Millicom International Cellular Sa ((TIGO)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Millicom International Cellular SA’s recent earnings call painted a picture of robust financial health and strategic growth, despite facing some regulatory and legal challenges. The company celebrated record profitability and successful acquisitions, which were the highlights of the quarter. However, regulatory setbacks in Costa Rica and a Department of Justice (DOJ) investigation provision were notable concerns. Overall, the positive financial performance and strategic initiatives overshadowed these challenges.
Record EBITDA Margin
Millicom achieved an all-time high adjusted EBITDA margin of 48.9% for the quarter. This remarkable accomplishment was attributed to disciplined cost management and strong operational execution, underscoring the company’s ability to optimize its operations effectively.
Organic Growth in Mobile Service Revenue
The company reported a 5.5% year-over-year increase in mobile service revenue, marking the strongest organic growth since 2021. This growth was driven by Average Revenue Per User (ARPU) expansion and a strategic shift from prepaid to postpaid services.
Successful Acquisitions
Millicom completed significant acquisitions in Uruguay and Ecuador, expanding its footprint to 11 countries. These acquisitions enhanced the company’s earnings quality, contributing $246 million and $490 million in annual revenues, respectively.
Strong Equity Free Cash Flow
The company reported an 18.1% increase in equity free cash flow over the last nine months, reaching $638 million. This milestone highlights Millicom’s strong cash generation capabilities and financial health.
Positive Performance in Key Markets
Millicom’s key markets, including Colombia, Guatemala, and Panama, showed strong growth metrics. Notably, Colombia’s service revenue grew by 6.5%, and its EBITDA margins expanded by 447 basis points, reflecting robust market performance.
Decline in Service Revenue
Despite the overall positive performance, the company experienced a 0.5% year-over-year decline in service revenue for the quarter. This decline was primarily due to a $74 million negative impact from the application of IAS 21 for Bolivia.
DOJ Investigation Provision
Millicom recorded a $118 million provision this quarter, reflecting the expected financial impact of resolving the ongoing DOJ investigation. This provision highlights the legal challenges the company is currently navigating.
Regulatory Challenges in Costa Rica
The Costa Rican regulator prohibited Millicom’s proposed combination with Liberty Latin America, prompting a formal appeal by the company. This regulatory setback poses a challenge to Millicom’s strategic plans in the region.
Higher Tax Payments in Nicaragua
Millicom faced higher tax provisions in Nicaragua due to ongoing tax litigation settlements, impacting its cash flow. This situation underscores the complexities of operating in diverse regulatory environments.
Forward-Looking Guidance
Looking ahead, Millicom remains optimistic about its financial trajectory. The company aims to achieve its $750 million equity free cash flow goal for 2025 and maintain leverage below 2.5x. With strategic acquisitions enhancing its regional presence and a focus on mobile subscriber growth and ARPU expansion, Millicom is well-positioned for continued success.
In conclusion, Millicom International Cellular SA’s earnings call highlighted a strong quarter marked by record profitability and strategic growth initiatives. While regulatory and legal challenges present hurdles, the company’s positive financial performance and strategic acquisitions provide a solid foundation for future growth.