Apr 26, 2017
Operator
Good morning and good afternoon, ladies and gentlemen, and welcome to the Millicom Financial Results Conference Call. Today’s presentation will be hosted by Chief Executive Officer, Mauricio Ramos; and Tim Pennington, Chief Financial Officer.
Following the formal presentation by Millicom’s management, an interactive Q&A session will be available. I would now like to hand the call over to Michel Morin, Millicom’s Head of Investor Relations.
Please go ahead, sir.
Michel Morin
Thanks Trish. And hello everyone and welcome to Millicom’s first quarter 2017 results conference call.
As usual, the results will be presented by our Chief Executive, Mauricio Ramos; and by our CFO, Tim Pennington. And before we begin, let me draw your attention to the Safe Harbor on Slide 2 of the presentation.
So, with that let me hand it over to Mauricio for his remarks.
Mauricio Ramos
Thank you Michel. Good morning or good afternoon to all, and welcome to our Q1 call.
As always, I am here today with Tim Pennington, our CFO. We are also formally welcoming Michel Morin as our new head of investor relations.
Most of you know Michel from his time at Morgan Stanley. We are very happy to have him join the team.
So please join me in saying welcome to Michel. And before we get started, I would also like to thank David Boyd for his great work during his interim time with us.
Thank you very much David. So now onto our Q1.
Let us first recap the basic strategy. So it is present in our minds.
One, we are rapidly building high-speed data networks, both mobile and fixed. You all know that.
Two, we are undertaking a two-fold reconfiguration of our business at the same time. The revenue reconfiguration is about focusing squarely on mobile data, fiber cable and B2B to drive our future growth, and of course to help offset the decline of the legacy mobile voice business.
And the cost reconfiguration, the second part is about focusing our spend to drive efficiency and deliver superior cash flow growth. And in complement to this and as you know, we are transforming our IT stack to enable convergence and provide a truly digital customer experience.
This is [Indiscernible] in terms of strategic approach. During [two months] we made a lot of great progress and we would like to share some of that with you today.
So let us get to it. The first message today is that we have increased the rate at which we are deploying our high-speed data networks.
We are just getting better and better at it every quarter. On the left hand side of this slide, you see the progress we made on our 4G network during the quarter.
During the quarter we added another 470 points of presence to the 4G network. That means that over the last 12 months we have more than doubled the capacity of that 4G network.
As a result, it now covers 48% of the population in our Latin American market, and it already carries over 40% of our overall data traffic, and you will see what that means in a minute. On the right-hand side, you see the fast progress we are making on building the fiber cable network.
During the quarter, we built a record 370,000 fiber cable homes. I will repeat that number, 370,000 fiber cable homes.
About 85,000 were upgrades from copper to fiber cable, and about 285,000 were actual new builds. This is our highest build rate ever.
And it means that over the last 12 months we have already added over 1 million fiber cable homes to the network. We are already at the build run rate that we had guided you for the full year in 2017.
Just as importantly, and although Q1 is a seasonally weak period, we had another strong quarter in terms of net adds, both on mobile and on fixed. On mobile we added another almost 400,000 4G smart phone data users to the system.
That means that over the last 12 months we have added over 2.5 million 4G smart phone data users, and you may recall that the average ARPU on our 4G users is now just below $20, driven by 4G data consumption. By the way, these numbers do not include our B2B users, which were also rapidly migrating to higher ARPU 4G consumption patterns.
In our fixed business, in the quarter we added a record 63,000 new fiber cable homes connected. Note that over the last 12 months we have added an 185,000 new fiber cable households as customers, and as a result we now have over 2.1 million fiber cable subscriber homes.
And even after the loss of some legacy copper subscribers, over the last 12 months we have added a net 100,000 subscriber homes to this system. We still have about 980,000 copper subscribers, which is why a portion of our cable builds are actually upgrades.
So that we can offer these subscribers a bundle with high-speed data, more retention and higher ARPUs. But, of course, we only upgrade where it is economically viable.
So we do expect the number of legacy copper homes to continue to decline very gradually over time as they have in the past three months. So the point is that we continue to drive strong growth in our 4G and cable users, and as a result the revenue reconfiguration into these lines of businesses continues to show good and steady progress as we expected.
The legacy voice and SMS revenue now represents only 27% of the overall service revenue mix. We are reconfiguring the business.
And it is still declining about 17%, but every quarter it represents a smaller drag on growth. And much more importantly, our strategic – our future revenue lines now represent 50% of total service revenue with continued and steady progress every quarter.
Mobile data grew at another very strong [18%] in the first quarter. And it now represents almost a quarter of our business.
The home residential business continues to grow, gaining 7.3% in Q1 and our B2B business grew 6.4% with renewed growth of Colombia. The strategic importance of our revenue configuration is that it is on its way to putting a comeback in revenue growth.
As our fiber mobile data and B2B grow and become larger businesses, they are increasingly lifting the overall service revenue growth for the group. This is precisely why this next slide is so important.
In Latam, our service revenue growth is now coming back. Sure.
We are still a bit negative, but growth is slowly and we think surely coming back. In the three markets in Latin America, where our revenue from mobile data now exceeds revenue from the legacy voice and SMS businesses, we have started to see an inflection in the revenue trend during Q1.
That is the point on this slide of Colombia, Paraguay and Bolivia. Let us focus a bit on Colombia as an example, where we are just about coming out of the woods, and our growth rate is now almost back to zero.
Not positive yet, but surely picking up. Overall, mobile user intake went back to positive this quarter despite having to raise prices to offset the impact of the higher value-added tax rate.
The competitive environment in mobile has stabilized in Colombia quite a bit, and ARPUs as a result are regaining some footing. So it will be possible now for the market as a whole as a matter of fact to better start monetizing data, something which was difficult to do until now.
And on the home business in Colombia, the price increases that we took late last year did slow down sales a bit in January and in February, and the copper subscriber base was somewhat [Indiscernible] to those increases during those two months, back in March we had very positive intake momentum, some of which you see in the quarter numbers already, and which has started strongly into April. The overall point is that in all of these markets, mobile data and cable are now large enough and growing strongly enough to help turn the revenue trend around, which makes us feel confident that our strategy is indeed working.
We have said repeatedly that ours is a two-fold reconfiguration of the business, the first piece is the revenue reconfiguration that we just talked about. The second piece is simply operational excellence.
Spending the OpEx and the CapEx where it makes an impact, and doing so in an efficient manner. The point here is the project here is delivering the goods.
Our EBITDA margin for the quarter was 36.8%, which means that our 12-month run rate is already above the 35% margin that we had communicated as a target sometime ago. The same goes for our operating cash flow margin.
The 12-month run rate is now 19.2%, which is getting very close to the 20% target that we had articulated some time ago. The point here is twofold.
One, we continue to improve our operations quarter after quarter [Indiscernible] delivers, and two, we are delivering superior margins and cash flow growth while we reconfigure the service revenue mix. But definitely, we are not asking investors to wait out for revenue growth in order for us to start delivering cash flow growth.
We are already doing that. There are a couple of projects worth highlighting here.
One is, the efficiency we are driving into our network costs. In the last year or so we have reduced our network costs by around 6% in absolute dollar terms at the same time as we doubled the size of the 4G network, and increased our cable network by about 12%.
We are doing this by changing our operating model, using managed services, optimizing energy spend, and gaining efficiencies in procurement, of course, on top of all the other smaller initiatives that make up a part of the Heat program. And two, these are ongoing digital transformations as we continue to invest heavily in IT.
We now have more than 4 million active users of our Tigo shop, and other digital distribution and client service applications. That is up from less than 1.8 million users only a year ago.
The point here is that it meaningfully takes our transaction costs from the system and helps us become a more digital company. The last point I want to make is that we continue to deliver on improving our capital allocation across the portfolio as well.
This quarter we completed two additional and important transactions. First and as previously announced, we have agreed to merge operations in Ghana with those of Airtel.
We will own this asset 50:50. The JV will have about $300 million of combined revenue, and about 10 million subscribers.
The point is that this JV will create a stronger, more profitable and a very attractive number two operator in that market. And second, today we have announced the sale of about 1400 towers in Paraguay to American Towers for cash proceeds of about $125 million.
These, of course, helps us unlock and better allocate capital, and it also helps us to continue to resume land costs. And also key here is that the lease rates are denominated in local currency, which as you can imagine is a smart way to add currency neutral leverage to the business.
To summarize the quarter, simply said, we had a good start to the year. The key messages are five.
One, we are making increasingly fast and very focused progress in building the 4G and fiber cable networks that underpin our strategic future. We added 470 4G pops and 370,000 fiber cable homes into the network just this quarter.
As I have said this before, we are investing more with less. And we are taking every opportunity to invest wherever we see growth opportunities.
Two, we have continued strong user intake in the quarter. We added another 400,000 4G users with good ARPU and a record 63,000 cable subscriber homes.
Three, our revenue reconfiguration is on track. 53% of our revenue mix is now mobile data or cable revenue.
Four, whereas we have not yet returned to service revenue growth our future lines of business continue to deliver strong growth and increasingly carry the weight, and five, our relentless focus on operational excellence continues to deliver. Our EBITDA run rate margin is now close to 35% are above that number, and our operating cash flow run rate is now pretty close to 20%.
Said differently, and simply we feel we are attaining strong operational momentum in executing our strategy. So yes, we still have to regain positive growth but we can just about see that on the horizon.
And yes, the second half of the year is where the real recovery needs to happen, but we had a good start to the year in this quarter, and that puts us well on track to deliver our full-year targets as we have articulated them to you. And with that summary, I will pass it over to Tim for more details on our quarter.
Tim Pennington
Thank you, Mauricio. Before I go through the numbers let me start by saying a few words on the economic outlook for the key markets we operate in.
Twelve months ago we saw slowing economic growth, weakening exchange rates and rising inflation. I think today we face a much less threatening economic outlook.
I wouldn't say the economies are robust, but they are generally steady. Looking at the charts on the left-hand side of this slide you see that economic growth forecast has stabilized around the 2% to 4% in all of our Latam markets.
On the top right, highlights of welcome stability in the Colombian peso. In fact it is 5% stronger than it was a year ago, but more importantly for us it has been fairly steady now for some time.
And the graph below that shows inflation, which has fallen quite rapidly from the highs in the summer and it was around 9% to today’s rates of under 5%. So let me turn now to the key financial metrics, service revenue, EBITDA and CapEx.
We are maintaining our guidance on these metrics, and as Mauricio has outlined, we feel very comfortable with the underlying trends in the business, albeit the headline numbers need a bit of explanation. Service revenue was down 1.5% year-on-year, but I will show in the next slide this was almost entirely due to Africa.
EBITDA was flat and we saw positive momentum in Colombia, Paraguay and Costa Rica, dragged back largely by challenges in Central America. But, our margin continues to improve and the focus on capital allocation and project Heat are delivering results on the cash flow.
Okay, turning first to service revenue. This slide is showing you the bridge from the service revenue growth in Q4 2016 to Q1 2017.
First thing to say is that we are now treating Senegal as a discontinued operation. So like for like, Q1 service revenue was in fact very similar to Q4.
The second thing to say, Latam momentum turned positive driving a 1.1% uplift in sequential growth, but note this was after MTR cuts in Columbia, the return of the [Indiscernible] fixed wireless service spectrum. These two took about 80 basis points of the group’s growth, whilst the drag on the Guatemala surveillance project held us back by a further 50 basis points.
I think the third point to make on this slide and I think this slide shows it very clearly is that all the positive momentum from Latam was offset by a difficult quarter in Africa. We saw a strong 2016 and we have seen a number of factors affecting the growth, the biggest of which was more than doubling of the ATM telecoms in Chad, which took the African service revenue into negative territory and contributed 130 basis point drag on the group’s service revenues.
Mauricio talked about Columbia, but I think it is worth repeating, we saw a more stable macroeconomic environment. We saw a more rationale mobile market and a return to positive net adds.
This led to stronger revenue trends despite the headwinds mentioned a few seconds ago, plus a record roll out in fiber cable, good traction and operational efficiencies, all of which added up to a 30 percentage point EBITDA margin for the first time. So we did face challenges in Latam.
El Salvador continued to struggle, whilst Guatemala had a full quarter driven by lower international incoming revenue. But elsewhere we had strong performances in Paraguay, which was further enhanced by a one-time accrual reversal.
There were no negative one-off charges in the quarter and you will have noticed that we are no longer reporting adjusted EBITDA. So our Latam EBITDA margin remained robust, up another 40 basis points and the OCF margin strengthened to over 30%.
As I said, a fairly tough quarter for Africa, part of the issue is that our base is now narrowing. With Senegal taken out of the numbers and once the Ghana transaction closes, we will also exclude Ghana from the group consolidated numbers.
So we are more exposed to single country issues as we were with Chad this quarter. But we remain focused.
EBITDA is still growing and that is a key priority for us. We kept the EBITDA margin above 30% and more importantly cash flow remained strong, solidly in positive territory and firmly heading to full free cash flow positive in 2017.
Okay, so let's turn our attention to the group EBITDA at 555 million in the quarter, margin 36.8%, up 80 basis points. We also benefited from positive FX movements.
So in real terms, EBITDA was up 2.8% year-on-year. I think the major reason EBITDA has remained robust has been our focus on cost through the project Heat transformation initiatives.
And I think if we turn to the next slide and look at costs in more detail, the slide shows the total cost base for the quarter without adjustments to FX or any other one-off impacts. And our total cost continues to fall.
They were down $10 million on a year ago, and whilst that doesn't seem a lot you can see from this graph the mix shift, G&A expenses are down 120 basis points. We save money on corporate costs, save money on network expenses in Africa.
Meanwhile we have continued to plough money into sales and marketing activities, which as a percentage of revenues increased by 60 basis points in Q1. Numbers to say on the P&L below EBITDA, depreciation, labeled A on this slide that was $16 million higher due to translational impact of a strong Colombian peso.
Note that the prior year has been restated to include the depreciation arising out of the fair value exercise on Guatemala and Honduras. Item B is the net finance charges were up $12 million, largely on high levels of local currency debt in Colombia, and finally item C, other non-operating income reflected FX movements in the main.
So cash flow, cash flow has improved by $100 million over the last 12 months. In Q1 2016 we had negative equity free cash flow of $50 million.
In Q1 2017, we have positive equity free cash flow of $50 million. So a $100 million swing.
And where did that come from? Well, EBITDA was a little bit better.
Cash CapEx, working capital and cash taxes all a little bit lower. We did see some offset from interest, which is higher largely on local currency debt levels and some timing differences.
Now, I would also caution now the first quarter is generally not representative of the year. But still we see the benefits of tighter cash flow management all the same in these numbers.
Net debt, pretty much in line with the end of Q4. Major movement was FX related and the payment for the acquisition of Cable Parana, our cable business in Paraguay.
Leverage ended the quarter at 1.94 times on a fully consolidated basis and 2.17 times on a proportionate basis. The Paraguay towers deal announced today will not have any noticeable impact on our leverage.
The contract will be treated as a finance lease. There will be a small positive impact on EBITDA and we also expect it to be mildly cash accretive as well.
So that brings us to the end of our Q1 presentation. To summarize the quarter, I would say, we started to see more positive revenue trajectories in Latam.
Data is starting to drive the business. The macro outlook is looking better and benefits from project Heat are starting to show as is the impact of the capital allocation decisions we have been making.
So the results we are seeing are strengthening the cash flow. There are still headwinds.
Africa took a backward step in this quarter and Central American businesses are not yet firing on all cylinders, but we believe we are on the right track. We are taking the right steps and we remain well positioned to deliver our 2017 outlook.
And with that, we will take questions.
Operator
[Operator Instructions] We will now take our first question which comes from Julio Arciniegas of RBC. Please go ahead.
Julio Arciniegas
Yes, hello, thanks for taking the question. Two questions please, the cable deployment has been accelerating this quarter, we are near now 300k, what should we think about the run rate in the future, and more, who are the challenges to go above the one million homes that basically the company is guiding.
And my second question is more related to Colombia, in Colombia, homes connected, they have been reducing by seeing your new disclosure, but this should improve cable deployment advances, where should we see positive net adds in Colombia? Thanks.
Mauricio Ramos
Julio, thanks for the questions, and I am just take them in the order in which you put them. We have guided in 2017 for about a million homes built, and you have seen us consistently speed up, get better, got built quarter upon quarter and we just have a quarter in which as I said earlier, we got quite a bit of homes.
We think the runway is somewhere around there, somewhere around a million homes, other cable homes per year. That's about what we seek from machinery point of view we can sustain and continue to sell and fill at the same time.
And as you've seen we are filling our network, we've articulated this normally before and if you do some math and the numbers were showing today, you'll realize that it is a good mix between these parts fill rate at a pretty parts fill rate. We're building about a million and filling about 18% to 20% if you do some back of the envelope math there.
12 months out, which is both the rates are pretty good. The challenge is going forward, have to do largely with the usual construction crews, training them per minute, getting them out there.
Again these are pretty fast rate and we are continuing to look for ways or speeding it up. As a matter of fact, key point here is that we're seeing pent up demand for these services, broadband and plenty of meat just about everywhere we operate.
So, we continue look for A) ways to ramp up the machine and B) Just this pocket of growth everywhere that we will like to guard and build and fill. That's the answer on table across the market.
And on Columbia you're right, there's a couple of elements there in the short term that’s having negative effect that we will wash out over time. One is for the quarter, specifically the combination of CISCO reform, the value added tax and our price increase.
These darken sales a little bit in January and February. They said earlier March was pretty strong and April continues to be pretty strong.
So, that sensitivity to the price increases and the value added tax is now washing away and we're now on positive territory in terms of net adds in Columbia. The second point which I also alluded to which is important for you all to have in mind is around the quite a bit of cocoa clumps in Columbia.
We're doing it for strategic reasons to retain subscribers but also will be able to offer a bundle there. And as a result of that there are what I have described us as copper cutters in the past in to this system.
But our build rate and our fill rate is such that in Columbia we're not in positive territory.
Julio Arciniegas
Okay, thank you.
Operator
Thank you. We'll now move to our next question which comes from Sumit Dhaka of New Street Research.
Please go ahead.
Sumit Dhaka
Hi yes, had a couple of questions please. One on the pilot deal in Paraguay, I was just interested in why the timing, I guess you've been sitting on tiles across the region for a number of years now.
What prompted that decision and how many more towers do you have across the portfolio? What could we expect going forward?
And just a final piece of detail on that. Could you give us some sense to the yield on the tower deal, the in fact will see on the even that financial charges will be very helpful.
Thank you. And then, secondly on Columbia you talked about the potential impact of MVNO changes on the wireless business.
Could you give a bit more sense as to what you're thinking about there? Something like it could be putting revenues on the pressure going forward.
What exactly do you think will play out over the next few quarters? Thank you.
Mauricio Ramos
Sure, so on the power deal and the rational is what you would expect in terms of knocking capital as I describe, allocating that capital elsewhere. Becoming more focused and efficient being a paper white business and financially we saw some more point that we put that cost into liquid currency, so that it's more of a natural hedge there for us to do.
From a statistic point-of-view there comes a pointing time being which or model operators have deployed such large networks into a market place that only a number of times no longer give even many positive critical advantage. And as a result of that, that point in time comes where you're better off on marking that capital and focusing on your core business while also driving some local currency exposure.
We still have in Latin America some 10,000 towers you would take, this stopped at the back of my mind, and you would take. Now, when or how or if we would do similar deals is not something that we're ready to discuss at this point in time, and Africa as you're aware are really went out and showed years ago when we put the towers into HDA.
Tim Pennington
Sir, just on the just add a couple of more points on this one. I mean, the other thing till here I would say is that we is the timing of this, you don’t pick a timing, these are capital discipline exercises if the numbers arrive and go with it, if the numbers don’t write we don’t go with it.
And you asked about the year, we don’t sort of but for disclosing the yield exactly but in the local currency pronouncing in Paraguay costs us north to 10% today. While as this would give us effectively mid-to-low single digit so yield on.
So, it really is this will move out extremely well on an NPV basis which is why we push the button on it. That was good?
Mauricio Ramos
Yes. So, and on the MTM question, changes into realization our land to provide a more stable environment for MVNOs to have this duality over beginning on rates.
We don’t speck that you would have a huge impact on ours going forward strategically. MVNO we named a small part of the mobile market place in Columbia.
And moving quaintly, we ourselves have been very open to MVNOs and whole stop I feel then simply because we have a large combining network with our recurring cannot so accretive revenue to us.
Sumit Dhaka
Okay, that's very clear. Thank you.
Operator
Thank you, very much. We will now move to our next question which comes from Bergae Telovisky of Gabriel and Company.
Please go ahead, your line is now open.
Bergae Telovisky
Good morning. Thank you for taking the questions.
Two questions. One on the spectrum position.
Would you talk a little bit about your current spectrum position in your key markets and whether there are any, I think it's kind of spectrum options coming up and how are you interesting kind of the growth in data demand your spectrum position for the next few years. And second question.
Mauricio, could you remind us of your M&A philosophy as you look at various markets, as you look at potential SSLs.
Mauricio Ramos
On spectrum and we don’t have any immediate urgent needs just about anywhere. In Columbia, we do have are very well aware a handicap which is we have historically not had access to all frequency bands, and there is a process with spectrum just starting in Columbia which on the positive side truly provide access for us.
Or should provide access for us to those bands. That's probably that's starting.
It's got some issues and now it doesn't really do anything to outsell for the unbalanced marketplace with one very dominant player in there. And withstanding process and whether when and what final condition will be still early and difficult to tell.
We would hope that certainly helps us solve in good terms for the handicap that we have in all frequency bands and it does something to level the playing field there. There is an ongoing processes on AWS in Guatemala that continue to get delayed and delayed.
We have now Virgin hero spectrum there. And in power wise that there may be something towards the end of the year or again the turning of this turning to special years.
As per the later cycles comes to an end, usually tends to deal to eight. On an M&A philosophy, we're extremely disciplined.
The M&A, the first and most important thing is to not get yourself in trouble and we think in that logic we have plenty of opportunities to start with in markets and even in my all the positions that we know well. So, we are focused on in country in field and more than anything else and if there will be interesting opportunities in adjacent geographies would be very careful.
And you can imagine that we monitor them, I know them and have contacts into all of those. That is our M&A philosophy and we do distant pieces or in fields just about every quarter.
Somewhere which we may not even naked to the headlines because they're so small and they're usually cable and in which makes more sense to buy then build. And lastly on SFA in Columbia which is one of those if you will, large medium size opportunity in country in fill.
That process continues to play along as I've said before they acted in the mix sky. It does have about a million fiber homes or with or penetration including range of over bill.
And it does have about 40% of the revenue base on copper along those socioeconomic segments. So, that' the flip side of that equation.
So, it's an asset that we monitor and have got a lot of work on very disciplined manner. We are ion our market.
We understand the economics of both the higher socioeconomic segments for the fiber home is but also the low socioeconomics of where the copper homes are. And the revenue mix is something that we're very careful with.
The issue with our process is that it's permeated with tons of uncertainty, not just around asset which we've done all the work on but the timing on the one hand maybe this year slipping to next year, who knows because there is so many state I've mentioned with. And the second was they uncertainty is that effecting of an appropriate valuation is also so much politically driven.
And that evaluation needs to be our point and reach it actually makes disciplined financial sets, sends and obviously we are that process more could not really take off without appropriate evaluation. I tell you this and this is a more important thing, I think you should have in mind with regards to that process and just about everywhere else, where opportunities on cable and excess.
But by the time, I'm using this process as an example. But by the time this process are around the activity, it will prevent.
If we'll have built just above the same amount of volumes or more over a million homes, careful in that timeframe, at a cost per all-in-all around $100 per home. So, that's the way we look at it, and you won the process and forth, if and waiting for off course we don’t know, but we're taking that time to go in your homes around and everywhere else.
And that's really what we're focused on and the way this unit' decisions.
Bergae Telovisky
Thank you.
Operator
Thank you. We'll now move to our next question which comes from Lena Osterberg of Carnegie.
Please go ahead, ma’am. Hello.
I got some questions on Africa. First of all, on Tanzania, I was wondering what's the progress on the ownership dispute and also the IPO.
Unless you say that you are sort of subject to any potential find and what price it could be. And then I was also curious to find out when you expect approval for Senegal and Ghana.
Mauricio Ramos
So, how about quick crack at those and between and Tim will good near has here with some of the more detailed questions. So, they are.
The IPO requirement in Tanzania it's unfolding. We have some new way.
A competitor of ours is allocating its own process first and we have leeway making it surely to go grindant later on in the yes. That success of initial IPO by one of our competitors is still just to be a turning and the process is ongoing.
And in the meantime, because you're going to make process just to make sure that everything around the requirements or are being able to draw that deal is fully in place and continue very dollar rate for our timing to be sometime in the second quarter after the first one have occurred. That was Tanzania.
Tim Pennington
I think mostly, I think to some extend that is going to be intertwined with legal case, there is a hearing next week. Obviously, there's no we will not be considering any sort of capital sort of raising transaction without settlement of this particular case.
Here we have lot of face in the Tanzania, just this departments that the illegal process there. So, with a bit of luck, this will be sorted out sometime during the second quarter.
They don’t after it is subject to the low of the land has been now indication of some choose as a rezone in one hardly that just started the process for IPO, unless IPO's give and take time. Though we are working sort of positively with the Tanzania power authorities and we'll approach the IPO acts.
Now, as and when appropriate subject to these other issues.
Mauricio Ramos
I got on the approvals that you had also asked before we forget about that we have engaged the corresponding governance of both countries and we received very positive feedback. They both understand good nature of these deals for the countries and that’s been informal and good positive feedback and of course the former processes are now underway and we expect that we will formally, closing new time.
It's hard to give you specific quarter sense of that but it's moving along and progressing past as expected.
Operator
Thank you. We will now move to our next question which comes from Thomas Heath of Danske Bank.
Please go ahead.
Thomas Heath
Thank you. Thomas Heath here.
A few questions if I may. Firstly on El Salvador which is unfortunate net situation is there anything to do there is there any way to be creative to remedy that or can we just hope for comps to eventually to get better on a smaller network if you say.
Secondly, on the Tanzania listing which you talked about the legal case that’s about you can subscribe shares there has been discussion about only local buyers for shares which of course would be unfortunate. And then, thirdly on Ghana is there any mechanism in place to exit that asset any protocol options?
Thank you.
Tim Pennington
I was going to quickly say on the network situation and I will start with El Salvador, I mean as there are all technical solutions that we are working as an industry to put Ghana into in and around the prison into more complicated technical solutions they might appear but I understand progress is being made on that and we don't expect this to be a forever in a day situation but it has taken longer than we perhaps hope to this stage.
Mauricio Ramos
I think, what I would add to -- which I think is important is as last year the situation there was permeated of course by the political impact and media impact that this matter is having on El Salvador and there were some friction between the government and the industry, the mobile industry. We moved very quickly to put together a joint table with government and all the operators which we largely held together.
To try and come out jointly in a coordinated manner we as well very well put better solutions more creative solutions and result of that now we have about very good ongoing dialogue with the government and we think that will help this kind of situation to be much, much more proactively managed going forward because we are simply jointly helping solve the problem. On Ghana the purpose of our venture with Airtel is to help drive much needed industry consolidation, better economics into a business that would be important in size.
That’s the first step. The first step is to get the synergies recomposed the business and of course as with everything else will do, we will then of course have a very capital oriented, very disciplined manner to what second step may look like.
And yes, and if there is additional on the Tanzania listing I think we [indiscernible] as we are holding the second part.
Tim Pennington
I think the Tanzania part is mandate that it Tanzania only invested in IPOs, some published fee, I am guessing that it's going to come, is asking for that to be extended to international. We don't have that officially.
It's purely speculation in the market but, we opposition has been that it should be opened to international investments as well as local investors but we will wait and see what happens with that.
Thomas Heath
Just to clarify was that the court case that you legally said that you…
Tim Pennington
No that’s something different. That is basically we have a shareholder, well he is not a shareholder someone who is sort of comes himself on the register and we are taking legal means to remove him from our shareholding register.
Thomas Heath
That’s helpful. Thanks.
Operator
Thank you. We will now move to our next question which comes from Johanna Ahlqvist of SEB.
Please go ahead.
Johanna Ahlqvist
Yes, hello. Two questions if I may.
First one on Africa again, given what is happening now in [Chad], how do you sort of foresee the development going forward from – in Chad, well should we expect impact for sustain for the full-year and that you will basically have just small number of EBITDA growth for the remainder of 2017 in Africa and then secondly back to Paraguay and sort of tower deal you made can you say anything how will that impact CapEx and OpEx going forward because I guess you will have some CapEx savings related to this and then you need to pay something on the OpEx side? Thank you.
Mauricio Ramos
It's always been a fairly volatile place Chad and Q4 was fantastic revenue growth. Q1 has been hit.
So we will adjust to Chad that said the EBITDA remain strong but the cash flow remains very good. So I think it's one have to write down for maybe for few quarters but it's a full focus on Africa in terms of cash flow and margin improvement that continues.
Tim Pennington
On a product wise this is your usual solid deal meaning it's that we have already said which I won’t repeat, it does have a positive [MPV] to us which naturally comes from the nature of this tower deals and of course to share that infrastructure. It does give us positive or marginally positive impact on EBITDA and CapEx of course and it comes more efficient use of the towers and as a result of that we have this small MPV cash accretive asset and more important element of course, they’re mass capital and local debt on the business.
Johanna Ahlqvist
Thank you.
Operator
Thank you. We will now move to our next question which comes from Kevin Roe of Roe Equity Research.
Please go ahead.
Kevin Roe
Thank you. Tim, are there any additional potential tax or regulatory developments that you are monitoring that could impact 2017 and Mauricio turning back to Columbia can you update us on competitive HFC bills and now you are positioning HFC products when there is a competitive alternative?
Thanks.
Tim Pennington
Okay, quickly then on tax. It's a difficult question because our country in which we operate in are constantly tinkering the tax reform.
I think the only big one that we are monitoring is that Guatemala it looks to be delayed at the present time as the Columbia tax reforms was implemented in the beginning of the year and I don't expect anything more from that. There is nothing major in the rest of Latin America that it's causing along those and in Africa frankly it's always challenging in Africa.
The Chad VAT increase came out of the blue from us in this quarter and so I wouldn't mind to kind of find that but there is nothing major on my radar at the present time.
Mauricio Ramos
Kevin, on the Columbia and the cable product if you will there and to build the opportunity there. Colombia had effectively an alternative HFC network by one of our competitors which houses some 6 million to 7 million homes to rotate and that information is currently available from our competitors and of course there are areas in which there is a dealer sale network.
Historically there has been limited investment in those alternative DSR networks and the size of the alternative HFC build, it is one that still gives a lot of room for our deal to occur. Let me explain what I mean by that.
Columbia is a country of [indiscernible] you take some 4 million to 5 million give or take, which yields £10 million to £12 million in our marketplace. Again, depending on what assumptions you make and what is the exact number of people per dwelling is, so call it 10 to 12 and Columbia is an increasingly urban society and the latest number show that it will be 90% to 95% earning from five years from today which is important and it’s loaded with medium sized city, very decentralized although Bogota is big it is similar to the U.S.
in the sense that you have lot of small and medium size cities where [indiscernible] urban cities that are continuously growing and so when you look at what you would expect on HFC network to color which you would take for example of why we open this -- almost 70% to 80% HFC of the entire homes available in the country which would of course mean the Columbia would then double, or so many million homes build and I will give you an idea of what the opportunity lies with basically to have million homes in Columbia [indiscernible] that just gives you an idea of why there is an opportunity as there has been limited investment in the urban society. In terms of what we are doing with the product, inflations are still low even in Columbia both broadband and KCB penetrations are around 40% to 50% whereas other more developed economies in the country that opportunity for long term target like Argentina and Chile and even Puerto Rico is much higher at 60+ so there is runway there to fill the networks and the better way to fill the work is obviously to offer any double play or triple play, as you can imagine our key strategy here is to positioning that product is cross shale product.
We have a large mobile network and we have large fixed based network. So onto the fixed network or settle mobile and onto the mobile we’re funding the triple place products.
But today we’re largely focused on cross selling and in areas where we rollout new networks just in selling out or setting a product, a double play or triple play that is, and this is a key point anchored around our product which is where the pent up and certainly exist and this last point is true that we operate.
Kevin Roe
That’s very helpful. Thank you.
Operator
Thank you. We will now move to our next question which comes from Bill Miller of Hartwell.
Please go ahead, your line is now open.
Bill Miller
Mauricio, it has been now there two years or little bit plus and I wondered if you could take us through the next two or three years and give us what you think the profile of Millicom will be at that time?
Mauricio Ramos
I think you should and that’s a great question that you should all expect us to become increasingly broaden and that mean we have laid our strategy, strategy is working. It’s all about building the 4G and high speed data networks, every quarter we build and we sell and we give you the out-clues and there is some subscriber count that we are having and that is showing as we will continue to show and that strategy is working and we are effectively region figuring the revenue next obvious business.
It will be two years up from today a data centric business conversing business with 4G high speed data and HFC high speed data networks and a data-centric converge product, everywhere we operate in America with a lot more revenue coming from data and a lot more revenue coming from subscription that what it is today for sure. And you expect us to as a result of that continue to drive our margins outlook cash-flow and EBITDA as we have done so far and because we continue to deploy initiatives around heat and you can expect us to take more in field opportunities in the market we operate and very carefully look out on those in-field opportunities into our adjacent opportunities as we reconfigure the business into being a data-centric conversion place in a market we operate.
If you look at what we have got basically a strategy that looks a team that is gaining more provisional momentum strongly we’re hitting them just all cylinders, we are making on the right capital decisions moving out of areas where we’ve got stronger capital and we are deploying it everywhere we possibly can and we will continue to look for opportunities where we can grow and that’s where we are driving the business.
Tim Pennington
If I could add much I mean I think and I think it's a great question. I see that our vision really that in two to three years time we will have the state of the art high speed internet network whether the customer wants it by fixed all or by mobile.
And our customer base will be increasingly sort of speaking will be more sort of contract based revenue and that will win high value customers so I think the direction we are traveling in gives us that huge opportunity given where we are with the great mobile positions and the growing cable positions. I hope that’s kind of helpful.
Bill Miller
It's very helpful. Thank you.
Operator
Thank you. We will now take our next question which comes from Mathew [indiscernible] of Barclays.
Please go ahead sir.
Unidentified Analyst
Good afternoon. Thank you for taking the questions.
So first I had a question with regards to 4G, you highlight how network progression has been in the last quarters. I was wondering if in Latin America you could give us a sense of how you compare with your peers and also lean to 4G.
I mean the fact that you also investing in cable network and fixed infrastructure is that helping you to build better 4G network. I mean are there synergies there something that may be some place competitors cannot copy.
So that’s the kind of the first question. In terms of other question Ghana, could you share with us how this venture is going to contribute to the group?
I understand you are not going to consolidate any more on accounting, but I mean are you expecting to get dividends out of this venture or other things your management fees, etcetera, etcetera. And then lastly on Bolivia I saw that [indiscernible] have increased as you highlighted in your press release.
Can you give us a little bit more color there? Thank you.
Mauricio Ramos
Before we start, this is going to have to be the last question given it's quite a lot in there. Sure.
Let me address if you will, the more strategic ones on 4G and fiber and all how that plays out. Down the road strategically it will be a bit for consumers and our job as a company will be to deliver that bid in the most cost efficient manner to that consumer whether it's on his or her mobile tablet or at home.
And as a result of that a high speed data eccentric outlook in Latin America and everywhere else will require a conversational operator to have high speed internet that works both on fixed and mobile and that is more strategic reason to do this is just to be cable to be there. In the meantime 4G is most advanced technology that is helping us drive consumers into high speed data products and all of this large number of fibers that we keep bringing in our quarterly basis for 100,000 this quarter, a run rate of 2.5, the reason they are coming in with such higher outputs is because they increase their consumption once the network is there and this is the key point and I hope we’re driving it sufficiently clear.
The pickup in offer is driven by higher consumption on a quite stable price -- so subscribers that have access to the network on a 4G network on an average or prepaid subscribers takes up about just North of 2gigabyte per month where the average is less than 1.5 so there is a pickup in consumption that drives output. Now that’s the sort of run way if you will as to how building a fixed network supports your 4G network if you look at building a 4G network, if you look out building a 4G network underneath or sort of building that cable network underneath your 4G network helps you with the delivery of that big in the short term because the faster you upload that base from the 4G network onto your fiber backlog, the more efficient you are as a operator and better you can drive outputs.
And if you fast forward not into 4G but into 5G and it doesn’t matter how hard it is in Latin America, 5G is effectively fiber technology. The more fiber you have in the ground the closer you are to the deploying 5G, that’s true for 4G but it's even more true for 5G so I think deploying fiber tube on network is way of preempting full proofing the future on more 4G than 5G.
I hope that was very clear to you. It [indiscernible] strategically and offers the product.
Tim Pennington
Thank you. I mean, clearly we consolidated in the financial accounts.
It will still contribute through its composition as net income and yes obviously we would like to see it generating some dividends to us but cash flow and repatriation will be by dividend going forward. And on the Bolivia spectrum issue, there are whole lot of moving parts in Bolivia this quarter but one of them -- and this is largely in accounting reclassification from CapEx to OpEx so now the spectrum fee has gone up particularly it was more of re-class, I hope that covers.
Mauricio Ramos
Thank you. We are going to hand back to the operator to close the call.
Operator
Thank you. Yes ladies and gentlemen unfortunately that is all the time we have available for questions.
I would now like to handle the call back to Mr. Ramos for any closing remarks.
Please go ahead sir.
Mauricio Ramos
Thank you very much. And thank you everybody for your attendance today.
We are happy with Q1. We think it's putting us on track for the full year and more importantly it's right down what we want to and think will have a lot of impact doing strategically just dwelling our networks and [indiscernible] data customers.
Thanks everybody.