Trilogy International Partners Inc

TSX:TRL

Earnings Call Transcript

[Operator]

Good day, and welcome to the Trilogy International Partners Incorporated Second Quarter Earnings and Webcast Conference Call. [Operator Instructions] Please note, the event is being recorded. I would now like to turn the conference over to Ann Saxton, Vice President of Investor Relations and Corporate Development.

[Ann Saxton]

Thank you, Michelle. Hello, everyone, and welcome to our conference call to discuss our second quarter 2018 results. This call is also being broadcast live over the web and can be accessed in the Investor Relations section of the Trilogy International Partners website. Joining me today are Trilogy's President and CEO, Brad Horwitz; and Trilogy's CFO, Erik Mickels.Please note that unless we state otherwise, all financial information we provide in our prepared remarks today is in U.S. dollars. This call includes forward-looking information from which our actual results may differ materially. For further information regarding the various factors, assumptions and risks that could cause our actual results to differ, please review the cautionary language in the About Forward-looking Information section of yesterday's press release as well as the cautionary note regarding forward-looking statements and the risk factors in our 2017 annual information form available on SEDAR, which is also included in our annual report on Form 40-F available on EDGAR.This forward-looking statements represents our expectations as of today and, accordingly, is subject to change. We disclaim any obligation to update forward-looking information, except as required by law. Please also refer to yesterday's press release for definitions and reconciliations of any non-GAAP measures that we use during today's call. The press release is posted on our website at trilogy-international.com under the Investor Relations tab. I will now turn the call over to Brad Horwitz, President and CEO of Trilogy International Partners.

[Bradley Jay Horwitz, Co]

Thanks, Ann. Hello, everyone, and thank you for joining us for our second quarter earnings call. Our businesses turned in a solid quarter with continued postpaid subscriber growth in both of our operating markets. We are particularly encouraged by the progress we have made in one of our main focus areas, and that's reducing churn in New Zealand.During the second quarter, we improved postpaid churn and expanded our postpaid subscriber base, which we achieved on both a year-over-year and sequential basis in both New Zealand and Bolivia.We had over 11,000 consolidated postpaid net additions, nearly double those of last quarter. As a result, our postpaid subscriber base is 5% larger than it was in the second quarter of 2017.Our consolidated postpaid revenues increased versus last quarter, more than offsetting the impact of the prepaid price competition we continue to see in both of our markets. Importantly, postpaid revenues now make up 53% of our wireless service revenues, compared to just under 50% a year ago. More broadly, our subscribers' consolidated data consumption continues to increase significantly each quarter. However, yields are down year-over-year due to pricing competition, resulting in a slight decrease in service revenue from the second quarter of 2017. Despite another quarter of strong consolidated postpaid gross additions, our second quarter sales and marketing costs decreased year-over-year and sequentially, as many of our sales and marketing costs were front-loaded into the first quarter. Cost of service expenses also declined in those periods and subscriber usage patterns continued to move from voice to data, and we had less national roaming and interconnection costs in New Zealand during the quarter.Our adjusted EBITDA increased 15% sequentially to $38 million, and our margins grew from 22% last quarter to over 25% this quarter.We ended the quarter with 91% of our consolidated network's LTE-enabled, and our LTE build-out is largely complete in both markets. With 38% more LTE sites than we had in Q2 of 2017 and continued growth in the number of LTE devices in our subscribers' hands, we believe that data consumption will continue to grow significantly.Moving on to our second quarter results by markets, starting with New Zealand. We continue to make traction in regaining our footing after the challenges we experienced in 2017. Our postpaid gross additions grew sequentially and year-over-year. Further, our significant efforts to reduce churn are making a difference. We improved our postpaid disconnects in the second quarter sequentially versus Q2 2017, resulting in about 7,200 postpaid net additions for the quarter. This was more than 2x our postpaid net additions from a year ago. Our postpaid base has grown 8%, and as a percentage of our subscriber base, has increased from 26.7% at the end of the second quarter last year to 29.3%.We brought on almost 1,000 prepaid net additions in the second quarter of 2018 as a result of some of the 2G customers we disconnected in Q1 coming back to our network. We had a net loss of more than 32,000 prepaid subscribers in the same quarter of 2017. Our prepaid churn in the second quarter reduced to under 3% for the first time since 2012.In line with the last several quarters, data usage continues to grow rapidly across all our subscriber segments. Our postpaid customers are now using more than 3.5 gig of data per month, which is up 65% compared to the same period last year and at 12% quarter-on-quarter. In constant currency, this increased usage, coupled with the growth in our postpaid base, drove a 6% year-over-year and a 3% sequential increase in postpaid revenues in the second quarter.The increase in data usage by our prepaid customers is even more dramatic, almost doubling over the last 12 months, and up nearly 30% versus last quarter. While usage trends are very strong, pricing in the New Zealand prepaid space remains very competitive. This, in addition to the continued migration of high-value prepaid customers to postpaid, has dampened prepaid ARPU over the prior quarter.Our blended ARPU grew 3% in the second quarter of 2018 versus the same period in 2017, benefiting from the favorable shift in our subscriber mix to postpaid, as well as increased data usage across our customer base. On a blended basis, data usage is up 86% versus the second quarter of 2017 and 20% sequentially, driving 10% year-over-year growth in ARPU. Our data revenue, excluding SMS, is now over 67% as a percent of wireless revenue versus 63% a year ago.With more than 73% of our customers now owning LTE devices and increased LTE network coverage, we anticipate growth in data usage to continue across the customer base.While we're pleased with the continuing growth in data usage, it's still catching up to the value that customers in New Zealand receive for price, putting pressure on the yields. We'll continue to explore additional ARPU accretive initiatives, such as cross-selling and product add-ons.Revenues from our broadband service increased 11% on a 16% larger base from Q2 2017 to Q2 2018. While the competitive dynamic in this business remains heightened, it continues to provide a valuable bundling opportunity with our mobile service and we have made some recent organizational changes that we believe will increase our success in this area.Our second quarter adjusted EBITDA in New Zealand was $22 million, a 6% improvement versus Q2 2017, and a 17% improvement, compared to the last quarter. Our adjusted EBITDA margin surpassed 25% for the first time since the first quarter of 2017 when we launched our new operating system. In comparison, last quarter, our adjusted EBITDA margin was 21%; and in the second quarter of 2017, it was 24%. Capital expenditures in the second quarter were $13 million, and we have 22% more LTE-enabled sites than a year ago. More than 96% of our network is now overlaid with LTE.In addition to reestablishing momentum, 2degrees has been making a number of organizational changes this year to better position the company for the continued growth opportunities that we see in the market. In brief, we're aligning the organization to optimize the customer experience and accelerate our customer and revenue growth.We've hired a Chief Digital Officer, a Chief Business Officer and created a Chief Operating Officer position with a primary focus on strategy and customer experience. And a few weeks ago, we filled the role of CFO at 2degrees. This addition, along with the strength that we've added to our sales, digital and customer care organizations over the last several quarters, will enhance our stability and provide knowledge and depth of experience to augment our growth.Finally, now that these organizational improvements are in place, Stewart Sherriff, our CEO at 2degrees, has let us know that he is preparing to retire. Steward has served in our Board since the inception of 2degrees, both as a Director and as Chairman of 2degrees prior to being named CEO. He's been in that position for the last 5 years. And after taking the company from a start-up operation to profitability, he has decided that it's the appropriate time for a new CEO to lead 2degrees to the next level as a combined wireless and broadband enterprise.Stewart has been working with John and me for almost 25 years in over a dozen countries. He has agreed to stay on as CEO until his successor is found, and the 2degree Board is beginning a global search for a new CEO immediately.Moving on to Bolivia. The second quarter marked another period of strong subscriber activations. Our second quarter postpaid gross additions increased 29% year-over-year and 19% versus last quarter. We also reduced postpaid churn on a year-over-year basis and sequential basis, resulting in 4,000 postpaid net additions, versus a 4,100 net loss a year ago. Much of this can be credited to targeted migrations from our prepaid base. As a result, our postpaid subscriber base is 1% larger than it was at the end of March.Our second quarter prepaid gross adds increased over 70%, versus the second quarter of 2017 and 11% versus the first quarter of 2018 as our 1.1 gig promotion remained incredibly popular. Data consumption across our base has increased substantially due in large part to the promotion. Even though that promotion has ended, we expect growth in data usage to continue as LTE adoption continues to be strong. An additional 33,000 LTE users are now on the network, up 40% from the second quarter of 2017.Our challenge in Bolivia is that pricing is more competitive than it was a year ago, which means service revenues have not kept pace with subscriber and data growth. Our larger postpaid base generated 7% more revenue than the first quarter of 2018, offsetting modest declines in prepaid revenue. Nonetheless, service revenues are down 8%, compared to Q2 in 2017.A big part of the pressure on revenues has been the prevalence of promotional pricing, including our own 1.1 gig promotion. We decided to remove this promotion from the market at the end of June. A few days later, our main competitor, Tigo, also discontinued a similar promotion. In a month since removing this promotion, we are seeing positive indications, including an uptick in top-up activity. While there will likely be some short-term noise in subscriber metrics as we expect prepaid gross addition levels to decrease, and churn to actually increase as spinners, the prepaid subs that repeatedly activated new SIMs for the 1.1 gig bonus, rather than reloading their existing SIM cards, come off the network. The termination of that promotion, we expect, will result in positive financial results. The increased penetration of broadband and the availability of Wi-Fi in Bolivia to offload data is also an area that we've been watching closely. We've observed during our fixed LTE trial that those homes with our high-speed broadband service, our customers' data consumption on their mobile devices has declined significantly. This dynamic validates the continued revenue potential for our fixed LTE product.Our team has been hard at work developing a number of data revenue-generating initiatives, which will go to market in the second half of the year. We are working with a few innovative partners to both capitalize on existing customer usage patterns and leverage our brand and LTE network. The year-over-year decline in second quarter revenue in Bolivia reduced our adjusted EBITDA. This reduction was partially offset by continued savings in voice interconnection costs as customer usage patterns transition from voice to data and sales and marketing expense reductions, due to changes that we made to our loyalty program.In addition to our new data revenue initiatives, we have identified a handful of cost-saving measures operationally. These measures, which we will implement in addition to the continued financial discipline in the third and fourth quarters, should benefit our 2018 adjusted EBITDA.Capital expenditures for the second quarter were $8 million and our network in Bolivia is about 87% LTE-enabled, versus 60% a year ago and 72% last quarter. With the LTE build-out largely complete, we are able to use CapEx as a lever to achieve strong free cash flow for the balance of the year.With that, I'll turn the call over to Erik to take you through the numbers. Erik?

[Erik Mickels, Senior VP & CFO]

Thanks, Brad, and hello, everyone. Our consolidated business ended the second quarter with 3.7 million total wireless subscribers. Our gross additions of 679,000 increased 46% compared to Q2 2017 and increased 5% sequentially. Consolidated net additions were 30,400 versus a net loss of 105,600 in Q2 2017 and also increased over 70% on a sequential basis. Our consolidated postpaid net adds for Q2 were 11,200 versus a net loss of 1,500 in Q2 2017. Our postpaid subscriber base has grown 5% since Q2 of last year. We ended the first quarter with 74,600 wireline subscribers, up 16%, versus Q2 2017.Our Q2 total revenues were $198.1 million, up 2% versus the same quarter last year due to higher equipment revenue associated with higher value handsets this year versus last year, as well as increased handset financing activity in the period. Consolidated postpaid revenue of $67.3 million grew 2%, compared to Q2 2017 and increased 2% sequentially as gains in New Zealand offset a modest decline in Bolivia. Total service revenues of $147.6 million for Q2 decreased 2% year-over-year due primarily to an 8% decrease in prepaid revenues, which is partially offset by an increase in postpaid and wireline service revenues in New Zealand. Postpaid revenues now represent nearly 53% of mobile service revenues, versus 50% a year ago, representing positive mix shift movement. Our consolidated operating expenses were $193.1 million in the second quarter, a 6% increase versus the same period last year. Excluding cost of equipment, the increase was primarily due to increased G&A cost in New Zealand, including bad debt expense and the impact of EIP receivable factoring costs. These cost increases were partially offset by decreased interconnection and national roaming expenses in New Zealand and changes we made to our customer loyalty program in Bolivia.Adjusted EBITDA was $37.5 million in the second quarter, down 5% compared to last year, and an increase of 15% sequentially. Our consolidated adjusted EBITDA margin was 25.4%, versus 26% in Q2 2017 and 22% in Q1 2018.Our consolidated capital expenditures for Q2 were $20.8 million, versus $17.9 million a year ago, primarily due to the timing of activities.We had 2,273 sites on air at the end of June, 1,887 of these sites, or over 91%, now provide LTE service. This is a 38% increase in LTE sites from last year, as we continue to invest in our business.Moving on to results by market. In New Zealand, we had solid sequential subscriber growth in both our prepaid and postpaid wireless subscribers. At the end of Q2, we had 408,300 postpaid subscribers, a growth of 8%, versus Q2 2017. Postpaid now makes up 29% of our 2degrees wireless sub base versus 27% a year ago. Postpaid net additions were 7,200 versus 2,700 in Q2 2017. Prepaid net adds were almost 1,000 for the second quarter compared to a loss of 32,500 a year ago. We had 2,900 fixed broadband net additions in the quarter, versus 3,700 in Q2 2017, and we ended the second quarter with 74,600 broadband subscribers. Our broadband base at the end of Q2 was 16% larger than at the end of Q2 2017. Our New Zealand service revenues for the quarter were $86.79 million, an increase of 1% year-over-year, as postpaid and wireline gains more than offset declines in prepaid and lower margin international roaming revenues. Wireline revenues of $15.9 million in Q2 increased 11% year-over-year. Our 16% increase in broadband subs was partially offset by residential ARPU compression, versus Q2 of last year.Our Q2 operating expenses in New Zealand were $134 million, an increase of $12.3 million or 10% versus last year. Excluding the $7 million increase in cost of equipment, the expense increase was primarily in general and administrative expenses, including $1 million from the impact of EIP receivable factoring cost related to our continued growth in postpaid subscriber acquisition and $1 million in additional bad debt expense in the period, compared to Q2 2017.We began to see some normalization in our operating expenses in the second quarter, including a $1.7 million reduction in equipment subsidies, which were higher in the 2017 period related to the transition to our IT operating system. We remain focused on stripping out additional expenses that we incurred last year and driving efficiency overall.Other OpEx improvements in the quarter include a year-over-year and sequential decline in Q2 cost of service expenses as increases in transmission cost associated with growth in our Broadband business were offset by a $1 million decrease in national roaming expense and a $2 million decrease in interconnection expenses associated with the reduction in lower margin traffic from an international roaming partner.In addition, costs related to our new brand campaign in New Zealand were front-loaded into Q1, resulting in a quarter-on-quarter reduction in sales and marketing expenses. As a result of these factors, our Q2 adjusted EBITDA in New Zealand increased 6% year-over-year to $22 million, which also represents a 17% increase on a sequential basis.Our adjusted EBITDA margin was 25.4%, versus 24.2% a year ago and 21.1% just last quarter. Our Q2 capital expenditures in New Zealand were $12.8 million. We ended June with over 96% of our sites overlaid with LTE, an increase from 81% in Q2 2017.Moving on to Bolivia. We ended the second quarter with 2.3 million wireless subscribers as we grew both our postpaid and prepaid subscriber bases. We had 22,300 net additions in Q2, versus a net subscriber loss of 75,900 a year ago, due largely to promotional activity, which continued in the quarter.Our service revenues in Bolivia were $60.8 million in the second quarter, up 2% sequentially, but an 8% decline versus Q2 2017.Data revenues, excluding SMS, declined 12% year-over-year. While demand for data continues to grow significantly, lower revenue per megabyte more than offset the growth of data consumption as a result of the promotional offers in the market.Despite the promotional dynamics in the market during the quarter, we have now experienced 2 quarters of sequential growth in both data revenue and total service revenue. This growth is driven by continued market shift towards LTE devices, as we continue to invest in our LTE network. Data revenue now represents 47% of wireless service revenue, as we continue to approach the inflection point. Postpaid ARPU for the quarter decreased 4%, versus Q2 2017, while prepaid ARPU was down 15%, compared to Q2 2017, again, primarily due to the prepaid activation promotion.Our operating expenses for Q2 were $54.7 million, a 4% reduction, versus Q2 2017. Sales and marketing costs decreased $1.8 million, compared to Q2 2017, due primarily to an expense reduction resulting from a change in our customer loyalty program. In addition, cost of service was down $791,000, including the impact of the shift in customer usage patterns from voice to data. Overall, good cost control in the quarter partially offset the top line impact of the competitive situation.Our resulting adjusted EBITDA in Bolivia was $18.3 million in the second quarter, an 8% increase compared to last quarter, but a 16% decrease year-over-year. Adjusted EBITDA margin for Q2 were 30%, compared to 33% last year. Our capital expenditures in Bolivia were $7.9 million in the quarter, up $747,000 versus Q2 2017, due to the timing of activities in both periods. We ended the quarter with 87% of our sites now overlaid with LTE.Shifting now to our consolidated cash and liquidity position. At the end of Q2, our consolidated cash and short-term investment balance was $39.3 million, which includes $1.9 million in New Zealand and $22.8 million in Bolivia, with the balance of $14.6 million at corporate. With respect to our capital structure, consolidated debt at the end of the second quarter, including $350 million of Trilogy's notes, plus local debt, was $511.8 million. As you may have seen, we've recently announced the refinancing of our $200 million New Zealand facility. The new senior finance facility in New Zealand has a 3-year term, is denominated in local currency and increases the facility size to NZD 250 million. This upsize provides additional capital to invest in our New Zealand business. We are in the process of evaluating uses of the capital, as well as the timing of any incremental cash CapEx.In Bolivia, our local bank borrowings totaled $25.4 million for a net debt of less than $3 million.From a consolidated gearing standpoint, net debt to consolidated LTM adjusted EBITDA was 3.4x at June 30. In terms of 2018 outlook, normalized for FX, New Zealand continues to be largely on track with internal targets through the first half. We have made positive strides in mitigating churn and driving net additions. In the second half of the year, we expect margin improvement as we continue to focus on running an efficient operation. As a result of this momentum, we expect the second half of 2018 in New Zealand to be significantly higher than the first. In Bolivia, the promotional pricing in the market has impacted both service revenues and EBITDA in the first half. However, we expect new revenue and margin-enhancing initiatives in the second half will provide some gains. Additionally, with our LTE build-out in Bolivia now largely complete and some CapEx efficiencies in the second half, operating free cash, which is EBITDA less CapEx, is expected to be on track for the full year in Bolivia.With that, let's go to questions.

[Operator]

[Operator Instructions] The first question comes from Jeff Fan of Scotiabank.

[Jeffrey Fan]

Good results on New Zealand. So I just wanted to maybe start there. The churn improvement, I think, is really the key focus as you go into the second half. So if you guys can talk a little bit about some of the leading indicators that you might be seeing, and whether it's Net Promoter Score or likely to recommend, or any of the metrics that you track that would give you confidence that the direction that we're seeing in the second quarter is going to continue for the second half for churn improvement. And then sticking with New Zealand, on the cost, there were quite a bit of costs that I think that you guys had to incur as you went through the system change. So maybe you can help just remind us what some of those costs were and then -- and how comfortable you are to bring those costs -- take those costs out now that you are seeing some of the churn improvement. And then finally, just on Bolivia. I guess the bigger question really is the -- your ability to really monetize data in that market because the 1.1 gig promo certainly helped you on the net adds, but as you've seen the last few quarters, it's really taken ARPU down. And then prior to those promotions, your ARPU is doing well, but your adds aren't doing well. So I'm just trying to get a -- sit back and kind of think about what does this market look like, what does your business really look like now that you're coming off those promotions again?

[Erik Mickels, Senior VP & CFO]

Jeff, thanks for the questions. It's Erik. I'll take the -- I'll start with the first 2. Brad can add color, and then I'll turn the third question over to Brad. First, on the churn. We are pleased with the progress that we've seen year-to-date, stepping things down from about 2% monthly churn at December, down to 1.8%, now at 1.6%. We've talked about exiting 2018 back at our historical postpaid churn levels of about 1.3%, 1.2%. So we feel really good about that. In terms of leading indicators, a couple that we look at: One is Net Promoter Score. We continue to see momentum in that area and year-over-year improvement, particularly on postpaid. And additionally, looking at call center metrics, we see call volumes are down, handling times are down and a lot of those KPIs are trending in the right direction, so that helps us feel good about churn. In terms of how that translates into financial results, it is compelling how every 10 basis points impacts -- improvement impacts the top line. So we will see that flow through. On the cost side, in the second quarter, we started to see some of those 2017 costs come out of the system, as you mentioned. We had elevated equipment margin in Q2 of 2017 as we needed to stimulate activity. That was about $1.7 million favorable in the period. As we look year-to-date 2018, we see things trending well sequentially in bad debt expense, customer care also tracking well against internal targets in national roaming and interconnection costs. So there's several things trending in the right direction that helps us feel good about the margin expansion, and then overall, leading to a very strong second half in New Zealand.

[Bradley Jay Horwitz, Co]

Yes, Jeff. This is Brad. On Bolivia, the -- you've assessed it correctly. While we're getting customers to certainly use data in much more copious quantities, getting them to put value, and to paying for that is what the challenge has been. We're pretty encouraged when we stopped the promotion that the top-ups with customers with their existing SIM cards is coming back and upticking nicely. More importantly, we think that the overall market is going to sort of follow that trend and put a little bit more stability back into it. The second thing is really a matter of continuing to source and introduce content to the subscribers. What we're seeing from a competitive standpoint as our competitors lay a lot more fixed broadband into the marketplace, content is becoming a bigger and bigger part of the overall mix, and so we are feverishly working with suppliers to work out the -- it's really the billing, the carrier billing situations with these, on how customers will actually pay for this in Bolivia. Recall that there's very few credit cards -- the credit card penetration is really low in Bolivia. And so in effect, we become the wholesaler, if you will, of the content that requires a fair amount of integration with those suppliers. And so we're trying to move that along quite a bit. The other thing, with the benefit of hindsight and now looking at customer usage patterns, much like the 1.1 gig promotion, some of the sort of incentive and value-added things that we do in terms of providing customers with basically extended periods of time, either weekly or monthly on their WhatsApp applications, we're constantly reviewing those and seeing if there is a way to trim down either the period of time that customers get that on an unlimited basis. And I think the last thing that we're working on that I think holds a fair amount of promise is that we have been working with an internationally recognized consulting group, really spending a lot of time on the analytics and the usage patterns of what -- not only our customers, but what any customer in the marketplace is doing. And we think that we will be trialing this, this quarter, and probably being more aggressive with it in the fourth quarter. But we're hoping that this is going to dramatically stimulate the postpaid acquisition and migration of our customers. What it's basically doing is taking existing usage data, creating algorithms and establishing a credit profile to which any customer coming into our stores or dealers with simply providing their number, we can assess on the spot the creditworthiness of these guys and instead of the somewhat cumbersome process they go through today. And the postpaid customers are more avid users of content that will be coming through. So it's an ongoing experiment and trial with it, but the overall market conditions, the economy in the country, continue to be strong. We continue to increase the LTE penetration among the base. And now, I think the network parity is there, particularly in the urban areas. And arguably, from a speed standpoint, one that hopefully translates into more usage, as well as more aggressive customer acquisition.

[Jeffrey Fan]

And just maybe a quick follow-up for Erik on the Bolivia CapEx and, I guess, the operating cash flow guidance that you're talking about. Am I reading you correctly that even though there is pressure in the EBITDA in Bolivia, that CapEx is going to be reduced to offset that, so that operating cash flow, EBITDA less CapEx, is going to be consistent with what you guided before? Is that the way to interpret that comment?

[Erik Mickels, Senior VP & CFO]

Yes, that's exactly right. If you look at our original CapEx guidance, it was in the upper 30s cash CapEx in Bolivia. And with some efficiencies we've identified and also some timing items, looking like that's going to be more closer to the lower 30s. So strong free cash flow relative to our original guidance.

[Operator]

The next question comes from Bentley Cross of TD Securities.

[Bentley Cross, Associate]

First, just wanted to follow on with Jeff's question about taking out the cost in New Zealand. Erik, maybe it would be helpful if you could just run through kind of maybe the last 4 quarters' bad debt expense, because that seemed to be one of the major drivers of throwing the cost around from quarter-to-quarter?

[Erik Mickels, Senior VP & CFO]

Yes. What I can say, Bentley, is if you look at the second half of 2017 relative to the first half of 2018, bad debt expense is down about $2 million relative to that period, and we see that improving in the second half. So that was a big driver for the incremental cost in 2017 and that's one that is trending well. In terms of the last 4 quarters, we're happy to send that -- we'll get that for you and send it off-line.

[Bentley Cross, Associate]

Another question on New Zealand. It seemed like the implied ARPU for the Broadband business has started to slow down in terms of the leakage from quarter-to-quarter. I'm wondering if we've kind of reached a new normal there, or if some of the promotions have gone by the wayside, or any commentary you can provide would be helpful.

[Bradley Jay Horwitz, Co]

Yes, Bentley. This is Brad. I wouldn't say that they've gone by the wayside. It continues to be one of the more competitive spaces in the marketplace. But I think that the degree of either value-added, be it a TV or a refrigerator, has diminished somewhat. And I think that the extended periods of free service, at one point, providers were offering up to 6 months of free service on a 2-year contract. That seems to be residing -- declining in terms of the promotional activity. And lastly, several of our competitors were offering up to $300 in credits against 2-year contracts as well. And I think that's all -- that activity is diminishing a bit. I don't really see prices increasing in that regard, but I think the new normal now has gone from heavily incented 2-year contracts, to more rational 1-year contracts. And then from our perspective, we continue to focus on bundling the broadband with our customer base, historically and predominantly, postpaid as it is today. But at the end of the day, every home in New Zealand has both mobiles and broadband in them and, by definition, broadband's a postpaid product. So I think that there's opportunity with some creative packaging and bundling to help stabilize things, as well as enhance the overall household ARPU that we'll start receiving from our customers in New Zealand.

[Bentley Cross, Associate]

One last one. Just a bigger picture question on Bolivia. I mean, you guys have said everything's for sale before at the right price. Given the trends in Bolivia, should we kind of assume that, that's off the table for the time being? Or would that still be considered?

[Bradley Jay Horwitz, Co]

I think we never take anything off the table. When it comes to that, what we do pay attention to are comps that are out there. The last time, I don't know if that was -- maybe it was the last-quarter-look or something, comps were down. Overall, I think the median was about 5.2x in Latin America, and that's not thrilling by any means when thinking about monetizing the asset. But for a fair price, we've certainly got an ongoing list of additional uses for capital to put into it. We like the business. It continues to generate cash for it, this market structure, and stability of the market is there. And I think that the team is looking at the right things. It's a little slower, not just our business, but all the businesses to sort of catch up to the economic growth that we see in the place. But we were down there last quarter, and the number of new hotels and the number of cranes being built everywhere still provide a robust economic environment. And while the methods are a little unusual, I think there'll continue be political stability in the country, and we're very comfortable operating there.

[Bentley Cross, Associate]

That's comforting answer. And just following on with that, what would the tax implications be? Obviously, it depends on the sale price, but kind of ballpark.

[Erik Mickels, Senior VP & CFO]

That's a complicated question, Bentley. There's many intervening entities, and it will depend on structure and a variety of factors. But I think a baseline assumption, you see our dividends or cash that we upstream is subject to the 12.5% withholding tax. I think a good place to start would be that proceeds would be subject to the same 12.5% tax impact.

[Operator]

[Operator Instructions] This concludes our question-and-answer session. I would now like to turn the conference back over to Brad Horwitz for any -- Brad Horwitz, President and CEO, for any closing remarks.

[Bradley Jay Horwitz, Co]

Thank you, Michelle. Well, thanks, everybody, for dialing in. While we're pleased with how we are progressing in 2018, coming off 2018, we continue to see and are pretty excited about the opportunities to actually accelerate the growth actually in both of our markets. In terms of staying consistent with what we've said we're going to do, we hope we've been delivering on that to everyone's satisfaction. There's still some cost to strip out of the businesses, but with the second half of the year with the enhanced organization that we've put into place for the market, and with some reinvigorated marketing and plans, we look forward to additional opportunities to accelerate both our growth and our revenues, and we look forward to updating everybody on our next call. So thank you, all.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.