And I could speak at length on Guate but maybe Maxime, anything to add to that.
Maxime Lombardini: Yes. Thank you, Mauricio. Hi, Soomit. I would say, first, we have not sacrificed CapEx. Much more, we have optimized CapEx especially by aligning technical, IT and sales to be more efficient. Second, we have renegotiated a lot of contracts with the vendors, both on network and IT. So for the same amount of money, we can get more. And there is more to come on that. And on the Home business, so we’ve made a huge HFC upgrade in terms of bandwidth capacity for quite a low cost. So, all that explain you that we can have a good performance commercially with relatively low CapEx. On top of that, there is more to come on costs, especially on contents. Each time a contract comes presented, we can renegotiate drastically and that is big amounts and then on subcontractors and on shared services, there are many shared services in Millicom that we started to push first to reduce and then to push to the countries just to avoid, let’s say, HQ costs with limited leadership on them.
And third aspect, we have many initiatives that are pushed on the service revenue. The first one is to lower as much as we can the churn, especially on Home because this comes with a high cost, both OpEx and CapEx and the HFC upgrade is quite successful on that. Then on the distribution. We are improving the distribution network and we are great believers on the FMC offers putting together the Home and Mobile business especially when fighting in certain countries with these small ISPs that are cheaper providing BBI only. That’s the best way to fight on that.
Mauricio Ramos: Thank you Maxime. And Bart, Bolivia and Honduras.
Bart Vanhaeren: Yes, so thanks for the question Soomit. So for once, we had positive currency effects in the quarter so we’ll take that. But you know, we operate in emerging markets and can all be positive in all countries at the same time. In Bolivia, so we are putting in the work in the sense that working with all suppliers to convert our contracts from U.S. dollar to local currencies to reduce our U.S. dollar need. We are still able to buy a number of dollars and euros in the market, a lot thanks to good relationships with our banks over the years. We have been issuing local bonds, we’ve been in the market for many years with them but those come at commission rates in between 10% and 30%. So that only makes sense to the extent that we can share that commission cost with our supplier which in most cases is relatively straightforward for them and for us than to execute on.
We also allocate some of the cash flow that we generate in the markets for debt repayments. So our net debt in Bolivia will have come down during the quarter. But then lastly, to say, I think the business itself has not suffered from this. So mobile business is up. B2B is up. And then in Home, we have a slowdown and our returns on in Home are a little bit longer. So to allocate the cash, it’s better to go into the Mobile business for even more immediate return. In Honduras, a bit of the same activities working with the suppliers but in Honduras, the difference with Bolivia, we are able to convert much larger amounts in U.S. dollar. The way it works is we have to present the invoices to the regulator. Those get reviewed and approved over time.
So there is a bit of a delay. DPO will go up but it’s a process that is still functioning. And so far, we’re not expecting that much of an impact on the upstream at this moment in time.
Mauricio Ramos: A couple of additional comments just to wrap it up, Soomit. Number one, for quite some time now, you’ve heard us say we’re cautious on our investment envelope in Bolivia and we talked about Honduras to a lesser extent. That’s precisely because we saw the dry up of foreign reserves coming out. So we’ve been preparing ourselves for that and managing the way Bart is describing it. In terms of the target, here are things that can go well, that are going well. There are things that can go bad and we try to put it into a bag and that basically shakes up with us confirming the envelope for target for this year with all the puts and takes in there.
Soomit Datta: It’s very helpful. Thank you very much.
Michel Morin: Thank you, Soomit. So next we’re going to go to Stefan Gauffin at DNB. Stefan?
Stefan Gauffin: Yes, hello, can you hear me.
Mauricio Ramos: Perfect.
Stefan Gauffin: That’s okay. Well, first of all, just thanks, Mauricio, for all discussions over the years. And I have a few questions. A couple of them will likely be short. So first of all, on the restructuring charges. Are we done now or will there be more charges come in the coming quarters. Secondly, the Panama business was boosted by the B2B contract. So around two percentage points to group service revenue or around $25 million to Panama service revenues. How should we think about these contracts going forward. Will they come down materially or how should we think? And then just thirdly, you mentioned reducing the MFS footprint. And just a couple of years ago, I believe the target was to do the opposite and to build out that business materially. So, could you just give a brief update on the MFS business. Thank you.
Mauricio Ramos: You bet. So listen, on the first part, Stefan, on the charges, I will tell you as a matter of principle, we’re going to continue driving efficiencies wherever we can find them, whenever we can find and we’re driven and focused to make the platform more and more profitable. And I think we see eye to eye the entire board and all of our investors. So now, we’ve done a lot over the last few months, Everest One and Everest Two. So the level of that activity will certainly be slower but we isn’t going to stop looking for efficiency. How exactly that translates into charges effectively on a quarter basis, Bart can probably give you some comment on that. Yep. Do you want to go for it?
Bart Vanhaeren: Yes, I think Mauricio. I think a lot of the restructuring charges are already spent, Stefan. So on the flip side, a lot of the benefits are in the run rates or in the bank, as we call it. Now as Mauricio said, we continue to look for more efficiencies. So I would say generally, yes, you will see more but that’s as well where we now not report adjusted anymore is a presentation as you have seen. So it has been ongoing for a number of quarters. And so I personally look at it and what we have as reported numbers and as this can continue over time, not going to say at the same intensity but, you know, I would encourage to look at reported rather than adjusted for one-off charges.
Mauricio Ramos: On the B2B contract. Stefan, very quickly, these are very large, very profitable contracts that basically have us in Panama get to something that begins to look like our fair share of the B2B market in that economy given the size that TIGO Panama currently has, we thought for those for years and we’re happy to attain it. But B2B, as you know, tends to be lumpy. These are long term contracts. But we booked the bulk of the first year revenue both in last quarter. So last quarter of last year and this quarter. Going forward, we want to be super clear. Do not expect that we’re going to continue to be having quarterly revenue from these contracts to the level that we had in the past two quarters. So now 25 to 30 per quarter, materially less.
Very important that we be transparent on that. And on MFS, a couple of comments and I’ll hand it over to Maxime. Number one, we’ve worked very hard to bring the business to OCF. And even I think I’ve said that a number of times so that we have perfect optionality with that business. We are very, very focused now on integrating it better into the operations of the business because that particular product reduces churn, it increases ARPU and has a lot of affinity with the operations which in fact, means we are learning a lot from that business, learning a lot on what countries it works better and on countries it doesn’t quite work as well. What works in Paraguay may or may not work in countries like Guatemala or others. So we’re pretty much in the learning process.
We’re pretty much in the efficiency process, pretty much in the integration process. And going forward, it’s all about optionality. We’re no longer focused on one specific M&A outcome here. Maxime, over to you for any add-ons you want to give on that?
Maxime Lombardini: Yes, very limited additional elements. The first one, we are not a fintech. It’s a market which is very complicated, very competitive with very limited markets. So we’ve decided to focus on the countries where we are relatively strong such as Paraguay, Bolivia and Honduras and on specific use cases, mainly the ones that are bringing something to the Telco business meaning the reloads for prepaid and the bill payments to lower the cost of consumptions. Lending will be in Paraguay only because it’s a risky business. That is not our core business. And very important, we’ve made the countries fully responsible for their [indiscernible] business. There is not a need anymore, any longer, a big team to build everything and think for the countries.
The countries will have to define what are the use cases they really need to be at software development and to market the products in very close relationship with the B2C teams. So it’s a different approach, really something where TIGO Money is supporting the telco business and not anymore the fintech living its life.
Stefan Gauffin: Hi, thank you. Very clear.
Michel Morin: Thank you, Stefan. So next we’re going to go to Marcelo Santos at JPMorgan.
Marcelo Santos: Hi, good morning. Thanks for taking my questions. I have two. The first is on Panama. So you mentioned that in the end, the third operator kind of really left and you were left to a two-player Mobile market. Is this something that regulator is going to accept? Should there be remedies? Is there some discussion? Usually when the number of players goes down, regulators get a bit more nervous. So I just want to understand what’s your perspective. And the second is, has there been any change in behavior, in competitive behavior in Colombia due to WOM’s financial issues? I mean, we saw that WOM Colombia was included, I think, in chapter 11. So just wanted to see if you are perceiving something on the ground. Thank you.
Mauricio Ramos: It’s interesting that you asked one question right after the other as if you’re suggesting a parallel and there may or may not be a parallel here, Marcelo. So let’s start with Panama here. It indeed has become a two-player market. As I said, we envisioned it would naturally eventually end up being by default. And it has been a very lengthy, organized, methodic, highly interactive process since Digicel decided to turn back the business and the licenses to the Panamanian government quite some time ago. We have worked as an industry. Millicom also is very closely with the government of Panama to assist in them handling that unexpected situation when the business was handed back to them. It has been a continuous dialogue.
