Slide 1: Growth and Returns: Q3 2011 Investor Presentation
Growth and Returns Q3 2011 Investor Presentation 1 Millicom International Cellular S.A.
Slide 2: Overview
: : Overview Millicom: • is an emerging markets telecoms group with operations in Latin America and Africa • operates under the Tigo brand • sees itself as an FMCG company, not a technology company • offers mainly pre-paid mobile voice but is developing VAS and broadband services • has strong market
Slide 3: Revenue growth of around 10% for 2011
: : Revenue growth of around 10% for 2011 Revenue growth YoY - local currency 13.5% 12.7% 12.5% 11.85% Avg 2010: +11.0% 11.5% +11.3% 10.74% -0.7 pt 10.5% 9.83% Avg Q3 11 YTD: +2.5 pt 10.53% 9.97% +10.6% 9.5% Avg 2009: +8.8% 9.1% 8.5% 8.65% 8.39% 8.23% 7.5% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q
Slide 4: Revenues by service
: : Revenues by service US$m Q3 11 Q3 10 $ Local growth currency Voice 736 706 4% 1% % of Voice+VAS revenues 71.6% 76.7% -5.1 pt VAS - SMS 103 91 13% 6% % of Voice+VAS revenues 10.0% 9.9% +0.1pt +28.9% VAS growth VAS non-SMS 189 123 53% 46% % of Voice+VAS revenues 18.4% 13.4% +5.0pt Other * 123 97 2
Slide 5: VAS contributing >28% of revenues
: : VAS contributing >28% of revenues + 5.1 pts Q3 11 35.0% 33.5% 30.0% 28.4% 27.1% 25.6% 25.0% 23.3% 24.6% 21.7% 20.0% 18.4% 15.6% 17.3% 13.4% 14.7% 15.0% VAS non-SMS as a % of Voice+VAS 11.4% 10.0% VAS - SMS as % of Voice+VAS 7.3% 11.8% 5.0% 9.9% 9.9% 10.0% 9.8% 10.0% 4.1% 0.0% Q3 10 Q4 10 Q1 11 Q
Slide 6: Revenues by category
: : Revenues by category Contribution US$m Q3 11 Q3 10 $ Local on recurr. rev.** growth currency Q3 11 Communication (voice, SMS) 840 798 5% 2% 77% Information (Data services) * 131 85 54% 48% 12% Entertainment (TV, Ringback tones, games) 84 70 20% 17% 8% Solutions (Tigo Cash, Tigo Lends You) 34 24
Slide 7: Strong growth of mobile data revenue (2G+3G) in Latin America
: : Strong growth of mobile data revenue (2G+3G) in Latin America Data revenue (2G+3G) - Latin America 100 Q3 2011: +93% YoY growth 90 80 70 US$ 60 millions 50 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 Q3 11 Commercial investment in 3G shows good results 7 48% of LATA
Slide 8: Good growth of data revenue in Latin America (2G+3G)
: : Good growth of data revenue in Latin America (2G+3G) QoQ Latin America Q3 2011 Q2 2011 growth Total data users* 2G+3G (millions) 3.7 3.3 12% % of total cus tomers 14.7% 13.3% 1.4 pt of which: 3G Data users* (millions) 1.6 1.4 13% % of total cus tomers 6.5% 5.9% 0.6 pt Total Data Revenue 2G+3G 89
Slide 9: Data in LatAm - revenue vs. traffic growth
: : Data in LatAm - revenue vs. traffic growth: Pay-for-use to control capex and preserve margins Revenue vs Traffic Growth 100.0 6.5 6.0 90.0 5.5 80.0 5.0 70.0 4.5 60.0 4.0 3.5 50.0 3.0 40.0 2.5 30.0 2.0 Q 1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 QUARTERS 9 Revenue Trafic MB'000 = GB
Slide 10: Tigo Cash gaining momentum
: : Tigo Cash gaining momentum Tigo Cash penetration % in first 2 markets launched (as a % of mobile customers) 20.0% 15.0% Paraguay (launched in Q3 10) 10.0% Tanzania (launched in Q4 10) 5.0% 0.0% Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Tigo Cash launched in 7 operations, 10 covering over 6
Slide 11: Increased commercial investment in data and services
: : Increased commercial investment in data and services (+11.0% YoY) 300 250 +11.0% 250 225 +17.8% 77 200 65 Subsidies cost US$m 150 Sales & Marketing costs (excl. subsidies) +8.2% 100 173 160 50 0 Q3 10 Q3 11 11
Slide 12: Product penetration
: : Product penetration Highest Lowest Total MIC Q3 11 Q3 10 Change market market (pts) Q3 11 Q3 11 SMS 54.3% 56.6% -2.3 85.0% 16.6% (com m unication) Ring Back Tone 25.7% 23.5% +2.2 38.5% 5.0% (entertainm ent) Data (2G+3G)* 13.3% 7.8% +5.5 25.8% 0.1% out of which 3G 5.3% 3.1% +2.2 9.6% 1.3% (inform
Slide 13: Evolution of ARPU
: : Evolution of ARPU Local currency mobile ARPU* in US$ and YoY growth (%) Total Central Am. South Am. Africa US$ YoY US$ YoY US$ YoY US$ YoY (constant (constant (constant (constant forex) Growth forex) Growth forex) Growth forex) Growth Q3 11 9.3 (3.5%) 11.8 (0.3%) 13.5 0.4% 4.9 (9.7%) Q2 11 9.4 (
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) Q3 11 Q3 10 Change Customers with ARPU > $10 35.5% 34.5% +1.0 pt Customers with ARPU < $10 64.5% 65.5% -1.0 pt Total 100.0% 100.0% Focus on value customers, especially 3G 14
Slide 15: Mobile revenue growth driven by value focus
: : Mobile revenue growth driven by value focus Stable ARPU in Latin America 20.0% YoY growth 15.0% 10.0% Customers 5.0% Revenue growth * ARPU in local currency** 0.0% -5.0% -10.0% Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 * Revenue = customers x ARPU in local currency ** Mobile ARPU based on total revenues exc
Slide 16: Growth drivers
: : Growth drivers Contribution to growth in points Indicative Annual 2010 H1 2011 growth in points (2012-2013) Communication 5.1% 4.0% ~ 3pts Information 3.1% 4.2% 3-4 pts Entertainment -0.1% 0.4% 0-1 pts Solutions 1.8% 1.7% 2-3 pts Other 1.3% 1.1% Total 11.2% 11.4% Around 10 pts Range: 8-11 pts An
Slide 17: Financial flexibility / uses of cash
: : Financial flexibility / uses of cash • Low leverage • Net debt: EBITDA: 0.6x as at September 30, 2011 • Comfortable gearing at 1x, up to 2x for an acquisition opportunity • Strong cash flow generation • OFCF* margin guidance for 2011 close to 25% • Investment focus on current footprint • Organic
Slide 18: Guidance for 2011
: : Guidance for 2011 • EBITDA margin > 45% • Capex around $ 820 million* below previous guidance at around $850 million • OFCF ** margin close to 25%*** (previous guidance = around 20%) * excluding potential new spectrum, green-field cable and capitalization of leasing costs for towers ** OFCF= Ope
Slide 19: Management focus
: : Management focus • Profitable Revenue Growth • Sustainable Cash Generation • Return on Invested Capital (ROIC) Critical to find the right balance between the 3 components rather than prioritizing any one single component Select the quality of the growth on the basis of attractive cash generation
Slide 20: Review for the period ended 30/09/11
Click to add title Review for the period ended 30/09/11
Slide 21: Q3 highlights
: : Q3 highlights • Revenue growth in local currency of 9.1% • ARPU stabilization in LATAM, decline in Africa to maintain affordability • Continued VAS development (+29%), with over 1/3 of revenues coming from VAS and half of recurring revenue growth coming from Mobile Data in Latin America • EBITDA
Slide 22: Financial highlights Q3 YoY
: : Financial highlights Q3 YoY US$ million Q3 11 Q3 10 $ Local growth currency Customers (million) 42.2 37.4 13% Revenues 1,151 1,018 13% 9.1% EBITDA 529 484 9% 3.6% % of revenues 46.0% 47.5% -1.5 pt Capex 217 196 11% % of revenues 18.8% 19.3% -0.5pt Operating Free Cash Flow * 387 245 58% % of reve
Slide 23: Quarterly highlights – Central America YoY
: : Quarterly highlights – Central America YoY US$m Q3 11 Q3 10 Reported Local currency growth growth Customers (millions)* 14.2 13.1 8% Revenues 460 432 6% 4.9% EBITDA 235 239 -2% -2.8% % of revenues 51.0% 55.2% -4.2pt Capex 66 55 20% % of revenues 14.4% 12.7% +1.7pt Operating Free Cash Flow 168 14
Slide 24: Quarterly highlights – South America YoY
: : Quarterly highlights – South America YoY US$m Q3 11 Q3 10 Reported Local currency growth growth Customers (millions) 10.9 9.7 12% Revenues 444 356 25% 15.2% EBITDA 190 151 26% 13.4% % of revenues 42.9% 42.4% +0.5pt Capex 74 68 9% % of revenues 16.6% 19.1% -2.5 pt Operating Free Cash Flow 139 103
Slide 25: Quarterly highlights – Africa YoY
: : Quarterly highlights – Africa YoY US$m Q3 11 Q3 10 Reported Local currency growth growth Customers (millions) 17.2 14.6 17% Revenues 247 230 7% 7.8% EBITDA 104 94 11% 4.0% % of revenues 42.1% 40.7% +1.4 pt Capex 76 73 5% % of revenues 30.9% 31.7% -0.8 pt Operating Free Cash Flow 116 1 % of reven
Slide 26: Revenue split by service - LATAM
: : Revenue split by service - LATAM US$m Q3 11 Q3 10 $ Local growth currency Voice 523 499 5% 1% % of Voice+VAS revenues 66.5% 72.1% -5.6 pt VAS - SMS 93 81 15% 7% % of Voice+VAS revenues 11.8% 11.7% +0.1 pt +28.4% VAS growth VAS non-SMS 171 113 52% 44% % of Voice+VAS revenues 21.7% 16.2% +5.5 pt O
Slide 27: Revenue split evolution - LATAM
: : Revenue split evolution - LATAM + 5.6 pts 40.0% 33.5% 35.0% 32.4% 30.6% 29.2% 30.0% 27.9% 25.0% 20.8% 21.7% 17.7% 18.9% 20.0% 16.2% VAS non-SMS as a % of 15.0% Voice+VAS 10.0% VAS - SMS as % of 11.7% 11.7% 11.6% 11.8% Voice+VAS 5.0% 11.5% 0.0% Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Note: Other VAS includ
Slide 28: Revenue split by service - Africa
: : Revenue split by service - Africa US$m Q3 11 Q3 10 $ Local growth currency Voice 213 207 3% 3% % of Voice+VAS revenues 88.6% 90.7% -2.1 pt VAS - SMS 10 10 -4% -1% % of Voice+VAS revenues 4.1% 4.5% -0.4 pt +33.8% VAS grow th VAS non-SMS 18 11 63% 67% % of Voice+VAS revenues 7.3% 4.7% +2.6pt Other
Slide 29: Revenue split evolution - Africa
: : Revenue split evolution - Africa + 2.1 pts 14.0% 12.0% 11.4% 10.5% 10.1% 9.9% 10.0% 9.3% 8.0% 7.3% 5.2% 5.5% 6.2% 4.7% 6.0% VAS non-SMS as a % of Voice+VAS 4.0% VAS - SMS as % of 4.5% 4.9% 4.4% 4.3% Voice+VAS 2.0% 4.1% 0.0% Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Note: Other VAS includes Ringback tones /
Slide 30: Financial Review
Click to add title Financial Review
Slide 31: Taxes
: : Taxes US$m Q3 11 Q3 10 Change PBT 247 205 20% Taxes* 64 60 8% Effective tax rate 26.0% 29.1% -3.1pt * Exclud ing D T A p o sit ive ad just ment in C o lo mb ia ( Q3 11) Harvesting benefits of tax planning Reduction of tax rate as 3 additional countries are now profit making 31
Slide 32: Deferred tax asset in Colombia
: : Deferred tax asset in Colombia • Colombia in a sustainable net profit situation • Recognition of a Deferred Tax Asset (DTA) for $231 million (one-off non-cash item) • DTA will be amortized over the period 2012-2015 when income taxes will start to be paid 32 32
Slide 33: Strong normalized EPS growth in Q3 11: +30%
: : Strong normalized EPS growth in Q3 11: +30% US$ million Q3 11 Q3 10 $ growth EBITDA 529 484 9% Corporate costs -26 -36 -28% LTIP adjustment in 2010 Depreciation -187 -184 2% Tower outsourcing % of revenues 16.2% 18.0% -1.8 pt -26% Debt push-down Net Finance Costs -43 -58 % of revenues 3.8% 5.7%
Slide 34: Cash Flow generation
: : Cash Flow generation OFCF US$m Q3 11 Q3 10 Change Central America 168 148 14% South America 139 103 35% Africa 117 1 Other (incl. Corporate) -38 -7 OFCF 387 245 58% % of revenues 33.6% 24.1% 9.5pt Strong cash flow, partly linked to 34 favorable timing of capex payments
Slide 35: Free Cash Flow
US$m : : Free Cash Flow 350 328 300 250 215 203 199 191 200 US$m Q3 11 Q3 10 Change 150 OFCF 387 245 58% 100 Net Interest paid -37 -26 45% Corporate Costs paid -21 -16 27% 50 FCF 328 203 62% 0 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 FCF* as % 19.9% 18.6% 17.7% 19.2% 28.5% of reve
Slide 36: Asset productivity - towers
: : Asset productivity - towers • First closing of Tanzania in Q3 2011 • Further closings in Ghana (92% of towers completed as of 30th September 2011) • First closing for DRC and Colombia expected in Q4 2011 • Expected total cash proceeds for tower deals in 2011: $205 million of which $65 million al
Slide 37: Shareholders’ remuneration
: : Shareholders’ remuneration • Shareholder return commitment of $1 billion in 2011 will be met. • $368 million share buy back to-date. • $189 million ordinary dividend paid in Q2 • Exceptional dividend of $3 per share to be paid in December 2011 (around $310 million), subject to EGM approval. • Ba
Slide 38: Leverage: low Net Debt/EBITDA
: : Leverage: low Net Debt/EBITDA US$m Q3 11 Q2 11 Change Gross Debt 2,210 2,323 -114 Cash * 1,028 1,060 -31 Net Debt 1,183 1,264 -80 Net Debt/EBITDA ** 0.6 0.6 * including pledged deposits (no n current) and time deposits ** (Net Debt/4)/quarterly EB ITDA Expected ND/EBITDA of 0.7 at year-end 38
Slide 39: Gross debt maturity
: : Gross debt maturity US$m 600 500 400 300 535 454 461 200 303 287 291 100 212 63 58 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 2 months 45% of gross debt at fixed rates 39
Slide 40: Quarterly interest expense
: : Quarterly interest expense 65 63 62 2 60 10 55 12 50 3 49 47 45 7 42 7 2 40 49 49 42 35 40 40 30 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Total interest cost Other f inancial costs HY bond early redemption Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Effective 7.1% 7.4% 7.2% 6.9% 7.1% rate* * Effective rate calculated on
Slide 41: Appendix
Click to add title Appendix Appendix
Slide 42: 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 43: 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 43 Number 1 and 2 market positions are key to profitability
Slide 44: Market share
: : Market share CAM SAM Africa MIC Avg Market Share Avg Market Share Avg Market Share Avg Market Share 54.3% 18.7% 31.3% 30.4% 70.0% 63.1% 58.0% 57.4% 60.0% 54.5% 50.0% 44.6% 42.4% 40.0% 35.1% 35.7% 33.0% 32.4% 30.5% Average 30.0% 23.4% MIC 20.0% 10.6% 10.0% 0.0% Increase QoQ Decrease QoQ Rwanda DR
Slide 45: Market share evolution
: : Market share evolution Market share* (%) Total Central Am. South Am. Africa Q3 11 30.4% 54.3% 18.7% 31.3% 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% * Comparable market share (i.e. for DRC only Kinshasa-Bas Congo area c
Slide 46: Churn partially linked to seasonal impacts
: : Churn partially linked to seasonal impacts MIC TOTAL 5.4% 5.3% 5.2% 5.0% 4.9% 5.0% 4.8% 4.7% 4.6% 4.6% 4.4% 4.2% Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q2 11 Q3 11 Q2 11 Q3 11 Q2 11 Q3 11 Q2 11 Q3 11 8.0% 6.4% 6.0% 5.8% 5.0% 4.1% 4.1% 4.6% 3.8% 4.1% 4.0% 2.0% CAM SAM Africa MIC TOTAL 46
Slide 47: Movements of currencies vs USD YoY
: : Movements of currencies vs USD YoY Closing rate Closing rate Change Average rate Average rate Change Q3 11 Q3 10 Q3 11 Q3 10 Guatemala GTQ 7.87 8.14 3% 7.83 8.06 3% Honduras HNL 18.90 18.90 0% 18.87 18.90 0% Central America Nicaragua NIO 22.70 21.62 -5% 22.56 21.49 -5% Costa Rica CRC 514.12 507.
Slide 48: Penetration rates
: : Penetration rates CAM SAM Africa * MIC Avg penetration Avg penetration Avg penetration Avg penetration 90.0% 91.0% 46.7% 66.1% 120.0% 105.2% 96.5% 94.6% 100.0% 86.2% 85.4% 88.9% 80.0% 66.0% 62.7% 63.6% Average MIC 60.0% 50.7% 40.2% 40.0% 26.2% 29.0% 20.0% 0.0% * For DRC , only penetration in Kin
Slide 49: 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 90.0% 91.0% 46.7% 66.1% Operational Data Total Mobile customers (000) 14.2 10.9 17.2 42.2 Attrib. Customers (000) 11.1 10.9 16.9 38.9 Ca
Slide 50: 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
Slide 51: 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 2
Slide 52: Merci
Merci 52