Good morning, and good afternoon everyone, and welcome to Millicom's Third Quarter 2021 Earnings Call. I am Sarah Inmon, Investor Relations Director at Millicom. This event is being recorded. Our speakers today will be our CEO, Mauricio Ramos; and our CFO, Tim Pennington. Following their prepared remarks, we will have a Q&A session. By now, you should have received a copy of our earnings release, which is available on our website, along with the slides that we'll be referencing during today's presentation. If you please turn to Slide 2, you can see our Safe Harbor disclosure. We will be making forward-looking statements, which involve risks and uncertainties, and could have a material impact on our results. We will also be referring to many non-IFRS metrics throughout this presentation. We define these metrics on Slide 3, and you can find reconciliation tables in the back of our earnings release and on our website. With those disclaimers out of the way, let me turn the call over to our CEO, Mauricio.

Thank you, Sarah. Good morning, and good afternoon, everyone. Thank you for joining us today. We had another excellent quarter in Q3. So let's jump right into it, starting on Slide 5. These are the highlights for the quarter. One, we had double-digit customer growth in Latin America, both in fixed and in mobile. First, we get the customers, and then the revenue follows, as you have heard me say a few times. With this kind of very strong customer growth, we are well on our way towards our target of sustaining mid-single-digit revenue growth. We grew service revenue by 9% in Q3 in Latin America. Two, we're now growing in every country and in every business unit. Three, and very importantly, we are winning in Colombia. Yes, we are in investment and growth mode in Colombia. And yes, we are using EBITDA and cash flow to get that growth. But the good news this quarter is that a, we're solidifying our subscriber and revenue growth in mobile; and b, we are clearly picking up market share. Four, we also continued to perform strongly in Guatemala and Panama in the quarter, with that, our three largest countries are all growing. And five, we have successfully resumed shareholder remuneration while continuing to further reduce our leverage in the quarter. All of this, while we remained as focused as ever on fulfilling our purpose, as you can see on Slide 6. As you saw from the InterVideo, this quarter, we teamed up with the Real Madrid Fundacion to help protect and develop vulnerable children in the region. We will leverage and increase the Fundacion's soccer learning facilities to give children better digital access and digital education there, strengthening our existing programs to combat cyber bullying and to promote more responsible use of…

Thank you, Mauricio. I'm going to start on Slide 16 with a bridge between our reported numbers and the LatAm segment. From the top chart, you can see reported revenues were just under 1.1 billion. But when you look at the business holistically, and that's including Guatemala and Honduras as they're fully consolidated, underlying revenues were just over $1.6 billion. Now to get to underlying LatAm service revenue, we exclude Africa, which was a little over 5% of our revenues today, and telephone equipment sales, which is the most important driver of profitability. On Slide 17, you can see that our LatAm service revenue grew by 8.2% in real terms and 8.5% organically, and remains strong across all segments and all markets. Now, this is the fifth sequential quarter of growth and represents some of the best-sustained performance we've seen since we started this transformation of Millicom into a leading LatAm operator. Economic activities continued to recover in our markets, remittances from the U.S., Central America sustained double-digit growth. Vaccination rates improved significantly in most countries and currencies in our markets were generally stable, both during the quarter and over the past year. This provided the basis for a strong performance in our consumer mobile business up 7.5%, while Home maintained double-digit growth, and we also showed positive growth in the B2B segment. On Slide 18, all our LatAm operations delivered positive service revenue growth. And once again, El Salvador registered the fastest growth of 18%, driven by mobile and stemming from network investments. Panama also had double-digit mobile growth, again on network investments, and importantly, the return to growth in our B2B business. This resulted in 9.5% overall growth. Now you've heard about Colombia and Guatemala's strong performance that was up 6% and 9.2%, respectively, again, both on home…

Thank you, Tim. Before we take your questions, let me take a few minutes to refresh everyone on our simple value creation model. It starts with a very clear sense of purpose to make sure that all key stakeholders see value in what we do. The first building block is our network-centric organic growth strategy. Demand for connectivity is large in our markets. Our ambition is to turn that demand into service revenue growth in the mid-single digits, drive margin expansion as we have, and grow our OCF by about 10% every year. With the investments we have made over the past year, this is now well within short-term reach. The entire organization is working toward delivering on that very same ambition in 2022. The second building block is our capital allocation strategy. This starts with a healthy balance sheet and our clear focus on the Latin American region. We're coming out of this harsh pandemic with more organic growth and lower leverage, and we're not able to return capital to shareholders every year. And three, we're now building new ventures that create value beyond our core connectivity business. Our Tigo Money venture is already the largest fintech in our markets. We're investing more in it now than we have done in the past to accelerate its growth potential and capture the large fintech opportunity in our markets because, indeed, no one is doing mobile money payments like we can in our markets, and this makes it a unique fintech opportunity for us. And our growing tower, fiber, and data center infrastructure also carries important strategic optionality for us to create value. It includes more than 9,000 towers of those in tier three data centers at approximately 170,000 kilometers of fiber. We now have projects underway to carve out both of these valuable assets from our core business and to manage them separately. This, in turn, will give us optionality to bring in partners for either venture to monetize or further grow both of them. I hope our model is crystal clear in what it means for value creation. Before I finish, please allow me to thank and recognize our amazing team, everyone, individually and collectively, because it is our vibrant culture, our unique Sangre Tigo, which gets the job done every day and the right way for all our stakeholders. We're now ready for your questions.

Thank you, Mauricio and Tim, for your remarks. We will now begin the Q&A session. Our first question today will come from Soomit Datta at New Street Research. Soomit?

Hi. Sorry, guys. My technical skills are not very good. Thanks very much for the call. A quick first question, please, on inflation and energy costs, if that's okay. So we're seeing inflation rising across the region, presumably, in some countries, across the footprint more than others. But it doesn't seem to be evident in the Q3. But I wonder as you look into 2022, do you see any kind of risks? Are there any particular markets where you would want to highlight that as an issue?

Sure. I'll start a little bit, and I'll hand it over to Tim because he's been doing quite a bit of good work on that. As you can imagine, Soomit, we've just gone through our budget process, so we've had light conversations on that. Indeed, it doesn't come through the results today, that's because we're not hearing from the teams and our review significant at this moment concerns on inflation, it just doesn't really come up at this point. I mean if you look at the official projections by international monetary fund and others, it doesn't seem to be something that weighs heavily in the horizon. Having said that, we've been doing quite a bit of work ourselves internally to prepare for an inflationary environment, particularly when it comes to pressures that affect worldwide supply chains. And by that, I mean, at the group level, we've been buying as much as we possibly can in terms of equipment and that's part of why you see us bulking up, if you will, in CapEx. Somebody said internally, we started buying our Christmas campaign gifts back in February, and I think that turned out to be a really good decision because, as you know, there are shortages around the world and chips and handsets and a lot of equipment. So I think we've prepared ourselves quite a bit for that. At the group level, as I said, we're not seeing a lot at the local level, but at the group level, we've been doing the things that you would expect us to do to better prepare for that environment. And that is making use of our scale to mitigate any cost pressures. So I already talked about loading up ahead of time, which we've been doing. We've also been optimizing overall rebate logistics as anticipation so that we have more equipment available simply from a circular timing point of view. And we're pushing back on our vendors and optimizing specs in addition to adding alternative vendors as well as to prepare the business for indeed some pressure at the group level. Tim, any more insights?

No. I think you've covered it pretty well. I concur, I mean, we're not really seeing a lot of inflationary pressures at the moment. That said, Soomit, I think we're very aware of it and clearly, Latin America is not immune to the global inflationary pressures out there. We're certainly seeing a few central banks pushing rates up and Colombia, in particular, moved its rates up. But kind of the main areas we will be impacting will be on people, on our employment costs. And we're not seeing that coming through just at this point. You mentioned fuel but bear in mind, although, obviously, network is a key part of our business, it only really represents about 5% or 6% of our overall opex as a percentage of the revenues and the fuel component of that is a subset of that as well. So kind of we're aware of it. But it's -- as you say, it's not very inevitable but at the moment.

And in some countries, Soomit, like Colombia, we just took a price increase. So we do have the ability to protect ourselves in revenue -- on the subscription part of our business for sure.

Great. That's clear. Thank you. Can I have a quick follow-up, please? This might be one for Tim. But just on the -- on Guatemala, performance is very good, but on the dividend, you've signaled that you're looking to pay down gross debt. Is that -- I was a bit surprised by that and I wondered, is that likely to be an ongoing policy in that market? Thanks.

No. When we redeem the $800 million bond in Guatemala, we used a combination of existing resources and new borrowings and also some loans from shareholders. And we've just finished paying off all of those loans, particularly the sold ones. I think the last payment was actually October. So in -- we have diverted the cash flow to paying down the loans, and we will resume the dividend flow from November, actually. So, it's just really the way we chose to allocate the capital.

Okay. Thank you so much.

Thank you, Soomit. Our next question will come from Marcelo Santos at J.P. Morgan.

Hi, guys. Thanks for taking my question. I wanted to ask about two operations that went a little bit softer, especially on the EBITDA side, Honduras and Paraguay. If you could -- is this more of you trying to boost up commercial efforts like you do in Colombia? Or is this more a competitive reason? Could you please throw some light on those markets? Thank you. Mauricio Ramos -- Chief Executive Officer Let me take those. So, I think they are similar but different animals, Marcelo. I think on Honduras, what you are seeing is perhaps, while we -- the situation we had in El Salvador from three or four years ago. It's a business that we're not happy with the performance we're getting, that's for sure in Honduras but we're also taking all the corrective measures like we did in El Salvador some years ago. And by that, I mean, we're modernizing the network. I've made a reference to that on the prepared remarks. And we're pretty positive that that in combination with the fact that this is a two-player market in which we have significant scale would allow us to correct for the shortcomings in performance that we see in Honduras today. Pretty positive that once we make these investments, as I said, that we've been doing on modernizing the network, Honduras will become a strong performer for us. Paraguay is a little bit different because I think Paraguay is further ahead in the change conversion cycle if you will. We have made some significant investments in Paraguay. We have tons of scale and as you heard we said a number of times, all the toys in Paraguay. And what we're beginning to see now in Paraguay is competition becoming quite more rational. So it's more stable today. Still a difficult environment from a competitive point of view, but certainly much more stable than it has been in the past. And if you look at the subscriber numbers in Paraguay, you can see that the business and in the market, there is a lot more stable. I would even adventure to say that it's stabilizing significantly. And you see that our mobile market share is now stable, even slightly up because we're picking up subscribers in Paraguay. We picked up 120,000 this quarter, they're up 7% and home is also becoming a little stronger. So service revenue in Paraguay is modestly up, and I think we're stabilizing significantly in Paraguay. And obviously, you see at the EBITDA level that we've paid for the soccer rights, and that's why EBITDA looks a little bit weaker than it would normally look, but that's very good because it helps us very much stabilize that business.

Perfect. Thank you very much.

Thank you, Marcelo. Our next question will come from Diego Aragao from Goldman Sachs.

Thank you. Good to see you all. So, the first question is related to the competitive landscape in Colombia, especially mobile, it seems that people and some of the other players are still, I'd say, performing well despite a new entrant into the market. So I'm just wondering if you can comment about your strategy and expectations in there? And the second question is related to the shortage of semiconductors that it's clearly, let's say, global supply. I guess, are we seeing any potential impact for your CapEx plan as we approach 2022? And also, maybe just a third question here, sorry, any initial thoughts on the proposed transaction between Liberty and America Movil, Panama. I would love to hear your thoughts on this. So thank you.

Sure. This here is, Diego. So on Colombia, as you saw in the prepared remarks, given everything that's going on in the country, we think our performance and our Q2 was quite strong, but I think Q3 in Colombia is outstanding in terms of demonstrating that our strategy is working. As I said on the call, we set out to buy spectrum. We set out to build a network. We set out to increase the commercial distribution. And the last year of the fall needed to be particularly that we do get the subscribers and we get the revenue. And that's happening, as you can see our numbers that we showed Diego, we're at 18% on the mobile subscriber base, postpaid in particularly, has had two record quarters, and this one was better than the last quarter with almost 150,000 net adds and about 110,000 prepaid net adds. So we're very happy with the way Colombia is performing. As you can gather from the prepared remarks, the issue we historically had in Colombia is that with such limited market share, we couldn't possibly be profitable. So our strategy is to find some scale, and everything that is happening in the market is allowing us to gain that scale. You've heard me say that it's a volume game, which will allow us to pick up a little bit of market share, and that's exactly what's happening. But what I added, and I think the numbers quite significantly show is that we come out ahead on the revenue proposition despite lower ARPUs in the market. So we're very pleased with the way Colombia is working for us, is exactly what the strategy was supposed to do. And if you add to that the fact that Home, again, the strategy that we laid…

Yes. With the chip shortage has been kind of facing us for a while, we've been forward buying. The big issue for us, Diego is set-top boxes. That's probably the area where there's been acute shortages. Handsets are a bit more fungible, but easier for us to deal with and network equipment, we have long lead times on that. So it's been the -- we saw the weak -- the risk area was in the set-top boxes. We put a lot of forward purchases in on that. And I haven't got the exact details, but we have probably committed at least half of our CapEx for next year already in terms of contracts, purchase orders, et cetera. So we've -- that's how we're trying to mitigate the risk here.

Right. And then lastly, on the Panama matter, it was part of our investment business when we went into Panama. If you recall, two years ago, that that mobile market had four players, a couple of them with good size and a couple of them with limitations on scale, would eventually rationalize down. And what you're seeing is precisely that, but it's been rationalized to three players now from four. So that was part of our investment thesis and as a result of that, we think it's just a sensible thing for the country to do. And with that in mind, it's just a further element of what was our investment thesis.

Very helpful, Mauricio and team, thank you very much.

You bet.

Thank you, Diego. I'm going to read a question for Stefan Gauffin at DNB, he's having some technical issues. His question is, if we are being cautious on our OCF guidance at $1.4 billion, we are saying that we are targeting 18% CapEx to sales in 2021, and that would put our Q4 CapEx levels higher than what we had in 2020. He is saying even if he puts these CapEx estimates into his estimates, he's coming to an OCF guidance a little bit closer to $1.5 billion.

All right. I'm going to give it a shot, and then Tim's just going to kind of validate, correct, adjust the numbers. So let me give you the big pictures here. All right, let's just be clear, we are on track to be surpassing the 1.4, okay, that's fair. But everybody needs to understand that this year, we are going to spend more CapEx than we historically have to the tune of $100 million to $200 million. And we've already had in this call, conversations around why that is important. But just to reemphasize that, we are finishing out the Colombia network where we missed network modernization programs, we talked about Honduras and talked about Paraguay and those are all coming to completion this year. So this year, for sure, we're going to be a little higher than normal to the tune of $100 million to $200 million. And as a result of that, that CapEx to sales ratio is going to be around 18%. Now, these projects are not with us into next year and we've already bought a lot of the CapEx or secured a lot of the CapEx for next year. And so we're pretty comfortable knowing that next year, our CapEx to sales ratio will come down to that 16% to 17% ratio that we've been talking about. And I think that the most key and important point here is to understand that. And I want to use the moment to go perhaps a little bit big picture on this conversation rather than spinning my head around the Q4 numbers. I think what's behind all of this is that the business model that we set out to put in place is coming to fruition pretty much right now. Let me explain what I mean by that.…

In fact, I wasn't going to correct anything. I was going to give you a little bit more specifics, I guess, in yes, if we look at the components here, we talked about a high level of CapEx and I know the market generally doesn't believe us, but we will probably spend about $450 million in CapEx in the fourth quarter. Now, this isn't an all of a sudden we're spending that amount. This is to do with projects we started in the first and second quarter where we effectively get to acceptance and therefore the bookings, that's why the number is higher. If I look at the other part of the components, the -- I see no big sort of red flags on the LatAm EBITDA side. I think we've talked about that performing well. If I've got one area of caution that I'm a little bit more concerned about, that will be on the Africa EBITDA number from the fourth quarter. Now I realize we haven't talked about it too much, it's subject to a sale and purchase agreement, but it is still part of our numbers, and it's still part of the OCF number. And there has been a significant impact on the MFS business because of a levy that was imposed by the government, which has had an impact. So kind of at the margin, Stefan, that will have an impact, I think. But overall, as we said, we're now very confident that the number is above $1.4 billion, whether we meet in the middle as the way you are, I'm not too sure, but certainly we remain very sort of optimistic about the LatAm performance.

I'm going to . I'm going to rain over wet pavement here. This year's investment higher than normal is what gets us to achieve the ambition in our financial cash flow model and is how we get to that service revenue growth, mid-single digits that we're already almost achieving this quarter into next year and it's how we get to margin expansion, and more importantly, how we get to that operating cash flow target of about 10%.

The good thing about Stefan's technical difficulty is he can't come back to us now and ask us a follow-up.

Well, thank you, both. I'm going to verbally ask another question for Bill Miller. He is wondering if you could expand on the fintech and money transfer business and how soon we could expect this to be an independent entity?

Very good, great question. So, I take -- I look at our TIGO business a little bit like they have what we -- back in the days when we talked about cable, and we said we're going to build a cable business and this is pretty much where we are today. We've built a $2 billion cable business with phenomenal margins, phenomenal service revenue growth, and a lot of runway into next year. Tigo Money is today what cable was three to four years ago when we put it out as a toddler that we would build into a young and independent individual. So what we have today with Tigo Money, as you know, is already a pretty sizable fintech, 5 million users, $50 million of revenue with launch in five countries. So it's not small, but it hasn't received all the attention of something that's already a pretty scaled-up fintech could. And that's exactly what we're aiming to do. Because we feel that we're barely scratching the surface of the fintech opportunity that's available in our countries today. Because the reality is no one really is doing mobile financial payments in our markets and certainly not taking care of this fintech opportunity. So what we aim to do is, first, become the preferred digital mobile platform in all of our markets, so that we feel that gap in financial payments, digital mobile payments in our markets. And for that, this year, we'll be launching pure codes for closer markets and reaching out to thousands of merchants so that we become that preferred digital mobile platform. That's point number one. Point number two of the strategy is to expand geographically. We've only launched in five countries, not in the others but in some of the countries where we launched, we…

Thank you, Bill, for your question. Our next question is from Stefan Billing at Kepler, and this is our last question, I believe.

Thank you. Hi, everyone. A couple of questions from my side. First of all, the nitty-gritty one, El Salvador, if we look at the cost base, it seems to be still a bit elevated. I think you had some accruals or something like that in Q2. Anything you want to comment on that?

El Salvador is just an incredible comeback story for us. It is hopefully the template to what we need to do and as I said earlier, it's become our highest growth business, phenomenal NPS, all on the back of changing the network, getting spectrum, putting a phenomenal team in place. And if you look at the Q3 numbers, they keep getting better with net adds that are up 13%, if I recall correctly. And on EBITDA, that's not only double-digit but in the 20%. So going forward, we're going to keep El Salvador, putting the same recipe and plays on and on because it really is working.

I think the elevated, to be honest though, I'm not really too worried about the OpEx in El Salvador at the moment because the area that it's mainly coming through is dealer commissions and dealer commissions are associated with gross additions. So they basically are to support the growth in the customer base. So I think that's the major reason why it's slightly elevated. But for me, this is a good OpEx.

All right. Thank you. Next is on Colombia, I was just curious on two things there. The Bogota region, are you now gaining good traction on the mobile side, thanks to the low band spectrum, or is that yet to come, and also, if there's any news on the potential cable reseller opportunity in Bogota that you can share?

Yes. So the answer to the first part is the pickup in -- the strong pickup in subscribers largely participate in Colombia is broad-based reasonably because we now have network that covers the entire country. And yes, we are able to better service Bogota now because we have a low-frequency network available in Bogota, so we are picking up subscribers in Bogota and it's more broad-based across the country than it used to be. So yes, we have corrected for a technical handicap or network handicap that we had in Bogota. But the net adds are coming from the entire country because we've also increased distribution. So that's the answer to the first part of the question. The answer to the second part of the question is, if you're referring to the deal between Ufinet and ETB to create a fiber call that would give access to third parties in Bogota. That has run into some legal problems in Colombia. I don't know whether they will be sorted out or not. But that also leaves today with the ability to itself, resell the fiber to third parties. So that would be the fallback position. And what it means for us is that whether it's a joint venture or not, sometime next year, we would be in a position to buy, to resell, or resold fiber services from either the joint venture or from commit away directly.

Sounds good. Thank you very much.

Thank you, Stefan, for your question. We have another question from Anders Wennberg. He is asking if Mercado Libre is active in payments in countries like Paraguay, Bolivia, and Colombia? How do we compare to them in terms of mobile payments? Could MercadoPago be a potential buyer of the mobile payments in South America?

So listen, Colombia, of course, is a little bit different. Colombia is a bigger market and one in which indeed Mercado is. So the opportunity for us for Tigo Money exists in all of our countries. The one that has the most competition today is particularly Colombia. Everywhere else, it's pretty much a blue ocean for us to conquer the digital payment space because we have unique capacities that others don't really have. We already know the mobile payment business because we've been in it for a while. We're increasing the technology, increasing the distribution, increasing the teams, increasing our platforms, and obviously our product proposition. But in other countries outside of Colombia, it really is a blue ocean for us to build that digital payments business. No one's doing it, neither other mobile operators, not any fintech. And as I said earlier, we have a unique advantage which is the fact that we have a large Tigo Money distribution platform. And it's not small. It's about 20,000 points in the markets that I just described where we launched Tigo Money in which Tigo Money could be cashed in or cashed out. That basically connects our fintech to the real economy and it's an advantage that nobody really has. And we may need to make significant use of that. And on the last little bit, it's just -- this is such a young, tiny baby, so we're not yet thinking about who's going to marry it or take it away from us. That may happen once when you sort of put him or her through primary school and high school.

Thank you, Anders, for the question. That was our last question. So Mauricio, if you'd like to make some final remarks, I'll leave the floor to you.

Thank you, Sarah. I think I'm really going to sobre mojado, rain over wet pavement. We're getting to the model that we wanted to create with service revenue growth, margin expansion, and operating cash flow growth is now very, very much around the corner. And I'm thankful to all of you who believed in the story, and I'm thankful to the team who's putting it together, and I'm pretty pleased that we're building a model that does have -- that are putting cash flow growth ahead of us. So thank you for just waiting for us to deliver on it as we are.