Millicom International Cellular S.A. — FY2021 Form 20-F
Business context and reporting period. Filed March 1, 2022, this audited annual report covers the year ended December 31, 2021, with comparisons to FY2020 and FY2019; it is not a standalone Q4 filing, and the supplied text does not give separate Q4 results. Millicom provides mobile, broadband, cable TV and mobile financial services across Latin America and Tanzania. Its statements are prepared under IFRS. Guatemala became a wholly owned, consolidated business on November 12, 2021; results therefore are not directly comparable with prior years.
Financial and operating performance
| Metric (US$ millions, except per-share and percentages) | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | 4,617 | 4,171 | +10.7% |
| Service revenue | 4,354 | 3,971 | +9.6% |
| Gross profit | 3,316 | 3,000 | Gross margin approximately 71.8% vs. 71.9% |
| Operating profit | 659 | 446 | +47.5%; operating margin approximately 14.3% vs. 10.7% |
| Net profit (loss) | 542 | (385) | Owners’ attributable profit was 590 vs. a loss of 344 |
| EPS attributable to owners | $5.84 | $(3.40) | Includes a substantial acquisition-related revaluation gain |
| Net cash from operating activities | 956 | 821 | Increase mainly reflected lower working capital |
| Operating free cash flow (non-IFRS) | 619 | 657 | Down 5.8% |
| Free cash flow (non-IFRS) | 128 | 106 | After net finance charges paid |
| Cash and cash equivalents | 895 | 875 | Restricted cash of 203 is separate |
| Debt, excluding leases | 7,744 | 5,691 | Net debt was 6,814 vs. 4,816 |
| Debt and lease liabilities | 8,911 | 6,711 | Net financial obligations were 7,981 vs. 5,837 |
Consolidated EBITDA, a non-IFRS measure, was $1.639 billion versus $1.495 billion, implying margins of approximately 35.5% and 35.8%, respectively. Capital expenditure additions were $951 million; cash purchases of property, plant and equipment and intangible assets were $875 million. Current assets of $2.286 billion were below current liabilities of $4.485 billion, including $1.840 billion of current debt and financing.
Business trends. Latin America segment revenue increased 6.4% to $6.220 billion and segment EBITDA rose 5.9% to $2.498 billion. Africa revenue fell 2.7% to $357 million and segment EBITDA decreased 11.0% to $111 million, in part because of a Tanzanian levy on mobile-money transactions. Mobile customers reached 58.4 million; Latin American Home customer relationships were 4.893 million, up 7.7%. Latin America mobile ARPU fell to $6.40 from $6.70, while Home ARPU rose to $28.40 from $27.90.
Material changes and unusual items
- Millicom paid $2.2 billion in cash to acquire the remaining 45% of its Guatemala joint venture. It recognized a $670 million gain from remeasuring its previously held interest; this materially boosted reported profit and is not recurring operating performance. Purchase accounting remained provisional at year-end, with $3.258 billion of provisional goodwill recorded.
- Guatemala contributed $223 million of revenue and $43 million of net profit after consolidation began. The filing estimates that full-year consolidation from January 1 would have added $1.38 billion of revenue and $147 million of net profit; these are pro forma estimates, not reported results.
- Investing cash outflow increased to $2.703 billion, principally reflecting $2.0 billion used for subsidiary acquisitions. Financing cash flow was positive $1.777 billion, including $3.113 billion of new financing and $1.335 billion of debt repayments.
- Interest and other financial expense declined to $531 million from $624 million, mainly due to lower average debt. Foreign-exchange losses were $43 million, compared with $69 million in FY2020.
- Millicom completed the disposal of its Ghana joint venture in October 2021 and recorded a $38 million exit-financing loss. Its planned sale of Tanzania operations remained subject to regulatory approval.
- The company repurchased 1.369 million shares for $50 million and paid no shareholder dividend in 2021.
Outlook, risks and contingencies
Management targets medium-term growth in organic operating cash flow, lower net leverage, and stable annual capital expenditure. It aims to pass an additional 3 million homes over three years, reach approximately 20 million homes passed over the medium term, and add more than 1 million customer relationships over three years. It also plans to reorganize its tower and Tigo Money businesses, subject to approvals, and expects share buybacks to resume in 2023 if consistent with leverage-reduction targets. These are goals, not guaranteed guidance; the filing provides no specific FY2022 revenue or earnings forecast.
- Acquisition financing and leverage: Year-end debt rose substantially after the Guatemala acquisition. A $2.15 billion bridge facility had $450 million outstanding as of February 8, 2022; the company intended to refinance the remaining balance partly through equity. Subsequent to year-end, it issued $900 million of 5.125% notes due 2032, and reported a new $252 million sustainability bond. Refinancing and any equity issuance remain important to monitor.
- Liquidity and cash access: Management said available cash, borrowing and operating-subsidiary funds should cover projected operating and capital needs for at least 12 months. However, the current-liability position, debt maturities, covenants, restrictions on subsidiary distributions, repatriation taxes and foreign-exchange controls could constrain liquidity at the parent-company level. Net financial obligations to EBITDA were 4.87x on the stated IFRS basis; the filing says the covenant calculation differs and was below 3.0x.
- Legal and tax exposures: Claims against subsidiaries totaled $246 million, with $36 million provided; joint-venture exposure was $13 million, with $1 million provided. Subsidiary tax-risk exposure was estimated at $343 million, with $69 million provided; the Group’s share of joint-venture tax exposure was $68 million, with $3 million provided. Telefónica’s claim following termination of the Costa Rica acquisition seeks unspecified damages; Millicom says it believes the claim is without merit.
- Operating and market risks: The filing highlights intense competition and pricing pressure, prepaid-customer churn, emerging-market political and economic volatility, currency devaluation, spectrum and license renewals, network investment returns, content costs, cybersecurity and privacy, supplier constraints, and evolving regulation. COVID-19 recovery supported 2021 activity, but further restrictions or weaker collections could affect performance.
- Other execution matters: Tanzania disposal approvals and the required Tanzanian public offering process remain unresolved. The company also disclosed ransomware incidents affecting Guatemala and El Salvador and an attack on a Colombian web portal; reported service impact and data loss were limited. Management and the auditor reported effective internal controls, but Guatemala’s controls were excluded from management’s assessment following the late-year acquisition; Guatemala represented 35.3% of consolidated assets.
Most important facts for investors to verify
- How much of the Guatemala bridge financing was ultimately refinanced, on what terms, and whether any planned equity issuance or rights offering was completed.
- Underlying cash generation and leverage excluding the $670 million non-cash revaluation gain, and the company’s progress against its cash-flow and net-leverage targets.
- Whether the provisional Guatemala purchase-price allocation, goodwill and expected acquisition benefits changed after year-end.
- Regulatory approval and closing status of the Tanzania sale, plus any resulting change in segment scope or cash proceeds.
- Developments in the disclosed tax disputes, litigation claims, spectrum renewals and cash-repatriation constraints.
- Whether Guatemala’s internal controls were fully integrated and assessed in subsequent reporting periods.
Audit: Ernst & Young issued an unqualified opinion on the FY2021 consolidated financial statements and an unqualified opinion on internal control over financial reporting.