Millicom International Cellular S.a. · NASDAQ:TIGO
Millicom International Cellular — Q2 2020 Earnings Presentation
36 slides from Millicom International Cellular's earnings presentation, Jul 30, 2020
Slide 1: Sustaining connectivity to our communities
Sustaining connectivity to our communities Second Quarter 2020 Mauricio Ramos, CEO Tim Pennington, CFO July 30th, 2020 Millicom International Cellular S.A.
Slide 2: Safe Harbor
Safe Harbor Cautionary Language Concerning Forward-Looking Statements Statements included herein that are not historical facts, including without limitation statements concerning future strategy, plans, objectives, expectations and intentions, projected financial results, liquidity, growth and prosp
Slide 3: Non IFRS measures
Non IFRS measures This presentation contains financial measures not prepared in accordance with IFRS. These measures are referred to as “non-IFRS” measures and include: non-IFRS service revenue, non-IFRS EBITDA, and non- IFRS Capex, among others defined below. Annual growth rates for these non-IFRS
Slide 4: 1. Key Messages
1. Key Messages
Slide 5: Key messages
Key messages Employee and customer safety remain top priority Sustaining our market Encouraging signs of leadership improvement Continued progress on Acquisitions on track to exceed strategic initiatives initial synergy expectations Sustaining solid cash flow generation and reducing net debt 5
Slide 6: COVID-19 has impacted our markets
COVID-19 has impacted our markets Confirmed Cases per Million Mobility Reduction Confirmed cases per million people as of July 21. Google retail and recreation mobility index Source: Bloomberg; Observatorio Ciudadano COVID-19 Nicaragua average for Q2 2020 13,030 11,658 -12% 9,966 -28% -35% 5,372 -46
Slide 7: 2. Q2 Financial Review
2. Q2 Financial Review
Slide 8: Q2 Latam financial highlights
Q2 20 Latam financial highlights YoY organic growth* for Service revenue, EBITDA and OCF ($m) Q2 19 – Q2 20 Service Revenue* EBITDA* OCF* -6.8% -8.1% -2.9% 354 1,270 544 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 39.5% 40.0% 24.2% 26.0% % of revenue *Non-IFRS measure. Please refer to the non-IF
Slide 9: Latam service revenue – COVID-19 impact
Latam service revenue – COVID-19 impact Lockdowns hit some markets very hard… …prepaid and B2B facing largest impact Service revenue* impact of lockdowns by country Service revenue organic growth* (%), Q2 20 Q2 20 0 Smaller -2 Colombia Guatemala Nicaragua Mobile -10.8% -4 Paraguay -6 El Salvador Ser
Slide 10: Latam service revenue – Q2
Latam service revenue – Q2 High impact countries ~65% of decline Signs of improvement in June Service revenue ($m)* impact of lockdowns by country Service revenue organic growth* (%), Q2 20 by month 1,358 -61 96m (-6.8%) -19 -16 1,270 Q2 19 FX + M&A Lockdown impact on mobility Q2 20 High Medium Low
Slide 11: Customer impact
Customer impact Customer activity gradually returning Mobile Customers Home Customer Relationships Latam Mobile Subscribers (‘000) Latam Home Customer Relationships* (‘000) Prepaid Top-up Evolution HFC Net Adds Q1 20 – Q2 20 Q1 20 – Q2 20 Latam HFC home customer relationships Prepaid Service top-ups
Slide 12: Q2 Latam service revenue by country
Q2 20 Latam service revenue by country Service revenue ($m), and YoY organic growth*, Q2 19 – Q2 20 Guatemala (24% of Latam) Honduras (9% of Latam) Panama (11% of Latam) El Salvador (6% of Latam) -1.6% -12.4% -12.5% -6.1% 305 82 119 136 Q2 19 Q2 20 Q2 19 Q2 20 Q2 19 Q2 20 Q2 19 Q2 20 Colombia (23% o
Slide 13: Q2 Latam EBITDA by country
Q2 20 Latam EBITDA by country EBITDA($m), and YoY organic growth*, Q2 19 – Q2 20 Guatemala (32% of Latam) Honduras (10% of Latam) Panama (10% of Latam) El Salvador (4% of Latam) -2.3% -19.9% -14.9% -14.9% 184 60 25 55 Q2 19 Q2 20 Q2 19 Q2 20 Q2 19 Q2 20 Q2 19 Q2 20 53.0% 51.4% 47.1% 44.4% 47.1% 43.1
Slide 14: Financial targets to navigate the crisis
Financial targets to navigate the crisis 1 At least $100 million 2 $200-$300 million capex in cost savings reduction 3 Targeting Latam 4 Accelerating net debt OCF flat at $1.4b reduction 14
Slide 15: Cost and capex reduction targets
Cost and capex reduction targets 1 At least $100m of cost savings 2 $200-$300m capex reduction Underlying opex at real rates* ($m) Subsidies and comissions Latam capex at real rates ($m) Q2 19 – Q2 20 Advertising and promotions Q2 19 – Q2 20 Employee costs 2019 one-offs Other G&A Fx 20% 38% 20% 22%
Slide 16: Latam operating cash flow
3 Latam operating cash flow Sustaining strong OCF generation LTM Latam OCF* ($b), 2018- LTM Q2 20 1.4 1.4 1.1 2018 2019 LTM Q2 20 *Non-IFRS measure. Please refer to the non-IFRS disclosures in this presentation for a description of non-IFRS measures. A reconciliation of non-IFRS measures to the near
Slide 17: Net financial obligations and leverage
4 Net financial obligations and leverage Reduced underlying net debt by $82m during H1 Jumia & Helios Towers 174 1,314 86 7,092 5,860 170 5,778 Colombia, El Salvador and Guatemala Underlying Underlying Equity Spectrum Disposals Underlying net Leases Underlying net debt* FCF* and Others debt* Q2 2020
Slide 18: 3. Preparing for the Future
3. Preparing for the Future
Slide 19: Our cable opportunity in Latin America remains bright
Our cable opportunity in Latin America remains bright… Residential broadband penetration is low Our broadband customer base has grown steadily Fixed Broadband penetration rates (%) HFC Broadband customers (m) 60 50 10% 40 30 Average 20 10 0 Guatemala Honduras El Salvador Nicaragua Colombia Panama Bo
Slide 20: … and we continue to invest to capture this opportunity
… and we continue to invest to capture this opportunity Protect Build 1• Customers 1 Leading Platform 2• Employees 2 Superior Networks 3• Financials Synergistic M&A 3 Integration 4 Digital 20
Slide 21: Leading telecom platform
1 Leading telecom platform Clear Strategy Strong Culture Market Leadership ESG Commitment #1 or #2 in all markets State-of-the-art Customer Centric Digital First Capital Allocation Network Infrastructure Discipline ~12m HFC homes passed ✓ Latam focused ~160,000km ✓ F-M Convergence of fiber deployed
Slide 22: Mobile network investments in key markets
2 Mobile network investments in key markets Colombia El Salvador LTE deployment on 700 MHz Leveraging AWS spectrum 19% 450 94% 800 new LTE Completion LTE sites on Completion sites 700 MHz 10% of traffic 25% +28% Congestion on 700 MHz of users on 700 MHz throughput ↓52% Nicaragua Panama Mobile networ
Slide 23: Nicaragua mobile acquisition - one year later
3 Nicaragua mobile acquisition - one year later Strong performance & healthy returns in challenging environment Sustained mobile leadership HFC growing fast Market share % HFC Customer Relationships (‘000) Q1 2019 – Q2 2020 Q2 2019 – Q2 2020 4X 53% Market share* Solid Q2 19 Q2 20 Cash Flow** >$45m S
Slide 24: Panama – successful integration
3 Panama – successful integration Solidified our #1 position Adding broadband customers HFC broadband customers (‘000) Q4 2018 – Q2 2020 #1 Mobile +7% #1 Broadband #1 Pay TV Solid Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Cash Flow* >$40m Upcoming rebranding Synergy targets increased Opex and revenu
Slide 25: Synergy expectations increased
3 Synergy expectations increased Initial Synergies Annual Run Rate Net Present Value of initial Estimated annual run rate* ($m) expected synergies ($m) NPV of synergies Costa Rica Revenue increased 10% Opex & Capex ~$500m +10% $70-95m $150m ~$385m $55-65m ~$350m ~$350m $25-30m $30-35m Initial Costa
Slide 26: Digital first strategy
4 Digital first strategy 2013 - 2018 2019 - 2021 2022 - 2025 5. Go Digital products Digital First Digital fully ops model Digital Building the foundations Group-wide execution to deliver Digital becomes our /organization and design an end-to-end digital journey primary operational channel Done Rolli
Slide 27: Digital adoption is accelerating
4 Digital adoption is accelerating Subscription: digital collection +1.3x Q2 vs. Q1 Tigo Money: Digital Transactions +1.9x Q2 vs. Q1 Latam digital collections ($) Latam digital transactions (m), Q1 20 – Q2 20 Q1 20 - Q2 20 1.3x 1.9x >14m Q1 2020 Q2 2020 Digital as % of 24% 35% total collections Prep
Slide 28: Building a digital broadband-centric company
Building a digital broadband-centric company Well prepared to meet current challenges – initiatives are working Encouraging signs of improvement Our Digital Highways are more essential than ever 28
Slide 29: Q&A
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Slide 30: Financial highlights – Q2 2020
Financial highlights – Q2 2020 IFRS Group Consolidated Financial Statements Selected P&L data Key Observations $ million Q2 2020 Q2 2019 % Var •A Impact of lockdowns Revenue 970 A 1,054 (8.0)% Cost of sales (296) (298) (0.4)% •B Acquisitions and accelerated brand Operating expenses (330) (424) (22.1
Slide 31: Latam segment bridge – Q2 2020
Latam segment bridge – Q2 2020 Group revenue to Latam service revenue bridge, Q2 20 1,446 86 1,360 90 1,270 476 970 Revenue Guatemala Underlying* Africa Latam Telephone and Latam service and Honduras revenue revenue revenue equipment revenue* Group operating profit to Latam EBITDA* bridge, Q2 20 544
Slide 32: Underlying financial obligation profile
Underlying financial obligation profile Latam HQ Africa Geography 62% 33% 5% Bonds Banks Leases Source 60% 25% 15% Interest Fixed or Swapped Variable rates* 77% 23% FX Local Hard currency exposure* 34% 66% Less than 5y 5Y or more Maturity* 37% 63% * Excluding Leases 32
Slide 33: Debt Maturity Schedule
Debt Maturity Schedule Well spread maturities** Average life 5.6 years 1,907 Average cost of debt 5.9% 1,110 880 Comcel 709 670 (GT) 630 $800m 546 6.875% 468 29s Telecel $750m Panama 25s 26s (PY) 28s 6.250% $600m $500m $500m $550m $500m 4.500% 6.000% 6.625% 5.875% 5.125% 130 124 81 SEK 2bn 4.913%* 2
Slide 34: Gross financial obligations by country
Gross financial obligations* by country Central America South America Africa Corporate $3,105m $2,244m Group (underlying) $424m $2,797m 8% guaranteed 0% guaranteed $8,570m 0% guaranteed 0% guaranteed 3% Guaranteed Of which Leases: $1,314m Guatemala: $1,168m Honduras: $431m (0% guaranteed) (0% guaran
Slide 35: Net financial obligations by country
Net financial obligations* by country Central America South America Africa Group (underlying) Corporate $2,668m $1,910m $408m $7,092m $2,104m Leverage: 2.90x Guatemala: $939m Honduras: $367m Leverage: 1.26x Leverage: 1.40x El Salvador: $212m Nicaragua: $105m Leverage: 1.56x Leverage: 1.15x Costa Ric
Slide 36: Millicom - The Digital Lifestyle
tico MILLICOM THE DIGITAL LIFESTYLE
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