Millicom International Cellular S.A.

Hello everyone and welcome to our second quarter 2026 results call. This event is being recorded. Our speakers today will be our CEO Marcelo Benitez and Bart Vanhaeren, CFO of the company. The slides for today's presentations are available on our website along with the earnings release and our financial statements. Please turn to slide two for the Safe Harbor disclosure. We will be making forward-looking statements, which involve risks and uncertainties, which could have a material impact on our results. On slide 3, we define the non-IFRS metrics that we will be referencing throughout the presentation. You can find the reconciliation table in the back of our earnings release and on our website. With those disclaimers out of the way, let me now turn the call over to our CEO, Marcelo Benitez. Marcelo?

Thank you, Luca, and thank you everyone for joining our call today. Before I begin, I want to thank our teams across all markets. These results are a direct reflection of their commitment to our customers and their relentless focus on execution. They are the reason why we are delivering another quarter of strong performance. Last quarter, I spoke about the strength of our operating model and our ability to keep growing while integrating new businesses and absorbing the associated restructuring cost. This quarter reinforces that point. We are executing against the same priorities we've outlined throughout the year. Delivering a better customer service, increasing our pull-through or more-for-more strategy, simplifying the business, improving efficiency and turning that operational execution into stronger cash flow. Before reviewing the operational highlights, let me provide some context around our mobile and home subscriber performance this quarter. As part of COTEL integration, we deliberately reduced promotional activity to avoid overlapping commercial offers between the two brands. At the same time, we completed the harmonization of subscriber reporting standards across the organization, improving consistency and transparency. As a result, our reported prepaid and home subscriber figures in Colombia includes a normalization effect this quarter. This is simply an accounting and reporting alignment. It does not reflect any deterioration in our underlying business. With this work now substantially behind us, we expect subscriber trends to normalize and growth rates to return to more typical levels over the coming quarters. More importantly, the underlying commercial momentum remains very healthy. Our pre-to-post strategy continues to deliver excellent results. Excluding M&A, post-pay net ads increased by 167,000 sequentially, demonstrating the continued strength of our commercial execution. Home net ads were broadly stable versus the first quarter, reflecting the normalization I just described. Even so, home service revenue delivered another strong quarter. Thank you very much. Combined with our continued focus on efficiency, this translated into record adjusted EBITDA of 1 billion. The first time Millicom has surpassed that milestone in a single quarter. Adjusted EBITDA margin remained solid at 46.3%, only slightly below last year's level despite the restructuring cost associated with the Colombian integration. Most importantly, our operating performance translated into record equity free cash flow of 327 million. I believe this is one of the most important message for the quarter. These results are not only the contribution from our recent acquisitions, but also the financing cost associated with those transactions. Even after absorbing those costs, our acquisitions are already equity free cash flow accretive within the first year. That is exactly the outcome we expected when we made these investments, and it reflects both the quality of the assets and the discipline of our execution. Given our first half performance, the progress we are making with the Colombian integration and the visibility we now have for the balance of the year, we are raising our 2026 equity free cash flow guidance from at least 900 million to around 1.1 billion. At the same time, we're improving our year-end leverage target to below 2.5 times. These upgrades reflect our confidence in the cash generating capacity of our expanded portfolio and our ability to continue executing with discipline. Consistent with that confidence, our board has approved an additional interim dividend of $1.5 per share, payable in two equal installments of 75 cents per share in January and April of next year. With that, let me turn to our mobile business. The strength of our commercial strategy is clearly reflected in our mobile results. As we've discussed before, that strategy is built on two simple principles. The first is discipline management of our prepaid base through our more for more strategy where we're giving more value primarily through ledger data bundles while driving healthy and sustainable ARPU growth. The second is our targeted pre to post migration strategy. Our analytics allowed us to identify the customers who are ready to move to a postpaid plan, creating value both for the customer and for Millicom. For our customers, the benefit is significantly better experience. On average, they remain connected nearly twice as many days each month after migrating to postpaid. For us, it strengthens customer loyalty, improves unit economics, and increases lifetime value. This strategy continues to deliver strong results. Our postpaid customer base has grown by more than 31% over the past year, supported by our expanded perimeter and continued commercial execution. Approximately two-thirds of our new post-paid sales comes from prepaid customers' migration to higher-value plans, demonstrating our ability to monetize our customer base while creating long-term value. Following the Coltel acquisition, conversion rates temporarily softened in the first quarter as we aligned commercial practices across the combined business. That process is now largely complete, and conversion rates have returned to levels consistent with our historical performance. The important point is that we are now achieving those same conversion rates across a customer base that is roughly twice the size, giving us a much larger platform for future growth. As a result, strong post-pay momentum, together with healthy output trends, drove mobile service revenue growth to 6.9% organically year-over-year to $1.2 billion this quarter. We are very pleased with this performance and give us confidence as we move into the second half of the year. With that, let me turn to our home business. Turning to home, we're encouraged by the continued improving of the competitive environment across our markets. Competition is becoming more rational, with less emphasis on aggressive entry-level pricing and greater focus on network quality, higher broadband speeds, and differentiated content. We believe this is creating a healthier market structure and a more sustainable foundation for long-term growth. Despite the subscriber harmonization actions we discussed earlier, our home customer base continued to grow modestly during the quarter. At the same time, our fixed mobile convergence strategy continued to gain traction, with FMC penetration now approaching 40%. This not only extends customer loyalty and lifetime value, but also improves the overall quality of our subscriber base. These commercial trends translated into another solid quarter for the home business. Service revenue grew 3% organically to $513 million, supported by disciplined pricing, high-value broadband offers, continued growth in convergence, and strong customer response to our FIFA World Cup content. We believe we are now seeing the benefits of our strategy we've been executing over the past several quarters. A more rational competitive environment, continued ARPU expansion and increasing convergence and creating a strong and more sustainable home business. While there is still more work to do, this quarter represents another important step in the turnaround of the home segment and reinforces our confidence in the path ahead. Let us now discuss the B2B segment. Turning to B2B, the strong momentum we saw in the first quarter continued into the second. Digital services remained one of our fastest growing businesses, with revenue increasing 14% year-over-year to $120 million. This reflects the continued demand for cloud, cybersecurity, managed services and other high-value solutions that are becoming an increasingly important part of our B2B portfolio. We are also seeing encouraging performance across all customer segments. In the SME segment, our strategy continues to deliver consistent results. Simple commercial offers, disciplined channel execution, and greater conversions help drive revenue growth 8% year-over-year for this segment. In the corporate segment, we continue to benefit from a regional footprint and our ability to deliver integrated cross-border technology solutions for large multinational customers. This remains an attractive market where we can differentiate beyond basic connectivity. We are also seeing good opportunities in the government segment, where our network capabilities and experience managing large mission-critical projects position us well to support the digital transformation of public institutions. As a result, B2B service revenue grew 3.8% year-over-year to $401 million. Overall, we are pleased with the continued evolution of the business. Our strategy of expanding beyond connectivity and increasing the mix of higher-value digital services continues to strengthen the quality of our B2B revenue base. With that, let's move to our two most important markets beginning with Guatemala. Guatemala delivered another outstanding quarter and it continues to set the benchmark across our operations. Our prepaid to postpaid migration strategy remains a key driver of performance. During the quarter, 86% of our new customers' postpaid sales come from prepaid. That's an exceptional conversion rate and a clear demonstration that our commercial strategy continues to resonate with customers. As a result, our postpaid customer base grew almost 20% year over year, combined with healthy ARPU. This translated into mobile service revenue growth of 6.4% to 295 million. Overall, Guatemala delivered its strongest quarterly performance in the last 10 years. Congratulations to Carlos, our General Manager, and to the entire team for another exceptional quarter. Let me now turn on Colombia. This is our first full quarter reporting Contel, under full ownership following the completion of the transaction in April. I am pleased with the progress we are making. The underlying commercial performance remains strong. Postpaid customers grew 7.1% organically year over year, with nearly two-thirds of new postpaid sales coming from prepaid migrations. This continues to strengthen customer loyalty, improve ARPU, and increasing long-term value. In-home, our customer base grew 2.4% organically year-over-year. We are also making good progress with convergence. Fixed mobile penetration has reached 44%, reinforcing customer value while creating additional opportunities for cross-selling and long-term value creation. Overall, I am encouraged by the progress we are making. The integration remains on track, and we are beginning to see the benefits of applying the Millicom Playbook to a much larger business. Before I hand the call over to Bart, let me briefly update you on Chile. This was our first quarter of operations, and the team has made an excellent start. The vast majority of our planned restructuring has been completed during the second quarter, allowing management to shift its focus toward commercial execution and operational improvement. The early results are encouraging. We've already improved adjusted EBDA sustainability, while our EFCF margin increased by 10% on points year over year. We are also seeing growing confidence from our banking partners who have been refinancing upcoming maturities and in some cases extending additional credit. That said, we remain realistic. Chile continues to be a highly competitive market with aggressive pricing and elevated churn. But we've entered challenging markets before, and we know what disciplined execution can achieve. It's still early, but the progress we've made in just a few months reinforces our confidence that we can build a stronger, more profitable, and more sustainable business over time. With that, let me turn the call over to Bart.

Thank you, Marcelo. The second quarter of this year has truly been an exceptional quarter. Service revenue reached $2 billion, increasing 60.1% year on year on a reported basis. On an organic basis, service revenue increased a solid 5.4% year on year. This is more than twice the growth rate we reported in the second quarter of last year. As Marcelo discussed, this acceleration was supported by our pre- to post-paid migration strategy, disciplined pricing and offer management across our business lines. Adjusted EBITDA reached 1 billion for the quarter. On an organic basis, adjusted EBITDA increased 9.1% year-on-year, once again growing faster than organic service revenue and demonstrating the operating leverage built into our business. I want to highlight the 58% year-on-year reported EBITDA growth almost as fast as the reported revenue growth despite having acquired lower margin businesses and despite having incurred approximately 35 million restructuring charges in Q2. Our strong operating performance drove a record $327 million of equity-free cash flow, an increase of more than 50% year on year. This means our recent acquisitions are contributing positively to equity-free cash flow within their first year of ownership. Achieving that level of accretion so quickly underscores the strength of our M&A execution, the effectiveness of our integration efforts and our ability to convert acquired earnings into tangible cash flows. The second quarter, equity-free cash flow benefited from favorable expense timing and working capital movements. Therefore, please remain cautious forecasting the remainder of the year. With that, let's review our performance by country. Starting for the first time with Colombia, given its increased relevance in our portfolio, we are very pleased with the progress achieved so far. Organic service revenue increased 11% year-on-year to $816 million, as we began applying our commercial strategies across a significantly larger customer base. Importantly, all three business lines, mobile, home, and B2B, contributed to the growth. This broad-based performance is encouraging and demonstrates the commercial opportunity created by the combined operation. Turning to Guatemala, service revenue increased 5.9% year-on-year to 382 million. As Marcelo explained, growth was driven primarily by our prepaid to postpaid migration strategy, together with pricing and offer management. Overall, this was a record quarter for one of our strongest operations. In Panama, service revenue grew 3.1% year-over-year to 175 million, marking a return to top-line growth. As a reminder, first quarter performance was impacted by the temporary suspension of a price increase following regulatory intervention. With the price adjustment reinstated in the second quarter, the business returned to growth and we remained focused on sustaining this trend. In Paraguay, service revenue increased 3.4% year-on-year to 169 million. Growth was supported by a 10% expansion in our postpaid customer base, together with a low single-digit increase in mobile ARPU. This combination of customer growth and disciplined monetization supported another healthy quarter. Turning to Ecuador, service revenue was broadly flat year on year at $112 million, which means we reversed the service revenue erosion observed under prior ownership and stabilized the business. Note that the second quarter 2025 results are provided on a pro forma basis for comparison purposes only. In our other markets, comprising of Nicaragua, El Salvador, Costa Rica, Bolivia, and Uruguay, service revenue increased 2.8% year-on-year to $398 million. Let's now turn to the profitability of our operations. Starting again with Colombia, our cost-saving initiatives are running ahead of plan, and Coltel's profitability has already moved towards levels comparable with our legacy Tigo-UNE operations. adjusted EBITDA reached $336 million for the quarter, increasing 3.9% year-on-year. This result includes more than $30 million of severance payments executed during the quarter and roughly $100 million year-to-date. Despite these costs, the operation delivered an adjusted EBITDA margin of 39.4%. While there is still work to be completed, the results reinforce our confidence that the integration and efficiency program is progressing very well. Turning to Guatemala, adjusted EBITDA increased 6.3% year-on-year to 245 million. The adjusted EBITDA margin reached 55.6%, improving by almost 1 percentage point year-on-year. This expansion was driven mainly by operating leverage, together with the solid service revenue growth I just discussed. In Panama, adjusted EBITDA was broadly stable year-on-year at 92 million. The adjusted EBITDA margin was 50.7%. We remain focused on converting the renewed top-line growth into stronger operating leverage over time. Next, let's turn to Paraguay, which delivered another excellent quarter. Adjusted EBITDA increased almost 17% year-on-year to 100 million. The adjusted EBITDA margin expanded by 6.4 percentage points to a company record of 56.9%. This improvement is a testimony to the team's relentless focus on efficiency, particularly within direct costs while also benefiting from FX tailwinds. I would like to congratulate our General Manager in Paraguay, Roberto, supported by Flor, our new Paraguay CFO that moved from our Guatemalan operation, as well as the entire team for these excellent results. Turning to Ecuador, the Milicom Playbook continues to produce solid results. Adjusted EBITDA increased almost 40% year-on-year on a pro forma basis to 58 million. The adjusted EBITDA margin reached 48.9%, an improvement of 15.4 percentage points year-on-year. This represents substantial progress in a relatively short period and is a direct result of the continuous execution of our efficiency initiatives. That said, I want to manage expectation for the second half. We plan to launch a Tigo brand in Ecuador later this year. This will require incremental marketing and promotional investments and we therefore expect margin to contract a few percentage points during the remainder of 2026. Adjusted EBITDA in our other markets reached 194 million increasing 4.7% year-on-year, faster than the growth, again demonstrating our operational leverage. The adjusted EBITDA margin was 46.3%. Let's now review the equity-free cash flow bridge for the quarter. As discussed, adjusted EBITDA reached $1 billion for the quarter, increasing $369 million year-on-year. Cash capex total 274 million, up 72 million compared to prior year, and this increase mainly reflects continued investment in our recently acquired businesses, together with higher spending on leased mobile devices under Colombia's customer device leasing program. Spectrum payments were 41 million during the quarter, mainly related to Colombia. Working capital and other contributed 47 million representing an improvement of 17 million year-on-year benefiting from payment phasing and improved inventory management. Taxes paid increased 40 million year-on-year in line with the increased contribution from our acquired businesses. Finance chargers were 131 million, increasing 49 million year-on-year, mainly as a result of the additional financing associated with our acquisitions. Lease payments increased 79 million year-on-year to 161 million. As in the first quarter, the increase was primarily the result of the expansion in our operating perimeter and the impact of Lattie Tower's sale and leaseback transaction last year. Putting all of these factors together, equity-free cash flow increased by more than 50% year-on-year to a company record of 327 million. Let's now turn to our net debt and leverage progression. We began the quarter with net debt of 7.6 billion and leverage of 2.76 times. Equity-free cash flow of 327 million and EBITDA growth reduced leverage by approximately 0.11 times. This benefit was largely offset by shareholder distributions during the quarter. We paid 125 million in ordinary dividends, but also 210 million in extraordinary dividends related to last year's Lattie Tower transaction, for total dividend payments of 335 million. In addition, we made 221 million of M&A related payments, mainly associated with the acquisition of the remaining coal-tailed stake previously held by La Nation. That does not come with incremental consolidated EBITDA. Finally, we also have an increase of net debt that is predominantly related to the appreciation of local currency denominated debt. The key takeaway is that despite the increase in net debt to 8.1 billion, leverage actually declined modestly from 2.76 times to 2.73 times, better than I expected during our Q1 call, giving us a solid starting point from which to reduce leverage further during the remainder of the year. That brings me to our 2026 financial targets. When we last spoke, I committed to updating our 2026 guidance once we had greater visibility into the progress of our turnaround initiatives, integration costs, and the performance of the combined businesses. First, based on the strong operating and financial performance achieved during the first half of this year, we are raising our full-year equity-free cash flow guidance. We now expect 2026 equity-free cash flow of around 1.1 billion, compared with our previous target of at least 900 million. Second, our first-half performance strengthens our conviction in achieving our leverage objectives. We continue to expect leverage to improve now to below 2.5 times, a level at which we are comfortable operating the business. This updated guidance reflects the strength of the underlying business, continued progress on integration initiatives and greater visibility into the cash generating potential of the expanded portfolio. Our strong performance allowed the board to approve an incremental interim dividend of $1.50, payable in two equal installments in January and April 2027. At the same time, we remain focused on disciplined execution, including the delivery of our integration plans, investment in our networks, and prudent management of leverage. With that, let me now open the call for questions. Thank you.

We'll now begin our question and answer session. As a reminder, if you'd like to ask a question, please let us know by emailing us at investors at milicom.com and we'll add you to the queue. Our first question for the day comes from Andreas Jolson from D&B.

Good morning and good afternoon. I don't know where you are. A very strong result, I must say. So congratulations. I have three questions. First of all, what can you say about phasing of cash flow for the remainder of the year? I think after or in connection to the Q1 conference call, you said that cash flow is mainly generated in Q1, Q4. Now we have a very strong...

Thank you very much.

Do you agree that we could see that as a sort of leading indicator for further continuous service revenue growth going forward? Or is there something extraordinary in the ARPA numbers for Q2 that we should be aware of? and thirdly, you managed to keep the improved profitability in the, so to say, old millicom countries. What is the main challenge you see to continue this sustainable improved profitability? Is there a risk that there is a sort of cross-discipline fatigue in the organization as you have had a strong cost to participate for quite some time now? How should we see that? Thanks a lot.

So let me take two and three, and Bart, you take the first one. Hello, Andreas, good to see you. I mean, we are here in Tegucigalpa, Honduras, visiting the operations and having this call at the same time. So... On the ARPU topic, let me just go back over the strategy. What was the strategy from the beginning? First, we invested in strengthening our networks with a very granular approach, looking side by side, sector by sector, node by node, and understanding where the untapped demand is. So this untapped demand starts immobile with prepaid. Our prepaid customers are just connected 15 days per month and nobody wants to be connected only 15 days per month. So what we are doing is we are extending the days connected, starting in prepaid with more allowances and more days connected with a slightly higher ticket and through a very, very well designed and very mature We are selecting and pre-approving prepaid customers that are ready to move to postpaid. In combination, this is increasing the total output of the base. In home, The challenge is a little bit different, and the results does have a one-off. So the challenge in home has to do with stabilizing churn, again, with a very granular investment on the network, and also has to do with calibrating the R-point, So the new offers are coming with a high ARPU. And as I mentioned in the call, we do see good response from the industry from that perspective. Promotional heat and activities are coming a little bit down. So that in combination with low churn. is creating a new inflection point towards growth. The one-off we have in home has to do with the World Cup rights. We did have in almost all our countries exclusivity on all the games for the World Cup, and it was a total success. The revenues coming from the World Cup has to do with selling packages to watch the games, more data packages, more pop-ups, more sales in home, and advertising revenues. So you will see a 3% growth Thank you very much. No, okay, fatigue. Well, I won't say we are in a very healthy cultural momentum. So we did incorporate the efficiency model as a business as usual. So we don't see any fatigue at this time. It's more now an obsession to fight inertia. So from the countries, we started the purchase order review. As you may understand, at the beginning, there was a lot of pushback from the center, but now that pushback is gone because basically the operations and the countries, they are already adopting these new criteria on where to put each dollar in OPEX and CAPEX. So it's part of the business as usual and we do see the results. So also it is clear that that is the model we want to follow. Incremental efficiencies is something that we are looking at using AI tools and automatizing mainly the contacts from the customers and internal operational heavy transactional operations.

Then on the phasing, Andreas, I think the equity-free cash flow is not made in Q4-Q1, it's more the business is made in Q4-Q1 in the sense that the entry point customer is the one that will generate 12 months of revenue. So Q4, you win them for the entry point. Q1, you keep them. And then the rest of the year, you know, if a customer won in Q4, will add much less to equity-free cash flow than one gained in January. But, you know, we do have phasing in the rest of the year, I think. We have on spectrum, we have on interest charges, we have a little bit of working capital. So we have some phasing in the first half of the year. Our Q2 is an absolute record equity-free cash flow for the company. So that's why I wanted to be a bit cautious. Don't just do Q2 with another two quarters in Q3 and Q4. I think it will look a little bit Our next question comes from Vani Kanamuri from HSBC.

Hi, thanks, Marcelo. Thanks, Bart. So the first question is on how you see the competition or disruption from satellite players in the light of SpaceX IPO. Do you see them as complementary? Is there a potential for partnership with them? The second one is on the integration costs. How do you see the phasing of integration costs over the next couple of quarters? And do you stick with your guidance from last quarter that the full year guidance for Colombia EBITDA-major would be similar to 2025? Thank you.

Thank you, Fani. Good to see you. We'll take the first one and Bart's going to take the second. SpaceX in... Starlink Solutions in our countries, if you analyze it from the mobile perspective, the benefits and experience is still very limited. Very poor indoor coverage and very low throughput. As you may understand, in our countries we almost have deployed 4G at 100% of our coverage, and in parallel we are launching new coverage and investing in 5G. So if you compare the experience of SpaceX satellite to the phone, compared with 4G and 5G, I think there is a long way for SpaceX to improve their technology. When we go to the fixed business, it is a very good solution for remote areas where we don't have coverage. So there we do see SpaceX gaining a small piece of customers. For example, in Paraguay, there is a lot of cattle. These are very far and distant places. So SpaceX is a great solution for them. But for urban areas, it is very difficult or it is a very, very poor experience compared to fiber steel. So in a nutshell, we do see as a complement product for our customers, but we don't see as a threat.

Yep. On the restructuring charges, Fanny, Overall for the group, it's not that we want to lock ourselves in. You see how fast we are restructuring. Every week we find new opportunities in the operation and it shows in the margin expansion. So what I have visibility to today, I would say, that we have roughly restructuring chargers for the full year in between $160, $170 million. We already have booked 60% of that roughly in H1. But on paid basis, we probably already have paid 50-50. So 50 in H1 and then another 50% of that. So roughly $80 million in H1 and another $80 million in H2, let's say.

Okay, and then on Colombia full year margin, do we still expect to be in line with FY25 as you had indicated in the previous conference call?

Yeah, roughly.

Okay, thank you. Thanks, everyone.

Thank you, Pani.

Thank you. Our next question comes from Gustavo Farias with UES. Gustavo?

Thanks for taking the time to answer questions.

The numbers came a little bit below of what we expected, so if you could comment on the outlook for CAPEX ahead, if there's any timing-related things to consider, and specifically about the Columbia CAPEX, if this has already reached its run rate. The second question is related to Argentina. We've had new remedies of the Telefónica Argentina and Telefónica Deal. Regulator requires a third player in the mobile market. Just wondering, does it change anything on your current strategy or there's nothing to be said here? Thank you.

Hello, Gustavo. I will take the first one, Bart, and you take the second one. With relating to CapEx, yes, Gustavo, there is a facing. We are investing in Colombia at a very... with a very aggressive approach. We plan to have full 5G coverage and also additional 1000 sites to be deployed in the next 12, 18 months. So there is gonna be an acceleration there. But it's going to be more or less on the rate where we are very comfortable. Today, you will see more or less 11%, I mean, including the new perimeter of capex over revenues, and we expect to be full year around 12%. So that's going to be the effect on the second half, and mainly because of Colombia.

Maybe to just add a little bit in terms of numbers, I think on a cash basis, so cash capex, we are probably 50% of the year. And on a book basis is indeed what Marcelo said, we are 40% of the year, and then so wrapping up a little bit in the year to go. To your question on Argentina, I think in previous calls we kind of mentioned Argentina is not on the radar for us. Same for Brazil or Mexico. So we don't have that on the radar.

All right, very clear. Thank you.

Thank you, Gustavo.

Our next question comes from Gabriel Vaz de Lima from Morgan Stanley.

Hey, everyone. Thanks for the opportunity of asking questions. Congratulations on the results. And just one question on my end. Just wanted to get your thoughts on how competition has been in Chile. We've seen some movements on front book prices in the last few weeks. So just wanted to get your thoughts on how you're seeing the market. Sure.

Thank you, Gabriel. Let me step back on Chile. First, we... We saw this as an opportunity to apply our playbook into a telephonic operation. That playbook starts with efficiencies. So that first phase is doing very well. The execution is going as planned. So just to give you an example, If you compare the last quarter, the EFCF was only 2% over revenues, and this quarter we are talking about 13% over revenues. So the first charpenter of our playbook is producing immediate results. When it has to do with competition, we recognize that it's a very tough market. It's a very fragmented market, very low ARPUs, and strong promotional activities from all the players. Nevertheless, we did saw a movement in pricing two weeks ago, as you mentioned, Gabriel, and we see this as a very positive sign. from the industry that, of course, we look at it with good eyes because it is absolutely key to make the investments in the long-term sustainable for all operators. But our primary focus is what is under our control. That is to end the phase one that has to do with efficiency, focus, and simplification of how we operate in Chile.

Thank you very much.

Our next question comes from Lidea Mitsubata from Tepi Morgan.

Hi, everyone. Sorry, I was not hearing at first. Good morning. Thank you for the opportunity to ask questions. First, I would like to elaborate a little bit on the margin outlook for Colombia. Could you provide an update on the outlook for 2026 and also for the long term? and the second one is regarding Paraguay. You mentioned in your release phasing effects impacting margins. Can you elaborate a little bit what was that, what was the driver and what we can expect on this operation? Thank you.

Yeah, so on the Colombia margin, you know, Q2 is 39.4%. I think we have a very good and solid second quarter. We have year-on-year revenue growth. Organically, 11%. So that drives operational efficiencies. We have some tailwinds from currency. So I think all to say we want to still be a little bit conservative for the year to go. We also have some rebranding efforts and things like this. So there will be a little bit of contraction from the additional cost. But at the same time, we have some savings from Thank you very much.

Second question, where are we? It's on the phasing effect.

Yeah, phasing. Paraguay, I think, so again, we are growing nicely. It's a bit the same story. We're growing nicely. The team is putting a ton of efforts on efficiencies, but the underlying element is nice growth, comes with operational leverage, hence margin expansion and good equity free cash flow. If you look at the year to go, the risk is always currency. So Paraguay, Colombia, Bolivia, those are the three countries where I always want to be a little bit conservative as currencies affect our equity-free cash flow generation. Now, we did localize a lot of our P&L, so meaning we transferred everything to local currencies. We're hedging debts by carrying local currency debt and accepting a little bit of a higher interest rate. So we did all the work there. over the last couple of years. But still, you know, strong currency will get more equity for cash flow.

May I make just one follow-up question? Since we are talking about free cash flow, you're generating a ton of cash. So do you have any visibility on what to do in 2027 with the amount of cash that you're generating? Any updates on your capital allocation strategy? If you have room to increase dividends eventually, what is the outlook here?

Yeah, so we just announced additional dividends, a dollar and a half payable in two equal installments in January and April. And if you think about it, we raised our guidance of equity-free cash flow to 1.1. Historically, I always said, listen, I like to distribute two-thirds. of our equity-free cash flow. Another way to see that is adding 150% coverage of your dividends. And so, so far, the board has followed that recommendation and the AGM as well. So now that we are getting to 1.1 billion, two-thirds, 750 million, 169 million shares, you get to the $4.5 that we will now distribute from AGM to AGM. On the back of Q4, we will issue new guidance for 2027. And, you know, so it will be the privilege of the board to recommend to the AGM a dividend policy for 2027. If you look at me, Bart's recommendation, that will be, again, two-thirds of the equity-free cash flow that we will guide on the back of Q4 results.

Perfect. Thank you very much for the answer. It's very clear.

Thank you. Next question comes from Marcelo Santos from JP Morgan. Marcelo?

Hi, actually, I'm together with Livia here, but what I would just double down a bit is in the margin part of Paraguay, you mentioned phasing effects on the margin when you discussed the P&L, at least that's what I understood from reading the release. Was there anything that was unusual about the margin in Paraguay that should revert in the coming quarters, or is that Paraguay margin sustainable? That's what we wanted to know about Paraguay.

I think what is really outstanding is the currency appreciation, Marcelo, because we do have, even though we did lots of efforts to localize all the costs, we do have heavy soccer rights issues. Local Soccer Rights and also Content Rights that a lot of them are still in dollars. So the more the Guarani appreciates, the lower the cost is in dollars. So that's more or less what's having an inorganic impact. in Q2. Of course, we are not experts, even if we tried to predict currency movements in the future, but it is at an all-time low, the dollar, compared to the Guarani.

Okay, pretty clear. Thank you very much.

Thank you Marcelo. This was our last question for today and concludes our question and answer session.

Thank you very much everyone.

Thank you.