Millicom Earnings: Cost-Cutting Efforts Hit Margins but Should Drive Future Cash Flows

Xavier Niel’s impact on Millicom has been swift. The European telecom magnate, who has bought up nearly 30% of Millicom’s shares over the past year and had his lieutenant Maxime Lombardini appointed as COO last September, is known for driving efficiency. Millicom’s cost transformation effort, dubbed “Everest,” is moving further and faster than initially planned, with restructuring charges denting fourth-quarter profitability. Management now expects more than $250 million in annual savings, equal to more than 4% of revenue and nearly double the plan provided last quarter. Millicom also expects to produce $550 million of free cash flow in 2024, more than triple the amount generated over the past three years combined. We like the path Millicom is on, and we are leaving our fair value estimate at $30 per share, but the firm still has a lot to prove.