Millicom International Cellular SA (TIGO) 2017 Q1 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 presentation will be hosted by 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 Michel Morin, Millicom's Head of Investor Relations. Please go ahead, sir.

Michel Morin: Thanks, Trish. And hello, everyone, and welcome to Millicom's First Quarter 2017 Results Conference Call. As usual, the results will be presented by our Chief Executive, Mauricio Ramos; and by our CFO, Tim Pennington.

And before we begin, let me draw your attention to the safe harbor on slide number 2 of the presentation.

So with that, let me hand it over to Mauricio Ramos for his remarks.

Thank you, Michel. Good morning, or good afternoon, to all. And welcome to our Q1 call.

As always, I'm here today with Tim Pennington, our CFO. We're also formally welcoming Michel Morin as our new Head of Investor Relations. Most of you know Michel from his time at Morgan Stanley. We're very happy to have him join the team. So please join me in saying welcome to Michel.

And before we get started, I would also like to thank [ David Bowie ] for his great work during his interning time with us. Thank you very much, David.

So now, onto our Q1. Let's first recap the basic strategy, so it's present in our minds. One, we are rapidly building high-speed data networks, both mobile and fixed. You all know that. 2, we're undertaking a twofold reconfiguration of our business. At the same time, the revenue reconfiguration is about focusing squarely on mobile data, fiber cable and B-to-B to drive our future growth and, of course, to help offset the decline of the legacy mobile voice business.

And the cost reconfiguration, the second part, is about focusing our spend to drive efficiency and deliver superior cash flow growth. And in complement to this, and as you know, we are transforming our IT stack to enable convergence and provide a truly digital customer experience. This is it in terms of strategic approach.

During Q1, we made a lot of great progress, and I would like to share some of that with you today. So let's get to it.

The first message today is that we have increased the rate at which we are deploying our high-speed data networks. We're just getting better and better at it every quarter. On the left-hand side of the slide, you see the progress we made on our 4G network during the quarter.

During the quarter, we added another 470 points of presence to the 4G network. That means that in the last 12 months, we have more than doubled the capacity of that 4G network. As a result, it now covers 48% of the population in our Latin American markets. And it already carries over 40% of our overall data traffic. And you'll see what that means in a minute.

On the right-hand side, you see the fast progress we're making on building the fiber cable network. During the quarter, we built a record 370,000 fiber cable homes. I'll repeat that number -- 370,000 fiber cable homes. About 85,000 were upgrades from copper to fiber cable, and about 285,000 were actual new builds. This is our highest build rate ever. And it seems that, over the last 12 months, we have already added over 1 million fiber cable homes to the network. We're already at the build run rate that we had guided to for the full year in 2017.

Just as importantly, and although Q1 is a seasonally weak period, we had another strong quarter in terms of net adds, both on mobile and on fixed. On mobile, we added another almost 400,000 4G smartphone data users to the system. That means that over the last 12 months, we have added over 2.5 million 4G smartphone data users. And you may recall that the average ARPU on our 4G users is now just below $20, driven by 4G data consumption. By the way, these numbers do not include our B-to-B users, which are also rapidly migrating to higher-ARPU 4G consumption patterns.

In our fixed business, in the quarter, we added a record 63,000 new fiber cable homes connected. Note that over the last 12 months, we have added 185,000 new fiber cable households as customers. And as a result, we now have over 2.1 million fiber cable subscriber homes. And even after the loss of some legacy copper subscribers, over the last 12 months, we have added a net 100,000 subscriber homes to the system.

As you know, we still have about 980,000 copper subscribers, which is why a portion of our cable builds are actually upgrades, so that we can offer the subscribers a bundle with high-speed data, more retention and higher ARPUs.

And of course, we only upgrade where it is economically viable. So we do expect the number of legacy copper homes to continue to decline very gradually over time, as they have in the past few months.

So the point is that we continue to drive strong growth in our 4G and cable users. And as a result, the revenue reconfiguration into these lines of businesses continues to show good and steady progress, as we expected.

The legacy voice and SMS revenue now represents only 27% of the overall service revenue mix. We are reconfiguring the business. And it is still declining about 17%. But every quarter, it represents a smaller drag on growth. And, much more importantly, our strategic or future revenue lines now represent 53% of total service revenue, with continued and steady progress every quarter. Mobile data grew at another very strong 18% clip in the first quarter. And it now represents almost a quarter of our business.

The home residential business continues to grow, gaining 7.3% in Q1. And our B-to-B business grew 6.4%, with renewed growth of Colombia. The strategic importance of our revenue reconfiguration is that it is on its way to put Millicom back in revenue growth mode. As our cable, mobile data and B-to-B grow and become larger businesses, they are increasing lifting the overall service revenue growth for the group.

This is precisely why this next slide is so important. In Latam, our service revenue growth is now coming back. Sure, we're still a bit negative. But growth is slowly and, we think, surely coming back.

In the free market in Latin America, where our revenue from mobile data now exceeds revenue from the legacy voice and SMS businesses, we have started to see an inflection in the revenue trend during Q1. That is the point on this slide on Colombia, Paraguay and Bolivia.

Let's focus a bit on Colombia's example, where we are just about coming out of the woods. And our growth rate is now almost back to 0. Not positive yet, but surely picking up. Overall mobile user intake went back to positive this quarter, despite having to raise prices to offset the impact of the higher value-added tax rate.

The competitive environment in mobile has stabilized in Colombia quite a bit. And ARPUs, as a result, are regaining some footing. So it will be possible now for the market as whole, as a matter of fact, to better start monetizing data, something which was difficult to do until now.

And on the home business in Colombia, the price increases that we took late last year did slow down sales a bit in January and in February. And the copper subscriber base was somewhat sensitive to those increases during those two months. But in March, we had very positive intake momentum, some of which you've seen in the quarter numbers already and which has carried strongly into April.

The overall point is that in all of these markets, mobile data and cable are now large enough and growing strongly enough to help turn the revenue trend around, which makes us feel confident that our strategy [ is ] in networking.

We have said repeatedly that ours is a twofold reconfiguration of the business. The first piece is the regulatory reconfiguration that we just talked about. The second piece is simply operation of excellence, [ spending ] the OpEx and the CapEx where it makes an impact and doing so in an efficient manner. The point here is that Project Heat is delivering the goods.

Our EBITDA margin for the quarter was 36.8%, which means that our 12-month run rate is already above the 35% margin that we had communicated as a target some time ago. The same goes for our operating capital margin. The 12-month run rate is now 19.2%, which is getting very close to the 20% target that we had articulated some time ago.

The point here is twofold -- 1, we continue to improve our operations quarter after quarter as it delivers; and, 2, we are delivering superior margins and cash flow growth while we reconfigure the service revenue mix. Said differently, we're not asking investors to wait out for revenue growth in order for us to start delivering cash flow growth; we are already doing that.

There are a couple of projects worth highlighting here. One is the efficiency we're driving into our network costs. In the last year or so, we have reduced our network costs by around 6% in absolute dollar terms at the same time as we've doubled the size of the 4G network and increased our cable network by about 12%.

We're doing this by changing operating model using managed services, optimizing energy spend, and gaining efficiencies in procurements; of course on top of all the other smaller initiatives that make up part of the Heat program. And two is our ongoing digital transformation as we continue to invest heavily in IT. We now have more than 4 million active users of our Tigo Shop and other digital distribution and client service applications. That is up from less than 1.8 million users only a year ago. Point here is that it meaningfully takes out transaction costs from the system and helps us become a more digital company.

The last point I want to make is that we continue to deliver on improving our capital allocation across the portfolio as well. This quarter, we completed two additional and important transactions. First, and as previously announced, we have agreed to [ peerage ] operations in Ghana with those of Airtel. We will own this asset 50-50. The JV will have about $300 million of combined revenue and about 10 million subscribers. The point is that this JV will create a stronger, more profitable and very attractive number to operate in that market.

And second, today we have announced the sale of about 1,400 towers in Paraguay to American Towers for cash proceeds of about $125 million. This, of course, helps us unlock and better allocate capital, and it also helps us to continue to streamline costs. And also key here is that the lease rates are dominated in local currency, which, as you can imagine, is a smart way to add currency-neutral leverage to the business.

To summarize the quarter -- simply said, we had a good start to the year. The key messages are five. 1, we're making increasingly fast and very focused progress in building the 4G and fiber cable networks that underpin our strategic future. We added 470 4G POPs and 370,000 fiber cable homes onto the network just this quarter. As I have said this before, we're investing more with less. And we're taking every opportunity to invest wherever we see growth opportunities.

2, we have continued strong user intake in the quarter. We added another 400,000 4G users with good ARPU and a record 63,000 cable subscriber homes. 3, our revenue reconfiguration is on track. 53% of our revenue mix is now mobile data or cable revenue. 4, whereas we have not yet returned to service revenue growth, our future lines of business continue to deliver strong growth and increasingly carry the weight. And, 5, our relentless focus on operational excellence continues to deliver. Our EBITDA run rate margin is now close to 35% or above that number. And our operating capital run rate is now pretty close to 20%. Said differently and simply, we feel we're attaining strong operational momentum in executing our strategy.

So yes, we still have to regain positive growth. But we can just about see that on the horizon. And yes, the second half of the year is where the real recovery needs to happen. But we had a good start of the year in this quarter. And that puts us well on track to deliver our full-year targets, as we have articulated them to you.

And with that summary, I will pass it over to Tim for more details on our quarter.

Thank you, Mauricio.

Before I go through the numbers, let me start by saying a few words on the economic outlook for the key markets we operate in.

12 months ago, we saw slowing economic growth, weakening exchange rates and rising inflation. I think today we face a much less threatening economic outlook. I wouldn't say the economies are robust, but they're generally steady. And looking at the charts on the left-hand side of this slide, we see that economic growth forecast has stabilized around the 2% to 4% in all of our Latam markets.

The graph on the top right highlights the welcome stability in Colombian peso. In fact, it's 5% stronger than it was a year ago. But more importantly for us, it's been fairly steady now for some time. And the graph below that shows inflation, which has fallen quite rapidly from the highs in the summer, when it was around 9% to today's rate of under 5%.

So let me turn now the key financial metrics -- service revenue, EBITDA and CapEx. We are maintaining our guidance on these metrics. And as Mauricio has outlined, we feel very comfortable with the underlying trends in the business, albeit the headline numbers need a bit of explanation.

Service revenue was down 1.5% year-on-year. But as I'll show in the next slide, this was almost entirely due to Africa. EBITDA was flat, and we saw positive momentum in Colombia, Paraguay and Costa Rica, dragged back largely by challenges in Central America. But our margin continues to improve. And the focus on capital allocation and Project Heat are delivering results on the cash flow.

Okay, turning first to service revenue -- this slide is showing you the bridge from the service revenue growth in Q4 2016 to Q1 '17. First thing to say is that we're now treating Senegal as a discontinued operation. So like-for-like, Q1 service revenue was, in fact, very similar to Q4.

Second thing to say -- Latam momentum turned positive, driving a 1.1% uplift in sequential growth. But note this was after MTR cuts in Colombia, the return of the UNE fixed wireless service spectrum. These two took about 80 basis points off the group's growth, whilst a drag on the Guatemala surveillance project held us back by a further 50 basis points.

I think the third point to make on this slide, and I think the slide shows it very clearly, is that all the positive momentum from Latam was offset by a difficult quarter in Africa. We saw a strong 2016, but we've seen a number of factors affecting the growth, the biggest of which was a more than doubling of VAT on telecoms in Chad, which took the African service revenue into negative territory and contributed 130-basis point drag on group service revenues.

Michel talked about Colombia, but I think it's worth repeating. We saw a more stable macroeconomic environment, we saw a more rational mobile market and a return to positive net adds. This led to stronger revenue trends despite the headwinds mentioned a few seconds ago, plus a record rollout in fiber cable, good traction in operational efficiencies; all of which added up to a 30-percentage-point EBITDA margin for the first time.

So we do face challenges in Latam. El Salvador continued to struggle, whilst Guatemala had a poor quarter driven by lower international incoming revenue. But elsewhere, we had strong performance in Paraguay, which was further enhanced by a one-time accrual reversal. There were no negative one-off charges in the quarter. You will have noticed that we're no longer reporting adjusted EBITDA.

So our Latam EBITDA margin remain robust, up another 40 basis points. And the OCF margin strengthened to over 30%.

As I said, fairly tough quarter for Africa. Part of the issue is that our base is now narrowing, with Senegal taken out of the numbers. And once the Ghana transaction closes, we'll also exclude Ghana from the group consolidated numbers. So we're more exposed to single-country issues, as we were with Chad this quarter.

But we remain focused. EBITDA is still growing, and that is a key priority for us. We kept the EBITDA margin above 30%. And, more importantly, cash flow remained strong, solidly in positive territory and firmly heading to full free cash flow-positive in 2017.

So let's turn our attention to the group EBITDA -- $555 million in the quarter, margin 36.8%, up 80 basis points. We also benefitted from positive FX movements. So in real terms, EBITDA was up 2.8% year-on-year. I think the major reason EBITDA has remained robust has been our focus on cost through Project Heat transformation initiatives.

And I think if we turn to the next slide and look at costs in more detail, the slide shows the total cost base for the quarter, without adjustments for FX or any other one-off impacts. And our total costs continued to fall. They were down $10 million on a year ago. And whilst that doesn't seem a lot, you can see from this graph the mix shift. G&A expenses are down 120 basis points. We save money on corporate costs, save money on network expenses and in Africa. Meanwhile, we've continued to flow money into sales and marketing activities, which, as a percentage of revenues, increased by 60 basis points in Q1.

(inaudible) to say on the P&L below EBITDA, depreciation, labeled A on this slide, was $16 million higher due to translational impact of a strong Colombian peso. Note that the prior year has been restated to include the depreciation arising out of the fair value exercise on Guatemala and Honduras.

Item B is the net finance charges, are up $12 million, largely on higher levels of local currency debt in Colombia. And finally, item C, other non-operating income, reflected FX movements in the [ main ].

So, cash flow -- cash flow has improved by $100 million over the last 12 months. In Q1 2016, we had negative equity free cash flow of $50 million. In Q1 2017, we have positive equity free cash flow of $50 million. So $100 million swing.

And where did that come from? Well, EBITDA was a little bit better; cash CapEx, working capital and cash taxes all a little bit lower. We did see some offset from interest, which is higher largely on local currency debt levels and some timing differences.

Now, I would also caution that the first quarter is generally not representative of the year. But still, we see the benefits of tighter cash flow management all the same in these numbers.

Net debt, pretty much in line with the end of Q4. Major movement was FX-related in the payments for the acquisition of Cable Parana, our cable business in Paraguay. Leverage ended the quarter at 1.94x on a fully consolidated basis and 2.17x on a proportionate basis.

The Paraguay Towers deal announced today will not have any noticeable impact on our leverage. The contract will be treated as a finance lease. There will be a small positive impact on EBITDA, and we also expect it to be mildly cash-accretive as well.

So that brings us to the end of our Q1 presentation. To summarize the quarter, I would say we started to see more positive revenue trajectories in Latam. Data is starting to drive the business. The [ mas lam ] book is looking better. And the benefits from Project Heat are starting to show, as is the impact of the capital allocation decisions we've been making. So the results we're seeing [ and consequently in ] cash flow.

The last on headwind -- Africa took a backward step this quarter, and Central American businesses are not yet firing on all cylinders. But we believe we're on the right track. We're taking right steps, and we remain well positioned to deliver our 2017 outlook.

And with that, we will take questions.

(Operator Instructions). We'll now take our first question, which comes from Julio Arciniegas of RBC.

Two questions, please -- the cable deployment has been accelerating each quarter. We are near now 300k. What should we think about the run rate in the future? And more, what are the challenges to go above the 1 million of homes that basically the company is guiding? And my second question is related to Colombia. In Colombia homes connected, they have been reducing, by seeing your new disclosure. But this should improve as cable deployment advances. When should we see positive net adds in Colombia? Thanks.

Thanks for the questions. And I'll just take them in the order in which you put them. We have guided in 2017 for about 1 million homes built. And you have seen us consistently speed up, get better, that build rate quarter-on-quarter. And we just had a quarter in which, as I said earlier, we built quite a bit of homes. We think the run rate is somewhere around there, somewhere around 1 million homes, fiber cable homes per year. That's about what we think, from a machinery point of view, we can sustain and continue to sell and fill and the same time. And as you've seen, we're filling out network. We've articulated this number before. And if you do some math in the numbers we're showing today, you'll realize that it is a good mix between a fast build rate and a pretty fast fill rate. We're building about 1 million and filling about 18% to 20%, if you do some back-of-the-envelope math there, 12 months out, which both the rates are pretty good. The challenges going forward have to do largely with the usual -- construction crews, training them, permits, getting them out there. But it is a pretty fast rate. And we are continuing to look for ways of speeding it up. As a matter of fact, a key point here is that we're seeing pent-up demand for these services, broadband and Pay-TV, just about everywhere we operate. So we continue to look for -- A, ways to ramp up the machine; and, 2, just these pockets of growth that are everywhere that we would like to go out and build and fill. That's the answer on cable across the markets. And on Colombia, you're right, there's a couple of elements there in the short term that have a negative effect that we'll watch out over time. One is, for the quarter, specifically the combination of fiscal reform, the value-added tax, and our price increase. (inaudible) in sales a little bit in January and February. But as I said earlier, March was pretty strong, and the [ inflow ] continues to be pretty strong. So that sensitivity to the price increases and the value-added taxes, I expect, is now washing away. And we're now on positive territory in terms of net adds in Colombia. The second point, which I also alluded to, which is important for you all to have in mind, is that we're updating quite a bit of copper homes in Colombia. We're doing it for strategic reasons, to retain subscribers; but also to be able to offer a bundle there. And as a result of that, there are what I have described as copper cutters in the past into the system. But our build rate and our fill rate is such that in Colombia, we're now in positive territory.

Okay, thank you.

We'll now move to our next question, which comes from Soomit Datta of New Street Research.

Had a couple of questions, please. One, on the tower deal in Paraguay, I was just interested in why the timing. I guess you've been sitting on towers across the region for a number of years now. What prompted that decision? And how many more towers do you have across the portfolio? What could we expect going forward? And just a final piece of detail on that, could you give a sense as to the yield on the tower deal, the impact we'll see in the financial charges? Would be helpful, thank you. And then, secondly, on Colombia, you talked about the potential impact of [ MDNO ] changes on the wireless business. Could you give a bit more sense as to what you're thinking about here? Sounded like it could be putting revenues under pressure going forward. What exactly do you think will play out in the next few quarters? Thank you.

Sure. So on the tower deal, the rationale is what you would expect in terms of unlocking capital, as I described; allocating that capital elsewhere, becoming more focused and efficient, being a capital-light business. And financially, (inaudible) point that we put that cost into local currency, so there's more of a natural hedge there for us to do. From a strategic point of view, there comes a point in time in which all mobile operators have deployed such large networks into a marketplace that owning a number of towers no longer gives you any meaningful strategic advantage. And as a result of that, that point in time comes where you're better off unlocking that capital and focusing on your core business, while also driving some local currency exposure. We still have in Latin America some 10,000 towers give-or-take, just off the back of my mind, give-or-take. Now, when or how or if we would do similar deals is not something that we're ready to discuss at this point in time. And in Africa, are you're aware, we already went down this road years ago, when we put our towers into HDA. The MDNO changes in --

-- appreciate, just let me add a couple more points on this one. I mean, the other thing (inaudible) I would say is that the timing of this -- we don't pick a timing, these are capital discipline exercises. If the numbers are right, we go with it. If the numbers aren't right, we don't go with it. You asked about the yields. We're not sort of up for disclosing the yields exactly. But local currency financing in Paraguay will cost us north of 10% today, whereas this would give us, effectively, mid- to low single digit sort of yield on that. So it really is -- this one worked extremely well on an MPV basis, which is why we pushed the button on it.

Yes. So on the MDNO question, the changes in the [ regulature ] are meant to provide a more stable environment for MDNOs to have visibility, a regulated visibility, on rates. We don't expect that it would have a huge impact on us going forward strategically. MDNOs remained a small part of the mobile marketplace in Colombia. And, more importantly, we ourselves have been very open to it, (inaudible) host [ part field ] there, simply because we have a large combined network with Telefonica. And that's accretive revenue to us.

Okay, that's very clear, thank you.

We'll now move to our next question, which comes from Sergey Dluzhevskiy of Gabelli & Company.

Two questions, one on spectrum position -- could you talk a little bit about your current spectrum position, your key markets, and whether there are any significant spectrum options coming up, and how are you addressing kind of the growth in data demand versus your spectrum position for the next few years? And the second question -- Mauricio, could you remind us of your M&A philosophy as you look at various markets, as you look at potential assets out there? And maybe more specifically on Colombia, any update on the ETB process? And do you see any other M&A opportunities in Colombia outside of ETB? Thank you.

Sure. So spectrum position -- overall, as a blanket comment, we are pretty good on spectrum. And we don't have any immediate urgent needs just about anywhere. In Colombia, we do have, as you're very well aware, a handicap, which is that we have historically not had access to low-frequency bands. And there is a process for spectrum just starting in Colombia, which, on the positive side, could provide access for us, or should provide access for us, to those bands. That's a process that's starting. It's got some issues, in that it doesn't really do anything to help solve for the unbalanced marketplace with one very dominant player in there. But it's a starting process. And whether, when and what [ time our ] conditions will be is still early and difficult to tell. We would hope that certainly helps us solve in good terms for the handicap that we have in the low-frequency bands, and that it does something to level the playing field there. There's ongoing processes on AWS in Guatemala that continue to get delayed and delayed. We have no urgent need of spectrum there. And in Paraguay, there may be something towards the end of the year. But again, the timing of these things, especially as presidential cycles come to an end, usually tends to get delayed. On our M&A philosophy, we're extremely disciplined. In M&A, the first and most important thing is to not get yourself in trouble. And we think, in that logic, we have plenty of opportunities to start with in markets and even in minority positions that we know well. So we're focused on in-country infill more than anything else. And if there were to be interesting opportunities in adjacent geographies, we would be very careful. And you can imagine that we monitor them and know them and have contacts into a lot of those. That is our M&A philosophy, and we do bits of pieces of infills just about every quarter, some of which may not even make it to the headlines because they're so small. They're usually cable, in which it makes more sense to buy than to build. And lastly, on [ SFA ] in Colombia, which was one of those, if you will, large or medium-size opportunities in-country infill -- that process continues to play along. As I've said before, the asset is a mixed bag. It does have about 1 million fiber homes with [ no ] penetrations, but important rates of overbuild. And it does have about 40% of the revenue base on copper and on those [ economic ] segments. So that's the flipside of that equation. So it's an asset that we monitor and have done a lot of work on in a very, very disciplined manner. We are in that market. We understand the economics of both the high socioeconomic segments where the fiber home is, but also the low socioeconomics of where the copper homes are. And the revenue mix is something that we're very careful with. The issue with that process is that it's permeated with tons of uncertainty, not just around the asset, which we've done all the work on, but the timing on the one hand, (inaudible) year slip into next year? Who knows, because there's so many political elements to it. And then, the second layer of uncertainty is that the setting of an appropriate valuation is also somewhat politically driven. And that valuation needs to be at a point in which it actually makes disciplined financial sense. And obviously, without that, the process would not really take off, without an appropriate valuation. But I'll tell you this, and this is the more important thing I think you should have in mind with regards to that process and just about everywhere else, where opportunities on the cable exist. But by the time -- I'm using this, of course, as an example -- but by the time this process around ETB is completed, we will have built just about the same amount of homes or more, over 1 million homes, just in that timeframe, at a cost per home of around $100 per home. So that's the way we look at it. While the process unfolds, if and when [ if it falls ], we don't know. But we're taking that time to build 1 million homes around, and everywhere else. And that's really what we're focused on and where we see these positions.

Thank you.

We'll now move to our next question, which comes from Lena Osterberg of Carnegie.

I've got some questions on Africa. First of all, on Tanzania, I was wondering what's the progress on the ownership dispute there, and also the IPO, and if you feel that you are sort of subject to any potential fines and what size they could be. And then, I was also curious to find out when you expect approval for Senegal and Ghana.

So I'll have a quick crack at those, and Tim will give me a hand here on some of the more detailed questions there. The IPO requirement in Tanzania is unfolding. We have some leeway as a competitor of ours is advocating its own process first. And we have leeway regulatorily to go behind them later on in the year. The success of that initial IPO by one of our competitors is still to be determined as the process is ongoing. And in the meantime, we continue to make [ process ] just to make sure that everything around the requirements of us being able to do that IPO is (inaudible) in place. We continue very constructive dialogue for our timing to be some time in the second quarter after the first one has occurred. That was Tanzania. I'm not sure --

Mauricio, I think to some extent, that is going to be intertwined with the legal case. There is a hearing next week. Obviously, there's no -- we will not be considering any sort of capital-raising transaction without settlement of this particular case. We have a lot of faith in the Tanzania Justice Department, their legal process there. So with a bit of luck, this will be sorted out some time during the second quarter. And there on after, it is subject to the law of the land. There's been no indication of sanctions. And there is only one party that they've started the process for IPO. And as you know, IPOs take time. So we're working sort of positively with the Tanzania authorities. And we'll approach the IPO as and when appropriate, subject to these other issues.

And on Senegal, Lena, and Ghana, on the approvals that you had also asked, before we forget about that -- we've engaged the corresponding governments of both countries. And we've received very positive feedback. They both understand the good nature of these deals for their countries. And that's been informal, good, positive feedback. And of course, the formal processes are now underway. And we expect that we will formally close in due time. It's hard to give you a specific quarter sense of it. But it's moving along and progressing faster than we expected.

Okay. Thank you.

We will now move to our next question, which comes from Thomas Heath of Danske Bank.

A few questions, if I may. Firstly on El Salvador, with this unfortunate network situation, is there anything to do there? Is there any way to be creative to remedy that? Or can we just hope for comps to eventually get better on a smaller network, if you say? Secondly, on the Tanzania listing, which you talk about the legal cases, that's about who can subscribe shares. There's the discussion about only local buyers with shares, which of course would be unfortunate. And then, thirdly, on Ghana, is there any mechanism in place to exit that asset, any protocol options? Thank you.

Do you want to go ahead, Tim?

Well, I was only going to quickly say, on the network situation in El Salvador, there are technical solutions that we're working as an industry to put jammers in and around the prisons. It's a more complicated technical solution than it might appear. But understand, progress is being made on that. And we don't expect this to be a forever-and-a-day situation, but it has taken longer than we'd perhaps hoped at this stage.

I think would add to El Salvador, Thomas, which I think is important, is -- whereas last year, the situation there was permeated, of course, by the political impact and the media impact that this matter is have in El Salvador. And there was some friction between the government and the industry, the mobile industry. We moved very quickly to put together a joint table with the government and all the operators, which we largely helped put together, to try and come at jointly in a coordinated manner with, as you very well put it, better solutions, more creative solutions. And as a result of that, now we have a very good ongoing dialogue with the government, and we think that will help this kind of situation to be much, much more practically managed going forward. Because we're simply jointly helping solve the problem. On Ghana, the purpose of our venture with Airtel is to help drive much-needed industry consolidation, better economics into a business that would be important in size. That's the first step. The first step is, indeed, to get the synergies, recompose the business. And, of course, as with everything else we'll do, we will then, of course, have a very capital-oriented, very disciplined manner as to what a second step may look like. And Tim, I don't know if there is any additional on the Tanzania listing. I think we just kind of let that play out and see where it falls in the second part.

I think so. The Tanzanian authorities have mandated that it's Tanzania-only investors in IPOs. I think there's been some publicity suggesting that Vodacom is asking for that to be extended to international. We don't have that officially, it's purely speculation in the market. But our position has been that it should be open to international investors as well as local investors. But we'll wait and see what happens with that.

But just to clarify, was that the court case, your legal issue, that you --

No. No, that's something different. That is -- basically, we have a shareholder -- well, he's not a shareholder -- someone who has sort of camped himself on the register. And we are taking legal means to remove him from our shareholding register.

That's helpful. Thanks.

Yes.

We'll now move to our next question, which comes from Johanna Ahlqvist of SEB.

Two questions, if I may. First, one on Africa again -- given what is happening now in Chad, how do you sort of foresee the development going forward in Chad? Should we expect this impact to sustain for the full year, and that you will basically have just a small-digit number on EBITDA growth for the remainder of '17 in Africa? And then, secondly, back to Paraguay and the sort of tower deal you made -- can you say anything? How will that impact CapEx and OpEx going forward? Because I guess you will have some CapEx savings related to this. And then you need to pay something on the OpEx side. Thank you.

I'm probably going [ to start ] (inaudible) it's always been a fairly volatile place, Chad. And Q4 was fantastic revenue growth, Q1 has been hit (inaudible) adjust to Chad. That said, the EBITDA remains strong, the cash flow remains very good. So I think it's just one we're going to have to ride out, maybe for a few quarters. But it's our core focus on Africa in terms of cash flow and margin improvement, and that continues.

Yes, on Paraguay, this is your usual tower deal, meaning it's -- on top of everything we've already said, which I won't repeat, it does have a positive NPV to us, which actually comes from the nature of these tower deals and the ability, of course, to share that infrastructure. It does give us a positive, only marginally positive, impact on EBITDA and CapEx, of course, as it becomes a more efficient use of the towers. And as a result of that, it has a small NPV cash-accretive effect. The more important elements, of course, are that it unlocks capital and helps us put local debt on the business.

Thank you.

We'll now move to our next question, which comes from Kevin Roe of Roe Equity Research.

Tim, are there any additional potential tax or regulatory developments that you're monitoring that could impact 2017? And, Mauricio, turning back to Colombia, can you update us on competitive HFC builds and how you're positioning Millicom's HFC product when there's a competitive alternative? Thanks.

Quickly, then, on tax -- it's a difficult question, Kevin. Because the countries which we operate in are constantly tinkering with tax reforms. I think the only big one that we're monitoring is in Guatemala. It looks to be delayed at the present time. The Colombia tax reforms were implemented at the beginning of the year, don't expect anything more from that. There's nothing major in the rest of Latin America that is causing alarm bells at this end. And in Africa, frankly, it's always challenging. In Africa, the Chad VAT increase came out of the blue from us in this quarter. And so I wouldn't like to kind of opine there. But there's nothing major on my radar at the present time.

So Kevin, on the Colombia and the cable product, if you will there, and the build opportunity there -- Colombia has effectively an alternative HFC [ network ], one of our competitors, which passes some 6 million to 7 million homes, give-or-take. And that information is publicly available from our competitors. And of course, there are areas in which there is a DSL network. Historically, there's been limited investment in those alternative DSL networks. And the size of the alternative HFC build is one that still gives a lot of room for our deal to occur. Let me explain what I mean by that. Colombia is a country of -- depending on what census you take -- some 45 million inhabitants, give or take, which yields 10 million to 12 million in that marketplace, again depending on what assumptions you make and what the exact number of people per dwelling is. So call it 10 million to 12 million. And Colombia is an increasingly urban society. And the latest numbers show that's 90% to 95% urban 5 years from today, which is important. And it's loaded with medium-sized cities, very decentralized. Although Bogota is big, it is similar to the US in the sense that you have a lot of small and medium-size cities, whether it's (inaudible), you name it, there's just lots of them, urban cities that are continuously growing. And so when you look at what you would expect an HFC network to cover, which if you take, for example, Chile or Puerto Rico as Latin American examples of what the ultimate build rate should be, you'll quickly have almost 70%, 80% HFC builds of the entire homes available in the country, which would, of course, mean a Colombia within some 80 million or so many million homes built. And that gives you an idea of where the opportunity lies. We've only got basically 4.5 million homes in Colombia, out of which some 900,000 are covered. That just gives you an idea of why there's been -- there is an opportunity, as there's been limited investment in a fairly urban society. And in terms of what we're doing with the product, penetrations are still relatively low, even in Colombia. Both broadband and Pay-TV penetrations are around 40% to 50%, whereas other more developed economies in the country, that should be the long-term target, like Argentina and Chile, and even Puerto Rico, [ see ] much higher, at 60-plus. So there is runway there to fill the networks. And the better way to fill the networks is, obviously, to offer a double-play or triple-play. As you can imagine, our key strategy here, positioning our product, is as a cross-sell product. We have a large mobile network, and we have a large fixed-base network. So onto the fixed network, we're selling mobile. And onto the mobile, we're selling the triple-play product. So today, we're largely focused on cross-selling. And in areas where we roll out new networks, just in selling a product, a double-play or triple-play, is that is -- and this is a key point -- anchored around the broadband product, which is where the pent-up demand certainly exists. And this last point is true in not only in Colombia, but everywhere else we operate.

That's very helpful. Thank you both.

We'll now move to our next question, which comes from Bill Miller of Hartwell.

Mauricio, you've now been there two years, or a little bit plus. And I wondered if you could take us through the next two or three years, and give us what you think the profile of Millicom will be at that time.

Sure. I think you should -- and that's a great question, Bill -- you should all expect us to become increasingly boring. And by that, I mean we've laid out a strategy. The strategy is working. It's all about building these 4G and high-speed data networks. Every quarter, we build and we fill. And we give you the ARPUs and the subscriber counts that we're adding. And that is showing, as it will continue to show, that the strategy is working. And we are effectively reconfiguring the revenue mix of this business. It will be [ treated ] from today a data-centric business, converging business with 4G, high-speed data and HFC high-speed data networks, and a data-centric converged product everywhere we operate in Latin America, with a lot more revenue coming from data and a lot more revenue coming from subscription than what it is today, for sure. And you can expect us to, as a result of that, continue to drive our margins up, both cash flow and EBITDA, as we have done so far. Because we continue to deploy initiatives around Heat. And you can expect us to take more infill opportunities in the markets we operate, and very carefully look out on those infill opportunities, into adjacent opportunities, as we reconfigure the business into being a data-centric [ convergent play ] in the markets we operate. If you look at what we got, we got basically a strategy that works, a team that is gaining operational momentum strongly. We're hitting in just about all cylinders. We're making all the right capital decisions, moving out of areas where we've got stranded capital and redeploying it everywhere we possibly can. And we continue to look for opportunities where we can add growth on cable and B-to-B. And that's the way we're driving the business.

If I could add, Mauricio -- and I think it's a great question -- I see, our vision really is that in 2 or 3 years' time, we'll have the state-of-the-art high-speed data network, whether the customer wants it by fixed or by mobile. And our customer base will be increasingly sort of sticky with us. They'll be more sort of contract-based revenues, and they'll be more high-value customers. So I think the direction we're traveling in gives us that huge opportunity, given where we are with the great mobile positions and the growing cable positions. Hope that's kind of [ head's up ].

Very helpful. Thank you.

We'll now take our next question, which comes from Mathieu Robilliard of Barclays.

First, I had a question with regards to 4G. You highlight how network progression has been in the last quarters. I was wondering if, in Latin America, you could give us a sense of how you compare with your peers, and also lean to 4G. The fact that you're also investing in cable networks and fixed infrastructure, is that helping you to build better 4G networks? Are there synergies there, something that maybe some price competitors cannot copy? So that's kind of the first question. In terms of other question, Ghana -- could you share with us how this venture is going to contribute to the group? I understand you're not going to consolidate it anymore, [ not accounting ]. But are you expecting to get dividends out of this venture, or other things? Do you have management fees, et cetera, et cetera? And then, lastly, on Bolivia, I saw that (inaudible) from usage fee have increased as you highlight in your press release. Can you give us a little bit more color there? Thank you.

Before [ we start this ], I think this is going to have to be the last question, given there's quite a lot in there.

Thanks.

Sure. So let me address, particularly with the more strategic ones on 4G and fiber, and how that plays out. Down the road strategically, [ they basically will be ] a bid for the consumers. And our job as a company will be to deliver that bid in the most cost-efficient manner to that consumer, whether it's on his or her mobile tablet or at home. And as a result of that, a high-speed data-centric outlook in Latin America and everywhere else will require a [ converge ] operator to have high speed in the networks based on mobile. And that is the more overriding and strategic reason to do this, is just to be able to be there. In the meantime, 4G is the most advanced technology that is helping us drive consumers into high-speed data products. And all of this large number of subscribers that we keep bringing in on a quarterly basis -- 400,000 this quarter, a run rate of 2.5 -- the reason they're coming in with such high ARPUs is because they increase their consumption once the network is there. And this is the key point. And I hope we're driving it sufficiently clear. This pickup in ARPU is driven by higher consumption on a quite stable price per gigabit. So subscribers that have access to the network on a 4G network, on an average, our prepaid subscriber picks up about just north of 2 gigabits per month, where the average is less than 1.5. So there's a pickup in consumption that drives ARPU. Now, that's the short runway, if you will, as to how building a fixed network supports your 4G network. If you look at, building a 4G network underneath, or sort of building a cable network underneath your 4G network, helps you with the delivery of that bid in the short term. Because the faster you offload that bid from the 4G network onto your fiber backhaul, the more efficient you are as an appraiser and the better you can drive cash flows. And if you fast-forward, not into 4G but into 5G -- and it doesn't matter how far out it is in Latin America -- 5G is effectively a fiber technology. The more fiber you have in the ground, the closer you are to deploying 5G. That's true for 4G, but it's even more true for 5G. So effectively, deploying our fiber cable network is a way of preempting, fool-proofing, the future of more 4G and 5G. Hope that was very clear to you. It helps (inaudible) positions you strategically and offers a product that the subscriber really wants.

Yes, thank you.

On the (inaudible) [ JV ], really, we'll deconsolidate it in the financial accounts. It will still contribute through its contributions of net income. And yet, obviously, we would like to see it generating sort of dividends to us. But our cash flow or repatriation will be [ right evident ] going forward. And on the Bolivia, the spectrum issue -- there's a whole load of moving parts in Bolivia this quarter. But one of them was this. And this is largely an accounting re-classification from CapEx to OpEx. So not that spectrum fees have gone up particularly; it was more of a re-class. Hope that covered it.

Okay. Thank you very much.

Thank you. Perhaps we can hand back to the operator to close the call.

Thank you.

Yes, ladies and gentlemen, unfortunately, that is all the time we have available for questions. I would now like to hand the call back to Mr. Ramos for any closing remarks. Please go ahead, sir.

Thank you very much. And thank you, everybody, for your attendance today. We're happy with Q1 and think it's putting us dead on track for the full year. And, more importantly, it's right down the alley of what we [ run to ]. And think we'll have a lot of impact to win strategically, just building on networks and filling them out with high-speed data customers.

Thanks, everyone.

Thank you.

This concludes Millicom's financial Results Conference Call. Thank you for your participation. You may now disconnect.