Millicom’s Earnings Call: Growth Amid Challenges

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

Millicom International Cellular SA’s recent earnings call painted a picture of mixed sentiments, highlighting robust customer growth and profitability amidst challenges in revenue growth due to currency impacts and tough prior year comparisons. The company showed improvements in debt management, although there was a slight increase in leverage.

Strong Customer Growth and Profitability

Millicom reported a significant increase in postpaid net additions, with nearly 50,000 new customers compared to the previous year. The home net additions also turned positive, with 62,000 new customers, reversing a decline of 13,000 last year. The Operating Cash Flow (OCF) margin improved by almost two percentage points to 36.7%, and the equity-free cash flow reached $135 million in Q1, which is typically the weakest quarter for cash flow generation.

Improved B2B and Home Business Performance

The B2B segment showed a growth of 4% CAGR over the past two years, driven by an 18% increase in digital solutions. The home broadband customer base increased by almost 7%, with one-third of home customers now being convergent, up from one-quarter a year ago.

Profitability in Key Markets

In Colombia, the adjusted EBITDA margin reached 39.1%, marking an increase of more than two percentage points year-over-year. Panama saw a record adjusted EBITDA margin of 51.2%, and Guatemala’s OCF grew by 10% to a record $190 million.

M&A Progress and Strategic Initiatives

Millicom made significant strides in its M&A activities, receiving antitrust approval in Nicaragua and closing part of the LAT International sale to SBA. The company entered a new agreement to sell its Paraguay operations to Atis Group and signed a binding agreement with Telefonica to acquire their stake in Coltel.

Debt Management and Efficiency Improvements

The company improved its equity-free cash flow by $172 million compared to last year, thanks to better control over working capital. Efforts to reduce FX exposure and volatility included replacing dollar-denominated debt with local currency debt.

Service Revenue Decline

Service revenue declined by 6.6% to $1.29 billion, primarily due to weaker foreign exchange rates and the devaluation of the Boliviano. Excluding FX impacts, the organic service revenue remained flat.

Challenging Comparisons and Slower Growth

B2B services saw a 6.4% organic decline, attributed to large projects in Panama the previous year. Service revenue in Guatemala also slowed due to tough year-on-year comparisons, affecting the mobile business.

Debt and Leverage Concerns

Net debt increased by $101 million during Q1, with leverage slightly rising to 2.47x. This was influenced by shareholder remuneration, including dividends and share repurchase programs.

Forward-Looking Guidance

Looking ahead, Millicom provided guidance for fiscal year 2025, projecting postpaid net additions of 262,000, an increase of nearly 50,000 from the previous year. The company aims to maintain its leverage below 2.5x and achieve an equity-free cash flow of around $750 million. The management expressed confidence in sustained revenue growth driven by postpaid mobile expansions and B2B services.

In summary, Millicom International Cellular SA’s earnings call highlighted strong customer growth and profitability, alongside challenges in revenue growth due to currency impacts. The company is making strategic progress in M&A activities and improving debt management, with a positive outlook for future growth driven by mobile and B2B expansions.