Millicom International Cellular S.a. · NASDAQ:TIGO
Millicom International Cellular — Q4 2010 Earnings Presentation
64 slides from Millicom International Cellular's earnings presentation, 2011
Slide 1: Q4 2010 Investor Presentation
Millicom International Cellular S.A. Q4 2010 Investor Presentation
Slide 2: Overview
: : Overview Millicom: • is a leading operator of mobile telephony services in emerging markets with over 38 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 having
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 42% →80%+? • Information • Entertainment Latin America: Colombia • Solutions 89%→100%+? 5
Slide 6: Penetration rates
: : Penetration rates CAM SAM Africa * MIC Avg penetration Avg penetration Avg penetration Avg penetration 88.1% 89.8% 41.6% 62.5% 120.0% 101.7% 95.1% 100.0% 92.6% 83.7% 85.7% 86.1% 80.0% 64.5% 57.3% 58.4% Average 60.0% MIC 40.9% 40.0% 33.6% 26.2% 22.6% 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 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% Q4 09 29.1% 53.0% 16.3% 32.1% 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% 24.6% of revenues in 22% 10% Q4 10 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: 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% -10.0% -15.0% Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 ARPU Q410 vs Q409 -3.7% with constant country mix * Recurring revenue = customers x ARPU in local
Slide 11: VAS penetration supporting ARPU development
: : VAS penetration supporting ARPU development Q4 10 Q4 09 Var Highest Lowest Q4 10 Q4 10 SMS 75.4% 73.6% 1.8 88.0% 49.0% (com m unication) Ring Back Tone 26.4% 22.7% 3.7 40.6% 8.0% (entertainm ent) Data (2G+3G) * 23.1% 18.7% 4.4 44.4% 23.9% out of which 3G is 7.5% 3.8% 3.7 11.2% 4.7% (inform ation
Slide 12: Strong growth of Data revenue in Latin America
: : Strong growth of Data revenue in Latin America $m 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Data represents the largest growth opportunity for Millicom in the next three years 12 Expectations for data growth in Latin America > expectations for voice growth
Slide 13: Successful innovation: Tigo Lends You
: : Successful innovation: Tigo Lends You • Lending of airtime to pre-paid customers ($0.45 on average) • Airtime recovered and fee for the service taken when customer reloads • Low default rate: around 1% • 12 million users as of December 2010 • Penetration rate: 38.5% among pre-paid customers • Po
Slide 14: Launch of Tigo Cash
: : Launch of Tigo Cash (domestic money transfer services) Paraguay Q3 10 Tanzania Q4 10 Ghana Q4 10 Guatemala Q1 11 Honduras Q1 11 14
Slide 15: Increased commercial investment
: : Increased commercial investment (+1.1 pt of revenues) 300 23.1% of revenues 22.0% +1.1 pt 247 250 of revenues 214 37 200 30 Telephone & Equipment US$m 150 costs 210 Sales & Marketing costs 100 185 (including subsidies) 50 0 Q4 09 Q4 10 Accelerated investment in 3G and services 15
Slide 16: 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 16
Slide 17: Guidance for 2011
: : Guidance for 2011 2011 EBITDA margin mid 40s Capex * above $ 800 million OFCF** margin mid-teens (as a % of revenues) * excluding potential new spectrum, greenfield cable and capitalization of leasing costs for towers 17 ** OFCF= Operating Free Cash Flow: EBITDA - CAPEX - WC movements - Taxes 17
Slide 18: Review for the period ended 31/12/10
Click to add title Review for the period ended 31/12/10
Slide 19: Q4 Highlights
: : Q4 Highlights • Record Group revenues at $ 1.1 billion, with double-digit organic local currency revenue growth • Sustained double-digit growth with the profile of the growth evolving: deceleration in Africa and a return to growth in Central America. • Accelerated commercial investment in data a
Slide 20: Full Year 2010 Highlights
: : Full Year 2010 Highlights • Sustained double-digit growth, with 2.5 points of growth added vs. previous year • More than half of new customers in Latin America are 3G data users • Strong EBITDA margin at 47.0% • Solid cash-flow generation and cash repatriation • 3 tower companies creating more t
Slide 21: Financial Highlights Full Year
: : Financial Highlights Full Year US$m FY 10 FY 09 $ Local growth currency Customers ('000) 38,590 33,920 14% Revenues 3,920 3,469 13% 11.2% EBITDA 1,841 1,599 15% 10.7% % of revenues 47.0% 46.1% +1.0 pt Capex ** 688 748 -8% % of revenues 17.5% 21.6% -3.9 pt Operating Free Cash Flow * 1,016 678 50%
Slide 22: Sustained double-digit growth with some volatility by quarter
: : Sustained double-digit growth with some volatility by quarter Mobile (excl. cable) revenue growth YoY - local currency 12.5% 12.0% Avg 2010: 11.5% +11.3% 11.0% 10.5% +2.5 pt 10.0% 9.5% Avg 2009: 9.0% +8.8% 8.5% 8.0% 7.5% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 2009 comparable, restated w
Slide 23: Revenue split by category
: : Revenue split by category US$m Q4 10 Q4 09 $ Local growth currency Voice 701 656 7% 7% % of Voice+VAS revenues 75.4% 78.4% VAS - SMS 95 91 5% 4% % of Voice+VAS revenues 10.2% 10.8% -0.6pt +25.0% VAS growth VAS non-SMS 133 90 48% 45% % of Voice+VAS revenues 14.3% 10.8% +3.5 pt Other * 139 135 3%
Slide 24: Strong momentum on non-SMS VAS revenue
: : Strong momentum on non – SMS VAS revenue + 3.0 pts 35.0% Q4 10 29.4% 30.0% 24.6% 25.0% 22.4% 23.3% 21.6% 21.7% 20.0% 17.4% 13.0% 14.3% 10.8% 10.3% 12.5% 15.0% VAS non-SMS as a % of Voice+VAS 10.1% 10.0% VAS - SMS as % of 5.1% Voice+VAS 5.0% 10.8% 11.1% 10.3% 10.2% 12.0% 9.9% 4.9% 0.0% Q4 09 Q1 1
Slide 25: Strong growth of 3G data revenue in Latin America
: : Strong growth of 3G data revenue in Latin America Latin America Q4 10 Q3 10 QoQ grow th 3G Handsets Customer base 1,572 1,342 17% % of total customers 6.7% 5.8% +0.9 pt 3G data users * 913 808 13% 3G data users/customer base 58% 60% -2.1 pt 3G Datacards Customer base 852 720 18% Total 3G data us
Slide 26: Regional review
Click to add title Regional review
Slide 27: Quarterly Highlights – Central America YoY
: : Quarterly Highlights – Central America YoY US$m Q4 10 Q4 09 Reported Local currency growth growth Customers ('000) 13,485 12,902 5% Revenues 388 379 2% 1% EBITDA 201 208 -3% -6% % of revenues 51.8% 54.9% -3.1 pt Capex 57 53 9% % of revenues 14.6% 13.9% +0.8 pt Operating Free Cash Flow 179 171 5%
Slide 28: Quarterly Highlights – South America YoY
: : Quarterly Highlights – South America YoY US$m Q4 10 Q4 09 Reported Local currency growth growth Customers ('000) 10,139 8,815 15% Revenues 383 313 22% 19% EBITDA 168 135 25% 22% % of revenues 43.9% 43.0% +0.9 pt Capex 112 52 117% % of revenues 29.3% 16.5% +12.8 pt Operating Free Cash Flow 69 109
Slide 29: Quarterly Highlights – Africa YoY
: : Quarterly Highlights – Africa YoY US$m Q4 10 Q4 09 Reported Local currency growth growth Customers ('000) 14,965 12,203 23% Revenues 239 227 5% 12% EBITDA 100 89 11% 20% % of revenues 41.7% 39.3% +2.4 pt Capex * 78 137 -43% % of revenues 32.5% 60.3% -27.8 pt Operating Free Cash Flow 72 20 % of r
Slide 30: Quarterly Highlights – Cable YoY
: : Quarterly Highlights – Cable YoY US$m Q4 10 Q4 09 Reported Local currency growth growth Revenues 59 53 11% 7% - Amnet 51 47 - Navega 8 6 EBITDA 28 25 10% 6% - Amnet 20 18 - Navega 8 7 % of revenues 47.5% 47.7% -0.2 pt Capex 26 8 229% % of revenues 43.7% 14.6% +29.1 pt Operating Free Cash Flow 6
Slide 31: Quarterly highlights – Group YoY
: : Quarterly highlights – Group YoY US$ million Q4 10 Q4 09 $ Local growth currency Customers ('000) 38,590 33,920 14% Revenues 1,069 972 10% 10.0% EBITDA 497 458 9% 9.1% % of revenues 46.5% 47.1% -0.6 pt Capex ** 272 252 8% % of revenues 25.4% 25.9% -0.5 pt Operating Free Cash Flow * 310 309 0% %
Slide 32: Financial review
Click to add title Financial review
Slide 33: Full Year normalized EPS +15%
: : Full Year normalized EPS +15% US$m FY 10 FY 09 $ EBITDA 1,841 1,599 15% Depreciation -662 -626 6% % of revenues 16.9% 18.0% -1.1 pt Net Finance Costs -200 -166 21% HY bond redemption % of revenues 5.1% 4.8% +0.3 pt Taxes -227 -199 14% % of revenues 5.8% 5.7% +0.0 pt Non-controlling interest -3 2
Slide 34: Strong Cash Flow Generation
: : Strong Cash Flow Generation OFCF US$m FY 10 FY 09 Change Central America 555.2 497.0 12% South America 311.3 263.0 18% Africa 144.8 -64.4 325% Cable 31.4 2.7 1081% Other (incl. corporate) -26.4 -19.9 33% OFCF 1,016.3 678.4 50% % of revenues 26% 20% 34
Slide 35: Free Cash Flow
: : Free Cash Flow US$m 300 252 250 227 203 200 200 155 US$m FY 10 FY 09 Change 150 OFCF 1016 678 50% 100 Net Interest Paid -156 -139 12% 50 Corporate Costs -75 -66 14% 0 FCF 785 473 66% Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 FCF* as % 25.9% 21.0% 15.9% 19.9% 21.3% of revenue *
Slide 36: Redemption of 2013 Notes
: : Redemption of 2013 Notes • Redemption on December 1, 2010: Principal $ 459.6 million Interest (10%) $ 23.0 million Early redemption premium $ 7.7 million Total $ 490.3 million • EPS accretive in 2011 36
Slide 37: Share buy back
: : Share buy back • $300 million program completed • 3,253,507 shares acquired • Average cost of $92.21 • 3% of outstanding shares purchased • Proposal at May 2011 AGM to cancel acquired shares 37
Slide 38: Shareholders' remuneration
: : Shareholders’ remuneration • Proposed dividend of $1.80 per share, i.e. a 29% increase over 2009. • Board authorization to acquire $300 million of shares until the next AGM (May 31, 2011) 38
Slide 39: Leverage: stable Net Debt/EBITDA
: : Leverage: stable Net Debt/EBITDA US$m Q4 10 Q3 10 Change Gross Debt 2,352 2,982 -630 Cash * 1,076 1,712 -636 Net Debt 1,276 1,270 6 Net Debt/EBITDA ** 0.6 0.7 * including pledged deposits and time deposits ** (Net Debt/4)/EB ITDA Balance sheet restructuring allows more cost-efficient leverage wi
Slide 40: Gross Debt maturity
: : Gross Debt maturity US$m 600 500 400 454 300 417 508 200 313 272 244 100 57 0 1-2 years 2-3 years 3-4 years 4-5 years 5-6 years 6-7 years Increased average maturity at 3 years and 3 months Better risk management with 41% of the debt at fixed rates 40
Slide 41: Network efficiency
: : Network efficiency • Agreements signed with Helios in Ghana/Tanzania/DRC • Close to 2,500 towers to be transferred (2/3 of all African towers) • Value creation > $400 million* as a combination of • Cash upfront > $180 million • 40% stake in 3 new towerCos • No further Capex on towers • EBITDA im
Slide 42: Appendix
Click to add title Appendix Appendix
Slide 43: Overview
: : Overview Central America: South America: Africa*: Mobile Amnet: 38m 28 m 60 m 172 m operations’ pops Guatemala 14m under license*†: El Salvador 6m 259m Honduras 8m Costa Rica 4.5m Guatemala 13.5m El Salvador 6m Senegal 12m Chad 10.5m Nicaragua 6m Ownership: 55.0% Ownership: 100% Ownership: 100%
Slide 44: ARPU in Local currency
: : ARPU in Local currency Q4 10 Q3 10 Q2 10 Q1 10 Q4 09 Central America El Salvador 11 11 11 11 12 Guatemala 105 101 102 104 104 Honduras 211 197 191 190 197 South America Bolivia 81 80 77 76 82 Colombia 23,526 22,631 22,159 22,159 22,632 Paraguay 56,667 51,809 48,473 49,557 53,699 Africa Chad 3,42
Slide 45: YoY Local currency ARPU growth
: : YoY Local currency ARPU growth Year-on-Year local currency ARPU growth (%) Total Central Am. South Am. Africa Q4 10 (5%) (2%) 1% (11%) Q3 10 (6%) (8%) 3% (7%) Q2 10 (8%) (11%) 2% (7%) Q1 10 (9%) (13%) 0% (3%) Q4 09 (10%) (20%) (4%) (9%) 45
Slide 46: Mobile revenues in local currency
: : Mobile revenues in local currency LC million Q4 10 Q4 09 Growth % Central America El Salvador * 92 107 -13.3% Guatemala 2,130 1,930 10.4% Honduras 2,854 2,781 2.6% South America Bolivia 577 489 17.8% Colombia 324,956 266,672 21.9% Paraguay 628,600 527,518 19.2% Africa Chad 13,702 13,536 1.2% DRC
Slide 47: Revenue split by category LATAM
: : Revenue split by category LATAM US$m Q4 10 Q4 09 $ Local growth currency Voice 492 452 9% 7% % of Voice+VAS revenues 70.6% 73.5% -2.9 VAS - SMS 83 82 2% 0% % of Voice+VAS revenues 12.0% 13.3% -1.3 pt +23.3% VAS growth VAS non-SMS 121 81 49% 46% % of Voice+VAS revenues 17.4% 13.2% +4.2 pt Other *
Slide 48: LATAM
: : LATAM + 2.9 pts 35.0% 29.4% 30.0% 28.2% 26.5% 27.0% 26.2% 25.0% 20.0% 13.2% 15.9% 17.4% 12.8% 15.2% 15.0% VAS non-SMS as a % of Voice+VAS VAS - SMS as % of Voice+VAS 10.0% 13.3% 13.4% 12.3% 12.0% 5.0% 11.7% 0.0% Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Note: Other VAS includes Ringback tones / Data (web br
Slide 49: Revenue split by category Africa
: : Revenue split by category Africa US$m Q4 10 Q4 09 $ Local growth currency Voice 209 204 3% 9% % of Voice+VAS revenues 89.9% 92.0% VAS - SMS 12 9 31% 40% % of Voice+VAS revenues 4.9% 4.0% +0.9 pt +41.0% VAS grow th VAS non-SMS 12 9 34% 42% % of Voice+VAS revenues 5.1% 4.0% +1.1 pt Other * 6 5 15%
Slide 50: Africa
: : Africa + 2.1 pts 12.0% 10.1% 10.0% 9.3% 9.0% 8.7% 8.0% 8.0% 5.1% 4.3% 4.7% 4.3% 6.0% 4.0% VAS non-SMS as a % of Voice+VAS 4.0% VAS - SMS as % of Voice+VAS 4.4% 4.7% 4.5% 4.9% 2.0% 4.0% 0.0% Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Note: Other VAS includes Ringback tones / Data (web browsing)/ Content (Prem
Slide 51: Movements of currencies vs USD YoY
: : Movements of currencies vs USD YoY Closing rate Closing rate Change Average rate Average rate Change Q4 10 Q4 09 Q4 10 Q4 09 Guatemala GTQ 8.02 8.35 4% 8.03 8.33 4% Honduras HNL 18.90 18.90 0% 18.89 18.89 0% Central America Nicaragua NIO 21.88 20.84 -5% 21.75 20.71 -5% Costa Rica CRC 512.97 565.
Slide 52: Revenue growth
: : Revenue growth US$m Reported 1,100 +10.0% +0.4% +10.4% growth 1,050 +5.5% 3.0 1,000 950 0.0 900 48.6 95.1 1,067 1,069 850 972 972 800 924 924 750 700 Double digit local currency organic growth despite: full consolidation of Honduras, full year impact of additional taxes in El Salvador/Africa and
Slide 53: Market Share evolution QoQ
: : Market Share evolution QoQ CAM SAM Africa MIC Avg Market Share Avg Market Share Avg Market Share Avg Market Share 53.8% 18.1% 31.1% 29.8% 70.0% 64.3% 58.0% 56.9% 60.0% 52.5% 50.0% 44.4% 42.6% 39.4% 40.0% 35.7% 32.7% 31.5% 25.2% Average 30.0% MIC 20.0% 15.0% 9.9% 10.0% 0.0% Decrease Increase Tanz
Slide 54: Decline in churn
: : Decline in churn MIC TOTAL 5.4% 5.3% 5.3% 5.2% 5.1% 5.1% 5.1% 5.0% 5.0% 4.9% 4.9% 4.8% 4.7% Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q3 10 Q4 10 8.0% 7.0% 6.8% 6.6% Q3 10 Q4 10 Q3 10 Q4 10 6.0% Q3 10 Q4 10 5.3% 4.9% 5.0% 4.7% 4.3% 3.9% 3.4% 4.0% 3.0% 2.0% CAM SAM Africa MIC TOTAL 54 Increased loyalty throu
Slide 55: SIM card registration
: : SIM card registration % of revenues from % of customer base customer base Starting date for Registration registered at Market registered at registration deadline December 31, 2010 December 31, 2010 Tanzania June 1, 2009 July 15, 2010 95% 99% MOAT* agreement granted extension to October 15, 2010.
Slide 56: Quarterly Interest expense
: : Quarterly Interest expense 70 63 62 60 2 10 12 50 46 47 3 43 2 2 40 2 30 45 49 49 20 44 41 10 0 Q409 Q110 Q210 Q310 Q410 Loan Interest expenses Other financial costs Redemption 10% notes Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Effective 7.5% 6.9% 7.3% 7.1% 7.4% rate Effective rate calculated on loan inter
Slide 57: Taxes
: : Taxes US$m Q4 10 Q4 09 Change PBT 226 197 14% Taxes 52 50 4% Effective tax rate 23.1% 25.3% -2.2pt Effective rate for full year 2010 of 28.0%vs. 27.4% in 2009 with more withholding taxes on dividend upstreams 57
Slide 58: Strong EPS growth in Q4
: : Strong EPS growth in Q4 US$m Q4 10 Q4 09 $ growth EBITDA 497 458 9% Depreciation -155 -186 -17% % of revenues 14.5% 19.1% -4.6 pt Net Finance Costs -57 -44 29% % of revenues 5.3% 4.5% +0.8 pt Taxes -52 -50 4% % of revenues 4.9% 5.1% -0.3 pt Non-controlling interest -19 -3 Profit in Colombia Othe
Slide 59: Increased cash repatriation
: : Increased cash repatriation Net cash upstream US$m 900 800 700 600 500 400 819 300 200 462 100 84 0 2008 2009 2010 59 Cash upstream > FCF
Slide 60: Q4 10 Market Overview – by Segment
: : Q4 10 Market Overview – by Segment Central South Amnet/ Millicom Segments Africa Total America America Navega Market Overview Population (million) 28 60 172 259 Mobile Penetration 88.1% 89.8% 41.6% 62.5% Operational Data Total Customers (000) 13,485 10,139 14,965 38,590 Attrib. Customers (000) 1
Slide 61: 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 62: 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 63: 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 64: Merci
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Millicom International Cellular — Q4 2010 Earnings Presentation on 6ix