TIGO

Business Context and Reporting Period

Company: Millicom International Cellular S.A. (Tigo)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Second Quarter (Q2) and First Half (H1) ended June 30, 2024
Business Overview: Leading provider of fixed and mobile telecommunications services in Latin America, operating in nine countries including Guatemala, Colombia, Panama, Bolivia, Paraguay, and Honduras (joint venture).

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Q2 revenue increased 4.7% year-over-year (YoY), driven by organic growth in most countries and favorable foreign exchange (FX) impacts from the Colombian peso (+14%) and Costa Rican colon (+6%). Organic service revenue grew 2.1%.
• Profitability Surge: Operating profit jumped 74.1% YoY to $345 million, and Net Profit turned from a $22 million loss to a $78 million gain. This was driven by cost savings from the "Everest" efficiency program, lower programming costs, and reduced amortization due to the Colombia mobile network sharing agreement.
• Cash Flow Improvement: Equity Free Cash Flow (EFCF) improved significantly to $268 million in Q2 (from a $24 million outflow in Q2 2023), aided by higher EBITDA, reduced Capex, and proceeds from a tower sale in Colombia.
• Deleveraging: Net debt decreased by $325 million during the quarter to $5.65 billion. Leverage ratio improved to 2.77x from 3.34x in the prior year, supported by debt repurchases and strong cash generation.
• Customer Metrics: Mobile customer base remained flat YoY at 40.6 million, but Mobile ARPU increased 7.1% YoY. Fixed broadband saw positive net additions for the first time since Q4 2022.

Guidance, Outlook, and Risks

Management Commentary and Targets

• 2024 Targets: Management targets EFCF above $600 million for the full year 2024 (excluding tower sale proceeds) and leverage near 2.5x by year-end.
• Strategic Focus: CEO Marcelo Benitez highlighted a transformation to increase cash flow, streamline product offerings, and prioritize ARPU growth in Mobile and B2B segments.

Subsequent Events and M&A

• Colombia Consolidation: Signed a non-binding MOU to acquire Telefonica's stake in Coltel and minority interests in TigoUne for approximately $1 billion, subject to regulatory approval.
• Costa Rica Merger: Signed a binding agreement to merge operations with Liberty Latin America in a cashless transaction; Millicom will retain ~14% equity. Expected to close in H2 2025.
• Hostile Takeover Attempt: Atlas Luxco announced a public offer to buy all shares at $24.00. The Board's independent committee unanimously recommended shareholders reject the offer as it undervalues the company.

Risks and Contingencies

• FX Volatility: The Colombian peso depreciated 7% during Q2, impacting reported results. Bolivia faces acute USD shortages, requiring high commissions (avg. 29%) for dollar purchases.
• Legal: A New York court ruled against Millicom in a breach of contract claim regarding the terminated 2020 Costa Rica acquisition; Millicom plans to appeal.
• Political: Increased political uncertainty in Bolivia following a coup attempt.

Investor Verification Checklist

• Atlas Offer Status: Monitor the outcome of the Atlas Luxco tender offer expiring August 16, 2024, and shareholder response.
• Colombia Transaction: Verify progress on the $1 billion acquisition of Telefonica's stake in Coltel and regulatory approvals.
• Bolivia Liquidity: Assess the impact of continued USD shortages and high commission costs on operational cash flow in Bolivia.
• Costa Rica Merger: Track regulatory approval timelines for the Liberty Latin America merger expected to close in 2025.
• Debt Repurchases: Confirm continued execution of the bond repurchase program to meet the 2.5x leverage target.