Millicom (NASDAQ:MICC) (STO:MIC)
Key highlights of Q3 2015
· Emerging market currency volatility intensified
· Revenue of $1.64 billion, down 2.0%
· Impact from Colombia FX
· Organic growth(a) of 7.2%
· Service revenue growth of 5.8%
· EBITDA at $560 million, up 2.1% – margin of 34.1%
· Organic EBITDA up 7.9%(a)
· Ex-UNE, margin up 0.6% year-on-year, the third consecutive
quarter of improvement
· Mobile customer base exceeds 60 million
· Cable footprint increases by 243,000 to 7.5 millio
Key financial indicators
$m Q3 2015 Q3 2014 %
change 9M 2015 9M 2014 %
change Revenue 1,641 1,675 -2 5,054 4,527 11.6
Organic revenue growth (a) 7.20% 8.60% 8.60% 8.70%
EBITDA 560 549 2.1 1,687 1,506 12
EBITDA margin
34.10% 32.80% 1.3 ppt 33.40% 33.30% 0.1 ppt
Capex 351 311
12.8 831 841 -1.3
Net debt 4,268 4,187 1.9 4,268 4,187 1.9
Adjusted EPS ($) (b) 0.17 0.79 -78 0.38 1.41 -72.8
· Latam: Reported revenue declined 1.4% to $1,400 million
mainly due to currency movements and lower growth from mobile
handset sales in Colombia. Organic revenue grew 6.2%. EBITDA was
$561 million, 0.6% higher than Q3 2014. Excluding currency
movements, EBITDA grew 3.8% year-on-year. Mobile data and Cable
were again the main growth drivers with revenue growth of 38% and
25% respectively. Smartphone adoption increased 3.3 percentage
points in the quarter to 46.2% and demand for fixed broadband and
DTH both grew at a healthy pace.
· Africa: Currency also affected Africa where reported
revenue fell 5.3% to $241 million. Adjusting for currency
movements, organic revenue grew by 11.9% which was 3.8% higher than
Q2 2015. EBITDA was $48 million, a year-on-year fall of 12.0%
largely due to stronger currency movements in Tanzania and Ghana
plus continued difficult trading conditions in Chad. Excluding
currency movements EBITDA grew by 9.6%.
· Corporate Costs: Reduction in corporate costs to $50
million compared to $55 million in Q2 and $59 million in
Q1.
(a)Organic growth represents year-on year-growth in local
currency (includes regulatory changes, excludes the impact of
exchange rate changes and excludes UNE)
(b) Basic EPS adjusted for non-operating items see page 14 for
reconciliation
CEO’s Statement
Major milestones - Mobile reaches 60 million whilst Cable passes
7.5 million homes
Stockholm, 22 October 2015
“The third quarter saw increased currency volatility across many
emerging markets. We experienced significant currency devaluations
in some of our key markets such as Colombia, Paraguay and Tanzania.
However we made some solid progress in converting our potential
into profitable growth. Whilst reported revenue was down 2.0% in US
dollars the underlying organic growth was 7.2%. EBITDA grew 2.1% in
US dollars and 7.9% on an organic basis.
A major milestone was reached in Q3 when we passed the 60
million mobile customers. Furthermore our brand tracker confirms
our brand’s increasing strength and affinity: Tigo is going from
strength to strength, bringing the internet to new customers,
driving smartphone penetration and increasing data consumption.
Since the start of the year, we have added nearly 4 million new
mobile customers.
I am also pleased with the progress we are making in Home, our
pay-TV, fixed broadband and telephony business. We are bringing the
digital lifestyle into customers’ homes. Our target is to reach 10
million homes in the medium term. This quarter, we delivered an
accelerated cable build-out with 304,000 new homes passed in HFC,
nearly tripling that of the second quarter. We continued to add new
customers at a strong rate across our DTH and cable footprint with
pay-TV contributing most to the growth. One of our core strengths
continues to be our ability to provide relevant local content for
customers. In Colombia we now offer the local football league
(“DIMAYOR”) on our fixed network and exclusively on mobile via the
Tigo Sports app.
This quarter, we saw mixed results from Colombia. On the one
hand, the UNE cable business accelerated its revenue growth based
on higher average revenue per line whilst good results from the
integration plan were achieved. The Tigo mobile business on the
other hand continued to see a more challenging environment and
organic revenue growth slowed to 9% on changing consumer behaviour
and price competition.
In Africa, we have strengthened the management team with the
appointment of Cynthia Gordon, as Africa Division CEO. We have
begun the roll out of a new brand awareness programme across all
our African markets to attract more digitally active customers,
increase smartphone sales and drive data penetration. Tanzania is
on the verge of a major milestone as it reaches 10 million
customers and the World Bank recently recognized the country as the
global leader in mobile financial services, recognizing Tigo’s
contribution to this achievement.
As we grow, we have also continued to develop our social
responsibility strategy. In September we led the industry in
creating a joint declaration to champion Child Online Protection,
hosting events in El Salvador and Costa Rica in collaboration with
UNICEF.
Looking towards the end of the year, we expect external market
conditions to become more challenging. Whilst we have not seen any
significant slowdown in the demand for our products and services as
a result of currency volatility we saw over the summer, GDP growth
forecasts were dampened across many of the countries we operate in.
We therefore remain focussed on protecting margins and improving
cashflow generation. In this respect I am pleased to note that
corporate costs have declined for the fifth consecutive quarter.
Further as a result of our actions, whilst we don’t have full
visibility on the revenue growth because of currency volatility, we
are comfortable with the EBITDA guidance range we provided in July
and now expect capital expenditure to be at the lower end of the
guidance range.
In addition, as noted in the press release we issued yesterday,
we have self-reported to relevant authorities potential improper
payments made on behalf of our joint-venture operations in
Guatemala. We will cooperate fully with the authorities and are
dedicated to ensuring that we resolve this matter as swiftly as
possible and in the most appropriate manner. While we cannot
speculate as to the possible outcome or the potential impact on our
business, we are currently thoroughly reviewing and assessing
strategic options and have initiated a thorough external review of
our compliance program, supported by the Executive Committee and
our Compliance and Business Ethics team, to further strengthen the
practices we already have in place.”
Mauricio Ramos
CEO, Millicom International Cellular S.A.
2015 guidance
In July, we rebased the guidance(1) provided in February 2015 to
reflect the impact of devaluation in the currency basket. No
further changes to guidance have been made despite further
significant currency volatility. With the exception of currency
impact, the group’s guidance remains unchanged:
Guidance with FX rates prevailing in July 2015
Revenue Between $6.8 and $7.2 billion
EBITDA
Between $2.12 and $2.26 billion
Capex (2) Between $1.25 and
$1.35 billion
(1) At constant foreign exchange rates and constant perimeter.
July guidance rebased revenue from $7.1 billion to $7.5 billion and
EBITDA from $2.20 billion to $2.35 billion. Capex remains unchanged
as most capex is in US dollars.
(2) Capex excludes spectrum and license cost.
Honduras & Guatemala call and put options
No agreements have been made with our partners in Honduras and
Guatemala to extend the call and put options. It is now the Board’s
view that both these options will expire on 31 December 2015
unexercised. One consequence of the lapse and non-renewal is that
under IFRS 10 and 11 we will be required to account for the group’s
operations in Honduras and Guatemala as joint ventures from 31
December 2015.
This would require Millicom’s 66.7% investment in Honduras and
55% investment in Guatemala to be revalued to fair value.
The deconsolidation of Honduras and Guatemala would have minimal
impact on the Group’s net income, dividends, and covenant
compliance. See additional information on page 16 and in the
IAS 34 statements.
UNE purchase price allocation (“PPA”) adjustment
During the three month period ended 30 September 2015, the
purchase accounting for the acquisition of UNE was finalised.
Compared to the provisional values recorded on date of acquisition,
the property, plant and equipment was revalued to $1,571 million
(from $1,417 million), mainly as a result of the reassessment of
economic lives of the network and recognition of assets under
finance leases. At acquisition date, finance lease liabilities of
$118 million were recorded ($71 million at 30 September 2015),
provisions of $18 million related to onerous contracts of the 4G
business, and deferred tax liabilities of $9 million related to the
fair value adjustments. Goodwill increased by $10 million. The
effects of the above mentioned adjustments and related to the first
and second quarter of 2015 were an $8 million increase in the
EBITDA of this quarter.
Conference call details
A presentation and conference call to discuss results of the
quarter will take place at 14.00 Stockholm / 14.00 Luxembourg /
13.00 London / 08.00 New York, on Thursday 22October 2015. Dial-in
numbers: + 46 (0) 858 536965, + 352 342 080 8654, + 44 203 427
1904, +1 718 971 5738. Access code: 3892654
A live audio stream of the conference call can also be accessed
at www.millicom.com. Please dial in / log on 10 minutes prior to
the start of the conference call to allow time for registration.
Slides to accompany the conference call are available at
www.millicom.com.
Significant events of the quarter
Corporate news
19 Aug Tigo and WorldRemit enable easy 2015: international money
transfers for the Tanzanian diaspora
26 Aug Millicom appoints Cynthia Gordon as EVP, CEO 2015: Africa
Division
Business news
30 Jul 2015: Tigo El Salvador awarded "Best Mobile Service for
Financial Inclusion 2015"
11 Sep 2015: Tigo DRC launched free Facebook campaign
21 Sep 2015: Agreement on the deployment of TiVo products on our
pay-TV platform in Latam
22 Sep 2015: Tigo Business forum in Guatemala with 1,300
business leaders
23 Sep 2015: UNE and Tigo ranked respectively 8th and 10th most
valued brand in Colombia
28 Sep 2015: TigoSports app launched in Colombia
Financial news
21 Jul 2015: Q2 15 results
31 Jul 2015: Successful completion of consent solicitation on
2020 and 2021 US$ bonds
Subsequent events
6 Oct 2015: New Nomination Committee is announced
6 Oct 2015: Millicom receives a 24% stake in leading African
towers company (HTA)
19 Oct 2015: Tigo launches online remittance service in UK,
European Union and Canada
20 Oct 2015: Tigo Rwanda is first to offer customers 4G internet
accessible on all enabled smartphones
20 Oct 2015: Mobile licence renewed in Bolivia for 15 years
21 Oct 2015: Millicom reports to authorities potential improper
payments on behalf of its Guatemalan joint venture
Agenda
10 Feb 2016: FY 2015 results
26 Apr 2016: Q1 2016 results
13 May 2016: 2015 AGM
Risks and uncertainty factors
Millicom operates in a dynamic industry characterized by rapid
evolution in technology, consumer demand, and business
opportunities. Combine with a focus on emerging markets in various
geographic locations, the Group has a proactive approach to
identifying, understanding, assessing, monitoring and acting on
balancing risks and opportunities. For a description of risks and
Millicom’s approach to risk management, refer to the 2014 Annual
Report
(http://www.millicom.com/media/2379621/Millicom-Annual-Report-2014.pdf).
In addition to the information in the 2014 Annual Report and the
information provided in this release, please refer to Millicom’s
press release, dated October 21, 2015, entitled “Millicom reports
to authorities potential improper payments on behalf of its
Guatemalan joint venture.” At this time, Millicom’s investigation
remains on-going, and Millicom cannot predict the outcome or
consequences of this matter.
Millicom is a leading telecom and media company dedicated to
emerging markets in Latin America and Africa. Millicom sets the
pace when it comes to providing innovative and customer-centric
digital lifestyle services to the world’s emerging markets. The
Millicom Group employs more than 16,000 people and provides mobile
services to over 60 million customers. Founded in 1990, Millicom
International Cellular SA is headquartered in Luxembourg and listed
on NASDAQ OMX Stockholm under the symbol MIC. In 2014, Millicom
generated revenue of USD 6.4 billion and EBITDA of USD 2.1
billion.
This press release may contain certain “forward-looking
statements” with respect to Millicom’s expectations and plans,
strategy, management’s objectives, future performance, costs,
revenue, earnings and other trend information. It is important to
note that Millicom’s actual results in the future could differ
materially from those anticipated in forward-looking statements
depending on various important factors, including those included in
this release.
All forward-looking statements in this press release are based
on information available to Millicom on the date hereof. All
written or oral forward-looking statements attributable to Millicom
International Cellular S.A., and Millicom International Cellular
S.A. employees or representatives acting on Millicom’s behalf are
expressly qualified in their entirety by the factors referred to
above. Millicom does not intend to update these forward-looking
statements.
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Press EnquiriesTabitha Aldrich-Smith, Interim Communications
DirectorTel: +352 277 59084 (Luxembourg) / +44 7971 919 610
/ press@millicom.comInvestor RelationsNicolas Didio, Director,
Head of Investor RelationsTel: +352 277 59125 (Luxembourg) / +44
203 249 2220 / investors@millicom.com
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