Millicom International Cellular S.a. · NASDAQ:TIGO
Millicom International Cellular — Q2 2011 Earnings Presentation
57 slides from Millicom International Cellular's earnings presentation, 2011
Slide 1: Q2 2011 Investor Presentation
Millicom International Cellular S.A. Q2 2011 Investor Presentation
Slide 2: Overview
: : Overview Millicom: • is a leading operator of mobile telephony services in emerging markets with over 40 million customers • sees itself as an FMCG company, not a technology company • operates in 13 countries with 265 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: 32% → ? • Communication 45% →80%+? • Information • Entertainment Latin America: Colombia • Solutions 90%→100%+? 5
Slide 6: 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 7: 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 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% Over 27% of revenues 22% 10% in Q2 11 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 fo
Slide 10: 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 11: 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 11
Slide 12: 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 13: 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. 13 Half of LATAM revenue growth coming from Data
Slide 14: 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 < $10 64.3% 65.9% -1.6 pt Total 100.0% 100.0% Focus on value customers, especially 3G 14
Slide 15: Tigo Cash gaining momentum
: : Tigo Cash gaining momentum 16.0% Tigo Cash penetration % 14.0% 12.0% 10.0% Paraguay 8.0% (launched in Q3 10) 6.0% Tanzania (launched in 4.0% Q4 10) 2.0% 0.0% Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Tigo Cash launched in 7 operations, 15 covering over 60% of total Millicom revenue
Slide 16: Increased commercial investment in data and services
: : Increased commercial investment in data and services (+21.1% YoY) 300 +21.1% 248 250 205 +39.7% 77 200 55 Subsidies cost US$m 150 Sales & Marketing costs (excl. subsidies) +13.0% 100 171 150 50 0 16 Q2 10 Q2 11
Slide 17: 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 17
Slide 18: 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 18 ** OFCF= Operating Free Cash Flow: EBITDA - CAPEX – Working Ca
Slide 19: Review for the period ended 30/06/11
Click to add title Review for the period ended 30/06/11
Slide 20: 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 21: 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% -1.7 pt -1.3 pt Capex 151 134 12% % of revenues 13.4% 13.7% -0.3 pt Operating Free
Slide 22: 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 23: 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 24: 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 25: 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 26: 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 27: Regional review
Click to add title Regional review
Slide 28: Quarterly Highlights – Central America YoY
: : Quarterly Highlights – Central America YoY US$m Q2 11 Q2 10 Reported Local currency Underlying growth growth growth Customers (millions)* 14.1 13.4 5% Revenues 449 435 3% 1.6% 3.4% EBITDA 232 245 -5% -7.1% % of revenues 51.6% 56.3% -4.7pt -3.6pt Capex 40 50 -20% % of revenues 8.8% 11.5% -2.7pt O
Slide 29: Quarterly Highlights – South America YoY
: : Quarterly Highlights – South America YoY US$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 30: Quarterly Highlights – Africa YoY
: : Quarterly Highlights – Africa YoY US$m Q2 11 Q2 10 Reported Local currency growth growth Customers (millions) 16.6 14.1 17% Revenues 246 219 12% 11.9% EBITDA 100 81 23% 22.1% % of revenues 40.4% 36.9% +3.5pt Capex 46 41 10% % of revenues 18.5% 18.7% -0.2 pt Operating Free Cash Flow 36 45 -19% %
Slide 31: Financial review
Financial review
Slide 32: Strong normalized EPS growth in Q2 11: +40%
: : Strong normalized EPS growth in Q2 11: +40% US$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 33: Cash Flow generation
: : Cash Flow generation OFCF US$m Q2 11 Q2 10 Change Central America 112 113 -1% South America 92 65 41% Africa 36 45 -19% Other (incl. Corporate) 28 15 87% OFCF 268 239 12% % of revenues 24.0% 24.4% -0.4pt Strong cash flow despite 33 high tax payments in Q2
Slide 34: Free Cash Flow
: : Free Cash Flow US$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 35: 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 36: 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 37: Leverage: low Net Debt/EBITDA
: : Leverage: low Net Debt/EBITDA US$m Q2 11 Q1 11 Change Gross Debt 2,323 2,338 -16 Cash * 1,060 1,274 -214 Net Debt 1,264 1,064 201 Net Debt/EBITDA ** 0.6 0.5 0.1pt * including pledged depo sits (no n current) and time depo sits ** (Net Debt/4)/EB ITDA Less cash following returns to shareholders i
Slide 38: Gross Debt maturity
: : Gross Debt maturity US$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 38
Slide 39: 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 40: Appendix
Click to add title Appendix Appendix
Slide 41: 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 42: 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 43: 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 44: 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 45: 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 46: 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 47: 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 48: 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 49: 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 50: 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 51: 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 51 a
Slide 52: 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 53: 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 53
Slide 54: 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 55: 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 56: 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 57: Merci
Merci 57
Millicom International Cellular — Q2 2011 Earnings Presentation on 6ix