Millicom International Cellular S.a. · NASDAQ:TIGO
Millicom International Cellular — Q3 2010 Earnings Presentation
46 slides from Millicom International Cellular's earnings presentation, Oct 19, 2010
Slide 1: Financial results Q3 10
Millicom International Cellular S.A. Financial results Q3 10 Mikael Grahne 19th October, 2010 François –Xavier Roger
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, revenues, earnings and other trend information. It is important to note that Millicom’s actual results in
Slide 3: Caveat
: : Caveat Honduras has been restated at 100% in this presentation, including the historical data, in order to facilitate comparisons 3
Slide 4: Q3 Highlights
: : Q3 Highlights • Group revenues exceeding $ 1 billion, with organic local currency revenue growth at 11.7% • More than 1.5 M 3G customers using data services in Latin America • Strong EBITDA margin of 47.5% • Continued strong cash flow generation • Full consolidation of Honduras • Restructuring o
Slide 5: Financial Highlights Q3 YoY
: : Financial Highlights Q3 YoY US$m Q3 10 Q3 09 $ Local growth currency Customers ('000) 37,443 31,857 18% Revenues 1,018 904 13% 11.7% EBITDA 484 418 16% 14.6% % of revenues 47.5% 46.3% +1.2 pt Capex 196 141 39% % of revenues 19.2% 15.6% 3.7 pt Operating Free Cash Flow * 245 151 42% % of revenues
Slide 6: Double digit revenue growth
: : Double digit revenue growth Revenue growth YoY - local currency 12.0% 11.5% 11.0% 10.5% 10.0% 9.5% 9.0% 8.5% 8.0% 7.5% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 6
Slide 7: Revenue growth driven by value focus (Arpu)
: : Revenue growth driven by value focus (Arpu) 25.0% 20.0% 15.0% YoY growth 10.0% Customers 5.0% Recurring revenue growth * ARPU in local currency 0.0% -5.0% ARPU -4% Q310 vs Q309 -10.0% with constant country mix -15.0% Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 * Recurring revenue = customers x ARPU in local c
Slide 8: Revenue growth
: : Revenue growth US$m Reported 1,050 +11.7% +1.3% +13.0% growth 1,000 950 +5.8% 11.9 900 0.0 850 101.9 1,006 1,018 47.5 800 904 904 856 856 750 700 Local currency organic growth at 11.7% despite full consolidation of Honduras and full year impact of additional taxes in Central America and Africa 8
Slide 9: EBITDA growth
: : EBITDA growth Reported growth Strong local currency organic growth at 14.6% 9
Slide 10: Revenue split by category
: : Revenue split by category US$m Q3 10 Q3 09 $ Local growth currency Voice 680 618 10% 10% % of Voice+VAS revenues 76.7% 79.3% VAS - SMS 91 84 8% 6% % of Voice+VAS revenues 10.3% 10.8% -0.5 pt + 25.7% VAS growth VAS non-SMS 116 77 51% 46% % of Voice+VAS revenues 13.0% 9.9% +3.1 pt Other * 131 125
Slide 11: Strong momentum on non-SMS VAS revenue
: : Strong momentum on non – SMS VAS revenue + 2.6 pts 25.0% 23.3% 22.4% 21.6% 21.7% 20.7% 20.0% 10.8% 10.3% 12.5% 13.0% 9.9% 15.0% VAS non-SMS as a % of 10.0% Voice+VAS VAS - SMS as % of 10.8% 10.8% 11.1% Voice+VAS 5.0% 9.9% 10.3% 0.0% Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Note: Other VAS includes Ringback
Slide 12: Strong growth of 3G data revenue in Latin America
: : Strong growth of 3G data revenue in Latin America driven by strong customer recruitment and stable prices Latin America Q3 10 Q2 10 QoQ growth 3G Handsets Customer base 1,342 1,170 15% % of total customers 5.8% 5.2% 0.6 pt 3G data users * 808 727 11% 3G data users/customer base 60% 62% -1.9 Data
Slide 13: Market share evolution
: : Market share evolution Market share (%) Total Central Am. South Am. Africa Q3 10 29.3% 53.8% 17.4% 30.4% Q2 10 29.4% 53.7% 17.3% 30.3% Q1 10 29.2% 53.4% 16.8% 31.0% Q4 09 28.7% 53.0% 16.3% 30.8% Q3 09 28.7% 53.5% 16.3% 30.4% Market share increases in all 3 regions but marginal decrease overall a
Slide 14: Churn
: : Churn M IC T O T A L 5 .4 % 5 .4 % 5 .3 % 5 .3 % 5 .2 % 5 .1 % 5 .1 % 5 .1 % 5 .0 % 5 .0 % 4 .9 % 4 .8 % Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q1 10 Q2 10 8 .0 % 7 .0 % 6 .8 % Q1 10 Q2 10 7 .0 % Q1 10 Q2 10 Q1 10 Q2 10 6 .0 % 5 .1 % 5.3% 4 .7 % 4 .6 % 5 .0 % 3 .9 % 3 .5 % 4 .0 % 3 .0 % 2 .0 % CAM SAM A
Slide 15: Regional review
Click to add title Regional review
Slide 16: Quarterly Highlights – Central America YoY
: : Quarterly Highlights – Central America YoY US$m Q3 10 Q3 09 Reported Local currency growth growth Customers ('000) 13,120 12,366 6% Revenues 376 374 0% -1% EBITDA 210 206 2% 1% % of revenues 55.9% 55.2% +0.8 pt Capex 40 26 56% % of revenues 10.6% 6.9% +3.7 pt Operating Free Cash Flow 131 105 25%
Slide 17: Quarterly Highlights – South America YoY
: : Quarterly Highlights – South America YoY US$m Q3 10 Q3 09 Reported Local currency growth growth Customers ('000) 9,678 8,414 15% Revenues 356 277 28% 21% EBITDA 151 113 34% 28% % of revenues 42.4% 40.7% +1.7pt Capex 68 29 132% % of revenues 19.1% 10.5% +8.5pt Operating Free Cash Flow 103 83 24%
Slide 18: Quarterly Highlights – Africa YoY
: : Quarterly Highlights – Africa YoY US$m Q3 10 Q3 09 Reported Local currency growth growth Customers ('000) 14,646 11,077 32% Revenues 230 200 15% 22% EBITDA 94 75 25% 34% % of revenues 40.7% 37.3% +3.4 pt Capex * 73 82 -12% % of revenues 31.7% 41.1% -9.4 pt Operating Free Cash Flow 1 -21 % of rev
Slide 19: Quarterly Highlights – Cable YoY
: : Quarterly Highlights – Cable YoY US$m Q3 10 Q3 09 Reported Local currency growth growth * Revenues 57 52 8% 4% - Amnet 50 45 - Navega 7 7 EBITDA 28 24 17% 6% - Amnet 18 17 - Navega 10 7 % of revenues 49.7% 46.0% +3.7 pt Capex 15 6 157% % of revenues 27.0% 11.0% 16.0 pt Operating Free Cash Flow 1
Slide 20: Financial review
Financial review
Slide 21: Taxes
: : Taxes US$m Q3 10 Q3 09 Change PBT * 205 199 3% Taxes 60 57 6% Effective tax rate 29.1% 28.4% +0.7pt * Q3 2 0 10 exclud ing g ain o n r evaluat io n o f Ho nd ur as Lower tax rate than Q2 10 with less withholding taxes 21
Slide 22: EPS growth impacted by exceptional items
: : EPS growth impacted by exceptional items US$m Q3 10 Q3 09 $ growth EBITDA 484 418 16% Depreciation -184 -162 13% Honduras revaluation % of revenues 18.0% 17.9% +0.1 pt Net Finance Costs -58 -43 36% HY bond redemption % of revenues 5.7% 4.7% +1.0 pt Taxes -60 -57 6% % of revenues 5.9% 6.3% -0.4 p
Slide 23: Increased cash repatriation
: : Increased cash repatriation Net cash upstream US$m 700 600 500 400 663 300 462 200 100 84 0 2008 2009 Q3 2010 YTD 23
Slide 24: Strong Cash Flow generation
: : Strong Cash Flow generation OFCF US$m Q3 10 Q3 09 Change Central America 131 105 25% South America 103 83 24% Africa 1 -21 Cable 17 12 41% Other (incl. Corporate) -8 -28 OFCF 245 151 63% % of revenues 24.1% 19.1% 5.0 pt 24
Slide 25: Free Cash Flow
: : Free Cash Flow* US$m 300 252 250 227 203 200 150 135 US$m Q3 10 Q3 09 Change 119 100 OFCF 245 151 63% Net Interest Paid -26 -43 -40% 50 Corporate Costs ** -16 -22 -24% FCF 203 119 71% 0 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 ** Excluding share based compensation * EBITDA - Capex +/- WC- Interests - Taxes
Slide 26: Redemption of 2013 Notes
: : Redemption of 2013 Notes • Redemption on December 1, 2010 with a $490.3 M payment: Principal $ 459.6 M Interest (10%) $ 23.0 M Early redemption premium $ 7.7M Total $ 490.3 M • EPS accretive in 2011 26
Slide 27: Share buy back
: : Share buy back • $ 300 M program in progress • Status as of September 30, 2010: • 1,126,349 shares acquired, i.e. 35% of program • $ 104.7 M spent • Balance to be completed by year end 27
Slide 28: Leverage: stable Net Debt/EBITDA
: : Leverage: stable Net Debt/EBITDA US$m Q3 10 Q2 10 Change Gross Debt 2,988 2,516 472 Cash * 1,712 1,276 436 Net Debt 1,276 1,240 36 Net Debt/EBITDA ** 0.7 0.7 * including pledged depo sits and time depo sits ** (Net Debt/4)/EB ITDA Excess cash will be reduced in Q4 with bond redemption ($490 M) a
Slide 29: Gross Debt maturity
: : Gross Debt maturity US$m 1200 1000 465 HY bond to be repaid on Dec. 1 2010 800 454 600 400 675 0 593 397 544 200 191 124 0 < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years Average maturity at 2 years and 6 months Expected average maturity around 3 years in December 2010 29
Slide 30: Revised OFCF guidance for 2010
: : Revised OFCF guidance for 2010 (including impact of full consolidation of Honduras in H2 that has a limited impact) 2010 Guidance 2010 Guidance as at Q2 as at Q3 EBITDA margin Around 47% Around 47% Capex $700m $700m OFCF* margin High teens Around 20% * OFCF= Operating Free Cash Flow: 30 EBITDA -
Slide 31: Appendix
Click to add title Appendix Appendix
Slide 32: Overview
: : Overview Central America: South America: Africa*: Mobile Amnet: 38m 28 m 63 m 169 m operations’ pops Guatemala 13m under license*†: El Salvador 7m 260m Honduras 8m Costa Rica 4m Guatemala 13m El Salvador 7m Senegal 14m Chad 10m Nicaragua 6m Ownership: 55.0% Ownership: 100% Ownership: 100% Owners
Slide 33: ARPU in Local currency
: : ARPU in Local currency Q3 10 Q2 10 Q1 10 Q4 09 Q3 09 Central America El Salvador 11 11 11 12 12 Guatemala 101 102 104 104 113 Honduras 197 191 190 197 194 South America Bolivia 80 77 76 82 77 Colombia 22,631 22,159 22,159 22,632 21,541 Paraguay 51,809 48,473 49,557 53,699 51,464 Africa Chad 3,49
Slide 34: YoY Local currency ARPU growth
: : YoY Local currency ARPU growth Year-on-Year local currency ARPU growth (%) Total Central Am. South Am. Africa Q3 10 (6%) (6%) 3% (7%) Q2 10 (8%) (11%) 2% (7%) Q1 10 (9%) (13%) 0% (3%) Q4 09 (10%) (20%) (4%) (9%) Q3 09 (12%) (19%) (3%) (15%) 34
Slide 35: Mobile revenues in local currency
: : Mobile revenues in local currency LC million Q3 10 Q3 09 Growth % Central America El Salvador 95 106 -10.6% Guatemala 1,986 1,875 5.9% Honduras 2,759 2,705 2.0% South America Bolivia 535 444 20.5% Colombia 295,967 237,884 24.4% Paraguay 566,871 486,469 16.5% Africa Chad 11,374 10,842 4.9% DRC 35
Slide 36: 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 September 30, 2010 September 30, 2010 Tanzania June 1, 2009 July 15, 2010 78% 88% MOAT* agreement grants extension to October 15, 2010
Slide 37: Penetration rates
: : Penetration rates CAM SAM Africa MIC Avg penetration Avg penetration Avg penetration Avg penetration 86.4% 88.8% 27.7% 48.4% 120.0% 99.2% 95.2% 100.0% 90.2% 81.8% 84.8% 83.0% 80.0% 59.8% 60.0% 53.2% 51.7% Average 33.3% 33.4% MIC 40.0% 20.4% 20.0% 10.2% 0.0% 37
Slide 38: Market Share evolution QoQ
: : Market Share evolution QoQ CAM SAM Africa MIC Avg Market Share Avg Market Share Avg Market Share Avg Market Share 53.8% 17.4% 30.4% 29.3% 70.0% 65.3% 57.3% 55.6% 60.0% 51.5% 50.0% 45.2% 42.3% 40.0% 36.3% 33.9% 33.1% 27.6% 26.1% Average 30.0% MIC 20.0% 15.3% 9.5% 10.0% 0.0% Increase Decrease Stab
Slide 39: Movements of currencies vs USD YoY
: : Movements of currencies vs USD YoY Closing rate Closing rate Change Average rate Average rate Change Q3 10 Q3 09 Q3 10 Q3 09 Guatemala GTQ 8.14 8.34 2% 8.06 8.25 2% Honduras HNL 18.90 18.90 0% 18.90 18.90 0% Central America Nicaragua NIO 21.62 20.59 -5% 21.49 20.45 -5% Costa Rica CRC 507.75 587.
Slide 40: Q3 10 Market Overview – by Segment
: : Q3 10 Market Overview – by Segment Central South Amnet/ Millicom Segments Africa Total America America Navega Market Overview Population (million) 28 63 169 260 Mobile Penetration 86.4% 88.8% 27.7% 48.4% Operational Data Total Customers (000) 13,120 9,678 14,646 37,443 Attrib. Customers (000) 10
Slide 41: Market Overview LATAM - Amnet
: : Market Overview LATAM - Amnet Latin America Central America AMNET South America El Salvador Guatemala Honduras Bolivia Colombia Paraguay Shareholding 100.0% 55% (p) 66.7% 100.0% 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
Slide 42: 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 43: Control of Honduras
: : Control of Honduras • Millicom entered into an agreement with its partner in Honduras to take full control of its affiliate Celtel from 1.7.2010. Celtel will be fully consolidated from Q3 2010 as a consequence • Millicom has an unconditional 5-year call option on its partner’s stake while Millic
Slide 44: Restructuring of ownership - Cable
: : Restructuring of ownership - Cable Former New Status ownership ownership Amnet Guatemala 100.0% 55.0% Closed Navega El Salvador 55.0% 100.0% Pending approval Navega Honduras 60.7% 66.7% Closed Amnet Honduras 100.0% 66.7% Pending approval 44
Slide 45: Quarterly Interest expense
: : Quarterly Interest expense 65 60 Costs of HY 10 bond early redemption 55 40% fixed rate 50 60% variable rate 45 Target of 50% 40 52 variable/ 50% fixed 49 47 45 45 35 30 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Total Interest expense (US$m) Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 * Temporary increase of gross debt.
Slide 46: Merci
Merci 46
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