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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello, everyone. Thanks for connecting to our video conference to discuss our Third Quarter 2022 Results. Before we begin, please take a moment to review the Safe-Harbor disclosure on slide two of the presentation, which is available on our website along with the earnings release.
During the presentation, we will be referencing non-IFRS measures, and we define these on slide three. And we provide reconciliation tables to the nearest IFRS metric in the earnings release, as well as on our website.
I will now turn the call over to our CEO Mauricio Ramos for his prepared remarks. Mauricio?
Good morning and good afternoon, everyone. Thank you for joining us today. The key message is that, we are on-track to meet our organic OCF growth target of approximately 10% for this year to generate solid equity free-cash flow in 2022, in-line with our budget for the year, to invest about $1 billion in CapEx this year, which is also consistent with our long-term target and we're also on-track on our key projects to highlight and crystallize value for our infrastructure and fintech arms, and on-track on reducing our net debt, with net debt down this quarter despite the tougher macro. And we're on-track also on our social and ESG initiatives with meaningful external recognitions that I will address later today.
So, the macro-environment is indeed much tougher, and yet we remain not totally, but very broadly on-track. And this is because: one, we enter this period of increased macro volatility from a position of immense strength. Our networks have been modernized and expanded, that increased our customer-base with sustained or larger market shares. Our SangreTigo culture is at its strongest point ever and our brand positioning has strengthened as a result in just about all of our markets. And two, because our business and, particularly its cash flow is extremely resilient, we showed that to you in [indiscernible] during the pandemic. And despite the weakened macro long-term demand for our products is still very much there and broadband penetrations are still very low. And three, because we do volatility and challenging environments quite well, we continue to invest wisely through those circumstances and always we take on the opportunity to become more-and-more efficient.
Indeed earlier this year, right after we could foresee this development is happening we started out a new long-term efficiency project to protect our targets. That priority is called Everest, it's already underway and Sheldon will discuss it later on this call. And lastly, because of currencies in Central America and Bolivia, where most of our cash-flow comes from, this time around have helped very, very well, even despite a strengthening dollar.
Now please turn to slide five for the financial highlights of the third quarter and for some more detail on how we are staying on-track. Service revenue grew 2.7% during the third quarter, this is a solid outcome in a tougher macro-environment. Q3 was also a good quarter in terms of operating cash-flow, with organic growth accelerating 4.5% on an adjusted basis. Year-to-date this is right in-line with where we had budgeted the year and also with the long-term plans that we communicated to you at the beginning of this year.
Now, there are some shifts in the way we are achieving our growth and this is consistent with the general trends we see in our markets. Throughout the year kids went back to in-person learning at school and parents have been returning to the office. As a result, mobility has resumed and consumers are upgrading their mobile plans or getting a prepaid phone for their kids and their families. All of this, you can see on the strong performance of our mobile business this year. The flip side is that, spending on pay-TV and residential services has slowdown and this is a phenomenon that is happening just as the global economy is slowing and consumers are feeling the effects of higher inflation.
So our read is that, this re-accommodation of demand post pandemic is largely driving the temporary slowdown in our home business. But this ebb and flow will settled and the growth in our home business will continue to be driven by its long-term drivers, low current penetration broadband reach, population growth, middle-class formation and digital adoption by a very young population today. And finally, B2B continues to perform very well and we will expand on this in a minute.
So let's go in detail line-by-line first. Let's start with our mobile business on slide seven. Our prepaid base continues to grow and most importantly to serve as the base for us to actively migrate our best prepaid customers to postpaid. We do this upgrades to postpaid with selective segmentation and based on consumption, reloads and payment history of which we have a ton. And this is working, we have now added nearly 1 million postpaid customers across our footprint over the past year. More than half of these were upgraded from prepaid and the growth in postpaid is widespread across all our markets.
On postpaid, still accounts were only 15% overall mobile customer-base, but it now contributes 35% for mobile revenue and it's growing about 10% organic. When we upgrade prepaid customers to postpaid, result is lower churn, a slightly better ARPU, better customer lifetime value and better network consumption patterns. So, as we articulated in our strategy some time ago, postpaid is now becoming an important growth driver for us.
On a more short-term notice, during the quarter we implemented price increases in many of our markets. You don't see that quite yet in the financial numbers, of course, there is a natural lag or delay for that to flow-through into the numbers. But the important point is that, this increases our reconstructive to pricing and will position us to close this deal with stronger momentum in mobile and also set us up for 2023.
Now let's talk a bit more about home on slide eight. As I said a few minutes ago, there is some ebb and flow in our net add numbers this year. This is caused by, one, the pandemic demand this year with already addressed. Two, the more difficult macro-environment with inflation industry it's not quite obvious, there should be no surprise to anyone. And three, we ourselves are choosing to remain disciplined on price. During the quarter we implemented price increases in most of our markets for home and we continue to charge installation fees, even if some of our competitors do not. This dampens net-adds in the short-term, but build a much better and stronger business for the long-run.
And as I said earlier, it is the long-term drivers of demand that will drive the business and keep it robust into the future. And these are low broadband penetration rates, digital adoption by young population and household formation on the back of economic growth. Once the ebbs and flow of the pandemic subside, we expect that we will be at a long-term run-rate of about 300,000 net-adds per year, consistent with our average in the recent years. Because of this we have now re-ramped our build machine. Cable is already an almost $2 billion revenue business for us with long-term growth. This quarter as a result we have built a [0.25] (ph) million homes and have started our greenfield fiber deployments.
We also entered into key additional content agreements. We signed a deal with [Televisa] (ph) is shown to distribute [Pix+] (ph) there over-the-top platinum. This will give our customers in some [indiscernible] access to great content, including the Spanish soccer league LaLiga, which is the number one content that helps drive demand.
And as you can see on slide nine, this agreement is just one more piece of the puzzle as we continue to position our flagship Tigo sports television channel as the home for soccer in most of our markets. And the core of the offer, we have exclusive television rights to many of the local soccer leagues in our markets. This is a cost-effective way to build scale, position our brand and drive increased conversions and loyalty from our customers. The content we presented on a 360 basis available both home and around mobile platforms. And we are now using our unique sports content platform to support our ESG platforms and our communities in a win-win partnership with Fundación Real Madrid.
Now a brief moment to highlight our strong performance in B2B on slide 10. Despite the weaker economy, our growth in B2B has continued to accelerate, hitting almost 6% organically in the quarter. This growth is driven by very robust demand for digital services, which grew 35% and are approaching 20% overall B2B revenue. As you likely recall, we revamped our long-term strategy for Tigo Business just before the pandemic and it is now working. This strategy has encompassed by a clear customer segmentation approach, the addition of digital, cloud and cyber security services to our connectivity offering, the strategic alliances with worldwide players and a clear focus on our well-trained commercial distribution team. Execution is not panning out to be solid. And I want to publicly congratulate the Tigo Business team today, plus, of course, raise the bar for them to deliver even more.
Let's now look at two of our largest markets, starting with Guatemala on the left. In Guatemala, both service revenue and EBITDA was down slightly year-on year in Q3. As you know, we gained a very significant amount of mobile market share before and during the pandemic and while our competitor was undertaking M&A integration efforts in the country. No surprise then that our competitor now wants to recover some of that. For those of you who have followed us, you know that we will always take the longer-term view and for these reason we have been investing to sustain our gains, by increasing the competitiveness of our product offerings, by enhancing our sales and marketing spend and by continuing to invest in our network. This may mean a bit of short-term vein, but it certainly will give us sustained long-term gain. Meanwhile, we continue to grow nicely in home and B2B in Guatemala and we are re-launching our Tigo Money business.
Now, all of these may not be obvious to you, but this is all pretty much as we had expected and had actually budgeted for this year. In fact our results year-to-date in Guatemala our about 1% below budget only, so this is in-line with what we had budgeted for.
In Colombia, we continued to deliver very robust performance with mid-single digit service revenue and EBITDA. This is driven by mobile, where service revenue was up 40% in the quarter. This is both volume and ARPU driven, as ARPU is not growing in Colombia in pesos. Now this is more than offsetting the softer trends we're seeing in home, as we discussed previously and Colombia is as a result growing overall and all the way down to OCF growth.
And finally in Panama, we're seeing continued strength in our mobile business, which grew 9%. This is a market that is in the process of consolidating from four players on to three and possibly with two players. And by the way, as you know, this is becoming the norm in Central America. The point is that, we still have a lot of opportunity to increase our scale in mobile in Panama. Meanwhile, B2B had a solid Q3 in Panama with 4% to 5% and we are continuing to successfully protect and nurture our market leadership position in home. We're driving larger-scale and continued margin expansion in Panama, which is already one of our better cash flow producers.
We told you in the beginning of the year that we expect CapEx for this year to land at about a $1 billion and we are on-track for that. But truly important is, what's within that envelope. We have rolled-out about 1,500 new physical sites and over 3,500 new radio base stations this year. This is about 18% more than we did last year. As a result, today our population coverage in 4G will reach 79% by the end of the year across the board, up from 76% last year. Most importantly, we have also completed this year the mobile network modernization in [indiscernible] Paraguay and Colombia with 5G compatible radios.
With this the networks in all of our countries have now been modernized over the last three to four years. And by the end of the year all of our mobile core networks will be 5G NSA ready. We have also now launched 5G in Guatemala as you know, and we have commissioned sites to build early next year. Also by year end we will have rolled-out about 850,000 new home passed, either in HFC or FTTH, including Honduras. And as a result our network will pass about 30.3 million homes by the end-of-the year. And of these around 800,000 will already be fiber to the home with fiber deployments now active in all our countries.
This year, we will also complete our fiber connectivity project from Bolivia to Paraguay. Ours will be as a result the only [indiscernible] fiber connection the two oceans through existing terrestrial routes. This carries important cost-efficiency savings going-forward. Whis year we will also finalized and complete our Tigo Cloud project. This project is the connection of our 13 Tier 3 data center facilities across all countries with our own cloud solutions. With this, we can host in-house or IT Tigo Business on telco needs, all in our own cloud infrastructure. This project has been in the making for last four years and will allow us to cost efficiently add capacity to absorb the traffic growth that we continue to see on our network. And we're glad to see it finalized this year. Now for those of you who like ratios, these all managed quite simply said at a healthy 17% CapEx to sales ratio is expected for the year.
Now please turn to slide 13 for an update on our plans to carve-out our towers in our Tigo Money fintech business. On towers, we have now continue to work with our financial and tax advisers on the business operation. And as a result, we're now well-advanced in prepaying the master lease agreements which we expect we will penalize in Q4. This will in-turn allow us to start transferring assets to the legal entities in the first-half of 2023, all as we have planned. And on Tigo Money we continue to expand and execute on our development plan. Our new app is now live in Honduras and Bolivia and we will be rolling it out in the remaining countries in Q4. For the past several weeks we have been piloting nano lending in Paraguay, although this is only early days, the early results are indeed very promising.
We've also started rolling out our new merchant platform across the board and we are now signing our retailers of all sizes. One of them is a major food delivery company that now accepts Tigo Money in four of our markets. This is a ton of color and a ton of detail, but seem to give the strong message that we are continuing to make good progress on these two strategic projects and that they are on-track.
Before I turn the call over to Sheldon to go over the financials, I want to take a moment to thank each and every one of our 20,000 employees at Tigo. We have jointly undertaking a major transformation over the past few years together, we have redefined our footprint with over $6 billion of M&A, create a $2 billion cable business, modernize our networks and increase our customer-base. And behind all of this transformation lies the two most lasting initiatives we have undertaken as a team. One, our drive to define our strong sense of purpose as a company, to build digital highways that connect our customers and improve our communities. And two, to strengthening our unique and strong culture SangreTigo.
Now I would say this, because it is these two pillars that are driving, one, the continued high ranking that our ESG strategy continues to deliver, which you can see on this page. And two, a recognition this year as the second-best place to work in all of Latin America and [indiscernible] best place to worldwide. And it is this team that is delivering and will deliver the targets and results that we have promised to you and to all of our stake holders.
With that let me turn it over to Sheldon.
Thank you, Mauricio. Before we review the financials, let me recap the macro context on slide 16. As you would expect, inflation in our markets has increased over the last 12 months, in line with global trends and reaching an average of about 8% in September of 2022. And on the right, you can see the GDP growth expectations have been coming down, with growth of 4% now presented for our markets in 2022, slightly faster than the 3.2% that the IMF is projecting for the global economy. The IMF also projects that 2023 will be another year of slower growth and it's interesting to see that our margins are expected to grow faster on average than the rest of the world, which I think is testament to the resilience of the countries where we operate.
Now let's look at our Q2 performance beginning on slide 17. Service revenue was $1.3 billion for the quarter, that's up 35% year-on year, given the Guatemala acquisition. Excluding the acquisition and the impact of FX, organic growth was 2.7%. Our mobile business grew slightly more than 3% and contributed more than two-thirds of the overall growth in the quarter. And all of the mobile growth came from postpaid, which continues to perform strongly and grew just shy of 9% year-on year. We continue to reap the benefits from the additional investments we've made in some of our mobile businesses over the last couple of years, especially in Colombia.
FX detracted from our revenue growth this quarter, largely due to the Colombian peso, which depreciated 12% on average during the quarter compared to a year ago. Like many currencies globally the Colombian peso has continued to weaken compared to the US dollars since the end of the quarter, but many of our other currencies like the Guatemalan quetzal have remained relatively stable.
Drilling down further on slide 18 for the service revenue by country. Mauricio has already talked about Colombia, Panama and Guatemala, so I won’t cover those again here. Elsewhere, our performance in most of our other markets was solid. El Salvador and Nicaragua maintained their strong momentum with growth of about 6%. Paraguay grew for the sixth consecutive quarter and was up 2% with solid performance in mobile and B2B. Honduras, which we don't consolidate, we're showing steady improvement and was up 2% this quarter. Bolivia was down 0.6% as we felt the impact of a change in regulation on our mobile overage rates [indiscernible] impacted August. This affected our mobile business, while our home and B2B business continued to grow both year-on year and sequentially.
Okay, turning to EBITDA on slide 19. EBITDA of $539 million was up 53% year-on year due to the consolidation of Guatemala. Organically, EBITDA was down 1.9%, but this was impacted by a one-off of about $7 million this quarter related to an early termination of a software contracts. Excluding this effect, EBITDA declined 0.6%. Other factors impacting EBITDA this quarter included about $6 million of incremental investments related to the carve-outs of our Tigo Money and Tower businesses.
Looking at EBITDA margins on slide 20, adjusting for this one-off this quarter margins are broadly stable despite the investments in our carve-outs and the tougher macro situation. Energy costs were up about 17% on average during the quarter and we have also seen an increase in employee wages, which we have largely been able to offset with efficiencies. On the flip side, we have been able to put through some price increases across our markets, especially in our postpaid and home subscription businesses, but also in prepaid in some markets. We're very encouraged by the competitive response to our pricing action and we are hopeful that the full benefit of these price increases will be more visible in our Q4 results when we will see a full-quarter effect of these actions and as we take additional steps to offset the impact of high inflation in our markets.
In addition, I want to share with you that we are putting the final touches on a very broad based efficiency program called Project Everest that we've been working on for the past several months. We expect the program will be a key pillar of our EBITDA and OCF growth next year and over the next several years as targeted savings ramp-up. I plan to share more detail on this project when we report our Q4 results.
Now looking more closely at the EBITDA performance by country on slide 21. Aside from Colombia, Panama and Guatemala that Mauricio already talked about. Nicaragua led the group with EBITDA growth of more than 13%, as they had an easy comparison due to the catch-up of municipal tax payments in Q3 of last year. El Salvador grew just shy of 4%, maintaining the solid performance that we have come to expect in the last couple of years. Paraguay EBITDA was down 2.7%, mostly due to some phasing of OpEx related to our soccer rights and our marketing campaigns. This is expected to normalize in Q4. Bolivia EBITDA declined 3.7% as the revenue impact from the regulatory change drop straight to the EBITDA line. Finally, Honduras, which is not consolidated, grew 3.5% as the business is starting to show signs of improvement.
Moving to slide 22. You can see how our operating cash flow, that is EBITDA less CapEx compared to the previous year. OCF more than doubled to $286 million in Q3 due to the consolidation of Guatemala. Adjusting for this M&A and also for the one-off charges this quarter, organic growth would have been 4.5%. As expected, this was an acceleration compared to the growths we reported in both Q1 and Q2 of this year.
On slide 23, you can see our usual net debt bridge. Net debt is down almost $830 million year-to-date, including about $100 million during the third quarter. Which came from equity free-cash flow contribution during the quarter and from the benefit of the effect of the weaker currencies of our local currency debt. So we ended Q3 just shy of $6 billion net debt, that's down almost $833 million since the start of the year, reflecting the rights offering and net debt to EBITDA after leases was 3.3 times. If we include lease obligations of just over $1 billion, our leverage was at 3.12 times at the end of Q3, down slightly from 3.14 times at Q2.
Finally on slide 24, I want to close out by highlighting that we have a very well positioned debt profile during this rising interest rate environments. We have very few maturities in the next 24 months, so we do not have to be active in this current market repricing our debt. Our $600 million revolving credit facility is undrawn, thereby providing significant liquidity. And 82% of our debt is at fixed rates or swapped for fixed.
Now please turn to slide 26 to talk about the outlook. As we've outlined today, the business continued to perform well in Q3 and even though conditions have gotten tougher, our results year-to-date are broadly in-line with expectations we had when we prepared our budget almost one year ago. And this is why we are reaffirming our targets today. First, as you can see on slide 26, we remain on-track to deliver organic operating cash flow growth of about 10% in 2022. As Mauricio mentioned earlier, we are maintaining healthy levels of investments through the business in 2022, but the phasing of our investment is different this year compared to 2021.
Given our target CapEx of about $1 billion for the year, this means that CapEx in Q4 should be much lower than the record level of CapEx that was spent in Q4 of last year. And on slide 27, we want to remind you that our equity free cash flow is seasonal in nature with most of it usually coming in Q4. And that is our expectation also again for this year. We now expect full-year 2022 equity free-cash flow should land between $150 million to $200 million. This is right in-line with our budget and is consistent with our target of generating between $800 million to $1 billion during 2022 to 2024 period.
With that we are now ready to take your questions.
Thanks, Sheldon. Thanks, Mauricio. So we'll now go to the Q&A portion of the call. If you'd like to ask a question, please email us at investors @millicom.com. And we'll take the first question now from Stefan Gauffin at DNB. Stefan?
Yes. Hello.
Hi, Stefan. How are you.
Yeah, I'm fine. So a couple of questions. Let's see if I can stop my video as well. So first of all can you talk about which markets and products you have implemented price increases for. When was this done and what magnitude of price increases? Perhaps more importantly what was the market reaction and how has your competitors responded? Have they followed you or -- any flavor of this would be really helpful.
And you said you had two questions.
Yeah. I can take the second one directly here. You are indicating some $200 million to $250 million in equity free-cash flow in Q4 in order to reach your targets. Looking at the seasonality, Q4 is usually a strong quarter in terms of net working capital, last year you had $100 million net working capital release. But I mean, it's clearly more needed in order to reach your target. So any flavor on what you see for cash-flow generation for Q4?
So why don't we go backwards, because I think the second one is super mathematical under the history of this in all of our prior year's in which we've actually done more in the fourth quarter than if we look into during this year. And so, I'll ask Sheldon to walk you through that one. And then I'll take on the pricing one in a second.
Sure. Hi, Stefan. Yes so. I think as I've talked about in the past and you picked-up just on your comments there. There is a large seasonality into our cash flows as a company, a lot of its working capital related. As I mentioned before, we spend a lot sort of in Q1 on working capital and we've got a big outflow that's related to amount prepayments through the year for software and regulatory fees and the like. We built-up inventories kind of in the years for handsets and the like which in Q4 is probably one of our biggest sales quarters for the year, so those inventories kind of get depleted at that point in time.
So you see a big swing and you've seen it historically and so there's a big outflow in our working capital which basically comes back in Q4. I think what's also bit more pronounced this year is the phasing of our CapEx, in Q4 last year was it was a very large CapEx quarter for us. You can see, as I highlighted in our slides. This year's Q4 CapEx can be upwards about $100 million less than prior year. So there is just a phasing of kind of our CapEx spend, this got to actually just benefit us as well from a cash flow timing perspectives as we move through the year. So that's all going to essentially come to fruition here in Q4 and that's where we see for large cash inflows coming into its achieve sort of $150 million to $200 million range that you talked about.
It's the nature of the business, as you very well know. We tend to book our CapEx in Q4 and paid in Q1. Taxes are paid in Q1. Most of the payments are prepaid during the first-half of the year. So that's the nature of the business, it happens every year and this year is consistent with prior years. I think the difference this year is it becomes a little bit more obvious to you, because we're not consolidating Guatemala and because we are giving new equity free-cash flow guidance. So just you're seeing what we see every year, it’s just done in a positive manner. So that’s pretty mathematical.
On the price increases and what we're seeing in the market and how much of that [indiscernible]. I'm going to try to keep it somewhat summary because it's nine markets, basically three lines of businesses, prepaid, postpaid and not including B2B. I will talk to that. So the matrix of that is quite big, so we can give you some more color offline. I think the big market where things are moving towards price reconstruction is Colombia. And that is true, both in prepaid and in postpaid, where you've seen ARPU actually grow up in Colombia around 6% if I'm not mistaken. So that given us in Colombia both volume gains and also price increase and ARPU pickup in Colombia. So the overall ARPU in Colombia is reconstructing significantly.
As you know, we expect that it would eventually happen. The situation today is one in which Columbia mobile is growing about 40%, 50% because there both volume and ARPU change. We're also seeing prepaid price reconstruction in Paraguay, those are the two market where we're seeing price decreases take the most. Everywhere else is still to be determined where there is a price increases we will stick or not and as you know the nature of prepaid is, we do this pretty much on a daily and weekly basis and will also play with commissions and other ways and [indiscernible] trying to get the ARPU up.
We have on postpaid, taken over the year price increases in just about, and I'm just looking at the chart here to make sure that I not speak out of school and just about every market with the exception of Panama. Bolivia, we did on postpaid very early in the year, we may do something later this year or early next year. But that's still to be determined on how the market plays out. In Colombia we did something in the middle of Q3 and that's sticking on postpaid in Colombia everyone seems to be following, including now the other three competitors on postpaid in Colombia. On Panama, we haven't done, it’s one market [indiscernible] done and it increases in postpaid and that's largely because our largest competitor is not allowed to do any price increases until early next year. So we don't want to create too much of price capture to ensure they can't. before that until early next year.
On home, we’ve taking the price increases in most of our markets, perhaps we gave you some detail on these. And those I have to say are sticking less than the postpaid price increases. Because we've been ourselves more price disciplined as we said than our competitors. And by that I mean, we have kept installation costs in the market, whereas others may have not, have not followed that on that regard, we think as we said in our prepared remarks, that's definitely the right and correct thing to do for the long-term.
As I said on the prepared remarks, we do think all these volumes were bit of an ebb, because of the [indiscernible] because of the economic situation, but we want to preserve a very healthy [indiscernible] and installation cost scenario for the long-term. That's the long and short of that.
That's perfect. Thank you.
All right. Our next question is going to come from Marcelo Santos at JPMorgan. Marcelo?
Hi, good morning. Thanks for taking my questions. The first question is on the line of the price increase of the first. I mean, Tigo operates in markets where it has a very good market structure. Tigo is usually number-one or two and there are few competitors, but when we see inflation is running at eight and you are growing your organic revenues service revenues at 2.7, what's the main gap here, is this only macro, is there -- could you just try to break-down this gap and how this should follow going-forward? That's the first question.
The second question is, if you could dig a little bit deeper on Bolivia, this regulatory changes what happened and what -- how should this progress going-forward? Thank you.
So, you are absolutely right, Marcelo, and t's a very good point, it allows us to point out that price increases on the back of an inflationary environment do not get immediately visible through our P&L. So the first reason why you don't see is right away is, number one, there is a timing lag. Most of these are being put forth as we speak or will be put forth in Q4 and some earlier in the year, but you don't do -- you don't want to go through the entire base, we do it in cohorts. So there is a lag effect on this. Point number-one. Point number two is, there is price elasticity of demand, i.e. in the context of inflation, every penny that you pass-on may come back to you with a hard some downgrades, it came back to you with some softer demand and its results of that recent price elasticity [indiscernible] on that one, because you know that that’s the reality.
So the long-term value that you will eventually pass-through, but in the short-term in the context of our inflationary environment it will take longer simply because of some price elasticity over there. And the third effect is that, competitors even though they are two-player markets, they see the opportunity to just wait it out, maybe a month, two months, maybe a quarter, maybe a couple of quarters and see if they take a little longer to react to the price increases, they may have better results. That’s the human nature of individuals and management teams, but it doesn't change the long-term outlook, right? It's just a couple of quarters of dislocation of long-term equity that always kicks in. So those are the three reasons why there in a lagging element to the price increases flowing into the P&L.
And what was the –
Bolivia.
Conversation. Yes so the Bolivia was on what the market call on demand, but [indiscernible] talk a little bit Bolivia macro. So the actual situation, the regulatory changes in Bolivia, this is a prepaid model by the way. And Bolivia is the last one of the countries in which when consumers have active people, right, they are consuming their prepaid balance on a promotion on that [indiscernible]. But if they use that app and they still have balance, that gets consumed at [indiscernible] which are high. Right. The entire industry continue to do this until about couple of months ago when the regulators said, we don't want to stop doing that, right? So you cannot charge when someone is out of a specific prepaid plan [indiscernible]. They always has to be within one of your existing packages. The state-owned company was doing the exact same thing as we were, so perfectly [indiscernible]. But the regulators said, don't do that. So what that does is, it takes out some of our higher pricing on prepaid when people were off, still on-balance but off the [indiscernible]. And as a result that we see a step-change in our revenue.
Now that will wash out, obviously, eventually, and we'll go back to normal rates. So it's a one-time loss of revenue, because we no longer allowed to do down the line.
When was that implemented?
In the middle of the quarter. In the middle of the quarter. So this quarter, you'll see sort of a partial impact. I mean, I think on a going forward basis, of course, we're reconfiguring our offerings to help mitigate as much of that as possible. And look, there'll be a period of time as for elasticity of the customers sort of moderate to the new environment. So we expect over time to mitigate a lot of the loss. But I think we'll have some impact here in a bit more pronounced even probably in Q4 in Bolivia because a lot of the full quarters impact of that until that mitigation happens more towards the course of 2023.
And one word [indiscernible] we don't miss, we sort of bring higher story on Bolivia. Indeed mobile in Bolivia is going through some short term [indiscernible] the regulatory. And of course, our competitor remains very [indiscernible] in its pricing. We don't believe that a mobile that long term pricing capacity for our competitor exists and they really run it for quite a long time. So we believe at some point they would run out of steam because they can't continue. In the meantime, our home business continues to grow and we continue to be very bullish on it. As you know, we created a business of cable in Bolivia over the last seven years up to date. It's massive. It's actually bigger in terms of revenues on our overall business in Bolivia. And we see a lot of runway. We restarted later this year as we continue to move into next year our build in Bolivia, because we think there maybe 0.5 million homes that can still be built in fiber in Bolivia. And we see a lot of growth opportunities as a matter of fact, you see that our base in Bolivia has gone up 7% year on year. We've employed on our Tigo business part of the equation, we deployed our Tier 3 data center and we're now basically doubling its capacity because it’s really kicking in Tigo business in Bolivia.
So we restarted our build and we think Tigo will be an increasing driver of our Bolivia revenue along with [indiscernible] already more than half of the business. So that gives you the entire picture of what's happening in Bolivia despite the regulatory change, the social policy pricing by competitor.
Thank you, fair enough. Thanks a lot.
Thanks, Marcelo. All right, we're going to go now to Soomit Datta at New Street Research.
Yes. Hi, guys. Two or three questions, if that's okay, please. Firstly, on the mid-term equity free cash flow outlook, $800 million to $1 billion. Obviously, the macro environment is getting tougher and you've talked about inflation obviously as a factor. So the broader context is a tricky one for you guys, but you're reiterating the guidance. How much is Project Everest, I think you called it? How much is that a relevant factor in making sure you hit the outlook going forward? And as a related question, the spectrum in the first nine months, I think, has been running at about $160 million. So would there be an expectation that that would be slightly above the normal run rate and it would reset, particularly thinking about some Colombian spectrum need to be reissued into 2022. So yes, I mean equity free cash flow just hitting the guide in the tougher environment and specifically maybe anything on spectrum? That's kind of one question.
Secondly then, just on inflation as well.
[Multiple Speakers]
One question with seven parts. Why don't I let you answer that and then maybe we run out of time.
We'll forget the second and the third anyway. Listen, there's many ways to -- and I think I found most of the pieces of it. There's many ways to answer for that, but I think the better way to address it is. The two things that are subsets in your question, we already baked in to the moment when we put things out for investor day. Meaning, by that time, although we don't have correct visibility on the final spectrum renegotiations in Colombia happening pretty much as we speak and into next year, we baked into that notion that the Colombian spectrum will be renewed at higher prices than before. And that with have an impact in 2022 and 2023 and that from 2024 onwards there's no longer that sort of bigger payment for the Colombia spectrum. I hope I made very clear, very clear on that.
I wanted to do at the time, which gives everybody visibility that, yes, 2022 and 2023 would be handicapped if you will, more impacted by the Colombia spectrum. But that lapse and in 2024 we're free from that. So that part of it was baked in -- is baked in, although we don't know what the final output would be. But we made our assumptions and they are all baked into that $800 million number. And as we said, I think in my prepared remarks, as a result of that our equity free cash flow that we've now told you for this year was going to be $150 million to $200 million is right in line with what we budget. So there's no change to that. We've budgeted right in the middle of that [indiscernible] that if you will. So there's no big price to us there.
The thing that is a little bit more different and you're right is that, indeed things change right after Investor Day, whether it's kind of creating or inflation or rates going up, but most of our [indiscernible] have not really moved. Most of Central America has not really moved. That's very different. These turnaround from any other crises and that's very important. Yes, Colombia has moved significantly and they did a little bit of Paraguay, but we don't really got a lot of cash flow today from equity free cash flow from Colombia. So it doesn't really move the needle in terms of what your question is. And as a result of that, we feel still like we're in the ballpark range. We are very confident we're going to make it, despite all these moving pieces.
Now the one thing we did and this is the last bit of your question is, Project Everest started by early this year for two reasons. One, you've heard me say this before, I'm a believer that we need to do efficiency projects every three to four years just to make sure that there's nothing you're missing and just to make sure that you're disciplined. But this time around, we understood that the marco was going to get tougher. And we wanted to start very early in the year. So we hadn't foreseen project Everest when we put on Investor Day, but we put it in right after just to make sure that when you ask that question, we can come and say, yes, we're going to make it, because project Everest, we're not going to give you any numbers. We may do that in Q4 is already delivering a lot of efficiencies that are going to help us make it through tougher times. So that's that on the equity free cash flow. We are on track.
Okay. That's super helpful. Maybe just a very quick follow-up then, if that's okay. On Guatemala, I'm just sort of interested in the sort of phasing of the competitive environment. So you've sort of explained the context for what's happening, but we sort of at the beginning of the -- beginning of a process of escalating competition? Or do you think they are sort of midway through or coming to the end of it?
So there's -- I'm not going to go back to explain, like, the history and the context. I think we did that on the prepared remarks. You get that quite well, right? We've gained quite a bit of market share in the last two years. Our competitor who seems to want some of that back and we're trying to figure out, I don't know, we kind of like you where we are. So we liked our skill and we like our market share. And the bigger question is the one you posed, which is, look at what happens from here going forward. Is this a skirmish or is this more of a drag on kind of competitive environment?
I want to point out to perhaps three key things I think are different in Guatemala or [indiscernible] long term? Number one, this is a two player market with two rational strategic mid-term driven investors. But it's not only, that’s a fairly well balanced market, the 60-40 market, right? So there are no long term incentives for either one of us to try to inch up significantly so. We don't [signalize] (ph) our own revenue, whether it's our competitor or ourselves.
Now with that, I think this is a short term dislocation, it is with some thunderstorms, some rains, but it is not a protracted long term winter, you want to allow that analogy, because the incentives are simply not there, right? Nobody gains from what it is. That's review. But I realize that this is going to hurt us in the short term than I did, other markets are focused on the short term. While I would say the heck of this may say. They are faster and they are bolder, we react to defend our 60% market share position the sooner the rainbow pass. And as I said in our prepared remarks, we play this for the long term. And we think the better long term is to actually get to that long term equilibrium very, very sustainable long term equilibrium the sooner we can. That's what the matter for you in a nut shell.
Great. Very helpful. Thanks.
Thanks, Soomit. So we'll go now to [Sunny] at HSBC.
Thanks for taking my question. So my question is on Colombia. It seems that your revenues quarter on quarter have been rather flattish. What is driving this? And how did the competitors react to your price increases in Colombia? So that's the first question from my side. The second question that I have is on a more consolidated level. How much is the broader pricing business that you have on a consolidated level? How much is it impacting your ARPUs? And how much is your -- how is it going to of secure inflation? And how is that going to take the guidance for 4Q EBITDA growth?
[Multiple Speakers] just flattish Colombia, you are saying ARPUs there or –
I'm talking about the service revenue growth in Colombia. If you look at it on Q-o-Q -- on quarter-on-quester it looks flattish, but you are growing very fast on the mobile. So what is driving the flattish quarter on quarter growth in Colombia?
Okay. And the second one was just basically ARPU price increase.
How much is the general price increases? And what is your expectation for EBITDA growth in Q4? And how does that currently offset your inflation -- inflationary costs?
Okay. So listen, on Colombia, again, it's better to answer with the big context. Our service revenue growth in Colombia is about 6%, largely coming from mobile. And in mobile, it is a combination of increased intake in customers. We got about 20,000 again this quarter in Colombia and we continue to inch up our position in Colombia every quarter now for six or more quarters. So there's an element of that which is volume. And postpaid in Colombia is up 25%, 30% on volume on a year on year basis. Then a chunk of this which is volume, which is the result, Sunny, as you may recall, from us getting spectrum, building a network, increasing commercial distribution, etcetera, etcetera.
What is new in Columbia on mobile, which we had anticipated, but is happening now for a couple of quarters is that, ARPU in mobile is being reconstructed and it's growing right around 6% now in pesos. And the reason for that is that, I think we sensed quite well that the market was ready for reconstruction and this is one of pricing penetration which we did. I was followed by now pretty much all the competitors in Colombia. And that's leading to the 6% ARPU reconstruction going forward.
Now your question, I think has a little bit more to do only with Colombia, which indeed is a little bit more sluggish in Colombia. And as I addressed on the remarks and in my earlier questions, indeed in Colombia inflation is high, 10% and consumers are filling that. And Colombia was one of the countries in which people were mostly constrained to their own during the pandemic. It's actually one of the highest home or lack of mobility ratio, so that we're seeing a lot of what I referred to as the app in Colombia happen. The third element in Colombia is that you're seeing B2B kick in quite significant and growing quite significant. And as a result of that, we have 6% service revenue growth in Colombia. And I don't want to draw -- you can do the comparison, it's pretty damn good compared to a lot of our competitors. You can do the math.
The second thing that I think is key in Colombia is that, we invested quite a bit and knowingly used our margin to do that. We're on the other side of that now and we are seeing most importantly meaningful OCF growth, double digit this year and into new year in Colombia because service revenue is re composing, our investment is behind us, most of the network -- other CapEx investment is behind us. And as a result of that, Colombia is becoming already a big OCF grower for us, which wasn't the case three years ago, because that's the way we want to play the market. All of this to simply say that Colombia is doing what we deemed it would do, say, in becoming a significant OCF core for us.
Yes. Go on with the second part.
Yeah. On the second part, you're just asking sort of price increases, how those play out here in the remainder of the year. Look, of course, we implemented a lot during the course of the quarter, we will be looking and expecting sort of to see full quarter with the benefit of that here into Q4. We haven't guided at all sorts of our Q4 results on service revenue, but we have to talk to you about what we're expecting on OCF and that being very back end loaded this year. And I will tell you that OCF objectives we have for the year and guidance we have for the year is not predicated on improvements on service revenue growth here for the balance of the year. So if we're not relying on all of that to kind of improve. I am expecting sort of EBITDA growth to improve here maybe for the remainder of the year. A lot of that just because we're starting to lap some of the investments we've been making in Tigo Money and [indiscernible], which we're ramping up kind of in Q4 last year. So we've got to have much more of a like for like comparison now in Q4, so we should see some EBITDA benefits on the growth line from that, which is going to help also drive the OCF target we mentioned for the year of approximately 10%.
And I think we kind of went through that pretty quick and we are on target to be right around that 10% OCF growth this year, which is consistent with our three year 10% OCF growth organically on average. So kind of focused on the cash flow, but the OCF, which is the only thing we've been providing long term guidance and actually on average on a yearly basis it is also on track.
Yes. Thank you.
Thanks, Sunny. Next, I think we have Lucas Chavez from UBS. Lucas, are you on?
Thanks for having my question. I cannot open my camera right now, it's not working on Zoom, but two questions here actually, the first one on Panama and the second one on El Salvador. On Panama, if you could give us more details on the current operation. I know you talked a lot about Panama already, but just to understand better mobile there and the consolidation. And why you're seeing there that is different from other countries? And if we -- and El Salvador, I just want to understand better service revenue than the growth seen in this quarter? Thank you.
All right? So on Panama, it's performing -- this is one of those rare unique situations in which we are performing right as our acquisition business plan said. And for the same reasons that our acquisition plan said when we perform in Panama. Even despite the pandemic and the inflationary environment, our business plan was predicated on getting a position in home that had 60%, 70% market share, defending our position going forward and being able to acquire a mobile player that then we could cross sell and increase market share as a result of being able to cross sell using our mobile market share. All of that, Lucas, has turned out as our investment thesis was. So in a country that is investment grade, dollar economy and which has become effectively the two player market as we speak. One player was acquired by Cable and Wireless. The other one has basically handed over the business to the government. And as a result of that, we're in a three player, possibly two player market on mobile in Panama, which has led out to the industry structure that we think is becoming the norm in Central America. But things have played out pretty much the way we imagine they would.
And as a result of that, and this is the punch right now, I'll give you some detail in second Lucas, What you see in Panama is, dollar denominated revenue, two player market effectively, we have the number one position for gaining scale on mobile and being able to not only defend fixed, but also grow our footprint because there's opportunities as the business continues to grow on fixed, because the economy is growing. As a result of that we see household formation in many new cities around Panama, which makes us very bullish. So the combination in Panama is, you have service revenue growth of 5%, 6% give or take. You have EBITDA margins that have already reached 45% and we see increased scale on mobile because the market is consolidating and the ability to build more network in Panama going forward. And the business is already growing operating cash flow at 205, 22% I think is the number.
So all in all to say, [indiscernible] we invested in Panama. It's only where we become one of our better cash flow producers and it's all dollar denominated. El Salvador, before I forget. So El Salvador had another solid quarter. Service revenue is up 6%. And the thing with El Salvador is, we put our playbook three years ago. You've heard me say this a number of times. We revamped our management team, put in one of our most solid management teams in place today. I hope they're listening to the call. We supported them with new spectrum acquisition and then with the funds to build out that network in a market in which we think we probably deploy a lot more. And today, we're harvesting all of that with strong service revenue growth, expanding margins in El Salvador, growing our postpaid base and also very bullish about cheaper money there. And in El Salvador, as I'm sure you see from the quarter numbers, all the lines of businesses are performing [indiscernible] think we can grow some more mobile where service revenue is growing and B2B, where again, Tigo Business is becoming an important part of the ecosystem in El Salvador. And as I just said a minute ago, Tigo Money also has room to play significantly in El Salvador. And again, just not to forget, it is also a dollar economy. So that helps out significantly. That's the long and short on Panama and El Salvador.
Okay. That's very clear. Thank you.
All right. Thanks Lucas. So we're right on the hour and that was our last question. SO back to you Mauricio.
All right. So I guess I got to wrap it up some here. You're not going to hear from me any last minute remarks that are different from what we're saying. We are on track to deliver that right around 10% cash flow growth this year. And if that is consistent, we are average 10% of growth for the three year period. We've had to adjust, as I said, in order to get there and we're making it. We're going to get to $150 million to $200 million of equity cash flow this year, which is consistent with the way we have budgeted for the year and consistent with our three year plan, [indiscernible] $800 million to $1 billion of equity call flow. We also continue to invest $1 billion and we have to do investments we have made in the past and we're happy with the ones we're making, we'll see a ton of upside opportunity, both in home and in mobile where every time we deploy new network, we see a pick up.
And we're also making progress on the strategic initiatives that we were aware of, Tigo Money and the Tower business. And we continue to just be quite frankly the better gold standard in terms of ESG in a region. And our great place to work recognition demonstrates that. So pretty much on track despite a much harder macro environment. Thanks for joining today.