Millicom International Cellular: Transformation and growth as UNE makes a strong start

LEUDELANGE, Sweden--()--Key highlights of Q3 2014

· Organic revenue growth(a) of 8.6%.

· Strong momentum in Colombia;

o Mobile service revenue growth of 20.5%.

o UNE makes a strong contribution with $52 million EBITDA (27.8% EBITDA margin).

· 1.46 million mobile net adds, mostly driven by Tanzania, DRC and Colombia.

· DTH encouraging take-up - customer base now close to 45,000.

· 103,000 new homes passed – footprint in cable now exceeds 5.4 million homes passed(b).

· Q3 EBITDA(c) at $549 million - margin at 32.8%; o Excluding UNE, EBITDA of $497 million and 33.4% margin.

Key financial indicators(d)

$m   Q3 2014(e)   Q3 2013(f)   % change   9M 2014   9M 2013   % change
 
Revenue 1,674 1,383 21.00% 4,527 4,089 10.80%
Organic revenue growth(a) 8.60% 6.10% 2.5ppt 8.70% 4.60% 4.1ppt
Of which UNE 186 N/A 186 N/A
EBITDA(c) 549 487 12.70% 1,506 1,499 0.50%
Of which UNE 52 N/A 52 N/A
EBITDA margin 32.8% 35.20% (2.4ppt) 33.30% 36.70% (3.4ppt)
EBITDA margin excl. UNE 33.40% 35.20% (1.8ppt) 33.50% 36.70% (3.2ppt)
Capex / sales ratio(g) 19.80% 21.70% (1.9ppt) 16.80% 15.00% 1.8ppt
Capex / sales excl. UNE 19.30% 21.70% (2.4ppt) 17.00% 15.00% 2.0ppt
Equity FCF 131 76 72.40% -57 -52 -9.60%
Adjusted EPS ($) (h) 0.79 0.72 9.70% 1.41 2.57 (45.1%)

· Mobile: Mobile revenue grew by 7.6% reflecting strong handset sales. Service revenue grew by 4.7% driven by mobile data, which accelerated to +34.7% (+32.4% in Q2), offsetting the decline of voice & SMS (-1.4%).

· Cable & Digital Media: the demand for our products remains strong. The ratio RGUs / households keeps increasing (+3.8% to 1.43x ex UNE) and 2Play/3Play customer base continues to grow (+20.0% year-on-year).

· Mobile Financial Services (MFS): 564,000 new customers with strong take-up in Tanzania and El Salvador. Revenue grew by 44.6% with the ARPU growing 12.0% sequentially (6.8% decline compared to Q3 2013).

· Cost & Capex Optimisation:efficiency and optimization programme started in Guatemala have been extended to 3 other countries (Bolivia, Tanzania, El Salvador). In Africa, our new Managed Services contract will boost the network quality while delivering cost savings.

a Organic growth represents year-on year-growth in local currency (excludes the impact of exchange rate changes) – it excludes UNE in Q3

b Including UNE

c EBITDA: derived from deducting cost of sales, sales & marketing costs, general & administrative expenses (including corporate costs) from revenue and adding other operating income

d Q3 2014 & 9M 2014 include UNE from 14th August. Q3 2013 and 9M 2013 do not include UNE

e Millicom owns 50% minus one share of UNE but consolidates 100% of UNE

f Proforma to reflect full consolidation of Guatemala, and equity accounting for Mauritius and Online

g Capex excluding spectrum and licence acquisitions

h Basic EPS adjusted for non-operating items see page 15 for reconciliation

President’s Statement

Transformation and growth as UNE makes a strong start

Stockholm, 22 October 2014

“It has been a momentous quarter with the completion of the merger with UNE in August. Our partnership with UNE has made a very solid contribution recording revenue slightly ahead of our own expectation and EBITDA at a 28% margin. It is very early days and the team are focussed on the considerable task of integration but together with the Tigo mobile business, which maintained its momentum in Q3, we see an exciting future opportunity.

Across the Tigo business we continued to see the benefits of the work we have undertaken over the last two years, which we highlighted at our Capital Markets Day in Miami at the end of last month. Organic revenue growth at 8.6%, excluding UNE, was a good achievement. Revenue maintained momentum not just in Colombia, but also in Bolivia, Guatemala and across the African businesses which achieved 12% organic service revenue growth in the quarter. It keeps us firmly on track for our $9bn revenue target in 2017.

We also had a good quarter in the Cable & Digital Media business. Tigo Star has extended its services with five of seven markets in Latin America now offering satellite payTV - making it available to tens of millions of people in rural areas and complementing our cable services. At the end of September, we had 45,000 customers on this service and our monthly take-up rate is accelerating. This is an impressive adoption rate and is very encouraging for the future development of this product.

We are continuing the transformation of the company elsewhere with the promotion and take-up of mobile data services with Smartapps in Latin America and Tigo Music in Africa both launching this month. Data users have risen 13% over the last three months and now comprise 25% of our mobile customer base.

Innovation in mobile money has gathered pace with the launch this quarter in Tanzania of the world’s first service offering a direct return on balances as well as the start of Africa’s first interoperable MFS. Overall, MFS has grown organically by 45%.

We have intensified action on efficiencies right across the company. We continue the rigorous country-by-country, function-by-function programme which has already identified important savings in one of our key markets.

At our recent Capital Markets Day, we affirmed our target of long term EBITDA margin of around 35% but, more importantly, operating cash flow margin of 20%. The success of our business in driving forward profitable revenue growth will be a key factor in achieving these goals and the results so far give me confidence in our capacity to deliver.”

Hans-Holger Albrecht President and CEO, Millicom

2014 Guidance

Target Guidance (excluding UNE) YTD Revenue (i) We expect revenue growth(a) to accelerate at a mid to high 8.7% single digit rate (versus comparable 5.5% in 2013) (ii) Reported revenue growth at constant exchange rate vs. 19.7% 2013 over 15% EBITDA EBITDA margin will stabilize around the mid-30s% mark 33.5% Capex In 2014, we expect a capex to revenue ratio of around 19%, 17.0% excluding spectrum and license acquisitions

Shareholder remuneration

We reiterate our dividend policy for no less than $2 per share and at least 30% of normalised net income.

We continue to have the ambition to progressively grow ordinary dividends. However our immediate priority will be on reducing Group leverage towards the middle of our target range of 1.0-2.0x Net Debt/EBITDA.

Nomination Committee for the 2015 Annual General Meeting

In accordance with the resolution of the 2014 Annual General Meeting, Cristina Stenbeck has convened a Nomination Committee consisting of members representing the largest shareholders in Millicom. The Nomination Committee is comprised of Cristina Stenbeck, Investment AB Kinnevik, Mathias Leijon, Nordea Funds and Tomas Risbecker, AMF and AMF Funds. The members of the Committee will appoint the Committee Chairman at their first meeting.

Shareholders wishing to propose candidates for election to the Board of Directors of Millicom should submit their proposal in writing to the Company Secretary, Millicom International Cellular SA, 2 rue du Fort Bourbon, BP 2312 L-1023 Luxembourg, Luxembourg.

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 Wednesday 22 October, 2014. Dial-in numbers: + 46 (0) 850 51 3793, + 352 2088 0359, + 44 (0) 207 784 1036, + 1 646 254 3365. Access code: 3783379

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.

a Under 2014 consolidation scope at constant exchange rates

Significant events of the quarter

Corporate news

16th July 2014: Millicom reaches agreement to sell its 50% stake in EMTEL (Mauritius)

3rd Aug 2014: Millicom merger with UNE receives third regulatory approval

14th Aug 2014: Completion of the merger with UNE in Colombia

Business news

09th July 2014: Millicom launches mobile education EduMe in Africa and Latin America

24th July 2014: 4G launches in Bolivia

13th Aug 2014: Exclusive music in Latin America: Tigo Sessions with multi Grammy award winner Juanes

10th Sept 2014: Millicom launches the world’s first mobile money service with automatic returns to users

11th Sept 2014: Millicom and Kalixa create online payments processing partnership for Africa and Latin America

24th Sept 2014: Millicom debuts digital music initiatives for Africa

Financial news

16th July 2014: Publication of Q2 results

24th Sept 2014: Capital Markets Day in Miami: Millicom confirms ambitious $9bn revenue target

Subsequent events

There were no subsequent events between 30 September and 22 October.

Agenda

3rd February 2015: FY 2014 results

22nd April 2015: Q1 15 results

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, giving access to the world, primarily through mobile devices. The Millicom Group employs more than 16,000 people and provides mobile services to over 53 million customers. Founded in 1990, Millicom International Cellular SA is headquartered in Luxembourg and listed on NASDAQ OMX Stockholm under the symbol MIC. In 2013, Millicom generated revenue of USD 5.16 billion and EBITDA of USD 1.88 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.

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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Contacts

Millicom International Cellular:
Press
Julian Eccles, VP, Corporate Communications
Tel: +352 277 59084 (Luxembourg)
+44 7720 409 374
press@millicom.com
or
Investor Relations
Nicolas Didio, Director, Head of Investor Relations
Tel: +352 277 59125 (Luxembourg)
+44 203 249 2220
investors@millicom.com

Contacts

Millicom International Cellular:
Press
Julian Eccles, VP, Corporate Communications
Tel: +352 277 59084 (Luxembourg)
+44 7720 409 374
press@millicom.com
or
Investor Relations
Nicolas Didio, Director, Head of Investor Relations
Tel: +352 277 59125 (Luxembourg)
+44 203 249 2220
investors@millicom.com