Company Reports

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.

Millicom is a collection of telecom businesses serving nine countries in Latin America. Economic and political challenges in certain markets, combined with a weak Colombian peso, have hindered recent financial results. However, we expect that continued smartphone and broadband adoption, attractive competitive dynamics in several countries, and cost-cutting efforts will allow the firm to generate solid cash flow in the coming years.

Millicom showed some signs of improvement during the third quarter. Recently appointed president and COO Maxime Lombardini also provided initial thoughts on the company, indicating that operating efficiency and debt reduction are top priorities. Lombardini formerly served as the CEO of Iliad, whose founder, Xavier Niel, is now Millicom’s largest shareholder. We expect his influence will lead to changes in Millicom’s operations, including potential divestitures or capital infusions. We are leaving our fair value estimate at $30. We believe the firm holds attractive operations in several countries, but the path ahead remains highly uncertain.

Millicom is a collection of telecom businesses serving nine countries in Latin America. Economic and political challenges in certain markets, combined with a weak Colombian peso, have hindered recent financial results. However, we expect that continued smartphone and broadband adoption will allow the firm to generate solid growth and cash flow in the coming years.

As telegraphed in its earnings warning at the end of June, Millicom’s operational struggles continued during the second quarter. Consolidated profitability remains under pressure as revenue growth has lagged inflation and the firm spends on restructuring efforts. We are leaving our fair value estimate at $30 as we expect Millicom will take steps in the coming quarters to improve its overall position.

Millicom is a collection of telecom businesses serving nine countries in Latin America. Economic and political challenges in certain markets, combined with a weak Colombian peso, have hindered recent financial results. However, we expect that continued smartphone and broadband adoption will allow the firm to generate solid growth and cash flow in the coming years.

Millicom has taken several twists and turns over the past month, most recently announcing it will miss its target for cumulative free cash flow from 2022-24, which it set with much fanfare 16 months ago. Millicom now expects this figure to reach at least $500 million, down from $800 million-$1 billion, on higher spectrum costs, elevated financing expenses, heavier investment in Guatemala, and weaker fixed-line results. We continue to believe the firm holds attractive investments in multiple Latin American countries, but we believe major changes are needed to improve execution. We had already expected the firm would fall short of its near-term cash flow targets, but our fair value estimate assumes Millicom gradually returns to mid-single-digit revenue growth, which current management has struggled to deliver.

Millicom delivered disappointing first-quarter results, particularly in Colombia and Guatemala. Consolidated profitability and cash flow took a hit during the quarter, which management ascribed to costs associated with its restructuring efforts, higher stock-based compensation, investments in growth initiatives, and legal expenses tied to a potential buyout of the firm. Millicom declined to provide an update on buyout discussions but indicated they are ongoing.

Millicom is a collection of telecom businesses serving nine countries in Latin America. Economic and political challenges in certain markets, combined with a weak Colombian peso, have hindered recent financial results. However, we expect that continued smartphone and broadband adoption will allow the firm to generate solid growth and cash flow in the coming years.

Millicom’s fourth-quarter results were underwhelming once again with currency weakness, economic uncertainty, and country-specific challenges all weighing on growth. Management repeatedly mentioned that the firm has begun raising prices to offset inflation and that it will continue raising prices this year given the competitive response thus far. We expect Millicom will be able to raise prices at least in line with the pace of local inflation in most markets given the favorable structure of the wireless industries in most of the countries it serves. The firm didn’t provide an outlook for 2023, but reaffirmed its medium-term targets, including 10% annual operating cash flow growth, with price increases and a new cost-cutting initiative contributing. Management also declined to comment further on discussions with private equity investors concerning a potential acquisition of Millicom. We aren’t changing our $30 fair value estimate.

After several years of restructuring, Millicom is now best thought of as a collection of investments in Latin American telecom businesses. We expect the firm will spend the next couple of years primarily operating its businesses rather than reshaping its portfolio, allowing it to more clearly demonstrate its ability to generate cash flow.

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.

After several years of restructuring, Millicom is now best thought of as a collection of investments in Latin American telecom businesses. We expect the firm will spend the next couple of years primarily operating its businesses rather than reshaping its portfolio, allowing it to more clearly demonstrate its ability to generate cash flow.

Millicom showed improvement in several areas during the second quarter, with most markets posting wireless customer growth and average revenue per wireless customer moving back in the right direction. Total service revenue increased 4.5% versus a year ago, roughly in line with the prior quarter, while the EBITDA margin held steady versus a year ago at 40%. Free cash flow was negative during the first half of the year on elevated capital spending, but management expects sharp improvement in the second half of the year, leaving the firm on track to generate $800 million-$1 billion cumulatively through 2024. The firm also completed several transactions during the quarter, including the equity rights offering announced earlier this year, the sale of its remaining African business, and the buyout of minority partners in Panama. These moves further simplify Millicom's operating structure and improve its financial position. Our fair value estimate remains $34, reflecting the impact of the rights offering on per-share valuation.

We are adjusting our Millicom fair value estimate to reflect the terms of the equity rights offering that the firm is in the process of completing. The stock is now trading without the right to participate in the offering, meaning that the stock price now reflects dilution from the offering. As a result, our fair value estimate mechanically falls to $34 per share from $51. To entice participation, shareholder received the right to purchase 0.7 shares for each share owned at a price of $10.61 per share, versus a prior share price of around $22. To preserve the economic value of their investment, shareholders must either exercise their rights and purchase additional shares at this heavily discounted price or sell their rights to another investor. The subscription rights are exercisable and will begin trading on May 27. The rights will continue trading until June 8 and can be exercised until June 13. Millicom announced its plans to issue the additional shares last fall to fund a portion of the buyout of its Guatemalan minority partner.

After several years of restructuring, Millicom is now best thought of as a collection of investments in Latin American telecom businesses. We expect the firm will spend the next couple years primarily operating its businesses rather than reshaping its portfolio, allowing the firm to more clearly demonstrate its ability to generate cash flow.

Millicom reported modestly disappointing first-quarter results, with customer growth slowing. Revenue per customer also took another step lower in U.S. dollar terms, largely reflecting local-currency weakness across markets. We continue to expect financial performance will rebound as economic growth and the benefits of improved market structures in several countries have an impact. After adjusting our model to reflect weaker near-term revenue, we have lowered our fair value estimate to $51 from $55, but we still believe the stock is deeply undervalued.

After several years of restructuring, Millicom is now best thought of as a collection of investments in Latin American telecom businesses. We expect the firm will spend the next couple years primarily operating its businesses rather than reshaping its portfolio, allowing the firm to more clearly demonstrate its ability to generate cash flow.

After several years of restructuring, Millicom is now best thought of as a collection of investments in Latin American telecom businesses. We expect the firm will spend the next couple years primarily operating its businesses rather than reshaping its portfolio, allowing the firm to more clearly demonstrate its ability to generate cash flow.

Millicom continues to attract both wireless and fixed-line customers at a solid clip, though competition has maintained downward pressure on wireless pricing, particularly in Colombia. Average revenue per wireless customer was flat with the prior two quarters at $6.40 per month, more than 10% lower than prepandemic levels. Management provided little detail on its plans or outlook for 2022 as it has an analyst day on Monday, Feb. 14. The firm is also working toward a $750 million rights offering to fund a portion of the Guatemalan minority buyout, which closed last November. We expect to reduce our $64 fair value estimate about 10% to account for dilution resulting from issuing equity at the current share price, though we would expect shareholders to have the option to participate and maintain the value of their investment. We believe the shares remain undervalued.