Millicom Earnings Call Highlights Cash and Growth Momentum

Millicom International Cellular Sa ((TIGO)) has held its Q1 earnings call. Read on for the main highlights of the call.

Millicom International Cellular’s latest earnings call carried an upbeat tone, as management emphasized strong organic growth, record first‑quarter cash generation and rapid progress integrating recent acquisitions. Executives acknowledged higher leverage, restructuring charges and heavier investment needs, but argued that operational improvements and expanding margins more than offset these near‑term headwinds.

Broad-Based Revenue Momentum

Millicom reported organic service revenue growth of 4.9% year over year, signaling healthy underlying demand across its footprint. Including the newly consolidated operations in Colombia, Ecuador and Uruguay, reported service revenue surged 45% to nearly EUR 1.9 billion, underscoring how the enlarged platform is reshaping the group’s scale.

Record Equity Free Cash Flow

Equity free cash flow reached a first‑quarter record of EUR 225 million, up EUR 48 million from a year earlier. Adjusting for last year’s one‑off items, management said EFCF would have risen by roughly EUR 90 million, highlighting a sharp improvement in the company’s recurring cash‑generation capacity.

EBITDA Expansion and Margin Strength

Adjusted EBITDA climbed 35.5% year over year to EUR 857 million, translating into a group margin of 43.2% for the quarter. On an organic basis, adjusted EBITDA grew 9.6%, and excluding Colombia’s Coltel, margins would have reached an impressive 47.9%, emphasizing the profitability of Millicom’s legacy operations.

Mobile Growth and Customer Mix Upgrade

Mobile service revenue totaled about EUR 1.1 billion, including roughly EUR 120 million from Coltel in Colombia. Excluding acquisition effects, mobile service revenue grew 7% year over year, fueled by a 4% rise in mobile customers and a 25% jump in higher‑value postpaid subscribers.

Convergence Driving Stickier Relationships

Across the group, reported postpaid net additions were 5.6 million and home broadband additions 1.5 million, figures boosted by the new assets. On an organic basis, postpaid net adds of 250,000 and home net adds of 46,000 helped lift convergent customers to about 36% of the base, a segment that exhibits roughly 50% lower churn than non‑convergent users.

Colombia Integration Showing Early Wins

Management highlighted Colombia as an early integration success, with organic postpaid customers up 9% and mobile ARPU rising 4.4% year over year. Coltel itself added around EUR 243 million to service revenue and EUR 33 million to adjusted EBITDA in just two months, and executives expect it to be a net contributor to equity free cash flow by 2026.

B2B and Digital Services Scaling Up

Digital service revenue grew about 19% year over year, driven by more than 20% growth in both cybersecurity and cloud solutions. Total B2B revenue excluding Coltel reached EUR 306 million, while the entrepreneur and small‑business customer base expanded more than 13%, reinforcing B2B as a key growth pillar.

Turnarounds in Ecuador, Uruguay and Chile

In Ecuador and Uruguay, recent acquisitions quickly shifted to margin expansion, with Ecuador delivering EUR 56 million of adjusted EBITDA and a 48.3% margin, roughly 13 percentage points higher than before. In Chile, the joint venture generated about USD 200 million of revenue and turned positive on equity free cash flow in its first two months, helped by a roughly 30% headcount reduction and lower debt.

Leverage Path and Financial Targets

Millicom reaffirmed its 2026 targets of at least USD 900 million in equity free cash flow and net leverage of around 2.5 times by year‑end. Net debt stood at about USD 7.6 billion at quarter end, corresponding to leverage of 2.76 times, and management outlined a clear plan to bring that ratio down as integration synergies and cash generation ramp up.

Restructuring Charges and Integration Costs

The quarter was burdened by nearly EUR 70 million of restructuring costs tied mainly to the Coltel integration in Colombia. Management signaled that roughly EUR 100 million of additional restructuring spending is still to come, though they expect these charges to unlock more than USD 100 million in annual savings in Colombia alone.

Net Debt Buildup and Leverage Pressure

Net debt increased after Millicom consolidated Coltel’s opening balance, which added around USD 1.5 billion, and other acquisitions that together pushed leverage up by about 0.3 turns. Executives cautioned that leverage might edge higher in the second quarter due to remaining acquisition payments and shareholder distributions before trending lower again.

CapEx and Spectrum Weigh on Cash

Cash CapEx rose to EUR 221 million, up EUR 107 million year over year, as the company invested heavily in network upgrades and integration initiatives. Spectrum payments also increased to EUR 99 million, including a EUR 70 million outlay in Ecuador, contributing to higher near‑term cash requirements but supporting long‑term network capacity.

Soft Spots and Market-Specific Weakness

Performance in Panama lagged the broader group, with service revenue flat year over year at EUR 172 million and a slight decline in adjusted EBITDA. Management acknowledged slower‑than‑hoped top‑line momentum there and implied that turning around Panama remains an operational focus for the coming quarters.

One-Offs, FX and Timing Distortions

Working capital was a EUR 27 million drag in the quarter, reflecting usual seasonality, while finance charges increased to EUR 126 million and currency movements inflated the reported value of local‑currency debt. Executives also noted that prior‑year one‑offs and foreign exchange volatility complicate year‑on‑year comparisons, particularly in margins and cash flow.

Margin Sustainability Questions

Some markets reported exceptionally high margins that management does not view as fully sustainable, including Paraguay, where adjusted EBITDA margin reached 56.3%. The company guided toward a more normal range of 50% to 56% in Paraguay and warned that Ecuador’s margins could be temporarily diluted by upcoming rebranding and marketing campaigns.

Forward-Looking Guidance and Outlook

Millicom kept its formal guidance unchanged, reiterating its 2026 goals of at least USD 900 million in equity free cash flow and net leverage near 2.5 times. Management expects leverage to tick up in the second quarter before falling toward that target by year‑end, supported by continued organic growth, integration synergies from Coltel and steady contributions from the Chile joint venture.

Millicom’s earnings call painted a picture of a company leaning into growth and integration, with improving cash flow and expanding margins offsetting near‑term financial strain. For investors, the story hinges on management’s ability to deliver the promised cost savings and deleveraging, but early signs from Colombia, Ecuador, Uruguay and Chile suggest the strategic bet is starting to pay off.