Millicom International Cellular S.a. · NASDAQ:TIGO
Millicom International Cellular — Q4 2017 Earnings Presentation
40 slides from Millicom International Cellular's earnings presentation, Feb 7, 2018
Slide 1: 2017 Q4 results
2017 Q4 results Strong finish to 2017, accelerating into 2018 Mauricio Ramos, CEO Tim Pennington, CFO February 7, 2018 Millicom International Cellular S.A.
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: 1. CEO review
¥ MILLICOM 1. CEO review THE DIGITAL LIFESTYLE Mauricio Ramos
Slide 4: Strategic and operational highlights
Strategic and operational highlights Strong finish to 2017, accelerating into 2018 1 Well into our strategic journey 2 A record year for network build and customer growth 3 Back to growth and financial performance accelerating 4 Delivering on our promise of improving capital allocation 4
Slide 5: Our journey… big picture
1 Our journey… big picture We have been transforming the company in many ways FROM TO Cable + convergence Mobile-only High-speed data (4G) Voice + SMS STRATEGY Subscription-driven Prepaid Compliance leader Purpose driven Legacy network State-of-the-Art (4G, HFC) Analog NETWORK Digital Legacy IT OTT
Slide 6: We have a single strategic purpose
1 We have a single strategic purpose Building digital highways that connect people, improve lives, develop communities By year-end 2018: 10M homes will be covered by our fixed network 10M mobile customers will enjoy 4G speeds Technology has the potential, and we the responsibility to transform socie
Slide 7: We are a purpose-driven company
1 We are a purpose-driven company Child Rights Great Place Diversity Protecting young digital citizens to Work Gender equality and women in tech • UNICEF - MoU Taking care of employees • Connected Women • COP: +188,000 children • Top 20 in GPTW Latam • +24k women trained • M-Birth: +2m children • 33
Slide 8: B2C Mobile - Record 3.5m 4G net adds in Latam
2 B2C Mobile - Record 3.5m 4G net adds in Latam Added 3.5m 4G customers comfortably beating our 3 million target and ending with a record Q4 4G network coverage expansion continues Record 4G data user net additions in Q4 and 2017 Latam 4G coverage in % of population covered Latam B2C Smartphone net
Slide 9: Our mobile business is back to growth
2 Our mobile business is back to growth ARPU trends improved and revenue growth turned positive in Q4 Latam B2C mobile ARPU evolution B2C mobile service revenue growth Constant currency blended ARPU (Q1 16 = 100 basis), Q1 16- Q4 17 Latam % growth in local currency, Q1 16- Q4 17 100.0 0.2% 99.2 97.9
Slide 10: Home – Record 250k HFC net adds in 2017
2 Home – Record 250k HFC net adds in 2017 We continue to build and connect new HFC homes at a rapid pace, both up more than 65% YoY Added 1.3m HFC homes-passed Connected 250k more HFC homes in 2017 Latam new HFC homes passed by quarter, 2016 – 2017 (000s) Latam new HFC homes connected by quarter, 20
Slide 11: HFC is growing double-digits
2 HFC is growing double-digits HFC growth offsetting legacy network attrition Homes Passed Homes Connected HFC RGUs 000’s, Q4 16 – Q4 17 000’s, Q4 16 – Q4 17 000’s, Q4 16 – Q4 17 11.8% 6.5% 9.0% 9,076 3,303 6,091 630 3,100 8,119 5,588 967 974 1,724 1,025 1,894 18.1% 12.2% 18.2% 8,446 7,152 2,329 4,3
Slide 12: Home revenue growing steadily
2 Home revenue growing steadily Subscription-based revenue helps produce consistent sequential growth QoQ Latam Home ARPU evolution Latam Home service revenue Blended ARPU ($/month), Q1 16- Q4 17 Millions of dollars, Q1 16- Q4 17 28.5 28.4 28.2 28.3 289 27.5 282 26.9 26.8 277 279 25.7 267 259 260 24
Slide 13: Revenue growth accelerating
3 Revenue growth accelerating Fastest Latam revenue growth rate in more than two years Latam service revenue growth Latam service revenue growth by business unit %YoY growth, Q1 16 – Q4 17 %YoY growth, Q4 17 % of Latam Service revenue Mobile Voice, -11.9% 31% 3.1% SMS & Others 2.9% 2.3% Mobile Data
Slide 14: Latam growth broad based
3 Latam growth broad based We sustained good momentum in all of our largest Latam markets in Q4 El Salvador Guatemala Honduras Service revenue, year-on-year (%), Q1 16 – Q4 17 2.7% 3.5% 3.4% -0.8% -3.9% -2.5% -4.3% -4.8% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 Bolivia Colombia Paraguay Ex regulatory impac
Slide 15: $400m turnaround in cash flow in three years
3 $400m turnaround in cash flow in three years Rapidly growing equity FCF generation while we invest to accelerate growth Annual equity FCF Reported eFCF $m, 2014-2017 ~$400m 356 269 235 -43 2014 2015 2016 2017 15
Slide 16: Capital allocation – delivering on our promise
4 Capital allocation – delivering on our promise More than $800m in asset disposals since 2015, with more to go DRC Disposal - Q1 16 Senegal Disposal - Q1 17 Ghana JV with Airtel - Q1 17 Paraguay ($125m) Tower Sale – Q2 17 Colombia ($147m) Tower Sale – Q3 17 Bima Non-core Partial asset Monetization
Slide 17: 2. CFO review
¥ MILLICOM 2. CFO review THE DIGITAL LIFESTYLE Tim Pennington
Slide 18: Financial highlights
Financial highlights Q4 was our strongest quarter of 2017 1 Revenue growth accelerated 2 Margin expansion also driving earnings growth 3 Capital discipline driving cash flow and return on capital 4 Capital structure healthy 5 Outlook 18
Slide 19: Key financial metrics – Q4 2017
1 Key financial metrics – Q4 2017 Group service revenue up 2.0% and EBITDA up 6.9% - full year capex flat Service Revenue a EBITDA a and Margins Capex b $m, Q4 16 – Q4 17 $m and %, Q4 16 – Q4 17 $m, FY 16 – FY 17 2.0% 6.9% $5m 1,427 1,456 561 988 993 525 Q4 16 Q4 17 Q4 16 Q4 17 FY 16 FY 17 EBITDA ma
Slide 20: Service revenue
1 Service revenue Improvement on a sequential basis Group sequential organic service revenue growth analysis %YoY, Q3 17 – Q4 17 35bps 73bps 2.0% 1.7% Q3 17 Latam Africa Q4 17 20
Slide 21: Latam
1 Latam EBITDA up 9% in Latam Latam service revenue Latam OCF (FY) $m, Q4 16 – Q4 17 $m and margin, FY 16 – FY 17 +1.4% +3.1% 1,244 Latam EBITDA 1,227 $m and margin, Q4 16 – Q4 17 +9.0% 1,307 22.9% 22.4% 1,268 552 506 Q4 16 Q4 17 Q4 16 Q4 17 FY 16 FY 17 Capex / 36.7% 39.2% Revenue 16.2% 16.7% Q4 16
Slide 22: Colombia progressing as expected
1 Colombia progressing as expected Investing in sales and marketing while absorbing regulatory challenges Service revenue growth* Colombia EBITDA bridge YoY growth, Q4-17 % Revenue, Q4 17 26.8% -0.9% -0.3% One-off 5.1% -3.8% 4.3% 2.3% 2.5% 26.2% 21.7% Reported -0.2% Q4 17 reported Mobile regulatory
Slide 23: Africa
1 Africa Africa still challenging but delivering on our cash flow commitment Africa service revenue Africa eFCF (FY) $m, Q4 16 – Q4 17 $m, FY 16 – FY 17 -6.3% Africa EBITDA $m and margin, Q4 16 – Q4 17 -15.9% 34 160 +41 150 58 49 -7 Q4 16 Q4 17 Q4 16 Q4 17 FY 16 FY 17 36.0% 32.4% Q4 16 numbers are a
Slide 24: EBITDA – Q4 2017
2 EBITDA – Q4 2017 Latam EBITDA growth offsetting Africa EBITDA evolution by region $ million, Q4 16 – Q4 17 +6.9% 9 0 45 +0.9% 5 561 525 520 Ebitda Q4 16 FX Ebitda Q4 16 LatAm Africa Corporate Ebitda Q4 17 (constant currency) 34.1% as % of revenue 36.0% 24
Slide 25: Cost review and margin sustainability
2 Cost review and margin sustainability Reinvesting G&A savings into sales and marketing to support growth Group total OPEX base Reported Group FY EBITDA margin $m per OPEX segment and reported growth YoY, FY 16 – FY 17 FY Reported EBITDA margin , 2014– 2017 (2.0%) 2,301 2,255 +360 bps Sales and +3.
Slide 26: Capital – focused capex lifting cash flow and ROIC
3 Capital – focused capex lifting cash flow and ROIC Re-deploying capital to Latam allows us to accelerate network build and improve returns Total Capex OCF (EBITDA – Capex) Return on Capital* Reported Capex (excl. Spectrum, licences and Reported Group EBITDA less capex, Group return on invested cap
Slide 27: P&L review - FY2017
2 P&L review - FY2017 P&L Summary Key Observations • Gain on sale of towers in Paraguay and A US$ million FY17 FY16 % Var Colombia Revenue 6,024 5,979 0.8% EBITDA 2,190 2,114 3.6% • Include debt management costs B Depreciation & amortization (1,310) (1,317) (0.5%) Other operating 39 A (38) NM Operat
Slide 28: Cash flow - FY 2017
3 Cash flow - FY 2017 EFCF up 39% higher year-on-year FY 2017 cash flow $ million 955 69 2,248 255 449 1,224 164 520 356 Ebitda including Cash capex Working capital Cash from Taxes paid Finance charges FCF Dividend to eFCF discontinued (ex-spectrum and others operations minorities operations and lic
Slide 29: Capital structure
4 Capital structure Cash generation and tower sales produced lower leverage in 2017 Net debt evolution in 2017 Debt profile $ million, 31 December 2016 – 31 December 2017 % of gross debt, 31 December 2017 114 167 Gross debt currency exposure 19 LC debt 356 265 USD debt 53 40% 60% 4,181 4,071 Gross d
Slide 30: Currency exposure
4 Currency exposure Only 15% of our proportional EBITDA is from high volatility FX country 10-year FX trends Proportional Latam EBITDA Bloomberg Weekly FX rates vs USD, 2008 - 2017 Latam EBITDA by country, adjusted for proportional Millicom ownership, and ranked by currency volatility, 2017 15% COP
Slide 31: Outlook 2018
5 Outlook 2018 Targeting faster revenue growth and operating leverage in 2018 Reach 10 million 4G subs, 10 million homes passed by the end of 2018 and add 300,000 HFC homes connected Latam Service Revenue 2-4% organic growth EBITDA 3-6% organic growth Capex Around $1.0 billion Africa eFCF Positive 3
Slide 32: Recap
Recap Gained momentum in 2017, finished strong in Q4, positioning Millicom for an even better 2018 1 We’ve come a long way on our journey... 2 ... 2017 was a pivotal year as growth returned … 3 ... we still have many more people and homes to connect ... 4 … with continued focus on cost control and c
Slide 33: Q&A
¥ MILLICOM Q&A THE DIGITAL LIFESTYLE
Slide 34: Depreciation and amortization, interest expense
Depreciation and amortization, interest expense A closer look at D&A and net interest expense lines Depreciation and amortisation Interest expense $ million, FY17 $ million, FY17 317 Average 38 24 cost of 43 debt of 6.2% 70 993 1,310 471 344 Depreciation Amortization D&A 2017 Interest Finance Debt O
Slide 35: Effective tax rate
Effective tax rate Withholding, Africa and HQ impact reported tax rate Latam effective tax rate was 23% in 2017 % of Profit before taxes, FY17 11% 13% 21% 68% 23% Latam effective Withholding tax Taxes in Africa, Other Reported effective tax rate Head Office + tax rate Associates 35
Slide 36: Debt maturity profile
Debt maturity profile Comfortable capital structure and liquidity with no major maturities until 2024 Debt maturities by year a $ million Average life of 5.4 years 930 754 641 593 560 397 414 GT $800m 249 25s 28s $500m $500m PY 149 SEK $300m 115 $243m 2018 2019 2020 2021 2022 2023 2024 2025 2026 >20
Slide 37: Gross debt by country
Gross debt by country Central America: South America: Africa: Corporate: Total MIC Debt: Total debt $1,606m Total debt $1,970m Total debt $337m Total debt $1,255m $5,168m 22% guaranteed 4% guaranteed 59% guaranteed 0% guaranteed 12% Guaranteed Honduras: $388m (58% guaranteed) Guatemala: $995m Chad:
Slide 38: Net debt by country
Net debt by country Central America: South America: Africa: Total Net Debt: $1,233m $1,539m $184m Corporate $4,071m Leverage 1.07x Leverage 1.53x Leverage 1.06x $1,115m Leverage 1.86x Honduras: $366m Leverage 1.3x Guatemala: $686m Leverage 1.0x Chad: $61m El Salvador: $116m Leverage 0.8x Rwanda: $41
Slide 39: Currency exposure of debt
Currency exposure of debt Dec. 2017 Debt including finance leases Cash Net debt US$ Local Total Total USD Local Total 1,709 1,867 3,576 804 1,341 1,431 2,772 Latin America* 48% 52% 100% 48% 52% 100% 139 197 336 153 132 52 184 Africa 41% 59% 100% 72% 28% 100% 1,255 0 1,255 141 1,120 -5 1,115 Corporat
Slide 40: * \LLICoM
* \LLICoM r ) THE DIGITAL LIFESTYLE
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