Millicom International Cellular SA (TIGO) 2018 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.

Thanks, Vicky, and hello, everyone. Welcome to our First Quarter 2018 Results Conference Call. And 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.

So with that, let me hand the call over to our CEO, Mauricio Ramos, for his remarks. Mauricio?

Thank you, Michel. Good day, everyone, and welcome to our first quarter call. As always, I'm here today with Tim Pennington, our CFO, whom you all know. Before we get on with the quarterly results, I want to make sure that you are all aware that yesterday we reported that the U.S. Department of Justice is closing its investigation on Millicom in relation to the matter that we self-reported back in October of 2015. Millicom is no longer under DOJ investigation and no fines were imposed on us. We're obviously pleased to share these outcomes with you.

During the last quarter call, I spoke about Tigo being a purpose agent of positive change in all the communities we operate in. We have shown, now, with our actions what it means to act with the highest levels of transparency towards you and towards our communities and to act in full cooperation with authorities. We have done the right thing and we have done it in the right way, as I said 2.5 years ago that we would. And the outcome is extremely positive. And the journey has helped us make great progress in building a world-class compliance organization.

I wish to thank all the members of our board, past and current, for the support and guidance they have given us in this process. And also our compliance, legal and communication teams for the great job they have done to get us to this point today.

Now let's start with the highlights of the quarter on Slide 4. In a single sentence, we are very, very pleased with our results. We kicked off the year with Latam service revenue growth accelerating to 3.9%. This acceleration is coming directly from our strategic businesses, which now account for 70% of our revenue on our growing 12%. We had another record quarter in terms of stronger 4G and cable net adds, and growth is now positive in every one of our Latin American countries. A strong quarter all around.

Now let's get onto some details, beginning on Slide 5. This is now our third consecutive quarter of positive Latam service revenue growth, and Q1 was our strongest growth in more than 2 years. We are accelerating. The chart on this page speaks for itself. The key point is that this turnaround is a direct result of our strategy. Our capital allocation focused on 4G and cable over the past few years is paying off. The turnaround is now solid and stable. 70% of our service revenue is now coming from mobile data, cable and B2B.

You can see the details on Slide 6. The chart on the left show that mobile data is both our fastest-growing business and the biggest contributor to our 3.9% revenue growth in the quarter. Mobile data grew 18% in Q1 and it is now large enough to offset the decline in our legacy mobile voice business. Home grew a strong 8% again, and B2B grew 9% during the quarter, so strong all around.

As you know, we have been investing to accelerate our transition to a data-centric revenue model. The right-hand chart shows that our strategic revenue lines, mobile data, cable and B2B, now represent almost 70% of our total service revenue. This is not only boosting our growth rate, it is also making our revenue more stable, more recurring and more predictable in nature, because a lot of this new revenue is indeed subscription-based.

Slide 7, gives you a historical perspective on each of these strategic lines of business. You can see that the high growth rates for the strategic businesses are broadly stable. These businesses are getting bigger every quarter and now generate a larger and increasing share of our revenue. As I have just said, about 70% now and growing double digits. And the legacy business is getting smaller and smaller, and its rate of decline is moderating. The result is a strong overall 3.9% service revenue growth rate over the quarter.

Let's look at this more closely on Slide 8. The left-hand side shows the growth rate of our Latam Mobile business. This is the Mobile business itself, both legacy and strategic mobile data on a combined basis. On this basis, Mobile grew almost 1% in Q1. Our Mobile business itself has returned to growth. And this is thanks to mobile data, the 4G networks we have built and the price discipline we have kept. In Guatemala, for example, Mobile growth hit more than 4% this quarter. This is the result of the strong 4G investments we made in Guatemala in the past few quarters. The chart on the right shows you that mobile data is now generating almost 50% of our total mobile service revenue, up from only 25%, only 3 years ago. Now remember that only 24% of our customers are on 4G today. Therefore, we are still in the early days of monetizing mobile data in our markets. Paraguay and Bolivia, in particular, have been growing strong in the past few quarters, and now Guatemala has kicked in.

As you know, the improving growth in our mobile segment is a direct consequence of our investment in 4G over the past 3 years. You can see this on Slide 9. We have increased the number of 4G base stations by almost 50% year-on-year and, our 4G networks now cover almost 60% of the population in our Latin American markets. Our 4G technology is now more widely available. The 4G user experience is simply superior. And as a result, we are seeing strong user uptick, just as we expected.

In Q1, we added almost 650,000 4G data users. This is our strongest ever performance for our first quarter.

Now let's take a closer look at our Home or Cable business on Slide 10. The main message from this slide, and quite a powerful one, is our commercial momentum is accelerating in our Cable business as well. Our equity story is predicated on the strong pent-up demand for Pay-TV and high-speed fixed broadband in the region. We have, therefore, been building high-speed data networks at, quite frankly, neck-breaking speeds. And now we are ranking out the subs quite strongly. In Q1, we added a record 91,000 homes connected to our HFC network. This 91,000 cable net adds are 3x more than what we did just 2 years ago in Q1 of 2016. Needless to say, we are well on track to reach our target of adding 300,000 net additional connected cable homes over the full year. And note that we keep bundling on new sales and on existing subscribers. So our revenue generating unit counts are growing even faster than our homes connected. And our bundling ratio is, therefore, increasing. This is simply the tried and tested cable playbook that we're putting in place everywhere. The cable net adds are strong, no doubt. But the most important point is the continued confirmation that there is strong pent-up demand for high-speed data in our market. In fact, look at our earnings release and you will see that we're adding subscribers while ARPU is going up. We're taking price increases quite consistently in Cable, now across our markets. And this simply confirms why it makes so much sense to strive as fast as possible towards our goal of passing 50 million homes with our cable network in the region. Simply said, we are not only building network at record speeds, now we're also connecting subscribers at record speeds.

Our cable, B2B and mobile data strategy is now yielding results in all of our Latin American markets. And you can see this on Slide 11. Not only is growth trending higher in every single country. But growth is now positive in every 1 of our 6 largest Latin American markets. Paraguay and Bolivia continue to grow at high single digits. And now Guatemala has shown strong acceleration in Q1, driven by mobile data, cable and B2B. We still have a lot of work to do, of course, that is always the case. But note that Colombia and Honduras are coming right behind in terms of revenue growth. We're executing there the very same playbook that we're executing everywhere else. And you can see that growth is now positive and improving in both of these countries. And note on Colombia. Note that about 1/3 of the record 4G and cable net adds this quarter came from Colombia. We're clearly investing for growth in Colombia, both CapEx and OpEx. And strong subscriber net adds do mean increasing subscriber acquisition cost in the short term, no doubt. But it also means long-term revenue growth. And in Q1, we saw both of those in Colombia. Strong net adds and improving revenue growth.

Next, let me recap what we have been doing and where we're headed on Slide 12. Penetration of 4G and fixed broadband is still very low in our markets. This is a business opportunity that underpins our equity story. We have strong mobile market leadership and a powerful brand. Therefore, we're leveraging the unique assets to build high-speed data networks as fast as we can. And now we have demonstrated that we're adding customers at a record rate, and revenue growth is positive and now accelerating. We have successfully reconfigured our revenue mix. Only 30% of our revenue mix is now legacy mobile, voice or SMS. And while we've been doing this, all this while we've been expanding EBITDA and operating cash flow margins and unlocking over $400 million of free cash flow generation. We also now have a well- oiled (inaudible) machine. Our network build rate is first-class and so is our customer intake rate. We have added over 3.7 million 4G users in the last 12 months, and 282,000 new cable subscribers in that same period. And this quarter has seen an acceleration in the net add rates on both 4G and cable. So all of this is really working.

And now that growth is back and subscriber additions are accelerating, we're focusing on further transforming our business to improve both our effectiveness and our efficiency. We have a series of initiatives underway that are starting to produce positive results in terms of both NPS scores, customer satisfaction and cost reductions.

One of the levers we're using to transform how we do business, improve customer satisfaction and reduce cost is digitalization. On Slide 13, you can see some screenshots of our digital platforms for prepaid customers on the left and for our postpaid customers on the right. We haven't made a lot of noise about this yet, largely to keep our story simple and focused to you. But we have been very busy on this front and our customers know it. Already, 38% of our core prepaid customers use our mobile app, Tigo Shop. They're using it for things like checking their balances and to do top-ups. As you can see in the second chart on the left-hand side of the page, the number of digital transaction has been growing rapidly and now reaches more than 25 million per month.

Postpaid customers are also engaging with us. About 70% of them already use our digital tools, at least once a month, and the number of unique monthly active users continues to grow rapidly, as you can see in the chart. This is an increasingly high customer engagement level on digital.

There's also strong potential for further cost saving this year and the key to that is improved digital customer experience. Customers that interact with us via digital platforms do so more often than the rest. We have a stronger satisfaction level, they interact with us more cost-effectively, they actually generate more ARPU and churn less. We are very happy with the strong focus and the success we are getting on digitizing our business. And do think that this is key strategically. Only through digitizing will we make strong inroads into reducing the cost structure of our legacy prepaid business and further transform Millicom.

With that, let me pass it over to Tim, to go over the financials.

Thank you, Mauricio. Now before I go through the numbers, let me start by saying a few words on the economic outlook in our markets.

Starting on Slide 15. We're seeing a relatively stable macro backdrop. GDP growth across our footprint is expected to be in the 2% to 4% range for this year. And looking at it specifically, the economy has been sluggish for some time now, but there is room for a little more optimism in 2018. And if I'm looking more closely at the consumer confidence stats, in March, it rose to its highest level for more than a year. Inflation continue to fall and there is an expectation there will be a pickup in economic activity in the second half of this year, after the Presidential elections. Albeit, we think the economy is likely to remain fragile in 2018.

In terms of currency, most of our currencies are being pretty stable or appreciating against the dollar. Like the Colombian peso, actually here on the slide. And as a result of this we have a circa 1 percentage point tailwind from FX in our Q1.

So let me turn now to the key financial metrics for the group on Slide 16. We are reporting our numbers under IFRS 15. The impact is not significant and all the organic growth rates we are reporting are like-for-like. That is adjusting for the IFRS 15 impact as well as the usual adjustments for FX and changing the perimeter. So group service revenue was up 3.6%. That compares to growth of 2% in the last quarter and a decline of 1.7% a year ago. EBITDA was up 1.5%. And now adjusting for one-off items, underlying growth was closer to 4%. And likewise, the underlying margin was about 10% -- 10 basis points higher than Q1 '17. So overall, we saw strong performance across the group in the quarter.

The group performance is being driven by Latam. The key financial indicators are on Slide 17. And in particular, as Mauricio mentioned, we saw this return to growth in Colombia. It was the best quarter for 2 years. Bolivia and Paraguay both maintaining great momentum, and Guatemala had an exceptional quarter. So that left us with service revenue growing at 3.9%, and that marked our fifth consecutive quarterly improvement here. And you heard from Mauricio, it was really supported by just the 1% return to growth for the mobile B2C business, driven by data and the slowing of the legacy revenues.

Home and B2B also maintained the growth rates we saw in 2017, up 7.6% and 8.9%, respectively. I'll come back to Latam EBITDA in a couple of slides. And on the OCF, it's fallen a little, but this is mainly on CapEx timing differences.

Let me first turn our attention to the group EBITDA. And compared to the same quarter last year, EBITDA is $554 million, grew by 2.3%, of which 1.5% was organic and the remaining 0.8% was a pickup from favorable FX and that very small IFRS 18 -- 15 impact.

I think it's more instructive for us to look at the underlying EBITDA trends by country on Slide 19. And here you can see that we really had momentum in pretty much all of them. El Salvador and Guatemala both saw very strong EBITDA growth, 9.3% and 8.4%, respectively. Bolivia would have grown 5.7% without the $6 million deferred revenue adjustment, and Paraguay by 14%, on a like-for-like basis. Colombia saw an 8.5% decline and this was a combination of a very strong comp in Q1 last year. But much of it -- this reflects the increased costs in respect of our commercial activity.

So let's look at the cost in a bit more detail. Slide 20, on the left-hand side of the (inaudible), that shows the operating cost for the quarter. And for the first time in many quarters, our overall cost increased. Now excluding the IFRS 15 impact, the OpEx increased by 6%, fiscal 0.5% on the slide, but it's 6% excluding IFRS 15. But if we adjust for FX and we adjust for one-offs, our normalized OpEx growth was 3.2%, which is in line with our revenue, and is arising pretty much from the increased commercial activity associated with the ramp-up in sales Mauricio talked about.

So overall, we are confident that the efficiency focus on to Project Heat. We'll continue to drive results and our -- in our ability to continue to drive margin. As the right-hand side of this slide demonstrates, the trailing 12-month EBITDA margin is up 360 basis points, since we started this journey.

Onto the P&L review on Slide 21. And like all other companies our 2018 accounts are under IFRS 15. However, the impact is minimal, service revenue impacted 1.3% and EBITDA by 0.1%.

Points of note. Item B, the net finance charges were $10 million down, resulting from refinancing activities. Tax reflect low withholding tax, which is just a timing difference, and MI is a little higher on higher profits in Guatemala.

The slightly higher charge in discontinued operation reflects a technical impact in respect to recycled FX losses, following the disposal of Rwanda.

Turning to Slide 22, now on the cash flow. Cash flow remains robust, pretty much in line with Q1 2017 in fact. The working capital outswing is a little higher, and which we expect as we are becoming more subscription based. There are some puts and takes in taxes, minority dividends and finance charges, but largely very much in line with last year and as well as the equity free cash flow.

Net debt, pretty much in line with the end of Q4. In Q1, we did have spectrum charges. We had the acquisition of 700 spectrum in Paraguay and renewals in El Salvador. Also the strength of the Colombian peso gave us an FX translation impact, leaving net debt at $4.1 billion.

Leverage ended the quarter at 1.87x on a fully consolidated basis. And on a proportionate basis, a little over 2x.

This brings us to the end of the presentation. And let me hand back to Mauricio to wrap-up.

Thank you, Tim. As I mentioned at the beginning of the call, we are extremely pleased with our results. Momentum in the business is back. Growth is positive and it is accelerating. Net adds are at record levels. Every country is now growing and we're hitting our targets for the year. Or said differently, our transformation is now real and stable.

With that, we're ready for your questions.

(Operator Instructions) We'll go first to Julio Arciniegas with RBC.

Can you give us some color on how the copper cable upgrade is evolving in Colombia? Should we finalize with this upgrade this year? And also, related to that, are we seeing some better trends regarding the churn of the copper subscribers in Colombia?

Thank you, Julio, for your question. I think, generally speaking on the copper network, we are down to about 0.5 million copper homes 400,000 or 500,000 in Colombia, down from about 900,000 to 1 million a year ago, give or take. That gives you an idea of the size of the network today. And as you can imagine, that's a network that had and still has quite a bit high levels of customer penetration levels, simply because of its historical nature. And we'll continue to retire that network throughout the course of the year and into early next year. That's the timeframe. And we'll continue to move many of those subscribers into our HFC network. And so that the legacy into 2019 will be much smaller. And you're seeing that come through the subscriber counts and the revenue growth in Colombia. The HFC and net adds are nothing short of -- are very, very strong in Colombia. But they are tempered for a period of time by the copper cutters, if you will. I think what's important overall in Colombia, now taking your question to move there a little bit is that you're seeing an inflection point in Colombia's revenue growth. You can see it is now positive and it is now returning to growth, accelerating even a little bit. And the more important thing, as I always say, is that it's the net adds that you need to watch. That's the telltale into the future, and the net adds in Colombia this quarter were about 1/3, both on 4G and cable of our entire net adds across the region. And if you look closely at our net add counts in Colombia and you can have access to the disclosure of some of our competitors in the region, you will clearly see that we're trending increasingly better in that market, not only in terms of subscriber counts but in terms of revenue growth. Competition is strong there, no doubt. But on the mobile market, it's a lot more stable than it was a year or 2 ago. We're beginning to see mobile in Colombia return to more positive momentum. We added about 200,000 4G subscribers there and with good ARPU. So we see that on mobile, although it's harder to monetize data there than it is everywhere else, no doubt, the reconfiguration in Colombia is happening. And on the fixed side, we connected about 1/3 of the homes we connected, as I said, for the entire region. And our HFC build is as strong as ever. We built about 140,000 this quarter. And our B2B business in Colombia is quite strong. And that's just not only the large corporations and the contract, that Tim alluded to, but it is growth on the SME part. And so overall, although it remains behind the rest of our countries, we see an inflection point and quite positive trends in Colombia.

And we'll go next to Stefan Gauffin with DNB Bank.

Yes, a couple of questions. First one relating to Colombia. Can you give some more information relating to the B2B contract that you won in Colombia for Congressional and Presidential election? How long time will you have those revenues and what are the costs associated with this? Secondly, in El Salvador, there's a quite a big drop year-over-year in B2C mobile subscribers, and you mentioned that you focused on the higher value segment, but you lose 20% of the subscribers in 1 year. And -- so can you give some more details there, if it's competition or what it is?

Yes. So I'll take a little bit of the Colombia one, and then may be comment partially on El Salvador and pass it over to Tim for additional comments. In Colombia, the B2B contract is effectively a connectivity contract. We are effectively their connecting party for the Presidential elections. As a result of that, we incurred, in some preparatory and setup costs during Q1, or revenue that effectively is more back-ended towards Q2 and Q3. The first wave of the Presidential elections or the first round is in Q2. And immediately following that, there will likely be a second round of the Presidential elections. So that revenue is back-ended. I'm not sure that we're providing specific details on either the costs of the revenue. But that's part of what you saw in the Q1 cost is the build-up to that. And as I said earlier, our B2B in Colombia has been strengthened going forward, not only because of these contracts but also because of the strength of the pickup in SME subscribers over the last 12 months. On El Salvador, on the B2C counts, there's a couple of effects there. The prism effect that we've talked about so very often. And then just some cleanup of subscriber counts after we transitioned our IT systems in El Salvador about a year or so ago. And the combination of those 2 give you that reduced subscriber count. The flipside of that is that you can see that El Salvador after the prism effect and the IT hiccup last year is now coming back to very strong revenue growth. Tim, anything I missed there?

I will just add two things, Mauricio. One is, just on that B2B contract and the electoral contract. I think it's a great contract for us to have and it is lower margin than our average, which is one of the reasons why the Colombia margin was a little bit lighter. And also, we did incur quite a lot of setup costs in respect of that, sort of last-mile transmission costs and people costs. So that's one of the reasons why our costs were a little bit higher this quarter than maybe we've see in previous quarters. But very, very good contract to have. The second question on the El Salvador subscriber reduction, it's a base cleanup, Stefan, we did a base cleanup in the first, I think in the first quarter of this year. And yes, there is a corresponding improvements in our ARPU, which I think you should look at. But nothing more than that.

We'll go next to Richard Dineen with UBS.

Just a couple of questions, if I may. On Colombia mobile, you mentioned that the competition is pretty strong there and that's something that America Mobile also commented on this quarter. If you may be just explain a bit more about that dynamic, what's driving that? And if you think it's likely to be sustained or whether it might subside? And then just the sort of a second question, a broader question, if I may. We're seeing a few markets in Latam that are starting fixed wireless broadband services, using 4G technology in areas where perhaps the network is less loaded, where it makes less sense to rollout cable. Just wondering whether that may start to figure in your thinking or if it's just really the sort of broadband side is purely a fixed prospect for you guys? That would be super interesting.

Sure. Listen, on Colombia, I think the comments are competition remains strong there in the mobile marketplace and the dynamics there, which are well known to everybody is that we have a very strong player in that marketplace. And a couple of some other players that are fighting for space. That combination makes for a difficult competitive environment. Those are the dynamics there. The key point is that it is a lot more stable today than it was 1 to 2 years ago when the mobile revenue for the entire country was decreasing almost 15% on an (inaudible) basis. If you look at our results, you see that things are stable now, flattish to stable. And if you look at the published results of our competitors, despite competition you see a lot more stability. Going forward, long term, it's hard to imagine that the smaller players will have a lot of air going into the future. But your guess on that one is as good as mine. I think what matters, going forward, in Colombia, is that you have only a couple of large players that are investing heavily in fixed and mobile, and angling themselves for a convergent play down the road. And that network superiority, that combination of fixed and mobile and the ability to provide next-generation mobile and cable services will make a difference. If you can bundle your mobile with a top-notch, state-of-the-art, fixed network that provides next-generation and high broadband services to the household, you're going to come out on the winning side. And that's the long-term outlook that I see for Colombia, and while we've been so bullish on investing there for the long term. The second part of the question, fixed broadband, I can imagine that, that may make some sense for mobile-only players that do not have the unique opportunity that we have to build cable at the break necking speeds that we're building it, 1 million to 1.5 million homes, and are seeing the take-up in cable that we're seeing. I'm a cable guy. Company is becoming a cable company, building a cable footprint underneath our mobile. It's hard for me to imagine that there is a superior technology to offer broadband to the household than cable even though we have this superior 4G networks in just about all of our markets. So wherever we can get to a household with cable in an economic way, that's what we are going to do because that's consistent with our long-term strategy. It's not just about the economics of cable. It's about the amount of spectrum that you can create for yourself, the amount of speed and bandwidth that you can offer. But also the fact that you can put through it a next generation Pay-TV product and converge all that with your mobile business. Fixed broadband does not offer to you that level of strength.

I think it just -- yes, Rich, I just want to add one quick thing on the Colombia market conditions. I think the economy is not insignificant in overall -- in this. I mean, we are seeing in all of our other markets fairly solid GDP growth, where I think it remains, as I said in my introduction, a little bit sluggish in Colombia which tends to make kind of people fight a little bit more for air in that type of market now. I think generally consensus views the opportunity for the economy to start to improve towards the second half after the elections. It doesn't guarantee that will change the competitive environment. But it's -- hopefully things will get a bit better later in the year.

We don't want to sound overly -- this is Mauricio, we don't want to sound overly positive. But Colombia has done an inflection point for us in revenue growth. That's quite clear. It is now positive on growth. It's accelerating. It's having net adds on 4G and cable, and we're gaining a little bit of share and you can see that on the public reports. And we've launched in Colombia, and this is part of what's happening there, a very strong next-generation TV product. We've raised speeds and continue to build HFC. So that's all the positive mix that makes us be bullish towards the future.

And we will go next to Johanna Ahlqvist with AEB (sic) [SEB].

Yes, from SEB. Two questions, if I may. First of all, you had a fantastic growth in the number of connected households in Latam. And I'm just wondering, on the ARPU side, because the ARPU only grew like 0.5 percentage point in the quarter, and how you foresee ARPU growth in the cable business going forward? And then secondly, if you can comment anything on a potential U.S. listing, if you see the advantages of doing that or not?

Thank you, Johanna. Indeed, we're very, very pleased with the fact that we're not only now building network but we're connecting cable subscribers. And as you see on our disclosure, ARPU ticked up yet again a little bit on cable and that's because we are taking price increases in a fairly regular manner across the table. We did a little bit of that in Colombia early this year. We did a little bit in Paraguay, call it, 2% to 3%. Bolivia, about the same, about 4%. And Honduras, a little bit more. And that's what's driving that ARPU up. It is actually quite significant that you can have this meaningful, fantastic pickup in net adds and also at the same time being -- be driving ARPUs up. And part of the reason we are doing that is because there is pent-up demand. We have the ability to do it. We have the pricing power to do it. Subscription cable allows you to do that. But also because we want to create room underneath those early subscribers so that we can continue to further penetrate the lower echelons of the penetration game in the region. This is cable 101, it's been doing it for 20 years and we need to create that space for the new subscribers. So we foresee that we can continue to sustain and bring ARPU up a little bit while we continue to generate penetration levels for our cable business as we continue to add subscribers. On the U.S. listing, we have indeed been getting tons of questions from analysts and investors on the matter. As a matter of fact, we reached out to many of our shareholders to understand their thoughts. And it's quite clear from our interactions that this is something that all view it as extremely positive for our story. And the benefits I think are clear in our minds. It would provide the company with, and investors, with enhanced liquidity. It would give us access to larger pools of investors, which I think is also very positive. In a sense to the U.S. investors, a U.S. listing would actually give them access to the dividend in dollars, which I think would be a positive. And we begin to see that a possible U.S. listing would give us larger research coverage. A lot of this with little to no downside other than some additional cost, which I think is good for the business. So we started engaging with external lawyers, accountants and [barters]. We got teams working on it all. We've also hired consultants to help us get ready for Sarbanes-Oxley compliance. We've had early discussions with both the New York Stock Exchange and the NASDAQ to better understand timing and cost. So we see this as something that has tons and tons of benefits. We're working on it. But as with everything else that we do, I expect us to be very diligent about it, before we make a final move on it. So just stay very tuned and be patient on it.

And we'll go next to Lena Osterberg with Carnegie.

I was wondering a little bit if you could say something about the revenue growth progression throughout the year? Because you're running into tougher comps in the second half. If you expect that with the stronger net adds that you're seeing now that you'll still be able to keep growth rates up? And then maybe my second question will be on the Ghana merger. It will be really interesting to see if you can share some thoughts on how that's going and how you're doing with the synergy implementation?

Lena, thanks for the questions. I'm going to give Tim a couple of minutes to prepare on the Ghana question, since he does sit on that board. On revenue growth, indeed, as you can imagine, we are, for this quarter, on the top end of our guidance for the year. We are, quite frankly, a little bit ahead of our plan -- of our internal plan, which is good and has us very happy as you can see. But part of the reason, indeed our guidance was to -- for the full year is 2% to 4%, is precisely because the second half does bring tougher comps. The combination of 2 things as being a little ahead of our plan but also knowing that we got tougher comps in the second half of the year leads us to still be have a little bit conservative on not changing our guidance beyond what it is simply because it's early on. It's a great start but it's only the first quarter. I hope that helps you a little bit. And of course, this is one of those tricks you learn in life in a subscription-based business. If you want to make your full year numbers, you better add the subscribers in the first quarter. And a ton of those subscribers are subscription subscribers for us, because they're 4G and they're cable. About 70% of our 4G net adds are actually postpaid net adds. So as a result of that, this quarter has given us the ability to rank up the subscribers in the first quarter. That's an old trick that we're happy to be able to put in place this year. And it does give us a little bit of comfort for the rest of the year. And now on to Ghana.

Yes. Thanks, Lena. And Ghana, is going very well. We've had a very fast start on that. The headcount reorganization is done. Some of the key contracts have been reorganized. So yes, it's going very well. There -- at the end of the day, it's a joint venture. It reports in to us via the Jv Line. So it isn't really going to move the needle very much for the group as a whole. But so far so good.

But I expect -- I mean you talked about potentially exiting that business. So it'll be interesting to see if you can lift profitability, because that would give you more money out.

That indeed is the plan. Kind of take the advantage of the synergies for an enhanced return. That is very much the plan.

Right. I think perhaps the only comment I would make on that is extracting the synergies does take a little bit of time.

We'll go next to Soomit Datta with New Street Research.

Just one question, please. Just kind of longer term question really on cable. As you move the homes passed from sort of 10 million, 11 million, through to 15 million, are you seeing any of the economics of the business model changing in terms of either ability to penetrate that homes passed number or in terms of the ARPU you can derive or even in terms of cost of connecting customers? I just wondered there is anything changing either positively or negatively? And just specifically as a follow-on, as we move into an OTT world, how -- you talked about Colombia I think, but Pay-TV is that something that customers are still keen to have conceptually.

Yes. Listen, the first question on the economics and outlook for our cable rollout and our cable play. Everything is panning out as I hoped it would. Perhaps there is more pent-up demand in certain pockets than I imagined there would be. And that's a positive development to look at that Bolivia, for example. You'll realize that we can't build fast enough there. And we're adding tons of subscribers. But if you look at our numbers, we're adding subscribers, not just network, pretty consistently across all of our markets. What we are seeing is that the economics are exactly as we imagined there would be, meaning it's about $100 per to pass a home, you're aware of those numbers. We are connecting slightly better than we anticipated we would. We publicly said in the first year, we're penetrating about 15% to 20% of the homes. We are on track. And we've given you guidance for 300,000 new cable connected homes this year. We did 91,000 this first quarter. So we are on track or slightly ahead of track for the full year. So the penetration levels are what we expected to be getting. The ARPU levels, we just talked about it a little bit earlier, they're coming up. We are being very disciplined on price increases so that we build room for the new waves. And longer term, we see nothing to have changed our optimism about building a cable franchise underneath our strong mobile businesses. That 50 million target, which is nothing other than a target, remains very strong. We continue to move towards it with network build and cable subscriber penetration. And I, perhaps, only wish to remind you that even when we get to that 50 million, that will still be only just about short of 50% of all the households in the markets we operate. And compare that buildout ratio we build against total number of households in the country, against countries in Latin America that have 75%, 80% ratios like Chile and Puerto Rico where the U.S. is closer to 90%. So there is no reason for us not to see anything but a continued strong opportunity to build our cable franchise underneath our mobile footprint. And on the second part of the equation, I -- we -- the second part of your question on OTT. It's different because Pay-TV and fixed broadband penetration levels are much lower in Latin America than they are in the U.S. 20% to 40%, depending on what market you pick of our footprint. And as a result of that, people are still paying and wanting to add Pay-TV as part of their bundle, number 1. And number 2, OTT is actually a meaningful proposition for you as a cable operator or us as a cable operator, to sell broadband. We actually bundle Netflix with our high-speed data broadband to create a more enhancing need for our subscribers to take up broadband. So it's a different ballgame from the zero-sum game that you see in developed markets where broadband penetrations and Pay-TV penetrations are 90%. That's a key difference for us in the OTT environment.

A very quick follow-up, if possible. Sorry, but just to your point on the structural attractiveness of cable. It does sound very compelling. Aside from Colombia, are there any other operators kind of following your lead? Any local operators trying to build scale quickly? Any competitive threats to think about?

It's a different economic model for the incumbent telco because they have incumbent economics. You know that. And in most situations other than Colombia, it's really the legacy telco that we're building cable against. And as a result of that, there are incumbent economics that they must face. There are small one-way Pay-TV only operators in most of our markets. Many of them are even pirating content. But once you rollout a high-speed data network with the ability to offer broadband and you bundle a little bit of mobile into the Pay-TV mix, slowly that mom-and-pop population starts disappearing. And of course, there could be other smaller builders of cable in our markets. But we do have the ability to have a mobile play that we can bundle our services with. And we do have all the SG&A paid for. So we have much better economics. And frankly, we don't see many, if any at all, attempting a cable build.

And we'll go next to Bill Miller with Hartwell.

Just looking at your really, really positive free cash flow generation and now your continuing sales in Africa, et cetera. What is -- what are you going to do with the proceeds of Africa in your free cash flow? Are you going to -- how are you going to deploy that? Where is it going to go and how can you use it to, if anything, accelerate your growth, either through more rapid buildout, which seems unlikely or acquisitions or stock buybacks? Or just let us know what you plan to do, please?

Yes, thank you, Bill. I think we've indeed created for ourselves a good problem, if you will. We've generated equity free cash flow north of [$100 million] now, which is high enough to pay for our dividend policy. And we have now revenue growth and cash flow growth in the system. So going forward, thinking about capital allocation, we'll go beyond just our organic thinking. And we are indeed going to have to start thinking quite a bit about external deployment of capital. And by that I mean just beyond our organic needs. And as you can imagine, the range of options in our minds include possible M&A and when I use the word possible M&A, I should highlight possible because our focus on capital returns has been phenomenal so far, hope we build a bit of a track record there and sufficient of it so that we'll be equally disciplined going forward. We have a number of opportunities that are available to us in terms of minorities that we now -- we operate but we don't consolidate. There are some in-market opportunities for us, which would have in-market synergies. And there are pockets of adjacent opportunities that are [write-down] geographically where we are and write-down operationally our alliance and businesses. So there are opportunities for us to deploy capital in a smart way beyond just organic. And as you very well point out, we are pretty bullish on our story. You've heard me say that often. It's all turning out to be true. We've gone from, basically, an opportunity to deploying a network against that opportunity to adding the subscribers right behind the network to bringing back the revenue in a more stable manner right after we started racking up the subscribers. And now we're moving on to EBITDA and operational leverage. So we think we're in the early days of being bullish about our own story and about our own equity. So everything leads me to believe that that is also an opportunity for us. Now having said all of this, there is an old saying in Latin America, which basically says, "Make sure you bring the horses to the stable before you actually saddle them out." And we still got to go out and get those horses, Bill, in terms of some of the divestitures. Hope that help -- gives you a pretty good idea of where our mindset is in terms of capital structure.

You've also got a much more stable business in terms of both currency and cable operations and everything else. So that, that should give you the courage to do some of these things now when you have already got the firepower.

Thank you. I think we've shown that we are very disciplined in capital allocation and you can expect us to be fully smart and disciplined going forward.

We'll go next to Sergey Dluzhevskiy with Gabelli & Company.

My first question is about content and distribution. So obviously, you have a strong cable business and a strong wireless business. We are seeing a few examples globally of combining distribution with content whether it's Comcast, whether it's Rogers, whether it's AT&T trying to buy Time Warner. What are your thoughts on combining content with distribution in your markets? And under what set of circumstances or under what scenario it may make sense for Millicom or if it won't and why not?

Yes, it's a very old cable debate and obviously, there are camps to this. Content and distribution, whether they should be under the same house or not. Our philosophy on this is that the content that we believe we should be in the business of owning is that content that makes, at a local level, a strong difference in terms of adding subscribers to the cable business. And that content in our region, in Latin America, at the local level, is called local soccer. So for all of our content, we take the view that there is no depreciation vis-à-vis our competitors on cable, meaning we buy the same content from all the U.S. houses. We have the same access to European soccer and European content and American content. But when it comes to local soccer content, in many of our countries, and this should be clear as part of our strategy, we have effectively created the Pay-TV exclusive soccer content. So in countries like Paraguay and Bolivia and increasingly in some others in Central America, we have struck exclusive deals with either the soccer leagues or the soccer clubs to create a premium Pay-TV product that we own exclusive rights, 360 cable and mobile for a period of time. That's not true in Colombia. In Colombia, the content is available to all the Pay-TV operators. It's exclusive to the Pay-TV environment. And Paraguay and Bolivia and increasingly in Central America, we are creating that premium exclusive soccer product for us. That's what we believe makes difference to our cable business. Everything else, no point in having differentiation. We take a parity approach. Evidently don't expect us to go out and buy a content company.

Right. And in terms of -- I guess, a different question. In terms of regulatory environment in your markets. As you look at your regulatory agenda for 2018, what are some of the main issues and developments that could be particularly important to the company over the next 12 months or so?

I think by far, I mean, we are in the markets that we are. But once you take the time to understand these markets, you realize that, A, they are lot more stable macroeconomically than most people believe they are. Two, they are a lot more stable politically than most people believe they are, quite strongly. And three, regulators are a lot more rational and organized than most people believe. And I can say this having been now 3 years into Millicom, we've been able to renew licenses (inaudible). And our spectrum position our -- and our relations with regulators is pretty stable. There's been markets in which the regulators have created havoc and that was actually our largest market, Colombia, presumably the more stable. But that was from 3 years ago and I think the regulator, as you have seen, has started to come back and try to correct the mistakes that were made 3 years ago, when the service contract was decoupled from the handset subsidy. And the regulator is now beginning to suggest that new legislation should be presented that basically allows the consumers to have the option to have their operators provide a subsidy or not. So the pendulum is switching back to rationality. And so I think overall, we see a somewhat stable environment. Every now and again, things happen like the one I just described in Colombia or the present situation we have in El Salvador. But we have a pretty balanced portfolio. And that's an important thing. There's no immediate correlation. And lastly, I think obviously, you must be aware of this, we got Presidential elections coming up in Colombia. I'm not going to comment on those. But you can have your own view. I think the market is generally very positive about developments in that market. We had elections in Paraguay just last weekend. They went smoothly. And overall, the region is having a turnover of President in the next 12 months, which so far, except for hiccup in Honduras that eventually got sorted out, it's been pretty smooth.

And we will take our last question from Peter Nielsen with ABG.

You've covered all the important issues. But one on mobile ARPU, please. You've shown very strong growth in 4G subscribers. You previously shown us the ARPU uplift from a 4G subscriber coming on. It still seems to not to be really visible in the overall ARPU. The trends are slightly improving but they're still not positive. You've already turned the corner of returning to Mobile growth. When do you think -- and could you talk a bit about what will it take for us to start to see positive ARPU growth as well?

Peter, I think a quick answer on this one. I mean, there's a lot of moving parts in the ARPU numbers. It's basically our revenue divided by subscribers so. It's influenced at the margin by cleanups of the base. That deferred revenue adjustment we made this year has an impact on it. And then so on and so forth. I think we take much more comfort from the underlying ARPU calculations that we see where we continue to see 4G customers giving us more than 3G customers in terms of our overall ARPU. And also, the service revenue growth. I mean, big, big positive for us this quarter was the mobile service revenue coming back to sort of just under 1% growth. So I think at the margin, you'll continue to see noise in our ARPU numbers. But I think as long as the B2C mobile business is positive, I think you should take some comfort from that.

I think I would point -- Peter, I probably -- I would just point to the fact that this quarter, mobile turned positive to just about 1% and that's probably the better indication of where things are going on the mobile business.

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.

Thank you, all, for joining today, and for your great questions. We're happy to have you here, and we look forward to our next call in about 3 months and new set of good results. Thank you.

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