Oct 22, 2015
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 the 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 Nicolas Didio, Head of Investor Relations.
Please go ahead.
Nicolas Didio
Thank you and welcome everyone to Millicom 2015 third quarter results presentation. Today’s presentation materials can be found on our website www.millicom.com.
Before we start, I would like to remind everyone that the Safe Harbor statements apply to this presentation and the subsequent Q&A session. With me today on this one-hour call are our CEO, Mauricio Ramos; and Tim Pennington, our CFO.
I will now hand over to Mauricio to give an overview of our Q3 2015 results and operational performance and strategy, after which Tim will take you through the financials and we will finish with a Q&A session. With that, I hand over to Mauricio.
Mauricio Ramos
Hello everyone and thank you very much for joining us today. As you know we always aim to structure our investor presentations in order to address the issue that are foremost on your mind and through that first.
Today is of course no exception. You will all have seen the release we put out yesterday, about our decision to report to U.S.
and Swedish Law Enforcement Authorities' attention to improper payments made on behalf of our joint venture in Guatemala. This is of course our Q3 call, but I would like to address this subject first.
As you will have noticed by now we are facing this issue head-on. And then of course I would like to move on and focus a little bit more on our quarterly results.
As the investigation is ongoing we are unfortunately extremely limited by what which we will share with you. That is, frustrating for sure, both for us and certainly for you as well, as we would like to continue to be as satisfying as we possibly can on this topic.
But in order to protect the integrity of the investigation we are unable to share details with you and we hope you could appreciate that. And I say that because we do want to take note of how proactive, how diligent and how decisive we have been.
As I said earlier we are facing these head-on, we are not sticking our head into the sand. A delicate matter was brought to our attention, it was reported to the Board, a special committee was promptly formed and an investigation is being conducted by a top-notch international firm.
A decision to report to the authorities was then made and we proceeded to disclose the matter to our shareholders immediately. So if you look at what we've done, so far we have investigated reported undisclosed, proactively, diligently and transparently.
We indeed came to the judgment that it would be appropriate to report this matter and will of course fully cooperate with the authorities to the extent that they do choose to investigate the matter themselves. We cannot make any predictions as to whether or when any government investigation will be commenced, much less the direction we may take.
Rest assured that the company is committed to maintaining a proactive compliant and business ethics program which includes training, auditing and monitoring. We are always working to improve that program and I hope we have shown already our commitment to that.
Furthermore we have engaged Covington & Burling to conduct an independent assessment of the company's compliance policies and procedures and the compliant organization so that we can further strengthen our practices much more. Again this is a voluntary and proactive step that we are taking decisively.
You may be wondering what will happen next. We understand that if an investigation by a government results, it will likely take some time.
If that happens we do not foresee that we will be able to provide any substantive updates on the work done by the authorities. If we can, of course, we will.
Again please know that we have reported the matter ourselves and will cooperate fully with the authorities. Any indication however as to how long an investigation will take will be pure guesswork from our side.
Equally we cannot speculate as to the possible outcome of any potential actions to be taken on behalf of the authorities. I am sure you have more immediate questions, naturally focused on the joint venture in Guatemala, the effects on the business and our future in Guatemala more generally.
Taking each one of those in turn; what does this mean from a financial perspective, I am sure you want to know. It is very early for us in the context of an ongoing investigation for sure to speculate on the effects if any that this may have on the financial of the Guatemala business or on Millicom or generally for that matter.
You may also wonder where would this leave us with our Guatemala business going forward. As with any responsible company, and in perfect consistence with what we have done so far we will thoroughly review and assess the strategic options that could be considered with regards to the Guatemala business as we would do with any other business.
This in itself is not a decision and I emphasize that, it is not a decision on any changes to the business but rather a result of our proactive risk management. I know that many of you would wish for more details on everything I have just said, but at this point in time in order to maintain the integrity of the investigation we will not be able to elaborate a lot more on this topic.
But we will gladly take your questions of course. I hope that you will understand that as much as possible and how responsibly we have acted so far, you will grant us a little bit of leeway in that regard.
In reality, please note that we are absolutely doing the right thing here, both from a business and from an ethical point of view. We however have a lot to say about our quarterly highlights on our business.
So let's turn to that as our business is indeed growing quite well. Regarding our Q, there are five key messages we would like to take-away from our call.
First is, our underlying financial resources are very good, with organic EBITDA growing at 8% in local currency. Number two, our EBITDA margin is improving.
We are very focused on driving profitable growth, and our margin is up 60 basis points already to 34.1%. Three, our growth potential is materializing and our strategy is showing promising results.
We have surpassed the 60 million mobile sub mark and the cable network is now 7.5 million phones. Four, in Colombia we are sustaining strong underlying growth.
And five, optimization our business continues with very strong and concerted focus on costs. The underlying business that you see here is we are dead focused on execution.
So look at Slide 5, Q3 was a solid quarter but of course FX has hit us very hard. There has been accelerated depreciation in key currencies like the peso and the guarani and of course this puts pressure on our U.S.
dollar reported numbers. You all know that.
But if you put FX aside for a minute, there are three key messages that underlie our financial performance in Q3 and you can see all of them here. Number one, organic revenue was up 7% year-on-year with strong service revenue underneath it and Tim will talk about this a little bit more later as it's a key metric for us to focus on.
Number two, EBITDA was up 3% year-on-year. And number three, EBITDA is growing faster than revenue, this is 100% consistent with the message we have given you of our focus on driving operational leverage.
Now let's take a little bit of a look at our operational performance. A few points on this slide.
One, in mobiles we have added 800,000 subscribers in Q3 and almost 4 million year-to-date. Now know that we have surpassed at 60 million mobile subs mark I mentioned earlier.
The second message here is that in Q3 we accelerated the build-out of our cable network, just like we told you we would do. We added 243,000 homes to our network during the quarter and year-to-date we have added a net 450,000 homes to our network.
You can clearly see the acceleration in our build here. And number three, the subscribers are coming in.
We have added 83,000 new RGUs or revenue generating units and 49,000 new customers during the Q and year-to-date we have added 230,000 new revenue generating units and about 130,000 new customers. Lots of pent-up demand filling our network and we will talk a little bit about that in a second.
Our EBITDA margin keeps improving. The message here on this slide is very simple.
We continue to drive profitable growth. This is our third consecutive quarter of EBITDA margin increase and we are dead-focused on continuing that trend.
Our reported EBITDA margin is now 34.1% in Q3 up 130 basis points from 32.8% a year ago and even excluding UNE our EBITDA margin is at 34% in Q3 up 60 basis points from Q3 last year. So we are indeed growing but we are growing in a more profitable manner as we told you we would do.
So to talk a little bit more about cable, as I know that you have been keen to hear more about this since our last call. The strategy is simple, you build, you fill, you monetize.
On building already told you that we are accelerating the rollout of our homes. We built in Q3 twice as many homes as we did in Q2 and Q1.
As you think about the economics of this build-out please know that the network CapEx to build a home or to pass a home is about $100 per home passed in our market. On filling the network we mean converting homes passed into homes connected or subscribers.
Our current penetration for the entire company is about 35%, so think on that as a long-term industry average or a target. In the newbuilds we are achieving 19% penetration within just 10 months of the new homes in the list for sales, that's a pretty good number.
And as shown on the chart below, the number of RGUs per connected home is quickly going up. Now getting close to two fixed services per home.
So we are driving a pretty good bundle ratio here. And we are monetizing this investment.
In a market as you see on the chart, the average revenue per home is about $27. So despite strong evaluation, average revenue per home remains very healthy in our markets and it has actually increased in local currency as we are driving our penetration of this business that we are in the early ages of.
In a simple manner we are ramping up the build with filling the network and we are monetizing this. Now let's take a little deep dive on Colombia.
As you know a very key market for us. The chart here takes away the effect of handsets and Tim will address that in a minute and focuses on underlying service revenue, the true metric of the health of our growth of course.
Tigo Mobile is still growing, albeit it's growing at a lower rate. We are segregating the service contract from the handset, has driven customers towards lower priced ones, you already know that.
However, we continue to increase our market share and our base in the country is strongly outperforming that of our peers. Our cable business is accelerating its service revenue growth reaching 8.7% this quarter.
This is a result of our refocused product portfolio and enhanced pricing since we merged. So note that, on a combined basis our Colombian service revenue grew to 6.1% up from prior quarters in local currency therefore showing an acceleration of our underlying growth.
And our -- a slide here -- our last slide here is a summary of our optimization program. We also continue to deliver reductions in our cost base across our operations and at the corporate level.
You know how focused we are on that. Our corporate costs ended at 3% of revenue this quarter and implied run rate now of about $200 million a year.
Rest assured that we continue to critically look at all business areas to optimize the way we work. There simply will be no rest for us on this front.
And before I hand over to Tim, as a conclusion I want to summarize the key highlights from the quarter in this slide. In Q3, we delivered strong organic growth and we remain very focused on executing our plan.
We expanded our footprint and customer base in both mobile and cable and we did this while increasing our efforts to enhance the margins and improved customer generation. And with that last message I will hand it over to Tim, to give you a lot of detail on our quarter.
Tim Pennington
Thank you, Mauricio. So starting on Slide 13; headline revenue growth as Mauricio said was 7.2% that compares to 9% in Q1 and Q2 and the difference is almost wholly due to more handsets revenue growth in Colombia and even that was hardly a slowdown, simply that the handset revenue grew rapidly in Q3 2014.
If we look at our other key metrics, service revenue growth, EBITDA, margin growth, ex-UNE and cash flow, also progressed in Q3. Obviously the quarter was complicated by strong FX headwinds which were through the summer and not just in Colombia but also in Paraguay, Tanzania and Rwanda.
Revenue in particular saw an unprecedented 13.5% FX swing. Before I get into the details, I will quickly run down the group P&L and headline revenues $1.64 billion, as I said organic growth remained good, service revenue margin notched up and EBITDA at $560 million that represented 7.9% organic growth and as Mauricio pointed out a 60 basis points improvement on Q3 2014 on an ex-UNE basis.
And as you can see on the slide, it was 1.3 percentage points higher on an absolute basis. Incidentally this is the last quarter we will extract UNE from the numbers, as from Q4 we will have full comparatives in the prior year.
But into this year including a risk quarter including UNE we benefitted from a non-cash PPA adjustment of $8 million. This relates to the finalization of the fair value exercise for the acquisition of UNE and as I said excluding that -- including that the 130 basis points showed good progress on the margin front.
Continuing down the group P&L, overall our operating profit was 5% lower than last year. This was due to higher depreciation and amortization and again this was mainly due to the PPA adjustment.
Net financing charge broadly in line despite higher levels of debt as the impact of local currency bulk borrowings shielded interest charges to some extent. And again the difference here, we also saw a PPA adjustment in these numbers.
In other sort of costs we took a $108 million loss on CapEx. This is a mark-to-market evaluation -- sorry both of those are mark-to-market evaluations pursuant to call options for Honduras and Guatemala which were credited this quarter, so we were left with a net $46 million in the other non-operating expenses.
On non-controlling interest which is dividends to partners were lower in the quarter reflecting scheduled dividend profiles. Taxes up a little bit on withholding tax.
But on tax we are still expecting our full year tax charge to be under $300 million. And finally EPS was lower in Q3 but that is largely due to the FX adjustment mentioned earlier.
Okay let me talk in a bit more detail on the revenue and service revenue growth trends for Q3. I think this graph which is familiar to you now, really shows the story of our -- of Colombia over the last 12 months.
A new regulation last year resulted in the change in the way postpaid handsets were sold, a set of selling within a bundle, they are now sold separately. This caused the relationship between total revenue and service revenues to diverge.
I think this anomaly has largely now been flushed through and we are returning to more normal levels of handset sales growth. However the key message I really want to sort of stress from this slide is about the service revenue growth and this includes regulatory impacts such as MTR cuts, for instance, we do not exclude them from service revenue growth.
It remains very consistent, so as you can see on this slide from 5.9% in Q3 '14, in Q3 '15 it was 5.8%, it was up 10 basis points sequentially. More from that point of consistency, mobile growth of 3% and cable growth of 25% were exactly in line with the growth levels we saw in Q2.
And to emphasize this point a little further, Slide 17 shows the organic growth rates for each of our countries and they are pretty similar to Q2. However and as the lower chart demonstrates the FX has weakened materially reflecting the global emerging market currency volatility we saw over the summer and since the end of September we have seen some stabilization in FX rates.
But I think it's too early for us to relax at this stage. And there you can see the FX impact a bit more clearly on this slide, when we look at the revenue by our product areas.
Underlying revenue in all of our business lines. Data growth was 39% offsetting a decline in voice and SMS.
Again cable was up strongly. MFS a little bit slower in the quarter as Paraguay saw some weakening in macro market conditions.
Same chart this time by our regions and actually LatAm saw pretty strong underlying quarter. They were up 6.2% and again excluding UNE, most countries are doing well.
The momentum is improving and particularly in Paraguay where we have worked very hard to turn the business around. Africa continues to show -- to grow strongly.
It was just under 12% this quarter in an organic basis and that is despite Chad suffering from severe economic and security issues. And in fact it is the only market where risk being -- currently where the macro is impacting our business.
If I exclude Chad the rest of Africa business grew by over 14%, pretty much in line with prior quarters and the group sequentially. Okay, if I look at EBITDA now.
A few moving parts here, but the underlying performance was very satisfactory. Absolute organic EBITDA increased in both Africa and LatAm.
And once again we brought our corporate costs down. And so our organic growth rate just under 8% and it was offset by FX impacts of -- translation impact was $61 million in the quarter and its mostly coming from LatAm.
And then we had growth in our UNE, UNE averaged $77 million in the quarter and then there was a further positive adjustment of $8 million PPA adjustment I mentioned earlier. So then let me take that and look at that performance on EBITDA kind of in more detail.
I will start with LatAm and good progress in Bolivia where we saw early teens growth. El Salvador is up nearly 10% as well.
Paraguay and Guatemala are up around 3% each there year-on-year. Colombia including and there we saw some margin improvement, we are now at 30.9% and that's up 2.2 percentage points on a Q3 2014 and more importantly we stress the importance of the service margin which increased to 34.3% and that's also up 2.2 percentage points.
In Africa we did see -- we also some progress. Our organic EBITDA was up 10 percentage points and Tanzania continues to post strong EBITDA growth, it was up 9.3% on revenues 14% higher.
We saw a good uptick in subscribers -- with our subscribers and also MFS revenues were also very strong again in the quarter. As I said Chad continues to drag the Africa performance on this macro security issues but despite that the environment and we -- we are holding market share there and as a result we are managing our costs more aggressively.
Rest of Africa we saw some increases although there was a little bit of margin pressure in some of the markets. So turning to our cash flow, familiar layouts looking at the nine month here, cash flow from EBITDA to equity free cash flow, that is the cash flow before the dividends and other one-off items like M&A.
Headlines are the cash flow was good. OCF which is after cash, CapEx and working capital was up 10% on last year and our free cash flow up 41%.
Dividends to minorities are just normal dividends so nothing special there. And our last is within equity free cash flow of $127 million year-to-date.
I want to just spend a minute on CapEx. Our guidance on CapEx for the year is between $1.25 billion and $1.35 billion.
I expect we will come in towards low end of that range. About half of our CapEx this year will go towards mobile which is largely 2G and 3G coverage and capacity.
Although we will spend a little under 10% on 4G coverage for this year. Cable is about a third of the total with half of that relating to the capitalization of set-top boxes and other success driven expenditure.
So we have about -- 30% of our cable CapEx is for the build-out and our expectation is we will build around about 600,000 homes in 2015. As most of our cable build-out is aerial, we estimate the costs to build-out 10 million homes and about some additional 3.8 million.
It's going to cost us around the $400 million mark and we expect that to spread over several years. Finally on net debt; net debt is $4.2 billion, leverage stable at 1.9 times, consolidated at 2.2 times proportionate.
We have now finalized our covenants adjustments to 3 times net debt to EBITDA of -- across all facilities on bonds. And our debt remains very balanced, about a quarter of the growth there from local currency, we have a 6.2 year maturity profile and we only have $200 million of maturing debt in the next 12 months.
So in conclusion, the underlying trends remain robust. We are beginning to see a weaker macro environment, but we are positioning the business to that end.
The uncertain FX picture is making forecasting U.S. dollar revenues more difficult, but we are very comfortable with the EBITDA guidance provided in July and that is despite the FX deterioration which happens in the mean time.
As I said we fairly expect the CapEx to land towards the lower half of the range and we will maintain our focus on margin improvement and improving our cash flow. We are going to be cautious going into 2016.
We will balance further cable expansion and our mobile expansion will improve cash generation. As I have said earlier, we have got ample liquidity to manage the fluctuating environment.
We maintain a low leverage policy as is appropriate for the group at this stage of the development. So with that we will take some questions.
Operator
[Operator Instructions] We will take our first question from Luigi Minerva from HSBC. Please go ahead.
Luigi Minerva
Yes. Good afternoon and thanks for taking the questions.
I have two around the Guatemala issue and one on the operational fundamentals of the quarter and going forward. So about Guatemala my first question is I just wanted to check if Millicom falls under the Foreign Corrupt Practices Act, FCPA, in the U.S.?
I presume you do because you issue bonds in U.S. dollar, but I just wanted to double check this.
And my second question is whether you have learnt any lesson for your internal auditing procedures from this experience? And then my last question on the fundamentals, is really an update on the margin progression of UNE in Colombia.
Where do you think you can get to in 2016 is an important part of the investment case? Thank you.
Mauricio Ramos
Okay. Why don’t perhaps I take the first two and give Tim a little time to prepare for number three.
Listen on the FCPA question, this is a very highly technical matter as you can truthfully imagine, but I will tell you that we have hired the best of the best legal counsel and their recommendation indeed has been that we report the matter to the U.S. and the Swedish authorities and that is what we have done.
It's an ongoing investigation and of course we have let that due process play out here. We feel very comfortable with the advice we have received with regards to reporting.
On the second question, we have learned I think two things. One thing which I think is positive in the midst of this all which is that our compliance mechanisms have actually worked.
I would like to draw distinction here as to what has happened. This is not a result of an external investigation by any institution and is not the result of government investigation.
This is the result of our proactive investigation and compliance procedures and whereas of course this is a difficult matter to report, I think as I said earlier it has led us to believe that doing the right thing is the right thing to do and to convincement that we will take a lot of rough punches along the way in the short-term but we will come out of this a much stronger company as a result of this. And I think the second lesson that we have learned, as I said there is two lessons here, is that, you need to remain very, very, very, very vigilant on this matter and that is, why as I have said earlier, we have also asked Covington to conduct a complete review of our compliance program and help us get better.
Tim Pennington
And Luigi on the margin on UNE, I think we -- clearly we set out our case to improve margin. In any business we believe there is ample opportunity to do that.
I think we've actually seen a good progress towards that and the numbers are a little bit complicated by the PPA adjustment that went through the year. But on a like-for-like basis we are 300 basis points up than the year ago in UNE business itself.
So we are just sort of now over the -- in fact we are just over 31 percentage points of margin on a sort of recurring basis ex-PPA in UNE. So yes, we are very sort of happy with the progress of this being made that.
There is a little bit of weakness in the mobile side given the competitive dynamics there but we are generally happy with the way Colombia is going.
Luigi Minerva
And so is a mid-30s by end of 2016 still your broad guidance?
Mauricio Ramos
I am not sure I understood that.
Tim Pennington
It was our broad guidance. I mean we are aiming to get the business towards the mid-30s and hopefully we won't stop that.
I am not sure we committed today that by the end of '16 but certainly we are very happy with the progress we have made so far and I think we are -- hopefully we won't let our guard down and we will continue to progress with any new business.
Luigi Minerva
Thank you.
Tim Pennington
Thank you.
Operator
Our next question comes from Stephen Bechade of Citi. Please go ahead.
Stephen Bechade
Hi. Yes I have got two questions.
The first one is just on the guidance. Is it still a constant currency guidance or are you happy with the range that you gave in U.S.
dollars? And my second question is, I have read some Guatemalan news and have some quotes of the local head of the legal department in Guatemala, who claims not to have known anything about what's going on.
So can I infer that this is a recent issue as opposed to a long drawn out issue?
Tim Pennington
Well dealing with the guidance question. I mean our guidance remains on constant currency.
We adjusted there for currency at the second quarter. We have not adjusted to-date this quarter because FX has been extremely volatile through the summer and based on the numbers that we have got in our own press release today, what we are telling you is that, we are comfortable with the EBITDA range and in fact the CapEx is not affected by the FX volatility really.
We expect on the CapEx range that reading the press release today it went to the lower end of that CapEx range.
Mauricio Ramos
And on the Guatemala question, I want to ask you to be careful in making inferences and extrapolating or interpolating bits and pieces of information. And the reason I say that is, because as I realize that it may be frustrating to have such limited information on this, it is important for the process to end up in a fair and transparent final outcome.
That we preserve the sanctity of the investigation and as a result of that we can't really comment on matters related to that. There is just that we want to continue the follow the due process here.
Stephen Bechade
Thank you.
Operator
Our next question comes from Bill Miller of JM Hartwell. Please go ahead.
Bill Miller
Good morning, good afternoon I guess. As you look out and we conclude the enterprise of the foreign exchange problems in dollars and all of those things what are the opportunities that still exist in cable?
Can you for instance give us any more quantification on how many homes need we pass in the most affluent areas? What is the timescale for that?
Can you take your cable expertise to other countries, even where you don’t have mobile? It's obvious as the fastest growing parts of your business are data and cable which are intertwined.
But can you take your confidence, your programming and do any of the other Latin American or Central American countries and how big an opportunity is that?
Mauricio Ramos
Thanks, Bill. A couple of comments on -- because the word cable is indeed a very broad concept.
So cable really means today PayTV and fixed broadband. But it also means large opportunity to reach business to business and I will speak to that in a second.
On the strictly residential part of the business, cable and PayTV and fixed broadband, penetration in our markets is very limited. It's on average somewhere between 15% to 35% for the PayTV and broadband which by any standard is still very, very low.
Speeds are still very, very low in the market and there is plenty of just homes to be built. The $10 million target is conservative and is stretched out to a number of years, but as you have seen we are ramping out that build.
And with that it's just an untapped opportunity. Everywhere we build, everywhere we show up with a little hub high-speed Internet we do find pent-up demand and we do drive the bundle ratio of around 2 which is pretty good for industry standards to be getting two revenue generating units per home and to be filling out the network as fast as we are.
Now the opportunities are from building more, building faster and because now you have a fixed network that actually reaches the small and medium enterprises then adding a fixed component to our B2B strategy that without cable we wouldn't have. So you just haven't heard us talk a lot about our B2B strategy, since we don’t want to give a confusing message but we are working hard on it and we will certainly articulate it down the road in a very cohesive manner because it's part and parcel of building a fixed network right underneath your mobile network.
Of course the second part of your question was can we take into other countries, yes, there are programming synergies or international band of synergies. There are SG&A synergies as you drive an into an adjacent country and we may do that at some point in time.
But as I have said earlier right now we have so much on our plate just building the network, building it and monetizing, in reaching this 10 million homes that we are focused on doing that and doing it well.
Bill Miller
Great. Thank you.
Tim Pennington
Thanks, Bill.
Operator
Our next question comes from Andreas Joelsson of DNB. Please go ahead.
Andreas Joelsson
Yes. Good afternoon.
And just a few questions first. Also again on Guatemala, if you could somehow explain a little bit more what you mean when you state that you are going to review your strategical options, what that could mean?
And on operations you mentioned and before also I saw some interview with you Tim that is maybe a more challenging environment towards the end of the year, do you see that on sort of reported top line or is it also on the service side? And finally also what's left to do more on the corporate costs side?
Thanks.
Mauricio Ramos
I will take the first one. It seems to be a pattern here and then Tim can scribble some notes for number two and number three.
We meant, Andreas, exactly what we said, as a natural course of business we continually review and assess the strategic options that can be considered with any of our markets and that includes Guatemala as well as it does any other market. And as we have said before, we are actually in the process of -- as we have said often reviewing our strategic options around Africa as well.
And so that is exactly what that we meant. Tim?
Tim Pennington
I believe what I have been about in terms of the macro environment is simply that we notice around the world that the macro environment is getting harder and in 12 out of 14 countries these GDP growth forecasts have been downgraded. We see inflation increasing in many of the markets as is unemployment and therefore, we need to be aware of that.
Now I will say that we have seen very little impact on that in our business to-date. The only place that's really hit has been in Chad.
Elsewhere some of our leading indicators continue to be extremely robust. So I look at the gross additions across the business and they are sequentially up and they are year-on-year up, which tells us that people buying handsets, they are still wanting the service.
So I think all the note of caution we're only putting into this is simply that we are aware of the environment we are operating in and we are very vigilant towards it and should we seek environments this year arrive quickly we will move quickly to effectively better manage that environment and continue to focus on our core objectives of improving our margins and improving our cash flows. So that is what we are trying to do.
And I can't leave my notes out here for your third question.
Andreas Joelsson
It was related to the corporate costs and how much more there is to do?
Tim Pennington
Yes. Look I think you never quite finish this exercise.
I feel we have made some good progress and to this level. We are now around on a $200 million run rate now.
I think I would not like to indicate they will go sort of much lower from this level. I think this is a good level for the business to go forward.
It isn't to say we won't continue to focus hard on bringing this cost down, but I think we have delivered what we said we are going to deliver in the last 12 months.
Mauricio Ramos
Perhaps to that I would add a little bit of color that is not so dollar focused but much more focused on the way we are running the business and it's good for you to know that we have reorganized ourselves in a much more focused towards the operations structure. So I have reorganized the team so that the Latin American GMs report directly to me giving me a lot more visibility into the business allowing us to better operate and act as an operating company rather than some form of a holding company.
And we have also added Cynthia Gordon to the Africa team as their head and she is also very much an operating person. So in reality the concept of a large corporate overhead is also being turned from a management point of view into much more of an operating structure that allows us to be closer to the business and involve the GMs a lot more in our corporate decision making.
That's part and parcel of the number that you are seeing.
Andreas Joelsson
Great. Thank you very much.
Operator
[Operator Instructions] Our next question comes from Stefan Gauffin of Nordea. Please go ahead.
Stefan Gauffin
First, I would like to start with Colombia. You don't seem to have booked any restructuring charges in EBITDA in UNE this quarter.
Instead you booked $10 million in the form of CapEx. Is this the way you will operate also going forward?
Secondly, you stated that the option expires in Honduras and Guatemala and that you would likely deconsolidate these assets, as of 2016. Is this already decided or what can be done to keep Honduras and Guatemala consolidated or are you working on another solution?
Then the final question relates to Africa. Looking at the EBITDA margin for Africa, excluding Tanzania, it is declining from 15% in Q1 to 13% in Q2 and to only 11% in Q3.
When do you expect to see the solid growth to filter through as improved margin in Africa? Thank you.
Tim Pennington
Thanks, Stefan and look the integration costs $10 million as you point out it was booked through CapEx, it is not a choice we make we decide where it goes. It really is we follow the accounting, and it's some form of sort of capitalization then we have to book it through the CapEx.
So we haven't changed our view on the overall cost of the integration but where it lands whether its P&L or CapEx is hard to determine and frankly it's all cash flow anyway. So we look at it that way.
I think the consolidation issue for Guatemala and Honduras, as you are aware it's an extremely technical issue. It is relating to the IFRS 10 and 11.
In the absence of extending the options and we have made no agreement to extend those options and we expect that we will be deconsolidating these businesses from the end of this financial year. Now that doesn't change, it is an accounting guess -- an accounting exercise, it doesn't change anything else from that respect.
Africa, ex-Tanzania and Chad and I think the issue with these businesses and why the margin is going down, they are in very sort of low levels of profitability. The margins are very narrow and there is a number of one-off issues in each of the quarters coming up where it distorts the margin.
Now you know that doesn’t say that we are happy with the margin or that there isn't a lot of work we can do on that. But I think, fundamentally looking through these one-off charges we feel we are making progress in Africa.
I can't discount the fact that in Q4 that we will still have some tidy up issues to deal with but in the main what is working for us in Africa is that our headline revenue growth has really started to motor again, now high-teens in Senegal and DRC, Ghana. And as long as we can keep that going and flush out these sort of one-off issues then we feel confident we will see the margin grow and we remain sort of committed to focusing the Africa business to get it to EBITDA minus CapEx breakeven in 2016.
So in order to do that we will have to continue to see margin growth in the Africa and in the Africa business ex-Tanzania.
Mauricio Ramos
And perhaps to just give you a little bit more color as we are going here through our budget, we are dead focused on putting together a budget for Africa that is perfectly consistent with what we have told you which is that we think in 2016 Africa can be EBITDA minus CapEx OCF neutral now.
Stefan Gauffin
Thank you.
Tim Pennington
Thanks, Stefan.
Operator
Our next question comes from Chris Grundberg from UBS. Please go ahead.
Chris Grundberg
Thanks very much. I've just got a couple of questions if I can.
Just on Colombia, I wonder if you can give a little bit more detail around that mobile performance and the competitive dynamic. Appreciate it's tough, but any update on the developments you've seen since the period end, and maybe what you think the medium-term mobile growth trajectory should be there over the next couple of years?
A follow up on cable. I'm just curious on the 10 million homes that you cite and the $100 per household cost.
Just to confirm, that's your assessment of that entire 10 million home base? It doesn't increase as you get further down that 10 million?
And maybe, if you're looking further out beyond that, what do you think the $100 might go to further down the pipe? Presumably the urban density goes down and the $100 goes up, but just curious on your thoughts on that front.
Thanks.
Mauricio Ramos
Yes. Sure.
So let me take the cable one and then Tim can put some notes on the Colombia specific one. Listen you are spot-on.
Cable is a game of density in the cost of the build. The reason and that build cost is around $100 is because of basically the 3G component of a cable build.
One is, the fact that in all of these markets the plant is built aerial, 95% to 99% and of course that have a very different cost from the plant being built underground. That's number one.
Number two is, this is a market with significant, significant density and of course the more homes you can pass per kilometer the more cost economic it is and that is the true nature of these markets we operate. And the third component is that, although this is high technology, high-speed data, in reality a big chunk of the investment is made on building the network, so that is labor cost, which on a relative basis is obviously less expensive in markets we operate.
Now having said all of that, of course we are building the homes that have the best return first and as we go -- as you would expect us to do and as we go down into the longer part of the tail it is likely that the densities do fall down and the cost per home tends to increase. But the number of homes built in each of these markets today as a percentage of the available homes is still very low.
If I could just perhaps point you to Bolivia as an example. We've built about a 150,000 homes and we think the market there would allow us to build somewhere around 750 to maybe 900 homes which would effectively be somewhere around 50% to 55% of the economic homes in the country.
So that gives you a pretty good feel for the homes we are building and the economics that we are building them on. Then that's why we feel of course that this number is correct.
Now I do -- from something in your question I duly correct or clarify that the $100 million is the investment on building the home pass but of course this is a game of filling the network and of course there is CapEx and installation cost some of which will recoup when you do install a customer. And that typically is in our markets if I could just give you a ballpark number around 150.
But again that's not spent on home pass, it's spent on our connected customer that is giving you revenue. So long winded answer but I hope it clarifies everything.
Tim Pennington
Thanks, and Chris on the mobile cite, I think what we have seen over the last couple of quarters is, the market slowing down a bit. But I think what's clear is that we are over indexing in our market and our growth is strong relative to the competition.
We are growing market share and I think we are over indexing because we are significantly over indexing in the data customer. We are picking up good solid data customers, 4G customers as well and that is supporting the future of the business.
So I think we will see a little bit of price competitiveness, a little bit of market sort of issues, but we still think we are doing the right things in that market and we are still sort of growing at a relatively good pace. The big thing that's really changed has been the handset revenue sales and part of that is technical to do with the change in the regulations, so that the base was -- the basis was different sort of last year than it is this year.
And those issues while I talked about on the call in the presentation have largely flushed through, so we will see some slowdown in the headline growth rate. But what we are confident about and what we are seeing is continued growth in market share and continued growth in our margins and that's what we are focused on.
Chris Grundberg
If I can just ask one other one. And apologies, it is on Guatemala.
You mentioned in your little run-through of the kind of the decision-making process, that obviously you appointed an international law firm. Then, on their advice, you decided to make the disclosure to shareholders through your release last night.
Just curious if you can give any color on that decision. What were the factors that meant that you thought it was worth telling shareholders?
Was that a materiality test, or any color you can give around that would be helpful?
Mauricio Ramos
Well I tell you that went through our heads and that of the Board was certainly largely our commitment to transparency and our commitment to being fully transparent to our shareholders. First came the recommendation to report and as a result of that, then the natural conclusion that our shareholders should know that we have voluntarily reported a matter to the authorities.
That's really it.
Chris Grundberg
That's helpful. Thanks.
Operator
Our next question comes from JP Davids of Barclays.
JP Davids
Two questions from me, please. Tim, just following up on Colombia.
Talking specifically about consumer behavior changes, and being a little bit more short term here. How are you guys responding in the market to these behavior changes at a consumer level?
And by that I understood that consumers were overspending on handsets, and maybe under spending on their ongoing ARPU. And then a second, unrelated question, just around Bolivia.
I see you've extended the license there. Can you provide some sort of sense of how much you paid for that extension?
Thank you.
Tim Pennington
Yes. In terms of the consumer behavior, I mean what changed in the market last year was that we and everyone else stopped subsidizing postpaid customers.
So what happened was that perhaps the pricing of the handset went up and the monthly recurring service revenue went down. When we look at our customer -- so that's what I mean by customer behavior, they spend more on the upfront handset.
But in reality when we look to the impact on customers we have seen something like a 3% to 4% reduction in effectively the net present value of the customer. So it's really a move from that to the front end from the monthly spend.
So there isn't that significant difference. The behavior, so we have changed in order to facilitate customers' ability to buy the handsets.
We have financing again schemes in place, so now that it goes onto our balance sheet, which is why some of our working capital is a bit higher than last year. And some of it we have entered into a partnership with a financial institution to effect this lay and finance those handsets.
So that's what is behind it.
Mauricio Ramos
One quick comment on Colombia and then the question on Bolivia. Just to make sure that it hasn't gone under the radar screen, because I think it's meaningful.
In Colombia up until about a couple of months ago -- I could be off on the timing here -- exclusive rights over the local soccer league were held by DIRECTV and the team in Colombia did a fantastic job to renegotiate that for the market. As a result of that, not only us, but other operators in the market now have that important soccer content, local soccer available to all operators.
And as a result of those negotiations we did secure some exclusive rights over that content for our mobile platform. Just to make sure that you factor that into the equation.
And on the Bolivia question indeed, it's a very straightforward answer, we are very happy to have concluded that extension. It's a 15 year extension and the cost of that extension is I believe $22.7 million -- I could be off in the decimal mark here or there -- but it's in our range, $22 million, $23 million.
And we just start -- we issued the formal notification a couple of days ago.
JP Davids
Thank you.
Operator
Our next question comes from Johanna Ahlqvist of SEB. Please go ahead.
Johanna Ahlqvist
Two further questions, if I may. The first one relates to South America, where I saw that within cable the number of RGUs declined in the quarter.
If you can comment on what's behind that? Secondly, if you could give us some more flavor on how the processes are working on the corporate governance?
How do you -- such issues as Guatemala, how are the processes working below Board level, to get such attention on a Board level?
Mauricio Ramos
Sure. Okay.
So on the RGUs first, because it's a very straightforward, just a cleanup of subscribers at UNE, that were subscribers that had no revenue associated with them. So there was no reason to have them as revenue generating units because they were not generating any revenue.
So that's a straightforward cleanup of RGUs, but it has no impact on revenue because they have none. I hope that's clear.
And then on the second point, on governance, as I said earlier, if you will, one of the outcomes of this process is indeed that the process has worked properly. Matters were brought to attention.
They were reported to the Board. The Board reacted promptly, created a special committee.
A decision was made by the Board which resulted in reporting and immediately thereafter disclosure. So the process is working as I said earlier.
We have taken a further step which is voluntarily undertake a review of our compliance process just to make sure that we strengthened it even better. And I want to take the opportunity to say that indeed our Board has been very decisive, instrumental in taking proper and timely action on this.
They've been a provider of great advice and guidance, and the result is that the company has taken decisive and proactive action.
Johanna Ahlqvist
Okay, thank you. Can I just follow up on the clean-up in South America?
Was that sort of -- how much was the clean-up, and what was the underlying intake, if you can say so?
Mauricio Ramos
Yes. I think I am being given the number here, 792,000 non-paying and as I said earlier no revenue associated with them.
So above the [acquisition].
Johanna Ahlqvist
Thank you.
Tim Pennington
And I think the details are under release by the way.
Johanna Ahlqvist
I will have a look, then. Thank you.
Operator
Thank you. That concludes today's question-and-answer session.
I would now like to hand the call back to Mauricio Ramos.
Mauricio Ramos
Well thank you very much everyone for joining us today. IT's an important Q for us and we do thank you for attending widely today.
Operator
This concludes Millicom's financial results conference call. Thank you for your participation.
You may now disconnect.