Telecomunicazioni
Millicom International Cellular: Solid 2018 Underpins Strong Medium-term Outlook
"I am extremely pleased by our strong performance in 2018 on many fronts. We delivered on all our operational and financial targets, and we made great strides toward increasing our focus on Latam by divesting our operations in Rwanda and Senegal and acquiring Cable Onda in Panama . We capped the year by completing our registration with the U.S. SEC, allowing our shares to begin trading on the Nasdaq Stock Market in January. As we begin this new chapter as a U.S. listed company, we are introducing our medium-term growth plans. The new year is off to an exciting start, and the Millicom management team remains laser-focused on creating shareholder value and once again delivering on its commitments in 2019 and beyond."
As disclosed on January 9th 2019, we anticipate another solid year in 2019 marked by the continued expansion of our high-speed data networks and customer growth. For our Latam segment, we expect organic service revenue growth to range between 3% and 5%, while EBITDA growth is expected to accelerate to between 4% and 6%, on a like-for-like basis. As usual, these organic growth rates are expressed in constant currency terms and exclude the impact of changes in foreign exchange and accounting standards. Finally, Latam segment Capex should be slightly above $1.0 billion , including about $85 million at Cable Onda, which we expect will generate EBITDA of approximately $184 million .
The company's strong performance in 2018 and the positive outlook for 2019 are consistent with the strategic plan approved by the Board of Directors. Over the medium term, management sees scope for organic service revenue growth to continue to improve, for margins to expand, and for capital intensity to gradually trend lower over time in the Latam segment. More specifically, management's ambition as outlined in the strategic plan is to deliver mid-single-digit organic service revenue growth, mid-to-high single-digit EBITDA growth, and around 10% OCF (EBITDA less Capex) growth, over the medium term for the Latam segment.
Underpinning our medium-term targets is our expectation that favorable socio-demographic factors will sustain strong demand and contribute to improved affordability for our services, thereby allowing penetration rates to gradually catch up to levels already seen in other markets globally and elsewhere in Latin America . From a competitive standpoint, we are investing to defend and build upon our current leadership position in all our markets and see the potential for further consolidation.
Over the medium term, we expect that approximately 60% of our mobile customers will consume 4G services, up from just over 30% currently. This will drive robust traffic growth, which we expect can produce low-single-digit organic mobile service revenue growth. Meanwhile, our residential cable business should reach 15 million homes-passed with 10 million revenue-generating units and around 5 million customer relationships. This expected customer growth, combined with steady ARPU expansion, gives us confidence that we can sustain high-single-digit organic cable service revenue growth over the medium-term.
To support execution of its strategic plan, Millicom targets financial leverage of around 2.0x proportionate net debt to EBITDA(i), reflecting greater subscription revenues and a higher relative proportion of our cash flow coming from Central America , where foreign exchange rates tend to be less volatile, balanced against the political and macroeconomic risks that are typical of emerging markets. With a leverage target of 2.0x, Millicom retains the flexibility needed to temporarily increase leverage above the target, as is the case following our recent acquisition of Cable Onda, which took our leverage to the current level of 2.5x.
On January 9th 2019, Millicom shares began trading on the Nasdaq Stock Exchange in the U.S. under ticker symbol TIGO.
On January 14th 2019, Millicom confirmed that it had received a preliminary highly conditional non-binding proposal from Liberty Latin America Ltd in relation to an offer for all shares of Millicom. On January 22nd2019, Millicom announced that preliminary discussions regarding a possible offer were terminated by Liberty Latin America Ltd without an offer being made.
The implementation of IFRS 15 had a modest impact on our operating profitability in 2018. As shown in the reconciliation table on page 21, implementation of the new standard reduced 2018 revenue by $77 million and service revenue by $116 million , and it increased EBITDA by $11 million for the year, as compared to what our results would have been if we had continued to follow the IAS 18 standard in the year-end 2018.
Most of the impact on service revenue relates to the change in how we present the results of wholesale international traffic. Revenue for a portion of this business are now presented on a net basis. This change in presentation had no material impact on EBITDA, but it produced a reduction in service revenue of $16 million in Q4 2018 and of $87 million for the full year 2018. Included in our 2017 results for this business were service revenue of $38 million for Q4 and $119 million for the full year. For comparison purposes, the organic growth figures discussed throughout this report exclude the impact of this accounting change implemented as of January 1st 2018.
IFRS 16 became effective on January 1st 2019 and affects primarily the accounting for operating leases, which will be brought onto our balance sheet. While the Group is still finalizing the implementation of IFRS 16, we confirm the preliminary assessment we disclosed within our Q3 2018 results, whereby we expect that application of the standard will increase our EBITDA by 6% to 8% and our underlying net debt, including Guatemala and Honduras as if they were fully consolidated, by 15% to 20%. As a result of these factors, our proportionate net debt to EBITDA ratio will increase by 0.1x to 0.3x. The application of this standard will have no impact on underlying cash flow generation.
A presentation and conference call to discuss these results will take place on February 8th 2019 at 2:00 PM ( Luxembourg / Stockholm ) / 1:00 PM ( London ) / 8:00 AM ( New York ). Please dial in 5-10 minutes before the scheduled start time to register your attendance. Dial-in numbers for the call are as follows:
Luxembourg: +352 2786 1336 US: +1 323 794-2551
A live audio stream, presentation slides, and replay information can be accessed at www.millicom.com.
Press:
Vivian Kobeh, Corporate Communications Director
+1 305 476-7352
press@millicom.com
Investors:
Michel Morin , VP Investor Relations
+1 305 445-4156
investors@millicom.com
Mauricio Pinzon , Investor Relations Manager
+44 20 3249 2460
investors@millicom.com
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