Earnings Call Transcript - TIGO Q3 2021

Sarah Inmon, Investor Relations Director

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.

Mauricio Ramos, CEO

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 the Internet. This Fundacion brings together the two things kids love the most, soccer and the Internet into a single space that will serve as a backdrop to encourage young kids to be more digital and better citizens. As you may also know, I am now Chair of the U.S.-Colombia Business Council, an important part of the U.S. Chamber of Commerce. A couple of weeks ago, we hosted President Duque in Washington to discuss the success that Colombia has enjoyed in attracting foreign investment. As President Duque has said, Colombia is open for business and back to economic growth and we're investing now more confidently than ever in Colombia. And you will see in a minute that we're gaining real momentum there. In Bolivia, we have recently launched our own TV channel, EducaTigo, to provide educational content 24/7 for children, filling a need that came to the forefront last year during the pandemic lockdowns. We see this new channel as a continuation to the work we have been undertaking to give teachers access to digital tools for the classroom, and we're very excited about the possibilities of this idea going forward. As you can imagine, we're investing where we think we can accelerate growth in our local economies. After discussions with President Cortizo of Panama, we announced our plan to invest $250 million to expand and upgrade our network in critical areas of Panama, to help boost its economy and also to create our Fintech Hub in Panama to bring jobs to the country and also to serve our growing Tigo Money business from there, facilitating payment for individuals and small businesses across our footprint. This is simply to give you a glimpse of how committed we are to our purpose and to help develop our communities. Doing good is good for our business, and more importantly, our business is good itself for our communities. Lastly, I want to highlight that we will now focus even more on reducing our impact on the environment and on increasing our already strong diversity and inclusion programs. We expect to announce our science-based targets for carbon footprint reduction and our specific D&I targets in early 2022. Now let's look at the operational financial highlights for the quarter, starting on Slide 7. As I said earlier, our customer base is up double-digits in all our segments. Home is up 13% year-on-year, mobile is up 11%, and postpaid is up almost 20%. This is driving strong revenue growth in all our business lines, as you can see on Slide 8, on the left. Home, our residential cable business continues to lead the way with double-digit growth of 13%. I said this last quarter, we have built an almost $2 billion cable business growing double-digits and with a long runway still ahead of it. Our Consumer Mobile business grew 8% in the quarter and our B2B business is back to growth with a 3% uptick in Q3. We continue now to see solid customer growth in B2B, particularly in the small business segment, but some sectors of the economy like travel and hospitality still have not yet recovered. When they do, growth in our B2B business will further strengthen. And as you can see on the right, every country operation grew strongly in the quarter. On Slide 9, you can see our LatAm service revenue evolution. Three points here. One, this chart is in dollars; two, Q3 was our fifth consecutive quarter of sequential revenue growth; and three, given usual seasonality, we expect the sequential trend to continue positively in Q4, especially given the investments we have been making, as you can see on Slide 10. We have told you throughout this year that we would invest more than usual in 2021, between $100 million to $200 million more than last year. CapEx to sales will therefore end the year at around 18% of sales. This is higher than our historical average of between 16% to 17%, and I know that this level of investment this year has surprised some of you. Two key comments on that. One, these investments are paying off. We're gaining market share in key countries, our NPS scores are up across the board, and we have strong subscriber and revenue growth in all countries. And two, this CapEx intensity as a percentage of sales will go down next year, for two reasons. One is simply the strong revenue growth that we are seeing; and two, also because many key investment projects are now winding down. Indeed over the past two years, we have invested heavily to roll out our 700 megahertz network in Colombia. We are well over two-thirds of the way done with that. By 2021, we will have also largely finished our network modernization program in El Salvador, Panama, Honduras, and Paraguay. And note, lastly, that we have also anticipated an accelerated purchase of key equipment this year to protect the business from possible supply chain disruptions later this year and more importantly, next year. Let's now take a minute to look at our three largest operations, beginning with Colombia on Slide 11. On the left is a network less than two years ago. On the right is a network today. The pictures tell the story. For more than a decade since we entered the Colombian market, our profitability in Colombia suffered from a lack of scale in mobile. As you surely know, it is next to impossible to be profitable in mobile with only 17% market share and this is what we had historically in Colombia. That was, one because we had a spectrum disadvantage. For years, the only player in the market with a low-frequency spectrum was TIGO. We have now fixed that, and we are now the largest holder of 700 megahertz spectrum in Colombia. We were also handicapped because, two, we had a network disadvantage. With our low-frequency spectrum, we could not build a competitive network. Today, with the spectrum in hand, we have fixed also for the network disadvantage. Today, ours is independently measured as the best network in Colombia; and three, because we also had a commercial distribution disadvantage. With our good network coverage, there was no point in scaling up our commercial distribution. But now with tons of spectrum and the best network, we have doubled the size of our commercial and service footprint. We have ramped up our sales and marketing efforts, opened up new stores, added independent dealers, and hired more salespeople. Why? Because the historical barriers to our growth, those that I just described before, the ones that kept our profitability subdued, no longer exist. No doubt, this is a bold move, but I want our message to be very clear. One, this is the right move. Two, and most importantly, it is working; we are winning, the subscribers, share, and most importantly, revenue. And three, the fixed part of this investment is behind us. The investment going forward is largely growth-driven. This is what Slide 12 tells you. One on the top left, our mobile's customer base is surging. We added 0.25 million postpaid subs just in the quarter; that's a new record, and our postpaid base is up 36% year on year. Two, on the top right, our revenue has inflected. We're getting both volume and revenue growth despite lower ARPUs in the market. Now I want to let you know that we monitor the profitability of our growth constantly and consistently. Our cost per gross addition is down, and so is our early churn. So although ARPUs are lower, we're adding good quality customers. And as a result, we're getting what matters, increased revenue. It is working. Our Home business continues to grow. We added 32,000 net customers and grew our top line. The copper network is now almost totally upgraded to cable fiber and the copper customer base is now almost totally migrated. As a result, we are now in solid and sustained growth territory in Home in Colombia. Just like we have done everywhere else, we're building a profitable business in Colombia by investing to gain scale in both mobile and fixed. Now please turn to Slide 13. This is a snapshot of Guatemala. Simply said, it is our largest and most cash-generative market. Our customer base is growing very rapidly, up 7% in mobile and with 30% growth in home, which is all organic. Service revenue, EBITDA, and OCF all grew throughout the pandemic and continue to show very strong growth in 2021, in what is a good and well-managed two-player market. Now let's take a quick look at Panama on Slide 14. We made roughly a $2 billion investment in Panama two years ago. Today, Tigo is No. 1 in an investment-grade and dollar economy with an improving industry structure and an economy that is going back to strong growth. We have sustained our market share in fixed, and we have grown our mobile market share to more than 40% with solid customer growth in both segments. With the integration successfully completed, synergies delivered and the TIGO brand now very strong in Panama, revenue and EBITDA are now both growing nicely, and margins are expanding. And here's the punchline. Panama is now our third largest operation with a run rate of about $300 million in dollar EBITDA and about $200 million in dollar operating cash flow. We are well on our way toward earning a very attractive return on the capital that we invested there. Thanks to all of you who supported us in creating Tigo Panama. Now let me turn it over to Tim to go over the financials.

Tim Pennington, CFO

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 and mobile growth. On Slide 19, you can see the EBITDA for our LatAm segment. At $622 million, this was up 7.1%. The margin was stable at just over 40% and this was despite incurring higher sales and marketing costs associated with the mobile customer intake. Turning to Slide 20. We have the LatAm EBITDA by country. Also with Colombia, we saw a 5.6% decline in EBITDA year on year. I think we've explained this. But to repeat, this is due to a significant increase in selling and marketing expenses. This is what has driven the very strong mobile customer intake during the quarter and has resulted in improved market share. Otherwise, growth was positive in all countries. El Salvador had its fourth consecutive quarter of growth, driven by a strong top line, and both Guatemala and Panama delivered double-digit EBITDA growth again, and we saw positive growth from all other operations. On Slide 21, we show the operating cash flow, and this is our underlying EBITDA less CapEx to the group, including Africa. Year to date, as of the end of September, our OCF is just below $1.25 billion, and we are now expecting to be above the $1.4 billion that we've been guided to since the beginning of the year. Now turning to our leverage position on Slide 22. We have reduced underlying net debt by $300 million this year to just over USD $5 billion and that gives a proportionate leverage of 2.67 times. When leases are added, our net financial obligations are around $6.2 billion and a proportionate leverage of 2.81 times. As you know, we've made reducing leverage a key priority of the business. We aim to bring leverage down toward two times. And on Slide 23, you can see that we've brought our leverage down every quarter since it peaked at the height of the pandemic. Overall, we brought leverage down by nearly 50 basis points over the course of the year, and we've been able to restart our share buyback program. And on the right-hand side of the slide, you can see that we've repurchased around 0.8% of our share capital as at the end of the quarter. And today, we're just over 1%. As a reminder, we've got authorizations to repurchase up to $100 million until the AGM in May, and we expect to invest $50 million during this calendar year and the remaining $50 million in the first four months of 2022. So with that, I will hand it back to Mauricio.

Mauricio Ramos, CEO

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.

Sarah Inmon, Investor Relations Director

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?

Soomit Datta, Analyst

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?

Mauricio Ramos, CEO

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 on 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?

Tim Pennington, CFO

No, I think you've summed it up well. I agree that we are not currently experiencing significant inflationary pressures. However, we are mindful of the situation, as Latin America is not exempt from global inflation trends. We have observed some central banks raising their rates, with Colombia being one example. The primary areas that may be affected will relate to personnel and our employment costs, but we are not seeing any impact from that at this time. While you mentioned fuel costs, it’s important to note that, while the network is crucial to our operations, it only accounts for about 5% or 6% of our total operating expenses relative to our revenues, and fuel is just a part of that. We are aware of the situation, but as you said, it is not a pressing concern at this time.

Mauricio Ramos, CEO

In some countries, like Colombia, we have implemented a price increase, which allows us to safeguard our revenue on the subscription side of our business.

Soomit Datta, Analyst

Thank you for the clarity. I have a quick follow-up. This might be a question for Tim. Regarding Guatemala, performance is strong, but concerning the dividend, you mentioned plans to reduce gross debt. I was a bit surprised by that, and I wonder if this will be a continuous policy in that market. Thank you.

Tim Pennington, CFO

No. When we redeemed the $800 million bond in Guatemala, we used a combination of existing resources, new borrowings, and some loans from shareholders. We have just finished paying off all of those loans, especially the sold ones, with the last payment actually made in October. We redirected cash flow to paying down the loans and will resume the dividend flow from November. This was simply our chosen approach to allocate the capital.

Soomit Datta, Analyst

Okay. Thank you so much.

Sarah Inmon, Investor Relations Director

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

Marcelo Santos, Analyst

Hi, everyone. Thank you for taking my question. I wanted to inquire about two operations that performed somewhat weaker, particularly regarding EBITDA, which are Honduras and Paraguay. Is this primarily because you are attempting to enhance commercial efforts similar to what you've done in Colombia, or is it more due to competitive factors? Could you provide some insights into these markets? Thank you.

Mauricio Ramos, CEO

Let me address those questions. I believe Honduras and Paraguay have some similarities but are fundamentally different situations. In Honduras, we are facing performance issues that we are not pleased with. However, we are implementing corrective measures similar to those we undertook in El Salvador a few years back. This includes modernizing our network, which I mentioned earlier. We are optimistic that with these investments and considering that we operate in a two-player market where we have substantial scale, we can improve the performance shortfalls we currently see in Honduras. We believe that once we complete these network modernization efforts, Honduras will become a strong performer for us. Paraguay, on the other hand, is at a different stage in its transformation journey. We have invested significantly in Paraguay and have a large market presence, as we've noted before. We are starting to see competition there become more rational and stable today, which is an improvement compared to the past. The subscriber numbers in Paraguay show a much more stable market, and I would say it is stabilizing significantly. Our mobile market share has remained stable or even increased slightly, with 120,000 new subscribers gained in this quarter, up 7%. Additionally, our home services are strengthening. Service revenue in Paraguay is showing modest growth, and overall, we believe we are stabilizing significantly in that market. While you may have noticed that our EBITDA appears weaker due to expenses related to soccer rights, this investment is essential for stabilizing our business.

Marcelo Santos, Analyst

Perfect. Thank you very much.

Sarah Inmon, Investor Relations Director

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

Diego Aragao, Analyst

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.

Mauricio Ramos, CEO

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 in 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; it's exactly what the strategy was supposed to do. And if you add to that the fact that Home, again, the strategy that we laid out five years ago is also performing, it's increasingly certain what we're doing in Colombia. We have reconverted a ton of copper, as you know, we're largely done with that; now the customer net adds are strong and they're bringing revenue in Colombia. Home sales revenue growth in Colombia is double digits. And if you look at what we're doing in Colombia today, we have both mobile and home working. We're the best network in the country. Our NPS results are significantly moving up. If you look at the portability in Colombia, we're clearly the winner. And if you look at where we come out in the price versus quantity game, we come out with increases in service revenue. So overall, very, very pleased. We're basically net winners in a competitive landscape.

Tim Pennington, CFO

On the second question regarding 2022, the first thing I'll mention is that Tim has been examining our budget in more detail, so I'll let him speak next. However, I want to emphasize that we have already secured a significant portion of our 2022 CapEx. If we hadn't taken these steps, we wouldn't be successful in this business. We not only made substantial investments in the fourth quarter of 2021, which is part of why we keep mentioning our plans to increase CapEx this year. We are already placing orders for 2022 to ensure we're prepared for that spending. Tim, do you want to add anything before we move on to the Panama issue? Yes. The chip shortage has been a challenge for some time, and we have been making forward purchases to address it. The main concern for us, Diego, is with set-top boxes, which have experienced significant shortages. Handsets are somewhat more flexible and easier for us to manage, while network equipment has longer lead times. The set-top box area has been our primary risk, and we have made considerable forward purchases for that. While I don't have the exact figures, we have likely committed at least half of our capital expenditures for next year in terms of contracts and purchase orders. This is how we are working to mitigate the risk.

Mauricio Ramos, CEO

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.

Diego Aragao, Analyst

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

Sarah Inmon, Investor Relations Director

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.

Mauricio Ramos, CEO

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 billion, 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. We set out a model, a ambition, if you will, to achieve top-line growth. We're pretty close to that. If you do the math against our 2019 numbers, you realize that our service revenue growth this quarter was around 5%, which is at a mid-single-digit level that our model predicates. If you look at our margins, we have said some years ago that we would seek margin expansion to get to EBITDA margins of around 40% and operating cash flow margins up north of 20%. We've reached that. We're there in terms of our EBITDA margins at around 40% and the margin expansion of the operating cash flow level, we're at margins and profitability that are in the 20 to 25%. So the last shoe here and this is why the CapEx conversation is so important, and the fact that it is coming down next year for the reasons that we've discussed now quite significantly. Last shoe fall here is simply that that target of operating cash flow growth of 10%, it's no longer something that sits out there in the horizon. It's around the corner. On the prepared remarks I thought I was very clear in saying that we're looking at it for the short term, and that's all part of the equation here. So I want that focus to be clear that we're getting to our target model very quickly into 2022. And Tim can correct now my Q4…

Tim Pennington, CFO

I wasn't going to correct anything. I wanted to provide some more specifics. If we look at the components, we've mentioned a high level of CapEx, and while the market may not fully trust us, we plan to spend around $450 million in CapEx during the fourth quarter. This isn't an unexpected amount; it relates to projects we initiated in the first and second quarters, which is why the number is higher as we move toward acceptance and bookings. Regarding the other components, I don't see major red flags on the LatAm EBITDA side, which is performing well. However, I do have some caution about the Africa EBITDA number for the fourth quarter, which we haven't discussed much. It is subject to a sale and purchase agreement but still affects our overall numbers, including OCF. The MFS business has been significantly impacted by a government-imposed levy. This will have some effect. Overall, we're very confident that our numbers will exceed $1.4 billion, and while I'm not sure if we'll meet in the middle as you suggested, we remain optimistic about LatAm's performance.

Mauricio Ramos, CEO

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%.

Tim Pennington, CFO

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

Sarah Inmon, Investor Relations Director

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?

Mauricio Ramos, CEO

Great question. I view our TIGO business similarly to how we approached cable back in the day when we aimed to build a cable company. Today, we have established a $2 billion cable business with excellent margins and strong service revenue growth, with plenty of potential for next year. Tigo Money is now in a position similar to where cable was three to four years ago when we were just starting to develop it. Currently, Tigo Money is a substantial fintech with 5 million users and $50 million in revenue, having launched in five countries. While it is significant, it hasn't garnered the attention that a more established fintech might. Our goal is to tap into the fintech opportunity that remains largely untapped in our markets, where mobile financial payments aren't widely utilized, and we aim to fill that gap. This year, we will introduce QR codes in select markets and engage with thousands of merchants to position ourselves as the leading digital mobile platform. Secondly, we plan to expand geographically since we've only launched in five countries and can relaunch more forcefully in those markets. Lastly, we'll explore other fintech opportunities, such as lending and insurance. The opportunity is significant due to our extensive presence in these markets through agents who facilitate cash transactions for our existing prepaid business. We're heavily investing in building our team and enhancing our strategies and capabilities, including IT. This increased investment in Q4 is largely directed toward Tigo Money. Concurrently, we are also working to carve out this business in a way that allows us the option of bringing in a partner to help advance its development. I'm genuinely excited about the tremendous opportunity we have to create additional value in this area.

Sarah Inmon, Investor Relations Director

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

Stefan Billing, Analyst

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?

Mauricio Ramos, CEO

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.

Tim Pennington, CFO

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.

Stefan Billing, Analyst

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?

Mauricio Ramos, CEO

Yes. The strong increase in subscribers, especially in Colombia, is broad-based since we now have a network that covers the entire country. We can better serve Bogotá because we have a low-frequency network in place, leading to more subscribers in Bogotá and across the country overall. We've addressed a previous network limitation in Bogotá. However, the net additions are happening nationwide as we've also expanded distribution. Regarding the second part of your question about the deal between Ufinet and ETB to create a fiber network that would provide access to third parties in Bogotá, that deal has encountered some legal issues in Colombia. It's uncertain whether those will be resolved, but it does mean we still have the option to resell fiber to third parties. This means that whether through a joint venture or not, by next year we will be positioned to buy, resell, or provide fiber services either from the joint venture or directly.

Stefan Billing, Analyst

Sounds good. Thank you very much.

Sarah Inmon, Investor Relations Director

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?

Mauricio Ramos, CEO

Colombia is a larger market where Mercado Libre operates, making it somewhat unique. However, Tigo Money sees opportunities across all our markets. Currently, Colombia faces the most competition, while other regions present a clear opportunity for us to establish our presence in digital payments. We have distinct advantages that set us apart from others. Our experience in the mobile payment industry allows us to enhance our technology, distribution, teams, and product offerings. In most countries outside of Colombia, we are entering a largely untapped market for digital payments, with no other mobile operators or fintech companies actively competing. We have a significant benefit with our Tigo Money distribution, which boasts around 20,000 points for transactions. This connection to the real economy is a unique edge we hold. As we develop this venture, we are focused on growth rather than any potential acquisitions, as it remains in its early stages.

Sarah Inmon, Investor Relations Director

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.

Mauricio Ramos, CEO

Thank you, Sarah. I'm really optimistic about our progress. We are close to achieving the model we aimed for, which includes growth in service revenue, margin expansion, and increased operating cash flow. I appreciate everyone who has supported this vision, and I'm grateful to the team for their hard work. I’m happy that we are prioritizing cash flow growth moving forward. Thank you for your patience as we work to deliver on these goals.