Millicom International Cellular S.A. (NASDAQ:TIGO) Q1 2024 Earnings Call Transcript

Millicom International Cellular S.A. (NASDAQ:TIGO) Q1 2024 Earnings Call Transcript May 8, 2024

Millicom International Cellular S.A. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Michel Morin: Hello, everyone and welcome to our First Quarter 2024 Results Call. This event is being recorded. Our speakers today will be our CEO, Mauricio Ramos, our President and COO, Maxime Lombardini and our CFO, Bart Vanhaeren. The slides for today's presentation are available on our website along with the earnings release and our financial statements. Now please turn to Slide 2 for the safe harbor disclosure. We will be making forward looking statements which involve risks and uncertainties and these could have a material impact on our results. And on Slide 3, we define the non-IFRS metrics that we will reference throughout today's presentation and you can find reconciliation tables in the back of our earnings release and on our website. With those disclaimers out of the way, let me turn the call over to our CEO, Mauricio Ramos.

Mauricio Ramos: Thank you, Michel. Good morning and good afternoon, everyone. The key highlight this quarter is our financial performance and you can see that on this page. After years of carefully building the strategic platform that we now have in TIGO today, we have spent the last few quarters making our platform a more profitable one and this has led to a strong start of the year this quarter. We're pleased with that and we remain very focused on navigating the significant challenges that still lie ahead. Service revenue this quarter accelerated to $3.8. That's our strongest performance in nearly two years. Two specific elements have contributed to this performance. First, during the quarter, we implemented another round of pricing increases in a majority of our markets.

As a result, mobile ARPU increased 5% on average in local currency terms and it was up in every single country. Second, we continued to generate revenue from two large government contracts in Panama. Please note that these contracts added a bit more than 2 percentage points to our organic service revenue growth in the quarter. We're extremely pleased with the successful work our B2B and Panama teams have undertaken to win these two contracts. Going forward, we will continue to bid for more of these contracts that help accelerate Panama's digital transformation. Having said that, I want to caution you that these two large projects are expected to generate less revenue in the quarters going forward. So we don't expect to sustain this level of service revenue growth in Q2, not really for the rest of this year.

EBITDA increased 20% year-on-year organically and this reflects both the service revenue growth that we just talked about and the effect of our efficiency program. The cost savings from Project Everest are now very visible. This EBITDA growth is going straight to operating cash flow as we continue to streamline our CapEx in line with our plans. But please do note that Q1 CapEx benefited from some phasing. As a result of all of these efforts, OCF was $519 million in the quarter. That's up more than 50% organically compared to last year. As I have indicated very often before, over the past few years, we have assembled a strong platform across the region. We're now making that platform more and more profitable. And given the strong start for the year, we remain confident that we will achieve our target equity free cash flow of about $550 million in 2024.

Let's look at Colombia first. Last quarter, we made excellent progress on our plan to make our Colombian business profitable and cash generative. Execution of the long-term strategic roadmap that we laid out for Colombia a few years ago is now showing strong results. In 2019, we made the bold decision to buy two blocks of spectrum in the 700 megahertz band to strengthen our competitive position in the mobile business. And as you know, we immediately put that spectrum to work by deploying network infrastructure and by expanding our commercial footprint. Since then, we have more than doubled our postpaid customer base and our mobile service revenue have grown very strongly and steadily as you can see on this page. We have achieved this despite the arrival of a new entrant who brought disrupting pricing to the market over the past few years.

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