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The Western Union (NYSE:WU)

Q3 2012 Earnings Call

October 30, 2012 4:30 pm ET

Executives

Michael A. Salop - Senior Vice President of Investor Relations

Hikmet Ersek - Chief Executive Officer, President and Director

Scott T. Scheirman - Chief Financial Officer & Global Operations and Executive Vice President

Analysts

Darrin D. Peller - Barclays Capital, Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

Timothy W. Willi - Wells Fargo Securities, LLC, Research Division

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Kartik Mehta - Northcoast Research

Operator

Good day, and welcome to the Western Union Third Quarter 2012 Earnings Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mike Salop, Senior Vice President, Investor Relations. Please go ahead.

Michael A. Salop

Thank you, Valerie, and good morning, everyone. We know many of you on the East Coast are joining us from home today, and we hope everyone is safe. We considered delaying today's release, but given the nature of the information being provided, we felt it was best to move ahead as planned.

On today's call, Hikmet Ersek, Western Union's President and Chief Executive Officer; and Scott Scheirman, EVP, Chief Financial Officer and Global Operations, will discuss 2012 third quarter results. Following their remarks, we will open the call for questions.

The slides that accompany this call and webcast can be found at westernunion.com under the Investor Relations tab and will remain available after the call. Additional operational statistics have been provided in supplemental tables with our press release.

Today's call is being recorded and our comments include forward-looking statements. Please refer to the cautionary language in the earnings release and in Western Union's filings with the Securities and Exchange Commission, including the 2011 Form 10-K, for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements.

During the call, we will discuss some items that do not conform to Generally Accepted Accounting Principles. We've reconciled those items to the most comparable GAAP measures on our website, westernunion.com, under the Investor Relations section.

All statements made by Western Union officers on this call are the property of The Western Union Company and subject to copyright protection. Other than the replay noted in our press release, Western Union has not authorized and disclaims responsibility for any recording, replay or distribution of any transcription of this call.

I would now like to turn the call over to Hikmet Ersek.

Hikmet Ersek

Thank you, Mike, and welcome, everyone. First, I want to say that our thoughts are with those who have been impacted by Tropical Storm Sandy. As we always do in times of need, we are supporting our customers, colleagues and partners in parts of the Caribbean and the East Coast of the U.S. where the storm has caused damage.

As is our tradition, when disaster strikes, we will be working with our agents and partners to provide support to people and NGOs in the impacted areas.

Turning back to the third quarter results. Our revenues increased 1% in the quarter. Similar to what many other global companies have reported recently, we have felt the effect of softer global economic conditions.

Our retail money transfer business was also impacted by compliance-related changes in a number of markets and competitive pricing pressures in certain corridors.

In constant currency terms, our Western Union branded C2C revenues increased slightly in the quarter, but trends slowed from the first half of the year.

We are implementing a series of action plans to spur long-term growth in the current retail money transfer environment, which I will discuss with you in a few minutes.

Western Union Business Solutions, pro forma revenues were flat in constant currency terms, due primarily to soft global trade conditions and very challenging comparison with the third quarter of last year.

As you may recall, we had an extraordinarily strong third quarter with Business Solutions in 2011. We are continuing to execute our strategies for future growth in business-to-business, adding new customers and expanding to new countries.

Our Business Solutions customers count increased 5% from prior year, and we are expanding our presence to 3 new countries, bringing the total to 29. We are also continuing to make great progress in the fast growing electronic channels portion of consumer money transfer. Our digital business delivered another strong quarter of transaction and revenue growth, while at the same time, adding new talent and developing additional product capabilities.

In total, our electronic channels revenue, which includes digital and account-based money transfer through banks, increased 25% in the quarter. We continue to increase our points of presence as well. One example is in Brazil, where Banco do Brasil customers can now receive Western Union Money Transfers at 44,000 ATM machines across the country.

In stored value, we further expanded our U.S. distribution, and we just announced we are teaming with ICICI Bank and MasterCard to launch a unique prepaid card potentially to serve millions of customers in India.

Turning back to consumer money transfer. As we have progressed through the year, and especially the last few months, the market environment in retail money transfer has become more difficult, and we are facing market share challenges in certain key corridors.

While we believe we have gained or largely maintained market share the last several years, a combination of factors appear to be driving challenges this year, especially in recent months. These factors include the impact of compliance changes, particularly those related to our Southwest Border agreement; the level of our prices related to competitors in certain corridors; and higher market growth in the higher principal electronic segment. Western Union has relatively smaller presence here, although we are growing very fast and have a big opportunity.

We have made and will continue to make compliance-related enhancements and changes around the world to meet new and evolving requirements. These actions have had a negative impact on our revenues in some markets and have added expenses to our cost structure. However, we believe it is our responsibility to maintain our industry leadership by implementing rigorous compliance practices to protect our customers and agents around the world.

The biggest impact from compliance-related changes has been in Mexico and Latin America. In Mexico, our Western Union brand is performing largely in line with the market. However, our overall revenue decreased over 20% in the quarter, due to declines in our Vigo and Orlandi Valuta brands.

We ended relationships with over 7,000 Vigo agent locations that could not meet our new compliance requirements. We also experienced operational challenges from related system implementations for our Vigo brand in Latin America, as we move this onto our Western Union platform.

We are executing action plans to address our challenges in this region. We are actively signing new agents for Mexico, including most recently, Banco Ahorro Famsa and implementing consumer and agent marketing initiatives to recapture customers.

We are likely to see similar revenue trends for Mexico over the next few quarters, but we believe we will emerge in back half of 2013 with a stronger network and better consumer proposition, allowing us to drive growth again in this important market.

Aside from compliance-related issues, we are also seeing market share challenges this year from competitive pressures in other parts of the world. We are implementing a series of strategic actions to quickly adjust to this environment and regain market share momentum. These plans are focused on: First, enhancing our value proposition in key corridors; second, accelerating investment in the fast-growing digital channel business; and third, taking steps to further optimize our cost structure.

Enhancing our value proposition will include steps to improve the consumer experience, as well accelerating pricing investment in key corridors. Our pricing investments have been relatively small the last few years, and we are now seeing some impact from differentials in certain large corridors, especially in this economic environment.

While our brand remains strong and stands for trust, reliability, speed and convenience, we need to enhance overall consumer value proposition in certain corridors. For competitive reasons, we will not disclose specific plans. But beginning in the fourth quarter, we will accelerate our pricing actions in key corridors.

In 2013, we will also address other areas of the consumer value proposition as needed. While not finalized at this point, we expect our 2013 pricing investment may be in the mid-single-digit range as a percentage of revenues, compared to 1% in both 2011 and 2012.

By implementing these immediate actions, our goal is to drive market share growth, gain customers and optimize long-term revenue and profitability. Pricing investments typically result in immediate transaction growth and a decline in revenues in the first 12 months, but this is offset by increased customers and usage, typically leading to revenue growth after the first year.

We know from experience that these actions have worked in similar situations, such as with our very successful U.S. domestic money transfer repositioning in late 2009. We have the results from over 100 other corridor pricing actions over the last 5 years to guide our expectations.

Additionally, we will also be improving our consumer value proposition. This will include a more attractive and easier to use point-of-sale process in key send locations, more tailored communication with each consumer and better overall customer service and support.

To remain a leader in global consumer money transfer, we must adapt quickly to the evolving environment. We have seen a significant decline in our cross-border principal movement in just the past few months. That is why we are implementing these actions for our business immediately.

In addition, there is opportunity for us to expand our presence in the digital and electronic channels. While the retail or cash-to-cash remittance market is growing, the digital and account-based segments are growing faster, and we are committed to increase our participation in these areas.

We are obviously very well-positioned and have been investing for the future with westernunion.com online money transfer. Even in difficult market conditions, this digital channel is executing against the plans implemented last year and remains on target to become a $500 million channel by 2015.

One of the key capabilities in the higher growth segment of the market is to be able to send online or deliver it into a bank account, and we are making progress in establishing these connections. We also continue to expand the world's largest financial service distribution network by integrating banks' online banking platforms for account-based money transfer.

We have now signed nearly 110 banks for online banking to connect to the Western Union network, including recently one of the worlds largest, Industrial and Commercial Bank of China.

But having the largest network and expanding, it is not enough. It is our goal to build the best network with the best agents, the best products and the best consumer experience in the industry. Our strategy going forward continues to be to execute on our vision to be the premier financial service provider for underserved consumers and businesses globally.

Our plans for the remainder of the year and 2013 are intended to drive us closer to this vision in an increasingly competitive market. To help -- to fund the investment required for the strategic growth actions and to maintain future profitability, we will implement the first phase of new productivity and cost savings initiatives, which have been a focus area under my leadership. We will also implement changes to our management structure to better support our multi-product, multi-channel focus and improve customer focused decisions.

To better coordinate and manage all of our businesses as an integrated whole, I will be more directly involved in driving performance from our business units. To this end, we will no longer have a President of Global Consumer Financial Services, and Stewart Stockdale has left the company. We thank Stewart for his contribution over the past 4.5 years and wish him well in his future endeavors.

All global business leaders will now report directly to me. Change is always challenging, but I have a long history being in the market, and I believe it is time to adjust our structure to tie all of our channels and products in a seamless fashion moving forward.

Turning back to 2012 results, we have had to adjust our full year outlook to reflect softer revenue trends in the second half of the year, as well as anticipated fourth quarter expenses for the cost savings initiatives.

Our focus in 2013 will be on increasing customers and market share in consumer money transfer and continuing to execute our strategies in business-to-business, digital and stored value, while taking the steps to improve productivity and optimize operating expenses.

We remain very confident in the long-term opportunities for the business. We are a leader in a growing market. We have a strong global brand, a large and growing agent network, and a global organization with best payment capabilities and a local market expertise.

Our cash flows generation remains strong, and we are pleased to announce that our Board of Directors approved a 25% increase in our dividend and $0.50 per share annually, and a new $550 million share repurchase authorization, which gives us the opportunity to repurchase up to approximately $750 million of our shares through the end of 2013.

Although the strategic actions we are implementing now will likely negatively affect short-term results in 2013, we believe they are the right steps to position us for long-term revenue and profitability growth in the current environment, and we are managing this business for the long term. We believe our strategic actions will result in a return to revenue and profit growth beginning in 2014.

In summary, in this challenging economic environment over the past few months, we have seen a mix of positive and negative trends in our business. On the positive side, we have been successful in executing our strategy for providing our customers multiple products in the retail, online and mobile channels. However, we have also recently seen challenges in our core retail money transfer business in certain key markets.

We have recognized these issues and are in the process of taking immediate actions to address them. Our vision to be the premier financial service provider for underserved consumers and businesses is correct. Our strategy to diversify from a single product, single channel business is correct. We remain optimistic about the future opportunities in our core retail money transfer business, and we believe that our current plans are the right measures to keep Western Union as the industry leader for the long term.

Now to give you a more detailed review of the quarter and our updated outlook, I would like to turn the call over to Scott.

Scott T. Scheirman

Thank you, Hikmet. Overall, for the quarter, we reported consolidated revenue growth of 1% on a reported basis and 3% in constant currency. Consolidated pro forma revenue decreased 1% constant currency, including Travelex Global Business Payments in the prior year period.

Constant currency revenue was negatively impacted by approximately 2 percentage points due to declines in the Vigo and Orlandi Valuta brands, which resulted from Southwest Border compliance-related changes.

In the consumer-to-consumer segment, reported revenue decreased 4% or 1% constant currency, while transactions were flat compared with the prior year period. Excluding the Vigo and Orlandi Valuta brands, Western Union branded consumer-to-consumer constant currency revenue grew 1% on transaction growth of 3%. We are generally seeing softer economic conditions in much of the world, including continued weakness in Southern Europe and some slowing in the U.S.

C2C cross-border principal declined 7% in the quarter or 4% on a constant currency basis. C2C principal per transaction declined 6% year-over-year and 3% on a constant currency basis.

Turning to the regions. C2C revenue in the Europe and CIS region, which represented 22% of consolidated revenues, decreased 9% year-over-year. This decline included a negative 5% impact from currency translation. Transactions in the region declined 3%.

Germany continued to hold up well with strong growth in the quarter. And many other parts of Europe have slowed and Southern Europe remained soft. Russia is down, but tracking to our outlook, as we implement our turnaround strategies and build our retail network in that market.

Turning to North America. Revenue declined 8% from the prior year, while transactions were down 5%. The region represented 20% of total company revenue.

U.S. outbound revenue declined, while domestic money transfer revenue remained flat on transaction growth of 7% in the quarter. Domestic $5 for $50 program continue to have strong growth. However, there were slowing in the higher principal bands in the U.S. Mexico revenue declined 22% and transactions decreased 18% in the quarter. As we told you in February, we anticipated losing revenue and market share in Mexico due to compliance-related changes throughout the year.

In the third quarter, we implemented a series of new system requirements that impacted our Vigo and Orlandi Valuta agent networks. As many of our agents could not meet the new requirements to increase our real time transaction visibility, we had to end those relationships, which resulted in a reduction of approximately 7,000 locations or 40% of our network in Mexico.

New requirements and system conversions for Vigo also caused disruption to our business in several Latin American countries. We expect the Mexico trends to be challenging over the next 3 to 4 quarters, while we work to increase our agent base and implement other consumer and agent-focused actions.

Turning to the Middle East and Africa region. Revenue in the quarter was flat on a reported basis, including a negative 3% impact from currency, while transactions grew 4%. The Asia Pacific region grew 1%, including a negative 1% impact from currency translation, with transaction growth of 2%. China revenue increased slightly, excluding the impact of currency, following declines in the first half of the year. The Latin America and Caribbean region delivered revenue trends similar to the second quarter, with revenue growth of 4%, including a negative 3% impact from currency. Transactions declined 2% in the quarter and were negatively impacted by the compliance-related changes we made to our Vigo business, while revenue benefited from geographic and product mix.

Westernunion.com C2C revenue increased 22%, including a 4% negative impact from currency translation and remains on track to our targets. Westernunion.com transactions grew a very strong 40%, aided by some of our promotional activity to acquire new customers. As a reminder, westernunion.com results are not included in the growth rates of the other 5 regions, although they are included when we discuss specific country trends.

Total electronic channel revenue, which includes westernunion.com, as well as account-based money transfer in mobile increased 25% in the quarter. Electronic channels now represent 4% of total company revenue, up from 3% of revenue in the year ago quarter.

In addition to the westernunion.com growth, revenue from account-based money transfer through banks increased 32%. We now have nearly 110 banks signed for account-based money transfer, with about 1/2 of the banks already launched. We also have 37 mobile network contracts, with 15 actively operating.

Prepaid revenue increased 9% in the quarter. In total, prepaid, including third-party top-up, represented approximately 1% of company revenue. Our prepaid cards were available at approximately 31,000 retail locations globally at the end of the quarter, including approximately 1,000 locations outside of the U.S.

Turning back to the total C2C business. The spread between transaction and revenue growth in the quarter was 1 percentage point, excluding the impact of currency, which negatively impacted the spread by 3 points. In C2C, the impact of net price decreases was approximately 2% in the third quarter, while mix was favorable by 1%.

On a year-to-date basis, the pricing impact remains at approximately 1% of company revenue. Moving to the consumer-to-business segment. Revenue decreased 5% in the quarter, including a negative 3% from currency translation. The U.S. walk-in business declined, and the electronic business continues to be affected by the pass-through of some of the debit fee savings related to Durbin. The South American business continues to have steady growth.

Business Solutions reported revenue of $95 million in the quarter, which compared to $34 million a year ago. On a pro forma basis, including Travelex results in the prior year, Business Solutions' constant currency revenue was flat, although it did increase from the second quarter. The business was impacted by slowing global trade and high growth comparisons with the third quarter of last year, when Western Union Business Solutions revenue increased 31% or 22% in constant currency terms.

Our customer count is increasing nicely, up 5% from a year ago, and we continue to expand geographically. Transactions are growing in low double-digits, but principal per transaction is down in part due to de-accelerating trade growth.

We have updated our full year revenue outlook to low to mid-single digit growth for this business, which reflects the economic slowdown in key markets. The Travelex integration is on track and remains planned for completion in 2013.

Turning to consolidated margins. The third quarter consolidated GAAP operating margin was 25.7% in the current and prior year period. Consolidated operating margin was 26.4%, excluding $10 million of Travelex integration expenses, compared to 26.7%, excluding $14 million of restructuring expenses in the prior year period. EBITDA margin, excluding integration expense, was 30.7%, which increased from 30.0% in the third quarter of last year, excluding restructuring expenses.

Compared to prior year, the consolidated margin benefited from currency, lower compensation costs and Durbin, but these benefits were offset by Business Solutions amortization, incremental compliance cost related to Southwest Border and Dodd-Frank, and investments in IT and westernunion.com.

The tax rate in the quarter was 16.8%, which compares to 23.6% in the third quarter of last year. As a reminder, the decrease in our tax rate is primarily due to the resolution of the U.S. tax treatment of our international operation, as we noted in the announcement of our agreement with the U.S. Internal Revenue Service last December. Reported earnings per share in the quarter were $0.45, compared to $0.38 in the prior year.

EPS was $0.46, excluding Travelex integration expenses, which compared to $0.40, excluding restructuring charges in the prior year. Earnings per share increased 15%, excluding integration expense in the current quarter and restructuring expense in the prior year period.

The C2C operating segment margin improved to 29.4%, compared to 29.0% in the same period last year. Margin benefited primarily from currency and lower compensation costs, with partial offsets from IT and other investments and higher compliance costs.

The consumer-to-business operating margin increased to 25.3%, compared to 21.0% in the prior year period. Margin improvement was primarily driven by lower debit fees related to Durbin.

Business Solutions reported an operating loss of $7 million for the quarter, compared to a loss of $2 million in the year ago period. Next year's operating loss does not include Travelex Global Business Payments.

The current quarter $7 million loss includes $17 million of depreciation and amortization and $10 million of Travelex integration expense. There's approximately $1 million that is included in both amortization and integration expense. Depreciation and amortization in last year's third quarter was $5 million. Business Solutions EBITDA margin of 20%, excluding integration expenses, improved from 8% in the first quarter and 15% in the second quarter.

Turning to our cash flow and balance sheet. We continue to generate strong cash flow. Year-to-date cash flow from operations was $860 million, which includes the impact of approximately $90 million of net tax payments relating to the agreement with the IRS. There were approximately $100 million in tax payments related to this agreement that remain to be paid, and we expect to pay those in 2013.

Capital expenditures in the quarter were $62 million or 4% of revenue. Depreciation and amortization expense was $61 million in the quarter. At the end of the third quarter, the company had debt of $3.4 billion and cash of $1.4 billion. Approximately 1/2 of the cash was in the United States.

During the third quarter, we repurchased approximately 6 million shares, totaling $112 million at an average price of $17.51. In addition, we declared $60 million in dividends.

Year-to-date, we've returned over $600 million through buybacks and dividends, while repurchases this year represent approximately 4% of the total shares outstanding. As of September 30, our shares outstanding were 599 million shares, and we had $194 million remaining under our existing repurchase authorization, which expires at the end of 2012.

Today, we announced a 25% increase of our dividend to $0.50 per share annually and an additional $550 million repurchase authorization, which expires at the end of 2013. We would anticipate continuing to increase the dividend in future years consistent with business performance.

Turning to the outlook for 2012. We have updated our projections to reflect lower second half revenue trends and the impact of expenses related to the productivity and cost savings initiatives. We are implementing some new cost savings initiatives in the fourth quarter to help fund growth investments and enhance long-term profitability. These initiatives contemplate a reduction of the company's overall headcount and the migration and consolidation of positions from various facilities, primarily within the United States and Europe, to regional operating centers and third-party providers, among other actions.

We have currently identified actions that should generate $30 million of annual savings by 2014. To realize these savings, we will incur pretax expenses of approximately $30 million in fourth quarter this year, which is now reflected in our margin and EPS outlook. We anticipate identifying and implementing additional cost savings initiatives throughout 2013.

As a result of these items, the updated 2012 outlook for revenue and margin is now 4% to 5% constant currency revenue growth, including a 4% benefit from the full year inclusion of Travelex. GAAP revenue growth 2% lower than constant currency. GAAP margins of approximately 23.5%. Operating margins, excluding TGBP integration expense of approximately 24.5%, EBITDA margins, excluding TGBP integration expense, of approximately 29%.

All the margin metrics are down 1 percentage point from the previous outlook, with 1/2 of the decline due to the $30 million of expenses related to the cost savings initiatives and the remainder primarily due to lower revenue projections.

For the full year, we now expect a tax rate between 14% and 15%, which is down from our previous outlook, partially due to the expenses related to the cost savings initiatives, reducing U.S.-based income in the fourth quarter. We currently would expect the 2013 effective tax rate to be somewhat higher due to some nonrecurring benefits in 2012.

The updated earnings per share outlook for 2012 is: GAAP EPS in a range of $1.60 to $1.63, compared to $1.68 to $1.72 in the previous outlook; and EPS, excluding Travelex integration expenses, of $1.65 to $1.68, which compares to $1.73 to $1.77 previously. EPS was negatively impacted by $0.04 from our prior outlook due to the $30 million of expenses related to the new cost savings initiatives.

Our outlook for cash flow from operations is now expected to be approximately $1.1 billion or approximately $1.2 billion, excluding payments of $90 million that we've already been made relating to the IRS agreement. We will provide our outlook for 2013 when we announce our fourth quarter results in February.

As Hikmet mentioned, while we are still evaluating several potential pricing actions, we currently expect consumer money transfer pricing investments as a percentage of revenue to be in the mid-single-digit range in 2013. Pricing investments typically result in revenue declines in the affected corridors in the initial year, but they drive transaction growth and customer acquisition, leading to subsequent revenue growth in the future.

Based on current economic conditions and the expected accelerated pricing investments, we currently anticipate slight revenue declines in 2013 in constant currency terms. As part of our strategic action plans, we also anticipate significantly increasing investments in 2013 across IT and other areas to support digital, stored value, other new product development and innovation and the customer experience.

Combining revenue declines, cost associated with higher transactions and the incremental investments, we believe GAAP operating income in 2013 could decline 10% to 15% from 2012 levels, if all plans are implemented as contemplated and the economy remains soft. Business Solutions' profitability is expected to improve significantly in 2013, including the impact of lower integration expenses and higher synergies.

These are very high level expected projections, as we have not yet completed a bottoms-up financial planning process for 2013. But directionally, we believe these ranges reflect the expected impact of the strategic actions and current environment. We'll have a clearer picture of 2013 in February, and we will update you with a more detailed outlook for the year.

We expect our strategic actions to lead to positive revenue and operating income trends in 2014. To summarize, while some parts of our business are facing economic, competitive and compliance-driven challenges, we believe we have the right action plans in place to position us for long-term growth in retail and digital money transfer, as well as Business Solutions and stored value. We also expect to continue to implement productivity improvements and cost saving initiatives to drive our business and profitability over the long term.

Operator, we are now ready for the first question.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Darrin Peller of Barclays.

Darrin D. Peller - Barclays Capital, Research Division

Hikmet, I'd like to just hear, if you don't mind your overview of long-term strategically where you these -- each of these businesses' growth profile looking like? I know generally and historically, you said this is a company you thought should be a growth company. Can you just tell us, the B2B segment at first maybe, where do you see that being kind of long-term average growth rates? And what can you do to get it back to that kind of growth rate that I think you initially thought it would be when you had bought Travelex? And then maybe just touch on similar answers for the other 2 segments, that would be appreciated.

Hikmet Ersek

Sure. Darrin, generally, I would say that the global economic environment, like with many companies, has been also challenging for us, especially the global trade has been slower than we thought. The transaction-wise, I think, the B2B business is doing pretty well, had a good quarter. Also comparing with the last quarter, quarter 3 2011, which we had a extraordinary, very strong growth there. So the revenues were flat, but it impacted also from global trade things. Don't forget that the principal amount in this quarter was quite flat, lower than we thought. So it was -- it impacted the revenue. But long term, we believe that our business in fact, the integration is growing very well. Our margins are increasing quarter-by-quarter on the B2B segment. We are now in 29 countries. As we started with the B2B business after the integration, we were at 16 countries, we're already on 29 countries. We recently launched India, which I believe that's a big opportunity also for the B2B segment. But globally, I would say that the economic environment is challenging. It reflects, not only the B2B, I would say, the total business also and the consumer behavior, the Southern European softness and European softness are continuing. And then also in the U.S., we see some economic challenges, it impacts our business.

Darrin D. Peller - Barclays Capital, Research Division

Okay. I guess what I'm trying to just understand is though, let's just hypothetically say, if you were in a macroeconomic environment where GDP was growing at a more normal state, maybe in a few percentage points range, do you continue to expect you'd be gaining market share globally? And if so, what kind of growth rate should that generate for the company long term? And I know that's not -- I'm not asking for guidance, I guess I'm just trying to think about whether this truly -- how much of a growth story this could be down the road?

Hikmet Ersek

I think we will -- on the -- if you look at our business, generally, I think our business is built on growth. We have the fundamentals. We have the 500,000 locations. We are in 200 countries. We are expanding in electronic channels, very, very good. We have a 25% revenue growth in electronic channels. We've been investing in dot com. We have about 40% transaction growth. I think we are reaching new customers here. So digital is very good. I think I'm also satisfied that the B2B as we -- in the global trend -- global trade comes back, that will also be very good. We have only 2% market share at the B2B business. I believe there is a huge opportunity. We do have, current some challenges in certain corridors, which we are fixing and we are very focused on that. Long-term, I believe that, given our multiproduct, multichannel approach, I think we are on the road again, when -- economy comes back on the growth track. And we giving -- going to give you more color also on the 2013 in February numbers, we will give you also more color there.

Operator

The next question comes from Julio Quinteros of Goldman Sachs.

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Hikmet, I'm trying to sort of get my arms around the organizational changes and what effect do you think these are going to have? Is the problem for you been lack of information or lack of real-time color in terms of what's happening on the field? Do you expect that having this direct alignment to you will fix that? Or is it more an information system seat back mechanism that you don't have to really understand what's happening with the business right now, because it really feels like a lot of things have kind of gotten away from you terms of having visibility into the model. So can help us understand how these changes, you think, will help you get a better feel for what's happening with the business on a real-time basis?

Hikmet Ersek

Well, Julio, first of all, as you know, I think the -- Stewart's position has been eliminated, right? I think these regions will direct reporting to me. And Stewart did 4 years of good job here, and we really wish him, really, everything best for his future. But what I would like to do here, also saying that I'm coming from the markets, as you know, I've been 14 years there. I know how that works. I know the agents very well. I've been, before I was coming over to U.S., I was running 125 countries. I built the international business. So also, knowing the regional heads very well. So I'm very confident that we have the right information with the market and with the regional leaders and with the agents to grow this, continue to grow this business. Also, I believe we are aligning the organization to multiproduct, multichannel organization in the future, regions will not only sell retail money transfer, we'll also have other products, like prepaid cards, which we -- it's happening currently, or stored value products selling on the regions, which is the alignment of the new organization. So I'm very confident that we are going to execute against our goals, which we just disclosed.

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

So having the people report directly to you in terms of alignment, what is -- what's different about that? Obviously, you don't have Stewart, that layer there anymore, but what do you expect to learn differently, I guess, from the alignment of the new alignment of these people actually reporting to you? And how much time do you think that's going to take for us to get a good feel, whether or not that's actually working?

Hikmet Ersek

I think, I'm very confident that regional heads know the business very well. So they're going to execute that, and they know the business very well and they're continue to execute very well. I think having also focus on the big part of our business, the retail money transfer, and having me personally involved here and I understand the business environment, then allocating the resources to the right part will definitely help us executing our strategy. And especially the recently announced price promotions, which we're going to launch immediately in the key corridors will help to drive the organizational alignment behind that.

Operator

The next question comes from Jason Kupferberg of Jefferies.

Jason Kupferberg - Jefferies & Company, Inc., Research Division

So I wanted to get your read on how much of all this change in the outlook is a function of industry wide factors versus company-specific? I mean it frankly sounds mostly company-specific, but you keep talking about macro softness. What's your take on that? I mean, how much of this is really specific to Western Union versus reflective of any broader industry trends?

Hikmet Ersek

Sure. I can't give you -- I think there are big, 3 big areas. First of all, as you said, it's the economic environment, macroeconomic environment does impact our business. We have some challenges in part of the world, which are increasing. And that unfortunately, don't look very bright for the future. The second one is the compliance environment. As we have regulatory environments changing, and we are investing more in being an industry leader, putting some compliance requirements for our customers, which are tougher and higher than it was in the past. And that's, I believe, also that's the, in the future, that the competitors will adapt to this compliance environment. We believe we as an industry leader, we are leading that, and I think we are protecting our customer. And the third part is definitely -- in some corridors, we do have some competitive pricing pressures, which impacted our business, and we recognize them. Just to give you some numbers in Q2, Scott, we were minus 2% on principal, right? In Q3, we had minus 7% on the principal. And that was under specific key markets. So we are reacting immediately to do some pricing promotions in that corridors to win the customer back. As you know, the last we've been investing only 1% in 2011. And on this year, it will also about 1%.

Scott T. Scheirman

About 1%, yes.

Hikmet Ersek

1%, Scott, in this environment from our revenue, pricing investments. But we were been a little concerned I think, but now we are reacting to immediate to the -- fix these key markets.

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Okay. And can you just give us a little more color on which specific corridors had this sudden change in competitive dynamics over the last couple of months, it just seems a little unusual for things to change so quickly. Maybe you saw some initial signs of it a quarter or so ago. But can you just help us understand what specific corridors? Because the compliance stuff in Mexico, for example, I think was pretty well explained by you guys earlier this year, but it sounds like there may be some newer corridors that now are experiencing the need for a greater pricing investment. And if that's the case, can you tell us which ones those are?

Scott T. Scheirman

Yes, hey, Jason, a couple of things related to that. And prior that, to reiterate what Hikmet said a minute ago is that, if you look at the cross-border principal that we transfer, it grew 2% in the first quarter. It was down 2% in the second quarter, then it was minus 7% in the third quarter. So we did see some sudden changes. And there clearly had been some compliance challenges, as we've we shared, and as you alluded to, including, not only in Mexico, but we had to do things with the Vigo brand that impacted Latin America. So compliance is -- stretches beyond Mexico, if you will, into some other corridors. As far as pricing and actions, hopefully, what you appreciate from competitive standpoint, I'm not getting into a lot of detail of where we're heading with some of our pricing actions, but we know they were, we've done hundreds of pricing actions. We know how to do these. And the key for us, it's about getting more transactions, more customers, improving our share. We know near-term, that will impact the financial results. But long-term, that will help grow -- help revenues and profits. But I just -- I don't want to give a lot of color on specific corridors for competitive reasons.

Operator

Your next question comes from Bryan Keane of Deutsche Bank.

Bryan Keane - Deutsche Bank AG, Research Division

It sounds like Mexico, obviously, was soft. What other corridors were kind of softer than you originally expected in this quarter?

Hikmet Ersek

Hey, Bryan. It was Mexico that was definitely soft. But also, resetting Vigo and Orlandi Valuta, especially Vigo, has impacted some of our Southern -- Latin American corridors also. Obviously, having, closing down also 7,000 locations, resetting Vigo in the -- and taking Vigo platform to our platform and putting different compliance regulations has impacted our business here.

Bryan Keane - Deutsche Bank AG, Research Division

And it sounds like, I mean, almost everywhere, U.S. sounded weaker. Asia sounded weaker. Middle East and Africa sounded weaker. What was the cause of those weaknesses in those areas?

Hikmet Ersek

I think part of this weakness was Europe, was definitely economic environment, part of it is competitive pressure. But part of this is in the Asia and it's economic environment. You could see that the softness of macro environment has impacted our business. But part of that, Germany's still holding. But part of the Western European countries started to soften also, given the global economical environment.

Bryan Keane - Deutsche Bank AG, Research Division

So it sounds like, just looking back, the pricing actions were about -- will be about 1% this year and 1% in 2011. They rise to mid-single digits in 2013, which I think is probably the highest in the company's history. So I guess, 2 questions. One, should you have had more pricing actions earlier, when it was only 1% the past 2 years? And 2, it really feels like competitively, the environments changed a lot from what Western Union used to be?

Hikmet Ersek

Bryan, maybe, your pricing action maybe, we could do differently in 2010 and '11. Maybe, but these are really certain corridors, Bryan. They are key corridors, which has been under pressure. It's not -- don't forget that we are in 16,000 corridors in 200 countries. There is not overall price pressure, our presence [ph] is still here. The market is growing. And we are in a growing market. So I would say that, this has been certain corridors impacted our business. Now don't forget also in 2010, we had a pricing action about 2% to 4%, including our DMT business. So we had -- it's a very success story. You'd recall we turned around this business and has been delivering very good numbers. And we did -- I personally did more than 100 price actions in my career, and which has been paying back after a year. And I believe this pricing action we're going to do, immediate price action will pay back by 2014.

Bryan Keane - Deutsche Bank AG, Research Division

Okay. Just last question for me. Scott, I know in the Analyst Day we talked about maybe getting some margin leverage as we head into '13. And I know we're expecting some of the recent acquisitions to show some leverage in margin in 2013. But it sounds like from the comments today that due to some other activities, it doesn't look like we're going to see much margin leverage. So A, is that true? And B, what is -- what should we expect from margin expansion x restructuring costs? Will we actually be able to see margin expansion or more flat or down still?

Scott T. Scheirman

For 2013, and again, Bryan, we'll give more color in February. But margins will be down somewhat in 2013, if you will. And probably, one of the most important factors for us is growing the top line, growing revenue, it does help with margin leverage from that standpoint. So the actions we're announcing today is really focused at growing that top line and growing profits, if you will. But even though revenues will be slightly down in 2013, we believe, as we move into '14, we have the opportunity to grow revenues and grow profits. And when I get ahead of myself about talking about 2014 today, let alone 2013, but what we're very focused on is more customers, more transactions. We're regaining the market share. And we think we've got the plans in place to do that as we move forward.

Operator

The next question comes from Tien-Tsin Huang of JPMorgan.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Just a few follow-up questions. Just the first one, just the competitive pricing pressure. Is it coming from the usual suspects? Or is it from some of the newer digital players? I'm curious.

Hikmet Ersek

It's both. I would say that in parts of Russia, for instance, which we have told already, it's coming from new competitors, which it will take us about the next few months and the end of 2000, middle, I would say, second, third quarter of 2013, turnaround this business because we have the open retail here. But in some parts of the competitors, like in, with existing corridors, big corridors, key markets has been coming from existing corridors. It's a mix of parts. Parts of it also is digital, although we are growing the digital very fast in the higher principals, Tien-Tsin, like 5,000 plus principal has been a big growth in this area, and it -- we are very small here. And the lower principal a month, on the remittance market, is -- was not growing that fast, and we have a good market share there.

Scott T. Scheirman

We continue to see on our online businesses, mostly incremental consumers. We continue to see that 80% new consumers that are -- they're using our online business, that are new to the Western Union franchise. So we're not seeing a big crossover from digital to cash, if that's what you're asking. So the pressure is really, more from the cash to cash players that we're seeing around the world.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Okay, got it, perfect. Just wanted to make sure. And just -- I know you can't give details on the pricing, but is there going to be -- it sounds like there's going to be still, sort of surgical promotions in key corridors but is it -- are we going to see a change in philosophy around pricing as well, and introduce new products like $5 for $50?

Hikmet Ersek

Well, obviously, every -- I can't give more color. But every pricing has a story behind that. And we are adapting our prices, in corridor by corridor obviously. In some corridors, we are aiding an account-based money transfer. In some quarters, it's cash-to-cash retail money transfer business. And -- but generally, from philosophy, we are a premium priced product, with stay service. We're going to stay at premium price. And because we can't -- we have the 500,000 locations, we are in 200 countries, we have a great compliance, we have a great brand, I think the premium price will continue, Tien-Tsin.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Okay. So far there's no change. Okay, good. Last one, just a quick one. Vigo, OV, what percentage of revenue is that today? Have you given that before?

Hikmet Ersek

I don't think we have. Scott, did we given that?

Scott T. Scheirman

No. It's -- we haven't given it, and I'll put it out here. It's about 3%, 3% of our top line in 2011, but that business was hit hard in the third quarter with both Mexico and Latin America.

Michael A. Salop

It was about half of our Mexico business, prior, but it's less than that now.

Tien-Tsin T. Huang - JP Morgan Chase & Co, Research Division

Yes, I think you do with something like 3% or 4%.

Operator

The next question comes from James Friedman of Susquehanna.

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

I had a couple of questions, in particular about the margin. Scott, I was referring to Slide 16, and I think it's Slide 18. So in your margin comments, you highlighted that currency and the compensation in Durbin for their combined margin. I was wondering if you could proportionalize the impact of each of those?

Scott T. Scheirman

Yes. And have me probably work back from the consolidated margins, even though on Slide 16, C2C is 80% plus of our business. But if I had to give you a sense of the things that are helping the margin, directionally, currency compensation adjustments and the Durbin fee is where, directionally all having about an equal impact on the plus side. And then a few things that are impacting the margin the other way is the incremental amortization because of the Travelex acquisition. We've got incremental cost on Southwest Border in compliance. Then we have some more investments in IT and dot com. So each of those have pluses and minuses. And the pluses directionally cancel out the minuses, where the margins were down about 30 basis points for the quarter.

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

Yes, I know. It was a good job with the margins. Just a follow-up on that with the Business Solutions. That's my fault for not understanding this, but why is it that there's $17 million in D&A now, whereas it was only $5 million in the Q3 last year? If you could share the timing on that, that will be helpful.

Scott T. Scheirman

Sure. We closed the Travelex Global Business Payments acquisition in November of last year. So if you go back to the third quarter of last year, we did not own that business. And that's where the amortization with the old Custom House Business Solutions, it was about $5 million. And because of the acquisition of Travelex Global Business Payments, we picked up an incremental $12 million in amortization expense as it relates to the purchase price.

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

Okay. And then the last thing for me is, at the Analyst Day, you had shared what you felt were the long-term growth targets of the business. Could you repeat what those were, and just kind of contextualize if you're still comfortable with those long-term growth objectives?

Scott T. Scheirman

Yes, let me kind of give an overview of what the growth rates are, and then I'll let Hikmet give some color commentary. And I just say, on a macro basis first, key -- given the economy, the things we're seeing with compliance and the competitive dynamics, achieving some of those objectives, at least in the near term, could be challenging, if you will, for sure. Especially as we think about '13 and '14. But the color we gave, kind of set around a couple of things is that in the C2C business, at that time, back in May, we expected that revenue growth to be above that 4% range. In the C2B business, we saw single-digit revenue growth. In Business Solutions, we saw that as a double-digit grower, low double-digit grower on a long-term basis. And then in Prepaid, we had the top line growing 20%, if you will. But Hikmet, I'll let Hikmet give some color on the long-term objectives.

Hikmet Ersek

Sure. I mean, the current economic environment did impact, especially our retail money transfer business. We are on the digital, pretty much on the road to achieve our 2015 goal, about $500 million business, and it's growing very well. I think that we have the right fundamentals also on the B2B business. I am very satisfied here. I think the global trade will help us and Raj and the team is doing a good job expanding that business also. On the Retail Money Transfer business, we can -- we will give you -- given the current environment, we'll give you a more color in our February meeting. But we have to adjust some numbers, given the investment, given the slower revenue, given the economic environment, we have to adjust our numbers for 2013 and will have some impact on 2014. But I believe that we are doing the right things here to fix that, and to come back to the strong growth rates.

Operator

The next question is going to come from Tim Willi of Wells Fargo.

Timothy W. Willi - Wells Fargo Securities, LLC, Research Division

I had 2 questions. First was just -- wanted to clarify something on your preliminary '13 guidance. Scott, I think you referenced a decline in GAAP operating income of 10% to 15%. Do you contemplate any additional charges in '13? Or will this $30 million in 4Q sort to take care of these new strategic actions?

Scott T. Scheirman

We're -- Tim, we're currently evaluating and preparing our plans and so forth. We've got some overall strategies. And part of those overall strategies continue to be improving productivity, optimizing our cost structure and so forth. So right now, I'd say, yes, I would anticipate taking some additional expenses in 2013. And those additional expenses, I would take, you would not -- likely not see a net benefit until 2014 from an expense standpoint. But the -- yes, we'll likely take more charges as we look at the cost structure.

Timothy W. Willi - Wells Fargo Securities, LLC, Research Division

Okay. And then the second question I had, I think it's been touched on a couple of different times. But competitively, I guess thinking about what you're trying to do on price and product and consumer experience, all those things you referenced, but don't want to go on a ton of specifics on yet. When you think about MoneyGram and Ria and maybe some others who have greatly expanded their footprints, potentially I guess you can say I have a little bit more visibility with the consumer that might have really only saw the Western Union brand in select locations, and now they're seeing these other brands emerge with more signs, more locations. And when you talk about dropping price to win those customers back, it may have left you to go to other brands so that they become more visible. Where do you get that confidence that once you put the pricing in, and bring them back into your store, that they will stay, given that those 2 brands and probably others intend to continue to build out signage and store locations? And one would assume, continue to innovate their businesses as well?

Hikmet Ersek

First of all, thanks for the question, Tim. I think, first of all, we are growing our retail network and we will grow our presence, global presence, constantly. One million point-of-sale presence will continue to happen. Don't forget that we just, as just as I said in the call, just announced about 44,000 ATMs in Brazil. And we have about 5 -- more than 500,000 locations globally. We just opened -- we are the first in a new country, Myanmar, we just opened the country. So our global presence, will continue to expand and also, our PSD presence happening very well in Germany. We are opening to, in also in Europe. We are opening more and more retail locations for our consumers. The second thing is that, don't forget, our brand awareness is still very high. Our brand awareness is 90 plus in many receiving countries and also in sending countries. In Africa, 90 plus. In receiving countries, South Asia, 95%. So that fundamentals are here, and going to continue to grow above that. Though in some parts of the corridors, in some parts of the key markets, we did have a very high prices, and adjustment of that will continue to give the consumers their convenience. I can tell you, when an example from U.S. domestic money transfer. As we had our -- we have the locations in the U.S., we have the globe awareness, adapting our prices, whilst gaining market share and the revenue came up to 12 to 18 months in a very strong way. And we win, again, market share here. And the similar things we have done, I have personally done in 100 corridors. I know how to do it. I know it's about 12 to 18 months. It may -- in most of the time, within the 12 months, the revenues are coming back. And the first 2 months, you will immediately see the transaction increase market share's gain, and we have done that, and we will be active on the market to gain market share.

Timothy W. Willi - Wells Fargo Securities, LLC, Research Division

Can I just ask one last one on that topic, and that'll be it. There's been a lot of, I guess, changes in reporting styles and organization of the company. I guess I'd be curious if you see areas to add to the bench, or maybe a different perspective would be helpful. And I guess I think about what you're trying to do or really trying to manage a brand and develop product here. Is there a role for somebody that comes from a large global consumer brand company to come in and give a perspective? Or do you feel like within Western Union, you've got the right capabilities to move forward on that front of the business?

Hikmet Ersek

I think we have a very strong team. We just hired also a very strong CIO, which comes from the -- a very strong capability, David Thompson. We have the -- a very strong General Counsel, our HR leader. We -- the new hires has been very strong to the company. And especially, our regional business heads. They know how to run the business. I think we have also a very strong CMO, Diane Scott, on the team. The business is unique. Has its uniqueness, has its challenges, but it's also a very different business. It's always, and by the way, we have also a very strong board, which advises and support us, a very diverse board, and we are constantly talking to them, and I believe that we have the right organization to grow this business. And we are a strong brand. You have this -- we have almost a $6 billion business. We have high margins. We generate high income. I think we have the right structures, the right organization in place.

Operator

Your next question comes from Andrew Jeffrey of SunTrust.

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Hikmet, I wonder if you could just, in very, sort of concise terms, articulate why you believe what you're doing is truly a strategic repositioning of the business? You, for example, referenced to the price changes in the U.S., which had some beneficial, would appear tactical, changes, as you look kind of at 2010 and in the beginning of '11. But I wonder just if you could make, in an elevator pitch style, the strategic defense of Western Union because we've kind of been sliding down a slippery slope here on pricing and on margins for the last few years, at least that's how it feels to me.

Hikmet Ersek

Well, first of all, on the pricing, if you look at our pricing structure the last years, we have been doing 4% investment in 2010, 1% on the, for I mean, in 2011 and 1% in 2012. But given the Western Union, if you lean back, Andrew, as you said, and look at Western Union, we have the global presence. We are in 200 countries. We operate in 16,000 corridors. We have different business in Latin America. We have bill payment business in North America. We have bill payment business. We have the B2B business. I think these assets are enormous. Now if you look at this business, we are a premium price. We are growing this business in many corridors, but we do have recent challenges in key corridors, which we have to fix it. You could call that a tactical, but I think it's strategic decisions here, which we are doing because these are fun, one-time corrections, which we will like to do it now, and move forward in 2014 with strong growth again. And that's in the correction, in the core business. But strategically, also, you look at our digital business, Andrew, growing very strong. And we did the right investment in San Francisco office, we opened, we built the right team. We have the right talent there to grow this business very strong. And no one else, but Western Union can connect the digital with physical location as we do it in 200 countries, in 16,000 corridors. That's one of the reason why it's growing so fast. And I am pleased on that.

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Okay, that's helpful. And then is there -- does there come a point, because I know you've articulated in the past, I believe the desire to have, perhaps as many as a million branches globally. Does there come a point at which there's a change in the balance between return of capital to shareholders or a thought about the capital structure versus the investment in branches? Because it does sound like there's a little bit of a hand off of the baton here from physical, location-based money transfer to electronic or account-to-account money transfer. Does that change strategic capital allocation considerations for Western Union here of -- might we hear about that next, I guess, is what I'm asking.

Hikmet Ersek

So well, our vision of 1 million touch points has not changed. I think we are expanding that, and I'm very pleased with the expansion plans on that and we are on target. But on the existing capital structure for existing retail locations, these are not lot of capital investments, except sometimes signing bonuses, right? But these are not capital expense because the retail locations already exist there. And what happens if you sign a post office or if you sign a bank in China, you do act on the -- on your service, on the existing banks or existing retails or existing shops, which doesn't impact our capital structure much here. Of course, we're going to further connect the electronic with retail, retail with electronic, account with electronic, account with retail, that's the beauty of the new strategy, that's the beauty of the Western Union growth.

Scott T. Scheirman

And I think and if you look at the external forecast, I mean as people are, other agencies are projecting that the cash to cash piece of the business is going to continue to grow, which we would agree with. But the digital side is growing faster. So we want to continue to invest there and connect more channels and choices for consumers.

Operator

The next question, or final question, rather, comes from Kartik Mehta of Northcoast.

Kartik Mehta - Northcoast Research

I just wanted to go back to the statement you said, Western Union being a premium price brand. Do you think considering what you had to do domestically and now it appears what you're having to do in some of these other corridors for pricing, can Western Union, in this environment, still remain a premium priced brand, in your opinion?

Hikmet Ersek

Absolutely. I think, don't forget that we are in 16,000 corridors, price correction, we are doing currently in on certain corridors. It's -- we're not touching all market, we are doing the certain corridors. We did that several times. I mean, if you recall, Kartik, our investments in Middle East, pricing investment in Middle East, to adopt our prices. And our Middle East outbound has been bought out and has been a success story for many years and still a success story. And I think, and there, we have a premium pricing. And in many, our westernunion.com business is a premium prices in many parts of that. And our existing business is compared with the competition that premium prices because we can -- we have the brand, we have the regulation involved, we have set the best settlement system. We have 500,000 locations. I think these are very much valued by the consumers, and that's why, I believe, the premium price philosophy will exist.

Kartik Mehta - Northcoast Research

So based on your past experience, when you put in price corrections such as this, what does that usually mean for transaction growth, Hikmet? What would you anticipate this resulting in, as you go forward?

Hikmet Ersek

First of all, dependent, really. I mean, it sounds almost like a politician, but it depends on the corridor. It depends on the market environment. It depends on which bands you to the pricing investments. And as you recall, as we did the $5 for $50, that most increase came from lower bands. And the increase was significant, as you recall that, I think in the beginning, we had about 20% increase, right, on the transactions.

Scott T. Scheirman

Yes, I mean, near-term we expect more customers, more transactions. It'll take about a year to lap the revenue declines, but we almost immediately see transaction uplift and a lot more customers. And that's the goal of this program here, is to do that.

Hikmet Ersek

That's immediately transaction growth. And customer growth, actually, Kartik.

Kartik Mehta - Northcoast Research

And then there's just one last question, Scott. You talked about, obviously, 2013 margins. It probably won't grow, considering the environment we're in. As you look at this company, as we move forward, what kind of revenue growth do you think is necessary in the new cost structure for you to have a positive margin?

Scott T. Scheirman

Kartik, I don't want to get too far ahead of myself for '13 or '14. But clearly, and you hit the nail on the head, as we need revenue growth and, year in, year out, if you think about inflation runs, 1% or 2% or 3%, kind of pick your number, whatever you may. But clearly, the goal of the programs is to get back to more customers, more transaction and revenue growth. And we clearly do need revenue growth to be helpful to margin expansion on a long-term basis.

Operator

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

Michael A. Salop

Okay, thank you, Valerie. We just want to thank everyone for joining us on the call today. We know it was inconvenient for a lot of you to try to find phone lines today and hard to join. So we appreciate you joining. And we're around all week for any further questions if you want to discuss things further. Thanks very much.

Hikmet Ersek

Thank you.

Operator

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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