Millicom Takes a Step Back in Q3 as Prices Come Under Pressure

Millicom took a step backward during the third quarter, in our view, as currency weakness and competition pressured revenue in several markets. Cash flow was also weak, but management continues to expect that the firm will generate $150-$200 million of free cash flow for the year. We've trimmed our near-term expectations, reducing our fair value estimate to $30 from $34 per share. We continue to expect Millicom will generate steadily improving results in the coming years as it benefits from continued wireless and broadband adoption and improving competitive dynamics in several markets. The firm has also done a good job of reducing its debt load in aggregate and shifting some obligations to its operating subsidiaries. Net debt at the corporate parent level declined to $2.0 billion from $2.2 billion last quarter and $3.8 billion at the start of the year. As a result, management should have flexibility to create shareholder value if opportunities to buy or sell operations in certain countries present themselves.