Millicom International Cellular SA (TIGO) Q2 2024 Earnings Call Highlights: Strong EBITDA ...
Equity Free Cash Flow: $268 million for Q2 2024.
Leverage: Ended Q2 at 2.7 times.
Organic EBITDA Growth: Almost 20%.
Mobile Service Revenue Growth: 5% in Q2 2024.
B2B Service Revenue Growth: Almost 6% organically in Q2 2024.
Colombia EBITDA Margin: 39.5%, a new record.
Guatemala Service Revenue Growth: 3% in Q2 2024.
Panama Mobile Service Revenue Growth: 14% in Q2 2024.
Service Revenue: $1.36 billion in Q2 2024, up 5.5% year-on-year.
EBITDA: $634 million, up 23.1% year-on-year.
CapEx: Expected to be less than $700 million for full year 2024.
Net Debt: Reduced by $325 million to $5.65 billion.
Q2 Leverage: 2.77, down from 3.1 in Q1 2024.
Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Millicom International Cellular SA (NASDAQ:TIGO) reported a significant increase in equity free cash flow, reaching $268 million, which was used to reduce net debt.
The company achieved organic EBITDA growth of almost 20%, driven by growth in mobile and B2B business and significant efficiencies.
Mobile service revenue grew 5% in Q2, marking an acceleration from the previous year's growth.
The B2B segment showed strong performance with a 6% organic growth in service revenue, supported by a 30% growth in digital solutions.
Millicom's efficiency programs have led to a reduction in employee costs by 15% and a significant decrease in spending on external services and programming.
Negative Points
The company faces intense competitive pressure in Guatemala, although there is some market stability.
Colombia's home business experienced a double-digit decline, offsetting mobile growth.
There is uncertainty surrounding the potential acquisition of Telefonica Colombia, with a lengthy process ahead.
Millicom's CapEx for 2024 is expected to be significantly lower than in 2023, which may impact future growth opportunities.
The company is no longer able to access sufficient US dollars in Bolivia, affecting its ability to pay international vendors.
Q & A Highlights
Q: On the long-term plan, where do you see further improvements from the current levels up to the 2026 target? Also, regarding the Colombia announcement, is the main rationale to gain scale and grow profitability, or are you encouraged by your own improvements in Colombia? A: We believe our operational and efficiency initiatives are sustainable and will reflect fully in 2025 and 2026. CapEx will grow slightly but align with revenue growth to strengthen networks. Regarding Colombia, the market is challenging, but rationalization makes sense. Combining businesses will allow better returns and financial stability, enabling responsible network investments and sustainable cash flow.
Q: You mentioned return-focused investments to sustain market leadership and drive growth. Is this focus on home or mobile, and is it broad-based across markets? Also, how should we think about CapEx in the medium term? A: Our network is key to capturing demand in mobile and fixed. We are strengthening networks to monetize demand through price increases, migration to postpaid, and convergence. In Colombia, we are at an inflection point with positive net ads in home. Regarding CapEx, we focus on efficiency and selective investments with strong returns, renegotiating contracts for better terms.
Q: Regarding the Colombia transaction, how dependent are the offers to different sellers on each other? What are the next steps in the process? A: The merger of the two entities is essential, requiring agreement from all parties. We are in the early stages, with non-binding agreements and regulatory approvals needed. The process involves making long-form agreements and following Colombia's privatization law, which will take several months.
Q: How much incremental EBITDA would the $1 billion equity investment in Colombia bring to Millicom? Are there thoughts on synergies? A: The $1 billion is equity value, and the total investment is larger. We aim for all countries to have EBITDA margins in the 40s. Synergies in mobile-mobile and fixed-fixed markets are typically strong, but we are still early in the process and will provide more details later.
Q: Last quarter, you increased prepaid prices in Guatemala. How has the market responded, and have competitors followed suit? A: The market in Guatemala is more rational, with revenue growth increasing from 2% to 3%. While there are some effects on the customer base, we don't see it as an issue. We have a strong commercial approach and network, and expect better commercial dynamics in the coming quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.