Earnings Call Transcript
MILLICOM INTERNATIONAL CELLULAR SA (TIGO)
Earnings Call Transcript - TIGO Q3 2020
Operator, Operator
Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Millicom Third Quarter 2020 Results Conference Call. A reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Mr. Michel Morin. Thank you. Sir, please begin.
Michel Morin, Senior Executive
Thank you, Howard, and good morning, everyone. Welcome to our third quarter 2020 results call. As usual, we're going to be making some references to some slides, which are available on our website. So to begin, please start on Slide 2 for our safe harbor disclosure. And as usual, we will be making forward-looking statements, which obviously involve risks and uncertainties and which could have a material impact on our results. And then on Slide 3, we define the non-IFRS metrics that we will be referring to throughout the presentation, and you can find reconciliation tables in the back of our earnings release as well as on our website. So with those disclaimers out of the way, let me turn the call over to our CEO, Mauricio Ramos. Mauricio?
Mauricio Ramos, CEO
Thank you, Michel. Good morning, and good afternoon, everyone. I do hope that you and your loved ones are all staying safe and in good health. As you know at Millicom, throughout the pandemic, we chose to stay fully committed to our long-term purpose. As you can see on Slide 5, this purpose is well-known by you and by each one of our 23,000 employees. And it means that throughout this pandemic, we have, one, kept our employees safe, engaged, motivated and productive; and two, we have kept our communities connected precisely because of the commitment from all our employees. Those in the front line and those in the back offices, thank you if you're listening to this call. And our service means that we have been up and running, we've upheld 24/7 every day because of this commitment from our employees. And because of our rapid deployment of our LILAK product, we have kept every single one of our users connected during the pandemic, and we're proud of this. Because of this, you will see that our paying customers are coming back and the Tigo brand is emerging out of this crisis, strengthened and more relevant to our communities. Please turn to Slide 6 for the key points of our call today. One, we had record customer net adds during the quarter, both in Mobile and in Cable. Our COVID reaction plan has successfully protected our user base on our market leadership position. Two, this user growth, particularly Mobile, helped drive strong revenue and EBITDA growth in Q3 sequentially from Q2. That said, we still have a long way to go to get back to pre-COVID levels, but the trends during Q3 were positively strong. Three, cash flow generation was also strong in the quarter. As a result, our plan to protect operating cash flow for the year is on track, and we further reduced net debt during the quarter. And four, and most importantly, even if we prudently held back some CapEx during the pandemic, we also continue to invest strategically and for the long term, positioning ourselves well to bounce back rapidly when this crisis ends. Let's look at some details point-by-point starting with Slide 7. In Mobile, we added a record 1.7 million users in the quarter. This is a very strong comeback. And we're now back to the same mobile user base we had at the end of March when the lockdowns were put in place in our market. Our prepaid business came back particularly strong. Prepaid is indeed the main driver behind our strong revenue growth comeback in Q3. Simply stated, when users left their homes, the first thing they did was turn on their mobile phones. As you know, we chose a different commercial and distribution and service layers in the market, precisely so that we could come back quickly and strong as we're doing now. We also had solid net adds on postpaid for the quarter with a net gain of about 140,000 customers. But note that we're still down about 350,000 postpaid users compared to pre-COVID levels. Many of these postpaid customers actually cautiously moved to prepaid. Thus, we do expect that it will take a few more quarters for us to reactivate the subscribers back up to postpaid. We also had record net adds in our Home business this quarter. We added a record 157,000 customers in the quarter. Our subscriber count is now about 62,000 higher than it was at the end of Q1. In fact, if you look at our HFC customers, we have almost 100,000 more customers today than we did at the end of March. This strong performance is coming, firstly, from strong demand for broadband, which is bringing us new customers, and secondly, from our early decision to offer a lifeline product for minimum for assistance. This product has allowed us to keep our promise to provide connectivity to our community, retain a good relationship and an overall relationship with our customers, avoid very expensive disconnection and reconnection costs during the pandemic and after the pandemic, keep our real churn levels down and protect our cash flows. This was also the right thing to do for our customers and for our communities in this time of need, and our brand is continuing and will continue to benefit further from this in the long term. Now please turn to Slide 8. These record net adds produced a 4% uptick in service revenue in Q3 compared to Q2. Again, we are still well below pre-COVID levels in terms of revenue and much recuperation is still ahead of us. But the comeback in Q3 was strong, adding about $50 million of revenue and growing 4% sequentially from Q2. We have also been keeping a very tight control on costs. As a result, almost all of that incremental revenue is dropping to the EBITDA line, which grew 7% in Q3 compared to Q2. I want to be extra clear. Much is still uncertain and the news over the last couple of weeks certainly highlights that, but we did see the business begin to come back in Q3. Now please turn to Slide 9 for a closer look at our organic service revenue growth and what is behind it in this quarter. Message one, on the left-hand side of the page, is that the improvement in this quarter was broad-based. Every one of our markets showed a solid improvement in year-on-year growth in Q3 compared to Q2. On the right-hand side of the page is the key and second message. This improved performance came entirely from our Mobile business, from prepaid, in particular, as already mentioned. Growth in Home remains strongly resilient in Q3, slightly positive and about the same as in Q2. But as you know, in our cable subscription business, revenue follows the user base. So our increased subscriber base in the quarter gives confidence that we will see growth in the Home business reaccelerate going forward. B2B, on the other hand, and as we expected, is still challenging with revenues down 8.5%. The weak economies in our markets are taking a toll on many of our SME customers, many have had to shut down either temporarily or permanently. So no B2B recoveries in the numbers of this quarter. That recovery is still to happen, still to begin, and we expect this recovery will take some time to come through. In short, on this slide, Q3 showed a strong comeback and a resilient business, but not all of our business lines are recuperating just yet, and there's still a lot of uncertainty for us going forward. And that is precisely why we remain so very focused on cash flow and on reducing leverage, as you can see on Slide 10. Over 6 months ago, we implemented our COVID action plan, which you know very well. We set a hard target to keep operating cash flow, EBITDA and minus CapEx, flat at around $1.4 billion. This slide simply shows you that we are right on track and that we are confident that we will deliver on that goal. We also told you that we would prioritize net debt reduction. That is the second point on this slide on the right. We have now brought net debt down by $240 million since Q1, and we will sustain this focus going forward. Now I would also like to give you some color on our key countries, starting with Guatemala on Slide 11. Guatemala continues to perform very well. It is a stable rational prepaid market in which we hold a strong market position. We also continue to invest to maintain market leadership to sustain the growth. As you know, the government of Guatemala did not lockdown the country as quickly as some other countries did. And that is one of the reasons why the impact on our future numbers was limited, and is also why in Q3, service revenue growth has gone back to positive. Throughout the year, we have continued to invest in both our Mobile and our fixed network and to drive efficiencies and digital adoption. In Mobile, we added over 300,000 users to our base in the quarter. Our base is now about 200,000 users higher than it was pre-COVID. Demand for residential cable has also continued to grow throughout the pandemic. We added 36,000 new customers in Q3, twice the number of net adds we added in Q2. Now let's go to Slide 12 for a look at Panama. At the macro level, Panama is the wealthiest country in Central America and one of the reasons we're investing so confidently in Panama. But the toll of the pandemic in Panama has been amongst the hardest, with its lockdown being one of the most severe and its GDP expected to contract almost 10% this year. Against this very challenging backdrop, we have continued to execute on our game plan, integrating the acquisitions, extracting synergies, protecting our market leadership on fixed and expanding on mobile. And we are extremely, extremely pleased with our underlying operating results. The subscriber counts tell the story impressively well. In Home, we have continued to see solid and consistent growth in our broadband Internet subscriber base. We're solidly holding our market share position and leadership on fixed, and then a little bit more. In Mobile, we have now celebrated the 1 year anniversary of our acquisition announcement. We have modernized the network, rebranded the business and extended our market leadership. Indeed, our customer base has expanded on Mobile by about 5% over the past year, reflecting a strong bounce back in Q3 as we currently began to reopen. And we're also picking up new customers from cross-selling mobile services to our cable customers. As you recall, this was precisely the cross-selling opportunity that our acquisition plan identified and was predicated on. The macro side in Panama is dollar-denominated and cash flow is seen to be robust. We have generated $160 million of operating income over the past year even though we have incurred some migration costs and taking a COVID hit, which we have not foreseen. This is most visible in our B2B business in Panama, which has been very hard hit at the beginning of the pandemic. Indeed, B2B is the only area of the group that did not recover in Q3 compared to Q2. So all in all, we're now firing on all cylinders in Panama. I'm very pleased with the underlying performance there, particularly in the B2B segment. Colombia. Let's look at Colombia on Slide 13. We are regaining to improve momentum in Colombia as well. On the mobile side, we expanded or upgraded our network by more than 1,000 sites of network as approved the 700-megahertz projector we bought earlier this year. Remember that we're now the largest holder of 700 megahertz spectrum in Colombia, which gives us better penetration than the area where we're previously on in the hybrid spectrum. And it is also helping expand coverage and cost-effectively so in geographic areas in which we have the coverage. You can see that we peaked at about 450,000 mobile customers in Q3. Some of this is related to increased mobility for sure. But our gross adds and our EPS scores are high in the areas where we have redeployed the network, which is a very promising sign. In Home, in Colombia, we continue to expand our high Cable network, adding about 62,000 home customers during the quarter. This is a bit less than initially, but a bit consistent with our tactical delay in network throughout during COVID, so that we'll be focused on filling the existing network for a better return to capital and more cash flow liquidity this year. And that is exactly what we did. We added in Colombia more than 80,000 fiber cable customers this quarter, driving our network penetration higher, helping us with cash flow this year, and strategically establishing capability in Colombia. This strong user base in Colombia is a good strategic part of the last section of our presentation focusing on long-term investment we continue to make beginning on Slide 14. The growth in our fixed broadband business is a key driver of long-term shareholder value creation for our business. Let me say that differently. We are in the business of creating shareholder value by increasingly generating long-term value from our customer relationships. That's what Cable is all about. Year-to-date, we have built an additional 300,000 fiber cable home customers, that's year-to-date. This is lower than our typical run rate of about 1 million per year, simply because during the pandemic, we shifted our focus to filling our existing network. And I'll just show you the positive results for Colombia. For the whole region, the results are equally positive. Year-to-date, we have added about 174,000 new fiber cable customer relationships, about half of those in Colombia and the rest split between Bolivia, Panama, and Guatemala. That’s year-to-date, 174,000 new fiber cable customer relationships, a net positive year-to-date. Interestingly, we increased the installation fees during this quarter aiming to minimize churn down the road, avoid bad debt and hopefully drive better industry practice for the long run. Our focus this year on increased network penetration, which is up significantly year-to-date is helping us drive better operating leverage, cash flow, and return on capital. Now going forward, as governments do continue to open up their economies, we will gradually ramp back our Home build back up again as broadband demand continues to stay strong. And we will, of course, continue to keep an eye on our network penetration reach. And in Mobile, you can see on Slide 15 that we continue to move forward with the very strategic investments we have been making to upgrade our mobile networks. We have added over 1,100 points of presence this year, mostly in Colombia, and we have upgraded 4,000 sites in the 4 countries where we have been deploying new spectrum holdings or modernizing networks. This network has the base to improve both coverage and capacity and improve both user experience and operating efficiencies. In Colombia, as you saw, this is already key to improving our competitive positioning. So our investments this year have centered on more focused cable fiber network rollout and mobile network expansion and modernization that I just talked about. There are 2 other areas where we have been focusing significantly. One is Tigo Money and the other one is our digital roadmap. Let's talk about Tigo Money first on Slide 16. We have been quietly building our mobile money user base. We now have about 5 million active Tigo Money users in Latin America, that's up about 20% over the past year, and yet only a fraction of our overall mobile user base. Usage is increasing dramatically. The number of financial transactions with Tigo Money has more than doubled over the past year, and so have the volumes that the platform is now transacting. Tigo Money is now transacting well over $2.5 billion annually. Our Tigo Money platform is now broadly providing a simple value-add service for our customers to gradually engage in business in Latin America with high potential for us. And of course, we look forward to updating you on our strategic progress on Tigo Money in Latin America in the coming quarters. And lastly, we have continued to invest and look significantly forward in digital adoption. You can see the progress on Slide 17. Simply said, the pandemic has forced many of our customers to embrace the use of digital tools and channels. Our digital readiness allowed us to respond accordingly. Just in the 6 months into the beginning of the pandemic, digital collections are up 50%, e-sales are up more than 80%, and digital prepaid reloads are up 60%. We have also repurposed our corporate responsibility programs to better support our communities digitally during the time of need. Our Maestr@s Conectad@s program, which means connected teachers, was initially rolled out in Bolivia, where we trained 140,000 teachers on the use of state-of-the-art online educational tools during the pandemic. The program was so successful that we have expanded into Guatemala, Nicaragua, and Paraguay, and we're looking to expand the program to all our operations in 2021. This program is an additional source of pride for many at Tigo who are personally involved with the program. And a part of this Sangre Tigo culture that you have heard me talk about before and you will continue to hear me talk about in the future. Now let me turn the call over to Tim to cover the financials for the quarter.
Timothy Pennington, CFO
Thank you, Mauricio. I will begin on Slide 19 with the connection between our reported figures and the Latam segment. According to the chart, our reported revenues exceeded $1 billion. However, when considering the business as a whole, including Guatemala and Honduras as if we consolidated, our underlying revenue was slightly above $1.5 billion. To arrive at the underlying Latam service revenue of $1.3 billion, we exclude Africa, which accounts for a little more than 6% of our revenue, along with telephone and equipment sales, which do not significantly impact our profitability. Moving to Slide 20, Latam service revenue declined by 3.1% on an organic basis from Q3 last year. We will examine this in more detail on the next slide. EBITDA was down 5.6% organically, but as Mauricio highlighted, there was a sequential increase compared to Q2, thanks to improved service revenue and lower bad debt. Our operating cash flow, calculated as EBITDA minus CapEx, saw a slight decrease, yet year-to-date figures are almost identical to last year and on track to meet our annual target. On Slide 21, while our service revenue fell by 4.7% in actual terms and 3.1% organically, it showed improvement compared to Q2, influenced by enhanced economic activity and our growth across most markets. This improvement was primarily driven by a rebound in mobile B2C, which decreased by 4.3%, a notable recovery from the 11% drop recorded in Q2. As Mauricio explained, this was largely due to the recovery of the prepaid business following the easing of lockdowns. Our Home business has maintained year-on-year growth, similar to what we observed in Q2, while B2B also tracked with Q2, declining by 8.5%, particularly in the small and medium-sized enterprise sectors. On Slide 22, as Mauricio has noted, we witnessed an improvement across all operations compared to the last quarter, though many remain lower than pre-COVID levels, with the exception of Guatemala, which experienced a 3.9% organic growth driven by a rebound in prepaid services and sustained strength in the Home business. Colombia's performance was generally flat organically, with Home doing well, counterbalanced by declines in Mobile and B2B. In Mobile, the situation appears better than it seems because last year in Q3 we were still recognizing Avantel revenue before that company went bankrupt, and this will no longer be a factor moving forward. In dollar terms, we reported an 11.4% decline in revenue for the quarter, entirely attributable to foreign exchange impacts. Paraguay faced similar FX challenges, with reported service revenue declining by 15.2%. However, if we exclude the FX effect and last year's one-off items, our service revenue was down just under 2%, which marks a significant improvement compared to previous quarters. On Slide 23, we present Latam EBITDA by country, reflecting sequential improvements due to cost-saving initiatives benefiting most markets. Guatemala leads with a 3.2% year-on-year growth, while the overall picture in other regions mirrors the revenue challenges highlighted earlier. Now shifting to the balance sheet in Slide 24, we've been quite active, notably calling the Comcel bond in Guatemala, which was our most expensive financing. We plan to refinance it using local currency bank loans, current cash resources, and some shareholder loans. Additionally, we've seized favorable market conditions to issue new bonds maturing in 2031, which will replace an existing bond set to mature in 2025. As a result of these actions, our average maturity now stands at 6.4 years, with an average debt cost of 5.7%. From the slide, you can see we have minimal refinancing needs before 2024. To conclude on Slide 25, I will discuss our current debt and leverage status. In line with our strategy to conserve cash and lower debt, we've reduced our underlying debt by $239 million over the last six months. Our net debt is now $5.7 billion, resulting in a proportional leverage of 3.16 times. Including leases in our net financial obligations, this figure is just under $7 billion, with proportional leverage rising to 3.29 times. With that, I'll hand it back to Mauricio to conclude.
Mauricio Ramos, CEO
Thank you, Tim. Before we take your questions, let me wrap up with a recap of key messages. First, our customer base is growing again. In Mobile prepaid, we are at pre-COVID levels. Postpaid, we still have some work to do. And in Home, we've continued to grow through and despite the pandemic. We expect that today's user growth will drive tomorrow's revenue growth, and that's the key moment in our Q3 numbers. Second, revenue and EBITDA improved in Q3 compared to Q2. We still have a way to go before we get to positive year-on-year growth. And we know this pandemic is far from over, but we are getting back on track and we remain positive, yet very cautious. Third, we have made a priority during the pandemic to protect our cash flow and to reduce net debt. You know that. We're well on track to deliver the $1.4 billion of operating cash flow that we guided towards, and we continue to reduce net debt in the quarter. And fourth, we continue investing. We're doing so in the areas that are aligned with our long-term strategy and in ways that position us to bounce back strong, better than ever after the pandemic passes. You can already see that starting to happen in our Q3 results, and we're all doing these things with a clear sense of purpose. And with that, we're ready for your questions.
Operator, Operator
Our first question or comment comes from Stefan Gauffin from DNB Bank.
Stefan Gauffin, Analyst
A couple of questions, please. First, included in your target to keep operating cash flow stable was to cut costs by at least $100 million, and to cut CapEx by $200 million to $300 million. So far, you have only cut CapEx by about $75 million year-to-date. And with the current improved development, are you still aiming to cut CapEx to this extent or have you changed that target? If you cut CapEx to that extent, the operating cash flow target does seem conservative. Secondly, next year, you have increased competition in Colombia with one likely to launch. How are you preparing for this increased competition? Are you looking more towards converged offerings in that market? Or any other flavor that you can give there would be appreciated.
Mauricio Ramos, CEO
Thank you, Stefan. Great, great questions. I wish we had a couple of hours to address them both. Let's start with the first one. I think jointly, Tim and I can do a good job of that. I'll start off generically what's happening. We're managing the business to that $1.4 billion literally on a weekly basis. And when we see that we have room to put a little bit more CapEx into the business while still delivering $1.4 billion, we go ahead and do it, particularly if we see the broadband demand is happening quite strongly as we see it happening. So we're actually faced with what I call a good kind of problem, which is we can invest a little bit more in CapEx into the business this year, try to position ourselves better for when the pandemic is over and still deliver $1.4 billion—that's what we've been doing. And we've been able to do that because we've been so strict on cost cuts significantly. And because this is the most important part of our plan, Stefan, the way we decide our COVID plan, we decided with the knowledge that we as a company, act one way or the other as pretty quickly. We can slow down pretty quickly; we can ramp up pretty quickly, which means we can look and keep a pause on what's happening in the markets. And that's exactly what we're doing. We're cutting back on costs significantly, but we remain ready to ramp up gradually if we need to. As a result of that, we're confident we're going to get that $1.4 billion and be able to invest into the business, anything that's over that. With that, I'll hand it over to Tim for more details, if you have any.
Timothy Pennington, CFO
Yes. I would only add one quick point. I mean our costs, as Mauricio has said, are running a lot lower than we had anticipated at the time. They're probably down just over $170 million in the last 6 months. Some of that is activity-related, some of it is FX. But a lot of it is also management. And as Mauricio said, if we can find excess savings on the cost side, then clearly, we want to invest and continue to invest in the business, provided we can deliver that $1.4 billion of operating cash flow.
Mauricio Ramos, CEO
Yes. Perfect. So on the second, Stefan, I think you've seen us over the course of this year really put focus on our ability to drive a better business in Colombia. And that's really the overall answer to your question. I'll go into detail in a minute, but throughout the pandemic, we've been building the 700 megahertz network. We just showed you the numbers. As of today, it's actually much more than 1,000; it's closer to 1,200 as we speak today. A number of additional sites, which gives us user coverage, expanded geographical preference, and provides a better user experience, which is significant. Just last week, we were labeled the Best-performing 4G Network in Colombia by Tutela, and this has been made public in Colombia. We also increased our commercial distribution network significantly. So in Colombia, because now we have more points of presence, and that doesn't just mean network, but it means commercial too. So we’re really focused on the opportunity, and this is the key point I want to make to you, Stefan: that for the first time in many, many years, because we popped this spectrum and we're putting it to use with the network investment and the commercial distribution investment behind it, we can play the true role of a challenger in this marketplace with the tools to succeed. We only have 15% market share on Mobile in Colombia. Yet today, we have a very, very strong fixed base and it's growing. We have a brand that works, and we're investing in the network and in distribution, which means we can now play as a challenger with all the tools, Fixed and Mobile, and you're right. Convergence is a really important part of this deal. We also have the frequency and the spectrum to play with and all the tools, with only 15% mobile market share, which means, in our minds, we’re ready now to be a challenger in Mobile.
Operator, Operator
Our next question or comment comes from the line of Marcelo Santos from JPMorgan.
Marcelo Santos, Analyst
The first question is about the sequential improvement in Bolivian EBITDA, which was pretty strong. I just wonder if you could comment a bit on that. And the second question is about the lifeline clients. Do you still have a large base on lifeline? I mean excluding— or is it most concentrated in El Salvador? Do we have potential to see this coming back in the following quarters besides El Salvador?
Mauricio Ramos, CEO
Yes. So on Bolivia, we were happy to see, Marcelo, the business not only stabilized in Q3 but also come back strongly to growth. I think we had strong net adds on Mobile and very strong net adds on Home, no doubt—a very strong quarter in Bolivia. A lot of that was a result of strong comeback from the difficulties we had early in the pandemic. The elections last week are helping provide a clear path towards certainty in Bolivia. Political uncertainty and then the pandemic had put us in a tough spot. With the new president, who is a former economy minister and a central banker, we believe this position will help provide stability on economic terms. I think that's exactly what Bolivia needed, quite honestly. As for the lifeline customers, which I think is a good point... Yes.
Timothy Pennington, CFO
Yes. I was only going to make one technical point. And I think it comes into your lifeline products because we introduced lifeline very late in Bolivia. It meant we took a very high bad debt charge in Q2, so a lot of the impact was lower bad debt charges. We've moved to normalized bad debt levels in Bolivia, and in fact, in most countries. So I would view the outlier as the Q2 EBITDA rather than where we are today.
Mauricio Ramos, CEO
Yes. So I'll make two or three points, Marcelo, on the lifeline customers. I think the first two are just as generic as it were. This has turned out to be a very good tool for us, not only through the pandemic but a tool that we think has merit going forward. We will continue to use it for the exact same reasons that it was helpful during the pandemic. It is a tool for us to keep going forward, and you can imagine why. It starts paving a way for us to manage retention and churn and maintain our relationships with our customers in a most cost-effective and cash flow accretive way for us. If you recall, we don't count any of these subscribers, this lifeline of minimum subscribers in the subscriber count that we reported to you. So there is a tool that sits outside our subscriber counts. We also don't book any revenue from the lifeline subscribers. So we've also kept our financials relatively clean. But that effectively means, Marcelo, is you can think of this as a dormant pool. We keep at lower levels, of course, now than during the pandemic, but we're using it to bring back subscribers. You've seen during Q3 we brought back a lot of those, but most importantly, we've added a lot of new customers to the base because we're at higher levels than we were before. As a result of that, this is a good tool, and importantly, it's something that we continue to use moving forward. I hope that helps you a lot.
Operator, Operator
Our next question or comment comes from the line of Peter Nielsen from ABG.
Peter Nielsen, Analyst
Yes. Just two quick ones. Firstly, you have on previous calls sort of flagged the sort of post-COVID challenges, which your markets will face. You're now seeing, as you said, a good recovery in Q3. Could you give us any qualitative indications on how you see the coming quarters? Will the sequential improvement in service revenue trend continue? Are you more optimistic about stabilization for next year? Or are you still sort of equally cautious as you have been in previous quarters? And then just a quick one for Tim. Your interesting comments about investing anything above the $1.4 billion. I guess we should interpret that, that you will come in at the $1.4 billion operating free cash flow this year and not above as you will continue to invest in CapEx. Is that correctly understood?
Mauricio Ramos, CEO
Yes. We'll get to those. Tim, you can also see your working on the $1.4 billion. On the first one on COVID, there are actually two pieces to this answer, Peter, and they're really good questions. One is, what is the outlook for COVID in our market and as a result of that, what is our outlook more generally? And they're somewhat distinct but interconnected. During Q3 this year, our economies began to open up slowly, which caused increased mobility across our countries. The lockdowns have been gradually eased. I should say that they have been eased but they have not disappeared completely. Mobility is not yet at 100% of what it was before the pre-COVID levels. We estimate depending on any given country, that is somewhere between 60% and 80% of what it was. So there's still some COVID reticulation that needs to happen in our markets despite the strong prepaid results you saw during Q3. Regarding the virus in our markets, it's still spreading, somewhat stable in most of our markets today, and we usually look at this on a daily basis, not seeing a second wave coming back into our markets. It doesn't mean that it's not possible, I want to say, but we're not seeing a resurgence of a second wave in the numbers yet. Now more importantly, going forward, and this is according to our assessment on how to assess the outlook going forward. The key element for us is that the recipe of a lockdown in our market, which was used very, very severely, and for lengthy periods of time, has no political support or fiscal maneuvering room to be cemented in such a hard or severe manner going forward. We don't expect, even if there's a second wave, and we don’t see it at this point, we don't know— we certainly don't know. We don't expect that the lockdowns can or will be put in place as harshly as before. The recipe in our countries will now air on the side of keeping the economies open, and the recipes going forward will have a lot more economic predominance than anything else. Now having said that, what we have learned during this pandemic is that things can change very quickly and in a very uncertain manner. Our Q3 was better than our Q2 in every country. We've already said that, driven mostly by prepaid. Prepaid came back strongly, but postpaid and B2B are still to recover, and how strongly and when they recover is a function of macro recovery. It’s a function of how bad the damage was, and a function of how long the health crisis stays even if there are no further lockdowns in the countries. Every month this past quarter, actually the last 6 months, has been gradually improved and therefore, we remain very cautious going forward. We do have a more positive outlook for 2021 than 2020, we surely do. But we also have a very cautious approach to things going forward because the key word here is the balance between the short-term and the long-term. If anything, we learned during this crisis, we have invested for the long term. We know that broadband is a product in high demand, it's got a long runway, and we see it short-term and long-term. But we also need to manage shorter-term, and that's what we’re doing very cautiously because the keyword here is uncertainty, Peter. And that uncertainty comes from, one, the mobility could come back; two, the macro will certainly influence our performance, whether it's the damage done to the economy or the fiscal constraints that our governments will face; and three, B2B, when it's coming back, is a function of when economics will recover, and we don't know that yet. So what we've learned is that being a business, as a leadership group, through navigating uncertainty is key. We've shown and we believe the key is our COVID plan, still ongoing governance. We have demonstrated that our key to success while we continue investing long-term.
Timothy Pennington, CFO
We needed a new North Star when COVID hit. We realized we needed to protect cash flow, reduce debt, and manage leverage. That's where we've decided we would maintain the cash flow for the same as last year. That was important for us. It remains a major target for us. Now, as I said in my earlier answer, I think we've probably done better on costs than we initially thought we could for various reasons. And on the CapEx side, we continue to have NPV-positive projects. We've paused or suspended. To the extent we can generate more cash flow, we want to execute these NPV-positive projects, particularly if we can see viability in 2021. We remain cautious, as Mauricio said, but we will seize opportunities that drive returns while still delivering that $1.4 billion.
Operator, Operator
Our next question or comment comes from the line of Fredrik Lithell from Danske Bank.
Fredrik Lithell, Analyst
Happy to see you returning back with your performance. I had a few questions, if I may. Little you had a few slides on digitalization and could you sort of elaborate a little bit more on that? Because I think this is one of the interesting parts that even though it's dreadful with the pandemic, it probably spurs innovation at the same time. So I'm interested to hear a little bit more behind the scenes of what is happening and what you see—what is unexpected on the digitalization terrain for you in your countries? Another technology question is fixed wireless access. Is that something you consider as an alternative or one of the tools in the toolbox to pass even more homes even quicker on the fixed side sort of? It would be interesting to hear that kind of discussion.
Mauricio Ramos, CEO
Yes. Great question. Thank you, Fredrik. So on digital, I think there's two bits to my answer to that. One is, we were ready with our digital plan and very focused. I think we have shown it to you a couple of years ago when I presented the first slides on how we were going to go about our digital-first platform and focus on commercial activities. Because we were ready and had a centralized group driving support for operations, we were able to capitalize on the needs immediately. We didn’t start from scratch during the pandemic; we just turned the wheels faster. The numbers show that. The pandemic did give us confidence to go out and do things. I'll give you one example: one of our distribution teams came up to me during the pandemic. As I said before, we would have always hesitated to put money into any given digital channel, fearing we would be taking away money from a non-digital channel that was proven and demonstrated to work. The reality is, during the pandemic, that non-digital channel simply did not exist. We realized there was no tradeoff anymore; we just put the money into digital and it worked. So that's what happened. We had the opportunity to go digital. As a result of that, we saw it grow and will continue to push forward with our digital strategy focused on commercial activity. Next stage is going to be layers of data analytics and artificial intelligence to become more efficient and create relationships with customers on a digital platform. Our fixed wireless access, we do use it sporadically to test certain markets to see if there's demand for fixed products that we may eventually want to extend intelligent cable rollout.
Operator, Operator
Our next question or comment comes from the line of Johanna Ahlqvist from Skandinaviska Enskilda.
Johanna Ahlqvist, Analyst
Yes. Two questions, if I may. The first one relates to—you touched a bit upon sort of what you expect going forward in terms of macro consequences and so forth. I'm just wondering if you can elaborate a bit on what countries do you expect to see sort of the toughest macro difficulties in the aftermath of the pandemic. So if we assume there will be no more lockdowns, where do you see the greatest risk in a sense? And then, if you have seen or expect any tax consequences in any of the countries that you're present. And then a quick one to Tim as well, on bad debt, if you can give us a number on how much the bad debt was in this quarter.
Mauricio Ramos, CEO
Yes. So I'll start with number two and move on to number one and then hand it over to Tim because he can weigh in on macro as much as I can. On the tax consequences, we've debated this to some extent. As you know, every country around the world has taken a big hit on fiscal accounts due to the pandemic. On one hand, you would think, 'Well, the governments are going to be even more tax-constrained.' They may look for some larger companies to bear the burden. On the other hand, every country has realized how important digital connectivity is to their citizens. We have a counterbalancing argument saying that they need to be careful with taxing this sector, especially during the pandemic, if they want it to be a driver of their digital economy moving forward. So it's uncertain how exactly that's going to play out. On the macro side, the key word here is caution. Central America has shown resilience in terms of FX and remittances. Remittances went down in April but started to grow in May. Currently, our economies in Central America have seen renewed growth in remittances, helping hold up those economies. I state this hesitantly because the informal sector weighs significantly in our economies and resilience is less solid at the formal level.
Timothy Pennington, CFO
Yes. Can I just make a quick comment on tax? We had a very low tax charge in Q3. To some extent, that is due to lower withholding tax. I expect to see a kind of normalization in Q4. The overall tax charge for the year is going to end up somewhere between $200 million and $250 million on an underlying basis. I realize that wasn't your question, Johanna, but I just wanted to get that in so everyone understands. And on the bad debt, I mean, I don't want to give exact numbers. But roughly speaking, in Q2, our bad debt charge was twice the normal level. In Q3, it was a third of that level. What was happening there was some write-back of charges we took in Q2 and a normalization of that level. I'm expecting Q3 to be more or less back at our normal level of charge.
Mauricio Ramos, CEO
In terms of countries, Johanna, one mention I've made is that two or four weeks ago, the level of uncertainty around Bolivia concerned us all. Today, we have less uncertainty than we did politically two or four weeks ago. So I think that's the only specific country I'd call out.
Operator, Operator
Our next question or comment comes from the line of Soomit Datta from New Street Research.
Soomit Datta, Analyst
Questions, please. One, just on Tigo Money, I think you've got a slide in the slide deck this time. I can't recall whether you have before recently or not. But it seems like there's a little bit of focus on that. Could you give some thoughts on where you see that business going over the next year or two? And I say that in reference to some initiatives we've seen in the region, particularly in Brazil, with the wireless companies beginning to push into this direction and beginning to move. Also not just looking at payments but also moving into credit. So I wondered just whether you had any perspectives on a kind of 1- to 2-year view there? And then secondly, please, just one on the balance sheet for Tim. Apologies, I dropped off the call and I'm not sure if I missed this. But just on Guatemala, if I understand it correctly, the local debt is being paid off there. And then there's a lower dividend payment coming out of Guatemala this quarter. Has that been all so far this year, I should say? You said that there seems to be an attempt to deleverage that particular operation, but it's already got relatively low leverage. So have I understood all that correctly? And maybe you could give a bit of perspective on what's happening at that asset.
Mauricio Ramos, CEO
Yes. So Tim has a master's degree on Guatemala financing. He'll take that for sure. He's been managing that aspect very closely. Tigo Money. You're right. I wouldn't say it's a little bit of focus. I would say it's a lot of focus that we're putting into Tigo Money. We've just been doing it quietly and forcefully, yet focused for the last two to three years. To give you an idea of what that business is today—in typical circumstances, it's small for Millicom, but could do somewhere around $40 million to $50 million on a yearly basis. So it's relatively small for us but it's large in terms of revenue compared to many of those Latam fintechs you're referring to. Importantly, it's profitable for us. Many synergies participate within the larger group with the mobile subscriber base we already have. It's grown rapidly before COVID and probably has only accelerated adoption and usage. Today, it is almost exclusively a payment model with some very small exceptions where we do lending for our own subscribers in Paraguay, just lending for mobile users. We want to ensure that we understand this model before we go broader into financial services; it's a medium to long-term ambition if this works out.
Timothy Pennington, CFO
And just on the Guatemala balance sheet. What happened there was we have an $800 million bond, 144A bond. It was our most expensive financing. It was at 6.875%, and we issued at 4.5%. You can see we landed a lot of money on the table. We considered refinancing that in the market, but Guatemala has been so cash generative, and we found local currency financing at reasonable prices. Given our strategy to match currency where we can, we decided to refinance that using a combination of cash resources, local currency financing, and a small element of shareholder loan. So as a result, they've been preserving cash over the last couple of quarters; hence, the lower cash and dividend payment you see this quarter. From our perspective, we're looking to reduce leverage across the group, and whether we do it in Guatemala or somewhere else, it's relatively neutral for us. That’s what’s been happening there, Soomit.
Operator, Operator
We have time for one more question. Our final question or comment comes from the line of Mathieu Robilliard from Barclays.
Mathieu Robilliard, Analyst
I had a quick question on M&A. So you stepped out of the deal at the beginning of the year. I guess the price that had been negotiated didn't reflect the new reality. But I wanted to have your view on whether you still believe M&A is not the right focus because you have a lot of uncertainty and you're managing your net debt; or conceptually, if there are interesting deals out there, is that something you would consider? The second one, kind of linked but not necessarily, is we saw in El Salvador that two of your peers stepped out of the deal because the regulator was imposing tough remedies. I just wondered if this sort of approach we've seen in El Salvador is now something we should expect more in other countries you operate in, being actually not very receptive to consolidation and going unfortunately more the European way than the U.S. way? Or is that an unfair generalization? Very lastly, if I can, any comments on the competitive environment in Paraguay?
Mauricio Ramos, CEO
Sure. Some of these are fairly quick to respond. It's important but quick. On M&A, the simple, straightforward, and rapid answer is M&A is not a focus of ours today. We're focused on weathering the crisis successfully as we seem to be doing. We don't think the crisis is over by any stretch of imagination, so we need to continue being focused on that. We're focused on delivering the operating cash flow, both from the synergies and integration, using our debt—that's squarely our focus today. On whether El Salvador presents things and for the region towards a harsher view on consolidation? I don’t think so at all, Mathieu. It’s an isolated contradiction. We've had quite a bit of M&A successfully throughout the region in Central America for the last couple of years that went quite well. In some markets, we created better structures like we did in Panama and Guatemala. I don’t think it’s indicative of a trend. If anything, I believe the opposite—governments realize they need strong digital highways and must invest since this is an important part of their economies. The more they will realize they need strong industry structures. Two to three-player industry structures are not as sustainable as four to five-player structures. I see that as evident to responsible governments as something they cannot ignore. The El Salvador matter, I think, is isolated. On competition in Paraguay, generally speaking, we've seen competition in Paraguay in 2020 be a bit more rational than it was in 2019. It’s somewhat painful for a period of months, but it also sends a strong message that we are defending our marketplace moving forward effectively, and we expect the marketplace to remain rational.
Operator, Operator
I'd like to turn the conference back over to management for any closing remarks.
Mauricio Ramos, CEO
I just want to thank you all for participating in the call today. We're coming back. We're on a good track. As you know, we need to balance that and we need to balance short-term with our long-term investments and cautiousness levels going forward. We do thank you for participating today and paying attention to everything we do. We look forward to being on the call with you next quarter.
Operator, Operator
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.