Millicom International Cellular S.a. · NASDAQ:TIGO
Millicom International Cellular — Q2 2017 Earnings Presentation
37 slides from Millicom International Cellular's earnings presentation, Jul 20, 2017
Slide 1: 2017 Q2 results
2017 Q2 results Mauricio Ramos, CEO Tim Pennington, CFO 20 July 2017
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: CEO review
CEO review Mauricio Ramos We believe in better. We believe in tico
Slide 4: What we are doing – Strategy Recap
What we are doing – Strategy Recap 1 Two-fold reconfiguration OPPORTUNITY NETWORKS NET ADDS PRICE GROWTH 2 Capital discipline 3 Driving cash flow Page 4
Slide 5: Our unique opportunity…
1 Our unique opportunity… OPPORTUNITY NETWORKS NET ADDS PRICE GROWTH Both mobile and fixed HSD are in their early days in our Latam markets MOBILE FIBRE CABLE 4G as percent of total mobile subscribers* Home passes ambition %, as of March 2017 Households millions >15 million >12 million >10 million >
Slide 6: … to build high speed data networks…
… to build high speed data networks… OPPORTUNITY NETWORKS NET ADDS PRICE GROWTH Doubling the size of our mobile network and adding more than 1m HFC homes per year MOBILE NETWORK FIBRE CABLE NETWORK 4G Network build in Latam Homes passed Coverage in % of population covered, Coverage Thousands Homes p
Slide 7: … with accelerated momentum in HFC…
… with accelerated momentum in HFC… OPPORTUNITY NETWORKS NET ADDS PRICE GROWTH Network build and fill accelerating across our Latam markets BUILD FILL HFC Homes-passed HFC Homes connected Last 12 month net additions (000s), Q4 16 – Q2 17 Last 12 month net additions (000s), Q4 16 – Q2 17 1,183 229 1,
Slide 8: … and add higher value customers in Mobile…
… and add higher value customers in Mobile… OPPORTUNITY NETWORKS NET ADDS PRICE GROWTH Best ever 4G net adds LATAM MOBILE 4G data user net additions 4G data users B2C Smartphone data users (000s), Q2 16 – Q2 17 B2C Smartphone data users (millions), Q2 16 – Q2 17 1 >2x 2 910 845 4.7 679 3.8 566 3.4 3
Slide 9: … and add higher value customers in Fixed
… and add higher value customers in Fixed OPPORTUNITY NETWORKS NET ADDS PRICE GROWTH Best ever HFC net adds LATAM HYBRID FIBRE CABLE HFC Homes connected – Net additions Total Homes connected – Net additions HFC HC Net additions (000s), Q1 16 – Q2 17 HC Net additions (000s), Q1 16 – Q2 17 2X >>> 68 5
Slide 10: Price leadership & discipline in Mobile…
Price leadership & discipline in Mobile… OPPORTUNITY NETWORKS NET ADDS PRICE GROWTH Migration to 4G lifts mobile ARPUs Latam ARPU comparison Latam Data usage – same subscriber* $/month, Latam Mobile B2C vs 4G user GB/User/month when migrating from 3G to 4G >2x 36% 1.9 1.4 7.7 Average 4G 3G 4G Latam
Slide 11: …and price leadership & discipline in Fixed
…and price leadership & discipline in Fixed OPPORTUNITY NETWORKS NET ADDS PRICE GROWTH Home ARPU steadily rising HYBRID FIBRE CABLE Home ARPU Average broadband speed* $/month, Last 12 months Mbps, Q1 2017 29 +4.1% in LC 19 9 Millicom markets 8 7 26.9 26.8 27.5 28.5 28.4 6 4 3 1 Q2 16 Q3 16 Q4 16 Q1
Slide 12: Latam growth trend improving
Latam growth trend improving OPPORTUNITY NETWORKS NET ADDS PRICE GROWTH Second consecutive quarter of revenue “come back” Latam service revenue growth Latam service revenue growth by business unit %YoY growth, Q2 16 – Q2 17 %YoY growth, Q2 17 0,8% Mobile Voice 33% -17.0% and SMS -0,5% Mobile Data 19
Slide 13: Colombia - strong KPI performance
Colombia - strong KPI performance OPPORTUNITY NETWORKS NET ADDS PRICE GROWTH Subscriber net adds have improved significantly in Colombia Colombia 4G net additions Colombia HFC connected net adds Subs thousands, H1 16 vs H1 17 Homes thousands, H1 16 vs H1 17 ~2x ~3x 391 56 201 20 H1 16 H1 17 H1 16 H1
Slide 14: Capital discipline
2 Capital discipline Divesting non-core assets that don’t earn their cost of capital – with more to go Congo ($200m) Disposal - Q1 16 Senegal ($129m) Disposal - Q1 17 Ghana JV with Airtel - Q1 17 Paraguay ($125m) Tower Sale – Q2 17 Colombia ($147m) Tower Sale – Q3 17 Non-core asset Monetizing dollar
Slide 15: Solid cash flow in H1 17
3 Solid cash flow in H1 17 Everything we do is aimed at enhancing returns and FCF Annual OCF (EBITDA-Capex) H1 OCF (EBITDA-Capex) $millions, 2015 – 2016 $millions, H1 16 – H1 17 1,141 930 +342 799 +27 694 667 2014 2015 2016 H1 16 H1 17 Annual equity FCF 269 H1 equity FCF $millions, 2015 – 2016 235 $
Slide 16: We are building momentum
We are building momentum 50% of population 1 Record HSD network up expansion with 4G coverage 1.2m HFC run-rate 900k 4G net adds 2 Record fixed and mobile user intake in Q2 68k HFC net adds Second quarter of 3 Growth is “coming back” improving growth trends in Latam 4 Improving equity FCF $88 m eFCF
Slide 17: CFO review
CFO review Tim Pennington We believe in better. We believe in tico
Slide 18: Key highlights
Key highlights Operational progress – cash flow generation and balance sheet management 1 Signs of a broad based recovery of Latam service revenue 2 Margin sustainability 3 Cash flow on track 4 Balance sheet optimization 5 Outlook maintained – at low end of range on weaker Africa Page 18
Slide 19: Key financial metrics
Key financial metrics Operating cash flow up 4% 1 Service Revenue a $m, Q2 16 – Q2 17 2 EBITDA a and Margins $m and %, Q2 16 – Q2 17 3 Capex b $m, H1 16 – H1 17 -1.3% -1.3% ($15 m) 1,441 1,423 542 535 411 396 Q2 16 Q2 17 Q2 16 Q2 17 H1 16 H1 17 34.9% 35.3% US$ million a) Q2 16 numbers are adjusted t
Slide 20: Service revenue
Service revenue Trends Improving in Latam offset by Colombia and Africa Group sequential organic service revenue growth analysis %YoY, Q1 17 – Q2 17 +24bps -0.6% -1.3% -1.5% 1.3% -0.3% Q1 17 Latam ex CO Colombia Africa Q2 17 Page 20
Slide 21: Colombia
Colombia Positive mobile offset by regulatory, home and B2B Service revenue growth Colombia total cost base Yoy growth, Q2 17 YoY growth per cost segment , Q2 16 and Q2 17 0.6% 1.0% 48% 52% Sales and Marketing +8.3% -2.5% 2.1% General and Admin 52% -9.2% 48% Q2 17 Mobile Discontinued Growth ex repor
Slide 22: Latin America
Latin America Key objective - Improve margins and cash flow OCF Service revenue ($m) (EBITDA – Capex) $m and margin -0.5% 1 3 +6% 718 677 1,257 1,251 25.5% 26.9% EBITDA Q2 16 Q2 17 $m and margin H1 16 H1 17 +0.4% 2 520 522 38.1% 38.9% Q2 16 Q2 17 Q2 16 numbers at Q2 17 FX rates Capex excludes spectr
Slide 23: Africa
Africa On track to deliver EFCF breakeven in 2017 OCF Service revenue ($m) (EBITDA – Capex) $m and margin 1 3 -6.2% -28.8% 66 47 183 171 17.4% 13.6% EBITDA Q2 16 Q2 17 $m and margin H1 16 H1 17 -18.0% 2 57 47 31.0% 27.2% Q2 16 Q2 17 Q2 16 numbers at Q2 17 FX rates and excluding Senegal Capex exclude
Slide 24: Costs review
Costs review Project heat driving cost efficiencies… Operating costs* • Project Heat delivering transformation Local currency growth, Q2 16 vs. Q2 17 organic -1.5% • > $200mn savings targeted Latam • Managed services now implemented in 4 Q2 16 Q2 17 operations +0.1% • Typically ~20% savings • Radio
Slide 25: EBITDA
EBITDA … leading to margin gains … EBITDA evolution by Region US$ million, Q2 16 – Q2 17 -0.5% -1.3% 2 4 -10 1 543 538 535 Reported FX EBITDA Q2 16 LatAm Africa Corporate and other EBITDA Q2 17 EBITDA Q2 16 (constant currency) 34.9% 35.3% Page 25
Slide 26: Margin sustainability
Margin sustainability … and margin resilience LTM EBITDA margin* %, Q2 16 – Q2 17 35.1% 35.4% 35.4% 34.5% 34.5% Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Page 26 *Excludes Senegal in 2016
Slide 27: Q2 P&L review
Q2 P&L review Non cash items explain the PBT swing US$ million Q2 17 Q2 16 % Var • A Includes $15m in bond redemption costs Revenue 1,517 1,540 (1.5%) EBITDA 535 538 (0.5%) • B FX related losses Depreciation & Amortization (336) (336) 0.1% Other non operating (1) (4) (75.5%) • C Loss on asset sale a
Slide 28: H1 cash flow
H1 cash flow Equity FCF improved by $82mn H1 2017 Cash flow US$ million 1,106 486 104 515 107 208 200 72 128 EBITDA Cash capex Working Capital Cash OCF Tax paid Interest Paid FCF Dividends to EFCF (ex-spectrum and others minorities & license) 35.8% 16.7% 6.5% as % of revenue Page 28
Slide 29: Net debt
Net debt Net debt increase due to the dividend payment Net debt evolution US$ million, 31 December 2016 – 30 June 2017 4,402 66 4,181 265 128 18 37% Corporate debt 31% Net debt YE 2016 Equity FCF Spectrum Dividend FX & others Net debt Q2 17 1.93x Net debt/LTM EBITDA 2.03x 2.15x Proportionate Net deb
Slide 30: Balance sheet optimization
Balance sheet optimization Actively managing the balance sheet Colombia 2020 Senior Notes Paraguay Colombia $300 million Redemption PYG 367k / $67 $147m Tower Sale Syndicated Loan Notice million (COP 448 bn) Term Loan Tigo UNE Millicom Tigo Tigo June 2017 June 2017 July 2017 July 2017 37% proforma
Slide 31: Summary
Summary 1 Best ever quarter for customer adds 2 Rapid build out of our HSD networks 3 Revenue progress 4 Cost and capital discipline 5 Latam firmly on right track Page 31
Slide 32: Q&A
Q&A We believe in better. We believe in tico
Slide 33: Appendix
Appendix We believe in better. We believe in tico
Slide 34: Debt profile
Debt profile Long average maturity to debt profile Debt maturity profile a Average life of 4.6 years b US$ million 1,032 907 745 Maturities in 2017 excl. redemption 660 USD 73 535 415 365 GT 305 21s 25s 193 20s 140 PY SEK 2017 2018 2019 2020 2021 2022 2023 2024 2025 >2026 Bank and other Financings B
Slide 35: Gross debt by country
Gross debt by country Central America: South America: Africa: Corporate: Total MIC Debt: Total debt $1,611m Total debt $1,814m Total debt $400m Total debt $1,772m $5,599m 23% guaranteed 1% guaranteed 68% guaranteed 0% guaranteed 12% Guaranteed Honduras: $395m (63% guaranteed) Guatemala: $994m Chad:
Slide 36: Net debt by country
Net debt by country Central America: South America: Africa: Total Net Debt: Corporate $1,206m $1,626m $208m $4,402m $1,362m Leverage 1.09x Leverage 1.66x Leverage 0.93x Leverage 2.03x Honduras: $378m Ghana: $28m Leverage 1.4x Guatemala: $683m Leverage 1.1x Chad: $55m El Salvador: $83m Leverage 0.6x
Slide 37: Currency exposure of the debt
Currency exposure of the debt June 2017 Debt including finance leases Cash Net debt US$ Local Total Total USD Local Total 1,745 1,681 3,426 595 1,470 1,362 2,831 Latin America* 51% 49% 100% 52% 48% 100% 215 186 400 192 196 13 208 Africa 54% 46% 100% 94% 6% 100% 1,772 0 1,772 410 1,365 -3 1,362 Corpo
Millicom International Cellular — Q2 2017 Earnings Presentation on 6ix