Q3 2025 Millicom International Cellular SA Earnings Call
Speaker #2: Hello everyone and welcome to our third quarter 2025 results call . This event is recorded . Our speakers today will be our CEO , Marcelo Benitez and Bart Vanhaeren , CFO of the company .
Speaker #2: Hello everyone and welcome to our third quarter 2025 results call . This event is recorded . Our speakers today will be our CEO , Marcelo Benitez and Bart Vanhaeren , CFO of the company being The slides for today's presentations are available on our website along with the earnings release and our financial statements .
Speaker #2: Now , please turn to slide two for the safe harbor disclosure . We will be making forward looking statements which involve risks and uncertainties , and which could have a material impact on our results .
Speaker #2: On slide three , we define the non-IFRS metrics that we will reference throughout this presentation , and you can find reconciliation tables in the back of our earnings release and on our website .
Speaker #2: With those games out of the way , let me turn the call over to our CEO , Marcelo Benitez . Good morning , everyone , and thank you for joining .
Speaker #3: Us . This has been another strong quarter for Millicom . Before we begin , I want to express my heartfelt appreciation to all members of the team .
Speaker #3: Your dedication and purpose driven execution are the heart of this results . Once again , thank you . In the third quarter , we accelerated top line growth while maintaining strict cost discipline .
Speaker #3: This reflects the consistent execution of our strategy , delivering the best customer experience with maximum efficiency . We also advanced on our strategic agenda , completing the Uruguay and Ecuador acquisition and closing the SBA tower transaction .
Speaker #3: Three milestones that strengthened both our balance sheet and regional footprint . Organically , service revenue grew 3.5% year over year , supported by mobile subscriber growth and R2 expansion in prepaid .
Speaker #3: Most importantly , we remain firmly on track to deliver our 750 million equity free cash flow target for 2025 . Let's now review the key milestones from the quarter .
Speaker #3: Our relentless focus on commercial execution continues to deliver solid results , both in consumer segment and in the business segments . Ambitus . We added nearly 250,000 postpaid mobile customers and about 60,000 new phones subscribers in B2B , the momentum remained strong .
Speaker #3: I'll touch on that shortly thanks to the discipline in capital allocation and operational efficiency . We delivered record profitability , adjusted EBITDA reached 695 million with an all time high of 48.9% margin .
Speaker #3: This translated into equity free cash flow of 243 million . We closed the quarter with net leverage of 2.09 ex , or 2.33 ex .
Speaker #3: The Herma , excluding the infrastructure sale , we remain fully committed to maintaining leverage below 2.5 ex even as we integrate Ecuador and Uruguay in Q4 .
Speaker #3: Let's now look at performance by segment and geography . Our mobile business delivered a strongest organic growth since 2021 , with mobile service revenue up 5.5% year over year .
Speaker #3: Growth was driven by Arppu expansion in prepaid . As we align pricing with inflation and by steady migration from prepaid to postpaid and postpaid base grew 14% , reaching 8.9 million customers , while prepaid volumes remained stable .
Speaker #3: These results demonstrate the strength of our commercial model , focused on delivering the best network experience . Focus on channel productivity . Free to post migration and fixed mobile convergence .
Speaker #3: Turning to our home business , our second largest segment , as we mentioned a moment ago , we added 60,000 new customers , up 5.4% year over year .
Speaker #3: Supported by convergence strategy , which bundles multiple services under one plan . This approach enhances customer value and keeps churn in the low single digits .
Speaker #3: Home service revenue was essentially flat year over year . A marked improvement from the nearly 5% decline a year ago . The strong foundation built in recent quarters positioned us for positive revenue growth .
Speaker #3: On the next quarter . Please turn to the next slide for a review on our B2B business . Our B2B segment continues to gain momentum .
Speaker #3: Service revenue reached 231 million , up 5.3% year on year in constant currency . Small business clients grew 10% . Totaling over 400,000 .
Speaker #3: Our digital services remain a key growth engine revenue rose 10% , led by cloud , cybersecurity and SD-Wan , growing around 35% year over year .
Speaker #3: In short , B2B is scaling profitable and remains a compelling growth platform for Millicom . Let's now review our performance in our largest market in Colombia .
Speaker #3: Colombia delivered another strong quarter postpaid customers rose 12% year over year , while prepaid also grew in home . Customers increased 12% , reaching 1.6 million .
Speaker #3: HFC and FTTH connection driving home service revenues up 5.7% . A full turn around 22,022 . Overall service revenue grew 6.5% and EBITDA margins expanded 447 basis points to 43.5% .
Speaker #3: This demonstrates how profitable growth is now firmly embedded in our Colombia business . Turning to what we continue to perform . Exceptionally well .
Speaker #3: Guatemala continues to set the bar for operational excellence . Postpaid customers grew 20% driving mobile service revenues up 4.6% . Exceptional efficiency led to operating cash flow growth of 22% year on year , reaching a record of 204 million .
Speaker #3: A remarkable achievement . Please turn to the next slide to look at Panama . In Panama , postpaid customers grew 15% , supporting 7.1% mobile service revenue growth .
Speaker #3: We achieved a record EBITDA margin of 52.2% . Underscoring Panama's position as one of our most efficient operations . Let's now turn to slide 12 .
Speaker #3: We are very proud to have completed acquisition of Uruguay and Ecuador , two countries that share our purpose of connecting people and driving digital progress across Latin America .
Speaker #3: This acquisitions broaden our footprint to 11 countries and enhance earnings quality through greater scale and macroeconomic stability . Uruguay at 700 cell sites 33% market share and 246 million in annual revenues , with 93 million of adjusted EBITDA .
Speaker #3: Ecuador brings approximately 2500 cell sites , 30% market share , generating almost $490 million in revenues and 161 million in adjusted EBITDA . With these two additions , we integrate an investment grade country and a dollarized economy into our portfolio , enhancing stable cash generation and unlocking meaningful synergies through original scale .
Speaker #3: We're energized by this opportunity . They strengthened our position as the leading pure play telecom operator in Latin America . Before we move on to the financials , I'd like to take a few minutes to update you on where we stand with our strategic projects and legal matters .
Speaker #3: First , as we shared last quarter with now completed the sale of our companies in El Salvador and Honduras . The Latte Tower transaction totaled about 975 million , marking a successful conclusion of our infrastructure monetization plan .
Speaker #3: With this , we've achieved what we set out to do and value for our stakeholders and stay fully focused on what we do best delivering connectivity .
Speaker #3: Turning on Costa Rica , I am pleased to share that we've settled our long standing litigation with Telefonica . This was related to the 2020 acquisition attempt .
Speaker #3: This brings important closure and allows us to move forward with clarity and focus . Separately , the Costa Rica regulator has decided to prohibit our proposed combination with Liberty Latin America that we announced on August the first of 2024 .
Speaker #3: So , concluding that the potential competitive effects could not be adequately mitigated by the remedies proposed by the parties or by any additional conditions that could impose this decision , was unexpected , as both parties had engaged extensively with subtle throughout the review of the process to develop a set of commitments that we firmly believe addressed any potential concerns .
Speaker #3: We respectfully disagree with this decision , and for this reason we have filed a formal appeal . On October 22nd and will continue to pursue all available options .
Speaker #3: We remain confident that the transaction will deliver meaningful benefits to customers and enhance competition and contribute positively to Costa Rica's digital development . Now , regarding the ongoing DOJ investigation , we recorded a 118 million provision this quarter .
Speaker #3: That figure reflects our current expectation of the financial impact of resolving the matter . Because the process is still ongoing , we cannot comment further at this stage , but we expect to share more details shortly .
Speaker #3: Finally , let me touch on Colombia , where things are moving steady on both fronts . EPM , on one hand , has officially launched the privatization process for its stake in Diego Luna .
Speaker #3: Under law two , two , six , and everything is progressing as expected . At the same time , the regulatory process for the acquisition is advancing well .
Speaker #3: We are now waiting for the minimum price disclosure for the stake held by La Nacion , and we continue to expect both EPM and Telefonica transactions to close in the first quarter of 2026 .
Speaker #3: With that , I will now hand it over to Bart , who will walk you through the financials in more detail . Thank you .
Speaker #3: Marcelo. Let's now turn to our financial performance for the quarter starting on.
Speaker #2: Slide 15 .
Speaker #3: Service revenue for the quarter totaled 1.34 billion , representing a year over year decline of 0.5% . This was no surprise considering the application of IAS 21 for Bolivia , which this quarter negatively impacted service revenues by 74 million compared to last .
Speaker #2: Year .
Speaker #3: When excluding the effects impacts underlying service revenue growth actually accelerated from 2.4% year on year growth in Q2 to 3.5% year on year growth in Q3 , reflecting the continued momentum of our commercial initiatives and strong operational execution across our markets .
Speaker #3: We also continue to deliver solid results in our prepaid and postpaid conversion strategy , resulting in local currency , double digit postpaid growth numbers .
Speaker #3: While prepaid revenues continued to grow by low single digits year over year in local currency , supported by a stable prepaid customer base .
Speaker #3: This growth reflects our ability to attract new clients and broaden the top of the funnel , reinforcing the strength of our commercial engine .
Speaker #3: Importantly , we delivered another quarter of margin expansion with organic adjusted EBITDA increasing by 23.8% year over .
Speaker #2: Year to reach .
Speaker #3: A record $695 million . It's worth noting that the year over year increase in adjusted EBITDA was influenced by a one time restructuring and M&A charges in 2024 , when normalizing for this effect , adjusted EBITDA still grew by 10% year over year .
Speaker #3: This increase translates into an adjusted EBITDA margin of 48.9% . Another all time high for the company . As Marcelo highlighted earlier , accelerating top line growth .
Speaker #3: while maintaining cost discipline remains a core pillar of our strategy . Finally , equity free cash flow rose by 18.1% for the last nine months when compared to the same period last year , reaching a total of $638 million .
Speaker #3: Marking yet another milestone for the company . Next , I would like to walk you through our performance by region starting on slide 16 .
Speaker #3: In Guatemala . Local currency service revenue grew 3.6% year over .
Speaker #2: Year .
Speaker #3: Reaching 366 million for the quarter . This solid performance represents a significant improvement over last year's top line .
Speaker #2: Growth .
Speaker #3: Driven primarily by our mobile strategy, which focused on effective customer base management and increasing RPO through the successful migration from prepaid to postpaid plans.
Speaker #3: Colombia delivered another strong quarter with service revenue expanding 6.5% year over year to 364 million , almost surpassing Guatemala for the first time in our corporate history .
Speaker #3: This growth was fueled by an expanding customer base , particularly in postpaid , robust performance in B2B and a material turnaround in our home business supported by intensified commercial efforts aligned with our strategic priorities in Panama .
Speaker #3: Service revenue remained largely flat year over year at 170 million when compared to Q3 2024 . We added nearly 65,000 postpaid subscribers to our customer base .
Speaker #3: These gains were partially offset by a decline in B2B revenue stemming from government contracts , which were executed earlier in 2024 . In Paraguay , we achieved $143 million in service revenue , increasing 3.5% year on year .
Speaker #3: This solid growth was mainly achieved through expansion in both our prepaid and postpaid customer bases , and relatively stable Arpus in Bolivia . Service revenue in constant currency accelerated to 6.1% year over year , reaching 84 million for the quarter , and for the first time since the onset of the devaluation , we recorded a quarter over quarter increase in service revenue .
Speaker #3: We remain cautiously optimistic about continued currency stabilization. Service revenue and other markets increased 1.4% year over year, reaching $217 million for the quarter.
Speaker #3: As robust topline growth in El Salvador and Nicaragua was partially offset by soft results in Costa Rica. As mentioned in my introduction, we're very pleased with the overall profitability achieved during the quarter, with adjusted EBITDA for the group reaching a record margin of 48.9%.
Speaker #3: As shown on the slide 17 , all of our largest operations delivered year over year margin expansion . Let's now review the performance of each country in more detail , starting with Guatemala .
Speaker #3: Adjusted EBITDA grew 6.2% year over year, reaching $236 million for the quarter. This strong result was driven by a combination of service revenue growth and operational efficiencies.
Speaker #3: As a result , Guatemala reported a record adjusted EBITDA margin of 56.6% , up 147 basis points compared to same period last year .
Speaker #3: In Colombia , adjusted EBITDA increased 17.3% year over year to 161 million . This performance reflects the robust top line growth discussed earlier , coupled with disciplined opex management .
Speaker #3: It's worth noting that last year's EBITDA was impacted by approximately 5 million in severance payments . I want to take the opportunity to congratulate our team in Colombia for their tireless efforts and outstanding results .
Speaker #3: Panama delivered a 10.4% year over year increase in adjusted EBITDA , reaching 93 million , driven by cost savings from efficiency programs as a result , adjusted EBITDA margin expanded by 480 basis points , reaching a record 52.2% .
Speaker #3: Paraguay also expanded its profitability when compared to the same period last year . The team achieved an 11.8% year over year increase , reaching a total of 76 million for the quarter .
Speaker #3: With adjusted EBITDA margins expanding to 51.4% . Reflecting continued operational discipline and growth in our customer base in Bolivia . Adjusted EBITDA increased 21.8% .
Speaker #3: On a constant currency basis year over year to 42 million for the quarter . The margin expanded by 649 basis points to 49.7% , primarily thanks to our ongoing focus on cost efficiencies and de-dollarization .
Speaker #4: Efforts .
Speaker #3: Finally , adjusted EBITDA in our other segments , which include Elsalvador , Nicaragua and Costa Rica , increased 7.7% to 108 million . As we continue to deliver operating leverage across all three countries .
Speaker #3: As a reminder , we have here Nicaragua and Honduras with margins above 50% . Making a total of five countries out of nine , with margins above 50% .
Speaker #3: And Bolivia is actually getting very close. Let's now turn to slide 18 for a review of our equity-free cash flow in the third quarter of 2025.
Speaker #3: Equity free cash flow totaled 243 million to reach 638 million over the last nine months , representing an increase of 18.1% year on year .
Speaker #3: Now , when comparing to the same quarter last year , we see a $28 million decrease , which is primarily attributable to a mix of strategic investments and timing related factors .
Speaker #3: As we are trying to stabilize equity . Free cash flow . Overall quarter's positive contributors were adjusted . EBITDA was up 110 million year over year in line with our increased profitability and 73,000,001 off impacts in 2020 .
Speaker #3: Four , mainly related to restructuring and M&A costs . Finance charges improved by 10 million thanks to lower debt levels , favorable FX movements and reduced commissions on US dollar purchases in Bolivia .
Speaker #3: Offsetting these gains were the following . Detractors cash CapEx increased by 50 million , mainly due to changes in working capital trade , working capital and others decreased 66 million , mainly due to the aforementioned litigation settlement with Telefonica related to the 2020 Costa Rica acquisition attempt , as well as timing of payables spectrum payments were up 12 million , reflecting the phasing of coverage obligations in Colombia and taxes paid increased 10 million , primarily due to the higher profitability .
Speaker #3: Now please turn to slide 19 for a more comprehensive view of our deleveraging . During the quarter , we reduced our leverage from 2.18 to 2.09 , a solid improvement of nine points quarter over quarter .
Speaker #3: This was primarily driven by our strong equity free cash flow generation of 243 million as just discussed . On the other hand , we paid 125 million dividend in line with our approved dividend policy and recorded 80 million in exchange rate impact .
Speaker #3: Due to the appreciation of our local currency debt . These items together added approximately 0.1 to our leverage . Overall , the quarter reflects disciplined capital allocation and continued progress toward our long term balance sheet objectives .
Speaker #3: Before reviewing our financial targets , I wanted to highlight that we have finalized the latte business divestment announced in October 2024 . As a reminder , the total consideration for the divestment was approximately $975 million .
Speaker #3: Let's now review our financial targets for the year. We're very pleased with our performance year to date and remain on track to meet our year-end leverage targets of below 2.5, as well as our equity free cash flow goal of around $750 million.
Speaker #3: As a reminder , this leverage target excludes the impact of any strategic M&A transactions executed during 2025 . I'd also like to emphasize that we are maintaining our free cash flow target , despite the adverse effects of the currency devaluation in Bolivia , as well as the one off legal settlements discussed .
Speaker #3: We're excited about what lies ahead and remain fully committed to delivering continued top line growth and sustainable margin expansion . With that , let me turn the call back to Luca .
Speaker #2: We'll now begin with a question and answer session . As a reminder , if you would like to ask a question , please let us know by emailing us at investors at Millicom and we will add you to the queue .
Speaker #2: Our first question comes from HSBC . What is the in Ecuador and Uruguay , transactions average ? Where do you be at the end of the year ?
Speaker #2: What is the net impact on these transactions in years to catalog ? Yeah . Thank you .
Speaker #3: Good question . So our leverage now is 2.09 . If you would normalize for the tower transaction that would have been 2.33 . Now .
Speaker #3: So 2.09 we closed Uruguay . That adds about 0.1 . We closed Ecuador at about 0.1 as well . So proforma we are close to 2.3 as of Q3 .
Speaker #3: If you would normalize for that . Our transactions .
Speaker #2: Thank you . In Ecuador there was a spectrum renewal news . Would the burden of payment fall on Millicom ?
Speaker #3: So we have there are two parts of the spectrum renewal . In fact one is a license renewal which comes with all the spectrum that was attached to the original license .
Speaker #3: That was approximately $150 million . That has been paid by Telefonica as a condition precedent to closing of the transaction . However , there is an upcoming 5G auction that will come probably in the beginning of next year .
Speaker #3: And of this year , and we expect mid to mid high double digit million dollar spectrum charges payable somewhere in the first half of 2026 .
Speaker #3: And important to say that if this was a prerequisite to close the transaction and with this renewal and also the availability of the 5G spectrum in Q1 strengthened our position to first focus on strengthen the network as it is the priority in our playbook .
Speaker #3: So we're very pleased to have enough spectrum to start operating in Ecuador .
Speaker #2: Thank you . Could you please provide more details on the DOJ provision ? What is the issue related to and when can we expect there to be a resolution ?
Speaker #3: Well , there is no much to say more than what we already said in the in the call . Basically , we are in the process with the DOJ , with regards of the litigation , the provisions that we printed this quarter is what we expect is going to be the outcome .
Speaker #3: And as I said , we will come back with more details shortly .
Speaker #2: Perfect . What is driving the higher tax provision in Nicaragua ? So .
Speaker #3: In .
Speaker #2: Nicaragua .
Speaker #3: We had tax litigation ongoing . We have been , you know , like many other legacy liabilities , we have used this quarter to to clean up and close a lot of matters no different in Nicaragua .
Speaker #3: We settled with the with the administration on a payment to the delta of what we settled with . And what is already paid .
Speaker #3: And provisioned . Is that increase . That payment will come partially in Q4 , partially in Q1 , to to for the finalization of the settlement .
Speaker #2: Perfect . Thank you . Marcelo . What is the future course of action in Costa Rica ? And if the appeal for the regulatory decision gets rejected ?
Speaker #3: Yeah . On starting on Costa Rica , we really believed that this merge was very , very good for the country and for the industry , Costa Rica .
Speaker #3: It's it's a very stable economy , has a very predictable macro but more importantly , they do have a lot of appetite for digital infrastructure that is at the core of what the country needs .
Speaker #3: And in order to have that , Costa Rica needs to have strong operators . That's why we propose to merge on a JV with Liberty in Costa Rica .
Speaker #3: Unfortunately , the decision of the subtle was against this merge . We are appealing , appealing that with the arguments that I already said , this is good for Costa Rica .
Speaker #3: Having said that , we need to also focus on what is under our control and what is under our control is to go back to our operating model .
Speaker #3: More focused on the commercial grip that we that we have in other countries . We are going to invest again , reinforce our infrastructure .
Speaker #3: Then also reinforce our channels and bring and bring that , bring that operation back to growth with strong focus as we have in all the other operations , in cost efficiency .
Speaker #3: So that is that is what's under our control and that is where the focus is going to be expecting . Of course , more better news from the hotel .
Speaker #2: Excellent . Thank you very much . Next on the line is Livia Mitsuhata from JP Morgan .
Speaker #5: Hi , Bart . Marcelo and Luca , thank you for the opportunity to make questions here . I have a couple . The first one , would you provide a outlook for CapEx for 2026 ?
Speaker #5: How are you seeing this line behaving on the next year ? And the second one we would like to explore a little bit more .
Speaker #5: The margin expansion across the board . We are seeing several countries expanding a lot margins . This year , particularly this quarter . Is this still mostly related to your efficiency program or are there more initiatives that we should be seeing that will continue , continue to impact your margins ?
Speaker #5: Going forward ? Specifically , I would like to touch on Colombia because we see an impressive margin gain there . So do you see eventually room for Colombia to join its 50 clubs that you talk so much .
Speaker #5: So like could you could we see the Colombia market also raising margins and reaching that level because we saw an impressive market there .
Speaker #5: Market improvement there . Right .
Speaker #3: Thank you . Thank you for your question . I mean the 50 club , is ready to receive more members . It's a club where you can get in and you can never get out .
Speaker #3: So I will start with Colombia . What happened in Colombia is purely organic . We accelerated top line growth . The direct cost had an decreased year quarter on quarter based or based on our efficiency initiatives .
Speaker #3: So that brings operating leverage at the gross margin level . And additionally to that , we kept the OpEx flat , even though we are investing a lot in commercial activities to fuel growth .
Speaker #3: So that's where the the profitability is coming . It's mainly operating leverage . If you talk about organic terms , but if you go on on dollar terms , also , you have some points .
Speaker #3: Of , of of growth coming from the , the the currency , the strengthening of the Colombian pesos currency . When we when we look at that , at the growth , at the group level , it's a little bit of a different story .
Speaker #3: It's a mix between organic growth that is more or less very similar to Colombia is operating leverage . But we do have some one offs , around $70 million year over year .
Speaker #3: That had to do with severance and M&A costs that we had last year . And we don't have this year on CapEx . We we .
Speaker #3: When we started this this new journey of efficiency , we always said that we invest with a lot of granularity . So we look at where the demand is .
Speaker #3: That's how we came from . $1 billion CapEx to a $700 million CapEx . So we are very comfortable with that envelope because this model is refining as we speak .
Speaker #3: So we have a very , very strong network performance with a lower cost . So our expectation is to maintain the envelope at around 700 million .
Speaker #5: Perfect . It's very clear . Thank you very much for the answer .
Speaker #2: Excellent . Our next question comes from Eduardo Nieto from J.P. Morgan . Hi . Good morning team .
Speaker #6: Thanks for taking the questions . So I had one around your leverage , but more so looking further , just because now you have more clarity on the closing of some of the acquisitions and including the one in Colombia .
Speaker #6: So just wanted to get your thoughts on where leverage should peak . Also , considering your dividends , your potential settlements of legal matters , just thinking where you're comfortable to get in terms of net leverage .
Speaker #6: And then a second part of that question is in terms of your debt or your financing needs , right . You have some maturities , especially in 2027 , more in 2028 , you have more M&A to close next year .
Speaker #6: So just wondering what you see as financing needs and what that could look like in terms of international capital markets . If you see a potential to change the mix between Hull Cadet , Opco debt and just any color that you can share on that , please .
Speaker #2: Yeah .
Speaker #3: Thank you . Eduardo . So the leverage 2.09 I think we mentioned already Uruguay and Ecuador each add about 0.1 to to the leverage .
Speaker #3: So around we get to 2.3 . EPM would add another 0.20 . In between 20 and 25 . So with that we get close to the 2.5 .
Speaker #3: And then would get possibly above that depending obviously on how EBITDA evolves . Our cash flow evolves , etc. if that happens , we do believe then depending on on the speed of our integration costs , that we would reduce that pretty quickly below the 2.5 .
Speaker #3: Again , on the debt side , we still have more than $900 million cash . On balance sheet today . So for the for the immediate upcoming payments , we do have the liquidity .
Speaker #3: We will do some tactical debt issuance , mostly focused on local currency debt . As we as we like it today , we have 50% of our debt in local currency .
Speaker #3: And you know , we're continuing to to look for opportunities . I can already tell you , we raised $200 million in local currency in Uruguay .
Speaker #3: That's . Probably the largest corporate debt issuance in Uruguay . So setting a new record in our first weeks in the country . And we've been working fantastically by by everybody down there .
Speaker #3: Next year , we will look at again at liability management . You know , cleaning up some some earlier maturities , possibly . And look at our debt curve this year .
Speaker #3: We really wanted to focus on , you . Know , cleaning a number of things up , closing the transactions , getting the see what we receive in terms of that structure .
Speaker #3: And next year we'll start to look back at a regular liability management .
Speaker #6: Thank you . Just one quick follow up on your comfortable I guess with the mix between the amount of debt that you carry at the whole cover , the cost , that makes that you have today .
Speaker #2: Yeah .
Speaker #3: We have 40% of our debt as of Q3 . Balance sheet date in HQ . As I said , we already raising 200 million additional in Uruguay .
Speaker #3: That was posted Q3 closing and we have a few others in the pipeline to continue to increase . I'm comfortable where we are , but as a as a strategy , I want to have a maximum of local currency , unless it's prohibitively expensive .
Speaker #3: So that's how we look at that .
Speaker #6: Thank you . Thanks for the details .
Speaker #2: Thank you very much . Our next question comes from Gustavo Farias from UBS .
Speaker #3: Your a .
Speaker #7: You can hear me . Well two questions . My end . So the first one if you could give us any color on the new countries you just entered Uruguay and Ecuador are looking at extracting those synergies from the operations , mainly in color on what could be the main drivers to drive margins up .
Speaker #7: The second question last quarter, you commented about a trend of price increases across countries, mostly driven by pre- to post-trade migration.
Speaker #7: So, if you could, could you give us an update on how that's evolving lately? Thank you.
Speaker #3: I'll take the first one . Yeah . So thanks for for your question . I mean these are , these are two very different countries .
Speaker #3: The case of Uruguay Uruguay is a very is a very developed country with high consumption per user . A lot of data demand very much postpaid .
Speaker #3: So there are three operators there . As you know , you have the state owned operator . Then you have us and then Claro .
Speaker #3: So first the network in Uruguay is pretty strong . So we are going to focus on developing Rpu as we did in the other countries by focusing on prepaid to postpaid with small prepaid base .
Speaker #3: And we want to expand the prepaid base a little bit . And also play into the devices field , because that's where the demand is .
Speaker #3: In Uruguay . They have a lot of appetite for very high performance handsets . Having said that , in parallel , and that is the first chapter of our playbook , is efficiencies .
Speaker #3: So we are going to implement what we have implemented in all the countries . The purchase order controls from $0 , contract renegotiations and also focus operations on what we do best , deliver the best connectivity .
Speaker #3: So the same playbook applies to to Ecuador , but the environment in Ecuador is different there . We do need to invest in network quality and network expansion .
Speaker #3: As I said , this spectrum renewal and the new acquisition of spectrum give us a good a good . Give us new spectrum in 700 that it's going to immediately affect positively on the quality of our network .
Speaker #3: But we need to expand also the coverage , especially in Guayaquil and the coast , where more than 50% of the people live , so that is the that is the strategy is the same playbook .
Speaker #3: But there is some pre-work to do in Ecuador in a network , in strengthening the network . And it's it's more commercial in Uruguay .
Speaker #3: I hope this answers your question , Gustavo .
Speaker #7: Yes . Very clear . Thank you .
Speaker #2: Thank you very much . We've received Steve . Continue without . Not okay . Seems like Gustavo . This question answered . And the next question comes from Andrés Cuello from Scotiabank .
Speaker #2: Can you comment on why you did not participate in the spectrum auction in Paraguay and comments on the competitive environment as new entrants is expected to launch 5G coverage soon and in addition , can you provide an update on the closing of the deal in Colombia ?
Speaker #3: I'll take the first one . You take the second . So in Paraguay , basically the conditions were not there for us to participate in the spectrum .
Speaker #3: In the spectrum tender , we we do . We have very , very good relationship with with the regulator . There is now a bit of a process on whether the , the new acquire can keep the spectrum .
Speaker #3: We respect that process and we trust the regulator that the regulator is going to is going to do the right thing . Having said that , there are other segments that are available .
Speaker #3: So we are working with the government segments in 2.6 and also in 700MHz . So we are working to get that spectrum for 5G .
Speaker #3: There is no way we will not have 5G in in Paraguay , and that is clear for us . And it's clear for the government as well .
Speaker #3: So on the on the new entrant , we do believe that to become a real player from scratch in a country like Paraguay , you need more than spectrum and and we as we welcome always competition .
Speaker #3: Right ? Only with 5G is very , very difficult to have a full . A full telco and not even talk about convergence play .
Speaker #3: So we we don't see at this point of time any threat for any serious competitor in New competitor in Paraguay . And whereas with the limited availability or percentage of 5G capable phones over the total number of phones in the country going to to the question about the closing in Colombia , as you know , this multiple transactions in one .
Speaker #3: So let me build the onion . So on one side we have the transaction with EPM , our partner in our existing operation .
Speaker #3: They have disclosed the minimum price . We we made some communications around that earlier in Q2 that we would participate in that , in that in the auction process .
Speaker #3: There's it's a privatization law called law 2 to 6 has two phases . Phase one is now ongoing . This is where the shares are offered to sector Solidario .
Speaker #3: Think about employees , pension funds . That's a process that takes two months . It will be done early December , after which there will be an auction organized and that that process takes less than a month .
Speaker #3: So this is well on track to close around year end early . You know , Q1 then we have on the other side the deal with Telefonica is done signed and has a number of conditions precedent for closing , which is merger approval .
Speaker #3: That merger approval is is ongoing . We're having constructive discussions with the regulator and expect , you know , to have a resolution in Q4 about that merger .
Speaker #3: And then the second condition precedent is also to have a deal with La Nacion , who is a third shareholder of Cartel . And we expect , you know , as we hear , they are getting to the end of their process , establishing the minimum price with similar that EPM had earlier in the year .
Speaker #3: And then they can launch phase one of the law 2 to 6 process immediately behind us . So that's a two and a two and a half month to three month process .
Speaker #3: Once they launch the law 2 to 6 process . And there again , we are expecting , you know , everything works out that we could close both transactions in Q1 .
Speaker #3: You know , knock on wood . Let's see how it goes .
Speaker #2: Excellent . Thank you Bart . Our next question comes from David Lopez from New Street Research .
Speaker #8: Hi . Hi . Congratulations for the third quarter . And thanks for the opportunity . Most of my questions have been answered , actually , maybe just a couple of follow ups on the Costa Rica deal .
Speaker #8: I was wondering if you could comment a bit on the remedies . Why were there not enough and why were they and do you have any idea how long the appeal process takes ?
Speaker #8: Usually , I guess pretty hard to answer , but if you have any . Any idea of you . And then you mentioned about spectrum in Ecuador , I was wondering what are the other auctions coming in the future and the rest of the portfolio ?
Speaker #8: And maybe last question on competition in Guatemala and you're posting good numbers . And I thought a few quarters ago there was a bit more competition from Claro .
Speaker #8: So again , your numbers are good . So I was wondering how how competition evolved in Guatemala . Thank you .
Speaker #3: In Costa Rica . So on remedies on on Costa Rica . It it was a surprise , David , for us to hear the arguments from subtle on why the remedies were not enough .
Speaker #3: We have we have been very proactive and very diligent . Also , not only with with liberty , but also working with external consultants and experts on the matter .
Speaker #3: We did not see any rational argument to say that there is no remedy that can really make this transaction to happen . It's some kind of a precedent to say that there is no way that this is going to happen , but we do respect the regulator and we do respect the formal channels .
Speaker #3: And that's why we are appealing . And we hope that this will reconsider its position with regards to to spectrum . Now , the well , you have first the renewal that that that was done .
Speaker #3: So that is that is one block of spectrum . Then you have the 5G spectrum that's going to happen now in Q1 . So that's I think about it for the short term , but it's more than enough to one strengthen our our existing infrastructure , mainly with 700MHz .
Speaker #3: That is the new spectrum that we are going to bring in . And also to start developing the 5G coverage , where the handset availability is there , right ?
Speaker #3: So so I think that is extremely positive . And on a very good timing for us with respect to Guatemala , we are fighting point of sale by point of sale as as we do with infra CapEx investment as investment and capital allocation .
Speaker #3: We also are very , very granular on how we fight in the commercial . Remember that Guatemala is a purely prepaid market . So the war is being done in the point of sale .
Speaker #3: Sale every day . So where we were attacked at the beginning of the year and it was very natural and predictable that this was going to happen was where Claro started to build new coverage .
Speaker #3: And we had very high market share for example , in Tenango . So what the reaction we we did was not a mainstream reaction because that was not necessary .
Speaker #3: But specifically in the regions where we were attacked . So this is working is a combination of working with the point of sale , strengthening the channels , strengthening a little bit .
Speaker #3: The offer , and also improving the network that is at the core of the consumer experience . So that's what we did in Guatemala .
Speaker #3: And now we are coming into a more stable place with , with , with the results and with the numbers . .
Speaker #8: Very clear . Thank you .
Speaker #3: Thank you David .
Speaker #2: Thank you very much , everyone . This concludes our question and answer sessions . We will reconnect with you and the market for our fourth quarter results on February 26th .
Speaker #2: Thank you very much .
Speaker #3: Thank you .
Speaker #2: Thank you .