Analyst Note| Michael Hodel, CFA |
Millicom has made great strides stabilizing it business following an extremely challenging hit from the pandemic. The firm reported a record 1.7 million net wireless customer additions across Latin America during the third quarter, nearly offsetting the 2.1 million net losses reported over the first half of the year. The residential fixed-line business also returned to strong customer growth (157,000 net additions versus 59,000 a year ago and 95,000 losses last quarter) despite a sharp slowdown in network construction. Management remains confident that it will hit its $1.4 billion Latin American operating cash flow (EBITDA less capital spending) target for the full year thanks to the rebound in demand and tight cost control. It seems that, all else equal, Millicom would comfortably exceed this target, but management plans to invest any cash flow above the target back into the business, reviving capital projects that were put on hold earlier in the year. We don’t plan to materially change our $64 fair value estimate, and we believe the shares are deeply undervalued.