Millicom International Cellular S.a. · NASDAQ:TIGO
Millicom International Cellular — Q2 2010 Earnings Presentation
52 slides from Millicom International Cellular's earnings presentation, 2010
Slide 1: Q2 2010 Investor Presentation
Millicom International Cellular S.A. Q2 2010 Investor Presentation
Slide 2: Overview
: : Overview Millicom: • is a leading operator of mobile telephony services in emerging markets with 37m customers • is an FMCG company, not a technology company • operates in 13 countries with 260 million potential customers under license • has strong market positions having successfully grown its
Slide 3: Proven track record of profitable growth in emerging markets
: : Proven track record of profitable growth in emerging markets 4,000 3,500 Revenue EBITDA 3,000 2,500 US $ (millions) 2,000 45.8% 43.4% 1,500 42.8% 46.1% 1,000 48.4% 500 0 2005 2006 2007 2008 2009 3 EBITDA Margin of 45.8% for 2009
Slide 4: Excellent market positions
: : Excellent market positions Guatemala El Salvador Senegal Chad 1 of 3 1 of 5 2 of 4 1 of 2 Rwanda 3 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: 30% → ? • Communication 27% →80%+? • Information • Entertainment Latin America: Colombia • Solutions 88%→100%+? 5
Slide 6: MIC average penetration <50%
: : MIC average penetration <50% CAM SAM Africa MIC Avg penetration Avg penetration Avg penetration Avg penetration 89.0% 85.6% 27.1% 47.7% 120.0% 101.2% 91.0% 92.0% 100.0% 82.7% 87.0% 81.4% 80.0% 56.5% 53.2% 60.0% 50.3% Average MIC 40.0% 33.3% 28.1% 20.2% 20.0% 9.5% 0.0% 6
Slide 7: Strong market share evolution
: : Strong market share evolution 31% 2007 2008 2009 2010 30% 29.4% 29.2% 28.7% 28.7% 29% 27.9% 28% 27.0% 27.1% 27.2% 27.2% 27% 26.6% 26% 25.4% 24.9% 25% 24.6% 24% 23% 21.8% 22% 21% Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Further market share growth in all
Slide 8: Product categories and strategic focus
: : 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 Solutions: access to services insurance,
Slide 9: Innovation is already a big part of our business
: : Innovation is already a big part of our business 20% 18% 16% 14% 12% 10% 18% 8% 6% 13% 10% 4% 8% 2% 5% 0% 2005 2006 2007 2008 2009 VAS as % of recurring revenue 9
Slide 10: …and an essential revenue growth factor
: : …and an essential revenue growth factor 70% 60% 50% 40% 30% 62% 20% 29% 10% 13% 13% 10% 0% 2005 2006 2007 2008 2009 VAS as % of total growth in recurring revenues in local currency 10
Slide 11: Stabilization of customer growth
: : Stabilization of customer growth 1,000 900 800 700 600 reported net additions ('000) 500 12 months moving average of net 400 additions 300 200 Stable customer growth despite continuous volatility caused by compulsory SIM registration in 4 markets 11
Slide 12: ARPU decline reducing steadily quarter on quarter
: : ARPU decline reducing steadily quarter on quarter 30.0% 20.0% YoY growth 10.0% Customers Recurring revenue growth * 0.0% ARPU in local currency Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 -10.0% -20.0% * Recurring revenue = customers x ARPU in local currency Excluding Rwanda which has no comparison base in 20
Slide 13: Free Cash Flow
: : Free Cash Flow* US$m 250 220 200 200 155 150 US$m Q2 10 Q2 09 Change 108 OFCF 227 123 85% 100 Net Interest Paid -53 -48 10% 61 Corporate Costs -19 -14 37% 50 FCF 155 61 154% 0 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 * EBITDA - Capex +/- WC- Interests - Taxes - Corporate costs Q2 09 Q3 09 Q4 09 Q1 10 Q2 10
Slide 14: Asset productivity
: : Asset productivity Ghana • Transaction signed in January 2010 • Sale and lease-back of 742 towers to a JV with Helios, with a minority stake for Millicom Benefits • Cash upfront • Opex savings NPV >$100m • Capex reduction • Equity Similar tower transactions targeted in other markets in 2010 14
Slide 15: 2010 Roadmap
: : 2010 Roadmap GOAL Accelerate through 1 Growth innovation Balance margin 2 Margins improvements with top line growth 3 Cash generation Increase 4 Asset productivity Improve 5 Asset protection / Risk management Monitor 15
Slide 16: 2010 guidance raised
: : 2010 guidance raised (including impact of full consolidation of Honduras in H2 that has a limited impact) Previous Guidance Revised Guidance EBITDA margin Mid-40s Around 47% Capex $700m $700m OFCF* margin Mid-teens High teens •OFCF= Operating Free Cash Flow: 16 EBITDA - CAPEX - WC movements - Ta
Slide 17: Regional Quarterly review
Click to add title Regional Quarterlyreview Add Title review 17
Slide 18: Q2 Highlights
: : Q2 Highlights • Group revenues up 14% • Double – digit constant currency revenue growth at 11.3% • Further market share gains • EBITDA margin of 47.0 % • Continued strong cash flow generation • Strong adjusted EPS growth +30% (excluding one-off items) • Payment of exceptional and regular dividen
Slide 19: Financial Highlights Q2 YoY
: : Financial Highlights Q2 YoY US$m Q2 10 Q2 09 $ Local growth currency Customers ('000) 36,729 30,758 19% Revenues 929 814 14% 11.3% EBITDA 436 371 17% 14.8% % of revenues 47.0% 45.6% +1.4 pt Capex 129 179 -28% % of revenues 13.9% 21.9% -8.0 pt Operating Free Cash Flow * 227 123 85% % of revenues
Slide 20: Revenue growth – positive Forex impact in Q2
: : Revenue growth – positive Forex impact in Q2 US$m 950 2.8% 14.1% 11.3% 22.6 900 929 92.1 906 850 0.0 800 814 814 750 700 Local currency growth at 11.3% despite full year impact of additional taxes in Central America and Africa 20
Slide 21: Revenue split by category
: : Revenue split by category US$m Q2 10 Q2 09 $ Local growth currency Voice 621 570 9% 7% % of recurring m obile revenues 78.1% 81.4% VAS - SMS 78 69 13% 9% % of recurring m obile revenues 9.7% 9.8% -0.1 pt + 28.4% VAS growth Other VAS 97 62 57% 50% % of recurring m obile revenues 12.2% 8.8% +3.3 p
Slide 22: Strong momentum on non-SMS VAS revenue
: : Strong momentum on non – SMS VAS revenue 25.0% 21.9% 20.9% 21.1% 19.9% 20.0% 18.6% 10.3% 10.3% 12.2% 15.0% 9.7% 8.8% 10.0% Other VAS as a % of Voice+VAS VAS - SMS as % of 5.0% 9.8% 10.2% 10.6% 10.8% 9.7% Voice+VAS 0.0% Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Note: Other VAS includes Ringback tones / Data
Slide 23: Growth of 3G data revenue in Latin America
: : Growth of 3G data revenue in Latin America US$m Q2 10 Q1 10 QoQ growth Latin America 3G Handsets Customer base 1,170 1,020 15% Penetration on total MIC customers 5.2% 4.6% 0.6 pt 3G data users 727 569 28% 3G data users/customer base 62% 56% 6 pt Datacards Customer base 564 466 21% Total 3G data
Slide 24: Regional review
Click to add title Regional review
Slide 25: Quarterly Highlights – Central America YoY
: : Quarterly Highlights – Central America YoY US$m Q2 10 Q2 09 Reported Local currency growth growth Customers ('000) 13,370 12,123 10% Revenues 330 332 0% -1% EBITDA 191 187 2% 2% % of revenues 57.8% 56.4% +1.4 pt Capex 30 20 50% % of revenues 9.1% 6.0% +3.1 pt Operating Free Cash Flow 104 100 4%
Slide 26: Quarterly Highlights – South America YoY
: : Quarterly Highlights – South America YoY US$m Q2 10 Q2 09 Reported Local currency growth growth Customers ('000) 9,239 8,060 15% Revenues 323 249 30% 19% EBITDA 138 98 42% 32% % of revenues 42.7% 39.2% +3.5 pt Capex 42 45 -6% % of revenues 13.1% 18.1% -5.0 pt Operating Free Cash Flow 65 48 36% %
Slide 27: Quarterly Highlights – Africa YoY
: : Quarterly Highlights – Africa YoY US$m Q2 10 Q2 09 Reported Local currency growth growth Customers ('000) 14,119 10,575 34% Revenues 219 183 20% 24% EBITDA 81 62 31% 34% % of revenues 36.9% 33.7% +3.2 pt Capex 42 72 -41% % of revenues 19.3% 39.4% -20.1 pt Operating Free Cash Flow 45 1 % of reven
Slide 28: Quarterly Highlights – Cable YoY
: : Quarterly Highlights – Cable YoY US$m Q2 10 Q2 09 Reported Local currency growth growth Revenues 56 50 11% 9% - Amnet 49 44 - Navega 7 6 EBITDA 26 25 5% 2% - Amnet 18 17 - Navega 8 7 % of revenues 46.6% 49.2% -2.6 pt Capex 15 23 -33% % of revenues 27.0% 45.6% -18.6 pt Operating Free Cash Flow 9
Slide 29: Financial review
Click to add title Financial review
Slide 30: Quarterly Interest expense
: : Quarterly Interest expense 48 47 47 46 46 45 45 26% fixed rate 44 74% variable rate 43 43 43 Target of 50% 42 variable/ 50% fixed 41 40 39 38 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Total Interest expense (US$m) Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 8.1% 7.4% 7.8% 7.3% 7.7% 30
Slide 31: Cost/ Margin breakdown
: : Cost/ Margin breakdown 100% 90% 80% 45.6% 45.8% 46.6% 46.8% 47.0% 70% Margin improvements 60% 50% 13.9% 14.7% 13.2% 13.8% 14.0% Stability 40% 30% 19.3% 18.9% 18.9% 18.5% 18.0% Leverage + focus on retention in CAM 20% 10% 21.2% 20.6% 21.3% 20.9% 21.0% Cost efficiency + scale 0% Q2 09 Q3 09 Q4 09
Slide 32: Strong EPS growth
: : Strong EPS growth US$m Q2 10 Q2 09 $ growth EBITDA 436 371 17% Depreciation -160 -144 11% Impact of scale and % of revenues 17.2% 17.7% -0.5 pt change in asset lives Net Finance Costs -44 -41 6% Low variable rates % of revenues 4.7% 5.1% -0.3 pt Taxes -55 -51 7% Favourable country % of revenues
Slide 33: Quarterly EPS
: : Quarterly EPS 4.50 4.18 4.00 3.50 3.00 2.50 2.00 +30% YoY 1.50 1.36 1.43 1.39 1.38 1.31 1.29 1.23 1.05 1.07 1.00 Reported EPS 0.50 Adjusted EPS * - Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 * Adjusted EPS excludes Forex movements on US$ debt and cash, gain/loss on financial instruments and disposals. Adjust
Slide 34: Taxes
: : Taxes US$m Q2 10 Q2 09 Change PBT 177 160 10% Taxes 55 51 7% Effective tax rate 31.0% 32.1% -1.1 pt Lower tax rate in Q2 10 despite withholding taxes following stronger cash upstreaming ($280m in Q2 10 vs $197m in Q2 09) 34
Slide 35: Dividend payment has restored appropriate leverage
: : Dividend payment has restored appropriate leverage US$m Q2 10 Q1 10 Gross Debt 2,516 2,355 Cash * 1,276 1,633 Net Debt 1,240 722 Net Debt/EBITDA ** 0.7 0.4 * including pledged depo sits and time depo sits ** (Net Debt/4)/EBITDA Dividends ($654 M) paid in June. ND/EBITDA at 0.7 post dividend 35
Slide 36: All regions Cash Flow positive
: : All regions Cash Flow positive OFCF US$m Q2 10 Q2 09 Change Central America 104 100 4% South America 65 48 36% Africa 45 1 Cable 9 -9 Other (incl. Corporate) 4 -17 OFCF 227 123 85% % of revenues 24.4% 15.0% 9.4 pt Positive Cash Flow for all clusters in Q2 10 36 Less dependence on Central America
Slide 37: Increased cash repatriation
: : Increased cash repatriation Net cash upstream US$m 600 500 400 300 512 462 200 100 84 0 2008 2009 H1 2010 37
Slide 38: Gross Debt maturity
: : Gross Debt maturity US$m 800 700 600 500 455 454 400 300 536 562 392 200 100 222 219 130 0 < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years Average maturity at 2 years and 6 months 38
Slide 39: Control of Honduras
: : Control of Honduras • Millicom entered into an agreement with its partner in Honduras to take full control of its affiliate Celtel from 1.7.2010. Celtel will be fully consolidated from Q3 2010 as a consequence • Millicom has an unconditional 5-year call option on its partner’s stake while Millic
Slide 40: SIM card registration
: : SIM card registration Market Starting date for Registration % of customer base registration deadline registered at June 30, 2010 Tanzania June 1, 2009 July 15, 2010 80% MOAT* agreement grants extension to October 15, 2010. DRC Dec 12, 2009 Full registration mandatory 75% for all customers since
Slide 41: Appendix
Click to add title Appendix
Slide 42: Overview
: : Overview Central America: South America: Africa*: Mobile Amnet: 38m 28 m 63 m 169 m operations’ pops Guatemala 13m under license*†: El Salvador 7m 260m Honduras 8m Costa Rica 4m Guatemala 13m El Salvador 7m Senegal 14m Chad 10m Nicaragua 6m Ownership: 55.0% Ownership: 100% Ownership: 100% Owners
Slide 43: ARPU in Local currency
: : ARPU in Local currency Q2 10 Q1 10 Q4 09 Q3 09 Q2 09 Central America El Salvador 11 11 12 12 13 Guatemala 102 104 104 113 115 Honduras 191 190 197 194 216 South America Bolivia 77 76 82 77 75 Colombia 22,159 22,159 22,632 21,541 21,488 Paraguay 48,473 49,557 53,699 51,464 49,301 Africa Chad 3,81
Slide 44: YoY Local currency ARPU growth
: : YoY Local currency ARPU growth Year-on-Year local currency ARPU growth (%) Total Central Am. South Am. Africa Q2 10 (8%) (11%) 2% (7%) Q1 10 (9%) (13%) 0% (3%) Q4 09 (10%) (20%) (4%) (9%) Q3 09 (12%) (19%) (3%) (15%) Q2 09 (16%) (20%) (3%) (23%) 44
Slide 45: Mobile revenues in local currency
: : Mobile revenues in local currency LC million Q2 10 Q2 09 Growth % Central America El Salvador 100 108 -7.4% Guatemala 1,942 1,789 8.5% Honduras 2,765 2,897 -4.6% South America Bolivia 504 395 27.7% Colombia 277,008 231,635 19.6% Paraguay 516,629 455,686 13.4% Africa Chad 13,513 10,527 28.4% DRC
Slide 46: Market Share evolution QoQ
: : Market Share evolution QoQ CAM SAM Africa MIC Avg Market Share Avg Market Share Avg Market Share Avg Market Share 53.7% 17.3% 30.3% 29.4% 70.0% 65.4% 57.6% 54.5% 60.0% 50.4% 50.0% 45.9% 42.7% 40.0% 36.3% 35.2% 32.0% 27.9% 26.4% Average 30.0% MIC 20.0% 12.0% 9.4% 10.0% 0.0% Increase (>0.2%) Stabl
Slide 47: Movements of currencies vs USD YoY
: : Movements of currencies vs USD YoY Closing rate Closing rate Change Average rate Average rate Change Q2 10 Q2 09 Q2 10 Q2 09 Guatemala GTQ 8.03 8.15 1% 8.01 8.12 1% Honduras HNL 18.90 18.90 0% 18.89 18.89 0% Central America Nicaragua NIO 21.35 20.33 -5% 21.23 20.21 -5% Costa Rica CRC 535.08 571.
Slide 48: Q2 10 Market Overview – by Segment
: : Q2 10 Market Overview – by Segment Central South Amnet/ Millicom Segments Africa Total America America Navega Market Overview Population (million) 28 63 169 260 Mobile Penetration 89.0% 85.6% 27.1% 47.9% Operational Data Total Customers (000) 13,370 9,239 14,119 36,729 Attrib. Customers (000) 9,
Slide 49: Market Overview LATAM - Amnet
: : Market Overview LATAM - Amnet Latin America Central America AMNET South America El Salvador Guatemala Honduras Bolivia Colombia Paraguay Shareholding 100.0% 55% (p) 66.7% (p) 100.0% 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 yr
Slide 50: 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 51: 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, revenues, earnings and other trend information. It is important to note that Millicom’s actual results in
Slide 52: Merci
Merci 52
Millicom International Cellular — Q2 2010 Earnings Presentation on 6ix