TIGO

Business Context and Reporting Period

Company: Millicom International Cellular S.A. (Tigo)
Filing Type: Form 6-K (Unaudited Interim Condensed Consolidated Financial Statements and Earnings Release)
Reporting Period: Three and nine months ended September 30, 2024
Filing Date: November 7, 2024
Operations: Leading provider of fixed and mobile telecommunications services in Latin America (Guatemala, Colombia, Panama, Bolivia, Honduras, Paraguay, El Salvador, Nicaragua, Costa Rica).

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Surge: Operating profit increased 43.1% year-over-year (YoY) in Q3 and 62.1% for the nine-month period, driven by efficiency programs and revenue growth.
• Revenue Growth: Total revenue grew 0.5% in Q3 and 4.5% for 9M. Service revenue grew 1.8% in Q3 (2.4% organically) and 5.3% for 9M (2.8% organically).
• Cost Reduction: Operating expenses declined 4.4% YoY in Q3. Depreciation decreased 9.4% due to a change in accounting estimates extending the useful life of fiber optic assets.
• Deleveraging: Gross debt decreased by $551 million in the first nine months of 2024. Leverage improved from 3.32x to 2.59x.
• Customer Growth: Mobile customers increased by 470,000 in Q3 (strongest since 2021), with 299,000 postpaid net additions. Fixed broadband (HFC/FTTH) added 68,000 customers.

Guidance, Outlook, and Risks

Guidance and Outlook

• 2024 EFCF Target: Raised to approximately $650 million (previously >$600 million), excluding proceeds from the Colombia tower sale and taxes related to the Lati International disposal.
• Leverage Target: Targeting leverage near 2.5x at year-end 2024.
• Strategic Milestones: Focus on completing initiatives in Costa Rica (merger with Liberty Latin America) and Colombia (network sharing with ColTel), and the tower disposal in Central America.

Management Commentary

CEO Marcelo Benitez highlighted that the company's transformation gained momentum, with robust commercial activity and sustained equity free cash flow. The increase in customer growth underscores the resilience of cash flow generation enabled by efficiency programs.

Risks and Contingencies

• Legal: A New York Supreme Court granted summary judgment in favor of Telefónica regarding a 2020 breach of contract claim; Millicom has appealed and expects a hearing in Q4 2024. Total legal claims exposure is $358 million.
• Regulatory/Tax: Tax risk exposure estimated at $268 million. The Group is subject to OECD Pillar Two Model Rules, though currently meeting transitional safe harbor rules.
• Macroeconomic: Currency depreciation in Colombia and Paraguay; acute shortage of U.S. dollars in Bolivia affecting commissions.

Investor Verification Checklist

• Accounting Change Impact: Verify the $48 million estimated full-year reduction in depreciation expense due to the revised useful life of fiber optic assets (15 to 25 years).
• Transaction Closing: Monitor the closing conditions for the Costa Rica merger with Liberty Latin America (expected H2 2025) and the Colombia network sharing agreement with ColTel.
• Legal Outcome: Track the appeal hearing regarding the Telefónica breach of contract claim and potential damages.
• Asset Disposal: Confirm the timeline and regulatory approval for the sale of Lati International S.A. (7,000+ towers) to SBA Communications Corp., expected mid-2025.
• Debt Maturity: Review the debt maturity profile, noting 40% of gross debt is in local currency and the average maturity is 4.8 years.