Good performance, focus on profitable growth

Key highlights of Q2 2015

• Revenue of $1.70 billion, up 17.8%
  • Excluding UNE, Group revenue of $1.43 billion  - organic growth(a) of 9.0%,
  • Adverse currency movements impact growth
  • Excluding UNE, reported revenue 1.3% lower
• EBITDA at $561 million – margin of 32.9%
  • Service revenue margin of 35.7%
  • Excluding UNE, EBITDA of $480 million – 33.6% margin
  • Reduction of Group corporate costs for the fourth consecutive quarter
• Increased synergies identified in Colombia business – upgraded NPV from $600 million to $750 million
• Strong quarter for mobile net adds: mobile customer base up 1.9 million
• Strategy refocused on monetizing the Digital Lifestyle, cable expansion and profitable growth

Key financial indicators

• Latam: Revenue at $1,464 million grew by 21.7% (7.7% organic ex UNE) compared to Q2 2014 and 1.6% up on Q1 2015. EBITDA of $564 million was up 16.1% (11.1% organic ex UNE) on strong performance from Colombia, Guatemala and Bolivia. Latam EBITDA grew 1.2% sequentially. Mobile data (+37%) and Cable (+25%) were the main growth drivers respectively supported by smartphone adoption and demand for fixed broadband and DTH.
• Africa: Revenue grew to $240 million, an organic growth rate of 15.3% on Q2 2014 and 2.4% up on Q1 2015. EBITDA was $52 million, a year on year fall of 17.5%, primarily on difficult trading conditions in Chad and adverse currency movement particularly in Tanzania. Excluding the currency impact, EBITDA was 1.8% lower than in the same quarter last year.
• Corporate Costs: A continued reduction in the corporate costs to $55 million in Q2 compared to $59 million in Q1 and $73 million in Q2 2014.

(a) Organic growth represents year-on year-growth in local currency (excludes the impact of exchange rate changes) and excludes UNE
(b) Basic EPS adjusted for non-operating items see page 14 for reconciliation

President’s Statement

Good performance, focus on profitable growth

Stockholm, 21 July 2015

“Millicom is a growth story and in the second quarter we delivered strong underlying organic revenue and EBITDA, which rose 9.0% and 9.3% respectively. We continue to demonstrate excellent momentum within our key markets. Mobile saw growth driven by data whilst both Cable and MFS performed very strongly.

Smartphone adoption is our winning card and drives increasing levels of data usage. In this quarter, we added 1.9 million new mobile customers and we now have a total of almost 60 million mobile subscribers. Yet barely more than just over a quarter of our customers have switched to smartphones. So our prize is to continue to expand our customer base and convert customers who have yet to upgrade to smartphones and data packages. 

In our fast-growing Cable business, we continue to see very positive trends in all key metrics and importantly in the adoption of multiple services per household. For example, more than half of our households now take two or three services from us. We closed Q2 with over 7.2 million homes passed and 4.9 million cable RGUs. And we have only just begun. We are swiftly seizing the opportunity to grow to 10 million homes passed in Latin America over the next three years, largely through organic growth, to become the second largest cable operator in the region.

Since joining Millicom I have been impressed by the range of Digital Lifestyle services we offer to our customers.  For instance, Mobile Financial Services is another key component of our Digital Lifestyle offer, strengthening customer loyalty whilst supporting wider financial inclusion targets. In this quarter, we reached the milestone of more than ten million MFS customers.

We have some excellent businesses.  The Latin America businesses move from strength to strength; we saw strong performances from Colombia, Guatemala and Bolivia which drove another quarter of headline revenue growth. Further progress has been made in the recovery in Paraguay returning to revenue and EBITDA growth although, like many of our businesses, this was adversely affected by currency movements.  

In Africa, we focus on growing both volume and value. Underlying revenues have shown further improvements and there is positive momentum, although we saw challenging trading conditions in some markets, especially Chad where the security situation and economic condition has deteriorated. In this quarter we agreed to acquire an 85% stake in Zanzibar’s leading mobile operator, complementing our existing business. This acquisition will strengthen our overall position in Tanzania, delivering further growth prospects for the Group. We are currently awaiting regulatory approval on this transaction.

Despite strong underlying growth, there were severe foreign exchange devaluations across many of our countries and this negatively impacted our reported growth. Whilst this is a fact of life working in emerging markets, Q2 was particularly severe, reducing like for like revenue growth by more than 10%.  We are taking firm actions to mitigate the impact of the currency fluctuations by continuing to focus on operational efficiencies and tightly managing the Group’s margins, which is why we were still able to post positive like for like EBITDA growth despite the currency impact on our revenues. We have also continued our focus on reducing corporate costs, which fell for the fourth consecutive quarter.

Having completed my first 100 days as CEO I am convinced we are on the right track.  The Digital Lifestyle is a great concept and we have articulated it further by more clearly defining an inspiring vision: to empower our customers to advance and enjoy life.  We have mapped out a clear and detailed operational strategy for how we will achieve our goals, converting potential into profits and increasing the cash flow.

We now have a roadmap to focus on two phases of opportunity in our fast growth emerging markets; building customer focused mobile products and services that can be monetised; and expanding our cable footprint to capture the emerging opportunity.

Our strong and improving business performance demonstrated in this period and throughout the first half of the year is testament to the drive and commitment of our people.

Millicom couldn’t be better placed to provide every aspects of the Digital Lifestyle to our customers who have an ever-expanding appetite and enjoyment of innovative mobile, social and content services. This opportunity, combined with our clear strategic plan to build and monetise the Digital Lifestyle, will deliver profitable growth. We have the firm foundations in place to continue to deliver customer and shareholder value.”

Mauricio Ramos
CEO, Millicom International Cellular S.A.

2015 guidance confirmed, adjusted for FX

We have rebased the guidance(1) provided in February 2015 to reflect the impact of the 7% devaluation in the currency basket. With the exception of currency impact, the group’s guidance remains unchanged:

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 costs.

Honduras call option

On 19 June 2015 Millicom reached agreement with its local partner to extend until 31 December 2015 Millicom’s five year unconditional call option to acquire the remaining 33.3% of the Honduran business and in return extend the local partners conditional put option over the 33.3% stake for the same period.  As a result Millicom will continue to consolidate the Honduras business (see Note 3 of the IAS 34 Interim Consolidated Financial Statements).  

If the call option is not exercised or extended beyond its 31 December 2015 expiry date, and in the absence of any other changes to the shareholders agreement with our local partner, the Honduran business will be deconsolidated and accounted for as a joint venture in 2016. This would require Millicom’s 66.7% investment in Honduras to be revalued to fair value.   

The deconsolidation would not be expected to have a material impact on Millicom’s share of the results of the Honduran business, receipt of dividends, or covenant compliance.

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).

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 Tuesday 21July 2015.  Dial-in numbers: + 46 (0) 853 526 408, + 352 342 080 8654, + 44 203 427 1904, +1 646 254 3360. Access code: 5391811      

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

2 Apr 2015: Publication of our 2014 Corporate Responsibility Report
13 Apr 2015: Nomination Committee proposal for the Board
29 Apr 2015: Millicom statement about proposed merger with Telecable in Costa Rica
15 May 2015: 2014 Millicom Annual Meeting of Shareholders
5 Jun 2015: Millicom signs agreement to acquire Zanzibar Telecom
9 Jun 2015: Cablesur acquisition approved by Conatel in Paraguay

Business news

24 Apr 2015: 4G goes live in Tanzania

Financial news

20 Apr 2015: El Salvador 8% Senior Notes Buy Back
22 Apr 2015: Publication of Q1 2015 results
24 May 2015: Distribution of the $2.64 dividend

Subsequent events

1 Jul 2015: Two LIH ventures (Kanui and Tricae) merged into Global Fashion Group

Agenda

22nd Oct 2015: Q3 2015 results

Contacts:

Press Enquiries:
Tabitha Aldrich-Smith, Interim Communications Director
Tel: +352 277 59084 (Luxembourg) / +44 7971 919 610 / press@millicom.com

Investor Relations:
Nicolas Didio, Director, Head of Investor Relations
Tel: +352 277 59125 (Luxembourg) / +44 203 249 2220 / investors@millicom.com

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 56 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.

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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