Millicom International Cellular SA (TIGO) 2018 Q4 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.

Thank you. Hello, everyone, and welcome to our fourth quarter 2018 results conference call.

Before we begin, please turn to the safe harbor disclosure on Slide 2 of the presentation, which is available on our website. We will be making some forward-looking statements today and these statements involve risks and uncertainties, which could have a material impact on our results if these risks materialize. So please take the time to review Slide 2 in detail.

And on Slide 3, it's a reminder that we use some financial measures that are not consistent with IFRS. We define those measures here. So please refer also to the back of our earnings release where you will find some reconciliation tables.

And on Slide 4, you can see the agenda for today's call. Our CEO Mauricio Ramos and our CFO Tim Pennington will take you through the slides today.

With that, let me turn the call over to Tim to discuss the financials for the group.

Thanks, Michel. We can turn to Slide 6. And some of you will have noticed that we've changed the format of our earnings release. So let me briefly highlight what's changed basically, as we know U.S.

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Format financials with our U.S. registration statement. And let me -- going forward, when we talk about the group numbers, we'll be referring to the IFRS presentation. And you will recall that Guatemala and Honduras are treated as joint ventures and so not fully consolidated in the group accounts. Instead, we account for them under the equity methods and only show our share of net profits. The impact of this approach on service revenue, operating profit and equity free cash flow is summarized in the 3 charts on this slide.

Now by contrast, when we talk about Latam, which will be the majority of this presentation, we will continue to include Guatemala and Honduras as if 100% consolidated. This is how we look at the business, and we think this gives investors a much more complete picture of our operational performance. And this is how management are incentivized.

Okay, with that out of the way, let me turn to the full year group P&L on Slide 7.

Full year total revenues on an IFRS basis were just over $4 billion, flat on 2017, but this is reflecting the impact of IFRS 15 adoption and adverse currency movements. If these numbers are lower than you expected, again, this is because of Guatemala and Honduras being treated as joint ventures. And you can see that from note A, our share of the net income from these operations is captured just above operating profit.

Incidentally, operating profit includes about 2 weeks of Panama. We also had a number of one-offs this year, including $50 million in Q4 relating mostly to the acquisition of Cable Onda, which is mostly noncash as well as there were some restructuring charges and costs associated with our U.S. listing.

Other points on this P&L, note B, shows lower net financial expenses largely because we incurred some onetime redemption charges last year, which didn't repeat this year. The big movement in associates in, note C, largely reflects noncash fair value adjustments, while the P&L tax in, note D, is lower on withholding tax and deferred tax.

Okay. Let me look at the cash flow on Slide 8, which I think is more meaningful. Some of you will have noticed differences compared to what we've shown you previously, but in essence, it is the same.

We will start with operating free cash flow, which is EBITDA minus CapEx, minus working capital and taxes and we then add dividends and advances that Guatemala and Honduras paid to Millicom. This is rather than the share of free cash flow previously and this explains why it is around $50 million lower than on our previous method of presentation.

We've got net financial charges paid and dividends to minorities and in this case, it is Colombia and Panama. The finance charge of $298 million in 2018 may look a lot lower than some of you might be expecting, but if you recall, if you remember, this is not including Guatemala and Honduras. Net -- equity free cash flow was $326 million comfortably above the dividend of $2.64 per share proposed for 2018 and that would amount to $266 million.

Let me now pass to Mauricio to review our performance in 2018.

Thank you, Tim, and good morning and good afternoon to everybody. Thanks for being here today. I'm going to focus on Latin America now for obvious reasons to you all. 2018 was a very strong year. I cannot say it any more clear than that. We delivered or outperformed on all of our targets for the year, as you can see on Slide 10. Organic service revenue growth came in at 4.3%, which is actually above the top end of our guidance range, and we're pretty pleased with that acceleration.

EBITDA growth ended the year stronger than we expected and we closed at 3.5% for the year and that includes about 100 basis points of headwinds from one-offs. So in reality, the underlying growth rate is really around 4.5%, which, as you can see, is a meaningful acceleration from where we were in 2018 and from where we were in 2017.

And our CapEx for Latin America ended the year at $954 million, which is lower than we had budgeted and expected at the start of the year. And the interesting thing is that we actually built more 4G sites and built more HFC homes than we had budgeted. So I want to take a moment to thank our procuring and our engineering teams across all markets for doing an excellent job. They really are doing more with less, particularly in 2018.

So we delivered on all of our operational and financial targets for the year. And as you can see on Slide 11, we also delivered strong results in all the areas, perhaps equally strategic. We made further steps to exit out of Africa, we sold Senegal and Rwanda and we did a lot more, as you are aware.

We bought Cable Onda, a fantastic acquisition. We've now rolled out our next-generation TV service platform across our entire footprint. And earlier this year, we launched our partnership with Amazon Prime Video for the region, which comes on the back of the deal we've done with Netflix before. And we've also significantly advanced our corporate responsibility agenda.

We did a lot of other things behind the scenes to develop our corporate culture. You can't really see these on a day-to-day basis, but that culture, that we're building is the blood that runs through our veins. We proudly call it (foreign language) TIGO now and it is the life blood that makes all these great results be real. It is the effort of this fantastic team and accompanies now because of that attracting great talent to TIGO.

And on Slide 12, you can see that we also prepared for our U.S. listing, which we completed about a month ago. We have set 2019 and we thought the first few days of 2019 quite really matched that description. This listing will make it easier for investors to trade our stock and to compare us to our Latin American peers, since most of them are also listed in the U.S. It will surely take some time for liquidity to build, but we are already seeing an increase in trading volumes both in the U.S. and in Stockholm.

So now let's look at our 2018 Latin America performance in more detail, starting on Slide 14. This chart speaks for itself. This thing is working. Our revenue is back to growth, and it is solid growth. It is now basically mobile broadband and cable growth. But this chart tells you is that our top line growth is in rapid acceleration mode. We are now approaching the mid-single-digit level growth that we aim to deliver over the medium term, and I will come back to that point later as it is quite meaningful.

On Slide 17 (sic) [Slide 15], you see that revenue growth improved significantly both for our Mobile business and for our Cable business in 2018. The left-hand side of the page shows how strongly our Mobile business has improved over the past 3 years. Growth turned positive in 2018 and that is a marked inflection point. Mobile data has now overtaken the legacy voice business in size. Data growth is now driving Mobile revenue, and we are growing over 1%. Mobile for us is now a broadband business, and it is growing.

The 10% Cable revenue growth that we saw in 2018 is equally noteworthy. I'm just going to say it again, 10% Cable revenue growth. We've been rolling out state-of-the-art cable networks, setting up sales teams and service layers, increasing broadband speeds, rolling out the next-generation TV product across the footprint, deploying exclusive local software content and adding OTT partnerships like [Netflix].

All of these work is now paying out. And it is fueling our acceleration in our Cable growth.

Now let's look at some of the KPIs, beginning with our Mobile business on Slide 16 in more detail. We continue to focus on getting more and more customers on to 4G. It's a proven strategy, and it is working. In 2018, once again, we added more than 3 million 4G users to end the year with just over 10 million users, as we have said we would. And that is still only about 30% of our customer base. We have a long way to go in 4G penetration in our markets.

And on the right-hand side, you see our postpaid segment. It is gaining momentum. This year, we added about 250,000 high-value postpaid subs in 2018, with all countries contributing to that postpaid growth and a meaningful turnaround on the postpaid segment from where we were 2 years ago.

On Slide 17, we present to you the KPIs for our Cable business. The message here is simpler, we are accelerating. As we said it would, Cable is delivering on its potential. We added more customer relationships and more RGUs in 2018 than we did in 2017, and that was already a good year. And we've been growing our ARPU even in dollar terms. As you know, we raise prices every year, and we continue to bundle and upsell additional services to our existing customers to drive overall ARPU growth.

Please look at our earnings release and look at the number of RGU additions that we have. We have a pretty meaningful bundling ratio on our net adds. And just for clarity, these numbers are like-for-like and they do not yet include Panama.

Now Tim will walk you through how these KPIs drove our service revenue growth per business and per country, starting on Slide 18.

Now I think there are 2 things to highlight on this slide. Firstly, organic growth was down by around about $200 million. This is due to the IFRS 15 accounting changes and also to FX headwinds. Absent those changes, service revenue was up 4.3%, as Mauricio said. And this brings me to the second point I wanted to highlight and that is that 80% of this growth has come from our Cable business.

Now if I turn to Slide 19 and look at growth by country, the key message here is that most of our countries performed well in 2018. Bolivia and Guatemala both had fantastic years driving forward very strongly on robust cable and mobile growth.

Colombia had a much better year than we've seen in the last couple of years, indicating that we're starting to see some traction. Organic growth was up 3.5% and that reflects the strengthening Home business and some positive momentum in Mobile, especially in Q4 where we saw Mobile service revenue growth of more than 4%, that's our best performance in a long time.

Paraguay ended 2018 with growth of 5.5%, they had a great first half, although competition intensified through the second half of the year. Conversely, Honduras ended the year strongly having had a slower start and it posted its best revenue performance for the last couple of years.

Finally, El Salvador had a very challenging year, as you are aware, but we're expecting better trends in 2019. And this is a market, frankly, with too many players, and we would welcome consolidation if it's approved by the regulators.

Turning now to Slide 20. You can see that the improving top line is also driving better EBITDA growth in most of our markets. With the exception of El Salvador, all businesses posted a strong EBITDA performance. Bolivia is motoring. Paraguay and Guatemala both posted north of 5% growth on very healthy margins, whilst Honduras was not far behind. Perhaps most satisfying for us, though, was Colombia was up 4.4% year-on-year with margins now approaching 30%.

The healthy EBITDA growth reflects not just the organic revenue growth we're seeing, as our strategy starts to pay off, but also our attention to cost control. There are a lot of moving parts in our costs. But if you exclude the one-offs and the variable cost items that fuel our growth, like network, our underlying G&A grew by less than 1% in constant currency in Latam in 2018.

And that leads us to Slide 21. The Latam organic EBITDA growth has improved steadily over the last 3 years and reached 3.5% last year. And as Mauricio said, if we adjust for the one-offs, which gives you a sense of the underlying momentum we have going into 2019.

So now Mauricio will take us through the medium-term outlook beginning on Slide 23.

Thank you, Tim. Before we go into this medium-term outlook, which is the first time we presented something like this to you, I want to highlight at the starting point that the fundamental building block for this model is that we've been successfully reconverting the product mix towards sustainable organic revenue growth. And that only then are we now predicating that, that sustainable organic revenue growth then produces strong free cash flow generation through operating leverage and through long-term efficiency programs. So this is not a plan, has not been and is not into the future based only on cost cutting or financial engineering. Top line growth for us comes first and that's what we delivered initially.

And that is why the key premise for us has been to focus on the yet untapped broadband opportunity in our Latin American markets. This focused simplicity for us drives results.

As you can see on Slide 24, penetration rates are still very, very low for broadband in our markets. These penetration rates will continue to rise as they gradually catch up with levels that already exist elsewhere in Latin America. All 4 socioeconomic factors are actually at work here. GDP growth in our market is expected to average about 3.5% this year, which is almost double the average for the broader Latin American region. GDP per capita in our markets is expanding even faster. So our services are quickly and will continue to quickly become more affordable to our subscriber base.

Demographics, second important factor, that is often overlooked. The median age of the population in Colombia is about 30, 22 in Guatemala, 24 in Bolivia and 25 in Paraguay. These are young populations joining the middle class, adopting a connected digital lifestyle and forming new households. These drives demand for our services.

And we've been executing incredibly on this plan over the past 3 years. And you can see what we have accomplished so far on Slide 25 as a recap. We have built a 4G network that now covers 65% of the population in our footprint, and serves now more than 10 million 4G users. In 2016, just to remember, mobile ARPUs were declining 6% as voice revenue was quickly eroding, but now ARPUs have stabilized and our Mobile business is growing, again, quite heavily.

In Cable, we've added 4 million homes to our footprint in just this short time frame, and we've signed up more than 1 million new customers in that short peroid of time. And we have done this while growing Cable ARPU every year.

So revenue growth has recovered, margins have expanded, and we're now generating healthy free cash flow. And we say all of this because this builds the credibility on the story of the past 3 years, which is the building block for what's coming ahead. And we're just getting started on deploying this strategy.

I'll talk now about our medium-term plan, starting on Slide 26. This is a very important slide, and there is a lot of information for you here. So look at it in a bit of detail please now and later on if you find some time. The main message is that we will do more of the same, but we will do it with accelerating growth and robust cash flow generation over the medium term. We are accelerating on a strategy that is working.

In Mobile, we will continue to expand our 4G network, but we will focus more on capacity rather than expansion so that we can drive usage. We've gone from 1 million to 10 million 4G users in just 3 years, and in the medium term, we aim to double that from here to about 20 million 4G users.

In Cable, you know that we expect to exceed 15 million homes, and remember that 15 million homes passed is not the end game, it's just a medium-term target, and Panama simply gets us there faster. By adding more homes and driving network penetration, we expect to double the number of residential customer relationships to around 5 million. And with a bundling ratio of about 2x, we will get to about 10 million RGUs. And we will remain disciplined on ARPU as we drive speeds up and rollout next-generation products across our footprint.

There is a lot here, but let's keep it very, very simple. This is what we're saying, 20 million 4G subs, 15 million homes passed, 10 million RGUs, 5 million customer relationships. Even more simply, 20, 15, 10, 5. And all of these effectively means the big number of 10% operating cash flow growth.

To the left side of this slide, you see a simplified version of what our strategy is in terms of our principles. Our strategy is network-driven. You've seen us do that. It is connectivity-centric, we know what our customers want, and it is aimed at securing a position as the convergence leader in the markets we operate. The strategic focus is to drive efficacy and efficiency. You have seen our margins improve over the past few years, and because we will continue to be equally focused, we expect to continue to pick up an additional 50 to 100 basis points of EBITDA margin on a yearly basis going forward.

Slide 27 shows the financial output of our organic growth plan and our financial guidance. We have provided you with 2019 guidance earlier this year. We're now providing you with medium-term guidance. The key messages are: one, 2019 growth accelerates over 2018; and two, we see further growth acceleration over the medium term. That is revenue growth will reach a cruising speed in the mid-single digits, EBITDA will grow faster than revenue, mid-to-high single digits and operating cash flow growth will be about 10% per year.

As I said earlier, our organic growth is the key foundation for the other components of our financial model, which I will go through in a minute, but nothing happens without strong organic growth.

On Slide 28, you can see how we think about capital allocation. One, we're quickly reallocating capital into Latin America as we complete divestitures in Africa. I think by now, you understand how we're doing that. Two, our organic growth is fully funded with internally generated cash. Three, our CapEx is almost exclusively dedicated to high-speed data networks and IT transformation to build us a fixed-mobile convergent future. And four, all capital allocation decisions are taken centrally. This means that country operations compete from a central funding group and that we fund growth projects first as a priority from the center.

This is how we got here over the past 3 years in terms of equity free cash flow generation and the financial and operational turnaround that you have witnessed and this is how we continue to do over the medium term.

On Slide 29, you can see that we're committed to maintaining a healthy balance sheet with a target leverage ratio of about 2x in the medium term. We felt comfortable taking the leverage up to 2.5x to get the Cable Onda deal done because our business is becoming more subscription-based and more predictable and Cable Onda was a fantastic acquisition that only helped us get there faster.

Still, we haven't lost sight of the fact that we operate in emerging markets, and we think it's prudent to keep leverage at around 2x, retaining the flexibility to take on more debt on a temporary basis if we see an opportunity to make acquisitions that advance our strategic goals and are cash flow accretive. And of course, we will always, always benchmark any M&A opportunities against buying back our stock.

This takes us to Slide 30 on strategic optionality. The last piece, if you will, of this strategic puzzle. We expect our free cash flow generation to continue to strengthen and this will free up additional capital over time. You all can do that math.

Now with regards to inorganic growth optionality, many of you have heard us talk about the 3 buckets. But let's talk first about the principles that inform those buckets and which are simple and unwavering in our minds. One, we stick to our knitting, our core competitiveness are fixed and mobile broadband, so please be reassured that we will not get creative strategic expansions presented to you. We like what we're doing.

Two, we like in-market consolidation opportunities that strengthen industry structures and drive fixed mobile convergence. They also usually have synergies.

And three, we only use capital externally if it enhances our provisional group metrics and if we can create returns in excess of our WACC.

These are the 3 buckets that you've heard us talk about before. They haven't changed, and they won't change. And just because we labeled bucket 1 minorities, it doesn't mean that those will happen first. Opportunities just turn out when they turn out and you saw us acting on Cable Onda when the opportunity came about.

And finally, on Slide 31, and just to recap, let me highlight the key things I'd like you to take from this call. It should be absolutely clear that we have accelerated growth in Latin America and that we've turned the corner. Both service revenue and EBITDA are growing, and we can see the positive impact on our strong cash flow generation. Cable Onda is now an integrated part of the Millicom family and is expected to deliver in 2019, just as we said it would, no hiccups, no surprises, just delivering. And our strategy is sound, and it is working, so we're going to stick with it and drive it further and with a same focus into the future.

Remember, 20 million,15 million, 10 million, 5 million, 10% operating cash flow growth, it's as simple as that.

And with that, let's take some questions.

(Operator Instructions) We will now take our first question from Rodrigo Villanueva of Bank of America Merrill Lynch.

My first question is related to Guatemala and El Salvador. And although América Móvil agreed to acquire the Telefónica assets in these 2 countries, how would you expect the competitive environment to evolve?

I think the acquisition by América Móvil of the Telefónica assets in Guatemala and in El Salvador, I think, is positive for the marketplace, that's the first comment I would make. Guatemala will go from 3 to 2 and El Salvador will go from 4 to 3, when approved. And that's overall very positive for a healthy investment structure into those marketplaces. Second point I would make is that, that better industry structure, both in Guatemala and in El Salvador will also facilitate spectrum auctions into the future. It will unlock a certain number of litigation that was in the marketplace and with focused players and a better industry structure, it will be easier and healthier for the marketplace for those spectrum auctions to come into the marketplace, and that's a positive overall. And you have indeed seen as of last week, the regulator in El Salvador has announced that both AWS and 1,900 will be put for auction. So overall, it is a positive for the industry structure and for spectrum.

Understood. And my second question is related to the operations in El Salvador. We saw sequential margin improvement of almost 500 basis points in the fourth quarter to around 35%. So I was wondering if this level is sustainable considering the measures that you have already taken to solve most of the issues in that country.

Yes, and thank you. We've been pretty transparent with you guys, and we've never minced any words to say anything other than to underscore the fact that we got some fixing to do in El Salvador. And I think as you point, the benefits of us doing that are beginning to show through because we've been pretty busy. We told you that we changed management midway through the year. We've now completed and, quite frankly, corrected our IT transformation. We've restarted now our cable build program, which is very meaningful, and we've redesigned our processes, which is why you see that margin pickup. And in Q4, if you look through the details of what's going on, just as you did in Q3, perhaps with less intensity, the net adds are coming back and I always point to that as a clear sign of future revenue growth. You've heard me say that a number of times. We added about 80,000 4G subs in El Salvador, that's the second quarter of about that level of net adds on 4G, which is positive with healthy ARPU. And we've now added about 10,000 cable connections. So the net adds are positive. The margins are improving. And of course, we already just talked about 2 positive developments in El Salvador that are beyond our operational improvements and those are the healthier industry structure, if the deal that you asked about gets approved, and the spectrum that is finally coming available in El Salvador. As I said, AWS and 1,900 auctions have been announced. This will certainly decompress pressure on the networks there, everybody is pretty tight in El Salvador. So this will only help, and of course, more spectrum on a better industry structure is always a positive. So that's what's happening in El Salvador, kind of big picture.

I'll just add that kind of Q2, Q3, we're disproportionately impacted by incremental bad debt charges we took. And if you look at our Q1, we were at 35% Q4, 35% and historically, we've run at kind of in the mid-high 30s in that business.

We will now take our next question from Julio Arciniegas of RBC.

My first question is regarding Colombia. The 4G penetration in Colombia is actually quite low. Have you seen a change on the demand of postpaid services following the unlimited offers that the company and then other players introduced in the market? And if it's so, have you seen that actually be having a positive effect on ARPU? And the second question is regarding the medium-term outlook. The company expects more than [15 million] households passed. Has the company considered using FTTH technology rather than cable for that network expansion?

Yes, so on Colombia, first, our Q4 KPIs in Colombia are nothing short of fantastic. If you look at the Q4 KPIs for Colombia, I mean, they're -- I think they're the best we've had in maybe 2 or 3 years, Tim can correct me here, and they're so good that I can go on all day saying that. We've added about 540,000 4G net adds up for the year, a meaningful amount of those came in the fourth quarter. In Colombia, we've added -- about 50% of the postpaid net adds that we've added this year came from Colombia. And they largely came in the fourth quarter. That's just on mobile. So the answer to your question on whether we've regained the initiative in Colombia on mobile, I think that's the point, I think that is exactly the point. In Colombia, with the stuff that we've been doing over the last 2 years, we're finally at a point where we feel we've regained our standing in the marketplace. And we, quite frankly, have strong initiative there. You know that we've been building cable networks like there is no tomorrow in Colombia. We've rolled out next-generation TV services, and we've been increasing speed. We've been moving legacy copper subs to the new networks. That's been painful, and it's drained a lot of our effort and our capital, but we are out of the woods of that, and you are now seeing significant pickup also in cable. We added almost 130,000 cable net adds in the year, and it's been a steady 30,000 per quarter. And on the back of all this, we feel like we've got the networks in place, we've got network advantage, we've got product initiative, and what you're seeing now in the fourth quarter is, strong KPIs, and revenue and EBITDA for the year now back on steady growth, as Tim mentioned, during his remarks. So I guess, what I'm saying is, I was always bullish on Colombia, perhaps out of my time and for years I've said Colombia is going to work, and we need to hold the course and be very bullish on Colombia. I could not be more bullish than now.

I think on your comments on ARPU, perhaps. At the moment, this is volume-led, as we expect. And -- but currently, it's predicated on improved and increasing data usage by these postpaid customers. So we expect longer term and certainly in the medium term, we'll see an impact on ARPU.

Yes, Julio, on your FTTH cable question, just about every 3 quarters, we -- sorry, every quarter, we go back and rethink holistically the question around FTTH and cable. And that's simply to say that we're not dogmatic on this. When the economics for fiber makes more sense than the economics for cable, we may start going that way. But where we sit today is the ecosystem for cable in Latin America is significantly bigger by significant degrees, and when I say America, I mean the Americas, including the U.S., than it is for fiber. So by staying with HFC plant, which is very variable, we take part of an ecosystem that has the lowest cost, both on the network itself and on the customer premise equipment. The second point of that is, cable remains a very flexible infrastructure, very modular infrastructure, that one that can certainly be upgraded. And the plans that we're deploying, as I've said earlier, is 1 gigahertz, 2a fully digital, 3.1 ready is very similar to the network that's been deployed in the U.S. by the big players in there. In markets in which average speeds are, in Colombia around 20 and elsewhere around 5 to 10. So we've got a lot of a runway on pretty economical cable infrastructure.

I don't think we're not building. I mean, I do not know exactly the number, but Colombia has got a fairly sizable amount of GPON out there now. They're primarily focused on the business community rather than residential community, but we -- don't think I have the details for you, Julio, but we have a reasonable amount of GPON on fiber out there.

We will now take our next question from Stefan Gauffin of DNB Markets.

Just a couple of questions, please. You stopped providing targets for KPIs for 2019. I know you've provided good targets medium term, but why stop guiding for upcoming year? And can you also clarify if you continue to see cable RGUs to continue to accelerate in 2019? And then just a follow-up on Colombia, given the extremely good mobile subscriber intake, have you seen any competitive response to your unlimited data plans? And have you seen continued good subscriber intake in Q1?

Thank you, Stefan. On the first question, there is really no particular reason on the KPI targets for 2019, other than we're providing a lot of guidance. The more meaningful reason is really that in the past, we were deploying a strategy in which we had to show you the milestones as they came about, so that you could see that revenue growth would come back. So we started out saying the KPI that matters is the network build. Once you had credibility that we were building the network, we said the KPI that matters is the subscriber intake, and those were the 4G milestones and the cable milestones. And now that we've demonstrated that the revenue growth came back, I think those KPIs become less relevant for us to demonstrate our revenue growth and our financial targets going forward. So we've decided that we'll rather give you a lot more color medium term on our financial targets and give you medium-term color on our operating KPIs. Having said that, there is nothing -- sorry, Tim?

Well, we can say that, Stefan, you can back solve essentially from the medium-term guidance we gave, and it's going to tell you that the run rate is going to be similar to what we've guided to last year. But in some ways, we don't want to be boxed into just doing x number of homes passed or x number of homes connected in any single year because going forward, we may push the accelarator a bit hard or we'll take our foot off the accelerator a bit for different reasons. But that I don't think that if you look at what we've guided to in the past, you'll be a long way to -- from where we're expected to go in the future.

Yes, so the point, Stefan, is we're not trying to not tell you what we're thinking this is going to work. I've said a number of times that on cable, we've reached a run rate of about 1 million homes passed build per year, that's our run rate. We like it. We think it's sustainable. We think it's good. It helps us also drive net adds on cable, and as I said, 400,000 on a yearly basis is right around to keep. Now any given year, maybe plus or minus, but in the medium term, we're certainly telling you, as Tim said, that you can backfill for that. And in 4G, you can also kind of back solve for that where we're running the business to be somewhere in between 2 million to 3 million per year. We want to make sure, particularly on 4G, and I'll be very transparent on this, that we handle the ARPU appropriately. We don't want to get ahead of ourselves. We did get ahead of ourselves in Bolivia and we corrected for that. So this is a volume and ARPU game, and we want to make sure that we maximize that. So that's the reason for that. Colombia, our competitors have put out. They did so within 24 hours of our "unlimited" product coming out. They did put out their matching products, but they're not similar in the sense that they're not unlimited. They're just basically a lot of volumes without an unlimited component to it. And remember, our unlimited -- so-called unlimited or "unlimited" product is more than just a product, it's -- or an offer. It's a proposition around simplicity. We've simplified our mobile offer to effectively 3 products, just like we're doing cable, by the way. So feel very comfortable with this proposition, and it's also a simplified proposition on the handset available and is a simplified proposition on the way we handle that postpaid subscriber. This is a postpaid product allowing us to have a very simple solution to the customer, and that's much harder to copy because it's an integral solution to our (inaudible) rather than just a promotion that our competitors have put out. And yes, we've seen continued momentum.

We will now move to our next question from Lena Osterberg, Carnegie.

I was wondering a little bit more about El Salvador. I think in your Q3 report, you mentioned that with the measures you've taken throughout 2018, you hope to return to revenue or at least stabilize the business in 2019. So I was wondering if you could maybe give us an update on what you think into 2019, if you sort of bundle the necessarily cleanup or you're done now, no more deals like this. And then second, when do you expect a regulatory approval of the voucher there?

It's a great question, Lena, and thank you. If you go back to that slide that Tim presented, every one of our countries is working. Every one is growing healthy revenue growth, each one and all of them are growing EBITDA growth. We, in the past, had some hiccups with Honduras and we said we're going to turn it around. Colombia, for a long time, you were patient until we got it right. I can assure you that we will get El Salvador right. We are focused. Actually, I'll tell you this anecdote. Somebody was showing me yesterday their travel schedules for all of the Millicom employees where they've been traveling to. This is how closely we monitor our costs, by the way. So where are people traveling to? And it was disproportionately allocated towards El Salvador, which I took as a fantastic, fantastic metric because it means we're focused on that market. We think we've done everything that needs to be done and we're going to get a little help, I think, from a better industry structure and the release of spectrum, so that's going to help us. Tim, anything?

I would say the kind of KPIs have turned supportive on it and yet, it's always a source for us to add growth rates on subscribers and postpaid subscribers, in particular. And we also started to build homes again in El Salvador where we sort of more or less put a stop on that as well as we sorted a few things out. And Q4 last year was a difficult comp for us. It actually was a very good quarter last year as it turned out probably not for the right reasons. So we took encouragement from the margin rebounding by 35% on a normalized basis. And as we said, market -- it's a little bit sticky market with 4 players in it, but with this acquisition, as Mauricio had talked about on the call, we should see a bit more market rationalization coming through. As to when the regulator might approve it, I mean, it's not really how cool, Lena, you need to ask others about that one.

We will now move to our next question from Johanna Ahlqvist of SEB.

Two questions, if I may. First of all, a question related to details in the cash flow. So if you can comment anything on the financial net and tax, what you see in 2019 and also sort of in the midterm outlook on those 2 parameters? And then just if I may add a question on Africa also. How -- can you comment anything on the sort of potential divestment of Tanzania in terms of timing? I know the IPO process is coming up now. Any flavor on that will be helpful.

So I'll take the Africa question, while Tim get some of the details. We continue to be active and proactive, I would say, on freeing up capital. And that includes not just Tanzania, but also Chad and to a lesser extent, Ghana that, as we know, we JV'ed. We think in terms of strategic divestiture, our focus right now is, as you very well pointed out, on getting that IPO done because that takes away a tremendous amount of uncertainty and comply with the legislation. So I think for the next 3 to 6 months, you should expect us to be fully focused on getting that IPO out of the way. And there is already a template for that in Tanzania that you're very familiar with.

Yes. And just in terms of sort of the outlook on the tax and interest, essentially, we don't see tax moving massively. I'm looking on a sort of whole group basis now, the way we used to look at it, including Guatemala and Honduras. And I would expect that group to be in the region of about $275 million, and then sort of Panama will be -- they're probably going to sort of will be around $300 million mark for 2019 tax line. And for interest, we're going to run that one, again, including Guatemala and Honduras around the -- it's going to sort of be nudging up towards $500 million on that basis, simply because we've got more tower leases coming through that. Tower leases now running at about $100 million, and the Cable Onda round figures will add about $100 million and so that's sort of the expectation that we've got.

We will now move to our next question from Sergey Dluzhevskiy of GAMCO investors.

My first question is about Panama and Costa Rica. Those are the 2 markets where you currently don't have wireless presence. Mauricio, if you could maybe share your thoughts on how important or critical is having wireless in those markets over medium term or the next few years either through owned facilities or through an MVNO with one of the providers?

You said 2 questions, so I'm going to answer that. I'm sure you're going to have a second one. Generally speaking, we didn't go into Panama or into Costa Rica with the mindset that mobile was necessary. Both of those are cable stand-alone very strong businesses. And as you know, I've operated cable businesses in the past that are stand-alone businesses, and they do extremely well. And with regards to a mobile or fixed mobile convergence solution for our cable assets, being on the cable side of that with a strong plan seems a perfect place to be because it allows you to pick the choice as to how you want to do it, whether you want to do it as an MNO or whether you want to do it as an MVNO, and then you're able to strategically think through it in a very clear manner. So for us, adding mobile to those markets is really about how to (technical difficulty) and very strategic rather than how to solve for our necessity. I hope that gives you a lot of clarity on our mindset.

Okay. And my second question is M&A related, I mean, it kind of ties into one of the buckets that you had on the slide show. If you look at your markets and you identified in-market M&As as one of the key areas that you're looking at, other than ETB in Colombia, do you still see meaningful opportunities for in-market M&A in your key markets? And maybe provide more color on how you think about in-market M&A because obviously, you found Cable Onda, which was in an adjacent market. It was a more attractive purchase potentially versus in-market M&A opportunities.

Yes, and that's precisely a really good point as to the timing point that I made. The opportunities come about in those 3 markets buckets when they come about. They don't really fit a nice spreadsheet as to when you're going to deploy capital or where because you've got to take the opportunities when they come and Cable Onda was simply a fantastic asset that fit us strategically really, really well. I don't want to go through a list of what is out there because that's going to only run me into problems, and you probably have a pretty good idea of what's out there. But I do want to come back to something that we've said for the 3.5 years that we've been around here, it's going to be 4 now. Our story is predicated on our significant organic growth opportunity, that's what our equity story is. What we've added over the last 18 months is a layer to that. But it's a layer that adds the icing on the cake, if you will, and it comes about because we've got the cash flow, we've got the balance sheet flexibility, and we've got a lot of strategic optionality. So we will remain very focused on organic growth. And when the opportunities come about, they make strategic sense, they make product mix sense and they make geographic sense, like Cable Onda did and if they're accretive on a value proposition and an operational metric proposition, then we'll go ahead and take them. And there are a few of those available out there, not a huge ton, but a few.

We will now take our next question from Kevin Roe of Roe Equity Research.

Mauricio, could you share any thoughts as you reflect back on the now concluded Liberty Latam merger discussions. There were alleged details of the merger talks reported by the press. Is there any record that needs to be set straight there, or any message you would like to share with your stockholders?

Yes, well, listen, I obviously, for reasons that you understand, and by the way, I do appreciate the question, Kevin, thank you for putting it out, I can't deviate from what we said publicly and I shouldn't deviate out of respect for all the shareholders and the people that were involved in the transaction. So I can only say that we did indeed receive a preliminarily highly conditional, nonbinding proposal from them. And that subsequently, we announced that those discussions, which were preliminary, regarding a possible offer were terminated by Liberty without an offer being made. That's what we've said publicly and that's verbatim pretty much what's on our releases. I think the only thing I would add, and this may or may not help you, is that there is a ton of mutual respect and appreciation between both management teams, regardless of what you may read out there. There is nothing other than enhanced mutual respect and appreciation for what both companies are doing.

All right. I'll throw a follow-up in there for Tim. You talked about the benefit -- the obvious benefits of mobile and HFC converged. As the HFC footprint now has expanded rapidly, can you go back and look at specific mobile KPIs in your HFC footprint versus your non-HFC footprint and share any benefits specifically on that?

Why are you throwing that one to me, Kevin?

Listen ARPU is higher and churn is lower.

I'll say it, I mean, we can give you the exact numbers, but that's just (inaudible) it allows us to fend off piracy, right? In markets in which there is a fair amount of unfair cable competition, bundling the broadband with the wireless helps us have a product both because it's broadband and because it's mobile than the local fly-by-night cable operators can match. Anything else?

I couldn't have said it better.

I want to have -- kind of go on a limb here with all of you guys because I want to share some thoughts. You've seen us pretty confident today and probably you're kind of wondering, something that we've never done in the past and the reason we've never done it in the past is because we were turning the business around, and now we've turned our business around, and we feel pretty comfortable that not only have we turned the top line around, but we've turned the bottom line around too, and we got that free cash. So our business has become extremely more predictable that I think you can see now. We've got more subscription in it. It's a lot more postpaid, both in cable, B2B and now mobile. And as a result of that, it's a lot easier for us to predict what's going ahead. We're no longer phasing that revenue or ocean from the legacy business. And we feel pretty confident that the strategy is working. So we talked a lot about during this call about the underpinnings of the sheer economic growth, the young demographics, the rising middle class, the digital adoption rates. Those are all in there and we're tapping into that opportunity. It's all still about low broadband

(technical difficulty)

out of the opportunity and that is what we need to remain focused on. And focus on the fact that our mobile business has turned its inflection point. Here, we were sitting a year or 2 years ago wondering, debating, arguing that it would turn around on the back of the strategy. And as we sit here today, we have more data than we have voice in the mix today. Our data business on mobile is growing double digit don't lose sight of that, and our 4G ARPUs are holding. They're still holding with 10 million users at around $15 and that usage is going up, we keep showing you that. And that's a business, the mobile business alone, that is now low single digit, it's 1% and going north of that in our plan. Two years ago, we could barely convince anybody that it was going to stop being a negative grower. And the users are coming in. The fourth quarter net adds are the best we've had in a long time for 4G. We added 1.5 million 4G users and I went through the Colombia numbers just a minute ago, but those net adds are strong across the footprint everywhere. And cable is now reaching critical mass. We were calling it our cruising speed. Our run rate is about 1 million, our net add run rate is about 400,000, Stefan, (sic) [Kevin] those were the numbers that you were looking for, and we've said them a number of times. Our ARPUs are holding and they're rising, we've shown you that. We've got tons of good products out there. We're raising speeds. We're adding the next-generation TVs, signing OTT agreements. And cable now is a high single-digit grower in our plan. It may even be a double-digit grower in our plan. And you see now our revenue growth today right around 4% and accelerating with Q4 KPIs that are phenomenal. I've said this a number of times. We'll show you the KPIs, the net adds, and you will see the net add follows. And immediately after that, you will see the revenue follow. And these are the best KPIs we've had in a long time. In Q4, we picked up 800,000 mobile subs, so we're up 500. These are not 4G, these are total subs, we're up 0.5 million subs from where we were a year ago and a lot of that is coming from Colombia. And you've seen us do this on margins and I want to highlight an important point. We've kept the margins. We've actually increased the margins 50 to 100 basis points on a yearly basis, when revenue was effectively going down or flat. It is much easier. It's actually only possible to have operational leverage when revenue is growing, and that's when you get operational leverage. And we're going to do that coupled with continued cost controls and efficiency programs that we put in place over the last 2 years when we didn't have that revenue growth. Those are going to stay on and going to help operational leverage. And bear in mind that, in the last 3 years, we put a lot of network out there. So we've stepped up our network maintenance cost, that's in the rearview mirror. It doesn't add up that significantly going forward. And as a result of these things, operating leverage, cost controls and the network expansion being in the rearview mirror, we're confident, as we see it here, that margin expansion is coming ahead of us. We've had some margin expansion, but there's still a lot more to go. It's going to be easier down the road. And of course, I don't want to overplay this, but we're beginning to see the signs of what I always said was going to happen, and I apologize for taking a victory lap, but I've always said that the industry structure, and particularly in Central America, was going to improve. It had to improve and would be driven by fixed mobile convergence, and you're beginning to see that happen with the deal that was announced a couple of weeks ago. And also, I hope this helps you, give an idea of where our mindset is today, and I apologize for the lengthy chat.

Unfortunately, that is all the time that's we have available for questions. I would now like to hand the call back to Mr. Ramos for any closing remarks. Please go ahead.

I think those were it. Just -- those became the closing remarks. Thank you, everybody, for joining the call today, and I hope you accompany us into this exciting future.

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