Millicom International Cellular S.a. · NASDAQ:TIGO
Millicom International Cellular — Q1 2011 Earnings Presentation
59 slides from Millicom International Cellular's earnings presentation, 2011
Slide 1: Q1 2011 Investor Presentation
Millicom International Cellular S.A. Q1 2011 Investor Presentation
Slide 2: Overview
: : Overview Millicom: • is a leading operator of mobile telephony services in emerging markets with around 40 million customers • sees itself as an FMCG company, not a technology company • operates in 13 countries with 260 million potential customers under license • has strong market positions havi
Slide 3: Proven track record of profitable growth in emerging markets
: : Proven track record of profitable growth in emerging markets 4,500 4,000 Revenue EBITDA 3,500 3,000 US $ (millions) 2,500 47.0% 2,000 45.8% 43.4% 1,500 42.8% 46.1% 1,000 500 0 2006 2007 2008 2009 2010 3 EBITDA margin of 47.0% for 2010
Slide 4: Attractive market positions
: : Attractive market positions Guatemala El Salvador Senegal Chad 1 of 3 1 of 5 2 of 4 1 of 2 Rwanda 2 of 3 Colombia 3 of 3 Honduras 1 of 4 Ghana Mauritius Bolivia 2 of 5 2 of 3 2 of 3 DRC Tanzania Paraguay 1 of 5 (K/BC only) 2 of 7 1 of 4 4 Number 1 and 2 market positions are key to profitability
Slide 5: Three main drivers of growth
: : Three main drivers of growth Market Penetration share Innovation (ARPU) Africa: Africa: 31% → ? • Communication 43% →80%+? • Information • Entertainment Latin America: Colombia • Solutions 90%→100%+? 5
Slide 6: Penetration rates
: : Penetration rates CAM SAM Africa * MIC Avg penetration Avg penetration Avg penetration Avg penetration 88.3% 91.1% 43.2% 63.9% 120.0% 102.1% 96.5% 100.0% 93.0% 84.7% 84.1% 86.8% 80.0% 66.4% 62.0% 58.0% Average 60.0% MIC 42.4% 33.3% 35.6% 40.0% 24.3% 20.0% 0.0% * For DRC , only penetration in Kin
Slide 7: Market share evolution
: : Market share evolution Market share (%) Total Central Am. South Am. Africa Q1 11 29.9% 54.4% 18.2% 30.8% Q4 10 29.8% 53.8% 18.1% 31.1% Q3 10 29.8% 53.8% 17.4% 32.1% Q2 10 30.0% 53.7% 17.3% 31.9% Q1 10 29.6% 53.4% 16.8% 32.4% Comparable market share (i.e. for DRC only Kinshasa-Bas Congo area cons
Slide 8: Innovation: Product categories and strategic focus
: : Innovation: Product categories and strategic focus Communication: access to peers voice calls, P2P SMS, roaming Information: access to databases internet access, Info, SMS Dedicated category Entertainment: access to content, managers music, video downloads, Mobile TV , Cable TV Solutions: access
Slide 9: Innovation is already a big part of our business
: : Innovation is already a big part of our business 25% 20% 15% 33.4% of revenues in 22% 10% Q1 11 18% 13% 5% 10% 8% 0% 2006 2007 2008 2009 2010* VAS as % of recurring revenue In 2010, VAS represented > 50% of total growth in recurring revenues in local currency 9 * Attributable consolidation for H
Slide 10: Mobile revenue growth driven by value focus
: : Mobile revenue growth driven by value focus ARPU approaching stabilization 25.0% YoY growth 20.0% 15.0% 10.0% Customers 5.0% Recurring revenue growth * ARPU in local currency 0.0% -5.0% -10.0% -15.0% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 * Recurring revenue = customers x mobile ARPU in local currency 10
Slide 11: Product penetration
: : Product penetration Highest Lowest Q1 11 Q1 10 Change market market (pts) Q1 11 Q1 11 SMS 52.5% 52.9% -0.4 78.9% 23.4% (com m unication) Ring Back Tone 26.6% 21.6% +5.0 42.5% 5.5% (entertainm ent) Data (2G+3G) 21.6% 18.4% +3.2 34.9% 0.4% out of which 3G is 5.2% 3.1% +2.1 11.7% 1.7% (inform ation
Slide 12: Strong growth of Data revenue (2G+3G) in Latin America
: : Strong growth of Data revenue (2G+3G) in Latin America Data revenue (2G+3G) - Latin America 80 70 60 50 US$ millions 40 30 20 10 0 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Commercial investment in 3G shows good results. Data represents the largest growth opportunity for 12 Millicom
Slide 13: Distribution of customers by mobile ARPU
: : Distribution of customers (prepaid and postpaid) by mobile ARPU Latin America (lim ited 3G services in Africa) Q1 11 Q1 10 Change Customers with ARPU > $10 37.0% 35.8% +1.2 pt Customers with ARPU < $10 63.0% 64.2% -1.2 pt Total 100.0% 100.0% Focus on value customers, especially 3G 13
Slide 14: Successful innovation: Tigo Lends You
: : Successful innovation: Tigo Lends You • Lending of airtime to pre-paid customers ($0.45 on average) • Airtime recovered and fee for the service taken when customer reloads • Low default rate: around 1% • Penetration rate: 34% of customers • Positive impact on churn and revenues 14
Slide 15: Launch of Tigo Cash
: : Launch of Tigo Cash (domestic money transfer services) Paraguay Q3 10 Tanzania Q4 10 Ghana Q4 10 Guatemala Q1 11 Honduras Q1 11 15
Slide 16: Tigo Cash Paraguay
: : Tigo Cash Paraguay (launched in Q3 2010) Tigo Cash no. of transactions ('000) by quarter - Paraguay 300 250 200 ('000) 150 100 50 0 Q3 10 Q4 10 Q1 11 Successful innovative service with strong growth 16 (no. of transactions +57.8% Q1 11 vs. Q4 10)
Slide 17: Increased commercial investment in 3G and services
: : Increased commercial investment in 3G and services (+14% YoY) 250 232 14% 203 200 150 +8% 160 Sales & Marketing costs (excl. subsidies) US$m 147 Subsidy cost 100 50 +30% 72 56 0 Q1 10 Q1 11 17
Slide 18: 2011 Roadmap
: : 2011 Roadmap GOAL Maintain through 1 Growth innovation Balance margin 2 Margins improvements with top line growth 3 Cash generation Maintain / Grow 4 Asset productivity Pursue 5 Asset protection / Risk management Monitor 18
Slide 19: Guidance raised for 2011
: : Guidance raised for 2011 Original New guidance guidance EBITDA margin mid 40s > 45% Capex * above $ 800 million around $ 850 million OFCF** margin mid-teens high teens (as a % of revenues) * excluding potential new spectrum, greenfield cable and capitalization of leasing costs for towers 19 ** O
Slide 20: Review for the period ended 31/03/11
Click to add title Review for the period ended 31/03/11
Slide 21: Q1 Highlights
: : Q1 Highlights • Highest revenue growth since beginning of 2008: 12.7% in local currency • Strong margin (47.1% EBITDA) despite accelerated investment in 3G and services • Further improvement in ARPU, with positive growth in both Central and South America • Strong normalized EPS increase (+33% ye
Slide 22: Financial Highlights Q1 YoY
: : Financial Highlights Q1 YoY US$ million Q1 11 Q1 10 $ Local growth currency Customers (million) 39.8 35.1 13% Revenues 1,081 954 13% 12.7% EBITDA 509 451 13% 12.4% % of revenues 47.1% 47.3% -0.2 pt Capex * 81 101 -20% % of revenues 7.5% 10.6% -3.1 pt Operating Free Cash Flow ** 249 253 -1% % of
Slide 23: Sustained double-digit growth with some volatility by quarter
: : Sustained double-digit growth with some volatility by quarter Mobile revenue growth YoY - local currency 13.5% +12.7% 12.5% +1.4 pt Avg 2010: 11.5% +11.3% +2.5 pt 10.5% 9.5% Avg 2009: +8.8% 8.5% 7.5% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 2009, Q1 and Q2 2010 comparable, restated
Slide 24: Revenue by service
: : Revenue by service US$m Q1 11 Q1 10 $ Local growth currency Voice 720 674 7% 7% % of Voice+VAS revenues 74.4% 78.3% -3.9 pt VAS - SMS 97 92 5% 4% % of Voice+VAS revenues 10.0% 10.7% -0.7pt +33.4% VAS growth VAS non-SMS 152 95 60% 62% % of Voice+VAS revenues 15.6% 11.0% +4.6pt Other * 112 93 20%
Slide 25: VAS crossed the 25% revenue contribution landmark
: : VAS crossed the 25% revenue contribution landmark + 4.0 pts Q1 11 35.0% 30.6% 30.0% 24.6% 25.7% 25.0% 23.3% 21.7% 22.2% 18.9% 20.0% 14.7% 15.7% 11.0% 12.7% 13.4% 15.0% VAS non-SMS as a % of Voice+VAS 9.9% 10.0% VAS - SMS as % of Voice+VAS 5.5% 10.7% 11.7% 5.0% 9.5% 9.9% 9.9% 10.0% 4.4% 0.0% Q1 1
Slide 26: Revenue by category
: : Revenue by category US$m Q1 11 Q1 10 $ Contribution growth Q1 11 Communication (voice, SMS) 819 768 7% 76% Information (Data services) 106 66 61% 10% Entertainment (TV, Ringback tones, games) 77 76 1% 7% Solutions (Tigo Cash, Tigo Lends You) 24 2 n/a 2% Others (T&E, inbound roaming, other revenu
Slide 27: Good growth of data revenue in Latin America
: : Good growth of data revenue in Latin America (2G+3G) QoQ Latin America Q1 2011 Q4 2010 growth Data users over handsets 2G+3G (millions) 5.8 6.0 -3% Datacards users (millions) 1.2 0.9 24% Total data users 2G+3G (millions) 7.0 6.9 2% % of total cus tomers 28.9% 29.2% -0.3pt of which: 3G Data users
Slide 28: Regional review
Click to add title Regional review
Slide 29: Quarterly Highlights – Central America YoY
: : Quarterly Highlights – Central America YoY US$m Q1 11 Q1 10 Reported Local currency growth growth Customers (millions)* 13.8 13.2 5% Revenues 455 424 7% 5.3% EBITDA 246 236 4% 3.0% % of revenues 54.1% 55.6% -1.5 pt Capex 26 35 -25% % of revenues 5.7% 8.3% -2.6 pt Operating Free Cash Flow 130 169
Slide 30: Quarterly Highlights – South America YoY
: : Quarterly Highlights – South America YoY US$m Q1 11 Q1 10 Reported Local currency growth growth Customers (millions) 10.4 9.0 16% Revenues 387 312 24% 20.0% EBITDA 165 132 25% 20.7% % of revenues 42.6% 42.4% +0.2 pt Capex 28 22 25% % of revenues 7.2% 7.1% +0.1 pt Operating Free Cash Flow 102 74
Slide 31: Quarterly Highlights – Africa YoY
: : Quarterly Highlights – Africa YoY US$m Q1 11 Q1 10 Reported Local currency growth growth Customers (millions) 15.5 12.8 21% Revenues 239 217 10% 15.0% EBITDA 98 83 17% 22.8% % of revenues 40.9% 38.4% +2.5 pt Capex * 26 43 -39% % of revenues 11.0% 20.0% -9.0 pt Operating Free Cash Flow 33 17 90%
Slide 32: Financial review
Financial review
Slide 33: Strong normalized EPS growth in Q1 11: +33%
: : Strong normalized EPS growth in Q1 11: + 33% US$m Q1 11 Q1 10 $ growth EBITDA 509 451 13% Corporate costs -22 -17 27% % of revenues 2.0% 1.8% +0.2 pt Depreciation -178 -173 3% % of revenues 16.4% 18.1% -1.7 pt Net Finance Costs -45 -42 5% % of revenues 4.1% 4.5% -0.4 pt Taxes -82 -66 24% Colombi
Slide 34: Strong Cash Flow generation
: : Strong Cash Flow generation OFCF US$m Q1 11 Q1 10 Change Central America 130 169 -23% South America 102 74 38% Africa 33 17 90% Other (incl. Corporate) -16 -7 OFCF 249 253 -1% % of revenues 23.0% 26.5% -3.5 pt 34
Slide 35: Free Cash Flow
: : Free Cash Flow US$m 250 203 209 200 200 191 155 150 US$m Q1 11 Q1 10 Change OFCF 249 253 -1% 100 Net Interest paid -39 -20 96% 50 Corporate Costs paid -18 -14 30% FCF 191 200 -4% 0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 FCF* as % 21.0% 15.9% 19.9% 19.5% 17.7% of revenue * EB
Slide 36: Share buy back
: : Share buy back • No purchases in Q1 • Program raised to $ 800 million for full year 2011 • Active shareholder remuneration policy • Excess cash • Disposal of Laos and towers 36
Slide 37: Leverage: low Net Debt/EBITDA
: : Leverage: low Net Debt/EBITDA US$m Q1 11 Q4 10 Change Gross Debt 2,338 2,352 -15 Cash * 1,274 1,076 199 Net Debt 1,064 1,276 -211 Net Debt/EBITDA ** 0.5 0.6 -0.1pt * including pledged depo sits (no n current) and time depo sits ** (Net Debt/4)/EB ITDA Low leverage triggers higher returns to shar
Slide 38: Gross Debt maturity
: : Gross Debt maturity US$m 700 600 500 400 454 588 300 531 200 325 236 323 236 100 53 46 0 < 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5-6 years 6-7 years >7 years Average maturity at 3 years and 4 months 38% of debt at fixed rates 38
Slide 39: Consolidation of listing onto a single exchange
: : Consolidation of listing onto a single exchange Rationale • No need for a dual listing in today’s globalized trading environment • Simplification of listing obligations • Additional management focus on business growth Implications • Nasdaq OMX in Stockholm retained as single and primary listing
Slide 40: Consolidation of listing onto a single exchange
: : Consolidation of listing onto a single exchange Timing: Announcement of listing consolidation April 19, 2011 Nasdaq US delisting becomes effective May 30, 2011 or thereafter Nasdaq OMX becomes primary listing May 30, 2011 or thereafter Ability to seek deregistration from the SEC From September 2
Slide 41: Appendix
Click to add title Appendix Appendix
Slide 42: Overview
: : Overview Central America: South America: Africa*: Mobile Amnet: 38m 28 m 60 m 172 m operations’ pops Guatemala 14m under license: El Salvador 6m 260m Honduras 8m Costa Rica 4.5m Guatemala 13.5m El Salvador 6m Senegal 12m Chad 10.5m Nicaragua 6m Ownership: 55.0% Ownership: 100% Ownership: 100% Ow
Slide 43: Mobile ARPU in local currency
: : Mobile ARPU in local currency US$ (constant forex) Q1 11 Q4 10 Q3 10 Q2 10 Q1 10 Central America 11.7 11.9 11.6 11.5 11.5 South America 11.4 11.7 11.4 11.1 11.2 Africa 5.3 5.4 5.5 5.5 5.6 Total Millicom 9.1 9.3 9.2 9.2 9.3 43 43
Slide 44: YoY Local currency mobile ARPU growth
: : YoY Local currency mobile ARPU growth Year-on-Year local currency ARPU growth (%) Total Central Am. South Am. Africa Q1 11 (2%) 1% 3% (6%) Q4 10 (5%) (2%) 1% (11%) Q3 10 (6%) (8%) 3% (7%) Q2 10 (8%) (11%) 2% (7%) Q1 10 (9%) (13%) 0% (3%) 44
Slide 45: Revenue split by category LATAM
: : Revenue split by category LATAM US$m Q1 11 Q1 10 $ Local growth currency Voice 511 481 6% 4% % of Voice+VAS revenues 69.4% 74.1% -4.7pt VAS - SMS 86 82 5% 2% % of Voice+VAS revenues 11.7% 12.7% -1.0 pt +33.4% VAS growth VAS non-SMS 139 85 62% 63% % of Voice+VAS revenues 18.9% 13.2% +5.7pt Other
Slide 46: LATAM
: : LATAM + 4.7 pts 35.0% 30.6% 29.2% 30.0% 27.9% 25.9% 26.5% 25.0% 17.7% 18.9% 20.0% 13.2% 16.2% 15.4% 15.0% VAS non-SMS as a % of Voice+VAS 10.0% VAS - SMS as % of 12.7% 11.1% 11.7% 11.5% 11.7% Voice+VAS 5.0% 0.0% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Note: Other VAS includes Ringback tones / Data (web br
Slide 47: Revenue split by category Africa
: : Revenue split by category Africa US$m Q1 11 Q1 10 $ Local growth currency Voice 210 193 9% 13% % of Voice+VAS revenues 90.1% 91.3% -1.2 VAS - SMS 10 9 11% 19% % of Voice+VAS revenues 4.4% 4.4% +0.0 pt +33.5% VAS grow th VAS non-SMS 13 9 40% 48% % of Voice+VAS revenues 5.5% 4.3% +1.2 pt Other * 6
Slide 48: Africa
: : Africa + 1.2 pts 12.0% 10.1% 9.9% 10.0% 9.3% 9.0% 8.7% 8.0% 5.2% 4.7% 5.5% 4.3% 4.4% 6.0% VAS non-SMS as a % of 4.0% Voice+VAS 4.9% VAS - SMS as % of 2.0% 4.4% 4.7% 4.5% 4.4% Voice+VAS 0.0% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Note: Other VAS includes Ringback tones / Data (web browsing)/ Content (Prem
Slide 49: SIM card registration
: : SIM card registration % of revenues from % of customer base customer base Starting date for Registration registered at Market registered at registration deadline March 31, 2011 March 31, 2011 Tanzania June 1, 2009 July 15, 2010 96% 99% MOAT* agreement granted extension to October 15, 2010. DRC D
Slide 50: Movements of currencies vs USD YoY
: : Movements of currencies vs USD YoY Closing rate Closing rate Change Average rate Average rate Change Q1 11 Q1 10 Q1 11 Q1 10 Guatemala GTQ 7.66 7.99 4% 7.83 8.22 5% Honduras HNL 18.90 18.90 0% 18.90 18.90 0% Central America Nicaragua NIO 22.15 21.09 -5% 22.01 20.96 -5% Costa Rica CRC 499.00 523.
Slide 51: Market Share
: : Market Share CAM SAM Africa MIC Avg Market Share Avg Market Share Avg Market Share Avg Market Share 54.4% 18.2% 30.8% 29.9% 70.0% 64.9% 58.2% 57.2% 60.0% 53.9% 50.0% 44.2% 42.8% 35.8% 37.6% 40.0% 33.1% 30.8% Average 30.0% 25.1% MIC 20.0% 15.1% 10.0% 10.0% 0.0% Increase QoQ Decrease QoQ Guatemala
Slide 52: Decline in churn
: : Decline in churn MIC TOTAL 5.4% 5.3% 5.2% 5.1% 5.1% 4.9% 5.0% 4.8% 4.7% 4.6% 4.4% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q4 10 Q1 11 8.0% 6.6% Q4 10 Q1 11 Q4 10 Q1 11 6.0% 6.0% Q4 10 Q1 11 4.9% 4.7% 4.3% 4.0% 3.8% 3.4% 4.0% 2.0% CAM SAM Africa MIC TOTAL 52 Increased loyalty through VAS and mandatory regi
Slide 53: Quarterly Interest expense
: : Quarterly Interest expense 65 63 62 2 60 10 55 12 50 3 49 47 45 2 45 7 2 40 49 49 45 43 42 35 30 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Total interest cost Other f inancial costs HY bond early redemption Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Effective 7.2% 7.3% 7.1% 7.4% 7.2% rate Effective rate calculated on lo
Slide 54: Taxes
: : Taxes US$m Q1 11 Q1 10 Change PBT 281 221 28% Taxes 82 66 24% Effective tax rate * 24.3% 29.9% -5.6 pt * f o r Q1 11 exclud ing o ne- o f f t ax in C o lo mb ia ( $14 millio n) Initial benefits of tax planning (transfer pricing, debt push-down, etc. ) 54
Slide 55: Increased cash repatriation
: : Increased cash repatriation Net cash upstream US$m 350 300 250 200 305 238 150 100 Q1 10 Q1 11 55 Cash upstream > FCF
Slide 56: Market Overview – by Segment
: : Market Overview – by Segment Central South Millicom Segments Africa Total America America Market Overview Population (million) 28 60 172 260 Mobile Penetration 88.3% 91.1% 43.2% 63.9% Operational Data Total Mobile customers (000) 13.8 10.4 15.5 39.8 Attrib. Customers (000) 10.8 10.4 15.3 36.6 Ca
Slide 57: Market Overview LATAM
: : Market Overview LATAM Latin America Central America South America El Salvador Guatemala Honduras Bolivia Colombia Paraguay Shareholding 100.0% 55% (p) 66.7% 100.0% 50% + 1 share 100.0% License Period (yrs) 20 yrs fr 1998 15 yrs fr 2003 25 yrs fr 1996 20 yrs fr 1995 10 yrs fr 2003 5 yrs renewal D
Slide 58: Market Overview Africa
: : Market Overview Africa Africa Chad DRC Ghana Mauritius Rwanda Senegal Tanzania Shareholding 100.0% 100.0% 100.0% 50% (p) 87.5% 100.0% 100.0% License Period (yrs) 10 yrs fr 2004 20 yrs fr 1997 15 yrs fr 2004 15 yrs fr 2000* 15 yrs fr 2008 20 yrs fr 1998 25 yrs fr 2007 Date of Expiry 2014 2017 201
Slide 59: Merci
Merci 59
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