Millicom Is Undervalued
Its increasing scale provides opportunities for future growth.
We are encouraged by Millicom International Cellular’s (MIICF)/(MIC SDB) first-quarter results and believe the shares are significantly undervalued. However, just as previous quarterly results were hit badly by negative currency movements, this latest quarter benefited from positive currency movements, making the initial results look better than reality. Reported revenue grew 0.4% year over year, but adjusting for currency and acquisitions, it declined 2.2% versus our full-year projection of a slight decline. We do expect improvement in underlying results throughout the year. Thus, we are maintaining our fair value estimate and narrow moat rating.
The most important item, in our eyes, is the continued expansion of Millicom’s convergence program. On this front, the company is making steady progress. It expanded its cable footprint by passing a record 370,000 homes in the quarter and now passes 8.4 million in total. This increasing scale provides opportunities for future growth. Additionally, the firm continues to expand its 4G coverage. It added 400,000 4G customers in the quarter, taking its 4G subscriber base to 3.8 million. 4G customers tend to have average revenue per user levels that are more than twice those of other subscribers. As Millicom converts its wireless customer base to 4G, its ARPU should increase and add to revenue growth. Overall data usage increased about 20%, but this is being offset in most countries by continued declines in voice and SMS revenue. In Colombia and Bolivia, data revenue now exceeds voice and SMS revenue, and others are moving in this direction, which makes data growth increasingly meaningful.
Allan C. Nichols does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.