Millicom International Cellular S.A. · NASDAQ:TIGO
Millicom International Cellular — Q2 2015 Earnings Presentation
30 slides from Millicom International Cellular's earnings presentation, Jul 21, 2015
Slide 1: 2015 Q2 Results
2015 Q2 Results Mauricio Ramos, CEO Tim Pennington, CFO 21 July 2015
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: Q2 Key Messages
Q2 Key Messages 1 Strong Q2 results 2 Strategic update: build and monetize the Digital Lifestyle 3 Colombia synergies increased to $750m NPV 4 Corporate costs trending down 5 2015 guidance confirmed Page 3
Slide 4: Strong Q2 results: mobile subscribers
1. Strong Q2 results Subscribers Mobile Mobile +1.9m 59.3m 13.4% Subscribers Net adds in Q2 15 Total subscribers YoY growth LATAM Africa +0.3m H N +1.6m Net adds in Q2 15 Net adds in Q2 15 31.7m 27.7m Total mobile subscribers Total mobile subscribers Page 4
Slide 5: Strong Q2 results: homes passed and RGU
1. Strong Q2 results Subscribers Homes passed (1) +114k 5.9m 155% Additions in Q2 Homes passed as of YoY growth in Homes passed June 2015 (UNE addition: 3.3m) RGU Pay-TV Broadband Telephony (Cable + DTH) Internet & others Q2 net addition +35k +28k -4k Page 5 (1) HFC and copper lines of UNE
Slide 6: Strong financials despite high FX pressure
1. Strong Q2 results Strong financials despite high FX pressure +18% YoY reported in USD, including UNE Revenue 1,704 +9% US$ million YoY organic -1.3% YoY growth in USD, excluding UNE EBITDA 561 +9% +17% YoY reported in USD, including UNE +0.3% YoY growth in USD, excluding UNE US$ million YoY organ
Slide 7: Our strategic focus revolves around key pillars
2. Strategic update Our strategic focus revolves around 2 key pillars 1 Build the Digital Lifestyle 2 Monetise the Digital Lifestyle Page 7
Slide 8: Monetising mobile data is the key
2. Strategic update Monetising mobile data is the key Smartphone penetration 100% Drive smartphone 1 adoption 75% 19% 28% Q2 14 Q2 15 in 3 years Average monthly data consumption (MB) Voice ARPU vs. Data ARPU1 per data user in Latam +58% +55% 1,074 7.9 2 Monetise data 678 5.1 Q2 14 Q2 15 Voice Data (
Slide 9: Expanding the cable footprint comes first
2. Strategic update Expanding the cable footprint comes first … HFC Homes Passed, k 10,000 BUILDING cable with 5,873 1 Homes Passed expansion 2,301 Q2 14 Q2 15 2 MONETISING Page 9
Slide 10: Preparing for Fixed-Mobile Convergence
2. Strategic update … while preparing for Fixed-Mobile Convergence Mobile Home Build digital + Grow footprint lifestyle and build Monetise data convergence Page 10
Slide 11: Strategic update: cash flow model
2. Strategic update: cash flow model Growth vs profitability vs investment sweet spot Revenue growth High single digit Operating leverage ~ 50% EBITDA Margin trending up towards ~ 35% Capex to Sales trending down towards ~ 15% OCF Margin trending up towards ~ 20% Page 11
Slide 12: Colombia – Mobile
3. Colombia – Mobile Regulatory impact reducing ARPU in the market but margin is improving Mobile customers, Colombia • Term contract changed market dynamic 000s, Q1 2014 – Q2 2015 • Removed subsidies from market, customers trading down to 8,594 8,357 lower packages 8,012 • Handset financing and FX
Slide 13: Colombia – synergies increased
3. Colombia – synergies increased Synergies increased to NPV of $750 million and run rate $70 million cashflow NPV of synergies (US$ million) Run rate and run rate mix in 2017 42% 850 $70m FX 100% 750 80% 600 EBITDA Capex COP @1,950 COP @ 1,950 COP @ 2,600 20% Initial New guidance guidance * Based o
Slide 14: Corporate costs down
4. Corporate costs down Focus on corporate costs trending in the right direction Corporate costs, US$ million Comments 80 73 350 70 64 63 60 59 55 300 • Corporate costs at 3.2% of 50 250 revenue this quarter 40 30 200 20 150 • Q2 implied run rate of $220m 10 0 100 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Corpo
Slide 15: FY Guidance updated for FX
FY Guidance updated for FX Rebased guidance confirmed Currency basket devalued 7% 1 Guidance updated to reflect current FX rates 2 Currency basket (7%) Revenue $6.8 - $7.2bn Guatemala (0%) Honduras (1%) Costa Rica 2% Colombia EBITDA $2.12 - $2.26bn (12%) Paraguay (9%) Ghana (7%) Senegal/Chad (7%) Ca
Slide 16: Financial review
Financial review Tim Pennington 21 July 2015
Slide 17: Key metrics
Key metrics Strong organic performance Revenue 1 EBITDA EBITDA - CAPEX Net debt $4.28 billion 9.0% organic growth in $561 million (+9.3% $271 million Q2 15 organic) 1.9x net debt / EBITDA (2.25x proportionate) 5.7% service revenue 32.9% Group margin Up 41% YoY growth 33.6% (+0.5% ex UNE) 15.9% margi
Slide 18: Operating performance
Operating performance Service revenue and margin continue to grow US$ million Q2 15 Reported Organic • Strong revenue growth growth % growth% • 9.0% organic growth Revenue 1,704 17.8% 9.0% • Service revenue growth Service revenue 1 maintained 1,571 16.5% 5.7% • EBITDA grows faster than EBITDA 561 17
Slide 19: Earnings
Earnings EPS hit by higher tax and lower associates US$ million Q2 15 Q2 14 % change EBITDA 561 479 17.2 • EPS movement mainly tax and Depreciation & Amortisation associates (337) (253) +33.4 • D&A higher due to UNE, Operating profit 223 225 (1.0) • Others include: Net Finance Charge (89) (89) 0.3 •
Slide 20: Revenue growth trend
Revenue growth trend Consistent service revenue trend Quarterly revenue growth Q2 2014 – Q2 2015 Mobile +3% 12% Cable +25% 10.8% 9.7% MFS +38% 10% 9.0% 8.6% 9.0% Handsets & CPE +53% 8% 6% 7.2% 5.9% 5.7% 5.6% 5.7% Group revenue 4% growth Service revenue 2% growth (1) 0% Q2 14 Q3 14 Q4 14 Q1 15 Q2 15
Slide 21: Revenue by business units
Revenue by business units Cable and MFS growing strongly Revenue evolution by Business Unit US$ million, Q2 2014 – Q2 2015 • Mobile up 3.3% organically • Colombia and Africa driving UNE 10 57 • Voice & SMS -5.3% 264 • Data growing 39.3% (Q1: 36.2%) (148) • Cable grew strongly 32 1,704 43 Organic • E
Slide 22: Revenue by region
Revenue by region FX headwinds offset solid organic growth Revenue evolution by Region US$ million, Q2 2014 – Q2 2015 • Major FX impact in Q2 • 10.3% of revenue ex-UNE • Major devaluations in Colombia, 38 UNE Tanzania, Paraguay • Strong growth in Latam 275 • Ex-UNE up 7.7% (148) 92 1,667 1,704 • UNE
Slide 23: EBITDA
EBITDA Latam and lower Corporate Costs drive EBITDA EBITDA evolution by Region US$ million, Q2 2014 – Q2 2015 • EBITDA growth of 17.2% • Organic growth 9.3%1 • FX impact UNE (1) 18 • Latam up 28% (10) 91 • Organic growth ex UNE 6.4% (44) 31 • $10 million integration costs for UNE 561 Organic 547 537
Slide 24: EBITDA - Africa
EBITDA - Africa Significant FX impact – Tanzania strong EBITDA evolution - AFRICA US$ million, Q2 2014 – Q2 2015 • Significant FX impact in Q2 • 15% adverse currency movement • Tanzania strong revenue growth driving EBITDA (10) 7 (5) • Revenue organic growth 19% (3) • EBITDA organic growth of 23% 63
Slide 25: EBITDA - Latam
EBITDA - Latam Underlying performance remains strong EBITDA evolution - LATAM US$ million, Q2 2014 – Q2 2015 • Most businesses posting positive growth 81 • FX an issue in Paraguay and Colombia • Central America steady progress – up (33) 5 26 1.9% 564 • Guatemala maintained good growth 485 483 483 •
Slide 26: Equity FCF – H1 2015
Equity FCF – H1 2015 Cash generation profile is improving YoY change 17% 22% 120% NM • H1 cashflow showing signs of improvement • OCF up 22% 168 • H1 EBITDA up 17% • Working capital outflow slowing down - $37m in US$ million 489 Q2 1,126 • Cash capex represents 144 102% of capex booked 469 177 • Tax
Slide 27: Net debt variation
Net debt variation Net debt increased due to dividend distribution Net debt evolution US$ million, 31 December 2014 – 30 June 2015 • Net debt increased to $4.3bn (21) • 5.8 year maturity • Average cost of debt 6.1% (264) • 24% gross debt in local currency 52 (51) • Small amount of M&A 4,281 • Rwanda
Slide 28: Conclusion
Conclusion 1 A good performance challenged by FX headwinds 2 EBITDA momentum maintained through better cost control 3 Our upside potential in Colombia remains strong Page 28
Slide 29: Appendix
Appendix We believe in better. We believe in ticd
Slide 30: Appendix – Below EBITDA
Appendix – Below EBITDA Depreciation and amortisation Interest 9 122 38 9 337 89 89 253 D&A Q2 14 Underlying FX D&A Q2 15 Interest Q2 14 Underlying FX Interest Q2 15 Tax 35 11 91 67 Tax Q2 14 Underlying FX Tax Q2 15 Page 30
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