Millicom International Cellular SA (TIGO) 2015 Q3 法說會逐字稿

Good morning and good afternoon, ladies and gentlemen; and welcome to the Millicom financial results conference call. Today's call will be hosted by the Chief Executive Officer, Mauricio Ramos; and Tim Pennington, Chief Financial Officer.

Following the formal presentation by Millicom's management, an interactive Q&A session will be available.

I would now like to hand the call over to Nicolas Didio, Head of Investor Relations. Please, go ahead.

Thank you; and welcome, everyone, to the Millicom 2015 third quarter results presentation. Today's presentation materials can be found on our website, www.millicom.com.

Before we start I would like to remind everyone that the safe harbor statements apply to this presentation and the subsequent Q&A session.

With me today on this one-hour call are our CEO, Mauricio Ramos; and Tim Pennington, our CFO. I will now hand over to Mauricio, to give an overview of our Q3 2015 results and operational performance and strategy. After which, Tim will take you through the financials and we'll finish with a Q&A session.

With that, I hand over to Mauricio.

Hello, everyone, and thanks very much for joining us today. As you know, we always aim to structure investor presentations in order to address the issues that are foremost on your mind, and to do that first.

Today is, of course, no exception. You will all have seen the release we put out yesterday, about our decision to report to US and Swedish law enforcement authorities potential improper payments made on behalf of our joint venture in Guatemala.

This is, of course, our Q3 call, but I would like to address this subject first; as you will have noticed by now, we're facing this issue head on. Then, of course, I'd like to move on, and focus a little bit more on our quarterly results.

As the investigation is ongoing, we are unfortunately extremely limited by what we can share with you. That is frustrating, for sure, both for us and, certainly, for you as well, as we would like to continue to be as transparent as we possibly can on this topic. But in order to protect the integrity of the investigation, we are unable to share details with you. We hope you could appreciate that.

I say that because we do want you to take note of how proactive, how diligent and how decisive we have been. As I said earlier, we're facing this head on; we're not sticking our head in the sand.

A delicate matter was brought to our intention. It was reported to the Board. A special committee was promptly formed. An investigation is being conducted by a top-notch international firm. A decision to report to the authorities was then made, and we proceeded to disclose the matter to our shareholders immediately,

So if you look at what we've done, so far we have investigated, reported and disclosed, proactively, diligently and transparently.

We indeed came to the judgment that it would be appropriate to report this matter and will, of course, fully cooperate with the authorities to the extent that they do choose to investigate the matter themselves.

We cannot make any predictions as to whether or when any government investigation will be commenced, much less the direction it may take.

Rest assured that the Company is committed to maintaining a proactive compliant and business ethics program, which includes training, auditing and monitoring. We're always working to improve that program, and I hope we have shown already our commitment to that.

Furthermore, we have engaged Covington and Burling, to conduct an independent assessment of the Company's compliance policies and procedures, and a compliant organization, so that we can further strengthen our practices much more.

Again, this is a voluntary and proactive step that we're taking decisively.

You may be wondering what will happen next. We understand that if an investment -- an investigation by government results, it will likely take some time. If that happens, we do not foresee that we will be able to provide any substantive updates on the work done by the authorities. If we can, of course, we will.

Again, please note that we have reported the matter ourselves, and will cooperate fully with the authorities. Any indication, however, as to how long any investigation will take would be pure guesswork from our side. Equally, we cannot speculate as to the possible outcome of any potential actions to be taken on behalf of the authorities.

I am sure you have more immediate questions, naturally focused on the joint venture in Guatemala; the effects on the business; and our future in Guatemala more generally. Taking each one of those in turn.

What does this mean from a financial perspective? I'm sure you want to know. It is very earlier for us, in the context of an ongoing investigation for sure, to speculate on the effect, if any, that this may have on the financial of the Guatemala business; or on Millicom more generally, for that matter.

You may also wonder, where would this leave us with our Guatemala business going forward?

As with any responsible company, and in perfect consistent with what we have done so far, we will thoroughly review and assess our strategic options that could be considered with regards to the Guatemala business, as we would do with any other business.

This in itself is not a decision, and I emphasize that; it is not a decision on any changes to the business, but rather of a result of our proactive risk management.

I know that many of you would wish for more details on everything I have just said. At this point in time, and in order to maintain the integrity of the investigation, we will not be able to elaborate a lot more for this topic; but we will gladly take your questions, of course.

I hope that you will understand that as much as possible, and how responsibly we have acted so far, you will grant us a little bit of leeway in that regard. In reality, please note that we are absolutely doing the right thing here, both from a business and from an ethical point of view.

We, however, have a lot to say about our quarterly highlights on our business, so let's turn to that as our business is indeed growing quite well.

Regarding our Q there are five key messages we would like you to take away from our call. First is our underlying financial results are very good, with organic EBITDA growing at 8% in local currency.

Number two, our EBITDA margin keeps improving. We're very focused on driving profitable growth, and our margin is up 60 basis points already to 34.1%.

Three, our growth potential is materializing and our strategy is showing promising results. We have surpassed the 60 million mobile sub mark and the cable network is now 7.5 million homes.

Four, in Columbia we are sustaining strong underlying growth.

And five, optimization of our business continues with very strong and concerted focus on costs.

The underlying big message here is we are dead focused on execution.

So look at slide 5. Q3 was a solid quarter, but of course FX has hit us very hard. There has been accelerated depreciation in key currencies, like the peso and guarani. Of course, this puts pressure on our US dollar reported numbers; you all know that.

But if you put FX aside for a minute, there are three key messages that underlie our financial performance in Q3, and you can see all of them here.

Number one, organic revenue was up 7% year on year, with strong service revenue underneath it, and Tim will talk about this a little bit more later as it's a key metric for us to focus on.

Number two, EBITDA was up 8% year on year.

And number three, EBITDA is growing faster than revenue. This is 100% consistent with the message we've given you of our focus on driving operational leverage.

Now let's take a little bit of a look at our operational performance, a few points on this slide. One, in mobile, we have added 800,000 subscribers in Q3, and almost 4 million year to date, now that we have surpassed that 60 million mobile subs mark I mentioned earlier.

The second message here is that in Q3 we accelerated the build-out of our cable network, just like we told you we would do. We added 243,000 homes to our network during the quarter, and year to date we have added a net 415,000 homes to our network. You can clearly see the acceleration in our build here.

Number three, the subscribers are coming in; we added 83,000 new RGUs, or revenue generating units, and 49,000 new customers during Q. Year to date we have added 230,000 new revenue generating units and about 130,000 new customers.

Lots of pent-up demand filling our network, and we'll talk a little bit about that in a second.

Our EBITDA margin keeps improving, the message here on this slide is very simple: we continue to drive profitable growth. This is our third consecutive quarter of EBITDA margin increase and we're dead focused on continuing that trend.

Our reported EBITDA margin is now at 34.1% in Q3, up 130 basis points from 32.8% a year ago. Even excluding UNE, our EBITDA margin is at 34% in Q3, up 60 basis points from Q3 last year.

So we are indeed growing, but we're growing in a more profitable manner, as we told you we would do.

Let's talk a little bit more about cable, as I know that you have been keen to hear more about this since our last call.

The strategy is simple: you build; you fill; you monetize. On building, I already told you that we are accelerating the roll out of our homes. We built, in Q3, twice as many homes as we did in Q2 and Q1. As you think about the economics of this build-out, please know that the network CapEx to build a home or to pass a home is about $100 per home pass in our markets.

On filling the network, we mean converting homes passed into homes connected or subscribers. Our current penetration for the entire Company is about 35%, so think of that as a long-term industry average, or a target.

In the new builds, we're achieving 19% penetration within just 10 months of the new homes being released for sale; that's a pretty good number. As shown on the chart below, the number of RGUs per connected home is quickly going up, now getting close to two fixed services per home.

So we are driving a pretty good bundling ratio here and we are monetizing this investment. In our markets, as you see on the chart, the average revenue per home is about $27, so despite strong devaluation, average revenue per home remains very healthy in our market, and it is actually increased in local currency as we are driving a penetration of this business that we're in the early ages of.

In a simple manner, we're ramping up the build; we're filling the network; and we're monetizing it.

Now let's take a little deep-dive on Columbia, as you know a very key market for us. The chart here takes away the effect of handsets, and Tim will address that in a minute, and focuses on underlying service revenue; the true metric of the health of our growth of course.

Tigo mobile is still growing, albeit it's growing at a lower rate. De-segregating the service contract from the handset has driven customers towards lower price plans, you already know that. However, we continue to increase our market share and our base in the country is strongly outperforming that of our peers.

Our cable business is accelerating its service revenue growth, reaching 8.7% this quarter. This is a result of our refocused product portfolio and enhanced pricing since we merged.

So note that, on a combined basis, our Columbian service revenue grew to 6.1%, up from prior quarters in local currency, therefore, showing an acceleration of our underlying growth.

And a slide here -- our last slide here is a summary of our optimization program. We also continue to deliver reductions in our cost base across the operations and at the corporate level. You know how focused we are on that.

Our corporate costs ended at 3% of revenue this quarter, an implied run rate now of about $200 million a year. Rest assure that we continue to critically look at all business areas to optimize the way we work; there simply will be no rest for us on this front.

Before I hand over to Tim, as a conclusion, I want to summarize the key highlights from the quarter in this slide. In Q3 we delivered strong organic growth and we remain very focused on executing our plan.

We expanded our footprint and customer base in both mobile and cable; and we did this whilst increasing our efforts to enhance the margins and improved cash flow generation.

With that last message, I will hand it over to Tim to give you a lot of detail on our quarter.

Thank you, Mauricio. So starting on slide 13, headline revenue growth, as Mauricio said, was 7.2%; that compares to 9% in Q1 and Q2. The difference is almost wholly due to lower handsets, revenue growth in Columbia. Even that was hardly a slowdown, it's simply that the handset revenue grew rapidly in Q3 2014.

If we look at our other key metrics, service revenue growth, EBITDA, margin growth, ex-UNE and cash flow all saw good progress in Q3.

Obviously, the quarter was complicated by strong FX headwinds, which were through the summer, not just in Colombia, but also in Paraguay, Tanzania and Rwanda. Revenue, in particular, saw an unprecedented 13.5% FX swing.

Before I get into the detail, I want to quickly run down the Group P&L. Headline revenues, $1.64 billion. As I said, organic growth remained good. Service revenue margin notched up.

EBITDA, at $560 million, that represented 7.9% organic growth and, a Mauricio pointed out, a 60 basis point improvement on Q3 2004 (sic) on an ex-UNE basis. As you can see on the slide, it was 1.3 percentage points higher on an absolute basis.

Incidentally, this is the last quarter we will extract UNE from the numbers as from Q4 we'll have full comparatives in the prior year.

But this year, including, or this quarter including UNE, we benefited from a non-cash PPA adjustment of $8 million. This relates to the finalization of the fair value exercise for the acquisition of UNE. As I said, excluding, or including that, the 130 basis points showed good progress on the margin front.

Continuing down the Group P&L, overall our operating profit was 5% lower than last year. This was due to higher depreciation and amortization and, again, this was mainly due to the PPA adjustment.

Net financing charge, broadly in line despite higher levels of debt as the impact of local currency borrowings shielded interest charges to some extent. Again, the difference here, we also saw a PPA adjustment in these numbers.

In other costs, we took $108 million loss on FX. This is a mark-to-market revaluation -- sorry, also, there was a mark-to-market revaluation on the put on call options for Honduras and Guatemala, which were a credit this quarter. So we were left with a net $46 million in the other non-operating expenses.

Our non-controlling interests, which is our dividends to partners, were lower in the quarter, reflecting scheduled dividend profiles.

Tax was up a little bit on withholding tax. But on tax, we're still expecting our full-year tax charge to be under $300 million.

And, finally, our EPS was lower in Q3, but that is largely due to the FX adjustment, noted earlier.

Okay, let me talk in a bit more detail on the revenue and service revenue growth trends for Q3.

I think this graph, which is familiar to you now, really shows the story of Colombia over the last 12 months. New regulation last year resulted in a change in the way postpaid handsets were sold. Instead of selling within a bundle, they're now sold separately. This caused the relationship between total revenue and service revenues to diverge. I think this anomaly has largely now been flushed through and we're returning more normal levels of handset sales growth.

However, the key message I really want to stress from this slide is that the service revenue growth, and this includes regulatory impacts such as MTR cuts, for instance, we do not exclude them from service revenue growth, it remains very consistent. As you can see on the slide, from 5.9% in Q3 2014; in Q3 2015 it was 5.8%. It was up 10 basis points sequentially.

Whilst on that point of consistency, mobile growth of 3% and cable growth of 25% were exactly in line with the growth levels we saw in Q2.

To emphasize this point a little further, slide 17 we show the organic growth rates for each of our countries and they are pretty similar to Q2.

However, as the lower chart demonstrates, the FX has weakened materially, reflecting the global emerging market currency volatility we saw over the summer. Since the end of September we've seen some stabilization in FX rates, but I think it's too early for us to relax at this stage.

You can see there the FX impact a bit more clearly on this slide, when we look at the revenue by our product areas. Underlying revenue grew in all of our business lines. Data growth was 39%, offsetting a decline in voice and SMS. Again, cable was up strongly. MFS a little bit slower in the quarter as Paraguay saw some weakening from macro market conditions.

The same chart this time by our regions and, actually, LatAm saw a pretty strong underlying quarter. They were up 6.2%, again, excluding UNE. And most countries are doing well and momentum is improving, and particularly in Paraguay where we've worked very hard to turn the business around.

Africa continues to show -- to grow strongly. It was just under 12% this quarter on an organic basis. That is despite Chad suffering from severe economic and security issues. In fact, it's the only market where we're seeing, currently, where the macro is impacting our business.

If I exclude Chad, the rest of Africa business grew by over 14%, pretty much in line with prior quarters, and it grew sequentially.

If I look at the EBITDA now, a few moving parts here. The underlying performance was very satisfactory. Absolute organic EBITDA increased in both Africa and LatAm. Once again, we brought our corporate costs down.

So our organic growth rate of just under 8%, it was offset by FX impact of a translation impact with $61 million in the quarter, mainly, mostly coming from LatAm.

And then we've broken out UNE; UNE added $77 million in the quarter. And then there was a further positive adjustment of $8 million, a PPA adjustment, I mentioned earlier.

So let me take that and look at that performance on EBITDA in a bit more detail.

I'll start with LatAm. Good progress in Bolivia where we saw early teens growth. El Salvador was up nearly 10% as well. Paraguay and Guatemala were up around 3% each there year on year.

Colombia, including UNE, we saw some margin improvement. We're now at 30.9% and that's up 2.2 percentage points on Q3, 2014. And more importantly, we stress the importance of the service margin, which increased to 34.3%, and that's also up 2.2 percentage points.

In Africa we did see, we also saw some progress. Organic EBITDA was up 10 percentage points. Tanzania continued to post a strong EBITDA growth, it was up 9.3%; on revenues, 14% higher. We saw a good uptake in subscribers and also MFS revenues were also very strong again in the quarter.

As I said, Chad continues to drag the African performance on those macro and security issues. But despite that, the environment -- we're holding market share there and, as a result, we're managing our costs more aggressively.

The rest of Africa, we saw some increases, although there was a little bit of margin pressure in some of the markets.

So, turning to our cash flow; a familiar layout, looking at the nine months here. Cash flow from EBITDA to equity free cash flow. That is the cash flow before the dividend and other one-off items like M&A.

Headlines are the cash flow was good. OCF, which is after cash, CapEx and working capital, was up 10% on last year and our free cash flow up 41%.

Dividends to minorities are just the normal dividends; so nothing special there. That left us with an equity free cash flow of $127 million year to date.

I want to just spend a minute on CapEx. Our guidance on CapEx for the year is between $1.25 billion and $1.35 billion. I expect we'll come in towards the lower end of that range. About half of our CapEx this year will go towards mobile, which is largely 2G and 3G coverage and capacity, although we'll spend a little under 10% of 4G coverage for this year.

Cable is about one-third of the total with half of that relating to the capitalization of set-top boxes and other success-driven expenditure. So we have about 30% of our cable CapEx is for the buildout. Our expectation is we'll build round about 600,000 homes in 2015.

As most of our cable buildout is aerial, we estimate the cost to buildout 10 million homes, and that's an additional 3.8 million. It's going to cost us around the $400 million mark and we expect that to be spread over several years.

Finally on net debt, our net debt is $4.2 billion; leverage stable at 1.9 times consolidated and 2.2 times proportionate. We've now finalized our covenant adjustment at 3 times net debt to EBITDA off, across all facilities and bonds.

Our debt remains very balanced. About one-quarter of the gross debt is in local currency. We've got a 6.2-year maturity profile and we only have $200 million of maturing debt in the next 12 months.

So, in conclusion, the underlying trends remain robust. We are beginning to see a weaker macro environment, but we're positioning the business to that end.

The uncertain FX picture is making forecasting US dollar revenues more difficult. But we are very comfortable with the EBITDA guidance provided in July, and that is despite the FX deterioration, which happened in the meantime.

As I said, we expect CapEx to land towards the lower half of the range and we'll maintain our focus on margin improvement and improving our cash flow.

We're going to be cautious going into 2016. We will balance further cable expansion and mobile expansion with improved cash generation.

As I said earlier, we've got ample liquidity to manage the fluctuating environment. We maintain a low leverage policy, as is appropriate for the Group at this stage of the development.

So with that, we'll take some questions.

(Operator Instructions). Luigi Minerva, HSBC.

I have two around the Guatemala issue and one on the operational fundamentals of the quarter and going forward.

So about Guatemala, my first question is, I just wanted to check if Millicom falls under the Foreign Corrupt Practices Act, FCPA, in the US? I presume you do, because you issue bonds in US dollar, but I just wanted to double-check this.

And my second question is whether you've learned any lesson for your internal auditing procedures from this experience?

And then my last question on the fundamental is really an update on the margin progression of UNE in Colombia. Where do you think you can get to in 2016? It's an important part of the investment case. Thank you.

Why don't perhaps I take the first two and give Tim a little time to prepare for number three?

Listen, on the FCPA question, this is a very highly technical matter as I'm sure you can imagine. But I tell you that we have hired the best of the best legal team and their recommendation, indeed, has been that we report the matter to the US and the Swedish authorities, and that is what we have done.

It's an ongoing investigation and, of course, we've got to let that due process play out here. But we feel very comfortable with the advice we've received with regards to reporting.

On the second question, we've learned, I think, two things. One thing which I think is positive in the midst of this all, which is that our compliance mechanisms have actually worked. I'd like to draw a distinction here as to what has happened.

This is not a result of an external investigation by any institution and is not the result of a government investigation. This is the result of our proactive investigation and compliance procedures.

Whereas, of course, this is a difficult matter to report, I think, as I said earlier, it has led us to believe that doing the right thing is the right thing to do. And to the convincement (sic) that we will take a lot of rough patches along the way in the short term, but we will come out of this a much stronger company as a result of this.

I think the second lesson that we learned, as I said, there's two lessons here, is that you need to remain very, very, very, very vigilant on these matters. That is why, as I said earlier, we have also asked Covington to conduct a complete review of our compliance program and help us get better.

Luigi, on the margin on UNE, I think, we -- clearly, we set out our case to improve margin in the UNE business. We believe there is ample opportunity to do that. I think we've actually seen good progress towards that.

The numbers are a little bit complicated by the PPA adjustment that went through the year. But, on a like-for-like basis, we're 300 basis points up on a year ago in the UNE business itself, so we're just now over the -- in fact, we're just over 31 percentage points of margin on a recurring basis ex-PPA in UNE.

So we're very happy with the progress that has been made there. There's a little bit of weakness in the mobile side, given the competitive dynamic there but, net-net, we're generally happy with the way Colombia's going.

So is a mid-30s by end of 2016 still your broad guidance?

I'm not sure that was our broad guidance. I mean, we are aiming to get the business towards the mid-30s, and hopefully we won't stop there. I'm not sure we committed to do that by the end of 2016 but certainly we're very happy with the progress we've made so far and I think we're -- hopefully, we won't let our guard down and we'll continue to progress with the UNE business.

Thank you.

Thank you.

Stephen Bechade, Citi.

I've got two questions. The first one is just on the guidance. Is it still a constant currency guidance or are you happy with the range that you gave in US dollars?

And my second question is I've read some Guatemala news and there's some quotes of the local head of the legal department in Guatemala, who claims not to have known anything about what's going on. So can I infer that this is a recent issue as opposed to a long drawn-out issue?

Well, let me deal with the guidance question. Our guidance remains on constant currency. We adjusted it for currency at the second quarter. We have not adjusted it this quarter, because FX has been extremely volatile through the summer.

Based on the numbers that we have got in our press release today, what we're telling you is that we are comfortable with the EBITDA range.

In fact, on the -- the CapEx is not affected by the FX volatility really. We expect on the CapEx range that are in the press release to be towards the lower end of that CapEx range.

And on the Guatemala question, I want to ask you to be careful in making inferences and extrapolating or interpolating bits and pieces of information.

The reason I say that is because, as I realize that it may be frustrating to have such limited information on this, it is important for the process to end up in a fair and transparent final outcome; that we preserve the sanctity of the investigation.

As a result of that, we can't really comment on matters related to it. It is just that we want to continue to follow due process here.

Thank you.

Bill Miller, JM Hartwell.

As you look out and we can clearly (inaudible) the foreign exchange problems, dollars, and all of those things, what are the opportunities that still exist in cable? Can you, for instance, give us any more qualification on how many homes need to be passed in the most affluent areas? What is the timescale for that? Can you take your cable expertise to other countries, even where you don't have mobile?

It's obvious that the fastest growing parts of your business are data and cable, which are intertwined. But can you take your competence, your programming, and do any of the other Latin American or Central American countries and how big an opportunity is it?

Thanks, Bill. A couple of comments on that, because the word cable is, indeed, a very broad concept. So cable really means today pay TV and fixed broadband, but it also means a large opportunity to reach business to business, and I'll speak to that in a second.

On the strictly residential part of the business, cable and pay TV and fixed broadband, penetration in our markets is very limited. It's on average somewhere between 15% to 35%, more than pay TV and broadband, which, by any standard, is still very, very low. Speeds are still very, very low in our market and there's plenty of just homes to be built.

The $10 million target is conservative and it's stretched out through a number of years. But, as you have seen, we are ramping up that build.

With that, it's just an untapped opportunity. Everywhere we build, everywhere we show up with the ability to have high-speed Internet, we do find pent-up demand and we do drive the bundling ratio of around 2, which is pretty good for industry standards to be getting 2 revenue generating units per home and to be filling out the network as fast as we are.

Now, the opportunities are from building more, building faster and, because now you have a fixed network that actually reaches the small and medium enterprises, then adding a fixed component to our B2B strategy that, with our cable, we wouldn't have.

So you haven't heard us talk a lot about our B2B strategy, simply because we don't want to confuse the message, but we're working hard at it and we'll certainly articulate it down the road in a very cohesive manner, because it's part and parcel of building a fixed network right underneath your mobile network.

Of course, the second part of your question was can it be taken to other countries. Yes, there are programming synergies. There are international bandwidth synergies. There are SG&A synergies, as you drive an operation into an adjacent country.

We may do that at some point in time. But, as I've said earlier, right now we have so much on our plate, just building the network, building it and monetizing in reaching these 10 million homes, that we're focused on doing that and doing it well.

Great. Thank you.

Thanks, Bill.

Andreas Joelsson, DNB.

Just a few questions. First, also again on Guatemala. If you could somehow explain a little bit more what you mean when you state that you're going to review your strategical options, what that could mean?

And on operations, you mentioned --I thought I saw some interview with you Tim, that it is maybe a more challenging environment towards the end of the year. Do you see that on a reported top line or is it also on the service side?

And finally, also what's left to do more on the corporate cost side? Thanks.

I'll take the first one, it seems to be a pattern here, and then Tim can scribble some notes for number two and number three.

We meant, Andreas, exactly what we said; that as a natural course of business we continually review and assess the strategic options that can be considered with any of our markets. That includes Guatemala, as it does any other market.

As we've said before, we are actually in the process of, as we've said often, reviewing our strategic options around Africa as well. So that is exactly what that we meant.

Tim?

Yes, what I've been talking about in terms of the macro environment is simply that we notice around the world that the macro environment is getting harder.

In 12 out of the 14 countries, the GDP growth forecasts have been downgraded. We see inflation increasing in many of the markets, as is unemployment. Therefore, we need to be aware of that.

Now, I will say that, we've seen very little impact on that in our business to date. The only place it's really hit us has been in Chad. Elsewhere, some of our leading indicators continue to be extremely robust.

So I look at the gross additions across the business and they are sequentially up, and they're year on year up, which tells us that people are buying handsets. They're still wanting the service.

So I think all the note of caution, we're only putting into this is simply that we're aware of the environment we're operating in and we're very vigilant towards it.

Should we see the environments deteriorate quickly, we will move quickly to effectively manage that environment and continue to be focused on our core objectives of improving our margins and improving our cash flows. So that was what was behind it.

And I can't read my notes as to your third question.

It was related to the corporate costs and how much more there is to do.

Yes, no, no. Look, I think you never quite finish this exercise. I feel we've made some good progress to this level. You know we're on our $200 million run rate now. I think I would not like to indicate they will go much lower from this level.

I think this is a good level for the business to go forward. It isn't to say we won't continue to focus hard on bringing those costs down. But I think we've worked -- I think we've delivered what we said we were going to deliver in the last 12 months.

Perhaps to that I would add a little bit of color that is not so dollar-focused, but much more focused on the way we are running the business.

It's good for you to know that we have reorganized ourselves in a much more focused towards the operations structure. So I've reorganized the team, so that the Latin American GMs report directly to me, giving me a lot more visibility into the business, allowing us to better operate and act as an operating company, rather than as some form of a holding company.

We've also added Cynthia Gordon to the Africa team, as their head. She's also very much an operating person.

So in reality the concept of a large corporate overhead is also being turned from a management point of view, into much more than operating structure, that allows us to be closer to the business and involve our GMs a lot more in our corporate decision-making. That's part and parcel of the numbers that you're seeing.

Great, thank you very much.

(Operator Instructions). Stefan Gauffin, Nordea.

First, I would like to start with Colombia. You don't seem to have booked any restructuring charges in EBITDA in UNE this quarter. Instead you booked $10 million in the form of CapEx. Is this the way you will operate also going forward?

Secondly, you stated that the option expires in the Honduras and Guatemala and you would likely deconsolidate these assets, as of 2016. Is this already decided or what can be done to keep Honduras and Guatemala consolidated? Or are you working on another solution?

Then the final question relates to Africa. Looking at the EBITDA margin for Africa, excluding Tanzania, it is declining from 15% in Q1 to 13% in Q2 and to only 11% in Q3. When do you expect to see the solid growth to filter through as improved margin in Africa? Thank you.

Thanks, Stefan. Yes, look, the integration costs, $10 million as you point out, it was booked through CapEx. It's not a choice we make; we decide where it goes. It really is we follow the accounting and if it's some form of capitalization then we have to book it through the CapEx.

So we haven't changed our view on the overall cost of the integration. But where it lands, whether it's P&L or CapEx is hard to determine and, frankly, it's all cash flow anyway, so we look at it that way.

I think the consolidation issue for Guatemala and Honduras. As you're aware, it's an extremely technical issue. It is relating to the IFRS 10 and 11.

In the absence of extending the options, and we've made no agreement to extend these options, then we expect that we will be deconsolidating these businesses from the end of this financial year.

Now, that doesn't change, it's an accounting exercise. It doesn't change anything else from that respect.

Then Africa, ex-Tanzania and Chad, I think the issue with these businesses and why the margin is going down, they're on very low levels of profitability. The margins are very narrow and there is a number of one-off issues in each of the quarters, funnily enough, where it distorts the margin.

Now, that isn't to say that we're happy with the margin or that there isn't a lot of work we can do on that. But I think, fundamentally, looking through these one-off charges, we feel we're making progress in Africa.

I can't discount the fact that in Q4 we'll still have some tidy-up issues to deal with. But, in the main, what is working for us in Africa is that our headline revenue growth has really started to motor again; high-teens in Senegal and DRC, Ghana.

As long as we can keep that going and flush out the one-off issues then we feel confident we'll see the margin grow. We remain committed to focusing the Africa business to get it to EBITDA minus CapEx, break-even in 2016.

So in order to do that, we'll have to continue to see margin growth in the Africa and in the Africa business ex-Tanzania.

And perhaps just to give you a little bit more color, as we're going here through our budget season, we're dead focused on putting together a budget for Africa that is perfectly consistent with what we have told you, which is that we think in 2016 Africa can be EBITDA minus CapEx OCF neutral.

Thank you.

Thanks, Stefan.

Chris Grundberg, UBS.

I've just got a couple of questions if I can.

Just on Colombia, I wonder if you can give a little bit more detail around that mobile performance and the competitive dynamic. Appreciate it's tough, but any update on the developments you've seen since the period-end, and maybe what you think the medium-term mobile growth trajectory should be there over the next couple of years.

A follow up on cable. I'm just curious on the 10 million homes that you cite and the $100 per household cost. Just to confirm, that's your assessment of that entire 10 million home base? It doesn't increase as you get further down that 10 million?

And maybe, if you're looking further out beyond that, what do you think the $100 might go to further down the pipe? Presumably the urban density goes down and the $100 goes up, but just curious on your thoughts on that front. Thanks.

So let me take the cable one and then Tim can put some notes on the Colombia specific one.

Listen, you're spot on. Cable is a game of density in the cost of the build. The reason that build cost is around $100 is because, basically, there are three key components of a cable build.

One is the fact that in all of these markets the plant is built aerial, 95% to 98%. Of course, that's at a very different cost from the plant being built underground. That's number one.

Number two is this is a market with significant density. Of course, the more homes you can pass per kilometer, the more cost economic it is. That is the true nature of this market we operate in.

A third component is that, although this is high technology, high-speed data, in reality a big chunk of the investment is made on building the network, so that is labor cost which, on a relative basis, is obviously less expensive in the markets we operate.

Now, having said all that, of course, we're building the homes that have the best return first. And as we go -- as you would expect us to do. As you go down into the longer part of the tail, it is likelier that densities do fall down and the cost per home tends to increase.

But the number of homes built in each of these markets today as a percentage of the available homes is still very low.

If I could just perhaps point you to Bolivia as an example. We've built about 150,000 homes, and we think the market there would allow us to build somewhere around 750 to maybe 900 homes, which would effectively be somewhere around 50% to 55% of the economic homes in the country.

So that gives you a pretty good feel for the homes we're building and the economics that we're building them on. Then that's why we feel, of course, that this number is correct.

Now, I do -- something on your question I do need to correct or clarify, that the $100 million is the investment on building a home pass. Of course, this is a game of filling the network and, of course, there is CapEx, an installation cost, some of which we recoup when you do install a customer. And that typically is, in our markets, if I could just give you a ballpark number, around [150]. But again that's not spent on a home pass; it's spent on a connected customer that is giving you revenue.

So a long-winded answer that hopefully clarifies everything.

Thanks, Chris. On the mobile side, I think what we've seen over the last couple of quarters is the market slowing down a bit.

But I think what's clear is that we're over-indexing in that market. Our growth is strong, relative to the competition. We're growing market share.

I think we're over-indexing because we're significantly over-indexing in the data customer. We are picking up good, solid data customers, 4G customers as well, and that is supporting the future of the business.

So I think we'll see a little bit of price competitiveness, a little bit of market issues. But we still think we're doing the right things in that market and we are still growing at a relatively good pace.

The big thing that's really changed has been the handset revenue sales. Part of that is technical, to do with the change in the regulation, so that the base was -- the basis was different last year than it is this year.

Those issues that I talked about on the call -- on the -- in the presentation have largely flushed through. So we will see some slowdown in the headline growth rate.

But what we are confident about, and what we're seeing is, continued growth in market share, and continued growth in our margins, and that's what we're focused on.

If I could just ask one other one. And apologies, it is on Guatemala. You mentioned in your little run-through of the decision-making process, that obviously you appointed the international law firm. Then, on their advice, you decided to make the disclosure to shareholders through your release last night.

Just curious if you can give any color on that decision. What were the factors that meant that you thought it was worth telling shareholders? Was that a materiality test, or any color you can give around that would be helpful?

I tell you that what went through our heads and that of the Board, was certainly, largely, our commitment to transparency and our commitment to be fully transparent to our shareholders.

First came the recognition to report; and as a result of that, then the natural conclusion that our shareholders should know that we have voluntarily reported the matter to the authorities. That's really it.

That's helpful. Thanks.

JP Davids, Barclays.

Two questions from me, please. Tim, just following up on Colombia. Talking specifically about consumer behavior changes, and being a little bit more short term here. How are you guys responding in the market to these behavior changes at a consumer level? And by that I understood that consumers were overspending on handsets, and maybe underspending on their ongoing ARPU.

And then a second, unrelated question, just around Bolivia. I see you've extended the license there. Can you provide some sort of sense of how much you paid for that extension? Thank you.

Yes. In terms of consumer behavior, what changed in the market last year was that we and everyone else stopped subsidizing postpaid customers. So what happened was that the price of the handset went up, and the monthly recurring service revenue went down.

When we look at our customer, so that's what I mean by customer behavior. They spend more on the upfront handset.

But in reality, when we looked at the impact on customers, we've seen something like a 3% to 4% reduction, in effectively, the net present value of the customer. So it's really a move from -- to the front end from the monthly spend. So there isn't that significant a difference.

The behaviors that we have changed in order to facilitate customers' ability to buy the handsets, we have put financing schemes in place. Some of it goes on to our balance sheet, which is why some of our working capital is a bit higher than last year; and some of it we have entered into a partnership with a financial institution, to effectively finance those handsets.

So that's what's behind it, JP.

One quick question on Colombia, and then the question on Bolivia, just to make sure that it hasn't gone under the radar screen, because I think it's meaningful.

In Colombia, up until about a couple of months ago, I could be off on the timing here, exclusive rights over the local soccer league were held by DIRECTV. The team in Colombia did a fantastic job to renegotiate that for the market. As a result of that, not only us, but other operators in the market, now have that important soccer content, local soccer available to all operators.

And as a result of those negotiations, we did secure some exclusive rights over that content for our mobile platform. Just to make sure that you factor that into the equation.

On the Bolivia question, indeed, it's a very straightforward answer. We're very happy to have concluded that extension. It's a 15-year extension, and the cost of that extension is, I believe, $22.7 million. I could be off on the decimal here or there, but it's in that range: $22 million/$23 million. We're -- we just were issued the formal notification a couple of days ago.

Thank you.

Johanna Ahlqvist, SEB.

Two further questions, if I may. The first one relates to South America, where I saw that within cable the number of RGUs declined in the quarter. If you can comment on what's behind that?

Secondly, if you could give us some more flavor on how the processes are working on the corporate governance? How do you -- such issues as Guatemala, how are the processes working below Board level, to get such attention on a Board level?

Sure. On the RGUs first, because it's a very straightforward, just a clean-up of subscribers at UNE that were subscribers that had no revenue associated with them.

So there was no reason to have them as revenue-generating units, because they were not really generating any revenue. So that's a straightforward clean-up of RGUs, but it has no impact on revenue, because they had none. I hope that's clear.

Then on the second point, on governance, as I said earlier, if you will, one of the outcomes of this process is, indeed, that the process has worked properly.

Matters were brought to our attention; they were reported to the Board. The Board reacted promptly; created a special committee. A decision was made by the Board, which resulted in reporting, and immediately thereafter, disclosure.

So the process is working. As I said earlier, we were taking a further step, which is voluntarily undertake a review of our compliance process, just to make sure that we're strengthening even better.

I want to take the opportunity to say that indeed our Board has been very decisive and instrumental in taking proper and timely action on this. They've been a provider of great advice and guidance, and the result is that the Company has taken decisive and proactive action.

Okay, thank you. Can I just follow up on the clean-up in South America? Was that sort of -- how much was the clean-up, and what was the underlying intake, if you can say so?

Yes, I think -- I'm given -- I'm being given the number here. 72,000 non-paying and, as I said earlier, no revenue associated with them. So [it's above] the acquisition.

Thank you.

And I think the details are in the release, by the way.

I will have a look, then. Thank you.

Thank you. That concludes today's question-and-answer session. I would now like to hand the call back to Mauricio Ramos.

Well, thank you very much, everyone, for joining us today. It's an important Q for us, and we do thank you for attending widely today. Bye.

This concludes Millicom's financial results conference call. Thank you for your participation. You may now disconnect.