Millicom International Cellular SA (TIGO) 2017 Q4 法說會逐字稿

Good morning and good afternoon, ladies and gentleman, 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.

Hello, everyone, and welcome to our fourth quarter 2017 results conference call. Before we begin, let me draw your attention to the safe harbor disclosure on Slide 2 of the presentation, which is available on our website.

With that, let me hand the call over to our CEO, Mauricio Ramos, for his prepared remarks.

Thank you, Michel. Good day, everyone, and welcome to our fourth quarter call. As always, I'm here today with Tim Pennington, our CFO, whom you all know. Let's start with a big picture overview on Slide 4, if you will.

Overall we're very pleased with our results for the quarter. Q4 was our best quarter this year in terms of net adds, revenue growth and EBITDA growth. We think of fourth quarter as a strong base for a solid 2018.

As you can see, we came out of the year, one, making significant progress towards our strategic journey, and I'll talk about that in a second; two, with a record year in terms of network deals and net adds; three, with positive and accelerating revenue growth and EBITDA growth; and, fourth, with an important list of transactions that helped us manage our portfolio. We have continued to reduce our exposure to Africa where our returns on capital are low. And we have been reallocating this capital into Latin America where we generate attractive returns on capital. And Tim will show you the progress that we are making in that front.

So let's get started on these points beginning on Slide 5. As you know, Millicom is the leader in most of our markets. Our brand is top of mind, and we have a strong and winning corporate culture. This is the foundation upon which we are building Millicom of the future.

Our legacy mobile voice and SMS revenue was, indeed, under severe pressure a couple of years ago, so we needed to accelerate our transition from voice to data by quickly building as fast as we could a 4G network from scratch. Mobile user penetration was and is, indeed, mature, so we had to focus on customer retention, 4G intake, and postpaid migrations. And we've been doing a lot of that.

And we had a unique opportunity to build a cable business right underneath our mobile footprint in Latin America. So we set out to build over 1 million homes per year every year, and we've been doing just that.

And we were not generating enough free cash flow organically to cover our dividend a while ago, let alone fund the needed 4G and HFC network build-outs. So we engineered a financial turnaround to support our planned operational turnaround, and both of those are now working.

And of course, we had to bring in some key talent in key areas of the business to make all of these happen. We are less than 3 years into this transformation, and, of course, we still have a lot to do, but we have come a very long way. We are today a much stronger company, one with a crystal clear strategic direction. Our business is now high-speed data not mobile voice. Our business is now increasing the subscription-based, not only prepaid. And we're setting ourselves up for convergence. And our margins are expanding again. And we now generate positive and growing cash flow.

So I'm proud of and thankful today to the more than 18,000 employees that are executing upon this single strategy.

And take a look at Slide 6 because all of this is important. We are, as a company, aligned on our strategic purpose. We build the digital highways that connect people, improve lives, and help develop our communities.

We are, indeed, building the fundamental infrastructure that will allow the developing communities that we operate in to join the digital economy of the 21st century. There is no digital economy, no digital citizen, no digital inclusion, no digital anything without the digital highways that we are building. Building these digital highways is both our business opportunity and our social responsibility. And we are, as a company, equally focused and equally excited on both tasks because they truly reinforce each other. The better we do as a business, the more we can continue to attract capital to continue to deploy these digital highways in our developing communities.

So by the end of 2018, we expect to service 10 million active 4G users and to have deployed a state-of-the-art network that will by then pass 10 million homes. These targets are both our business and our social targets for 2018 because building digital highways that connect people improve lives and develop our communities is, indeed, our business and our social purpose.

There are many, many other ways in which we act as agents of positive change in all of our communities. We have highlighted a few of these on Slide 7. There will be a lot more detail on all of these initiatives in our 2017 Annual Report. And note, please, that this will be the second year in which we report our financial and social performance in an integrated report.

The anchor to this all is our relentless focus on fostering a positive workplace that embraces diversity and a purpose to what we do. And in 2017, we were very proud to be recognized by Great Place to Work among the top 20 Latam companies to work for, and the only teleco in that group. And we're also, as you know, well on our way to becoming a compliance leader in our markets.

Now let's look at some numbers, starting with our Mobile business on Slide 8. The chart on the left shows a continued expansion of our 4G network. We added over 2,000 PoPs this year and reached 56% population coverage. This is not a small point. We have effectively built a 4G network in all our mobile markets in the last 2.5 years.

And on the right, you can see that we added 1.3 million 4G mobile customers in Q4 alone and 3.5 million for the full year. Demand for high-speed data is clearly there in our markets, and we're tapping into it.

Both of these numbers Q4 and full year in terms of mobile net adds

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are record for us. And we also beat our full year target of 3 million, largely because we invested, as you recall, heavily in the second half of the year in sales and marketing.

And as I have said repeatedly, we're still only in the very early innings of 4G adoption in our markets. Only 22% of our mobile users today are on 4G.

And our financials, as we have said often, are now beginning to reflect that our mobile strategy is paying off.

Take a look at Slide 9, please. On the left-hand chart, you can see that our ARPU has been improving over the past 2 quarters on the back of the higher ARPU that 4G users bring in. And as a result, on the chart on the right, you can see that our Mobile business itself returned to positive growth in Q4. That is not a small point. Our Mobile business alone is back to growth on Q4.

Let's move on to our Home business on Slide 10. The chart on the left shows that we added 1.3 million homes-passed to our HFC network in 2017; that is 66% more than what we built in 2016. We have not only built a 4G network in the last 2.5 years, we have also built about 2.6 million cable homes-passed. We're simply getting better and better and more efficient at building networks. And this point is really important because recall that our long-term vision is to expand our cable network to about 50 million homes from about 9 million homes today. And this investment also requires that we go to market with a good product and value proposition to our customers.

And the chart on the right shows that we are, indeed, signing up new customers at a fast clip. We added, again, a record 250,000 HFC subscribers in 2017, up 65% from 2016. And every quarter in 2017 was better than 2016 in terms of net adds to our HFC business. And in 2018, we are raising the bar on HFC customer additions. We aim to add 300,000 HFC-connected homes in 2018. That's 20% more than what we did in our record 2017.

Slide 11 is a new slide, but it is compelling all across and it actually speaks for itself. We're expanding our HFC network and adding customers at a double-digit pace. And this is more than offsetting the ongoing drag from our still existing small legacy copper home business.

And on the right-hand side chart, you can see that our proposition is sticky and we can cross sell well. Our HFC Bundling ratio has been steadily increasing each quarter which we reached almost 1.9x in Q4, and that is a world-class ratio.

Slide 12 is also a new slide, but one that we have talked about conceptually often. Our Home business enjoys good pricing power and our ARPUs have been gradually increasing. You all know that. With steady volume and price pickup, our Home revenues have been growing consistently on a sequential basis every quarter.

You have also seen Slide 13 before. But note that this is our fourth consecutive quarter of service revenue growth pickup in Latin America. And Q4 was actually our strongest quarter in the last 2 years. A lot of network investment and operational reorganization has gone into making this operational turnaround sustainable and profitable. This is today a changed business, driven now by high-speed data offerings, both mobile and fixed, increasingly consumer-centric, and increasingly subscription-driven. And this is all a direct result of our strategic focus over the past 2.5 years. You can actually see this quite clearly on the right-hand side of the page.

Today, almost 70% of our revenue mix comes from our areas of a strategic focus, mobile data, cable, and B2B. And you can see that we have high growth rates in all of them. And in addition, this focus is making our revenue more stable and recurring in nature.

Needless to say, 3.1 service revenue growth is not our end goal. Mobile data now generates about 47% of our mobile service revenue and it's growing strongly. We are at the inflection point where data will contribute more to our revenue than voice. It is actually already happening in

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markets.

And as I noted before, our mobile service revenue itself turned positive in Q4 for all of Latin America and it grew 3% in the fourth quarter in Bolivia and Paraguay, the 2 countries where we are further along in this transition from voice to data; simply to say, the playbook that we are implementing works.

On Slide 14, you can see our service revenue growth rates for each of our 6 largest Latam markets. The main message we communicated to you in Q3 remains valid in Q4; revenue growth is improving across all of our markets. We hit an impressive 9% growth both in Bolivia and Paraguay where we have made deliberate investments to increase our CapEx in the last couple of years in the areas of our strategic focus. And this is why we're absolutely convinced that our investments in Colombia and Honduras will also pay off over time; it is the exact same playbook that we're executing everywhere.

On Slide 15, you can see how focused we have been on making sure that we generate enough cash to continue to invest in this strategy. With growing state-of-the art networks, strong 4G and HFC net adds, revenue growth back in the system and a business now driven by high-speed data and cable, we come out of 2017 having effected a strong operational turnaround. And while doing so, we have also picked up $400 million of organic free cash flow in the last 3 years. That is not a small financial turnaround. And this is a result of our efforts in working capital, cost controls and capital efficiency and efficacy.

And speaking of capital allocation, let's go to Slide 16. During the fourth quarter, we announced the sale of our operations in Rwanda and we reduced or stake in BIMA, the micro-insurance provider. And last night, we announced the sale and leaseback of our portfolio of about 800 towers in El Salvador for about $145 million. That is 8 transactions in the past 2 years all aimed to streamline our assets and redeploy resources back into Latam where we generate attractive returns. And you'll see [the properties] we're making on that [from].

And with that, let me hand over the call to Tim, who will go over our financials in more detail.

Thank you, Mauricio. So you've just heard Q4 was a very good quarter for us. The microenvironment has been largely stable, inflation has remained relatively low and currencies have been stable.

But the main factor in the quarter was the strategy is working. This time last year, I said that our key focus in 2017 would be revenue growth, margin expansion, CapEx discipline, cash generation and capital structure. And I think we kicked all of those boxes.

You heard from Mauricio the group returned to growth, margins have continued to expand. Now this is the third straight year that we've increased EBITDA margin. Capital discipline is driving cash flow, again up for the third year in a row as was the return on capital. And the capital structure is in the best shape we've had now for several years.

So let me start with the financial numbers on Slide 19. Service revenues in Q4 grew by 2%, driven by the return to growth of the Latam Mobile business, although Home continued strongly as did B2B.

EBITDA grew by 6.9%, and we maintained the margin progression. It was up 190 basis points to 36%.

Full year CapEx, shown on the right-hand side of the chart, was basically in line with last year, and the $1 million figure I guided to in Q3.

So let's take a deeper look at service revenue. And on Slide 20, we show the sequential improvement from 1.7% organic growth in Q3 to 2% in Q4. And you can see the growth accelerated in Latam with 73 basis points of sequential growth improvement. And as Mauricio showed, this is driven by Paraguay and Bolivia, although we're also seeing a good return to growth in El Salvador. It was partially offset by Africa, which remains challenging.

Let me look at Latam in more detail. Service revenue has fully rebounded now, turning positive in the last quarter and now accelerating to 3.1%. The key to this return, as you've heard, is Mobile. And we have the first positive growth rate in 6 quarters, and that's despite the ongoing drag from the regulatory headwinds in Colombia.

So we now have positive Mobile service revenue growth in 4 of our 6 Latam mobile markets.

EBITDA was also very strong in Q4, up 9% organically, improving sharply from 2.5% in Q3. There were no one-offs this quarter. We did have a one-off charge in the prior quarter. And I just think for that, the underlying growth was 4.1%. The overall Latam EBTDA margin was 39.2%. That's up 250 basis points, mostly stemming from margin improvement in Paraguay and the absence of that one-off charge in Colombia.

And then turning to Colombia on Slide 22, basically Colombia did exactly as we thought it would do, very strong KPIs. We added [1 million 40] data users. We almost doubled our 4G customer base during the year. Service revenue did fall marginally, reflecting the impact of regulatory tariff reductions implemented in the first half of last year. And those tariff reductions reduced our service margin by about 250 basis points of growth. And encouragingly, Mobile service revenue improved for the second consecutive quarter.

I also want to point out on the chart on the right that we've continued to bring overhead costs down. Although at the moment, we're reinvesting those savings in sales and marketing activity, so the margin remained the same underlying rate of around 26%.

Turning now to Africa, revenues were down more than 6%. But the silver lining is that Tanzania is showing signs of recovery. In fact, service revenue growth in the quarter was almost 10%. As a reminder, our Africa results include only Tanzania, Chad and Rwanda, although we will exclude Rwanda starting in Q1 as we close the sale of this business in January. Africa will represent less than 10% of group revenues and, as a result, we've now wound down our Africa regional team.

The weaker revenue performance hit EBITDA; however, we kept EBITDA margin up and above 30%. And this is important in achieving the core objective for the region of equity free cash flow positive. And as you can see from this slide, our equity free cash flow, and this is after CapEx, interest, tax, and regional costs, swung positively by more the $40 million.

Turning to EBITDA on Slide 24. You'll note that we saw a positive FX impact by just under 1%, but positive all the same. Organic growth was a further 6.9%, to give us $561 million of EBITDA driven entirely by Latam.

On the next slide, it shows the total cost base of the full year. Overall, our costs in 2017 fell by just under $50 million. But this highlights the progress made in restructuring the cost base. G&A costs fell by over 7%, partially offset by an increase in sales and marketing expenses as we target growth.

On the right-hand side of the slide are the actual margins we've reported since we began the journey Mauricio sketched out. They reflect the impact of FX, disposals, cost initiatives, voice declining, the growth in our high-speed data networks, everything.

And as we promised to deliver margin improvements whilst we went through this transition, and we have done that, the reported margin has increased from 33% in 2014, to 34% in '15, 35% in '16, and now 36.4% in 2017.

And on the next slide, we want to highlight the link between our approach to investments and our returns. And over the last 3 years, we brought down CapEx in absolute terms while focusing on our key strategic growth areas. Despite this, we've improved the operating cash flow by 650 basis points, to the point where our OCF margin is almost at the 20% target level.

And with a very disciplined approach to capital management, selling off low return businesses lightening the balance sheet through tower sales, improving margins, et cetera, we've improved our return on capital by 450 basis points over the same period.

Now before looking at the P&L, let me just say a few words about (inaudible). And our initial assessment is that it will only have a very small impact on the business. Service revenues will be 1% to 2% lower, whilst EBITDA margin might be up by about 1 percentage point. But no impact on cash flow.

So turning to the 2017 P&L, and a few observations. Firstly, the swing in other operating income was due mainly from gains on the sales of the tower assets. The net financial expense has increased largely on debt management's activities, whilst a loss in (inaudible) in large part reflects the write-off entirely of our stake in LIH.

Finally, the full year P&L tax charge was $252 million, which was in line with our expectations, and they are very much in line with last year.

Turning to cash flow. And this is the full year picture. You see that our EBITDA, our cash EBITDA, was $2.25 billion, CapEx broadly in line, offset by working capital upswing this year. But it let us with cash from operations of $1.2 billion. [Asset cash base] which were a little lower than last year, financing charges is noted a little higher, and the dividends to minorities (inaudible) in line. So it left us with equity free cash flow of $356 million, which is exactly $100 million higher than 2016, and more than enough to cover our dividend.

On Slide 29, the net debt fell by over $100 million and largely as a result of the stronger operating cash flow on the disposals. Slide shows the net debt movement on 2016, and we reduced the level of net debt to under $4.1 billion.

Leverage at the year-end was 1.86x, that's on a fully consolidated basis, and just over 2x on the proportionate basis. Now note that this does not include the cash from our (inaudible) of the El Salvador towers, and pro forma, we would expect net debt to be below $3.9 billion and pro forma leverage to be about 1.75x.

Let me talk a little bit about our currency exposure in Latin America. Mostly it's true that hardly any of our income is dollar-based. We operate in quasi-dollar Central American region. And I think it might surprise you to see just how stable these currencies have been.

The chart on the left shows the currencies we operate in against the dollar over the past decade. And then to give you some context, we've also included the Brazilian real and the Mexican peso in the charts, even though we do not operate in these countries.

So if you look at the 3 risk buckets we've got, we've got low volatility markets like Guatemala and Bolivia, which have actually appreciated against the dollar. We have moderate volatility markets such as Paraguay, Costa Rica and Honduras, which have devalued round about 2.5% per annum over the last 10 years. And the high volatility market which is Colombia and the Colombian peso. But even that has proved more resilient than we see in the Brazilian real and the Mexican peso over the past decade.

And finally, on the right-hand side of the slide, it just shows these buckets by the proportion of EBITDA. And you can see that almost half of our owned EBITDA is exposed to low volatility currency markets, 36% to moderate volatility markets and just 15% to high volatility markets.

I'm also [going] to point in these high volatility markets, we have piled on a lot of Colombian peso debt. So we're now 2x net debt to EBITDA in the Colombian operation.

Before I hand back to Mauricio, I'll quickly update you on our outlook for 2018. We expect to maintain the momentum we established in 2017. We're going to push on the 2 key milestones, adding a further [3 million 40] subscribers, taking the total to approximately 10 million, adding another 1 million HFC homes-passed, taking that total to 10 million. And since building the network is what will drive the top line, we're targeting increasing the HFC homes connected from 250,000 this year to 300,000 in 2018, a 20% increase.

We're splitting our financial guidance for last time. We expect to see 2% to 4% organic service revenue growth and 3% to 6% EBITDA growth, with about $1 billion in CapEx. Target for Africa is to remain equity free cash flow positive.

And finally, we also confirmed today the recommendation to pay a dividend of $2.64, although unlike prior years, we proposed to pay this in 2 installments in May and November, to better match our cash flows.

With that, back to Mauricio.

Thank you, Tim. Before we take your questions, let me recap briefly. We have been making a ton of progress in transforming the company, strategically, operationally, and financially. We're proud of what we have accomplished, but we still have a lot of work to do. There are a ton of 4G subs out there for us to go out and sign up and a lot of homes still to connect to our enlarging network.

2017 marked an inflection point for us with strong net adds and revenue growth coming back into the system and now accelerating. We always knew that it would, of course, but we're delighted to see it coming through now. The strategy is working.

And Q4 was our strongest quarter in 2017, so we have great momentum going into 2018. And that's important because it gives us great confidence for this year ahead of us.

And with that, we're now ready for your questions.

(Operator Instructions) We'll take our first question from Lena Osterberg from Carnegie.

A question on Colombia. I was wondering if you could maybe split out more detail what your service revenue growth was for the Home segment and for the Businesses segment. And also, as you're now not facing regulatory headwinds year-over-year, because I think those came in Q1 last year, what should we expect in terms of Mobile service revenue growth for 2018, as your best guess?

Yes, so a little bit of color on Colombia as a way to answer your question. And then the second part, we can be very granular, I think, on that. As I said on my remarks, the same strategy that we're implementing everywhere else is being applied to Colombia. And we have very strong confidence that it is beginning to work in Colombia. If you look at our Mobile performance for 2017 in Colombia, there are a few numbers out there that are quiet relevant. We added over 300,000 overall mobile users in the year. That's a net positive. Now we focus, of course, more on the 4G than on anything else. But if you look at the numbers, we've doubled the subscriber 4G base in Colombia. We went from about 1 million 4G users in 2016 to now 2 million in 2017. And as you've heard me say before, we're great believers in this part of the strategy that revenue growth follows the pickup in user net adds. It's worked everywhere else, and we're beginning to see it work in Colombia in mobile. And pricing in mobile in Colombia is much more stable than it was a year ago. And you can clearly think of our ARPUs as being pretty stable in Colombia these days. And whereas we don't really give a lot of detail per segment per country, we can certainly tell you that sequentially mobile, we do see revenue in Colombia has been up the last 3 quarters, and that's certainly very, very comforting for us. And to give a little bit of picture on cable, so because this is a better way to answer your question, Lena, you can see that we built some 600,000 homes in Colombia last year. We've connected about 100,000 HFC homes in Colombia. That's not a small number. And more interestingly, if you look at the number of RGUs that we've connected, HFC RGUs that we connected in Colombia this last year, it's about 300,000. So the bundling ratio on the net adds on HFC is 3x, which is driving our bundling ratio up, but quite clearly is demonstrating that there is a big base that we can cross sell to in Colombia, and that's obviously part of a good bundling strategy. And lastly, of course, there is some drag in Colombia on the Home business from the corporate cutters as I've referred to before. Every quarter that's less and less. But it's still something that you have to factor in. And lastly, not to extend myself too much, I think on the regulatory headwinds, those were largely first quarter and a little bit of second quarter last year. So they'll lap into the second part of this year.

Could you maybe just say what the service revenue growth was? You didn't quite express it in the other markets. And Colombia is one of your biggest markets, and there you don't say what your growth rates were for the 2 segments.

I would love to. But the minute I do that, Michel's going to jump on my back and remind me that we don't disclose segment information. And I don't think we can legally do it on the call without having done it on the earnings release. My apologies to you. I did try to give you as much color as I could.

Can I ask you then on Rwanda because you will deconsolidate that, how much, roughly, in revenues (inaudible) to contribute in 2017?

Yes. It's in the release, Lena, and I think it was about $15 million of EBITDA, and revenues would be about $60 million or so. I'm sorry I'm a bit vague, but I cannot find the page now.

Then I'll find it myself. That's fine.

But it's in the release. It's in the release in one of the footnotes.

We're mentally moving on, Lena.

Yes.

Our next question comes from Johanna Ahlqvist from SEB.

A question also related to the Homes business. You show that ARPU has been very stable or even growing on that part. And I'm just wondering, in your guidance for 2018 where do you foresee Homes ARPU going? Will it be stable at this level? Or do you foresee an increase or even a decrease? And then just a second question if I may, to you, Tim, on the financial expenses, given that you increased the share of tower leases now, how do you foresee financial expenses for 2018? Thank you.

I'm going to try to give you some granularity without, obviously, enhancing our disclosure, for the same reasons as before. But a word on our Home business. We're increasingly excited about it. You all understand the economics; we've explained them to you big picture. 2017 was a very good year in terms of beginning to add significant number of HFC customers. We did build 1.3 million homes; that's 18% growth from the prior year. And we added 250,000 new HFC customers. That's not a small number. And it's actually 12% higher than the prior year. And I alluded to the RGU pickup in Colombia a minute ago. But if you look at our Latin America numbers, we added 250,000 HFC customers, but we added 700,000 HFC RGUs. So that bundling level at the Latam level is pretty big. And you see that our revenue in Latam for Home is about 7% this past year. Now it is also known in the market that there has been an early year, late last year, early year increase in Colombia in the home rates. All the market has followed that increase. That's applicable to the new sales, not to the existing base. So that will have a positive impact going forward. And you can take that as a little bit of granularity. And I think the last comment I want to make on the Home business is perhaps big picture but something that may not be all that evident. I spoke of an operational turnaround and of a big financial turnaround, and obviously a strategic redirectioning of the business. But our growth coming back in 2017 is largely the result of the mobile strategy; the 4G network that we've built in a couple of years, driving mobile data growth of about 20%. And the reason for that is that building a mobile network is much faster. And because we had a much bigger mobile business, it gives us a boost and allows growth to come back quicker than does cable. Cable, the pickup, the boost from cable is still relatively slow into our financials. It's going to start coming through more and more strongly into the future once we've accumulated a significant amount of homes built and we've accumulated a significant amount of home net adds as you're beginning to see us focus on. And that's when the kicker from the Home business is really going to start coming in. It isn't quite there in the financials today; it's still to come.

And just on the second part of the question, the accounting on these transactions is fairly complicated and we haven't sort of nailed down the El Salvador transaction as that was only just signed. But our estimate is interest, net financial charges will be around that $450 million mark.

Our next question comes from Sergey Dluzhevskiy from Gabelli & Co.

Obviously you have a very strong strategy organically in Latin America. But Mauricio, if you could share your thoughts on M&A in light of this strong organic business case, whether you still see like-minded companies in the regions that can accelerate your strategy. And my second question is on Ghana. What is your view of this investment, obviously post-close of the joint venture? And how do you view it medium term and longer term?

Listen, on M&A, and obviously your question's a very open-ended, big-picture question. I'm going to first emphasize what has proven to be the right strategy for the last 3 years and will continue to be our main focus going forward, which is our priority in tapping on that large organic growth opportunity that we have in front of us. 4G penetration is only 21% in our own subscriber base today. And fixed broadband and fixed paid TV penetration in the markets we operate is as low as 15% and as high as 40%, 45%. Compare that again to developed countries where it's 80%, 90%, and you can immediately see that we have a tremendous organic growth opportunity in front of us. So that is our focus; it's proven to be right and will continue to be our clear focus going forward. Now we do have a duty to shareholders and we're smart, and to the extent that there are M&A opportunities out there that we can tap into, we will look at them diligently and thoroughly, consider them throughout Latin America. And it will be on inorganic opportunities as methodic as we've been on organic growth opportunities. And we're very cognizant of the fact that bucket number one is the potential ability that we may have down the road to buy out minority stakes. We have a ton of EBITDA within the properties that we currently own that we don't own outright, and that's obviously an opportunity that nobody else has. So that's bucket number one. There are still some market consolidation opportunities in markets that we operate, and we call that bucket number two. And then bucket number three is adjacent country market expansions into our same business. And we will continue to be very methodic on those. And the work that we're doing internally, I'll tell you this, is one that will lead us to always, as you would expect us to do as stewards of your capital, to place those opportunities against our own stock and measure any M&A opportunity right up against buying back our own stock as a measure that we're disciplined [to all that] you've entrusted us with. And on Ghana, we're very clear we are partners, that we have some time ahead of us to tap into the merger opportunities, strengthen our business. And from there on, it is quite clear that we strategically will try to make that business one that allows us to reallocate capital.

Our next question comes from Richard Dineen from UBS.

Just a question, maybe if you can give us an update on the regulatory and legal situation in Guatemala. We saw the incident in November and the recent appointment of Stephen McFarland as an advisor. If you could just maybe help us understand the scope of what's going on there and any potential risks that you see, that would be really interesting. Thank you, guys.

Absolutely. And thank you for putting that question forth and allowing us to bring everybody up to speed to the extent that you may not have seen the news back in November. A little bit of background. In July of last year, 2017, and you may recall that we put this into our earnings release, the local attorney general publicly indicated that an executive that was [officially] employed by a competitor of our company in Guatemala, had entered into a plea bargain agreement and testified regarding alleged illicit electoral financing. And his testimony alleged allegations relating to Tigo, Guatemala. Then in November of last year, which is what you're referring to, the local authorities did, indeed, raid the offices of Tigo, Guatemala, to obtain documentation. And back then the authorities related those actions to an ongoing, quote/unquote, construction and corruption case which is investigating the business dealings of the Ministry of Communications of Guatemala in connection with alleged use of illicit electoral financing. I just want to be clear that neither Tigo, Guatemala, nor any of its employees has been charged with any wrongdoing and that we're completely cooperating with the local authorities. That should bring everybody up to speed with what's been happening publicly in Guatemala. And separate from that and not related to that, as we have been trying to find someone who would help us better navigate in Guatemala, we announced earlier this week that we had engaged Stephen McFarland, who's a former U.S. ambassador, retired U.S. ambassador to Guatemala, to effectively be our, and that is Millicom's, set of eyes and ears and a local voice in the country. And I emphasize that, A, he is a representative of Millicom and has been appointed by Millicom, and, B, that his appointment is entirely independent of any particular event. We just simply need someone in Guatemala that helps us represent our interest and, as I said, be our set of eyes and ears and a local voice. And having someone like Stephen who's well-known in Guatemala, extremely well-connected and highly respected, simply enhances and improves and strengthens Millicom's presence in Guatemala. So the matters are unrelated, but it certainly is moving in the right direction for us. And we're happy to have Stephen's advice.

Our next question comes from William Miller from J.M. Hartwell.

I'm interest in your growth of free cash flow and what you're really going to do with it --

Bill, could you just shout up a bit? It's hard to hear you.

Can you hear me better?

Yes, much better.

Free cash flow growth is accelerating. What are you going to do with all that money? That's one part of it. You going to buy back stock? Raise the dividend at some point? Invest in other businesses in Latin America or what? What? And secondly, where do we stand on any potential listing in the United States?

Listen, on effectively the first question on capital structure, indeed, we've landed with a, quote/unquote, good problem. Certainly nicer to be here today than where we were 2 or 3 years ago when the dividend was being funded out of the balance sheet. So today, indeed, we're positive on free cash flow and, indeed, it is growing. And we have rebalanced quite significantly our asset portfolio. So there are some proceeds from deals that are, as Tim said, are in the pipeline. And our leverage range and debt maturity is in shape; Tim alluded to that. So we're, indeed, in good shape there as well. Good problems to have and in shape. And as I said earlier, going forward, we're going to pair M&A against buybacks. That's just our mental framework. We're going to assess M&A relative to buybacks because we need to let you know that we're very disciplined in valuation when we look at M&A. And as a result of that, we got to measure it against our own IRR, the one that we can generate on our business against these organic growth opportunity that we have. Last comment I'll make there is that we're not quite there yet. This is a little bit theoretical. But we realize that that's a bridge that we're going to have to cross sometime into the future. And the second question was on listing. Listen, we've been getting a lot of questions from investors about this, no doubt. And we're seeing more and more U.S. investors in our shareholder base. So the 2 things are probably highly correlated. Generally speaking, we're pretty positive towards a U.S. listing; I'll be transparent about that. We do see the benefits of enhanced liquidity, access to a larger pool of investors, greater visibility and research coverage. Those are all positives. Having said that, we have been doing a lot of diligent work as well; legal, accounting, as you can imagine a good management team would do. And we've become very clear that when the time comes to consider this, we won't be replacing our stock on listing. I want to be clear on that. It is a dual listing that we would be considering. We've also been engaging with many of our largest shareholders. Quite a few of them, actually, we've talked to, to understand their views and their views on this. That's what we would normally do as a management team. We've also engaged with our board on the topic. And whereas I can't really comment on it now and what decision will eventually be taken on the matter, obviously, it's something that's on our radar screen. So we'll keep you posted on it and stay tuned on that one.

Our next question comes from Soomit Datta from New Street Research.

Couple of questions, please. One, just around the revenue guidance for '18. We've heard about, I think, how Colombia should improve the growth rates going forward, which all makes sense to me. But when I looked at the revenue guidance, 2% to 4%, and the midpoint of that is where growth is today, i.e., just disclosed 3% growth. So the guidance doesn't necessarily suggest revenue growth is going to increase when Colombia's obviously a positive force on that. I just wondered what is maybe kind of pulling you back a bit in terms of being more upbeat on that top line guidance, please. And then secondly, on CapEx, for the Latam region, I think guidance is now, for $1 billion, used about $900 million or so in '17. I think the HFC homes-passed is coming down to $1 million from $1.3 million, which I think saves you about $30 million. I'm just wondering, where is the extra CapEx going if it's not into HFC homes-passed. Thanks very much.

Just quickly on that second question. I mean, our CapEx is re-orientating more at fixed and mobile. You're right that we'll build fewer homes probably next year than we did last year. But that isn't really a big issue. It's all about set-top box and customer premise equipment today. And a lot of it is becoming, I think it will be the biggest portion of our CapEx for next year, success-driven sort of CapEx. So that is what is driving there. And I think the CapEx number that we put out there as well as the revenue number, kind of we want to hit these numbers. So we have basically given you the guidance based on what we think is good, sustainable performance. There are a few sort of kind of pluses and minuses out there. The one you alluded to with the Colombia regulatory sort of headwinds, those will sort of tail off towards second half of the year. But there are other sort of ups and downs that could take place, and we didn't want to sort of put guidance out there that we weren't very sort of confident with based on our entry point into this current year. So that's behind us.

We've also secured some meaningful LTE spectrum in a couple of locations. So we want to make sure that we get that build-out done because that's significant to the strategy.

Maybe just a quick follow-up because you brought it up. Just on the set-top box costs, I think I've got in my notes cost of connecting a home $50. Is that sort of still the going rate? Or is that going up for any reason?

I think we've always said $150. That's roughly the cost. We capitalize both the set-top box itself which probably is not dissimilar to

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So kind of capitalize labor costs and a few other things to throw into that. So it averages out for us at about $150 per home connected.

Our next question comes from Peter-Kurt Nielsen from ABG.

At the last call for Q3, I remember Colombia margins were sort of a big issue discussed. And I think you indicated that you would continue to push for future growth and that probably by mid-year this year, if I understood correctly, you would start to ease off a bit and perhaps see some margin improvements in Colombia. Is that still your thinking, please? Thank you.

Listen, on the margins on Colombia, perhaps 2 big questions, and I'll ask Tim to help me out here; 2 big answers. One is we have made meaningful progress on the margins in Colombia. And I think Tim showed a very good slide that shows that our G&A's down in Colombia quite significantly. But we've also made the decision halfway through last year to put more of those savings into growing and our sales and distribution in Colombia as a way of strengthening our position in the marketplace. And I think you've seen the results of that in the second part of the year. In the last quarter, we added almost 350,000 4G net adds and for the full year we've added about 1 million, most of those in the second half. And again, on the cable business we've added almost 100,000 HFC homes in Colombia, with meaningful cross selling. So effectively what we're doing in Colombia is, indeed, bringing the margins up, but in the short term investing

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continue to tap into that growth, I would think it's plenty to have in Colombia. And going forward into Colombia, we always temper expectations a little bit because, A, we're in a growth phase in Colombia, and that's important for people to understand that we want to tap into that growth rather than deliver EBITDA margin immediately, as much as we've been doing it really well at the group level and Tim alluded to our significant pickup in EBITDA margin. We want to make sure that we capture a growth opportunity whenever it is available. And I think lastly on margins, so I don't extend myself too long, I want to point over to a margin that we had promised a long time ago that we're about to deliver in 2017. If you go back, with your good memory, I said we were going to drive this business, when I first joined, to 20% OCF margin in the mid-term. We didn't want to make a big point of it today, but we're at 19.9%. So margin is something that we've been able to execute on while basically reconfiguring the business, and both strategically, operationally and financially.

And Peter, I don't want you to take the impression that kind of come the third quarter we'll have turned the tap off and be pushing margins in Colombia. It will really depend on what the situation looks like on the ground. I think to Mauricio's point and the point I was making in my presentation, when managing the margin at the group level and whilst we've managed a lot of transition in the business, we have delivered sequential improvement in the margin. And in a sense, that will be our guiding focus rather than specifically all moving the Colombia margin this year.

Our next question comes from Stefan Gauffin from DNB.

First of all, I didn't really see a big impact from the riots in Honduras that started in December. But these problems have continued into Q1. So is there a risk for top line in Q1? And if you at all can give some information on how this impacted the business? Secondly, just follow up, I didn't really hear what you said relating to price increases in the Home business. I know there were some material price increases lost during Q4/Q1. Has this continued recent? Or is it expected to [come any] price increases early in 2018? Thank you.

So on Honduras first. Yes, the political instability that ensued the debate around the president elections in Honduras towards the end of last year did cause our business in Honduras to be impacted towards the end of last year. And you can see that in the numbers for Honduras. We performed everywhere else. So the overall Latam business for the Q4 did not take a meaningful impact from Honduras. But in Honduras itself, it is the one business where we started out this year, 2018, a little bit handicapped because effectively over a month of turmoil has a diminishing impact in our ability to sell mobile, our ability to install and also our ability to service. So there is going to be a little bit of that in Q1, simply because we started out the year lower than we had anticipated, given the impact that it had in Q4. So you're spot on, on that, Stefan, that there is something in there. And then on the Home business, if you recall, there's been 2 price increases; one that happened the end of 2016, early [2015], and stayed throughout the year and caused some hiccups, in turn, early in 2017. And then I was earlier in the call alluding to home price increases of around 4% to 5% that took place in the marketplace towards the end of last year. And those are on the new acquisitions, not on the base, largely. And the entire market has reacted in a disciplined manner, and so far those remain in place.

Just on Honduras, I want to emphasize Mauricio's point. It did happen. It did sort of drag Honduras a bit. But Honduras is 10% of our revenues and it affected us for a couple of days. It sort of slowed us down. Then kind of going to Soomit's points earlier, these are things that happen in our market. We manage the portfolio to just sort of compensate for these things. And essentially, although they're a little bit behind, we've got good traction in mostly all of our other markets as well. So I think it's there for us to keep mindful of, but I don't think it will change our views on 2018.

Our next question comes from Henrik Nilsson from Nordea.

On the sale of towers in El Salvador, are these effects included in the CapEx outlook? And is it a material impact on the CapEx at all? And Tim, sorry. I think you maybe commented on this already, but I had a bad line. How much is it reasonable to impact the cost level in El Salvador going forward? And then a third question, if I might. I mean, on tower sales in general, you've done it a couple of times over 2017 and now in the early start of 2018 as well. I guess the comments I hear from local telecom operators is that not everyone is agreeing that it's actually a good idea, that it's some kind of indication that you won't need capital and you will put yourself in a bad, weak negotiation position a couple of years out. Can you walk me through why you believe that this is shareholder value accretive? Thank you.

Yes. Let me take the first part, if you will, the strategic rationale for this, because, as you can imagine, we don't go about this lightly. We think about it quite carefully. And you've seen from our balance sheet and our equity free cash flow profile that we really are not out there looking for capital. We have access to capital quite openly. We are comfortably levered and we got positive equity free cash flow that has nothing to do with either these towers or sales proceeds from other portfolio rebalancing. The reason we do the tower deal is, A, we don't think that business is our core. It's [an end] and steel and power. And it is capital-intensive in its nature. And as Tim showed, by shedding out of businesses that are capital-intensive and not our core, we can generate a better return on capital. In addition to that, we only sell when we conclude that the asset is no longer strategic. We do it when we think our competitors have reach network parity with us. And at that point in time, network advantage is not given by the towers that you have or don't have because it already network parity. We always keep in the portfolio towers that we deem strategic. And to that end, we still have some 8,000 towers in Latin America. That's a ton of towers that we still deem strategic. And we do, do these deals only when we walk through the long-term math and we find them to be NPV positive. So we're not focused on whether they impact EBITDA or they impact CapEx. We're focused on them being NPV accretive to us, given that they're noncore. And we also like the idea that they give us a long-term, good capital structure. These are long-term leases, 12 years clause and renewable, and they're always at local currency rate. So with that roundabout of strategic rationale, we're pretty happy with what we're doing. And as I said, we still got a ton of tours that we're not giving up because we do think they're strategic.

And just to be clear, Henrick, when we talk about CapEx, our CapEx excludes spectrum license costs and finance lease capitalizations because which one you get at would be -- the CapEx is to show you what the cash flow of the business is, and these are just accountings [with no] cash adjustments.

Unfortunately, that's all the time we have available for questions. I would now like to turn the call back over to Mr. Ramos for any closing remarks.

Well, thank you, everybody, for joining us today and for your questions and your continued focus and interest in our story. We're extremely excited about the way we're coming out of the fourth quarter. And as I said, we feel that we're positioning ourself solidly for a good 2018. So please stay tuned for our news. Everybody, have a good day.

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