Post-pay Net Additions: 262,000, up nearly 50,000 from a year ago. Home Net Additions: 62,000, compared to a decline of 13,000 in Q1 last year. OCF Margin: Increased by almost 2 percentage points to 36.7%. Equity Free Cash Flow: $135 million in Q1. Leverage: Ended the quarter at 2.47 times. Mobile Business Growth: Just over 3% this quarter. Adjusted EBITDA: $636 million, margin reached 46.3%. Service Revenue: $1.29 billion, down 6.6% from $1.38 billion a year ago. Colombia Service Revenue Growth: 3.6% year over year. Guatemala OCF: Grew 10% to $190 million. Panama Adjusted EBITDA Margin: Reached 51.2%, a new record. Equity Free Cash Flow Improvement: Up $172 million compared to last year. Net Debt Increase: $101 million during Q1. Annual Dividend Proposal: $3 per share, subject to shareholder approval.

Warning! GuruFocus has detected 5 Warning Sign with MLCMF.

Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Millicom International Cellular SA (MLCMF) reported strong customer growth with post-pay net additions of 262,000, a significant increase from the previous year. The company's efficiency program has led to higher profitability, with an operating cash flow (OCF) margin increase to 36.7%, outperforming many other telecom companies. Equity-free cash flow was robust at $135 million in Q1, despite it typically being the weakest quarter for cash flow generation. The home business saw a positive turnaround with 62,000 net additions, reversing a decline from the previous year, and broadband customer base increased by almost 7%. Millicom International Cellular SA (MLCMF) achieved record adjusted EBITDA margins in several key markets, including Panama and Paraguay, indicating strong operational efficiency.

Negative Points

Service revenue declined by 6.6% year-on-year, impacted significantly by weaker foreign exchange rates, particularly a 40% devaluation of the Boliviano. The mobile business experienced a slowdown in growth compared to previous quarters, partly due to tougher year-on-year comparisons. B2B services saw a 6.4% organic decline, attributed to the absence of large projects that had boosted previous results. Leverage increased slightly to 2.47 times, influenced by dividend payments and a share buyback program. The company faced challenges in maintaining service revenue growth in certain markets, with declines noted in Nicaragua and Costa Rica.

Q & A Highlights

Q: How is the fixed business in Central America performing, and what is the impact of competition from America Movil? A: Marcelo Benitez, CEO, explained that Millicom has been investing in network quality and focusing on commercial activity node by node. Positive net additions have been consistent over the last three quarters, and revenue is expected to turn positive by the end of Q2. Despite America Movil's investments, Millicom's market share remains unaffected.

Story Continues

Q: Are there any updates on joining new indices now that Millicom's shares are listed only in the US? A: Bart Vanhaeren, CFO, stated that while joining new indices is not under Millicom's control, the company has declared its principal executive office in Florida, which may qualify it for indices like the Russell 2000 or 1000. The rebalancing happens this month, and official communication is expected by the end of the month.

Q: Should we expect mobile service revenue growth to accelerate in the coming quarters? A: Bart Vanhaeren, CFO, noted that excluding factors like exchange rate impacts and governmental projects, service revenue is growing at 2%. Postpaid growth is consistent, and home and B2B segments are expected to contribute positively. An acceleration in growth is anticipated in the second half of the year.

Q: What is the outlook for taxes, and how should they be viewed for the full year? A: Bart Vanhaeren, CFO, explained that taxes are complex due to different regimes across countries. The effective tax rate is around 25%-26%, and taxes are expected to increase slightly year-on-year due to increased profitability, excluding M&A impacts.

Q: What are the plans for addressing upcoming bond and loan maturities, and is there a strategy for replacing US dollar debt with local financing? A: Bart Vanhaeren, CFO, mentioned that Millicom aims to increase average maturity to over 5 years and prioritize local currency debt to replace US dollar debt. Decisions are pending due to ongoing M&A activities, and the company is comfortable with its current leverage, expecting improvements throughout the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

View Comments