Apr 24, 2014
Operator
Good morning and good afternoon, ladies and gentlemen, and welcome to the Millicom Financial Results Conference Call. Today's call will be hosted by Hans-Holger Albrecht, President and CEO; and Marc Zagar, Deputy CFO.
Following the formal presentation by Millicom's management, an interactive Q&A session will be available. I would now like to hand the call over to Nicolas Didio, Head of Investor Relations.
Please go ahead.
Nicolas Didio
Thanks, so welcome everyone, to Millicom first quarter results presentation. My name is Nicolas Didio, and I'm the new head of Investor Relation.
Today's presentation materials can be found on our website, on www.millicom.com. Before we start, I'd like to remind everyone that the Safe Harbor statements apply to this presentation and the subsequent Q&A session.
With me today on this 1-hour call are our President and CEO, Mr. Hans-Holger Albrecht; and Mr.
Marc Zagar, our Deputy CFO. I will now hand over to Hans-Holger to give you an overview of our Q1 '14 results and operational performance.
After which, Marc would take you through the financials, and we will finish with the Q&A session.
Hans-Holger Albrecht
Thank you, Nicolas. And hello everybody, and thank you for joining us on today's conference call.
Marc and I will shortly take you through the highlights of today's results. After which, there will be time for you to ask questions.
But before we come to the presentation, let me first give you an overview of the business. I will start in Rwanda’s capital, Kigali, where we launched a tech incubator earlier this month.
It may not be a big investment, but recognition of our confidence in the digital opportunity and symbolic of our determination to find solutions relevant to the fast growing markets, in which we operate.
Hans-Holger Albrecht
After Kigali, I personally crossed the border to go Goma for the first time myself in Eastern Kivu region of the Democratic Republic of Congo, which was recently, as you may remember, a war zone. Since we went back there last summer, we have added more than 1 million customers at the rate of 80,000 per week.
I met people from our team, who had watered through unbridged rivers to get our networks towers working. Again, it's not a very significant number of all, but another symbol of our results to reach new markets wherever they may be, and the kind of spirit you'll find the Tigo people.
Hans-Holger Albrecht
More recently as well, I was traveling to El Salvador, where I saw how our newly launched Tigo Star brand highlight in a fresh, and in my view a very inspiring way the distinctive content on our TV platform and broadband services. And in Columbia, if you go there, you can feel the buzz created by the Tigo Music, which is now the country's leading music platform.
Hans-Holger Albrecht
It's this kind of content that gives us the edge, I believe, in the future and helps to drive cable and mobile ARPU and to reduce churn.
Hans-Holger Albrecht
Rwanda and DRC are with Tanzania free markets highlighted this month by the World Bank as high-growth economies, with GDP growth of over 6% in 2013, with the regional trends expected to continue. And in Latin America, the World Bank also paints a promising picture.
Just 2 weeks ago, it forecast 2014 growth of 4.5% or above in some of our biggest markets such as Columbia, Bolivia and Paraguay.
Hans-Holger Albrecht
I think, it is this combination of rising economy standards, population growth and highly entrepreneurial attitude that fuels Millicom's rising treasury that you see confirmed again today in the numbers. And if Millicom transforms, so we need to support and measure the company's health in nonfinancial terms to demonstrate to stakeholders our commitment to responsible business.
Hans-Holger Albrecht
This week, we released our second corporate responsibility report, and I would encourage you to have a look at it later today or whenever you have time.
Hans-Holger Albrecht
So, we have delivered on our growth plans in all regions with revenue rising by 8.5% in local currencies. Africa, accelerated in the first quarter with double-digit growth for the first time in over 2 years, with Senegal adding 650,000 new customers in just 3 months.
Hans-Holger Albrecht
Our Cable and Digital media business grew by nearly 13%, with the launch of Tigo Star. The Tigo Sports channel and we're announcing today the new initiative such as DTH launch in Bolivia.
So if you can see, the transformation to digital continues, for instance, in mobile data, smartphone sales were 3x what they were in the first quarter 2013.
Hans-Holger Albrecht
Of course, like always in life when you run a business and a company, it's not all plain sailing. We have, obviously, pressures from foreign exchange movements coming.
As always, competitive intensity, which you have to deal with, and there's always the kind of common threat when it comes to our business from regulation and new taxes.
Hans-Holger Albrecht
As for the margins, we're within the guidance on margins as we continue this crucial but careful investment phase to grow and diversify into a true digital lifestyle company, and we're just delivering on these promises. And remember, where the company was coming from, if you have listened to the last quarters, we had the kind of growth issue in the company, we had to challenge.
We're facing a substantial change in our business model from a high margin voice business to a subsidized data model, and which are going to come back later as well. We had to invest into the growth in the future in order to have a kind of long-term sustainable business.
Hans-Holger Albrecht
[indiscernible] however the momentum, I think, it's clear for you to see and for our customers to enjoy whether from today they're watching football from a satellite in La Paz or enjoying Facebook, WhatsApp for free in Tanzania. These illustrate just how well we know our customers and how we give them what they want.
Hans-Holger Albrecht
Now turning into the slides and starting with Slide #4. The first slide is a snapshot of Millicom today, with positions across 2 continents.
We have strong positions in 13 mobile markets, and in the first quarter 2014, we passed the mark of 51 million mobile subscribers. We have 5 main Cable and Digital Media markets, with over 3 million homes passed.
MFS is growing quickly in 10 markets with over 7.3 million customers. And in Online, we're present in 10 markets in Latin America through the LIH venture with Rocket and 21 markets in Africa through Africa Internet Holding with Rocket as well.
While LIH and AIH have been equity consolidated since the first quarter 2014, they continue to represent an important part of our diversified digital strategy.
Hans-Holger Albrecht
Our emerging markets footprint makes us well-positioned to achieve the record growth on which we're focused. This quarter, we have seen growth in all regions, with Africa and South America growing double-digit and Central America improving versus the fourth quarter.
Hans-Holger Albrecht
If you move to Slide #5, on Slide 5 you'll see the 4 pillars supporting our long-term growth strategy. In Mobile, as you know we're focusing on driving data penetration and building services to increase loyalty and brand affinity.
Hans-Holger Albrecht
In Cable and Digital Media, our focus is extending the addressable market and increasing the RGUs per customer through bundling. With MFS, we're focused on increasing the penetration rate of the product educating the market and adding over time new products.
Hans-Holger Albrecht
Our 4 pillar growth strategy and story remains the same despite the deconsolidation of Online. On the Online side, we're currently awaiting final regulatory approval for the MTN deal, which we expect to be completed in the second quarter in 2014.
And we continue to expand across Africa and Latin America with the launch, for instance, of an MITV or mi.tv in Columbia, which is an in-house product and a kind of electronical TV guide and second-screen.
Hans-Holger Albrecht
As a whole or below whole, of course, cost and CapEx optimization is a key issue and really underpins revenue growth across all of these pillars. Our CapEx is geared to revenue growth and is now decreasing as the forecast from 2013 peak, and we remain focused on prudent use of cash and on cost control.
Hans-Holger Albrecht
If you move to Slide #6, the transformation to a digital lifestyle company moves ahead as demonstrated by today's announcement about the launch of our DTH service in Bolivia, and our partnership with Facebook in Tanzania. There will be more announcements to come in the short-term, so we continue this journey in the next coming months and weeks.
Hans-Holger Albrecht
DTH, we believe, is a big opportunity for us in Latin America, with so much of the population outside the reach of cable areas. With low levels of video penetration right across the footprint, Tigo Star, our brand, can now exploit the potentials through 2 complementary platforms, cable and satellite.
Hans-Holger Albrecht
If you move to Slide #7, in Q1, revenues grew 8.5% in local currency after 8.2% in Q4, with the new parameter and 3.6% 1 year ago. I will comment later the performance of each business unit.
Hans-Holger Albrecht
The increase in mobile data penetration, which we experienced in 2013, continued in the first quarter, with 20.9% growth across the group, up 5.8 percentage points compared to the first quarter last year.
Hans-Holger Albrecht
MFS has now over 7.3 million customers and penetration exceeds 18% of our customer base where the service is offered. Our EBITDA margin before corporate costs was 38.2% in the first quarter.
After corporate costs, the margin was 34%, down by roughly 4 percentage points compared to the first quarter in 2013.
Hans-Holger Albrecht
Let me reiterate once more that we're still in a phase of investing for growth through subsidies, marketing and innovating products, such as those we have announced today, but we continue to maintain, obviously, a rigorous financial discipline and therefore can confirm our margin guidance. We are optimizing efficiencies across our business, with a view to achieving EBITDA growth as well as top line growth after the investment phase.
Hans-Holger Albrecht
If you move to Slide #8, in the table there, you will see a summary of our revenue performances by regions and by business unit. I'm pleased to report that growth is visible across the board, so it's not a one-sided, one single-story growth story.
This is a case for the 3 regions, and each business unit, including Online.
Hans-Holger Albrecht
On Slide 9, you will get an overview of quarter-by-quarter growth and by division, growing nearly 7%, the mobile division generated 77% of the group's recurring revenue growth. Cable and Digital Media increasing by 13%, contributed 15%.
And MFS, up 49%, contributed 8%. The impact from regulation in Q1 was milder than in 2013, costing us 0.9 points of growth.
And including ForEx impact, the growth in Q1 was 4%.
Hans-Holger Albrecht
If you move to Slide 10, there we want to highlight some of the last 12 months big achievements. We're now close to the 52 million mobile customer mark at the end of March.
Smartphone uptake also continues rapidly with an 87% year-on-year increase in penetration in Latin. This trend obviously bodes well for the digital strategy and adding more of our customers to access data services via their mobile.
Hans-Holger Albrecht
Slow progress of the penetration rate of the double play in Central America and Latin America. The volume of double play users is indeed going up, but strong net adds in the single play product leaves the rate to be flat for the moment.
But we're very confident that we will be able to upgrade customers in the near future.
Hans-Holger Albrecht
Volumes transacted by MFS continue to grow at 39% growth year-on-year. Some seasonality in our key markets explain why Q1 is not expanding that much versus Q4.
Hans-Holger Albrecht
If you move to Slide #12, the operational performance. Over the quarter, you saw mobile grew 6.6% in local currency and 7.7% on the like-for-like basis.
While we continue to be impacted by regulatory pressure, this is easing. The impact on revenue growth was, as I said, 0.9 points, a significant reduction from the 1.5 points we saw in Q4, and 3.3 points in Q1, 2013.
Hans-Holger Albrecht
Importantly, mobile information, our data customers grew at 29.8%, thanks to strong net adds.
Hans-Holger Albrecht
Over the same period, subsidies grew 14% in local currency as we continue to see unmet demand for access to the internet, and return on subsidies within 1 year. We continue to take advantage of the increasing availability of attractively priced and quality smartphones to facilitate acceleration of mobile internet uptake.
Hans-Holger Albrecht
Smartphone sales have tripled in the first quarter 2014, compared to the first quarter last year. And entry-level sales represent the majority of our sales, same percent that we saw in the fourth quarter.
Hans-Holger Albrecht
If you move to Slide 13, in Cable and Digital Media, we reached the milestone of 3 million homes passed. Revenue grew by close to 13% in the first quarter of 2014 year-on-year in local currency.
Our commercial strategy was focused on the launch of Tigo Star in February in Paraguay, and Tigo Sports in March. Tigo Star is now also available in El Salvador and in Costa Rica.
This has partially driven RGUs per household to increase by 4% in average, with 3% in Central America and 10% in Latin America.
Hans-Holger Albrecht
Turning to Slide #14, we continue to see an increasing penetration of MFS, now reaching more than 18% of all mobile customer base across the commercial footprint. Our MFS RGU is increased by almost 1.1 million in the first quarter with strong customer uptake in Africa and Central America.
As highlighted of the quarter -- highlight of the quarter was launch of the first international MFS service that features integrated currency conversion in Rwanda and Tanzania. Individuals and business can make simple cross-border transaction from their handsets without needing to go to a bank or a specialist provider.
Hans-Holger Albrecht
Our vision of MFS has not changed. It represents a huge opportunity.
But this is still a very new service, which requires educating the customers, a solid trust in the brand and a very good network coverage. We have faced in the first quarter, headwinds, when it comes to transaction volumes and ARPU.
Tanzania, our biggest country for MFS, has experienced competitive pressure until February. Since the promotion of our competitor has reduced, the situation is back on track in March, and we can see the same trend continue into the second quarter.
But this is a reminder, that this product is far for mature. It's a new business and you always have to find the right path to move forward.
In the cycle of MFS ecosystem, we are just offering money transfer today, self top up and international remittances, but, I believe, there will be a lot of new services to come in the future, and we're working on those ones as well.
Hans-Holger Albrecht
Finally, one additional comment on the ARPU. As we build penetration in countries, the volume of transaction is limited and has a dilutive impact on the average ARPU, which will ease over time, I guess, as well.
Hans-Holger Albrecht
On Slide 15, as you know, since January, we're no longer consolidating Online. It comes after some changes in our agreements in Africa and Latin America.
We continue to grow our online business with new launches and synergies. The $31 million revenue generated this quarter compares with $27 million in the fourth quarter of 2013 and USD 11 million in the first quarter 2013.
Hans-Holger Albrecht
We expect our partnership with MTN to receive regulatory approval leaving Millicom, Rocket, Internet and MTN as equal shareholders of the American Internet -- African Internet Holding.
Hans-Holger Albrecht
Millicom and MTN together have 220 million mobile customers in Africa, with limited overlap. Meaning, that the partnership presents a significant growth opportunity for us and our partners..
Hans-Holger Albrecht
We have also seen some interesting synergies. For example, customers using Easy Taxi in Bolivia can now pay using MFS.
We have also launched recently in Columbia, a key market for us, as I mentioned, mi.tv, which is an in-house product. And other online highlights include double-digit growth from Jumia in Africa.
We see a rapid increase in the number of rides completed through Easy Taxi and more and more customers using the mobile phones to order from Hellofood.
Hans-Holger Albrecht
So much about the operation. I will now hand over to Marc to run through the quarter financial highlights.
Marc Zagar
Thank you, Hans-Holger. I'll turn to Slide 17.
First let's look at the developments in the revenue drivers and our progress in subscriber acquisition across the 3 business areas: Mobile, Cable and Digital Media and MFS. We added 1.6 million mobile subscribers in the quarter, taking the total to 51.6 million.
Homes passed by our cable business grew to over 3 million in the quarter 1, and we gained nearly 1.1 million new MFS customers, taking our total to over 7.3 million.
Marc Zagar
These 3 business divisions enjoyed strong year-on-year revenue growth. Mobile delivered 6.6% year-on-year growth.
Cable and Digital Media 12.8% and MFS 48.6%.
Marc Zagar
Turning to Slide 18, you can see that we generated total revenues of in excess of $1.4 billion in the quarter, up 8.5% year-on-year in local currency, and 4% on a reported basis in U.S. dollars.
We saw less impact from regulatory headwinds than in previous quarter, with like-for-like organic growth of 9.4%. EBITDA was $478 million in the quarter post corporate costs, down from $498 million in Q4, 2013, with a margin of 34%.
Marc Zagar
As mentioned by Hans-Holger, the EBITDA margin is in line with our guidance, which is around the mid-30s range for the full year.
Marc Zagar
The EBITDA is declining by 3.7% in local currency year-on-year, and the decline is only 1.1% in local currency if we exclude corporate costs. CapEx expenditure was down from Q4 at $163 million or 11.6% of revenues, but 20% over the last 12 months excluding spectrum.
Marc Zagar
In Q1, we did not have spectrum CapEx, and our full year guidance of around 19% of revenues, excluding spectrum and licenses, remains unchanged.
Marc Zagar
On Slide 19, you can see that the revenue growth continues to be driven by South America, delivering $81 million in the quarter. Africa's contribution continues to increase with $26 million in the first quarter.
Within the business units, Mobile continues to be the biggest revenue earner, contributing $74 million year-on-year, in terms of growth. Cable contributed a strong $19 million.
MFS contributed $8 million year-on-year.
Marc Zagar
We also saw growth of $18 million coming from other revenues, including primarily equipment sales as well as MVNO and roaming revenues. Foreign currency fluctuations had a significant $65 million negative impact on revenues this quarter, most of that impact deriving from 3 countries; Columbia, Paraguay and Ghana.
Marc Zagar
Turning to Slide 20. In Q1, our EBITDA margin after corporate cost was 34%, which is 4.3 points lower than it was in Q4 2013 -- in Q1 2013.
Marc Zagar
Two different angles to understand the dynamic of the margin development. First of all, we have a regional mix effect.
As you heard from Hans-Holger, our growth in Africa is strong and above Millicom's average in the first quarter. We are growing our customer base in Africa significantly since Q2 -- Q3 of last year.
And this comes somewhat at a cost of the EBITDA margin level.
Marc Zagar
In Q1, the margin in Africa remained, however, broadly stable compared to the second part of 2013, but lower than the first half of 2013, when we were experiencing little or no growth in terms of customers.
Marc Zagar
So during this period of investment and growth, and consequently, with the higher relative growth of Africa and it's lower margin year-on-year, we saw a negative contribution to the overall EBITDA margin of Millicom of 1.5 points coming from Africa. Similarly, and still looking at the mix and the drivers coming from high-growth areas, in South America, we saw exceptional growth of Tigo Columbia, and having relatively low though strengthening margin, Columbia also had a dilutive impact on the overall EBITDA in the period.
Marc Zagar
So looking at it from that first angle, it is very important to highlight that broadly half of the EBITDA margin decline year-on-year, came from these high-growth areas.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
First, you see the impact of regulation, 0.8 points, 50% of which came from Africa. Within the commercial bucket of 1.6 points, the main impact corresponds within that to 1.1 point, being the impact from increased equipment sales, OTME [ph].
This arises from our successful smartphone penetration push in LatAm, and this is a rather healthy indicator that should be correlated to the KPIs, Hans-Holger, described a few slides earlier in terms of smartphone penetration growth in the quarter from 20% to 24% for LatAm.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
In the same bucket, I would also highlight that commissions had an impact of 0.4 point, driven by the significant customer adds in Africa, which I referred to previously. Regarding the business development bucket, 50% is deriving from higher employee costs, essentially in Africa, also linked to our strong commercial drive there.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
Finally, corporate costs, which include shared services and the costs of the development of our digital media startup venture, as we said a few months ago, are increasing as we build stronger central functions to support our market and new growth area.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
Turning to Slide 21, you can see that normalized net profit reached $61 million in Q1 compared to $136 million in Q1 2013. The main movements are linked to the lower EBITDA following our accelerated investment in growth opportunities, higher D&A due to network upgrades, and higher gross debt which increased by $1 billion over the period creating higher interest charges.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
On Slide 22, you see that operating free cash flow reached $108 million (sic) [$109 million] in Q1, compared to minus $37 million last year. The 2 main items driving the improvements were paid CapEx and working capital movements in Q1, which was far less seasonally marked than last year.
Free cash flow reached $50 million (sic) [$51 million] versus minus $92 million last year.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
On Slide 23, looking at our debt position, our gross debt increased by $194 million in Q1 versus at the end of Q4 2013. Our net debt position increased by $135 million to $2.6 billion, pointing to a net debt over EBITDA of 1.34x at the end of March.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
I also remind you that the cash position includes roughly $800 million which currently sits in escrow pending the closing of the transaction in Columbia. We continue to extend the maturity of our debt to 5.5 years, with the issuance, in particular, of the new corporate bond in Guatemala, the new local bond, I mean, in Guatemala, up from 4.8 years last December.
We are also optimizing our balance sheets when possible, and the recent partial tender offer of our bond in El Salvador will help reduce the cost of debt.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
Slide 24. We are mindful that our revenues can be negatively impacted by foreign currency movements and address this through rigorous treasury management.
We raise that in local currency, whenever possible and use the mix at fixed and floating rates to ensure that across all markets across we are naturally hedged. At the end of March, 71% of the group gross debt was labeled in U.S.
dollar, but the ratio goes to 59% if we look at local operation. 82% of our group gross debt was in fixed-rate.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
Slide 25. Our full year guidance remains unchanged.
To recap, we expect mid to high single-digit pro forma revenue growth, which is based on the new parameters announced at the time of the Q4 results, with the full consolidation of Guatemala, and equity accounting from Mauritius and Online.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
We are working to achieve growth in the long term, and we continue to expect EBITDA margin to stabilize around the mid-30s after corporate cost in 2014. No change as well regarding our CapEx target at around 90% -- 19% of revenues for the full year excluding spectrum and licenses.
Secondly, and turning to slide, and looking at the waterfall, specifically, where we see the impact of cost by nature. I would highlight the following
So with that, I hand back to Hans-Holger for his concluding remarks.
Hans-Holger Albrecht
Thank you, Marc. To sum up, the growth pattern experienced in the first quarter is in line with our expectations.
The trends we've seen in the first quarter underscore the importance of digital and validate our strategy to be a rapidly transforming company that helps customers adopt new products and enjoy a digital lifestyle. We have been investing for growth in the long-term and are confident that we now have strong foundations in place from which to exploit new digital opportunities.
Hans-Holger Albrecht
This sums up our presentation of the results, and we're happy now get your questions. So operator, could we have the first question, please?
Operator
[Operator Instructions] The first question comes from Stefan Gauffin from Nordea.
Stefan Gauffin
I would like to dwell upon the net financial costs in the quarter, which was fairly high. I know, there is cost for the redemption of the bond in El Salvador, but if I look at the increase in net -- if you look at the increase in interest expense, it goes from the $69 million in Q1 last year to $104 million this year, and excluding the El Salvador it's $92 million, but if I look at the cash flow statement, the increase is only from $55 million in cost to $58 million in cost, so what should we expect going forward, why is it such an increase in net financials, and what sort of interest expense should we calculate on -- for the gross debt?
Marc Zagar
Yes, when it comes to the increase in the interest cost, I mean, this is primarily driven by the increase in the net debt, which we highlighted. If you are comparing to the cash flow statement, I mean, there is not a perfect match there because the coupons on the bonds are not necessarily following the same timing when it comes to cash.
When it comes to the -- we're not guiding on financial costs going forward, but what we've said before is that we expect our net debt to increase after we close UNE transaction because obviously, the impact which was flat before of equalizing our contribution in this merger. From this level of 1.34x, our net debt we expect to rise towards the top end of our previous net debt limits, which we flagged for a long time as 2x.
So that obviously, will have a continuing negative impact on the financial cost that the business is bearing.
Stefan Gauffin
But if we look at your financial cost for the bonds that you have outstanding, what's the average interest rate cost for the group?
Marc Zagar
For the group, we're looking at a cost approximately of 6%.
Operator
The next question comes from Sergey Dluzhevskiy from Gabelli Company.
Sergey Dluzhevskiy
Couple of questions. But first on the satellite, on DTH launch in Bolivia, if you could talk a little bit about this launch and about your DTH strategy in general, because I think you have mentioned that you're going to be launching DTH in other markets, and also are you working independently in terms of DTH or are you working with a partner?
And finally on DTH, who are you leasing satellite capacity from?
Hans-Holger Albrecht
If I talk about the strategy, I think the opportunity for us, when it comes to DTH in our markets is that, although we are focused out on the cable rollout and cable footprint, there is always a big part of the population, which doesn't get cable. Hence you can't serve our TV products to them.
And DTH, as you know is a very cost-effective and a good way in doing it. Particularly from a basis that with the cable business we have in our markets, we have already many of the infrastructures in place, you need to know to run a DTH platform, like the playout center, you have a customer service center, you have the kind of technical platforms and support and so forth.
So it is not a major investment you have to undertake in order to reach those kind of markets and it gives a perfect footprint to cover the whole country. The second reason why you have to do it from kind of strategic standpoint, is that, as you know, sports rights and content rights are sold on a country level, and in order to compete in the future for those kind of rights, you have to have a kind of nationwide offering.
So if you're just a regional player or local player in the cable segment, you may face disadvantages towards other DTH players or OTT players in the long term future. When it comes to how we do it, we do it ourselves.
As I said, it is not a major investment. So we don't have any partner in the business in itself.
Obviously, we team up with all different kinds of content suppliers, may it be on sports, may it be on the movie side, may it be on the channel side. But the business operation in itself, we do so far on our own.
And the satellite provider, I have to come back to it, it's a local one, but I don’t have the name right now in my head.
Sergey Dluzhevskiy
Okay. Are you going to be using the same one in other markets, or it's going to depend on the market?
Hans-Holger Albrecht
Yes, the choice, of course, was to do it as cost-effective as possible. Hence, we were trying to use satellite, which covers our regions and our footprint in Rango [ph].
Sergey Dluzhevskiy
And one more question, kind of bigger scale on M&A. Global wireless M&A has been picking up pace over the last year or 18 months.
Obviously, your focus is on cable, but, if you could talk a little bit about your thoughts or vision on becoming a larger mobile operator, whether focusing on existing markets where potentially, it could drive consolidation or on adjacent markets. For example, in Panama, which [indiscernible] lies next to Columbia and close to a cable market in Costa Rica, there is a company called Cable & Wireless, I don't expect you to comment on specific companies, but this would be an example of an adjacent market, maybe you could talk a little bit about your thoughts on acquisitions in-market and outside-of-market, and adjacent markets in wireless?
Hans-Holger Albrecht
Well, as you know, we are big fans of the combination of cable and mobile in-market, which is one of the kind of the key focuses we have, hence where we operate with mobile, we believe as well there is cable opportunity. We should look at and vice versa.
Right now the main focus is on executing and operating the assets we have. As we -- it's going to get the approval by the end of the second quarter for UNE.
We have done [ph] just approved one of the biggest transaction the company has ever done, and it has a lot of management time to be devoted and a lot of financial resources to be devoted to as well. So that's the main focus.
And we feel fine with the markets we have grown. So we see good growth opportunities, and we see good opportunities to build the business forward.
In market consolidation, we obviously, would always look as a first choice, in case it would come up, but we can't see any on the horizon right now. And when it comes to outside or countries nearby to our operations, it's not on the agenda as the first go right now.
So currently the focus is closing UNE and integrating that one correctly and then rollout the kind of tools gradually [ph] mobile, cable in the existing markets we have.
Operator
The next question comes from Lena Osterberg from Carnegie.
Lena Osterberg
Lena Osterberg from Carnegie here. Sorry to go back to the interest rates, cost question, which was posted before.
So basically, it's a little bit different. If you look at it quarter by quarter, you have the same level of gross debt in the fourth quarter, and still your interest costs are up.
So I'm just trying to understand what's going on in the interest line? Why is it increasing so much, and what is the underlying costs for the debt, is it something else in this quarter compared to Q4?
And then also your depreciation charges as you said are up and you say that part of this is due to the accelerated depreciation. So I was wondering how long will you be on an accelerated path and how much is this, what is the underlying run rate?
And then also on the corporate costs, when you had your Capital Markets Day, you guided that, the corporate costs would decline to 2.5% of the group revenues by 2017. These currently, at least based my own consensus estimates, imply that the group costs will decline over the next few years.
Is that a viable assumption while you're building up your group functions?
Marc Zagar
Okay. Going back to the interest.
I mean, I can't give you the full detail on everything, but the big building blocks I would say, as you are comparing Q4 and Q1 are that, if you recall in Q4, we issued the bond for the financing of the UNE transaction that happened mid-quarter. And then, in the first quarter we issued the bond in Guatemala, also that happened towards the end of January, or right at the end of January.
So the impact of these and the timing of those mid-quarter is certainly a factor explaining the change in these numbers. It's not a straightforward timing impact.
We can provide you more detail [indiscernible].
Lena Osterberg
Sorry, the bond was issued mid-October, not mid-quarter, I think.
Marc Zagar
Yes, correct. Yes
Lena Osterberg
So you've pretty much had it in for the full quarter now?
Marc Zagar
Yes. Yes.
Lena Osterberg
So that's why I'm -- you have pretty much the same gross debt for both quarters, but still your net interest costs go up quite significantly, so I'm just trying to understand what's going on and what we should expect forward? Because it makes a big difference on the EPS line.
Marc Zagar
Yes, sure. I think, one item we flagged before, was the cost we booked regarding the Salvador redemption, which we booked [ph] by part of the Salvador bond, and we booked some $12 million in cost in the first quarter.
Lena Osterberg
Yes, but also adjusting for that, it's a very big step up.
Marc Zagar
Okay. Well listen we can follow that offline, if you want to provide you more than [indiscernible], okay?
And your second point was....
Lena Osterberg
On the depreciation.
Marc Zagar
On the depreciation. Yes, we're not providing any guidance on depreciation at this point, though.
Lena Osterberg
But is there any, that you wrote there is an accelerated path of depreciation in the quarter, what is that related to and roughly how much is it?
Marc Zagar
It was roughly in the region of $20 million.
Lena Osterberg
And is that sort of a one-off, or should we expect that into the rest of the year as well?
Marc Zagar
But again, we're not really giving any guidance on depreciation.
Lena Osterberg
Okay.
Marc Zagar
And when it comes to the corporate cost the, I mean, if you're referring to the Capital Markets Day guidance, you should remember that these percentages we gave as a guide line were based on the revenues including UNE. So these will, obviously, have a dilutive impact on the corporate cost level.
We do not expect the cost to go down in absolute terms, rather just out of line [ph].
Hans-Holger Albrecht
Let me, maybe add one point to the corporate cost because it's important to understand. This is all based and part of the kind of change we have in the business model, so a lot of new functions we had to create on the corporate side, which we didn't need in the past, like when it comes to handset sourcing, handset subsidies, churn management and support and so forth.
So this is one of the kind of key drivers we have, but as Marc said, it will stabilize in terms of absolute cost and since [indiscernible] goes up a percentage, a part of revenue should come down. And the second point, which is important as well to note is that many of the new development functions we have, like for example, our digital media business, is counted in the corporate cost as well, so it's a blended number where you have 2 additional corporate costs like legal or finance or whatever and you have the business development cost, which are a bit higher, which should be more moderate going forward as well.
So overall I'm not too concerned about that part.
Lena Osterberg
Okay. Can I also ask a final question, because you with your guidance you are sort of indicating that your margins will come up slightly over the rest of the year, could you maybe say something about what's going to drive that margin uplift and how you will do that without sacrificing revenue growth?
Hans-Holger Albrecht
No, just to be clear we said our margins will be around the 35 level, and that we could also be confident. So we don't change any terms in terms of guidance or we don't say anything in terms of what kind of margins we can expect for the coming quarters, the full year guidance, that is exactly as it has been before.
Operator
The next question comes from Joseph [indiscernible] from Citi.
Unknown Analyst
I have got 2 questions please. The first one on MFS.
You've got a multiyear guidance to reach $600 million to a $1 billion of revenues, and what I to try to understand is, based on some of the information you disclosed in Slide 14, it looks like the ARPU you're getting out of Tanzania, which is one of your most advanced markets, is perhaps a bit more challenged than you expected. Do you still see room for the growth to pick up so you manage to reach your target in the medium term?
And then secondly, on revenue growth, I think, you gave us a lot of information around the EBITDA development -- the margin development over the year, I was wondering, whether you can give us some clarity around how to think about the revenue performance. Your guidance obviously, is a range from mid- to high-single digit growth.
You're at the higher end of that range at this point, but as the comps get tougher, what kind of exit rates do you expect for the year? And what kind of rate do you think is satisfying for you in the medium term?
Hans-Holger Albrecht
When it comes to MFS, I think it's a regular question because, indeed the guidance we had at the Capital Markets Day was the revenue between USD 600 million and USD 1 billion. We highlighted at that time as well that, it's a completely new business, so obviously, there will be changes or there will be adjustments in the kind of business model.
But the underlying trend and the underlying number we have been giving out hasn't changed and we are so confident at this stage that we're going to get there. This is based on a very simple assumption: A, we have penetrated MFS to a very high level of customer usage in just 2 or 3 markets so far, so there is much more room for us to go in other markets.
And as the penetration goes in the other markets, obviously slow [ph]. And we're not just depending on Tanzania for example or El Salvador.
So the more we rollout the MFS model, which has been launched, in all countries, I think the more the growth should accelerate. And the second point is, as well, that we are still working very strongly on the -- we call it the financial ecosystem.
So right now, we're mainly using it for the very simple services, our MFS services, but in the future you will move into other business areas like merchant payment, utility payment, insurances and so forth and so forth. I think connectivity, is the question of the ARPU, and yes, there has been a competitive pressure in Tanzania and Paraguay, which is our biggest market when it comes to first quarter, where one of our competitors was giving MFS for -- more or less for free.
That has stopped now, and we see a kind of see a kind of return of the markets immediately. I think, it is unlikely that we will see those kind of competitive behaviors again, because it destroys new business model and ARPU driver for the industry.
But, like always, there's also things we can't control in short-term and always create certain kind of pressure, but shouldn't change the long-term fundamental rule when it comes to MFS. When it comes to the revenue growth for -- I think it was for this year, how we see it, as we've said, I think we have laid out foundation for growth for the rest of the year, and we don't have to change our guidance as we've indicated earlier.
We have seen strong performance, good performance in most of the countries, but there is still room for us to [indiscernible] this kind of momentum because not all of the countries have performed equally, some had regulatory pressure, some had pricing pressures, which we believe will ease. So therefore, the kind of guidance we have for the full year is intact.
And we don’t have any concerns, we wouldn't achieve those kind of high single-digit within [ph] gross figures.
Operator
The next question comes from Erik Pers from Danske.
Erik Pers
My first question is about your acquisition in Bolivia, how much revenue from Multivisión was recognized in the quarter, please? Secondly, customers in Senegal, came in massively in the quarter, what did they -- I mean what did the introductory offer look like, how much did these customers pay to be counted in as active customers in the quarter?
And then thirdly, I want to just come back to -- Lena asked a question earlier about corporate costs, but just to clarify, you are still committed to this 2.5% target as corporate cost versus revenue.
Hans-Holger Albrecht
Okay. if I start with the Bolivian piece, it was very small, so honestly we don't the figure here right now, it's not a kind of major driver, when it comes to Bolivia, I look to Marc.
Marc Zagar
$4 million.
Hans-Holger Albrecht
$4 million, so it's very small, and didn't have a major impact. When it comes to Senegal, the offer -- we had a very strong customer intake, that's true.
It was a combination of a good price packages we had to build and a strong marketing campaign. It's not the kind of model in terms of final offer we're going to run for the future.
But the situation in Senegal was a bit different for us from a competitive landscape, because we had been facing 3 substantial issues, which we had to come over due to the -- as you remember, maybe the license dispute we had with the government for many years. So A, we had a brand drag, when it comes to the Tigo in Senegal.
So we had to win back the confidence and the support of the customers. We had a major issue when it comes to network reliability and network quality, which was driving the customers out, and we had, as I said, not an unattractive pricing offer when it comes to the end consumer.
And all this we tried to take tackle with an integrated campaign to grow on all these 3 elements and to bring customers back to see and test Tigo and get the kind of confidence back in the service and the brand. And that has resulted in a very strong subscriber intake, there's not a 100% correlation over the business subscriber intake and the revenue growth, but we believe after we rebuild our position as a good carrier that should come eventually as well.
And when it comes to the corporate costs, at this stage, we confirm our guidance as no major change. Obviously, again, those things can sometimes move in terms of what kind of initiatives you put on the corporate side and what kind of functions you have.
But it's nothing which we see is different from what we have announced earlier. We will have more priority as well because it's a bit a question of -- definition of corporate cost as well.
We give you more credit probably during the Capital Markets Day, we intend to have in the fall, and in a nice location and then you will get the details about this one as well, but for the time being, it's the number we stick on.
Operator
Your next question comes from J.P. Davids from Barclays.
J. P. Davids
Two questions please. Firstly, given the rapid proliferation of smartphones that you highlight, are you comfortable that you've developed a pricing model, an adequate pricing model for bundled services and maybe you can provide some color on the recovery period for this margin investment that you flagged?
The second question, just a quick one, on Paraguay, just give us any update there is on regulation there, I thought there was a risk of asymmetric mobile termination rates being introduced in that market?
Hans-Holger Albrecht
Yes, when it comes to the smartphones bundle and the smartphone subsidies and smartphone offerings, obviously, the whole intention is for us to bundle it into data packages and add it like in the case of Colombia which works very well with additional digital services like such as the Tigo Music for example. The philosophy is that the return should be a maximum -- I mean, normally, of course, in the life cycle of a customer, but maximum 12 months, so it's a controllable investment you're doing.
And more importantly, I think we have been becoming better and better in penetrating and pushing low-cost entrant's brand into the market, such as Huawei phones or tech phones or those phones which come at $15 or even less nowadays into consideration. So it's a goal to educate the customers to take low cost phones, penetrate the market and push those segments very aggressively.
Bundle the services in order to increase loyalty and reduce churn. And have a return which as I said, maximum wise should be 12 months.
And just to come back, because people always ask about corporate costs. This is for example, a completely new division we have on the corporate side, which is focusing entirely on exactly what smartphone you source, how you package them together and what kind of sales channel, because there's a big important cost there [ph] as well, even if it's only in order to get the returns corrected.
When it comes to Paraguay, there is a -- right now there is a -- it's quiet, there is nothing to expect there from discussions. We don't have any kind of further indication or knowledge that another regulatory impact would come from this market at this stage.
Operator
The final question comes from Bill Miller from J. M.
Hartwell.
William Miller
Can you give us a little color on your operations in Colombia, how are your profit margins are improving or not improving? And where your -- how fast your operation is growing?
Secondly, can you give us any benchmarks as we lookout not just this year, but at towards the '17 date that you've given us that is very important to you, can you tell us what '15, '16 or '17 will do for growth when you expect the bulge in growth to take place, so that we can measure not on a quarterly basis, but on a yearly basis, your progress?
Marc Zagar
Bill, regarding your first question for Colombia. I think, as we highlighted before, we've seen a very strong and continuing performance when it comes to revenue growth in Q1 again.
And the -- and that's -- I'm referring to local currency, really driven by the inroads they are making when it comes to smartphone penetration and market share. So that's been very positive.
Obviously, as you know also in Colombia, on a year-on-year basis, the currency was much weaker. So from the U.S.
dollar contribution perspective, that shaved off quite a lot of that growth in U.S. dollar contribution terms.
The margin in Colombia is at the lower end of our margins because obviously, Colombia is a country in LatAm where we've got the lowest market share, but obviously, where we are also growing and developing that market share significantly. However, from this low level, and despite the significant inroads we're making in terms of revenue growth, we're seeing some strengthening of the margin, which is a very positive factor.
Hans-Holger Albrecht
Bill, maybe I answer the question, when it comes to the road to 2017, and as you know, we don't give kind of year-by-year or quarter-by-quarter forecast when it comes to 2017. As since on our operational side, there may be always issues you have to adjust, but the kind of big picture is intact, and just to highlight maybe, how we see the kind of key trends coming together in order to be there by 2017.
The growth, as we can see in the figures, is coming back. Is actually accelerating quarter-by-quarter and it shows that once we do the right investment, and we do the right focus on the customer, the brand and network, we gain our market position and we're coming back and move forward.
We see as well, that it's not one-sided growth story anymore, just mobile it's a equally balanced between voice data, it's cable, it's digital media and other places, and it's across all operation, not just Latin America for example, as it has been in the past. And the second point, of course, which will drive the growth even further is the merger, once is approved and executed between UNE and Tigo in Colombia.
We are not going for growth only. We are going to go for profitable growth and we want to focus on returns as well.
And therefore, the other elements you have in terms of the growth strategy, CapEx. We said it should come down after the peak towards 15% in 2017.
We see it kind of start to decline as the percentage figure already. So again, I think we are on the right track.
We have done a lot of operational points which will support this in terms of procurement, in terms of one network solutions and so forth, and so forth, and so forth. I think the indications are in the right direction as well.
And on the EBITDA side as well, as you can see, we reconfirmed our guidance for this year and we see outside potential in some markets. Marc mentioned for example, one of our bigger markets like Colombia has lower margins than average.
But over time, of course, realizing synergies with the cable and taking us from a market position. It should be upside there as well.
So I think the indicators are going into the right direction. I am pretty confident 2017 figures are fine and the road -- sometimes you turn left, sometimes you turn right, but the fundamental direction is in place.
Operator
Thank you. This is all we have time for.
So I would now like to hand the call back to Hans-Holger Albrecht. Please go ahead.
Hans-Holger Albrecht
Yes. Thank you, everyone, for listening in and for all these questions.
As usual, if there any kind of follow-up questions don't hesitate to contact me, Marc or our IR team. Otherwise, let's stay in touch and let us talk to you again at our second quarter announcement.
Thanks and bye for now.
Operator
Thank you. This concludes Millicom Financial Results Conference Call.
Thank you, for your participation. You may now disconnect.