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Edited Transcript of TRL.TO earnings conference call or presentation 13-Aug-19 5:30pm GMT

Q2 2019 Trilogy International Partners Inc Earnings Call

Sep 7, 2019 (Thomson StreetEvents) -- Edited Transcript of Trilogy International Partners Inc earnings conference call or presentation Tuesday, August 13, 2019 at 5:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ann Saxton

Trilogy International Partners Inc. - VP of IR & Corporate Development

* Bradley Jay Horwitz

Trilogy International Partners Inc. - Co-Founder, President, CEO & Non-Independent Director

* Erik Mickels

Trilogy International Partners Inc. - Senior VP & CFO

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Conference Call Participants

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* Bentley Cross

TD Securities Equity Research - Associate

* Jeffrey Fan

Scotiabank Global Banking and Markets, Research Division - Director of Telecommunication Services & Canadian & U.S. Telecom and Cable Equity Research Analyst

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Presentation

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Operator [1]

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Good afternoon, and welcome to the Trilogy International Partners Inc. second quarter earnings conference call and webcast. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Ann Saxton, Vice President of Investor Relations and Corporate Development. Please go ahead.

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Ann Saxton, Trilogy International Partners Inc. - VP of IR & Corporate Development [2]

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Thank you, Andrea. Hello, everyone, and welcome to our conference call to discuss our second quarter 2019 results. This call is also being broadcast live over the web and can be accessed in the Investor Relations section of the Trilogy International Partners website.

Joining me today are Trilogy's President and CEO, Brad Horwitz; and Trilogy's Senior Vice President and CFO, Erik Mickels. This call includes forward-looking information from which our actual results may differ materially. For further information regarding the various factors, assumptions and risks that could cause our actual results to differ, please review the cautionary language in the About Forward-looking Information section of yesterday's press release as well as the cautionary note regarding forward-looking statements and the risk factors in our 2018 annual information form available on SEDAR, which is also included in our annual report on Form 40-F available on EDGAR.

The forward-looking information represents our expectations as of today and accordingly, is subject to change. We disclaim any obligation to update forward-looking information, except as required by law. Please refer to yesterday's press release for definitions and reconciliations of any non-GAAP measures that we'll use during today's call. The press release is posted on our website at trilogy-international.com under the Investor Relations tab.

I will now turn the call over to Brad Horwitz, President and CEO of Trilogy International Partners.

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Bradley Jay Horwitz, Trilogy International Partners Inc. - Co-Founder, President, CEO & Non-Independent Director [3]

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Thanks, Ann. Hello, everyone, and thank you for joining us for our second quarter 2019 earnings call. We're pleased by our second quarter results. Both of our operating markets again met internal expectations, and we continue to deliver against our full year 2019 targets.

We're particularly encouraged by our momentum in New Zealand. We posted another solid quarter in both our postpaid and broadband customer bases, almost doubling our combined net additions versus the second quarter of 2018. Our steady growth in these key areas of focus over the last several quarters is apparent and are expanding revenue and adjusted EBITDA at 2degrees.

In Bolivia, the competitive environment remains elevated. We continue to actively address the current market dynamics, and in the second quarter, we completed our strategic consultancy work, which identified opportunities to improve our operating structure and enhance revenues. The impact of implementing these changes will take some time, however, and we remain committed to optimizing this asset and shareholder value.

Our consolidated business ended the second quarter with 3.4 million wireless customers, 23% of which are now on postpaid plans compared to 20.6% a year ago. Our postpaid and broadband net additions in New Zealand continue to grow with another record quarter of our broadband business raising the bar in activations and net additions.

Our second quarter consolidated adjusted EBITDA was $35.7 million, down 5% versus last year, including a 6% foreign exchange headwind in New Zealand. Our adjusted EBITDA margin was 26%.

Moving on to results by market, starting with New Zealand. We continue to build momentum in postpaid in the second quarter, marrying our improved churn profile with growth in activations. As a result, our Q2 postpaid net additions increased 91% from a year ago and were at their highest level since the fourth quarter of 2016. 32% of our 2degrees wireless base is now postpaid compared to 29% at the end of the same period last year.

An element of our postpaid gross addition growth in the second quarter can be attributed to the successful launch of a new $85 unlimited pool plan in mid-April. Our proposition is consistent with our heritage of providing better value for price and fighting for fair. As an example, it includes significantly more data provided under our fair use cap as well as free hotspotting. Up to 3 connections can share the unlimited pool plan at an additional $25 per line.

In addition, our broadband uptake, including among our existing postpaid customers, continues to grow. Our broadband net additions were more than 2x those in the second quarter of 2018, and we ended June with a broadband base that is 25% larger than a year ago. While we usually see a seasonal increase in broadband activations in the second quarter, this was magnified by our care team's cross-selling efforts, our launch of Amazon Prime content and our 10th anniversary price freeze campaign. As a result, the second quarter marked the highest level of broadband gross and net adds since 2016.

On the prepaid side, we continue to have some work to do. Our prepaid subscriber count decreased by almost 23,000 in the second quarter, primarily due to tourists who visit New Zealand during the summer, which were disconnected under our 90-day subscriber definition. While we remain focused in our strategy to increase our postpaid base, which now contributes 2/3 of our wireless service revenues for the quarter, we believe there is still opportunity to grow in the prepaid market. To that end, we've refreshed our prepaid offerings in mid-July in an effort to reinvigorate this segment.

Our second quarter subscriber revenues in New Zealand grew 6% on an organic basis compared to a year ago. By this, I mean, excluding the impact of foreign exchange and the implementation of the new revenue accounting standard. This increase was driven by continued growth in our postpaid and broadband customer bases. Our postpaid revenues increased 6% year-over-year on an organic basis, with the growth in our postpaid base again offsetting some ARPU compression. Take-up of our higher-value prepaid packs by our prepaid base resulted in a 1% increase in prepaid ARPU in the quarter on an organic basis. Our broadband revenues in the second quarter grew 8% compared to the same quarter last year or 16% on an organic basis.

Data consumption across our New Zealand base increased 42% versus the second quarter of 2018, more than offsetting yield compression in the market of 29%. Our postpaid churn management and steady momentum in growing our postpaid and wireline customer base is accretive on the bottom line. Our second quarter adjusted EBITDA in New Zealand was $27 million, a 23% increase compared to last year. On an organic basis, our adjusted EBITDA grew 18% due to our revenue growth in addition to improving operating efficiencies. Capital expenditures in the second quarter were $16 million, and more than 99% of our network is now overlaid with LTE.

Before moving off of New Zealand, as we referenced earlier, we celebrated our 10-year anniversary this month. As we look back, the accomplishments of the team are outstanding, from a start-up, to a full LTE network, nearly NZD 0.5 billion of service revenue and a 23% market share. Our challenger, fighting for fair brand position continues to resonate, and we're extremely excited about the next chapter.

Moving on to Bolivia. Competitive intensity remains. Despite this pressure, I would characterize our subscriber trends in Q2 as comparable to last quarter and potentially more stable due somewhat to good traction with our $28 postpaid bring-your-own-device plan among both new and existing customers. We have maintained our subscriber mix, which was almost 17% postpaid at the end of June and improved postpaid ARPU by 2% sequentially. Our customers' data consumption increased 81% year-over-year in the second quarter, nearly offsetting market data yields, which were 33% lower than they were in the second quarter of 2018.

Our blended ARPU decreased 2% on an organic basis versus the second quarter of 2018. As a result, our second quarter service revenues were $51.5 million, down 15% compared to last year. This includes a $1.2 million reduction to postpaid revenues due to the impact of the new revenue standard.

More than 42% of our subscriber base uses LTE compared to 40% last quarter and 21% a year ago. While the number of sites we have overlaid with LTE did not change materially quarter-on-quarter, our team has been expanding our coverage through optimization. This resulted in increasing our LTE footprint in Cochabamba, the first city in our optimization project, by almost 22%. This capital-efficient work provides an improved customer experience and supports the continued demand for data.

Our second quarter adjusted EBITDA was $11.4 million, down 38% compared to 2018, including a $350,000 NRS benefit. Second quarter capital expenditures in Bolivia were $5.6 million. Looking at the second half of this year, our priorities will be addressing coverage requirements associated with our spectrum license in addition to expanding our fixed LTE offerings. To that end, we are on track to launch fixed LTE services in the fourth quarter of this year.

With respect to the Bolivian competitive environment, as we mentioned on our last call, free data welcome packs with activation were reintroduced to the market early in the second quarter, which we followed, to a lesser degree, in June. Despite this uptick in pressure, porting activity in the market continues to decrease. In the second quarter, porting across all 3 operators decreased by 21% and our port-outs decreased 20% sequentially.

Our focus on strategic alternatives while optimizing the value of our Bolivia business is unchanged. In June, we completed the first phase of our work with an experienced consulting firm, and now we are shifting to the implementation phase for some of their recommendations. We would expect to see some benefits from those efforts later in 2020.

With that, I'll turn the call over to Erik to take you through the numbers. Erik?

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Erik Mickels, Trilogy International Partners Inc. - Senior VP & CFO [4]

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Thanks, Brad, and hello, everyone. Our consolidated business ended the second quarter of 2019 with 3.4 million wireless subscribers. 783,000 of these customers were on postpaid plans, an increase of 4% versus Q2 2018 and an increase of 2% sequentially.

Our total wireless subscriber count decreased by 32,000 in the second quarter as prepaid disconnections in each of our markets more than offset the strong postpaid net additions in New Zealand. Our consolidated postpaid net adds for Q2 were 12,900 versus 11,200 a year ago as gains in New Zealand were again partially offset by a modest decline in Bolivia.

Growth in our New Zealand broadband base continued to ramp up in the second quarter, and we ended June with 93,400 broadband subscribers, up 25% versus Q2 2018. As a reminder, with respect to comparability, we implemented the new revenue accounting standard, on NRS, in the first quarter of 2019, and 2018 was not recast for the new standard. Further, we had a 6% foreign exchange headwind in the second quarter, which also impacted reported results. Where noted, we refer to results on an organic like-for-like basis, which is excluding the impact of the new revenue standard as well as foreign currency. We believe an organic perspective enhances comparability during this NRS implementation year.

Our total revenues in the second quarter were $179.6 million, a 5% decrease on an organic basis versus the same quarter last year. Our total service revenues in Q2 of $136.1 million decreased 4% year-over-year, again on an organic basis due primarily to reduced service revenues in Bolivia, which were partially offset by subscriber revenue gains in New Zealand.

Consolidated postpaid revenues of $63.2 million were flat on an organic basis as growth in New Zealand was offset by Bolivia declines. Our consolidated operating expenses in Q2, including cost of equipment sales, were $172.9 million, a reduction of 4% versus the same period last year on an organic basis, primarily due to lower cost of equipment sales in both New Zealand and Bolivia and reduced bad debt expense in New Zealand.

Excluding cost of equipment sales, our Q2 consolidated operating expenses decreased by $2.3 million or 2% versus the same period last year, again on an organic basis. Our consolidated adjusted EBITDA was $35.7 million in the second quarter, a 9% decrease on an organic basis versus last year. Our consolidated adjusted EBITDA margin was 26.3% this quarter versus 25.4% a year ago. On an organic basis, our adjusted EBITDA margin for Q2 2019 was 23.9%.

Our consolidated capital expenditures for Q2 were $21.6 million versus $20.8 million a year ago. At the end of June, we had 2,355 sites on air, of which 95% provide LTE service. This is a 7% increase in LTE sites versus a year ago as we continue to invest in our networks.

Moving on to results by market. In New Zealand, we ended the second quarter with 451,200 postpaid subscribers, an 11% increase from Q2 2018 and a 3% increase sequentially. Our postpaid net additions in the second quarter were 13,700, nearly doubling compared to Q2 2018 driven by both increased gross adds as well as significant improvements in churn, which was 1.25% this quarter versus 1.61% a year ago.

Our prepaid subscriber count was reduced by 22,700 during the second quarter versus a gain of 934 a year ago, primarily due to disconnecting tourist SIMs in the quarter.

Our fixed broadband net additions in the quarter were 6,200, more than double the net adds from last year due to another quarter of higher activations and reduced churn over the prior year. Our broadband base is now 93,400, a 25% increase versus a year ago.

New Zealand service revenue in the second quarter was $84.3 million, down 3% compared to Q2 of 2018 due to currency fluctuations. On an organic basis, however, which again excludes the impact of foreign exchange and NRS, our service revenues in New Zealand increased 4% versus prior year as growth in our postpaid and broadband revenues offset declines in prepaid and noncore revenues.

On a more detailed level, our Q2 subscriber revenues, which include postpaid, prepaid and broadband and which comprise 97% of our total service revenues, increased 6% on an organic basis versus Q2 2018 as our growth in postpaid and broadband was partially offset by prepaid declines. Our postpaid revenues in the quarter were $42.8 million, a decrease of 1% versus Q2 2018 on a reported basis.

On an organic basis, our postpaid revenues increased 6% year-over-year as the 11% growth in our postpaid base was partially offset by ARPU compression of 4% in the quarter. The impact of the new revenue standard was to reduce postpaid ARPU by nearly 1% during the second quarter, with the remainder of the ARPU reduction due to pricing dynamics in the market as contemplated in our initial 2019 outlook.

Our Q2 prepaid revenues of $22 million decreased by $1.3 million or 5% versus Q2 2018. Excluding the impact of FX, prepaid revenues increased slightly year-over-year and represents the third consecutive quarter of sequential improvements. Prepaid ARPU for the quarter increased 1% over prior year on an organic basis due primarily to increased adoption of higher-value prepaid rate plans.

Our broadband revenues in the second quarter of $17.2 million increased 8% versus the same period last year or 16% on an organic basis. Our organic broadband revenue growth was due to a 25% larger base, offset by a year-on-year ARPU decline of 3%. Our noncore revenues, including roamer, which is reported within wireless service revenue and nonsubscriber international long-distance revenues, which together represent 3% of service revenue, declined $1.9 million or 45% as a result of the decline in the volume of other operator subscriber traffic on our network and lower rates in a bilateral agreement with another operator for ILD, both of which began in the third quarter of 2018. As discussed on prior calls, the bulk of these noncore declining revenues contribute lower margins and thus, the revenue declines are accompanied by a similar reduction in corresponding costs.

Our operating expenses for Q2 in New Zealand were $116.5 million, down 13% versus the same period in 2018. On an organic basis, our operating expenses decreased 5% due primarily to lower cost of equipment sales, primarily due to decreases in the volume of higher-cost device sales and a reduction in bad debt expense due to higher sales of EIP receivables, improved accounts receivable collection efforts and improved credit risk of our customer profile. Additionally, the impact of the new revenue standard was to reduce sales and marketing expenses by $2.4 million during the quarter in addition to some timing benefits in the period.

Our adjusted EBITDA for the second quarter in New Zealand was $27 million, an increase of 23% versus Q2 2018 or 18% on an organic basis. Our adjusted EBITDA margin in the second quarter was 32.1% or 29% on an organic like-for-like basis versus 25.4% a year ago. And again, the second quarter benefited from some timing of bad debt expense and marketing spend in the quarter.

Our Q2 capital expenditures in New Zealand were $16 million versus $12.8 million a year ago. On an organic basis, our capital expenditures increased 32% due to timing. LTE now covers just under 100% of our network versus 96% in Q2 of 2018. Our capital intensity in the period was 18.9% versus 14.8% a year ago.

Moving on to Bolivia. We ended the second quarter with 2 million wireless subscribers. Our subscriber count was reduced by 23,000 subs in Q2 due to ongoing competitive pressure and increased churn activity. Our service revenues in Bolivia were $51.5 million in the quarter, a 15% decline versus Q2 of 2018 due to a reduction in the size of our subscriber base and continued yield compression in the market. In addition, the implementation of the new revenue standard and reallocation of service to equipment revenue resulted in a decrease to our Bolivia postpaid revenue of $1.2 million in the quarter.

On a sequential basis, service revenues declined 1%. Our postpaid ARPU decreased 12% versus Q2 2018 or 7% on an organic basis due to promotional activity in the market. Our prepaid ARPU decreased 4% due to pricing changes in the market since last year. Our operating expenses for Q2 were $52.2 million, down 5% versus Q2 2018 as our cost of service decreased $800,000 or 4%, primarily due to a decrease in interconnection costs as a result of lower voice and SMS traffic terminating outside of NuevaTel's network, coupled with a decrease in site maintenance expense. These decreases were partially offset by an increase in site rents of $700,000 due primarily to the tower sale leaseback agreement completed in the first quarter of 2019.

Our cost of equipment sales decreased $1.5 million or 33%, mainly due to a 40% decline in the number of handsets sold. Sales and marketing was comparable for the same period in 2018 as an increase in customer retention expense was offset by a $1.2 million reduction in commission expense associated with the implementation of the new revenue standard.

And our general and administrative expenses increased $500,000 or 6%, primarily due to higher consulting expense and was partially offset by a combination of individually insignificant items.

Our adjusted EBITDA in Bolivia was $11.4 million in the second quarter, and our adjusted EBITDA margin was 22%. Excluding the impact of NRS, our adjusted EBITDA for Q2 was $11 million and adjusted EBITDA margin was 21% compared to $18.2 million and 30% in Q2 2018.

Our capital expenditures in Bolivia were $5.6 million in the second quarter, a decrease of 29% versus Q2 of 2018 due to the timing of our LTE expansion in 2018. We ended the second quarter with 90% of our sites overlaid with LTE in Bolivia.

Shifting now to our consolidated cash and liquidity position. At the end of Q2, our consolidated cash balance was $86.1 million, $12.3 million of which was held by 2degrees and $68.4 million was held by NuevaTel. $5.4 million in cash was held at corporate. With respect to our capital structure, consolidated debt at the end of the second quarter, including $350 million of Trilogy's holdco notes, plus local debt and other, was $548.2 million. Our debt in New Zealand was $153.3 million or $228.3 million in local currency.

At June 30, we had available capacity on the New Zealand $250 million facility of about NZD 22 million. In Bolivia, our debt outstanding totaled $41.7 million, which includes $14 million related to the initial tranche of the tower sale and leaseback transaction closed in the first quarter.

From a consolidated gearing standpoint, net debt to consolidated LTM adjusted EBITDA was 3.1x at the end of Q2, down from 3.4x at the end of Q2 last year. As an update on the $100 million tower sale leaseback transaction in Bolivia, we recently signed commitments for a second closing, which covers an additional 143 towers and will put an additional $20 million on the balance sheet. Reflecting this commitment, we will have closed on 543 of the approximately 600-plus towers in the deal, driving gross proceeds of $84 million.

We expect additional closings to occur before the end of the year, and our outlook contemplates incremental expense related to the year-to-date closings of approximately $3 million in the second half of 2019. Additionally, we recently completed our annual ratings review with one of the credit agencies, which affirmed our current rating. We are pleased with the outcome and remain focused on driving growth while protecting the balance sheet.

Before moving on to Q&A, as Brad mentioned, I will also note that results for the quarter are in line with internal targets. In terms of full year outlook, our New Zealand business is tracking very well on both service revenues and adjusted EBITDA. In Bolivia, effective cost management has the business performing on the adjusted EBITDA line. Our service revenue in Bolivia continues to be impacted by dynamic competitive activity to date, which has us trending to the lower end of our guidance range based on first half results.

In terms of cash, capital expenditures, we have previously disclosed that baseline CapEx for 2019 would be substantially consistent with 2018 on an absolute dollar basis or mid-80s on a consolidated level, and that's in millions. As was mentioned in addition to baseline CapEx, we are also moving forward on previously referenced opportunities such as fixed LTE in Bolivia.

In New Zealand, the pace of growth in postpaid and broadband has exceeded our expectations and as we're increasing capacity and CPE investment as well as pulling forward some other growth initiatives. As such, we estimate consolidated 2019 cash CapEx to be in the mid-90s. And again, such incremental investment is expected to be largely funded with available borrowing capacity in New Zealand and free cash flow in both markets.

With that, let's go to questions. Andrea?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Jeff Fan of Scotiabank.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Director of Telecommunication Services & Canadian & U.S. Telecom and Cable Equity Research Analyst [2]

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Two questions. Let's start with New Zealand. Given the momentum that you guys are seeing on the subscriber side, are you guys comfortable with kind of the balance that you're seeing with subscriber growth versus the ARPU trend since ARPU was a little bit soft?

And maybe you can, Brad, also touch on the broadband cross-sell opportunity as well. That was probably one area that we -- there's been a lot of talk over the last couple of years. It sounds like that is starting to really play out. So maybe you can talk a little bit about the opportunity that's still left in terms of selling into that base.

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Erik Mickels, Trilogy International Partners Inc. - Senior VP & CFO [3]

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Great. Thanks, Jeff. This is Erik. I'll take the first part. In terms of our outlook for the rest of the year, we're pleased with the momentum that the team has established. You look at 6% organic growth on a subscriber revenue, leads to that, to some of that conviction there. I would remind that the comps in the second half of the year are a bit more challenging than the first half, but sitting here today, feel very good about the trajectory.

In terms of the balance between ARPU growth, our initial outlook have contemplated strong double-digit -- strong high single-digit, low double-digit growth on the subscriber side, and we anticipated some ARPU pressure. So we feel good about the balance at this stage, but continue to monitor things and that overall mix.

In terms of broadband, very pleased with the growth on the gross adds. And on the ARPU, very pleased to see some of that stabilization on a sequential basis that has held up, and some of the larger competitors have actually increased broadband prices in the first part of the year. So that is generally trending well as well.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Director of Telecommunication Services & Canadian & U.S. Telecom and Cable Equity Research Analyst [4]

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Just on the broadband cross-sell. Is there any way to kind of quantify, of your broadband customers or of -- or your mobile customers, the overlap there currently in terms of broadband and mobile services?

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Erik Mickels, Trilogy International Partners Inc. - Senior VP & CFO [5]

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Jeff, it's Erik. I'll comment on those numbers, and then Brad can add additional color. Today, it's roughly about 60,000. So roughly 2/3 of our broadband base has our mobile offering, and we're in the low teens in terms of our postpaid customers that have our broadband. So a significant runway in that regard.

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Bradley Jay Horwitz, Trilogy International Partners Inc. - Co-Founder, President, CEO & Non-Independent Director [6]

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Yes. I guess what I would add is that the 60,000 subs that have the broadband now, that's up an additional 5,000 from the previous quarter. And that's a trend that we feel good about and that we expect to see continuing. The -- recall that the discount that a customer gets from the 2 is relatively modest at $10, but the take-up seems to be particularly strong right now.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Director of Telecommunication Services & Canadian & U.S. Telecom and Cable Equity Research Analyst [7]

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Okay. And just finally, on the CapEx, Erik, you gave some numbers at the end regarding your CapEx. Can you just repeat that? The mid-90s was a consolidated number, and it sounds like the increase from the previous guidance is all due to New Zealand. Did I interpret that correctly?

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Erik Mickels, Trilogy International Partners Inc. - Senior VP & CFO [8]

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Most New Zealand, with a bit of incremental in Bolivia, as we are moving forward on the fixed LTE opportunity that we referenced in past calls.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Director of Telecommunication Services & Canadian & U.S. Telecom and Cable Equity Research Analyst [9]

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Okay. But the new update for consolidated CapEx in U.S. dollars is mid-90s?

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Erik Mickels, Trilogy International Partners Inc. - Senior VP & CFO [10]

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Correct.

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Operator [11]

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Our next question comes from Bentley Cross of TD Securities.

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Bentley Cross, TD Securities Equity Research - Associate [12]

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I just wanted to follow on with that last question. Just where exactly are these CapEx dollars going? Obviously, on the Bolivia side, it's pretty clear, but on the New Zealand side, can you just kind of enlighten us where the incremental dollars are going?

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Erik Mickels, Trilogy International Partners Inc. - Senior VP & CFO [13]

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Yes. A couple of buckets, Bentley. This is Erik. First, increased capacity with a significant increase in subscribers and usage overall in the network and demand for the services; also, CPE investment with a significant increase in broadband adds, which has exceeded our expectations; and also, pulling forward some growth initiatives, which I'll put into the digital initiative category in terms of streamlining things and generally optimizing the business in that regard.

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Bentley Cross, TD Securities Equity Research - Associate [14]

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So not the incremental roaming area that you've talked about before?

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Erik Mickels, Trilogy International Partners Inc. - Senior VP & CFO [15]

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Correct.

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Bentley Cross, TD Securities Equity Research - Associate [16]

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Okay. And then maybe on the Bolivian side. One of your competitors talked about kind of hoping, I think, at this point, it's just hope, versus stability in the market. Maybe you guys can comment on just what you're seeing on the outlook there.

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Bradley Jay Horwitz, Trilogy International Partners Inc. - Co-Founder, President, CEO & Non-Independent Director [17]

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Yes, Bentley. This is Brad. The promotions that had started, I guess some time at last year, kind of ran its course and were pulled from the market. We were hopeful that, that was going to remain the case. But it was -- similar offerings, even more enhanced, was introduced by our competitors, which basically increased the amount of data that a customer was going to get with their purchase of a BOB 10 SIM card.

And that continues. We watched that for a while before we jumped into -- before we jumped back into that fray with a relatively similar competitive offering. I don't -- my instincts tell me that given that this is an election year and we're coming into an election period in Bolivia, that this thing that was started by Intel is probably going to remain in place for the next couple of months until the election -- until there's clarity on what's happening with the election.

So I think that what we're really looking at is really just the ARPU on this side and not getting too concerned or excited about the -- what would be normally a subscriber count as a lot of these things are just being used for the promotions and then not carrying on for it. So I expect that on the prepaid space, we're going to continue to see high levels of activations due to this, which basically gives these guys more than they had before, which has an overall impact on recharges and on breakage.

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Bentley Cross, TD Securities Equity Research - Associate [18]

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Okay. And then just lastly on the Bolivian side with your consultancy work now done, what sort of incremental costs will come out and have to from those guys, not including obviously the incremental leased tower -- tower lease costs?

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Bradley Jay Horwitz, Trilogy International Partners Inc. - Co-Founder, President, CEO & Non-Independent Director [19]

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Well, I think some of these -- you really got 2 things. We've got a couple of initiatives that are on the -- that would be on the revenue side and on the product side, which we'll be looking at for next year, but a lot of the savings that we're seeing on this is going to be on what we call sort of network optimization and grooming as we look at ways to optimize the network. And at some point, we're going to have to look at mitigating and really closing down the 2G network over the next couple of years. And that will -- that grooming of the network, being more efficient with lower-yielding sites and moving those to other places, will come into play with that.

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Operator [20]

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(Operator Instructions) And our next question is a follow-up from Jeff Fan of Scotiabank.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Director of Telecommunication Services & Canadian & U.S. Telecom and Cable Equity Research Analyst [21]

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Just sticking with Bolivia and to follow up on that lease question. Looking beyond this year, do you see signs that there would be some stabilization in either the service revenue or more importantly, I guess, the EBITDA or margins? Like what are things that we should be looking for to get that to improve as we look out the next 12, 18 months or 24 months?

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Bradley Jay Horwitz, Trilogy International Partners Inc. - Co-Founder, President, CEO & Non-Independent Director [22]

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Well, I think that what we're -- Jeff, this is Brad. I think what we're kind of got our arms around or eyes watching is really what the elections, what surprises, if any, are going to come out of the elections. What, if anything, is the current administration going to do to try and stimulate potentially an increased popular vote as it comes across. And I think once we get through that, that's when we're hoping to see a more consistent stabilization across the channels.

I think that we'll continue to see the -- Tigo is going to continue to focus on their triple-play offering. They will continue to invest in their fiber deployment as does Intel. We will be introducing our version of broadband on fixed towards the end of the year, largely in areas that are outside of where the current fiber deployments exist. And I think that as we look out, we hope to see stabilization in the core mobile business with gains in revenue, subsequently followed by EBITDA from the success of the fixed line business.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Director of Telecommunication Services & Canadian & U.S. Telecom and Cable Equity Research Analyst [23]

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Okay. And for Erik, sticking with Bolivia, as we go through the second half and also 2020, can you just review for us some of the ins and outs with respect to cash coming in and cash coming out related to your site sale, spectrum license renewal or any bank debt repayments?

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Erik Mickels, Trilogy International Partners Inc. - Senior VP & CFO [24]

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Sure, Jeff. Thanks. This is Erik. Given holdco structure, we take a multiyear look at cash management and how we move cash around the system. The tower sale transaction does generate or free up operating cash for dividends. We will reinvest the majority of those proceeds as required into the business, including the upcoming spectrum renewal, which you referenced. It will then free up some proceeds for general corporate purposes later this year.

As we look into 2020, it will continue to look at in both businesses, with the New Zealand business generating significant free cash looking forward and a variety of levers that we can look at to generally move cash around as needed and then supplementing with strategic initiatives when deemed appropriate.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Director of Telecommunication Services & Canadian & U.S. Telecom and Cable Equity Research Analyst [25]

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Okay. Do you mind quantifying some of those amounts that you mentioned a little bit for us?

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Erik Mickels, Trilogy International Partners Inc. - Senior VP & CFO [26]

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Sure. On the tower sale transaction, which is more of the immediate term item, under our asset sale provisions, once we have reinvested proceeds down to a $25 million floor, those amount could be used for general corporate purposes as needed.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Director of Telecommunication Services & Canadian & U.S. Telecom and Cable Equity Research Analyst [27]

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Okay. And the spectrum renewal for, I think, $25 million, how much confidence do you have that that's the amount that will be needed to -- for the renewal's licenses?

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Erik Mickels, Trilogy International Partners Inc. - Senior VP & CFO [28]

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As we sit here today, that continues to be our view of a reasonable estimate of what this will look like. And again, this is a renewal that has some precedents and benchmarks versus an auction-type scenario.

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Operator [29]

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This concludes our question-and-answer session. I would like to turn the conference back over to Brad Horwitz for any closing remarks.

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Bradley Jay Horwitz, Trilogy International Partners Inc. - Co-Founder, President, CEO & Non-Independent Director [30]

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Great. Thanks, Andrea. Well, thanks, everyone, for dialing in for the call today. As we mentioned, we've got some great momentum happening in New Zealand. Given it's our 10th anniversary there, that's the focus of a lot of promotion or work that we've been doing. Things are looking -- we expect that momentum to continue throughout the rest of the year. With Bolivia, we're feeling that things are stabilizing a bit as that goes forward and with the initiatives that we'll be coming out with in the fourth quarter will ideally start to grow the revenue stream again.

We'll be speaking to you again in November, and we look forward to updating you on our progress at that time. Thank you.

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Operator [31]

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