50 slides from Millicom International Cellular's earnings presentation, Jul 19, 2011
Slide 1: Financial results Q2 2011
Millicom International Cellular S.A. Financial results Q2 2011 Mikael Grahne 19th July, 2011 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: Q2 Highlights
: : Q2 Highlights • Underlying* local currency growth at 11% • Further improvement in ARPU, with positive growth in both Central and South America • Continued VAS development, with almost 1/3 of revenues coming from VAS and half of revenue growth coming from Data in Latin America • Underlying* EBITD
Slide 4: Financial Highlights Q2 YoY
: : Financial Highlights Q2 YoY US$ million Q2 11 Q2 10 $ Local Underlying growth currency growth Customers (million) 41.3 36.7 12% Revenues 1,120 977 15% 10.2% 11.0% EBITDA 513 464 11% 6.4% % of revenues 45.8% 47.5% -1.7pt -1.3 pt Capex 151 134 12% % of revenues 13.4% 13.7% -0.3pt Operating Free Ca
Slide 5: Increased commercial investment in data and services (+21.1% YoY)
: : Increased commercial investment in data and services (+21.1% YoY) 300 +21.1% 248 250 205 +39.7% 77 200 55 Subsidies cost US$m 150 Sales & Marketing costs (excl. subsidies) +13.0% 100 171 150 50 0 5 Q2 10 Q2 11
Slide 6: Sustained double-digit growth
: : Sustained double-digit growth Revenue growth YoY - local currency 13.5% 12.7% 12.5% 11.85% Avg H1 11: Avg 2010: +0.2 pt +11.5% +11.0% 11.5% +11.3% 10.74% +2.5 pt 10.5% 9.83% 10.53% 9.97% 9.5% Avg 2009: +8.8% 8.5% 8.65% 8.39% 8.23% 7.5% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11
Slide 7: Mobile revenue growth driven by value focus. ARPU approaching stabilization
: : Mobile revenue growth driven by value focus. ARPU approaching stabilization 25.0% YoY growth 20.0% 15.0% 10.0% Customers 5.0% Revenue growth * ARPU in local currency** 0.0% -5.0% -10.0% -15.0% Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 * Revenue = customers x ARPU in local currency Underlying growth (excludi
Slide 8: ARPU evolution
: : ARPU* evolution US$ (constant forex) Q2 11 YoY Q1 11 Q4 10 Q3 10 Q2 10 Central 11.9 +1% 12.2 12.4 11.9 11.8 America South America 13.2 +3% 13.2 13.9 13.3 12.8 Africa 5.1 -6% 5.3 5.4 5.5 5.5 Total Millicom 9.4 -2% 9.6 9.9 9.7 9.6 *Mobile ARPU based on total revenues excluding cable and roaming 8
Slide 9: Distribution of customers by mobile ARPU
: : Distribution of customers (prepaid and postpaid) by mobile ARPU Latin America (lim ited 3G services in Africa) Q2 11 Q2 10 Change Customers with ARPU > $10 35.7% 34.1% +1.6pt Customers with ARPU < $10 64.3% 65.9% -1.6 pt Total 100.0% 100.0% Focus on value customers, especially 3G 9
Slide 10: Revenues by service
: : Revenues by service US$m Q2 11 Q2 10 $ Local growth currency** Voice 730 684 7% 4% % of Voice+VAS revenues 72.9% 77.8% -4.9 pt VAS - SMS 98 84 17% 12% % of Voice+VAS revenues 9.8% 9.5% +0.3 pt +33.6% VAS growth VAS non-SMS 173 112 55% 50% % of Voice+VAS revenues 17.3% 12.7% +4.6 pt Other * 119 9
Slide 11: VAS contributing >27% of revenues
: : VAS contributing >27% of revenues + 4.9 pts Q2 11 35.0% 32.4% 30.0% 27.1% 24.6% 25.6% 25.0% 22.2% 23.3% 20.8% 20.0% 15.6% 17.3% 13.4% 14.7% 12.7% VAS non-SMS as a % of 15.0% Voice+VAS 10.5% 10.0% VAS - SMS as % of Voice+VAS 6.2% 11.6% 5.0% 9.5% 9.9% 9.9% 10.0% 9.8% 4.3% 0.0% Q2 10 Q3 10 Q4 10 Q1
Slide 12: Revenues by category
: : Revenues by category US$m Q2 11 Q2 10 $ Contribution growth Q2 11 Communication (voice, SMS) 828 768 8% 74% Information (Data services) 121 73 64% 11% Entertainment (TV, Ringback tones, games) 80 70 14% 7% Solutions (Tigo Cash, Tigo Lends You) 30 21 46% 3% Others (T&E, inbound roaming, other rev
Slide 13: Product penetration
: : Product penetration Highest Lowest Total MIC Q2 11 Q2 10 Change market market (pts) Q2 11 Q2 11 SMS 51.0% 54.3% -3.3 76.8% 17.8% (com m unication) Ring Back Tone 25.4% 22.8% +2.6 40.6% 5.3% (entertainm ent) Data (2G+3G) 21.8% 19.0% +2.7 33.5% 0.4% out of which 3G is 5.2% 3.4% +1.8 10.3% 4.5% (in
Slide 14: Good growth of data revenue in Latin America (2G+3G)
: : Good growth of data revenue in Latin America (2G+3G) QoQ Latin America Q2 2011 Q1 2011 growth Total data users 2G+3G (millions) 7.3 7.0 4% % of total cus tomers 29.6% 28.9% 0.7 pt of which: 3G Data users (millions) 2.0 1.9 4% % of total cus tomers 8.1% 7.9% 0.2 pt Total Data Revenue 2G+3G 81.2 6
Slide 15: 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 90 80 70 60 US$ 50 millions 40 30 20 10 0 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Commercial investment in 3G shows good results. 15 Half of LATAM revenue growth coming from Data
Slide 16: Tigo Cash gaining momentum
: : Tigo Cash gaining momentum 16.0% Tigo Cash penetration % 14.0% 12.0% 10.0% Paraguay 8.0% (launched in Q3 10) 6.0% Tanzania (launched in 4.0% Q4 10) 2.0% 0.0% Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Tigo Cash launched in 7 operations, 16 covering over 60% of total Millicom revenue
Slide 17: Market share evolution
: : Market share evolution Market share (%) Total Central Am. South Am. Africa Q2 11 30.5% 54.4% 18.6% 31.7% 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% Comparable market share (i.e. for DRC only Kinshasa-Bas Congo area cons
Slide 18: Decline in churn
: : Decline in churn MIC TOTAL 5.4% 5.3% 5.1% 5.2% 4.9% 5.0% 4.8% 4.7% 4.6% 4.6% 4.4% 4.2% Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q1 11 Q2 11 Q1 11 Q2 11 Q1 11 Q2 11 Q1 11 Q2 11 8.0% 6.0% 5.8% 6.0% 4.7% 4.6% 3.8% 3.8% 4.0% 4.1% 4.0% 2.0% CAM SAM Africa MIC TOTAL Increased loyalty through VAS development 18 a
Slide 19: Regional review
Click to add title Regional review
Slide 20: Quarterly Highlights – Central America YoY
: : Quarterly Highlights – Central America YoY US$m Q2 11 Q2 10 Reported Local currency Underlying growth growth growth Customers (millions)* 14.1 13.4 5% Revenues 449 435 3% 1.6% 3.4% EBITDA 232 245 -5% -7.1% % of revenues 51.6% 56.3% -4.7pt -3.6pt Capex 40 50 -20% % of revenues 8.8% 11.5% -2.7pt O
Slide 21: Quarterly Highlights – South America YoY
: : Quarterly Highlights – South America YoY US$m Q2 11 Q2 10 Reported Local currency growth growth Customers (millions) 10.7 9.2 15% Revenues 425 323 31% 19.5% EBITDA 182 138 32% 18.4% % of revenues 42.8% 42.7% +0.1 pt Capex 62 42 47% % of revenues 14.5% 13.0% +1.5 pt Operating Free Cash Flow 92 65
Slide 22: Quarterly Highlights – Africa YoY
: : Quarterly Highlights – Africa YoY US$m Q2 11 Q2 10 Reported Local currency growth growth Customers (millions) 16.6 14.1 17% Revenues 246 219 12% 11.9% EBITDA 100 81 23% 22.1% % of revenues 40.4% 36.9% +3.5pt Capex 46 41 10% % of revenues 18.5% 18.7% -0.2 pt Operating Free Cash Flow 36 45 -19% %
Slide 23: Financial review
Financial review
Slide 24: Taxes
: : Taxes US$m Q2 11 Q2 10 Change PBT 249 195 28% Taxes 57 64 -10% Effective tax rate 23.0% 32.7% -9.7pt Harvesting benefits of tax planning (transfer pricing, debt push-down, etc. ) Reduction of tax rate as 3 countries reduced their loss or are now making profit 24
Slide 25: Strong normalized EPS growth in Q2 11: +40%
: : Strong normalized EPS growth in Q2 11: +40% US$m Q2 11 Q2 10 $ growth EBITDA 513 464 11% Corporate costs -30 -22 37% Building categories Depreciation -189 -168 13% % of revenues 16.9% 17.2% -0.3 pt Net Finance Costs -39 -46 -15% Debt push-down % of revenues 3.5% 4.7% -1.2pt Taxes -57 -64 -10% %
Slide 26: Cash Flow generation
: : Cash Flow generation OFCF US$m Q2 11 Q2 10 Change Central America 112 113 -1% South America 92 65 41% Africa 36 45 -19% Other (incl. Corporate) 28 15 87% OFCF 268 239 12% % of revenues 24.0% 24.4% -0.4pt Strong cash flow despite 26 high tax payments in Q2
Slide 27: Free Cash Flow
: : Free Cash Flow US$m 250 215 203 199 200 191 165 US$m Q2 11 Q2 10 Change 150 OFCF 268 239 12% 100 Net Interest paid -27 -55 -51% Corporate Costs paid -26 -19 39% 50 FCF 215 165 30% 0 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 FCF* as % 16.9% 19.9% 18.6% 17.7% 19.2% of revenue * E
Slide 28: Asset productivity
: : Asset productivity • Two new tower deals signed in Guatemala and Colombia complete the bulk of our tower sharing initiatives • Over 7,000 towers in 5 markets committed to be shared • Value creation in excess of $600 million as a combination of: • Cash received on transfer of towers • Equity stak
Slide 29: Share Buy Back
: : Share Buy Back • 1,592,875 shares bought in Q2 at an average price of $107.24 for a total consideration of $ 170.8 million • Share buy back executed on Nasdaq US in May + 1 day on Nasdaq OMX in June • Remainder of the $ 800 million program for the full year to be executed on Nasdaq OMX • 4.2 mil
Slide 30: Leverage: low Net Debt/EBITDA
: : Leverage: low Net Debt/EBITDA US$m Q2 11 Q1 11 Change Gross Debt 2,323 2,338 -16 Cash * 1,060 1,274 -214 Net Debt 1,264 1,064 201 Net Debt/EBITDA ** 0.6 0.5 0.1pt * including pledged depo sits (no n current) and time depo sits ** (Net Debt/4)/EB ITDA Less cash following returns to shareholders i
Slide 31: Gross Debt maturity
: : Gross Debt maturity US$m 700 600 500 400 454 650 300 467 200 327 346 216 100 208 62 47 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 1 month Reduced exposure to interest rate volatity with 45% of gross debt at fixed rates 31
Slide 32: Listing consolidation
: : Listing consolidation Listing • Primary listing on NASDAQ OMX in Stockholm on June 3 • Nasdaq US delisting on May 27 Index • Exclusion from NASDAQ100 at the end of May • Inclusion in OMX Stockholm benchmark index from June Conversion • About 80% of ordinary shares have been converted into SDRs •
Slide 33: Guidance for 2011
: : Guidance for 2011 • EBITDA margin > 45% • Capex around $ 850 million* • OFCF ** margin around 20% (previous guidance = mid-teens) * excluding potential new spectrum, green-field cable and capitalization of leasing costs for towers 33 ** OFCF= Operating Free Cash Flow: EBITDA - CAPEX – Working Ca
Slide 34: Appendix
Click to add title Appendix Appendix
Slide 35: Overview
: : Overview Central America: South America: Africa*: Mobile Amnet: 39m 28 m 61 m 176m operations’ pops Guatemala 14m under license: El Salvador 6m 265m Honduras 8m Costa Rica 5m Guatemala 14m El Salvador 6m Senegal 13m Chad 11m Nicaragua 6m Ownership: 55.0% Ownership: 100% Ownership: 100% Ownership
Slide 36: 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 Q2 11 (2%) 1% 3% (6%) Q1 11 (1%) 3% 3% (6%) Q4 10 (5%) (1%) 3% (13%) Q3 10 (5%) (6%) 5% (7%) Q2 10 (8%) (11%) 3% (7%) *Mobile ARPU based on total revenues excluding cable and roa
Slide 37: Revenue split by category LATAM
: : Revenue split by category LATAM US$m Q2 11 Q2 10 $ Local growth currency** Voice 514 489 5% 2% % of Voice+VAS revenues 67.6% 73.5% -5.9 pt VAS - SMS 88 74 19% 12% % of Voice+VAS revenues 11.6% 11.1% +0.5 pt +33.6% VAS growth VAS non-SMS 158 103 54% 49% % of Voice+VAS revenues 20.8% 15.4% +5.4 pt
Slide 38: Revenue split evolution - LATAM
: : Revenue split evolution - LATAM + 5.9 pts 35.0% 32.4% 29.2% 30.6% 27.9% 30.0% 26.5% 25.0% 18.9% 20.8% 20.0% 16.2% 17.7% 15.4% 15.0% VAS non-SMS as a % of Voice+VAS 10.0% VAS - SMS as % of 5.0% 11.1% 11.7% 11.5% 11.7% 11.6% Voice+VAS 0.0% Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Note: Other VAS includes Rin
Slide 39: Revenue split by category Africa
: : Revenue split by category Africa US$m Q2 11 Q2 10 $ Local growth currency Voice 216 195 11% 10% % of Voice+VAS revenues 89.5% 91.0% -1.5pt VAS - SMS 10 10 3% 6% % of Voice+VAS revenues 4.3% 4.7% -0.4pt +34.1% VAS grow th VAS non-SMS 15 9 61% 64% % of Voice+VAS revenues 6.2% 4.4% +1.9pt Other * 5
Slide 40: Revenue split evolution - Africa
: : Revenue split evolution - Africa + 1.5 pts 12.0% 10.5% 10.1% 9.9% 10.0% 9.3% 9.0% 8.0% 5.2% 6.2% 4.7% 5.5% 4.4% 6.0% VAS non-SMS as a % of 4.0% Voice+VAS 4.9% VAS - SMS as % of 2.0% 4.7% 4.5% 4.4% 4.3% Voice+VAS 0.0% Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Note: Other VAS includes Ringback tones / Data (w
Slide 41: Stability of underlying growth
: : Stability of underlying growth* Reported growth Underlying growth* (local currency) Q1 11 12.7% 11.9% Q2 11 10.2% 11.0% H1 11 11.5% 11.5% * Underlying growth provides a proper reflection of the actual performance in local currency as it excludes exceptional items such as tax provisions, accounti
Slide 42: 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 June 30, 2011 June 30, 2011 Tanzania June 1, 2009 July 15, 2010 95% 97% MOAT* agreement granted extension to October 15, 2010. DRC Dec
Slide 43: Penetration rates
: : Penetration rates CAM SAM Africa * MIC Avg penetration Avg penetration Avg penetration Avg penetration 89.6% 90.5% 44.5% 64.7% 120.0% 104.8% 96.3% 100.0% 92.9% 85.7% 85.0% 87.2% 80.0% 64.9% 61.9% 63.8% Average 60.0% MIC 45.3% 38.0% 40.0% 25.8% 23.2% 20.0% 0.0% * For DRC , only penetration in Kin
Slide 44: Market Share
: : Market Share CAM SAM Africa MIC Avg Market Share Avg Market Share Avg Market Share Avg Market Share 54.4% 18.6% 31.7% 30.5% 70.0% 64.2% 58.3% 57.7% 60.0% 54.3% 50.0% 44.3% 42.6% 35.7% 37.7% 40.0% 33.4% 30.8% 30.4% Average 30.0% 24.2% MIC 20.0% 10.4% 10.0% 0.0% Increase QoQ Decrease QoQ Rwanda El
Slide 45: Movements of currencies vs USD YoY
: : Movements of currencies vs USD YoY Closing rate Closing rate Change Average rate Average rate Change Q2 11 Q2 10 Q2 11 Q2 10 Guatemala GTQ 7.81 8.03 3% 7.71 8.01 4% Honduras HNL 18.90 18.90 0% 18.90 18.89 0% Central America Nicaragua NIO 22.42 21.35 -5% 22.28 21.23 -5% Costa Rica CRC 504.09 535.
Slide 46: Quarterly Interest expense
: : Quarterly Interest expense 65 62 63 2 60 10 55 12 50 49 3 49 2 45 7 42 2 40 49 49 47 42 35 40 30 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Total interest cost Other f inancial costs HY bond early redemption Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Effective 7.6% 7.1% 7.4% 7.2% 6.9% rate* Effective rate calculated on l
Slide 47: Market Overview – by Segment
: : Market Overview – by Segment Central South Millicom Segments Africa Total America America Market Overview Population (million) 28 61 176 265 Mobile Penetration 89.6% 90.5% 44.5% 64.7% Operational Data Total Mobile customers (000) 14.1 10.7 16.6 41.3 Attrib. Customers (000) 11.0 10.7 16.3 38.0 Ca
Slide 48: 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 49: 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 50: Merci
Merci 50