeah, Hi, guys until three questions.
Please.
Firstly on the mid term equity free cash flow outlook.
Hum.
1 million too.
Obviously.
The demand environment is getting tougher.
Yeah.
Inflation, obviously is MPS.
But you are reiterating that guidance.
How much is project Everest I, thank you for that.
Is that.
A relevant factor in making sure you hit.
The outlook going forward.
And does it relate to question the spectrum in the first nine months I think has been running at about 160 million U S. Dollars. So would there be an expectation that that would be slightly above the normal run rates on it.
Reset.
Particularly thinking about some Colombian spectrum be reissued into 2022, so yes, I mean equity free cash flow just hitting the guide in the tough environment and specifically maybe anything on spectrum that that's okay that was kind of warm.
Jim.
<unk>.
Secondly, then just on inflation.
One question.
Alright.
One question was seven pumps.
But I'll, let you answer that and then maybe we were on the outside.
Because I will forget the sector and then the third anyway.
Listeners theres many ways too.
I think I got most of the pieces of it.
There's many ways to answer that but I think.
The better way to address it.
Yes.
The two things that are subsets and your questions.
We already baked in to the moment, when we put things out for Investor day.
Meaning by that time, although we don't have perfect visibility on the final spectrum lease renegotiations in Colombia.
Much as we speak and into next year, we baked into that notion that the Colombian spectrum will be renewed at higher prices than before.
The impact in 'twenty.
And your payment for the Columbia Spectrum, I Hope I made very clear very clear on that we wanted to do at the time.
Everybody visibility yes.
B would be handy.
More impacted by the Colombian spectrum that locks in 2024 were free from that so that part of it was baked in.
Although we don't know.
But we've made our assumptions of growth <unk> without $800 billion number.
Yes.
As we said I think in my prepared remarks, as a result of that.
Free cash flow. We've now told you for this year was going to be 100 billion.
It's right in line with what we budgeted so there is no change to that.
We bought it right in the middle of that.
Slater.
Cleveland 90, if you will so the ability to price to us there.
Got it.
A little bit more different than youre right is that in the <unk>.
Things change dry docked Reyes Investor day.
That is creating an issue in our rates going up.
Most of our currencies have not really moved sooner.
Assuming most of syntonic gosh, maybe move that maybe different.
This time around from any other prices and Thats very important yes, Colombia has moved significantly and maybe a little bit of product right.
<unk>.
Our cash flow today from equity preclinical from Colombia, So it doesn't really move the needle in terms of what was your question. Please.
And as a result of that.
Yield steel.
Like we are in the ballpark range.
We are very confident we're going to meet here. Despite all these moving pieces and then one thing we did and this is the last bit of your question is.
Project ever has started by.
Earlier this year.
Two reasons one.
You've heard me say this before I'm, a believer that you need with agency projects every three or four years.
Just to make sure that there is nothing you are missing just to make sure that the Q.
But this time around we understood that the macro is going to get tougher and we wanted to start very early in the year. So we haven't foreseen project at risk when we put on Investor day, we put it in Raptor just to make sure that when you ask us that question can come in and say, we're going to make it because project at risk, we're not going to give you any numbers.
They do that in Q4 is already delivering a lot of efficiencies that.
Are going to help us make it through tougher times.
So thats not on the equity free cash flow.
Sure.
On track.
Okay.
Super helpful. Maybe just a very quick follow up then.
Okay.
<unk> just sort of interested in the in the sort of the phasing of the competitive environment. So is it.
You sort of explained the complex bolt something but.
So the beginning of.
At the beginning of a process of escalating competition or do you think was sort of.
Midway through it will coming to the end of it.
So there is.
Paired remarks, you guys got my well gain quite a bit of market share.
The last two years.
<unk>.
Since the one some of that back and we're trying to figure out I don't know, we kind of like where we are so we like our scale.
We like our market share.
But the bigger question is the one you posed which is okay. What happens from here going forward is a skirmish or this is more of a drag.
Kind of a competitive environment.
I want to point out too.
Three key things that make a difference in Guatemala, or Brian obviously with the long term.
Number one this is a two player market.
With.
Through rational strategic.
Jacque.
Reinsurance driven investors, but it's not only that.
So fairly well balanced 60, 40, Mark right. So there are no long term incentives for either one of us to try to in shop.
Significantly so we don't cannibalize our own revenue, whether it's our competitor for ourselves.
Now.
With that.
I think this is a short term dislocation.
So we certainly understand some range, but it is not a protracted long term winter.
All of that incentives.
Incentives are seeing their northern Gaines.
It is that's our view.
But I realize that this is going to hurt us in the short term markets are focused in the short term.
Right.
Hit this mistake.
Zig faster and bolder.
We react to and defend our 60% market share position.
The sooner the Rainbow packs.
And as I said in our prepared remarks, we play this for the long term.
I think the better long term just to actually net without long term commitment.
<unk> very sustainable long term inquiry.
The sooner we can.
That's what the amount of the year.
That's great very helpful. Thanks.
Okay.
Alright, Thanks estimates.
So we'll do analysis funny at HL.
HSBC.
Thanks for taking my question. So my question is from Colombia, It seems that dealer revenues quarter on quarter have been flattish.
What is driving this.
How did the comps get us the actual pricing to this in Colombia. So that's the first question from my side. The second question that I have is on Armada.
Consolidated level.
How much is a broader price into the second half.
Holiday to live at home like is it impacting your booth and home excuse me with that.
Or is it going to articulate inflation and how is that going to take the guidance for Q EBITDA growth.
Okay got it.
First of all just a flattish Colombia.
You were saying <unk>, who's there or I am talking about.
Or at least having a growth in Colombia.
He looked at on Q O Q on quarter on quarter it looks flattish.
Like you have growing very fast on the mobile as to what is driving.
The flattish quarter on quarter growth in Colombia, Okay.
And the second one was just the price.
Price increases.
How much their agenda, but I think resist and what is your expectation for EBITDA growth in Q4.
Is that going to be all stipulate, all inefficient inflationary costs.
Okay, So listen on Colombia again.
It's better to two.
Ashwin.
The big context, our service revenue growth in Colombia is about 6%.
Largely coming from mobile.
And in mobile it is a combination of.
Increased intake in customers. We added about 200000 again this quarter in Colombia, we continue to in shop and in Colombia every quarter now for six quarters.
So there is an element of that.
Volume on postpaid in Colombia is up 25, 30% of all of the AUM on a year over year basis split and a chunk of this which is positive which is the result finally as you may recall from us, adding spectrum and building a network, increasing commercial distribution et cetera et cetera, what is new in Colombia.
On mobile, which we had anticipated but it is happening now for a couple of quarters is the arc was the rollout is being constructed.
It's growing right around 6% now.
And the reason for that is.
Is that I think we sensed by well of the market was ready for reconstruction and this is one of the pricing equation, which will it.
I was followed by I know pretty much all the competitors in Colombia, and Thats, leading to 6% will be constructed over now.
Now your question I think has a little bit more to do with only Colombia, which it needed a little bit more sluggish in Colombia and as I am.
First on the.
The remarks on in my earlier questions.
Leading Columbia Inflation's high 10% consumer.
Consumers are feeling that in Colombia look one of the countries in which people. We're most constrained some of their home during the pandemic. It was actually one of the highest one.
Michael its Bob.
And duration. So that we are seeing a lot of the what I referred philosophy in Colombia happened.
Managing in Colombia is that Youre seeing.
In our significant and growing.
And quite significantly and as a result of that we have 6% service revenue growth in Colombia.
And I don't want to draw you can do the comparisons it's pretty darn good compared to our competitors.
But the second thing that I think is key in Colombia is that we invested quite a bit.
Knowingly used op margin to do that.
On the other side of that.
Yes.
And we are.
We're seeing.
Importantly, meaningful meaningful ownership rose double digits this year and into next year in Colombia, because service revenue is youre closing our investment is behind US most of our network. Other topics investment is behind us and as a result of that Colombia is becoming already vehicles yet.
To us which wasn't the case two years ago, because that's the way we wanted to make a market all of this to simply say that Colombia is doing well, Jim we did with <unk>.
Okay.
A significant quarter for us.
Yeah.
Goldman Sachs.
The second part that you were just asking sort of price increases how those play out here.
The remainder of the year.
No of course, we implemented a lot during the course of quarter.
We will be looking and expecting to see.
With the benefit of that here in Q4, we haven't guided at all parts of our Q4 results on on service revenue, but we have to talk to you about what we're expecting for earlier on OS apps.
And that being very backend loaded this year.
Tell you that ocs objectives, we have for the year end guidance is not predicated on you know improvements on service revenue growth here for the balance of each year.
So we're not we're not relying on all of that coming through.
I am expecting sort of EBITDA to improve here for that for the remainder of the year a lot of that just because we're starting to lap some of the investments we've been making in <unk>.
<unk> money and.
In infra infra co, which really ramping up kind of in Q4 of last year. So we're going to have much of a like for like comparison now in Q2, we should see some EBITDA.
Benefits on the profile from that which is going to help also drive dlcs up just the off target that we mentioned for the year of approximately 10%.
If we could kind of fill up pretty good.
Great.
We are on target.
Right around that.
San Jose here.
The base year.
This is consistent with our three year, 10% of the ship growth organic okay.
Okay.
Items.
Okay. Thanks, guys.
I think we have Lucas challenged from UBS.
Are you on explorer, having my question.
Cannot make him the right now it's not working zoom, but Mike two questions here actually the first one in Panama and the second one is followed by brand on Panama, who could give us more details on the country operation.
Both Panama already but just to understand better mobile there and the consolidation and while you are seeing there that is different from other countries and U S.
Sorry about that I, just want to understand better service revenue then the growth in this quarter. Thank you.
Alright.
So.
On Panama.
Okay.
It's performing this is one of those rare unique situations in which we are.
All right as RF decisional business plans.
And for the same reasons that our acquisition plans said, we're performing Panama.
Eamonn.
Despite the.
The inflationary environment.
Our business plan was predicated on <unk>.
Our position in the home that had 67% market share.
Pending acquisition going forward.
Being able to acquire more months of the year.
Then we could cross sell and increase market share as a result of being able to cross sell all of them.
Sure.
All of that Lucas has panned out as our investment thesis was so in a country that is investment grade.
Dollar economy.
And.
Which has become <unk>.
To lead a two player market as we speak.
One player was acquired by <unk>.
Cumulative margins and the other one has basically handed over the business to the government and as we must also that we are at now.
Layer, possibly player market on mobile in Panama, which has led out to the industry structure that we think is becoming the norm used car maker.
So things have played out.
Pretty much the way we margin they would.
And as a result of that and this is the punchline I'll give you some details in a second because.
What you see.
Yes.
So I didn't know culminated revenue.
Player market effectively we have the number one position.
<unk> scale and more about being able to not only <unk>.
But also rollout footprint because theres opportunities as the business continues.
Yes.
To grow on fixed because the economy is growing and as a result of that we see household formation in many new cities around Panama, which makes us very bullish so the combination in Panama as you know service revenue growth of five 6% eight you have EBITDA margins that we've already reached 45%.
And we see increased scale on mobile because the market has consolidated and the ability to build more network in Panama going forward and the business is already growing operating cash flow at 20% and 22% is the number so all in all just to say.
Okay got reinvested in Panama is on its way to become one of our better cash flow producers and it's all dollar denominated.
Okay.
Before I forget.
So it sounds or had an audit and other solid quarter uncertainties revenue is up 6%.
And the thing with the Salvador is we put our nasal.
Three years ago.
You've heard me say, there's a number of times.
We revamped our management team, including one of our most solid management teams in place today, all for listening to the call.
Order them with new spectrum acquisition, and then with the funds to build out that network.
And our marketing, which we have been.
And today, we are harvesting all the strong service revenue growth.
The margins are going to growing our postpaid base and also very bullish about people money there.
And and then thought about <unk> as I'm sure you can see from the quarter numbers all of the lines of businesses are performing.
But we think it can grow some more.
We're sort of your revenue is growing and we believe we're again people business is becoming an important part of the system.
Sorry about the Runoffs I, just said I mean.
Nicole.
Technical money also has a phase III efficacy and again just not to forget. It is also a $1 a problem so that helps out significantly.
That's the long on the charter, Panama and El Salvador.
Okay, that's very clear thank you.
So we're right on the hour and that was our last question.
Alright, So I guess I got a rump head up some here youre not going to hear from me any last minute remarks that are different from what we're saying we are on track.
Two of these were that right around 10% of operating cash flow growth. This year and if that is consistent with.
Average, 10% <unk> growth for the three year period.
We'd have to adjust as I said in order to get there.
We're making it.
We are going to get to $100 million to $100 million of equity and cash flow. This year, which is consistent with the way we have budgeted for the year and consistent with our three year and rich community of $800 billion to $1 billion of free cash.
Cash flow, we also continue to invest $1 billion and we are happy with.
The investments we have made in the past.
We're making because we see a ton of upside opportunity both in home and mobile where every time, we deploy unit, where we see a pickup and we're also making progress on the strategic initiatives that you were aware off.
The tower business and we continue to just be quite frankly.
To better gold standard terms of ESG in our region and part of it.
Finished work recognition demonstrates that.
So.
Pretty much on track.
Quite the much harder microenvironment.
Thanks for joining today.
Yes.
[noise].