Millicom International Cellular SA (TIGO) Q1 2020 Earnings Call Transcript

Millicom International Cellular SA (TIGO -0.89%)
Q1 2020 Earnings Call
Apr 30, 2020, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Millicom Q1 2020 results conference. [Operator instructions] I must advise you that this conference is being recorded today, Thursday, 30th of April, 2020. I'd now like to hand the conference over to your first speaker today, Michel Morin. Thank you.

Please go ahead.

Michel Morin -- Vice President, Investor Relations

Hi, everyone, and welcome to our Q1 2020 results conference call from home. As usual, we're going to be referencing some slides, which are available on our website. And if you will please turn to Slide 2 for our safe harbor disclosure. We are going to be making forward-looking statements today, and these involve risks and uncertainties, which could have a material impact on our results.

So please take a look at the details here. And then on Slide 3, we define the non-IFRS metrics that we will be referring to throughout the presentation, and you can find the reconciliation tables in the back of our earnings release and on our website. So with those disclaimers out of the way, let me turn the call over to our CEO, Mauricio Ramos.

Mauricio Borrero -- Chief Executive Officer

Thanks, Michel. Good morning, and good afternoon to everyone. We hope each one of you is safe and in good health. And we wish you all and your families the very best in this difficult times.

Our call will, of course, be a bit different today. We are living, as you know, through unprecedented times. So I will focus most of my remarks on COVID-19, how we have responded, the impact it has had on our business and how we're preparing for the future. And then Tim will go over our Q1 results in more detail.

Let's start on Slide 5 with a time line of our response. In Phase 1, we started more than two months ago, we activated our crisis management response, and we move quickly to ensure the safety of our employees and the continuity of our service. In Phase 2, we have essentially replanned our business for the year. We have laid out some guiding principles to help streamline our decision-making during crisis, and we have set up a task force to adapt to and learn from the new realities.

To share best practices across our markets and to capture opportunities as they present themselves for the future. Phase 3 will be the market recovery. It is hard to imagine that right now, but it will come, and we will be ready for it. We will come back to this later.

But first, let's take a closer look at the last two months beginning on Slide 6. I will not go over every single point on this slide, of course. The key point here is simply that we have accomplished a lot in a very short period of time. We have got the bull by the horns, if you will.

We operate in emerging markets, so we're used to move and adapt quickly. For more details around our approach to dealing with the crisis, I invite you to read the CEO letter that we published today, along with our earnings release. It will help you understand how we're addressing these crisis proactively and carefully. And with heartfelt sympathy toward our community and our customers.

Now moving on to Slide 7. On the chart on the left, you can appreciate that our markets seem to be at the earlier stage of infection much more so than many other markets globally. Most of them are doubling cases every three to five days, and the curves do appear to be flattening now. But it is still too early to tell whether this reflects real progress or simply a lack of testing and/or unprecise reporting, only time will tell.

But it is very true that most of the governments in our markets reacted and acted very quickly. Most of them closed their borders, the schools and implemented severe curfews and very strict lockdowns very early on. The results of these measures is that there are still only very few confirmed cases in our markets today. But as you can imagine, the lockdowns are causing a major drag on economic activity.

You can imagine the sequence here. No mobility means no need for prepaid mobile, and lockdowns mean many of our point of sales are closed, which has made it harder for us to sell. Let's expand on this on the next slide, No. 8.

The challenges we have faced in the last two months can be grouped into four main categories. One, as I just mentioned, the fact that people are very limited in their ability to move around has been very disruptive to demand for prepaid mobile and for our sales and distribution channels. It's all about the lockdowns. In some countries, as many as 50% of our points of sales have been closed for the past month or so.

Tim will show you later the obvious correlation between the severity of the lockdowns and the impact on mobile prepaid. It really is all about the lockdowns. We have dealt with this challenge by promoting the use of our digital channels and by quickly finding new and creative ways to reach our customers. We're adopting every day and so our customers, and in turn, we adapt to them.

For example, customers have now adopted the top-ups for the times of their days when the lockdowns allows for mobility. So maybe every time a couple of days or to get the top-ups from friends. Most of our countries have now set target dates for partial or gradual reopening of the economies. Those target days are on the slides we're providing you, but note that these are targets, and of course, they can be moved.

Again, it's all about the lockdowns. Two, we've been working closely with governments to support our communities in this time of need, and we've been doing a lot of that. Governments have naturally asked us not to disconnect customers who cannot afford to pay. We're very hepatic to this, and we understand that we do have key role to play in making sure that our communities do stay connected through this time of need.

So we have rolled out lifeline products with very minimum features that allow us to keep our customers connected and loyal to us during the lockdown, while also incentivizing customers who can afford to pay for their services to continue to do so. This approach is smart, and it is helping us maximize our collection of keeping our customer base there and loyal to us for the future. And because we want to minimize that debt in the future, we have also quickly moved to make sure that we charge installation fees for any new home or business customer installation. We have had increased demand for residential program, no doubt, but we want to make sure this is good and lasting demand.

It's all about stewarding our capital properly. The third challenge we have faced is that our customers are almost all at home, almost all the time. So they're spending a lot more time on our fixed network to work from home for virtual customs or simply for entertainment. So we have seen traffic surge by 40% to 50% across our fixed networks.

The good news is that our networks have been coping really, really well. Remember that we have built state-of-the-art fiber networks over the last five years, so they're coping very well. And to make sure this continues, we're redirecting our capex to focus on network liability and capacity. And I will expand on this in a minute.

We do have the network that gives us an advantage on our own business. And fourth and finally, it is still too early to the assess the impact of this pandemic is going to have on the economy. We actually do not know its duration or its severity yet, but, and this is very important, we are preparing as we should be for a very severe global recession. And for the effects of the same in our markets and the prospects of greater currency volatility.

And that is why we are taking very quick and very decisive steps to protect our cash flow and preserve our strong liquidity position that we have today. And Tim will expand on this later. Now please turn to Slide 9 for a summary of how this is impacting our business today. As of mid-March, there have been little-to-no impact up until that point on our business, and we were tracking to budget.

But things changed very quickly in the second half of March as many of our countries started to close their borders, closed schools and close very severe curfews or lockdowns. The situation is still very fluid, and it varies from country to country, depending mostly on the severity of the restrictions that have been put in place in each of those countries. The restrictions or provisions on citizen mobility, in particular, have a material impact on our prepaid business because they severely disrupt our distribution channels. And because, as I said earlier, less mobility simply means less need for mobile.

Postpaid has been a lot more stable on our mobile business, but the continued and sustained growth that we were having in the past few quarters is now almost gone. Because we usually sell these subscriptions and do outrigs throughout their stores. And a majority of these are not closed, and users are naturally more cautious now preferring prepaid over postpaid. Again, it's all about the lockdown and the ability it has on our distribution and sales channels.

The good news is that churn is down significantly on postpaid mobile. Now the story is much more positive in Home. In Home, we're still growing our customer base and still growing our service revenue, and churn is down also a lot. The key challenge for us in Home, as you can expect, is to make sure that our customers continue to pay us on time.

So far, so good. We have had quite a bit of success in our lifeline product in helping us give the customers for the long-term while maintaining very strong collections. And on B2B, the impact has been mixed. On the one hand, we have had the large enterprises and the governments who rely on us now more than ever, even if some of them are hurting for connectivity.

But on the other hand, we have the small businesses who have had to shut their doors and simply don't need or cannot afford to pay for our services anymore. Here, sharing a nonpaid is much quicker to occur. So when you put all of this together, we began to see the impact of COVID in the second half of March. After a first quarter that has largely been on track.

The impact worsened in April as the mobility restrictions became more severe. We estimate the impact to be around 6% to 7% in terms of organic service revenue growth. Now please take this number as an indication only. Take it as a well meant attempt, a transparency on what we're seeing in the business.

But April indeed may end up being a bit of an outlier because we had Easter in there and because everyone was just getting used to the new reality, so there may be a lot of noise in there. In fact, we have seen the trends improve a little bit after Easter, and we have seen customers begin to adapt to the new reality. Again, it's all about lockdown and for how long it will stay on. But precisely because of that, we also need to be careful because the macroeconomic situation is going to be more difficult in the new months to come.

So take this number as an attempt of transparency, but use it cautiously. And naturally, it has the tendency to change. As you can imagine, digital has emerged as a key tool during this crisis, and it will surely stay as part of the new normal. The quarantine is forcing our Latin American culture to adopt digital tools much faster.

We were already making significant progress on digital, but now our users have had to embrace the idea of having to top-up their prepaid digitally and to pay their bills digitally. The numbers on this screen speak for themselves. Our subscribers are no more likely to use our mobile apps and interact electronically with our agents rather than coming to our store or calling our call centers. And more importantly, we're seeing people embrace the use of digital wallets include our own TigoMoney.

In Paraguay, for example, the government is actually using TigoMoney to disburse COVID subsidies to the neediest citizens. As you can imagine, we are eagerly redirecting our spend into digital. The benefits of this enhanced effort will stay with us and with the business for the future to come. So that was just mostly Phase 1, a very intense couple of months.

We're now in what we call Phase 2 of our response plan. We know that we must prepare for a much more challenging macro environment than what we were expecting before. And I do not think I can overemphasize that. You can easily see the significant change in growth expectations for our markets on this slide.

The World Bank is now forecasting a recession in 2020 in all of our markets and in the broader Latin American region followed by a strong recovery in 2021. So we are preparing ourselves for a very rough 2020 because we want to be in a very strong position once we begin to recover in 2021 or later. Now our repivoting the business for the crisis has been passed, and it has had some very strong key guiding principles. We want to share some of those with you.

First and foremost, our employees' safety comes first. We are an essential service in these times of increased need for connectivity. So we need to keep ourselves safe, not only because it is the right thing to do for our employees, but also because we need to be healthy, so that we can keep our communities connected. For critical and front line functions like field services, call centers, stores and network maintenance, we are protecting our college by introducing new safety protocols and by distributing sanitary and protected gear.

75% of our workforce is now working from home, front-line installation, maintenance and service teams all state out there on the streets. With protective gear and safety protocols, but most importantly, with a strong sense of purpose and pride in what we are doing for our communities. Internally, we call this SangreTigo. The CEO letter, we attached today to our earnings materials will give you a good sense of what that means and how important it will be.

So at a time when families worry about their future, we also know that our customers need us more than ever and that our teams are the ones making all of this happen. And we want them to know that we need their continued commitment to keep and enhance our strong brand equity value during the crisis. And just as importantly, to help us be ready with them for the rebound. We want to hit that rebound quickly and swiftly.

With respect to the market and our commercial activities, we have shifted our focus from net gain to customer service and retention. Our key goal is to protect our market leadership and our market share. If we stand by our customers and communities in this time of need, we will protect our base and our share, and we will enhance our brand equity value into the future. This approach will also allow competitive environments to be less aggressive during the crisis as we're beginning to see them behave.

And finally, from a financial standpoint, we are very fortunate to be in a very strong position with about $2 billion of liquidity at hand. But we know that the world has changed and that 2020 will be challenging, that's what we've been saying. Liquidity, we think, is now key and this cautious swing. So we have made a number of decisions that are aimed at protecting our strong capital generation and preserving our strong liquidity.

Let me expand on this on Slide 13. First, as you can see on the left, one of our main goals is to protect our operating capital targets for the year. Obviously, if our revenue is impacted as we expect it might be, then we need to offset this with some meaningful and smart reductions to both opex and capex. We have already started to change our capex decisions, only approving network investments that help to, one, ensure network reliability; two, expand capacity to deal with increased traffic; and three, keep plowing ahead with strategic network deployments, like the ones we have in Colombia and Panama and El Salvador.

We expect this will allow us to reduce our capex by at least 20% or around at least $200 million this year. And we have also taken decisive steps to reduce opex. Some of this will, of course, naturally happen given the lower levels of activity that we expect. But we're also looking to take additional costs out of the business.

This will be an additional $100 million in cash flow improvements at least. Second, as you can see on the right on this slide, we have decided not to recommend the dividend for 2020, and we have decided to sustain buybacks for now. In total, these metrics should produce more than $550 million of additional cash flow relative for our nation plans, which further support an existing $2 billion in liquidity, and we think make perfect business sense for these times of crisis. And we'll give you details in a few minutes.

So now into what we call Phase 3 of our response to COVID-19. Needless to say that sun is not out yet and no rainbows are visible yet behind the rain. It is indeed a little bit difficult to imagine how anything good can come out of the strategy. But think about all the adjustments of businesses, individuals and societies are making over the past few months.

It is remarkable how businesses across many sectors of the economy have responded and are quickly adopting and how consumers are doing the same. Schools have moved online. Parents are working from home. Consumers are buying everything online, requesting delivery to digital apps, and they want to pay digitally.

Even family reunions and rock concerts have moved online. All of this will further require our connectivity and our services. And over the past two months, businesses have put their continuity plans to the test. Every company, every Board of Directors is going to take a closer look at those plans, and they will give the map on cloud service and cloud security and robust connectivity will be an essential part of those plans.

And all of those require services. In our markets, some companies might finally embrace the need to move their infrastructure and their mission-critical data to the cloud. They might even be willing to invest to make sure that the employees are equipped with laptops and are set up to work remotely from home. Something we haven't seen so far in the markets.

Some companies might even may pay to make sure the employees have reliable broadband connections at home. All of this, of course, will require next-generation networks and connectivity, the kind that we have been building and providing for the past few years. And finally, this crisis places a bright spotlight on the companies with strong cash flow and strong liquidity like us, particularly in emerging markets. Some of the weaker players in our industry may not survive this crisis, which we expect will accelerate the ongoing trend toward having only two and sometimes three players in every country.

And maybe a few more governments will recognize the need to have fewer, stronger and better capitalized facilities-based telecom operators like ourselves. And with that, let me turn it over to Tim to go over our performance in Q1.

Tim Pennington -- Chief Financial Officer

Thank you, Mauricio. I'm going to start by looking at Q1 on Slide 15, and then I'll focus on the financial aspects of our response to COVID-19. So basically, COVID-19 did not impact our business until mid-March, as Mauricio said, we're pretty much on track until that point. And bear in mind that last year, so our first quarter was our strongest quarter.

So this left our Latam service revenues broadly flatten on an organic basis, as you can see here. But around the same time, we also saw the currency impact of oil prices in Colombia, and that left us with a 3.5% FX hit although this was offset by revenues from acquisitions. So on a reported basis, our service revenue ended up 5.5%. Organically, EBITDA fell by 2.5%, although half of the fall came from a one-off charge in Nicaragua related to the acquisition, and OCF was 3.9% lower.

And again, that was basically due to the EBITDA one-off as well as facing differences in capex execution. I think you've heard from us, we are targeting measures to maintain the OCF for the year, and this is important as we search for measures to accelerate our deleveraging activities. So if I pick up now on how we've seen COVID-19 impact on Slide 17. The indicators on this slide give you a sense of what we're seeing, but note, it is still very fluid.

So on the left-hand side, you see the components of our organic service revenue growth and perhaps unsurprisingly, prepaid and B2B that have been most affected. In prepaid, as Mauricio said, it really has been the lack of mobility and the correlation between the severity of the lockdown and the impact on revenues. And you can see this on the chart on the right-hand side, this shows this correlation. Very much Bolivia and Honduras have the most stringent lockdowns, and we've seen the biggest impacts there, whereas Guatemala and Nicaragua unless are being lockdown, less of an impact.

Now across our subscription business, postpaid has seen a significant fall off in new sales. We've lost a tailwind from upgrades from prepaid. But as Mauricio did say the Home has been much more stable, and we are still selling in Home, revenues are still growing there. And finally, across B2B, we felt the impact mainly in the SMB segment with some offsetting demand from multi corporates.

On a see through basis, our small businesses represent around about 7% of Latam service revenue. So it is noticeable, but not meaningful at this point. OK. So let me now look at how it shook out in Q1 on Slide 18.

Guatemala continues to show strong revenue growth. And note, this is largely mobile performing well. Whereas in Panama, we did see a more challenging quarter, again, mostly due to B2B being lower than the very good quarter last year. And if you recall, we've got a higher proportion of our revenues coming from B2B and Panama.

Home by contrast had a very strong quarter commercially, adding around 200,000 RGUs onto our HFC network, and this was offset by some fall off on our DTH revenues, which is generally a less profitable business for us in any event. So let's look at EBITDA in more detail on Slide 19. And these numbers here, the organic movement, that is the like-for-like EBITDA performance by operations. We saw the main challenge coming from South America.

In Bolivia, which is still recovering from the turmoil in Q4. This was largely impacted by prepaid mobile ARPUs. In Colombia, where EBITDA fell by 2.3% organically. Our results were impacted by the loss of the Avantel revenue.

And without this, our organic EBITDA growth would have been positive. I think also note that the weaker peso had an impact on dollar-based costs, such as programming. And that was one of the causes for the margin, EBITDA margin to worsen by 1.5 percentage points to 33.3%. And in fact, similar impacts in Paraguay, falling 10% organically, partly due to increased commercial activity, but also from the impact of the weaker guarani on dollar-based costs.

And both Paraguay and Colombia faced large FX devaluations, which had a significant impact on the translation of our EBITDA. And we see that on the next slide on Slide 20. The Colombian peso devalued 22% year on year, and Paraguay devalued 7%. This had a $15 million drag on — sorry, an $18 million drag on our revenues, roughly 3% on — sorry, $15 million drag on EBITDA, 3% of Latam EBITDA.

But as you'll see later, local currency financings are partially mitigated the impact of this on our leverage and debt. So organically, EBITDA down 2.5%. The one-off $8 million charge relating to the acquisition in Nicaragua explaining half of the drop. OK.

So now I want to turn our attention to how we've adapted the business to the crisis on Slide 21. As Mauricio said, we moved pretty quickly to protect business, to protect OCF, we have revised our capex and opex plans, reducing both materially. And to protect the balance sheet, we secured liquidity. We focused on cash and looked to mitigate FX and seek opportunities to deleverage.

So let me start on protects balance sheet on Slide 22. And firstly, although we entered this crisis at a higher level of leverage. Nevertheless, we've got a very strong liquidity position, and we've taken further steps to enhance our liquidity. Reviewing contracts payment terms collections withdrawn on our OCF aspect, etc.

So in short, today, we hold around $2 billion of cash and credit facilities within the group, of which more than a $1 billion of cash that's in the group HQ. And further, as you can see on the slide, we have very limited maturity. And in fact, we only have $111 million left to refinance this year. And next year, it's only a little over $170 million.

And secondly, we have a strong, robust cash flow, and you'll see that on Slide 23. This is showing the trailing 12-month OCF. And on a run rate, our OCF and our EBITDA minus capex is around $1.4 billion. Of this, nearly 70% is coming out of Central America, which is remaining fairly robust so far with a little FX volatility in Q1.

The balance comes from South America with Colombia accounting for around 15% of group OCS and Bolivia 6%. Now we're not complacent about this, which is why we have acted to reduce our capex spend, as we said, by nearly $200 million to $300 million. And what we've done here is we've postponed our network expansion activities, both in cable and in mobile. We've canceled noncritical IT projects, and we've been seeking better terms on the capex we will still fulfill.

In addition, we're looking at cost savings of at least $100 million that will be through hiring freezes, reducing subsidies, cancellation of nonbusiness-critical activities and seeking reductions on contracts that will no longer generate returns. And with all of the aim as material sells out of maintaining the group OCF. Now finally, I want to look at the net debt and leverage. Usual slide on Chart 24.

And we finished the quarter with underlying net debt of $7.2 million, which was largely in line with where we ended the year. And that's after $122 million of new spectrum acquisition, plus we did complete $10 million of the share buyback program before suspending. And finally, to note, the equity free cash flow is typically negative in Q1, as we see large working capital outflows. I want to point out with the use of local currency funding in Colombia, Paraguay and elsewhere contributed to reducing our net debt by $175 million during this quarter.

And also now, we rely on local currency funding to fund most of our operation in Bolivia. So looking at the leverage impact of this, at the end of Q1, we had proportional leverage of 3.25 times that was up marginally from 3.19 times at the end of 2019 and on an IAS 17 basis, leverage was three time. As I said, we are making it a priority to bring that leverage down, and which is why we are suspending the dividend and the buyback programs for 2020. So with that, let me pass back to Mauricio to wrap up.

Mauricio Borrero -- Chief Executive Officer

Thank you, Tim. Before we take your questions, let me just conclude by saying that I am incredibly proud of how our teams have responded to the challenges we have faced in the last two months. Never been that start as I am today. We've never been more proud of the long hours that everybody is putting in there.

You heard me talk about our strong culture, that passion that we bring to work every day. We refer to it internally as SangreTigo and the SangreTigo has kept us focused on our customers throughout the first phase of this crisis. And that is what will make the difference, purpose and passion and modulation and keeping close to our customers. Very close to our customers.

And financially, that we are in a strong position. This will also make a difference. Can and we are protecting our cash flow targets. We have ample liquidity and no meaningful maturities and and we're taking quick decisive and relevant measures to accelerate the leveraging.

The next few months will be challenging. We know it, we don't want to sugar coat it to you but we have really quickly refocused the business to, one, protect our employees; two, keep our customers and the communities connected, keeping our market share and positioning ourselves for a quick rebound and three, preserving our cash flow. It is as simple and as focused as that. If we do this well, we will strengthen our brand equity and value for the long run, and we'll be positioned to rebound very, very quickly.

And this is important because this crisis will pass, and we will be there, and our uses will be there. We will be closer to them. And what will ultimately matter is how we behaved in this process toward our consumers. And with that, we'll take some questions from you.

Michel Morin -- Vice President, Investor Relations

Maria, we're ready for questions.

Questions & Answers:

Operator

All right. Thank you. [Operator instructions] Your first question comes from the line of Johanna Ahlqvist from SEB. Please ask your question.

Johanna Ahlqvist -- SEB Equity Research -- Analyst

Yes. Good morning to you. I think I have two, three questions. The first one if I get you correct, you aim for flat OCF for 2020.

And I'm just wondering, does that also include working capital? Because I guess you will face quite what the risk is at least that you will continue to have a negative working capital throughout the year given the payment terms for customers that you discussed? The second question relates to, if you can say how much of top-ups, data top-ups that are done through digital channels today? So if we can get sort of the base, is it a minor share or any flavor on that would be helpful. I think I'll start there. Thank you.

Mauricio Borrero -- Chief Executive Officer

Yes. So I'll take the second one and then perhaps, Tim, you can provide some color on No. 1. It has doubled the amount of digital top-ups have doubled in just a few months.

But it's still a very minor percentage, around 5% or so still so we're seeing continuous improvement, but it's still a very slow base. Prepaid is still a physical distribution of business. Now we're ahead of our competition, but it's still low numbers.

Tim Pennington -- Chief Financial Officer

Yes. And on the working capital point, Johanna, it is complicated. I accept that. We will see working capital move around a lot.

But we are seeing some offset there. We've pushed payment terms out with large suppliers. So there is a balancing impact taking place on that. Our inventory will run-up a little bit as we go through the summer, but it will come down toward the end of the year.

So I don't see any impacts on that. So although it's very difficult for us to predict at this stage. I don't expect to be a defining feature for us for this year.

Johanna Ahlqvist -- SEB Equity Research -- Analyst

So just to maybe make that clear. Do you aim for a flat OCF 2020 over 2019?

Tim Pennington -- Chief Financial Officer

Yes, we do aim for that over 2019, but look, kind of it's an aim, not a promise. It's kind of there's a lot of moving parts for us. It's allowed us to [Inaudible] the organization around the target, which is achievable. And focus where revenue is tough at the moment.

It is very important that we focus on the cash flows. And I think that's what we're doing internally and externally. And there are some variables that are outside our control, but the ones that are inside our control, we are targeting to focus on the OCF in that way.

Mauricio Borrero -- Chief Executive Officer

Let me add to that, Johanna, because you're sort of focusing on something very important. Thank you for that. This is a pretty bold statement we're making, quite bold because we don't hold any particular crystal ball here that's better than anyone else's. But we see the importance of saying to all of our shareholders that we are aiming, and we think we can protect that operating cash flow target for the year.

It's a pretty bold statement, and it just gives you an idea of how focused we are on that. Give us some wiggle room, we have no crystal balls. But it is a very important target that we set ourselves to protect our investors.

Johanna Ahlqvist -- SEB Equity Research -- Analyst

Thank you.

Operator

Your next question comes from the line of Stefan Gauffin from DNB Bank. Please ask your question.

Stefan Gauffin -- DNB Bank -- Analyst

Yes. A couple of questions for me. First of all, on the cost savings, you talked about that you had some savings coming. So I think you're aiming at the subscriber acquisition cost due to lower churn.

Is that included in the $100 million cost savings? Or is that coming on top? Secondly, you talked about that Paraguay was impacted by a high commercial activity in the quarter. How has that developed after the COVID-19 crisis hitting the market? And then thirdly, you had a very different performance in Colombia versus your peer, America Movil in terms of subscriber development and service revenue development. Can you elaborate on this difference? Thank you.

Mauricio Borrero -- Chief Executive Officer

All right. So why don't we do this joint team because there may be bits and pieces that you may have just add to this. And thank you, Stefan for the question. So first and foremost, what we call the replan, by the way, for the year, that's the internal work we use for it.

On the opex part of it, which I think is your question, not the capex, which is we're at least targeting $100 million. It's a straightforward question. The larger part of that, 50% to 60% is a reduction in commercial activity. So it does include lower churn, lower activity, less structurals and field services, lower sales commissions, lower sales subsidiaries, lower marketing and advertising spend, of course, which is significant.

So it is indeed all included in there. There's an additional element of that some 20% to 25%, which is direct savings. So that's programming, bandwidth, etc. As you can imagine, we're working with our vendors to help and chip in, if you will, during the situation.

And the rest is G&A and other stuff that is very important. So hopefully, that gives you a lot of color on No. 1. No.

2, the straightforward answer on Paraguay is life or the commercial aggressiveness with the COVID, if there's a silver lining to this is that we're not seeing the impact on profit and continued competitive aggressiveness, quite the opposite. The reaction from our competitors has actually been to roll back their network rollouts to be much less aggressive on the marketplace and focus on also just protecting the business. But we're not seeing a continuation of an aggressive commercial activity in Paraguay. And that's good because we don't have to battle two fronts at the same time.

I hope that answers Paraguay quite completely. And then in Colombia, there's perhaps three layers to what go into Colombia. The first one is the part that is just noise in our numbers. And I use the word noise, for lack of a better one here.

Our numbers for Q1, and I may need some help from team here, basically have the loss of our wholesale business, largely the Avantel contract that we were happy to let go as we were not being paid. And that has an impact on our numbers vis-à-vis our competitors in the market. If you were to correct for that, our mobile business would be growing mid-single digits. So there's just a noise of that effect.

So that's No. 1. No. 2 is right in the middle here, the B2B business.

As you know, in Colombia, we are much more exposed to government contracts than our competitors are in our B2B business because we have a larger B2B business. And in earnest, even before the crisis we had already begun to experience some of those government contracts slowing down. So there's a difference in our B2B business. And the last bit, the third layer of this is that our business in Colombia, which is quite strategic on Home, remains very, very solid.

You've seen the numbers. We had solid net adds for the quarter, and our business in Home grew mid-single digits for Q2. So we're very happy with that. So there's a mix back there that explains why this is not a direct apples to apples comparison.

We remain extremely focused on our strategic developments in Colombia. We are happy with our HFC rollouts. We seen how relevant that is in the middle of the crisis. And as you very well know, we're flowing along the deployment of our 700 megahertz spectrum network, actually last week, we just announced that we had closed on the first tranche with the government, and that we're already deploying it, and that will be the first to have that 700 megahertz spectrum commercially deployed, which, as you know, has cost reductions and indoor penetration, benefits and increased coverage for us.

So that's one of the projects that I was referring to as strategic that we're not holding back on. That's it. I don't know if I missed anything on that one.

Stefan Gauffin -- DNB Bank -- Analyst

No. I think that was very clarifying. Thank you.

Operator

OK. Thank you. Your next question comes from the line of Soomit Datta from New Street Research. Please ask your questions.

Soomit Datta -- NewStreet Research -- Analyst

Yes. Hi, guys. Hope everyone's keeping well. two or three questions, please.

One is maybe a bigger picture question, which is we've seen a number of Emtelco's report now. And I'd say the commentary from yourselves and the outlook seems to be much worse than we've generally seen in the sector. So questions that I've had this morning are, is there something specific about the Millicom markets which is meaning that things are worse here. Obviously, I guess the main point you're making is lockdowns are impacting businesses.

But those lockdowns are happening the world over. So what is it, which is really having such a dramatic impact that may be isn't happening elsewhere. And I referenced America Movil, we heard from yesterday and things are definitely tough, but they seem to be much better there. So if you could help us understand that would be very helpful.

As a first question. Maybe I'll ask that, and then I can come back to on the one.

Mauricio Borrero -- Chief Executive Officer

Well, you can imagine that we have been questioning ourselves quite a bit. Is our view overly cautious or overly green vis-à-vis perhaps a story that others are painting out there. I think there's an element that we simply do not like sugar coating things, and we would like to preserve our credibility. There's an element that we do think things are going to get tough in our markets, and we'd like to call it earlier rather than late.

Even if that causes this gap in perception. But there's also an element that our markets have had much, much stricter lockdowns. And some of them started very early. If you look at the base of the lockdowns in our markets, they started earlier than they did in some of the markets, even in the U.S.

We're very attuned to it. And there, the word lockdown is perhaps not correct. These are curfews. These are 24-hour curfews with the exception of Nicaragua and Guatemala in which people are not allowed to even walk their dogs on the streets.

I'm not making up this. This is the way it is. You can go single person, you cannot be double person in some of these markets. So these are very, very strict lockdowns.

And I tell you, we see the correlation immediately. We have network tools that allow us to from the network see the mobility in our market and the correlation to toot and the correlation to use. And it is a very, very strong collation. Now there are some differences across jurisdictions.

Some of our competitors do operate in markets that have not had this very significant lockdown measures. Speaking of the countries themselves, Mexico has not had a lockdown. And Brazil, as you know, has not had a lockdown. So there is a difference between the approach our regulators and our governments have taken.

And that may be permeating our own views on this. As I said earlier, this is all about the lockdowns. The minute we see the lockdown is off, like we've seen in a couple of days in Dudas, we see top-ups immediately come back up.

Tim Pennington -- Chief Financial Officer

I think, Soomit, if I can just add in here. A lot of our competitors have reported have been reporting backwards, kind of as we have seen, only seen a couple of weeks impact on Q1, which is not that impactful on us whereas it was effectively 0.7% or $10 million. What we're trying to do is give you a picture of the future and giving you what we're seeing in equal. And as Mauricio said on the call, April has got instrumental, so it may not be representative of the future.

But we are we can't bank on that. And therefore, we have to prepare the business for what could be a significantly long extended period. Once the lockdowns have gone an extended period where we have to put the business in the right place in order to weather that storm. We have a strong market position.

We have a strong business, but we have to put it in the right place for that, and that's really why we were giving you this indication of what we're seeing currently.

Mauricio Borrero -- Chief Executive Officer

So this has been an internal debate. And luckily, we have a Board that's been very supportive of our view. If we're being overly cautious, great because we're protecting the business. We're doing all the right things.

But everything we're doing, we are preserving the ability to come back really, really quick. If you read the CEO letter, if you read our prepared remarks in detail, we're keeping the teams. We're keeping the commercial distribution. We're protecting those, which are peaking the strategic projects so that we're ready for a strong comeback.

So should it be that in these things are not as grim as we think they may be, and we'll be ready right there for the comeback, having protected the subscriber base, the business, the liquidity and our teams. That's our strategic approach. And I really thank you for this big picture question because it does allow us to tell you what we're doing and why we're doing it. We think we're putting ourselves right in the middle of protecting the business, preparing for the worst by being really ready to come back very, very quickly.

Soomit Datta -- NewStreet Research -- Analyst

OK. That's really clear. And maybe I mean, just as a follow-up, it sounds like the biggest factor is the lockdown. And again, so it's been stricter and maybe a little bit longer in those countries.

So that's maybe a differentiator. But presumably within — and hopefully, within some weeks or a month or so, you come out of lockdown. And the guidance you've given from April suggests about a $30 million hit to revenues. So you have a couple of quarters, or sorry, months, I think that is.

You have a couple of months where you lose $30 million, $60 million. I guess the response seems somewhat disproportionate. You've cut the cash returns by $250 million. And you're cutting capex by $200 million to $300 million.

You're looking for opex savings, I think, maybe $40 million to $50 million away from the commercial savings. So if we're going to bounce back from these lockdowns, isn't the response, but if the lockdowns are the bigger driver, isn't a response on the sort of cash flow side somewhat disproportionate?

Tim Pennington -- Chief Financial Officer

No...

Mauricio Borrero -- Chief Executive Officer

Sorry, go ahead, Tim.

Tim Pennington -- Chief Financial Officer

Well, I mean we have other factors as well. We have an FX impact in Colombia and Paraguay at present time. We have still around about 35% to 40% of our revenues are coming out of prepaid. We see already slowdowns in remittances.

As Mauricio said, I think this is a better position for us to be and to be slightly more prudent now and then maybe prudent long toward the end of the year when it's easy for us to change direction again. But if we did it the wrong way around, it would be very difficult for us to manage the business.

Mauricio Borrero -- Chief Executive Officer

Yes. So I think our principles, we're going to protect our operating cash flow, that we can do and are doing and we're going to be very, very cautious on protecting liquidity. I think that's the most important, savviest thing we could do and the most prudent thing we could do. Now I don't know that we can call the moment when things are going to go back to normal.

And that's why we need to be more cautious. We just do not have that crystal ball. And we're not approaching it in that way. We're approaching it in the sense of protecting the operating customer, being cautious, preserving the liquidity because we do not know when things will go back to normal, and I think that's a key point.

Soomit Datta -- NewStreet Research -- Analyst

OK. Helpful. Thank you.

Operator

Your next question comes from the line of Marcelo Santos from JP Morgan.

Marcelo Santos -- J.P. Morgan -- Analyst

Hi. Good morning. Good afternoon. Thanks for taking my question.

Hope all of you or families are well. The first question is about the SME exposure. So you mentioned that SME taking relatively large it how much of your revenues broadly are exposed to segment? That's the first question. And the second question is about the potential Costa Rica you're not closing.

If the conditions are not so fueled tomorrow. How much of the synergies that you attributed to the acquisitions? Do you think you would lose if you don't have the potential, you would lose if you don't actually close that deal?

Tim Pennington -- Chief Financial Officer

Should I deal quickly most with the small business because I did mention in my script, we see about a 7% free through contribution from small businesses in the Latam service revenue. So it's 7% of our Latam service revenues. It's noticeable, but not meaningful, I would say.

Marcelo Santos -- J.P. Morgan -- Analyst

Perfect. Thank you.

Mauricio Borrero -- Chief Executive Officer

Yes. So we didn't quantify the synergies per country for the Costa Rica acquisition. Perhaps the most important thing I can say is as much as we would definitely want to uptake on mobile in every market we operate, and that's always been part of our strategy. At this point in time, it's a lot more prudent given that we have the absolute legal right not to go forward, not to extend in terms of that contract or not to go forward.

It's really a very sound and prudent business decision. The largest synergies by far were in Panama and are being attained in Panama rather than in Costa Rica. As you very well know, our business in Costa Rica have been very factual here. Our existing business in Costa Rica is relatively small.

Operator

Your next question comes from line of Cesar Medina from Morgan Stanley.

Cesar Medina -- Morgan Stanley -- Analyst

Thanks so much for taking the time to discuss the results. I have two questions. First, a follow-up on Costa Rica. Can you please clarify or as much detail as you can possibly provide? What are the specific hurdles that present for the transaction to be closed? And then second, throughout the call, you have mentioned you expect a strong come back eventually, etc.

Then maybe clarify the comments pertaining to the long-term goals that you have been reviewing them? And where is the risk in the reset your long-term goals go over or under what you were expecting before?

Mauricio Borrero -- Chief Executive Officer

OK. So listen, on Costa Rica, and thank you all for the questions. I'll try to address them here with a little help from my team. So a little bit on the Costa Rica.

And so for your clarity, as you can imagine, these are contracts that are very heavily negotiated in New York. They're black and white. They're clear, they're agreed by the parties. Like every standard contract, they have provisions on what approvals need to be attained, and they all have a long date on them.

So there's this contract. Ours has a set of regulatory approvals and a process for the regulatory approvals that are to be obtained by May 1, tomorrow. And after May 1, the party has the right to terminate basically not to extend the contract. We've been very clear that if all those regulatory approvals are obtained, we will fulfill our obligations, and we will close, no doubt about that.

But if they're not, we have the availability, and this is crystal clear. As just an [Inaudible] not to extend. And those are regulatory approvals, so it's a number of the M&A process have not been obtained as of today. If they are attained before tomorrow, we'll go ahead and close.

Of course, if they're not attained, we will and have notified Telefónica that we will not extend. As I said earlier, it's the business decision that we think is best fit to the time that we live in. And as I said earlier, it's just the right prudent business decision for us to take. Now Telefónica company have a different view on what their legal rights are.

And if they do and they wish to proceed in court in New York. Of course, they have the right to, and we will defend our rights there because the contract is black and white. So that's the Costa Rica bit of it. I do not write No.

2, but I'm sure Tim can help me on that one.

Tim Pennington -- Chief Financial Officer

Well, it was about the long-term goals and kind of where they have changed. And I'll give you my quick to benefit. And in a sense, no, they haven't. Obviously, we need to be cautious at this point in time.

But in many ways, I see the demand for our product enhance out a bit rather than diminished. I mean, I think what everyone around the world is really likely is the importance of broadband. And we are the provider of broadband currently to 11 million households in the footprint area. There are 30-odd million households in our markets.

And we see no reason to see why that would diminish over this time, if anything, possibly enhanced. But, I don't expect the same view.

Mauricio Borrero -- Chief Executive Officer

Absolutely. The only thing I would add to that, and I hope this comes across possibly is we expect to lead the comeback in our markets. We expect to be strong in our position once the crisis is over at all levels, the employee teams in place, the operating cash flow protected, the balance sheet strengthened, the commercial terms cap, the network deployment is also ongoing. So that we can lead our markets when the recovery is there for us.

This is a matter of timing. We do not want to be ahead of where our markets are. But this doesn't make sense. We just need to be ready for when they come back, and we will bounce back quickly, swiftly, and we will lead that comeback.

We just don't know exactly when it's going to happen.

Cesar Medina -- Morgan Stanley -- Analyst

Thank you.

Operator

OK. Thank you. Your next question comes from the line of Bill Miller from MAI Hartwell. Please ask your question.

Bill Miller -- MAI Capital Management, LLC -- Analyst

Gentlemen, well done. I'm glad you're all safe and sound. Getting back to Costa Rica. How much do you save by not going forward with the acquisition? How many hundreds of million?

Mauricio Borrero -- Chief Executive Officer

Yes. So the purchase price is very public. It's just a little north of $570 million. Obviously, there's a little bit of a chip there in our buildup of mobile over fixed in Costa Rica.

But as I said earlier, these are times when you got to make the sound business decisions. And this is without his attention without the right business decision to make. So the number bill is $576 million, I believe, is the exact number. I may be corrected, but somewhere in there.

Bill Miller -- MAI Capital Management, LLC -- Analyst

And secondly, in the larger context, with a strong balance sheet, with the No. 1 or 2 market share acquisitions in most of your markets, how are you going to take advantage of that? Will it be others? That fall by the wayside and you can pick up their asset free for nothing or Tim, you said you're going to be able to grow faster than you had been able to grow historically. But how much faster and do you think it's because competition will? Or how do you make that statement?

Mauricio Borrero -- Chief Executive Officer

Yes. Listen, a couple of things will definitely occur here. People will be competitors that it will be a lot more cautious with their returns and demand on their capital because there will be much more pressure by their own liquidity constrained in their less strong balance sheet. So some of the existing competitors indeed will have to ease off their pressure, change their plans, ease off on the roll out plans.

And as a result of that, and we do believe that there'll be a better industry structure coming out of this. It always happens. Now we're one of the stronger ones out there. And as a result of that, everything we're doing positions us for that.

And I also believe, and I strongly believe is that regulators will also change their views. And as what I said in my prepared remarks. Because they are realizing right now, as we speak, that it is a stronger company, the multinationals with the ability to invest and be there for the consumers that are the best, best for them to keep for future times in their markets. And I do believe that this will cause them to understand that much more than they have before.

Those two things, I think, will lead to better industry structures.

Bill Miller -- MAI Capital Management, LLC -- Analyst

That's great. I look forward to that. Thank you.

Operator

Your next question comes from the line of Sergey Dluzhevskiy from GAMCO Investors. Please ask your question.

Sergey Dluzhevskiy -- GAMCO Investors -- Analyst

Good morning, guys. Thank you for taking the question. Looking at your markets, obviously, you have touched on this already, but as you look at the range of your markets, niche markets, do you believe have had the most effective response to the pandemic? And which markets do you worry somewhat as you look at the events unfolding.

Mauricio Borrero -- Chief Executive Officer

Well, I have to be honest with that, and somebody has a better answer. I think time will tell in just about every country in the world, not just our own markets, whether it's severe lockdowns where the better public response, public policy response or whether a light-touch response to lockdown-wise the better market response. With our responsible add on, I do not know the answer to that, and I don't think just about any policy maker around the world knows the answer to that. We're looking for it, I tell you.

In a year, two years from today, we'll all look back and try to figure out what was the smarter way to go about this. And this is true, not by market just for every market. I don't want to step in the shoes that are bigger than the ones we can fill.

Tim Pennington -- Chief Financial Officer

Sure. I think it's fair to say. But the government is reacting very quickly to this. I think they all, by and large, we acted fairly quickly to we cross our fingers and hope that's a good solution.

Sergey Dluzhevskiy -- GAMCO Investors -- Analyst

And one more follow-up on Costa Rica, I guess, from kind of market dynamics and competitive landscape there, assuming that you don't close on that acquisition. So the fact that you won't purchase mobile assets there, does it mean that you would look for an MVNO agreement in that market? Or how would you look at Costa Rica without mobile assets there? Would you look to exit that market? Just your overall assessment, where you stand in Costa Rica, if you don't close on that transaction?

Mauricio Borrero -- Chief Executive Officer

Great question. Thank you for that. Listen, I've always said, we've always said that, of course, we think fixed and mobile in a converged environment leads to an enhanced strategic particular, no doubt, and this has not changed that. But I have also said that I am happy, we're happy to have cable stand-alone because cable stand-alone is very resilient.

You're seeing it through the crisis. It does not immediately need a mobile solution, and it does hold the stronger long-term strategic part because those mobile, those networks are very, very resilient and capturing the bulk of the topic. So we think with cable stand-alone, we're in a good position and a good strategic position to evaluate other options, which includes the ones you're mentioning.

Sergey Dluzhevskiy -- GAMCO Investors -- Analyst

Right. And my last question is on kind of noncore, nonstrategic assets. So obviously, you have mentioned a lot of measures to improve cash flow and liquidity, but you didn't mention kind of dispositions of some assets that you have, which I believe are always an option. So you have a stake in Helios Towers, you have JV in Ghana.

What are your thoughts on the timing and the eventual monetization of some of those nonstrategic assets?

Mauricio Borrero -- Chief Executive Officer

So two quick comments on that. Of course, those are out there, no doubt. Whether it's Tanzania or HTA, no doubt they're there for options. No.

2, we have a ton of liquidity. It's $2 billion plus measures. Internally, I call it to the team the big bazooka and I basically tell, it is important that we go into this with the biggest bazooka we possibly have because we don't control the timing of this at outside, but we can control how big a bazooka we have. And it is big.

It is really, really big. And what I tell the team is we need to know that because then that would allow us to make all the commercial people, strategic decisions with the ability to not be constrained by that. Now big bazooka is really, really important for us to have peace of mind. Now with all that in the mix, the things that we've shown you today, I believe that we can act on that we have acted on that are within our ability to decide, not the ones that may or may not happen, which they may or may not happen.

So that we can give you certainty on what the bazooka is today and how much we can add and are already adding on decisions to the bazooka. And that's what we wanted to highlight to you today.

Sergey Dluzhevskiy -- GAMCO Investors -- Analyst

OK. Great. Thank you.

Operator

Thank you. And your next question comes from the line of Lena Osterberg.

Lena Osterberg -- Analyst

Yes. Good afternoon. I have two questions, if I may. First of all, as I understand it, the impact that you've seen now early April and you expect on service revenue decline that's been mainly related to market closures and constraints because of COVID-19.

So if market starts to open up, and people can move around freely, do you expect an improvement? Or do you think that the next impact will be the hit on the real economy? In that case, when do you expect that to come? And how big will that impact be? Also, it would be very interesting to hear what you're seeing now in Colombia with consumer confidence dropping massively on the oil price decline? And how you think that will sort of translate over the next couple of months for your business as well? And then also on cash flow and liquidity, it is indeed a big bazooka that you're building up. So I'm just wondering how scarier scenario should we expect, given the size of liquidity that you're building up now?

Mauricio Borrero -- Chief Executive Officer

Good. Perhaps Tim, I'll defer to you on the FX and on a matter for bazookas, not only are you an expert in on that, but some of the measures that you've been taking in the last few years have made a difference on our balance sheet. So if you want to start with that one, and then we'll go to...

Tim Pennington -- Chief Financial Officer

So look, kind of the big impact we've had is be in Colombia. And obviously, that currency has devalued by 22% year on year. So it's now trading at 4,000 and budgeting at 3,400 for this year. We're not expecting 4,000 to change materially.

But it's not going back anytime soon. I mean, you guys are better judges of the oil prices. And this is not looking like it's going to recover quickly. So we're preparing for a world where we are around about 4,000 in Colombia.

Paraguay's had a little bit of a hit as well. Central America, on the other hand, has been very solid, but these economies are very dependent on remittances. We're already seeing remittances down around about 10%, but that could have an impact, it may not. And the global financial crisis, the as some devaluation, it actually wasn't in the Colombia levels, but we don't know, Lena, and that's why we're taking these actions the sort of when you have uncertainty, you need to be prudent, and that's why we're doing this.

Mauricio Borrero -- Chief Executive Officer

Yes. I think I'll build on that to tackle the other parts of your question. The answer to both of your questions is actually, you're correct. Yes, the lockdowns have a significant impact.

The minute the lock counts go away, we'll see immediate renewed consumption of mobile. That's true. But it is also true that these markdowns are having as meaningful impact on the economy. And that macro effect, I don't think we're seeing just yet.

That's still to happen, both in you're true. And obviously, the longer the lot tons stay on and the more pronounced they are, the bigger that impact will be. And what you're hearing from us, which I think is a responsible thing to here, quite honestly, is that we do not know when or if these lockdowns will be effectively lifted, whether they'll come back, on what the response to this pandemic will ultimately need to be. And it is a responsible thing to be very cautious in this environment.

I think Tim said it earlier, I've been adamant with my team, I've been adamant with my board that you had a crystal ball and I knew exactly what the damage of the economy is today. And if I knew exactly that it is over, and that we've gone now already into recovery mode, I will be taking a different view. But no one knows that. And as a result of that, the responsible thing to do is to tell you, we can protect the operating cash flow, and we're going to move to do it.

And we're going to build, I'm going to keep using the term because it seems to have a [Inaudible], a big bazooka. We do need it, we do want it. What I tell the team on and on is if you're going into a dessert. And you do not know if you're going to be in it for a day, two days, a week or three months, you put as much water into your jeep as you possibly can.

And that's what we're doing. And I hope you get that because I think it's a responsible thing to do.

Tim Pennington -- Chief Financial Officer

And Mauricio, I think the other thing, which maybe is important to distinguish here between developed markets and developing markets. Most of our customers, most of the people in these countries are not salaried. They need to go out to work, they need to go out to get cash. And if they don't work, they don't go out, and they don't have disposable income.

And clearly, they need disposable income to buy our products.

Mauricio Borrero -- Chief Executive Officer

I want to say an obvious thing also because I think this is part of the big picture that we're talking. And it's important that we understand our approach to this. If indeed, we're being overly cautious. If indeed, we have built a big bazooka, perhaps too big.

If indeed, the lockdowns ease off next week or next month, and there is a way for the economies to come back quickly and strongly. No harm will have come to us at all. I want to be very clear to that. Because we've kept the teams, we've kept the commercial distribution teams.

We're keeping the strategic projects, and we're ready to bounce back immediately. Immediately, and this is what the teams have heard from me. So no harm will come to us. But because we don't know that, that is necessarily the outcome.

It just makes such business strategic sense to protect ourselves. And if it is longer, we're going to be the strongest if it lasts longer. That's our strategic mindset. And I am convinced this is the right approach.

Lena Osterberg -- Analyst

And I just have a follow-up on that. So the cash flow boost that you're getting from all these actions and potentially by not doing the Costa Rica acquisition. Should we see sort of that you expect a negative cash flow in the similar magnitude?

Tim Pennington -- Chief Financial Officer

To the similar magnitude to what?

Lena Osterberg -- Analyst

To the savings that you're doing. Because you're doing them to offset something. So are you assuming that you will have a COVID-19 will be a $550 million hit on your cash flow. If you didn't do these things.

Tim Pennington -- Chief Financial Officer

I don't think you can assume that, but I don't think you can see that. I think the way we've looked at this is to say that one of the leaders we can pull today, which either we're not down in the business or are frankly not required because there's no one out bet to buy the product. And that's what we've done. And we've pulled back hard on those levers.

And we have pulled back hard on the capital distribution piece, all of these things, ultimately, we can reverse. But at this point in time, with the lockdowns that we're seeing, with the macro impact that is on the way. The fact that our economy are cash based, we think it's a prudent thing to do. And to echo Mauricio's points, we're going to sort of manage this ship to where the wind is blowing, and we will move it.

We're moving it besides to daily or weekly. So it's really to make sure we can order this in a strong place.

Lena Osterberg -- Analyst

OK. Thank you all. All right.

Mauricio Borrero -- Chief Executive Officer

Well, not surprisingly, we spent more time than we normally do. And thank you for all your big picture questions. They've given us an opportunity to tell you how we're thinking about things. And I think that's more important than anything else.

I don't want to tell you that the team is extremely motivated, really focused. We've never acted more tightly and more swiftly. It's one of our strategic advantages. We can react and adapt very quickly with a very, very efficient team.

We're doing the things that we think are right. We're keeping our subscriber base, and we're keeping it close, connected and enhancing our equity brand value with them by protecting them. We are keeping our operating cash flow targets to protect you as investors. And we think the right thing to do here today is to adapt to create more liquidity to help preserve our strong balance sheet, the big bazooka that we're talking about because we are uncertain about the longevity of this crisis, but very optimistic and very certain about the future.

We talked about that, and we talked about Phase 3 during our prepared remarks. We're really diligently preparing for that. There will be good changes. And all of those changes point to those diesel highways that we'll be building being more essential than ever.

If anything has come out of this crisis is that there will be a renewed enhance not to turn back digital wave in our markets. And we are doing everything to be on the one hand, cautious. But on the other, really, ready to bounce back and lead that recovery. Because we think the approach that we're taking will make us emerge even stronger than we are today.

And I hope you appreciate that our strategic plan stands makes a lot of business sense. Thank you for dialing in today. I hope everyone is staying safe, you and your families, and we look forward to interacting with you continuously. Thank you.

Operator

[Operator signoff]

Duration: 78 minutes

Call participants:

Michel Morin -- Vice President, Investor Relations

Mauricio Borrero -- Chief Executive Officer

Tim Pennington -- Chief Financial Officer

Johanna Ahlqvist -- SEB Equity Research -- Analyst

Stefan Gauffin -- DNB Bank -- Analyst

Soomit Datta -- NewStreet Research -- Analyst

Marcelo Santos -- J.P. Morgan -- Analyst

Cesar Medina -- Morgan Stanley -- Analyst

Bill Miller -- MAI Capital Management, LLC -- Analyst

Sergey Dluzhevskiy -- GAMCO Investors -- Analyst

Lena Osterberg -- Analyst

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