Millicom International Cellular SA Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Restructuring Benefits: The restructuring program completed in 2024 is paying off, with visible benefits in Q1 results, including strong customer growth, increased profitability, cash flow generation, and M&A transactions.
• Mobile and Home Growth: Postpaid net adds were 262,000 (up ~50k YOY) and home net adds were 62,000 (vs. -13k YOY). OCF margin was up almost two percentage points to 36.7%, and equity-free cash flow was $135M in Q1.
• Mobile Details: Growth slowdown vs prior quarters due to extra day in 2024 and competitor cyber-attack. Postpaid growth driven by channel productivity, simplified offers, migration to postpaid, and fixed mobile convergent packages.
• Home Details: 62k home customer adds, HFC/FTTH up ~5% YOY, broadband up ~7%, convergent customers increased from 25% to 33% YOY.
• B2B Details: Continues to perform well, with 4% CAGR over two years and digital solutions up 18%.
• Country Highlights: Colombia adjusted EBITDA 39.1% (up 2+ points YOY); Guatemala OCF grew 10% to $190M; Panama adjusted EBITDA 51.2% (new record).
• M&A Updates: Sale of LAT International in progress (filed antitrust approvals, closed in Nicaragua, pending in others, expected Q2/Q3); sale of Lati Paraguay to Atis Group in coming weeks; acquisition of Coltel stake in Colombia in progress; Costa Rica regulatory process ongoing.

Segment Performance

• Mobile Business: Grew ~3% this quarter. Mobile service revenue: postpaid accelerated while prepaid was slightly negative due to an extra day in 2024 and a competitor cyber-attack. Postpaid net adds were 262,000, up nearly 50,000 from a year ago.
• Home Business: Added 62,000 home customers, with HFC and FTTH customers above $4M, up almost 5% year over year. Broadband customer base went up almost 7% while pay TV was flat and fixed telephony down more than 20%. One third of home customers are convergent.
• B2B Business: Grew at 4% CAGR in dollars over the past two years, with digital solutions up 18% over the same timeframe.

Guidance

• 2025 equity-free cash flow target around $750M, with leverage expected to end the year below 2.5x.
• M&A projects: Expect to close LAT International sale in Q2/Q3, Lati Paraguay sale in coming weeks, and Coltel acquisition in Colombia in progress; Costa Rica regulatory process ongoing.

Risks

• Foreign Exchange: Significant devaluation of the Boliviano impacted service revenue.
• Regulatory Delays: Pending approvals for LAT International sale in some countries.
• Seasonality: Working capital seasonality can affect cash flow stability.

Question and Answer

• Q: Churn behavior and home connections in Central America?

A: Churn is under control, with positive net adds in home business. Home connections include HFC and FTTH, with growth in broadband.

• Q: Mobile service revenue growth and profitability sustainability?

A: Expect acceleration in Q2, with profitability sustained by efficiency programs and growth in new gross adds.

• Q: Tax updates and leverage?

A: Tax effective rate ~25-26%, leverage target 2.5x, comfortable with current leverage level.

• Q: Debt maturity and leverage comfort?

A: Aiming for longer average debt maturity, considering M&A, comfortable with 2.5x leverage.

• Q: Working capital and B2B growth?

A: Working capital efforts to stabilize cash flow, with B2B growth from organic digital solutions and convergence.