Millicom International Cellular S.A. · NASDAQ:TIGO
Millicom International Cellular — Q1 2018 Earnings Presentation
43 slides from Millicom International Cellular's earnings presentation, April 2018
Slide 1: Investor presentation
Investor presentation Millicom International Cellular S.A. April, 2018
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: Contents
Contents 1 Our journey... Big picture 2 Capital allocation and ROIC 3 Latin America service revenue and EBITDA 4 Currency exposure… myths and reality 5 Latin America service revenue by business unit 6 Market structure by country 7 Spectrum and licenses 8 Latam snapshot - Macro 9 Latam snapshot - Mic
Slide 4: 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 5: Capital allocation and ROIC
2 Capital allocation 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 capital, finance lease cap
Slide 6: Latin America service revenue and EBITDA
3 Latin America service revenue and EBITDA Contribution by country – FY 2017 Service revenue EBITDA PY ELS ELS PY 12% 8% 7% 15% GT 23% GT 31% Full CO consolidation CO 22% 32% HN 11% BO HN BO 10% CR CR 12% 11% 3% 3% ELS ELS PY 11% PY 10% 17% 21% GT 18% GT 24% Proportionate Contribution CO CO 23% 15%
Slide 7: Currency exposure… myths and reality
4 Currency exposure… myths and reality Only 15% of our proportional EBITDA is from high volatility FX country 10-year FX trends Proportionate Latam EBITDA Bloomberg Weekly FX rates vs USD, 2008 - 2017 Latam EBITDA by country, adjusted for proportional Millicom ownership, and ranked by currency volat
Slide 8: Latam service revenue by business unit
5 Latam service revenue by business unit Contribution in FY 2017 El Salvador Guatemala Honduras Service revenue, FY 2017 B2B B2B B2B Mobile Mobile 15% 12% Mobile 15% B2C B2C Data Home B2C Data 23% 8% Data Home 25% 34% 8% Home Mobile 26% B2C Mobile Mobile Voice & B2C B2C Other Voice & Voice & 36% Oth
Slide 9: Market structure by country
6 Market structure by country Bolivia El Salvador Mobile 2nd 1st 3rd NA NA Mobile 1st 3rd 2nd 4th NA NA BBI 1st 4th NA 3rd 2nd BBI 2nd 1st NA NA NA NA PayTv 1st 3rd NA NA 2nd PayTV 1st 2nd NA NA 4th 3rd Colombia Guatemala Mobile 3rd 1st 2nd 6th 4th 5th NA Mobile 1st 2nd 3rd BBI 2nd 1st 3rd 4th NA NA
Slide 10: Spectrum and licenses
7 Spectrum and licenses Spectrum auctions possible in ELS, CO, HN, and GT and in next 3 years El Salvador Guatemala Honduras All amounts in 2xMHz 27.5 34.0 35.0 60.0 25.0 22.5 10.0 10.0 26.0 45.0 20.0 15.0 18.0 0.0 10.0 5.0 5.0 10.0 20.0 25.0 5.0 15.0 20.0 18.0 10.0 40.0 20.0 12.5 14.0 7.5 15.0 20.0
Slide 11: Latam snapshot - Macro
8 Latam snapshot - Macro FY 2017 Colombia Guatemala Bolivia Honduras Paraguay El Salvador Costa Rica GDP growth (2018e)* 2.8% 3.4% 4.0% 3.6% 4.0% 2.1% 3.8% GDP per capita (2018e)* $ 14,990 $ 8,440 $ 7,870 $ 5,730 $ 10,230 $ 9,260 $ 17,930 Inflation (2018e)* 3.1% 4.0% 5.0% 4.0% 4.0% 2.0% 3.0% Populat
Slide 12: Latam snapshot - Micro
9 Latam snapshot - Micro FY 2017 Colombia Guatemala Bolivia Honduras Paraguay El Salvador Costa Rica Revenue $ 1,739m $ 1,328m $ 555m $ 586m $ 662m $ 422m $ 149m EBITDA $ 469m $ 665m $ 217m $ 265m $ 318m $ 155m $ 62m EBITDA% 27.0% 50.1% 39.1% 45.3% 48.0% 36.6% 41.5% Financials Gross debt $ 1,130m $
Slide 13: Latest results summary
¥ —_ Latest results summary @ EHICOM Q1 2018 Business Update ¢ mituicom Contribution to Service ‘Year Quarterly Year service revenue revenue = on Year Net Additions on Year Group 61% 0 B2c 862m Customers 46.8m 40.21m 42.0% Hoax 4Gsubscibers 7.8m 40.69 495.5% (m) Mobile MFS Customers 101m 026m 44.5%
Slide 14: 2018 Q1 results
2018 Q1 results Kicking off 2018 with accelerating momentum Mauricio Ramos, CEO Tim Pennington, CFO April 25th, 2018 Millicom International Cellular S.A.
Slide 15: 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 16: CEO review
¥ MILLICOM 1. CEO review THE DIGITAL LIFESTYLE Mauricio Ramos
Slide 17: Highlights
Highlights Kicking off 2018 with accelerating momentum 1 Latam service revenue growth accelerated to 3.9% in Q1 2 Strategic revenue grew 12% and now accounts for 69% of service revenue 3 Mobile data grew 18%, fueled by 643k 4G net additions (a Q1 record) 4 Home grew 8%, fueled by record 91k HFC home
Slide 18: Revenue growth accelerated to 3.9% in Q1
1 Revenue growth accelerated to 3.9% in Q1 Fastest growth rate in more than two years Latam service revenue growth %YoY growth, Q1 16 – Q1 18 3.9% 2.9% 3.1% 2.3% 0.9% -0.5% -1.3% -2.0% -2.3% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 18
Slide 19: Strategic businesses driving growth
2 Strategic businesses driving growth c.70% of our revenue is strategic and growing double-digits Strategic revenue grew 12%… … to c.70% of service revenue Contribution to Latam revenue growth year-on-year, Q1 2018 Latam strategic revenue as % of service revenue Q1 15 – Q1 18 Strategic revenue lines
Slide 20: …three strategic businesses growing steadily
2 …three strategic businesses growing steadily Strategic businesses grew 12% in aggregate in Q1 2018 Mobile data Home Reported service revenue, $m, Q1 17 - Q1 18 353 302 346 336 289 279 282 277 320 302 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 27% 23% 18% 17% 17% 16% 18% 7% 7% 9% 7
Slide 21: Mobile is growing again, driven by data…
3 Mobile is growing again, driven by data… Mobile revenue growing again as data growth more than offsets legacy voice decline B2C mobile service revenue growth Mobile data Latam % growth in local currency, Q1 16- Q1 18 Mobile data as % of Mobile B2C, Q1 17 - Q1 18 0.9% 0.2% -1.2% -0.9% 48% -2.9% 41%
Slide 22: …a direct result of our investments in 4G
3 …a direct result of our investments in 4G Record 4G net additions - on track to meet FY guidance of 3m 4G network coverage Network expansion continues 4G data user net additions in Q1 18 Latam 4G coverage in % of population covered Latam B2C Smartphone net new data users (000s) by quarter , Q1 16
Slide 23: Home net add intake accelerating strongly
4 Home net add intake accelerating strongly 91k new homes connected in Q1 2018 – on track to deliver FY guidance of 300k New HFC homes connected Latam HFC homes connected, net adds by quarter, Q1 16 – Q1 18 (000s) 91 63 31 Q1 16 Q1 17 Q1 18 Bundling ratio 1.80 2.31 on net adds 23
Slide 24: Every Latam country now growing
5 Every Latam country now growing Continued momentum in all of our largest Latam markets El Salvador (11%*) Guatemala (18%*) Honduras (10%*) Service revenue, year-on-year (%), Q1 16 – Q1 18 5.4% 5.7% 0.0% -0.1% 0.0% 2.1% 3.5% 3.4% -0.6% 2.7% 0.3% -1.6% -0.7% -0.8% -1.0% -1.4% -3.7% -0.8% -1.6% -4.8%
Slide 25: Next steps in our journey
6 Next steps in our journey Digital transformation will help drive sustainable EBITDA growth and FCF generation Turning opportunity into Free Cash Flow and shareholder value Opportunity Network Users Revenue EBITDA Cash Flow Leveraging our Building high Driving Subscription- Digital Superior FCF mar
Slide 26: Digitalization is changing how we do business
6 Digitalization is changing how we do business Digitalization drives customer engagement Prepaid - engagement driving transaction growth Postpaid – engagement with 16% of subs 4x per month Unique Monthly Active Users Transactions (millions) Unique Monthly Active Users Unique Monthly Active Users (P
Slide 27: CFO review
¥ MILLICOM 2. CFO review THE DIGITAL LIFESTYLE Tim Pennington
Slide 28: Macro update
1 Macro update Our markets continue to grow 2-4% with more stable FX GDP growth projections – 2018 COP appreciation in early 2018 Real GDP growth Daily closing rate Jan 17 – Apr 18 %, FY18e 3,100 El Salvador 2.1% 3,000 2,900 Guatemala 3.4% 2,800 COP USD FX 30d moving average Honduras 3.6% 2,700 Jan
Slide 29: Key financial metrics – Q1 2018
2 Key financial metrics – Q1 2018 Group service revenue up 3.6% Service Revenuea EBITDAa and Margins Capexb $m, Q1 17 – Q1 18 $m and %, Q1 17 – Q1 18 $m, Q1 17 – Q1 18 3.6% 1.5% +$9m 1,373 1,422 554 157 148 546 Q1 17 Q1 18 Q1 17 Q1 18 Q1 17 Q1 18 37.1% 36.5% a) Q1 17 numbers are adjusted to Q1 18 FX
Slide 30: Latam
2 Latam Solid growth returning to Latam Latam service revenue Latam OCF (Q1) $m, Q1 17 – Q1 18 $m and margin, Q1 17 – Q1 18 +3.9% -3.1% Latam EBITDA 363 $m and margin, Q1 17 – Q1 18 +1.3% 1,288 28.1% 26.3% 1,240 514 508 Q1 17 Q1 18 Q1 17 Q1 18 Q1 17 Q1 18 Capex / 38.1% 37.2% Revenue 10.0% 11.0% Note
Slide 31: EBITDA – Q1 2018
3 EBITDA – Q1 2018 Latam biggest contributor to EBITDA growth EBITDA evolution by region $ million, Q1 17 – Q1 18 +1.5% 0 1 7 +0.8% 4 554 546 542 Ebitda Q1 17 FX and other Ebitda Q1 17 LatAm Africa Corporate Ebitda Q1 18 (constant currency) 37.1% as % of revenue 36.5% Q1 17 numbers are adjusted to Q
Slide 32: EBITDA progression by country
3 EBITDA progression by country El Salvador Guatemala Honduras EBITDA ($m), margin and year-on-year growth, Q1 17 – Q1 18 +9.3% +8.4% -0.8% 37 174 63 61 34 161 Q1 17 Q1 18 Q1 17 Q1 18 Q1 17 Q1 18 33.3% 35.7% 50.2% 52.1% 43.2% 42.5% Bolivia Colombia Paraguay -5.3% / +4.0% / +5.7% adj -8.5% +14% adj 5
Slide 33: Cost review and margin progression
3 Cost review and margin progression Steady upward margin trend continues Group total OPEX base Last 12 month Group EBITDA margin OPEX and growth YoY, Q1 17 – Q1 18 Last 12-month EBITDA margin, Q1 2015 - Q1 2018 +6.0% 557 +360 bps 36.2% 35.1% 32.6% 32.9% Q1 17 Q1 18 Q1 15 Q1 16 Q1 17 Q1 18 33
Slide 34: P&L review – Q1 2018
4 P&L review – Q1 2018 P&L Summary Key Observations US$ million Q1 18 Q1 17 % Var • IFRS 15 had small impact on Service A Revenue (-1.3%) and EBITDA (-0.1%) Revenue 1,516 1,459 3.9% A EBITDA 554 542 2.3% • Interest savings from re-financing B Depreciation & amortization (317) (322) (1.8%) activity,
Slide 35: Cash flow – Q1 2018
5 Cash flow – Q1 2018 We generated $45 million of equity FCF in Q1 Q1 2018 cash flow $ million 267 566 86 38 213 127 4 49 45 Ebitda including Cash capex Working capital Cash flow from Taxes paid Finance charges FCF Dividend to eFCF discontinued (ex-spectrum and others operations minorities operation
Slide 36: Capital structure
6 Capital structure Net debt and leverage stable in Q1 Net debt evolution in 2017 Debt profile $ million, 31 December 2017 – 31 March 2018 % of gross debt, 31 March 2018 Gross debt currency exposure 8 52 LC debt 34 45 48 USD debt 41% 59% 4,100 4,071 Gross debt distribution Operations Group 24% Net d
Slide 37: Recap
Recap Kicking off 2018 with accelerating momentum – on track to hit full year targets Target 1 +91k HFC homes connected 10m total homes passed by year-end +300k 2 +643k 4G customer net additions 10m 4G customers by year-end +3m 3 3.9% service revenue growth in Latam +2-4% 4 EBITDA growth on tr
Slide 38: Q&A
¥ MILLICOM Q&A THE DIGITAL LIFESTYLE
Slide 39: Debt profile
Debt profile Comfortable capital structure and liquidity with no major maturities until 2024 Debt maturity profile a $ million Average life of 5.2 years 942 758 665 655 563 405 GT 357 $800m 25s 28s 221 $500m $500m 146 PY SEK 126 $300m $239m 2018 2019 2020 2021 2022 2023 2024 2025 2026 >2027 Bank and
Slide 40: Gross debt by country
Gross debt by country Central America: South America: Africa: Corporate: Total MIC Debt: Total debt $1,705m Total debt $1,998m Total debt $279m Total debt $1,226m $5,208m 25% guaranteed 4% guaranteed 57% guaranteed 0% guaranteed 13% Guaranteed Honduras: $393m (51% guaranteed) Guatemala: $994m Chad:
Slide 41: Net debt by country
Net debt by country Central America: South America: Africa: Total Net Debt: $1,231m $1,620m $130m Corporate $4,100m Leverage 1.06x Leverage 1.62x Leverage 0.81x $1,119m Leverage 1.87x Honduras: $364m Leverage 1.4x Guatemala: $634m Leverage 0.9x Chad: $53m El Salvador: $167m Leverage 1.1x Costa Rica:
Slide 42: Currency exposure of debt
Currency exposure of debt Dec. 2017 Debt including finance leases Cash Net debt US$ Local Total Total USD Local Total 1,724 1,979 3,702 852 1,333 1,517 2,850 Latin America* 47% 53% 100% 47% 53% 100% 99 180 279 149 92 39 130 Africa 35% 65% 100% 70% 30% 100% 1,226 0 1,226 107 1,125 -6 1,119 Corporate
Slide 43: * \LLICoM
* \LLICoM r ) THE DIGITAL LIFESTYLE
Millicom International Cellular — Q1 2018 Earnings Presentation on 6ix