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Millicom International Cellular SA (TIGO -2.14%)
Q3 2019 Earnings Call
Oct 24, 2019, 9:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Ladies and gentlemen, thank you for standing by. Welcome to today's Tigo Q3 2019 results conference call. [Operator instructions] Also, I must advise that the call is being recorded today, Thursday the 24th of October 2019. And without any further delay, I will now hand over the call to your first speaker today, Michel Morin.

Thank you. Please go ahead.

Michel Morin -- Vice President of Investor Relations

Hello, everyone, and welcome to our third-quarter call. As usual, we'll be referring to some slides, which are available on our website. And if you turn to Slide 2, our safe harbor disclosure is there. We will be making forward-looking statements, which involve risks and uncertainties and which could have a material impact on our results.

And on Slide 3, we define some non-IFRS metrics that we will also be referring to throughout this presentation. You can find a reconciliation tables in the back of our earnings release and on our website. So with those legal disclaimers out of the way, let me turn the call over to our CEO, Mauricio Ramos. Mauricio?

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Mauricio Ramos -- Chief Executive Officer

Thanks, Michel, and a good day to everyone. Thanks for joining us today on the call. I'm actually joining you today from Honduras on one of our site trips. And as usual, I'm here with Tim Pennington, our CFO.

On Slide 4, you see how much strategic progress we have made this year. We continued to successfully divest out of Africa, and we allocated that capital to Latin America, particularly to cable. We listed the company in the U.S., and we will soon be 100% free-float company. And more importantly, our operating free cash flow has also continued to increase steadily toward our medium-term target of around 10%.

So our long-term strategic plan, organic and inorganic, is well on track and delivering on the operating cash flow growth that it was meant to achieve. I am therefore happy and confident about our long term and direction of travel. But since this is also a quarterly call, let me address the obvious on Slide 5 and get it out of the way. Our keys service revenue and EBITDA results were weaker than I had planned for.

July and August were indeed quite weak. But September came back strong, yet not strong enough to make up for a good quarter. The key source of the short-term disappointment is largely prepaid mobile, which is more sensitive to changes in the economy and in competitive intensity. In Paraguay, the economy has indeed been contracting, and this has no doubt put some additional pressure on the prepaid market, which remained quite competitive as well in the quarter.

In Bolivia, price competition in prepaid has picked up this year ahead of presidential elections, which are now in the middle of the final stages, we hope. But the positive side of the mobile story is that postpaid continues to perform well across most of our markets, and we'll talk about that later on. The second challenge we faced in Q3 was in B2B. Let me be clear; our B2B business is actually performing really, really well in its underlying core strength this year, especially in the SMB segment.

So the declining B2B that you see on this slide is because we are comparing against stellar performance last year in Colombia and Panama. I'll talk about it more later, but keep in mind that in both of these countries...

Questions & Answers:


Someone has left the conference.

Mauricio Ramos -- Chief Executive Officer

B2B is about a third of our total revenue. Finally, our home business continued to grow nicely in the quarter, up 7%. So the key takeaway from this quarter is that prepaid was impacted by a weak macro and tough competition in a couple of markets, but we do expect that these challenges will pass. And in the meantime, we continue to deliver strong results in our subscription businesses, both mobile and cable, consistent with our long-term strategy.

This is why you see me as upbeat and confident as ever about our medium-term plan. As I said a couple of minutes ago, I do like our direction of travel and progress we're making in our strategic direction. Indeed on Slide 6, you can see that we had a very strong Q3 in our strategic KPIs. Actually a record quarter.

In mobile, we added more than 850,000 4G customers in the quarter. This was an exceptionally strong quarter for 4G adoption across all our markets, and postpaid in particular has been very, very strong for us. We added another 500 points of presence and a ton of additional capacity on 4G networks, which by the way now cover almost 70% the population in our markets, which equates to covering the vast majority of the urban population in our markets. And in cable, we added $0.25 million homes to our HFC network in terms of build, maintaining a run rate of about 1 million homes billed per year.

And more importantly, we added a record 99,000 cable customers in the quarter. And you can see more clearly the momentum that we have in our cable business on Slide 7. Penetration rates for broadband are low in our markets, and there's a lot of pent-up demand for reliable and affordable broadband and paid TV. And that is key to the premise of our business plan in the medium term.

So we're leveraging our strong band and our mobile market leadership to create a unique, high-growth cable business. Every quarter and every year for the past four years have seen an acceleration in our cable net adds. That's what you see on the chart on the left on this page. And as I said last quarter, the key metric to what's now is our network penetration rate.

We've been creating a build machine and we've also been adding our sales machine to the cable business. And that is why you see that the network penetration up, the rate is up more than 2 percentage points over the past year. I note that this happening in the middle of a large and multi-countries who's seeing network build of about a million homes per year. Now you guys all know that nothing drives cable cash flow more than network penetration rates.

This is what we have been achieving and are focused on. This is simple Cable 101 economics. Indeed, the improved penetration of our cable network is one of the main drivers of our operating cash flow growth this year. Simply said, our long-term drive into postpaid and mobile and into cable is delivering and on track.

Now I want to take a few minutes to talk about some of our markets on a country-by-country basis starting with Bolivia on Slide 8. Bolivia has been a great success story over the past four years for us. When I joined Millicom in early 2015, we had less than 100,000 customers in cable in Bolivia. And many of these were actually on an old MMDS network.

We have made a significant commitment to deploy capital in the country, and today we have about 500,000 cable customers, a state of the art HFC network that passes about 1.2 million homes, sustained monthly ARPU of about $30 and consistently growing on revenue. And we have also strengthened our mobile business in Bolivia. In 2018, we grew both subscribers and ARPU. And in 2019, growth in mobile indeed -- mobile revenue indeed began to slow down.

Our main competitor has reduced pricing drastically, and we have followed them to defend our market share. And you can see on the right that we have been successful in doing just that. Our subscriber base, and this is a key point, has remained stable. Of course the price to pay for that has been rapid ARPU erosion this year.

But the key to the long term is to sustain that subscriber stable market share. Now we view this as a short-term dislocation. Bolivia has a good industry structure, and this aggressive pricing is probably impacting our competitors as much as it impacts us. So we expect that the market will correct itself soon enough.

Now let's turn to Paraguay on Slide 9. In Paraguay, we're No. 1 in every category, and we have many tools there to defend our key position. I want to make three key points about what's going on in Paraguay.

One, our home business has been growing steadily every quarter. It is a healthy grower, a subscription business, and it is very strategic to our long-term fixed-mobile convergence strategy in Paraguay, and it has continued to grow quite well. We have continued to expand HFC network to new towns and to cross-sell broadband to our larger pay TV customer base. Second point I want to make is that the real challenge has been in mobile as competition began to intensify more than a year ago and has been heightened by the economic turmoil.

We did gave that increasing competition some time to play out to protect the industry, but a couple of quarters ago we said enough is enough and started aggressively defending our market share and position. And we have succeeded now in doing that. Please look at the net adds based last quarter. We have a very strong customer intake during the quarter.

That should be no surprise there because we've risen up to the challenge and we're fighting back. We do have the best brand. The distribution network is unparalleled, we have plenty of spectrum on a superior network, a growing cable network with exclusive sport content. So we took some short-term pain, and we are indeed very encouraged to see some signs of ARPU stabilization on a sequential basis beginning to emerge as our subscriber intake was very strong also during the quarter.

The last point I want to make in Paraguay is that unfortunately the economy has been under a lot of pressure recently. And this has certainly not helped particularly in the prepaid segment of the mobile market, which is more sensitive to the economy. The good news is that the macro forecast for next year are more positive as the political turmoil begins to settle down. Now let's look at Colombia on Slide 10.

Big picture, we really have turned this business around from where we were a couple of years ago, and we're now growing in all segments. Both service revenue and our EBITDA have been growing low single digits steadily now for a couple of years, and that's steady, positive growth. We know that we can still do better than this. But there are no quick fixes, and we know that we are definitely on the right path in Colombia.

And you can see this on the third chart with growth accelerating in our two largest businesses: mobile and home. As I mentioned earlier, B2B is actually performing very well in Colombia. But the challenge we face is that 2019 was an exceptionally strong year because of our large and profitable global brand contract related to the elections. Now this was not really a one-off because we do get these kind of contracts every so often.

But it does make our B2B business a bit lumpy from quarter to quarter. We continue to have a really strong B2B business in Colombia. It is just that we had an exceptional 2018, and that makes the math kind of funky. So do look as a lumpiness in B2B, and you can appreciate that we have a steadily improving business in Colombia.

Let's move on to Panama on Slide 11. I also want to give you some color there. This is of course our newest market. We have allocated about $2 billion of capital to Panama, and we're now the largest telecom service provider in the country and No.

1 across all segments. I know that some of you are a bit concerned that service revenue growth has been challenging this year. But take a look at chart on the left which shows that our revenue has been quite stable since we took control of the business. So the challenge we have is that we're comparing against an exceptionally strong performance in 2018 and in Q3 in particular.

And we do see a pause in government spending during the transition to the new government. Of course, we knew all of this when we bought the company, so there are no major surprises here, which is our EBITDA and operating cash flow are growing and trending ahead of our plans. On the top right chart, you see that our HFC customer base has been very stable and that we have been cross-selling more services to our cable customers, as you would expect us to do. And this is driving our ARPU slightly higher.

We have also been working to improve the return profile of our smaller DTH business. And this is where you're seeing a decline of about 10,000 DTH customers since the beginning of the year. We simply want to be very disciplined in our capital spend and make sure that every business has the kind of return profile that we want it to have. Now finally, big pictures.

The keys to the Cable Onda acquisition story for you to keep in mind are, one, the integration is on track. Two, synergies and efficiencies have turned out to be better than we had anticipated, and as a result, the operating cash flow for the company on the business is running about 10% ahead of our plans for this year. And three, we have had no hiccups, and the integration of the mobile business is marching along according to plan. This is actually a perfect segue into Slide 12 to update you on the status of the rest of the acquisitions we undertook earlier this year.

This was a methodic and strategic effort to redeploy capital out of Africa in order to create a consistent footprint throughout Latin America with leading fixed and mobile operations in all of our nine countries in the region. And to create a consistent and contiguous presence and footprint in Central America, while driving a strength in industry structure across all of our markets. As I just said, Panama is closed both on fixed and mobile. It is still early days, but so far so good.

Nicaragua closed in May. The macro environment in Nicaragua is challenging, but it is clear that we bought a very high-quality asset with a very strong market position. And I'm very confident in our team's ability to execute our strategy, which is now in place, and to deliver on the synergies that lie behind our acquisition plan. And finally, Costa Rica is, as we said all along, on track to close in November, just as we planned.

So when you look at this page, you can see that in the space of a year, we signed, got approval for and closed all of these four transactions. And we already have 2020 budgets for all of this. So we will start 2020, just within a year of these acquisitions, operating all of these properties. No hiccups so far.

Budgets for them for 2020 for all the operations. We're on to execution now, and we know there is a ton of focus to deliver the synergies that we have promised. Now let me turn the call over to Tim to go over the financials for the quarter.

Tim Pennington -- Chief Financial Officer

Thank you, Mauricio. So I'm going to start by picking up on a few of Mauricio's remarks on the economy and look first at the operating environment and then at the reported group numbers, followed by the familiar review of the Lat Am set. So let me start by turning to Slide 14. So the title of this slide says it all.

Many of you will have listened to the Oxford Economics view on the long-term prospects for our markets. You'll have heard a very positive outlook supported by very positive demographics and significant catch-up potential. However, what has changed is the short-term outlook. There it's very clear there's a very clear regional slowdown, possibly reflecting global trends and partially local political events.

We see GDP growth downgraded in many of our Lat Am markets in the last six months. Now on Slide 15, you can see that our business profile has changed. With the acquisitions in Panama and Central America, we are reducing our exposure to more volatile economies and currencies. In Q3, more than 50% of group revenue was generated in Central America, which traditionally has maintained more stable currencies, supported by substantial U.S.

dollar remittances. And in fact, if I roll forward to the end of next year, we'll expect Central America revenues to be around 55% with Africa below 5%. OK. Let me now turn to the group numbers on Slide 16.

And if you recall, we treat Guatemala and Honduras as JVs in the group reported at P&L. Group revenue increased by 10.8%. That's largely on acquisitions, and that more than offset weakening currencies. Operating profit, however, was 15% lower, and again, it's largely reflected acquisitions, namely higher expenses and higher amortization charges, and we also had an IFRS 16 impact.

And finally, there were lower gains on sales than we had a year ago. Also, the contribution from Guatemala and Honduras was stable. On Slide 17, as usual there are a few moving parts below the line. The biggest being the revaluation of Jumia, the African e-commerce business.

We'll now move on to discussing the Lat Am segments. And on Slide 18, before driving into the operating performance, just a reminder on how we get to the key financial metrics for the Lat Am segment. So turning to Lat Am service revenue on Slide 19, overall it was up 9%. Again, that's largely on acquisitions and that was partially offset by adverse FX movements.

Our organic growth was 1%. As Mauricio said, weaker than we are hoping for, and largely on challenges in the mobile prepaid sector across several markets. This led to a 1.7% drag from the mobile business, and with a slight drop in B2B on the tougher comp, dampened a very strong 7.2% growth in the home business. And we can break that down by country on the next slide, Slide 20.

I think Mauricio has covered much of the drivers here. I would just add that in Colombia we saw particular weakness in the mobile wholesale sector. And please note that we've now disconnected a major wholesale customer, and that will have an impact on us in Q4. In Paraguay, we continued to see challenges.

In fact the quarter there, there was a postpaid deferred revenue adjustment, which flattened the headline revenue. Whilst in Central America, Guatemala, Honduras, Costa Rica all performed reasonably well and in line with our plan. And in El Salvador, it was pleasing to see sequential improvement. Now on Slide 21, the Lat Am EBITDA, as was noted, was lower than expected.

But even so, we tracked lower -- even though we tracked lower, it was on lower revenue growth. Costs have been well-controlled, and you can see that in the margin. The margin remains robust, even adjusting for IFRS 16m and we have a strong margin. So let's take a look at the individual countries on Slide 22 now.

But in the main performance in Central America was robust, margins remain strong, and as I said, we saw welcomed return to positive growth from El Salvador. The challenges fell mainly in South America, Paraguay. The headline was fronted by some one-off adjustments, but the margin was maintained. In Bolivia, the impacts that hit the top line filtered down to EBITDA.

And in Colombia, where we took a large bad debt provision on that wholesale customer, so we slipped into negative growth. That said, the margin has been maintained and even in markets where we saw increased challenges. And it was based on the performance -- based on the performance in the quarter, it's clear that we cannot get the group's growth target for this year. Alas, we've had to revise these downwards in the face of the tougher macro and competitive environment, we have been redirecting the business to maintaining market share, maintaining margins and hedging our cash flow targets.

And this is what we see on Slide 23. Lat Am OCF was again strong in Q3, up nearly $100 million to $373 million, and up 10% organically and up 34% on a reported basis. I also want to look at the equity free cash flow on Slide 24. The equity free cash flow is the cash flow before spectrum, M&A and dividends.

Now in short, our equity free cash flow is around $140 million lower than last year, but this is almost entirely driven by the impacts associated with acquisitions. We have around $47 million of additional one-off costs so far hitting the operating cash flow, plus we've incurred the full financing cost on these acquisitions. We can see that we have financing costs up $118 million. And of course we have not yet benefited from the associated cash flows from these acquisitions.

So if you adjust for these items, the effect -- the equity free cash flow is largely in line with last year. And that's why we remain comfortable as we expect these acquisitions to be strongly cash generative. I'd like end as usual on our net debt on Slide 25. Net debt at the end of the quarter stood at $7.1 million after financial leases and $5.8 million in net financial debt.

The increase reflects the purchase of the Panama mobile business during the quarter. Leverage ended the quarter at 2.63 times on a fully consolidated basis and 1 point -- sorry, and 3.14 times on a proportionate basis. And finally, the closing on Telefonica Costa Rica should add approximately $550 million in the rest of the year, which we intend to fund with debt, and that will take our proportionate leverage to around 3.25 times. And with that, let me pass back to Mauricio to wrap up.

Mauricio Ramos -- Chief Executive Officer

Thank you, Tim. Let's look a little bit ahead. As I said at the start of this call, a lot has happened in just this year. So much so that it would be easy to overlook the fact that our shareholder structure is also undergoing a significant transformation.

As we show on Slide 27, Kinnevik, our largest shareholder, is executing plans to distribute its entire 37% stake in Millicom to its institutional shareholders. And I want to take the opportunity to personally thanks Georgi, the Stenbeck family and everyone at Kinnevik for their long-standing support to Millicom, and particularly for the support that they have given us, this management team, over our tenure the last four years. But as many of you know, Kinnevik's own strategy has taken them in a direction that is different from ours, and that presents us at Millicom with some short-term challenges, as well as some important long-term positives. In the short term, this distribution is a very significant increase in supply of the stock, and this would indeed add volatility to our stock price.

But this is a temporary dislocation. For investors willing to take a longer-term view, the end game is first the stock that will be significantly more liquid, and one of only two companies in Latin America with 100% free-float. Second, a company with a strong corporate governance framework with both U.S. and Sweden listings, a single class of stock, and a compensation structure that aligns management and shareholders significantly.

And I can tell you that as a management team, we're all very excited about the opportunities that lie ahead for this company and work 24/7, seven days a week. And also for the benefit of the Kinnevik shareholders who will soon receive Millicom shares, please allow me to remind everyone of the opportunity we are pursuing on Slide 28. First, as you would expect for our countries, broadband penetration rates is still very low. Only 35% of our mobile customers are on 4G, and we keep adding strongly.

And the 3.4 million HFC or cable customers that we currently have, growing as fast as they are, only represent around 10% of the total households in our footprint. So it is still very early days for broadband adoption in our markets. Second, the macro outlook for our market is less volatile than for the rest of the Latin American region, even if we get hiccups here and there on any given quarter. Our populations in the markets we operate are younger, the middle class is expanding rapidly, and digital adoption continues to be very fast.

And third, this is why we have actively deployed capital against this opportunity from Africa into Latin America significantly, both organically and inorganically, to strengthen our position and improve the industry structure in our markets, as you have seen us do over the last 12 months. So we have a unique opportunity to build proper networks to meet this pent-up demand, and that is exactly what we have been doing, as you can see on Slide 29. We have been investing consistently to build 4G networks and state of the art cable fiber networks. For many of our customers, this is their first time using broadband, so we want to deliver an excellent customer experience and we track NPS scores closely.

This is one of the metrics that actually sits within our compensation plan. We're doing all of this while maintaining our capital intensity reasonably healthy and stable, and our capex is increasingly success-driven and variable in nature. This is one of the main reasons why we remain confident in our ability to generate healthy operating cash flow growth, the metric that we deem the most important going forward. As you can see on the right hand part of Slide 30, we have been deploying capital consistently and increasingly to build 4G networks and state of the art cable fiber networks.

It is a simple enough story. And we have been adding subscribers, both 4G and cable, consistently every quarter onto those networks. Our capital intensity in this is stable and healthy and increasingly success driven. And this is one of the main reasons why we remain confident in our ability to generate healthy operating cash flow growth as you can see on the right hand part of Slide 31.

This is the slide that sums up our organic growth strategy. We're building networks to adding customers. This is what I call the show me the money number, that operating cash flow that is now getting close to 10%. This is what the management team is focused on and this is how we're compensated.

We're getting there because we keep costs under control, because we're getting better and better at capital spend efficiency and procurement, because Cable Onda is delivering on our operating cash flow growth, because we have synergies ahead of us and because the cable network penetration rates are increasing. Just overall a more efficient use of capital spend. This is how we view the long-term opportunity for Millicom. And on that note, we are very ready for your questions.

Michel Morin -- Vice President of Investor Relations

Ramone, if you could open up for question, please.


Thank you. [Operator instructions] Our first question is from the line of Mathieu Robilliard. Thank you, please go ahead.

Mathieu Robilliard -- Analyst

Yes, good morning. Thank you. First question was on the 2019 guidance. So quite simply, if over the nine months you did 2.2% organic growth and 1% in service revenue in Q3, you're pointing to about 2% for the full year.

So I guess you're expecting a reacceleration of service revenue growth in Q4 compared to Q3. Maybe if you could elaborate a little bit on the drivers for that. I think in the past you had mentioned that in Colombia, you could have a big B2B contract, but then you announced today that you will disconnect the customer. Maybe that's B2B in Colombia is not such a strong contributor.

Anyways, that's the first question. The second question is regards to Nicaragua. You highlight that there's some tough macro trends there, and I was wondering if that meant that revenues were down year on year in Nicaragua. And then finally in terms of Bolivia and Paraguay, obviously you're trying to protect market share and you are succeeding in doing that.

You're using price it seems as a way to fight back. What are the other tools that you can use to protect yourself against the competition? And will Bolivia eventually follow the route of Paraguay for a few quarters? A few questions, I'm afraid. Thanks.

Mauricio Ramos -- Chief Executive Officer

All right, Mathieu. That's a handful. But thank you because they're all very, very good questions. I tried to take notes to see if I can answer them all.

And maybe I'll leave the 2019 guidance a little bit toward the end to wrap up with that. Let's start with Nicaragua. We've only owned the asset for a little bit. And the macro in Nicaragua indeed has been significantly weakened because of the political turmoil.

I think once the political turmoil and instability subsides, and whether that happens short term or medium term, it's very difficult with all things political to determine, the macro will come back strongly. The flip-side positive to that is, as I said on the call, we did buy a really good asset with great market share, significantly strong market position. It strengthens our cable build, which gives us the ability to blanket the country with mobile while we build. And more importantly, and I think this is key, we have, although it's early on, found some interesting opportunities to make more efficient use of the spectrum and gain on procurement.

So whereas indeed the economy has been hit, and indeed we should expect that it's going to be tougher on the top line, we do see upside significantly on the operating cash flow because there's spectrum efficiencies and because there's some upsides there. With regards to Bolivia and Paraguay and what's going on there and other tools, so listen; there's a similarity here in our time to react to economic downturns or political motivations behind increased competition, particularly in prepaid. We try to let the market work through those. But if it doesn't, we react very, very strongly, as you've seen us do.

And both in -- and we do that by basically making it very, very clear that we'll take the short-term pain, but we're never ever going to let our market positions be eroded for the long term. And when we do fight back, we fight back with decisiveness and we fight back strongly. Not just on price -- and I'll go into the second part of your question in a minute -- not just on price, but certainly on price. And the immediate effect you see within a couple of months is that our subscriber intake recuperates.

And that has happened both in Bolivia and in Paraguay where quite clearly I can sit here and say we haven't lost an inch of market share in either country simply because we've fought back. Now we have a very long toolkit. So both in Bolivia and in Paraguay, we have significant spectrum positions, very pertinent spectrum positions. We're not lagging in lower I bands.

We have deployed significantly extensive cable and mobile networks in both Paraguay and in Bolivia. We've actually just increased capacity in both of them. In both we have exclusive soccer content, and we have a heightened significantly long capillarity of our distribution networks. And we have the ability to basically deploy our mobile network on top of our cable network, which gives us the lowest cost of production on a mobile bed and allows us to speak to the consumer on a holistic basis, including content.

So our toolkit is pretty extensive and goes beyond just pricing, and certainly it allows us to defend our market position for the long term. Bolivia has obviously more of a political backdrop to what you see happening today. So likelier than not, once the political stability, and we hope it does returns to the country, we'll see the industry going back to its normal stage. Now, Bolivia in particular is a healthy industry.

Bolivia is a place where we have significant market position. And the same is true for Paraguay. With regards to what's going on on guidance, I'm going to pass it over to Tim for a little bit more detail in a second. There's puts and takes there.

We have seen our subscribers come back both in Bolivia and Paraguay, and that's positive. We hope that on the backdrop there'll be stability. But of course Bolivia remains somewhat dependent on what happens with the political situation. Obviously over the last week or so it's been difficult for us to sell, given the instability politically there.

That may stay for a little longer or not, but in the long term, it will certainly go away. And we see indeed contracts out of Colombia and a strong part of the second year as we usually have. Anything else on the fourth quarter, Tim, that you'd like to add?

Tim Pennington -- Chief Financial Officer

I would add -- I mean, look, we are forecasting the year-end will be stronger than the year to date on EBITDA, therefore we've got more visibility on EBITDA at the moment, Mathieu, necessarily than revenue, and we expect both to be strong EBITDA. The comp is a little easier. We've got some kind of good things coming through in the fourth quarter, particularly on B2B. And we're a little bit more cautious on revenue simply for the reasons that Mauricio outlined and the reasons that were in your question.

There a little bit more uncertainty now in Bolivia, the macro environment is a little more challenging. So we've been a tad more cautious on the revenue outlook. But I think the message of this is that to the extent that we found our environment has changed, we've kind of changed tack and made sure that we maintained the market share, we maintain the margin, we maintain the cash flow. And that's really what you see coming out of the Q3 and what you will probably see coming out of Q4.

Mathieu Robilliard -- Analyst

Thank you very much.


Our next question is from the line of Lena Osterberg. Thank you. Please ask your question.

Lena Osterberg -- Analyst

Hi, yes. Hello. I have three questions, please. First of all, looking at the mobile ARPU, you're now down 4.5% year over year.

So I was wondering, how much of this do you believe is related to, say, temporary measures for defending your market share in Bolivia and Paraguay where you could possibly, if the climate improves, raise prices again? Or how much of this will be there for another 12 months because it's a permanent price cut? Then the second question is on Guatemala. Here, I understand Claro is now in the process of migrating Telefonica's customers. Do you know how far they have come in that process, and do you expect the competitive pressure will ease once you have finished that migration? And then finally on Colombia. You mentioned a couple of times now that you'll have a negative impact from disconnecting one of your wholesale customers.

If you maybe could say what the reason is for disconnecting them and how much you expect in terms of impact on a full-year basis and if it will be a full-quarter impact or not.

Mauricio Ramos -- Chief Executive Officer

All right. So the mobile ARPU -- and thanks for the additional questions that help us provide all this color -- it is indeed largely prepaid, if not entirely prepaid. And Tim can correct me if this is not 100% correct. And the reason I hesitate not to say that, or I don't hesitate to say that is because our postpaid business, which is the other side of course of what's in mobile, quietly has been growing very, very nicely and very, very stable.

I think I alluded in my remarks or we put it somewhere in the release that our postpaid business in mobile has indeed been growing its revenue mid-single digits. And that's on the back of volume. We're adding somewhere around 250,000 on a yearly run-rate basis postpaid subscribers. You know that that's what we're driving the business toward, subscription, cable and postpaid.

Back two or three years ago, that number was negative. And we've sustained now seven quarters of consistent postpaid gains in subscribers of about 50,000 to 75,000 per quarter. And that mobile revenue is, on postpaid is growing. So it is entirely prepaid.

And prepaid is very sensitive to macro and to competition. It's less resilient than a subscription business. When it will subside depends on factors that we don't fully control, whether it's the economic backdrop in Paraguay or the political situation in Bolivia, or some additional competition that may come out of those countries and other countries. But eventually it will subside whether it's next quarter or two quarters from today.

And when the industry structures return to their stable equilibrium levels, indeed ARPUs will come back. If you look at the chart that we showed for Bolivia, prior to dislocation ARPU had been going up. If you would look at the Paraguay situation, you would see the same thing. So just hold your breath on that and it'll come back.

A little bit on Guatemala, which I think it's important. It's been very quiet because it's been a great performer and continues to be a great performer. We have indeed, as you very well know, seen that in the midst of undertaking the integration process, our competition in there has placed aggressive data offerings. We believe this is aimed at protecting their combined market share in the context of the integration process.

It actually makes sense for them to do so to protect their market position in the middle of integration process and prevent us from attacking that market position. But we've been busy ourselves in investing in the network and in the commercial distribution capillarity to protect our own market share, particularly from that increased allowance on data. And although revenue growth has slowed down there, you see that it's still pretty solid, and we have not lost an inch of market share in Guatemala. And that's because I think the key thing about Guatemala is to keep in mind the big picture here for the long term.

This is now a two-player market, which is significantly better on a number of fronts than a three-player market, including access to spectrum, including stability and including the ability to get a return on investments. But not only is it a two-player market, it's a 60-40 market share, give or take, which is just about the healthiest and more stable market share distribution you can possibly have. Competitors have made a meaningful investment and are undergoing this integration. So I would expect that although this is a protective measure, over the long term, they're going to be focused on getting a return on their investments just as much as we are.

Now there is increased risk during this transition period, no doubt. But the flip side of that, I think -- and we need to be cautious about that, and that's what you see my in tone. But I also see in Guatemala for the longer term that the political landscape seems to be improving significantly. They had a clean and clear transition in power and a government that seems to be doing and saying all the right things.

So whereas we may have some short-term uncertainty, I think the long-term outlook in Guatemala remains increasingly positive. And lastly on the Colombia MVNO situation, the answer is very simple. We disconnected an MVNO that was simply not paying the bills that we hosted. And there's no more to it than that.

When and if they pay, we will reconnect them. The loss of that revenue has had an effect on our numbers in this quarter. It does have an effect on our outlook for the rest of the year, and that's why you've seen us correct that. And the last comment I'll make is that of course this is MVNO revenue.

It's not part of our strategic design going forward. And perhaps part of what's going on here is that the industry structure in Colombia simply needs to be reshaken because there's just no room for everybody. Anything else, Tim?

Tim Pennington -- Chief Financial Officer

I would just add on, we disclosed in the earnings release we took a $5 million debt charge in the third quarter for that MVNO , that wholesale contract. And there was no revenue impact actually in the third quarter. We were still booking revenue. We'll stop booking revenue effectively with effect from the end of October, and so again in September.

So there will be no revenue in the fourth quarter. I can't be specific on the amount of impact on that, Lena, but we've given you the bad debt charge, so that gives you some sort of help. And we will take a -- obviously, there'll be a revenue on an EBITDA impact for us in Q4. I think just picking up -- yes, go on.

Lena Osterberg -- Analyst

How long before you start booking a bad debt charge? How many months of lost revenue?

Tim Pennington -- Chief Financial Officer

You know, kind of essentially the bad debt charge is now done. We've provided most if not all of that. So what happens from now on is we stop recognizing income. In fact, there won't be any income coming because we stopped them on the network.

So essentially that shouldn't -- they shouldn't be an impact for us other than the absence of that revenue and hence the absence of that EBITDA into Q4 and onwards. We don't...

Lena Osterberg -- Analyst

I'm trying to figure out how many months of revenues that would have been, if you could provide or not. When do you start to book a bad debt charge? How many months late payments do you have to have for you to go to bad debt?

Tim Pennington -- Chief Financial Officer

Well, we -- it's roundabout 90 days that 90 days non-payment that we go there.

Lena Osterberg -- Analyst

OK. Thank you.


Our next question is from the line of Johanna Ahlqvist. Thank you. Please ask your question.

Johanna Ahlqvist -- Analyst

Yes. Two questions, if I may. The first one actually relates to Africa or Tanzania and if you can give us any updates on sort of what's happening there. I know you mentioned that this process is taking longer than expected.

And I guess if you do not see sort of proceeds from Tanzania in the sort of foreseeable future, would you expect that -- would you consider to cut dividends to deleverage faster than you currently are? And then my second question, I guess you touched upon this topic before, but you mentioned that September is better than August and July. And I'm just wondering if you relate -- referred to competitive climate or macro or if it's a sort of general comment. Thank you.

Mauricio Ramos -- Chief Executive Officer

Yes. So I'm going to start with the last one because that's the one that's more present in my mind. The answer is very simple. We had subscriber intake come back in prepaid.

You've seen the numbers or we've alluded to the numbers, and with those renewed revenue. And we've been able to therefore stabilize the markets where we have the most competition. And as a result of that, September came back strong on subscriber intake. So that's I think the key reason for that.

It just wasn't as strong as we had hoped it would, and therefore my comments before. On Africa, I think indeed we've said before that Tanzania, you should just take a deep breath and allow us to do in Tanzania as we've done everywhere else. But we're going to have to take our timing and a moment to do that. In the meantime, as you saw, the IPO of HTA was accomplished and so was the HPO -- or the IPO of Jumia.

So those are assets that now sit a little bit more liquid and well within our treasury department to determine what to do with them and what the right time frame for that is. But I want to address the more important point I think you made just to not leave it sort of up there hanging. Regardless of Africa, and Africa has never factored into our decision making around our capital structure and our dividend or leverage policy. Because we've always known that as much as we're allocating capital from Africa into Latin America, the timing and our ability to execute, good as we have been on it, we've never fully controlled.

So it's never been part of our core plan, and I want to be super clear on that. We've never said that money is going to come in in Quarter A or Year 8 and it's going to be allocated to A, B or C. It's always been outside of our planning because we don't control it. And that continues to be true.

But I think the most important point here that I don't want to leave that hanging there is that going forward, we actually have on our capital remuneration, buyback, leverage, all of which is part of your question, a pretty good problem to solve going forward, regardless of Africa. If we were to execute on Africa sooner, then this good problem would be sooner and better, and that is that we have operating cash flow that is growing. We're getting pretty close to that 10% growth rate that we have targeted and I have been alluding to. And as Tim remarked, even if our equity free cash flow dips this year, we knew that, and it's coming as a result of the financing and the integration costs of the acquisitions on the back of which we have synergies, procurement savings and a significantly improved operating cash flow profile.

And even throughout this year, our equity free cash flow remains pretty solid for the year, and we'll soon go back to that. So what we really have is a pretty good problem on how to allocate that increasing EBITDA free cash flow regardless of Africa. Now, because I don't want to leave the question hanging, we have not changed either our leverage policy nor our dividend or capital remuneration policy, and we see no reason to do so on the back of the delay on Tanzania.

Johanna Ahlqvist -- Analyst

Crystal clear. Thank you.


Our next question is from the line of Stefan Gauffin. Thank you. Please ask your question.

Stefan Gauffin -- Analyst

Yes. A couple of questions on Colombia. You have reported quite good growth in mobile, but there is a large subscriber net loss in Q3 2019. Is there a change in competitive landscape in Colombia? And then secondly also, you stated in the report that home growth in Colombia was impacted by promotional campaigns this quarter.

How should we think about that going forward? Is that continuing into Q4 and next year? Thank you.

Mauricio Ramos -- Chief Executive Officer

Yes. So as I said, and thank you for the question, I think the key thing about Colombia is that all our three lines of businesses are growing: mobile, cable, and B2B is a healthy grower if you back out the spectacular 2018 that we had. So as we sit here, we're in a far better place than we were a couple of years ago when Colombia was a little bit of a headache for us. Now it is growing healthily.

And by the way, we keep making significant progress on margins just about every quarter. Mobile for us, when you look at the entire subscriber base, you miss out on the -- and that's just the way we report it. It's not something that you would necessarily view. It's largely the effect of us moving our subscriber base into the quote-unquote unlimited plans that are more of a subscription nature by definition.

And our focus has been significantly to move those subscribers to those plans because the lifetime value is higher, the churn is lower, the cost to serve is much smaller, and we basically, we gain more during the market. And that has given us tremendous amount of postpaid growth in Colombia on the mobile business, which is on the back of or underlying that growth in Colombia. And it's also helping us position ourselves for a combined postpaid world in mobile with our increasing push on cable. We had a record year -- a record quarter, sorry, in cable net adds in Colombia at just short of 50,000 net adds in cable in Colombia this quarter, which is pretty fantastic.

So I don't see any concerns on the volume in Colombia. This part, that promotional activity, we added 46,000 HFC net adds in Colombia, which is pretty meaningful. So it's not taking away from our ability to continue to grow in Colombia. So there's a lot that remains to be fixed in Colombia, but it's certainly a country that's beginning to work for us.

Stefan Gauffin -- Analyst

OK. Thank you.


Our next question is from the line of Henrik Mawby. Thank you. Please ask your question.

Henrik Mawby -- Analyst

Hi, good afternoon. Can you hear me?

Mauricio Ramos -- Chief Executive Officer

Yes, well.

Henrik Mawby -- Analyst

So good questions from the previous speakers. But I guess coming back to Bolivia, judging by the comments in the report, it seems like ARPU is dropping mid-teens, I believe. How should we think about this? Is there still a large base that can spin down? And is this sequentially, or are you seeing it leveling out now or should we expect it to continue in the coming quarters? And then a similar question on Paraguay. It's also there quite dramatic deterioration in the ARPU in mobile, but you allude to it stabilizing at least Q3 over Q2.

But reading the comments and hearing what you say about macroeconomic environment and Paraguay getting another hit, is it still stable now in October, or should we be concerned that it takes another round down? Thank you.

Mauricio Ramos -- Chief Executive Officer

Yes. Listen, I'm a little bit more optimistic on Paraguay. Or let me rephrase that. I want more visibility on what may happen in Paraguay going forward than Bolivia.

And in Paraguay, indeed, you've heard us say that we're regaining subscriber intake. And this is all prepaid we're talking about, by the way. B2B, postpaid and the cable business remain very, very solid. We have seen the subscriber intake come back in Paraguay.

And as a result of that, we're now stabilizing market share positions, if not gaining. So the volumes are stable, and we have begun to see ARPUs stabilize in Paraguay. And that's just a result of us fighting back. So I don't imagine that the industry there wants to continue to spin down the ARPU when there are no market share gains to be attained.

We have fair amount more of a comp lever there, if you will. The economy has been negative for a couple of quarters, but that's been a result obviously of the situation in Argentina, but also of the droughts that occurred there earlier in the year. Rain has come back and hopefully Argentina will stabilize. Just about everyone is speaking of the new economic growth in Paraguay next year.

So every single forecast that I've seen differs in the amount of positive growth that will occur in Paraguay next year, but everyone's positive as opposed to negative where we are today. So with a moderate degree of optimism, I think both the industry and prepaid will be more stable going forward and the economy will come back. And Bolivia is similar in the industry situation, i.e. we fought back as we've shown you.

And as a result of that, the market share is completely stable at this point in time. And as I said during my remarks, this is hurting others as much as it's hurting us, if not more. And we haven't given up an inch of market share, nor will we. The reason why it's a little bit more difficult to predict when, and I think Lena has the same concern, is because there's a fair amount of uncertainty in Bolivia as we speak right now on the political situation.

So I want to be a little bit more cautious on when Bolivia's going to turn around. Having said that, it is a country that remains macro solid. It's going through a democratic process that has puts and takes here and there. But more importantly, it's an industry that's demonstrated the ability to grow both in fixed and mobile.

So when is a matter of question mark, but if, no doubt it's going to come back.

Tim Pennington -- Chief Financial Officer

Yes. I would just add, Henrik, I think Mauricio's slide shows it. Although he didn't put numbers on kind of the year on year, our ARPU declines are roundabout 12%. But you see them flattening off.

So sequentially, ARPU decline in Q3 was somewhere in the two, just a bit north of 2%. So I'm not sure we're going to call that as the bottom, but I think we've taken a big step down. And the other point I would make is that ARPU in Bolivia has been historically relatively healthy, and we expect that to continue to be the case relative to the average in the group as a whole.

Mauricio Ramos -- Chief Executive Officer

I think the big thing is that when you have macroeconomic dislocations or political turmoil, prepaid gets hit. And if you add a little bit of competition or if you have some competition in there, these political and macro turmoils only heightened that segment of the market. And that's one of the big reasons why we've about pinned our future into more and more subscription, more and more fixed mobile and more and more B2B precisely so that we isolate ourselves from these quarterly hiccups. It does not take away from the long term, but do cause us to take some rein as we're going through what we deem to be a long-term asset.

Henrik Mawby -- Analyst

Understood. And maybe one more question while I have you on the line here. On Africa, costs came in in quite substantially below my expectations. Is there anything temporary natured in those costs? Or it seems like you're bringing it down quite handsomely.

Tim Pennington -- Chief Financial Officer

Well, I'd like to take a round of applause on it, but I suspect IFRS 16 is the answer to that particular question. We'll, perhaps, take it offline.

Henrik Mawby -- Analyst

I should have -- I haven't made the adjustment, but I still think you've come down.

Mauricio Ramos -- Chief Executive Officer

I'm not going to talk -- look, you can talk about the trend, Henrik. Effectively, we no longer have a long-term base around Africa team because we no longer have an Africa position. What we have is a couple of portfolio positions, HTA and Jumia, and a single country position. So that does not require a long-term base headquarter.

Henrik Mawby -- Analyst

Thank you.


Our last question is from the line of Peter Nielsen. Thank you. Please ask your question.

Peter Nielsen -- Analyst

Yes. Thank you. Yes. You may actually, Mauricio, just have answered the question.

You seem to have, or you have maintained your medium-term ambitions. But as Tim said earlier, there has been a number of downgrades to GDP forecast in the near term. It was just going to ask how sensitive you believe you are to those. And perhaps you just partly answered it, Mauricio.

But how sensitive do you think you are in terms of your ability to leverage on the revenue growth that may be into higher EBITDA growth, if you can give any more color. You just indicated you primarily see this as a prepaid issue. Is that correct? And is there anything else to add on that subject? Thank you.

Mauricio Ramos -- Chief Executive Officer

No, great question, and perhaps that answer really allows me to sort of wrap up a little bit of what I think is a long-term view here. A straightforward no-hesitation answer to your question is no. There's no reason for us to change our medium-term guidance outlook view. As I said during the prepared remarks, I remain as confident as I have ever been on the long-term plan.

And remember just a couple of months ago I put some of my own personal money behind this plan. And the reason for that is the underpinning of our strategy here is low penetration broadband rates across our markets, whether it's 4G or cable, fixed, broadband, and the ability to generate better industry structures with the cable builds that we're putting in place, which underpins our mobile business but helps us reach into those penetration rates. And that does not change because there's been an economic slowdown in a given country a quarter here or there. The second underpinning to our story is this growing middle class.

We are expecting that over the course of the medium-term outlook, the middle class in our market will grow by about -- by that we mean those over $20,000 of income per year will grow by about 6.5%. And about half of the population in our markets sits between their high-teens or their mid-20s. We have a young population that's adopting digital in the midst of improving industry structure that we are still driving like we did in Central America. So the underlying secular macroeconomic and industry structure drivers to our plan remain there.

What's going on here, this is like when you set out to run a long marathon, if you guys are runner or like the analogies, or you're going on a long trip and you have a clear pathway in which you're going to run the marathon, and you know you're going to get there on a given time. And you come an accident on the road or a blocked road here or it starts raining on you, you know that all of that's going to pass, and you know that you're going to finish and you know that you're going to finish strong because you've trained and you have a plan and you believe in what you're doing. So a slow quarter here or there, a correction to guidance on any given year does not take away from the fact that our pace in this marathon's pretty good. Our strategy is solid, and our capital discipline I believe is unmatched and strong.

We're allocating capital exactly where it needs to be allocated. And this long-term plan underpins the way I describe is as solid as I ever was. So that's just a long way of saying we remain confident in our medium-term outlook. And if you hang in long enough, you'll see it come through next year.

Peter Nielsen -- Analyst

OK. Thank you.


No further questions at this moment. Please continue.

Mauricio Ramos -- Chief Executive Officer

Well, I think that was probably a good way for us to finish the call. So thank you, everyone, for joining. Do take a look at our long-term prospects, and we'll continue to do what we do pretty well, which is drive broadband penetration in these markets. Thanks, everybody.


[Operator signoff]

Duration: 73 minutes

Call participants:

Michel Morin -- Vice President of Investor Relations

Mauricio Ramos -- Chief Executive Officer

Tim Pennington -- Chief Financial Officer

Mathieu Robilliard -- Analyst

Lena Osterberg -- Analyst

Johanna Ahlqvist -- Analyst

Stefan Gauffin -- Analyst

Henrik Mawby -- Analyst

Peter Nielsen -- Analyst

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