Millicom International Cellular S.a. · NASDAQ:TIGO
Millicom International Cellular — Q4 2016 Earnings Presentation
34 slides from Millicom International Cellular's earnings presentation, Feb 8, 2017
Slide 1: 2016 Q4 results
2016 Q4 results Mauricio Ramos, CEO Tim Pennington, CFO 8 February 2017
Slide 2: Disclaimer
Disclaimer This presentation may contain certain “forward-looking statements” with respect to Millicom’s expectations and plans, strategy, management’s objectives, future performance, costs, revenue, earnings and other trend information. It is important to note that Millicom’s actual results in the
Slide 3: CEO review
CEO review Mauricio Ramos We believe in better. We believe in ticd
Slide 4: 2016 – in brief
1 2016 – in brief Strong subscriber intake growth… Mobile ‘000s ‘000s vs. FY15 Smartphone users 25,586 +5,279 4G users in Latam 3,432 +2,576 Cable Total Homes Passed 8,119 +487 HFC Homes Passed 7,152 +777 HFC RGUs 3,694 +450 Page 4
Slide 5: 2016 – in brief
1 2016 – in brief … with heavily accelerated investment in networks and IT infrastructure… Latam 4G network size Latam % of traffic in 4G 3.0x Mobile 4G In all LATAM 2x 30% markets* 10% 2015 2016 2015 2016 Latam HFC network size Speeds increased Mbps** 50 +12% 30 Home HFC 3 6 10 15 2015 2016 Conecta
Slide 6: 2016 – in brief
1 2016 – in brief …. while delivering a continuously strengthening cash flow Financials $ million vs. FY15 Service revenue 5,855 +1.2% Adjusted EBITDA 2,225 +4.3% OCF 1,141 +22.7% Note: % variation are organic (local currency, same perimeter) except OCF Page 6
Slide 7: Strategic progress – service revenue
2 Strategic progress – service revenue Continued strong growth in Latam mobile data and cable Mix evolution FY 2016 YoY growth Legacy Latam voice & sms -15.2% 22.7% Latam mobile data Strategic focus Home 9.7% 50% 45% 7.4% Latam cable (home + B2B fixed) B2B 3.6% Other Africa and other Q4 Q1 Q2 Q3 Q4
Slide 8: Mobile – monetizing data
2 Mobile – monetizing data More LTE subscribers >> increased data usage >> higher data ARPU Data users LTE users 1 Growing our base of data users 2 Converting our users into LTE subscribers for higher ARPU +1.7m +2.5m 13.7 3.4 12.0 0.9 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Grow
Slide 9: Cable – building and filling the network
2 Cable – building and filling the network Accelerated HFC build-out and customer connection Total homes passed exceeding 8m target HFC homes passed exceeding 7m 1 Building the network everywhere we operate +478k 2 Building and upgrading copper networks +777k 8.1 7.2 7.6 6.4 Q4 15 Q1 16 Q2 16 Q3 16
Slide 10: Strategic progress - operations
2 Strategic progress - operations Project Heat driving transformation and efficiency Program overview Procurement • Centralized logistics 179 5 & • Mobile devices Initiatives Functional areas supply chain • Set-top boxes 179 20 Sales IT • Infrastructure as a Service & • Customer Relationship Managem
Slide 11: Strategic progress - Latam
2 Strategic progress - Latam Building the digital highway across Latam Guatemala – fastest mobile data growth - 35% Honduras – accelerating 4G and continuing the build El Salvador – 4G launched / tax, security set backs Costa Rica – continuing digitalization Colombia – strong build, tough competitio
Slide 12: Strategic focus - portfolio
3 Strategic focus - portfolio Optimizing our portfolio to maximize cash flow delivery Senegal Disposal Cash: $129m Multiple: 6.3x Page 12
Slide 13: Strong cash flow growth
4 Strong cash flow growth Driven by margin expansion and disciplined allocation of Capex 1 Strong OCF growth 2 Strong Equity free cash flow growth 23% 269 W/Capital 235 1,141 EFCF 930 81 +312 154 2015 2016 -43 2014 2015 2016 3 Dividend recommended of $ 2.64/share $265m cash dividend Page 13
Slide 14: 2016 Recap
5 2016 Recap + 2.6m LTE subscribers Building the future > 8.1 million Delivering OCF up 23% the cash flow EFCF positive Page 14
Slide 15: 2017 – stepping up the pace
6 2017 – stepping up the pace Faster network expansion, more customer pick up and accelerated transformation Mobile +3m LTE subscribers Home +1m HFC homes passed HEAT Operational excellence Page 15
Slide 16: CFO review
CFO review Tim Pennington We believe in better. We believe in ticd
Slide 17: Key messages
Key messages 1 Service revenue Reconfiguring the mix 2 Margin expansion Focusing on costs 3 Capex discipline Allocating to core growth areas 4 Strong cash flow generation Dividend covered 5 Lower net debt Financial strength Page 17
Slide 18: Key financial metrics
Key financial metrics Higher EBITDA margins – capex discipline – strong cashflow 1 Service Revenue a $m, Q4 15 – Q4 16 2 Adj EBITDA a and margin $m, Q4 15 – Q4 16 3 Capex b $m, Q4 15 – Q4 16 -0.9% +1.4% 1,498 1,484 559 566 446 -$46m 400 33.6% 35.5% Q4 15 Q4 16 Q4 15 Q4 16 Q4 15 Q4 16 US$ million a)
Slide 19: Service revenue
Service revenue Impact from legacy and Colombia Service revenue growth %YoY growth, Q4 15 - Q4 16 Colombia (2.7)% 6.2% 4.1% 2.1% -0.2% -0.9% “Surveillance” (0.9)% Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Page 19
Slide 20: Latin America
Latin America Margins remain robust – Cashflow strong FY OCF Service revenue ($m) (EBITDA – Capex) $m and margin -2.3% 1 3 1,286 1,257 1,197 1,158 20.2% 22.4% EBITDA Q4 15 Q4 16 $m and margin FY 15 FY 16 -2.1% 2 512 501 36.3% 36.7% Q4 15 Q4 16 Q4 15 numbers FX adjusted Capex excludes spectrum and li
Slide 21: Colombia
Colombia Transforming revenue, progress on the integration Service revenue Q4 15 - Q4 16 Colombia -1.9% • Service revenue down 1.9% YoY • Improving vs. -2.9% in Q3. • Mobile competitive environment • Prepaid promotional activity Service Voice Mobile Home B2B Other Service Revenue and SMS Data Revenu
Slide 22: Africa
Africa Exceptional year and positive cash flow FY OCF Service revenue ($m) (EBITDA – Capex) $m and margin 9.1% 1 3 228 97 209 10.8% -4.2% EBITDA Q4 15 Q4 16 $m and margin -35 FY 15 FY 16 +138% 2 74 31 32.4% 12.3% Q4 15 Q4 16 Q4 15 numbers FX adjusted and excluding DRC Capex excludes spectrum and lic
Slide 23: EBITDA
EBITDA Further margin improvement – driven by Africa and cost improvement EBITDA evolution by Region US$ million, Q4 15 – Q4 16 • Group opex down 3.6% +1.4% • Latam EBITDA 2.1% lower • Colombia $23 million restructuring 7 • El Salvador operating environment 9 14 14 • Africa EBITDA up by 138% • Cost
Slide 24: FY Costs review
FY Costs review Focus on efficiencies in operations and corporate Total cost base $m Reported and % of revenue, FY 15 vs. FY 16 Direct Costs 4,553 • 4G data transmission cheaper 4,077 • Reduced bad debt • Lower equipment sales Direct Cost 27.6% 26.5% Sales and Marketing • Commission structures • Low
Slide 25: FY Capex review
FY Capex review Focused investment Total Capex FY Capex at $1,031 million $m Reported and % of total Capex, FY 15 vs. FY 16 • Focus on 4G and capacity • Accelerated cable roll-out 1,273 • IT infrastructure • Capex intensity at 16.5% 1,031 Latam Mobile 42% • Latam • 39% Mobile 33% • 47% Fixed • Afric
Slide 26: FY P&L review
FY P&L review Higher D&A and finance charges – no repeat of 2015 FX and one-offs US$ million FY 16 FY 15 % Var Revenue 6,249 6,572 (4.9%) A• Fair value adjustment EBITDA 2,172 2,188 (0.8%) D&A (1,368) A (1,281) 6.8% B• Local currency financing and refinancing costs Operating profit 761 843 (9.8%) C•
Slide 27: Full year cash flow
Full year cash flow EFCF covers the proposed dividend Full year Cash flow US$ million 2,225 2,172 53 1,051 1,121 1 259 427 434 165 269 Adjusted One-off EBITDA Cash capex Working Cash OCF Tax paid Interest FCF Dividends to EFCF EBITDA charges (ex- Capital Paid minorities spectrum & and others license
Slide 28: Net debt
Net debt Down by $114 million – lower leverage – inside target range Net debt evolution US$ million, 31 December 2015 – 31 December 2016 4,295 4,181 334 269 Finance 265 13 295 162 Leases 39 3,962 3,886 Finance leases Bank and bonds Net debt 2015 Equity FCF Spectrum M&A Dividend FX & others Net debt
Slide 29: 2017 Outlook
2017 Outlook Targeting faster growth Low single digit organic growth Service Revenue Ahead of growth rate achieved in 2016 Mid-to-high single digit organic growth EBITDA Ahead of growth rate achieved in 2016 Capex Broadly similar to 2016 OCF (EBITDA – Capex) Around 10% organic growth Page 29
Slide 30: Q&A
~~ We believe in better. We believe in tico Page 30
Slide 31: Debt profile
Debt profile Long average maturity to debt profile Debt maturity profile a Average life of 5.4 years US$ million 911 840 740 708 621 391 Low maturities 323 in 2017 195 127 140 2017 2018 2019 2020 2021 2022 2023 2024 2025 >2026 Page 31 a) excluding financial leases
Slide 32: Gross debt by country
Gross debt by country Central America: South America: Africa: Corporate: Total MIC Debt: Total debt $1,570m Total debt $1,555m Total debt $416m Total debt $1,748m $5,290m 21% guaranteed 1% guaranteed 71% guaranteed 0% guaranteed 12% Guaranteed Honduras: $402m Senegal: $14m (62% guaranteed) (100% gua
Slide 33: Net debt by country
Net debt by country Central America: South America: Africa: Corporate: Total Net Debt: $1,185m $1,259m $209m $1,528m $4,181m Honduras: $383m Senegal: $3m Ghana: $20m Guatemala: $694m Chad: $60m El Salvador: $25m Rwanda: $67m Costa Rica: $84m Tanzania: ($32m) Zantel: $93m Colombia: $727m Bolivia: $21
Slide 34: Currency exposure of the debt
Currency exposure of the debt December-16 Debt including finance leases Cash Net debt US$ Local Total Total USD Local Total 1,470 1,655 3,126 682 1,143 1,301 2,444 Latin America 47% 53% 100% 47% 53% 100% 231 185 416 207 204 5 210 Africa 55% 45% 100% 97% 3% 100% 1,748 0 1,748 220 1,531 -3 1,528 Corpo
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