Millicom International Cellular S.A. — 2020 Form 20-F
Reporting period: Fiscal year ended December 31, 2020; filed March 10, 2021. This is an annual report, not a standalone fourth-quarter filing. The financial statements are audited and prepared under IFRS as issued by the IASB. Amounts below are U.S. dollars unless stated otherwise.
Business context
Millicom provides mobile, broadband, cable TV, fixed-line and mobile financial services in emerging markets, principally Latin America, with mobile operations in Tanzania. It reported 38.8 million mobile customers and 3.8 million fixed-service customer relationships at year-end. Guatemala and Honduras are equity-method joint ventures in the consolidated financial statements, although included as if consolidated in Latin America segment reporting.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $4,171 million | $4,336 million |
| Gross profit / gross margin | $3,000 million / approximately 71.9% | $3,135 million / approximately 72.3% |
| Operating profit / operating margin | $446 million / approximately 10.7% | $575 million / approximately 13.3% |
| Net profit (loss) | $(385) million | $154 million |
| Net loss attributable to company owners; loss per share | $(344) million; $(3.40) | $149 million; $1.48 |
| Net cash from operating activities | $821 million | $801 million |
| Cash and cash equivalents | $875 million | $1,164 million |
| Total assets / total equity | $12,422 million / $2,274 million | $12,895 million / $2,680 million |
Reported EBITDA, a non-IFRS measure, was $1,495 million versus $1,530 million. Free cash flow was $106 million versus negative $45 million; equity free cash flow after lease principal repayments was $56 million versus $73 million. Capital additions were $1,169 million, including $520 million for licenses and other intangible assets.
Debt and financing excluding lease liabilities was $5,691 million, compared with $5,972 million; lease liabilities were $1,021 million. Net financial obligations, including leases and after cash deductions, were $5,837 million versus $5,902 million. The group reported a 3.90x net financial obligations-to-EBITDA ratio on its stated basis and a 0.74 gearing ratio. Current assets were $2,307 million and current liabilities $2,608 million. Management said available cash, borrowings and operating-subsidiary funds were expected to cover projected operating and capital spending for at least 12 months.
Changes versus 2019
- Revenue fell 3.8%, primarily due to COVID-19-related restrictions and weaker currencies, partly offset by a full year of contributions from Nicaragua and Panama mobile acquisitions completed in 2019.
- Latin America revenue declined 2.0%; Africa revenue declined 4.0%. Latin America EBITDA fell 2.4%, while Africa EBITDA rose 6.9%.
- Operating profit fell 22.4%. Depreciation rose 7.9% and amortization rose 15.6%, reflecting full-year acquisition effects and additional amortization, including Colombia spectrum.
- The group moved from $154 million net profit to a $385 million net loss. Higher financial expenses and a $106 million net non-operating expense—versus $227 million income in 2019—were significant factors.
- Cash from operations increased modestly, while investing cash outflow declined to $495 million from $1,502 million, largely because 2019 included acquisition spending. Financing cash flow shifted to a $598 million outflow from a $1,355 million inflow.
Outlook, commentary and risks
- COVID-19 restrictions temporarily closed stores and distribution channels, reduced mobility and sharply affected prepaid mobile activity. Collections weakened early in the pandemic, increasing bad-debt provisions; management reported a recovery in collections during the second half. Management expected pandemic-related effects and economic fallout to continue weighing on performance until they passed.
- Management’s strategic priorities include expanding 4G and HFC networks, monetizing data, developing converged and digital services, and growing B2B offerings. No quantified company-wide financial guidance is provided in the supplied filing text.
- Foreign-exchange losses were $69 million, versus $32 million in 2019; the Colombian peso’s depreciation reduced consolidated revenue by approximately $122 million.
- Cash dividends to shareholders were suspended for 2020 to preserve liquidity. The group received $71 million in dividends from the Guatemala and Honduras joint ventures, down from $237 million.
- Material exposures include $339 million of subsidiary tax-risk exposure, with $77 million provided, and $288 million of claims against the company and subsidiaries, with $45 million provided. The filing says the ultimate outcome of legal claims is not expected to materially affect financial position or operations. A Telefonica lawsuit follows Millicom’s termination of the Costa Rica acquisition agreement; Millicom disputes the claim.
- Other key risks include emerging-market political and economic volatility, currency and cash-repatriation restrictions, competition, spectrum and license renewals, cybersecurity, and debt and refinancing needs. Capital expenditure commitments totaled $564 million, of which $400 million was due within one year. No financial covenant breaches were reported at year-end.
- Unusual items included a $45 million impairment of a loan to the AirtelTigo Ghana joint venture; Guatemala’s early redemption of $800 million of notes; and non-operating fair-value effects on equity investments. Goodwill impairment testing found no impairment, although the filing identifies sensitivity to assumptions for certain country cash-generating units.
Important facts for investors to verify
- Review the full audited financial statements and notes, including the reconciliation and definitions of non-IFRS EBITDA and cash-flow measures.
- Assess debt maturities, interest costs, lease obligations, capital commitments and the effect of the February 2021 debt redemptions disclosed as subsequent events.
- Monitor COVID-19 recovery, customer collections, prepaid activity and the performance of Colombia and other major markets.
- Check developments in tax disputes, the Telefonica Costa Rica litigation, Tanzania’s proposed public offering requirement and spectrum/license renewals.
- Consider the distinction between consolidated results and segment reporting that includes Guatemala and Honduras joint ventures on an “as-if-consolidated” basis.