Millicom International Cellular S.A. (
Q3 2009 Earnings Call
October 19, 2010 9:00 am ET
Mikael Grahne - President and CEO
François-Xavier Roger - CFO
David Kestenbaum - Morgan Joseph
James Rivett - Citi
Peter Nielsen - Cheuvreux
Ric Prentiss - Raymond James
Stephen Mead - Anchor Capital
Stefan Gauffin - Nordea
Sven Skold - Swedbank
Kevin Roe - Roe Equity Research
Andreas Joelsson - SEB Enskilda
Mathieu Robilliard - Exane BNP Paribas
Sergey Fedoseev - HSBC
Thomas Heath - Öhman Equities
Lena Osterberg - Carnegie
Previous Statements by MICC
» Millicom International Cellular S.A. Q2 2010 Earnings Call Transcript
» Millicom International Cellular S.A. Q1 2010 Earnings Call Transcript
» Millicom International Cellular S.A. Q4 2009 Earnings Call Transcript
» Millicom International Cellular SA Q3 2009 Earnings Call Transcript
Welcome to the Millicom Q3 210 results conference call. For your information, this conference is being recorded. May I also remind you that this call is being audio streamed over the web and is accessible at www.millicom.com together with the presentation summarizing the key features of the results.
I would now like to hand you over to the host of today’s call Mr. Mikael Grahne, President and CEO and François-Xavier Roger, CFO. Please go ahead.
Thank you, operator and welcome to you all. As usual you can find the slides for this call on our Web site.
Please turn to Slide #4. First I would like to make clear that we have consolidated Honduras at 100% since July 1, 2010 as our unconditional call option over 33% stake gives us full control of that business. The historical numbers are bearing in our press release and this presentation have been restated accordingly in order to give like-for-like comparisons.
Turning to the highlights, you can see that Q3 was another quarter of solid top-line growth for Millicom. Revenues exceeded $1 billion for the first time, increasing organically in local currency by 11.7%. Our EBITDA margin remained strong at 47.5%.
Cash flow generation also continued to be strong, with an operating free cash flow margin of 24.1%. During the quarter we announced our intention to redeem the corporate 2013 or early and preferred to push down debt to operating level. We also entered into agreement with our partner in Honduras and Guatemala in Q3 in order to align the ownership over our cable operations in each Central American country.
These agreements will enable the full integration of our fixed and mobile operations and integration of synergies. Excluding the adjustments for the re-valuation of our operation in Honduras, earning per share grew by 2% year-on-year to $1.34.
Slide #5, Customer numbers were up 18%, and we ended the quarter with 37.4 million customers, one million of whom are 3G customers using data services in Latin America. Local revenue growth of 13% reflects increase in stability in local currency ARPU and some currency benefits in South America.
EBITDA growth at 16% continues to outstrip revenue growth as margins improved, but in coming quarters if we see opportunities to invest further in our brands and services in order to accelerate our top-line growth we will do so and this may reduce EBITDA margins slightly from current high levels.
CapEx of $196 million was 19% of revenues. We are reiterating our CapEx of $700 million for the full year.
Slide #6. On slide six you can see how our year-on-year local currency revenue growth has been moving positively quarter-on-quarter. The 11.7% growth rate that we had reported for Q3 is the highest rate achieved since the beginning of 2009 and this is being driven by our focus on innovation and ARPU stabilization.
Slide #7. Local currency ARPU declines continued to slow, as you can see on slide 7, as a result of our focus on higher quality customers and developing our non-voice revenue streams. In South America local currency ARPU was up year-on-year for the second quarter in a row.
Part of the decline in the branding group ARPU continues to be down through regional mix impact, with lower ARPU Africa growing faster. If we exclude the impact of country mix, the decline in ARPU was 4%, demonstrating that we are moving closer to stabilization. We no longer see a total correlation between customer number growth and future revenue growth. Especially now, that 3G is bringing in a larger number of higher ARPU customers into the mix. Mandatory [decisions ] also continues to cost volatility in net additions in Africa.
Slide #8. Breaking down revenue growth into its component parts. We increased our double digit rates of local currency revenue growth from that achieved in Q1 and Q2, despite the full year impact of additional taxes in El Salvador and Africa and a full consolidation of Honduras, which has slightly reduced the total growth, as Honduras has a lower growth than the group as a whole.
We enjoyed a small benefit from currency movements in Q3, primarily due to the strength of the Columbian peso.
Slide #9. Turning to look at EBITDA growth, the underlying performance excluding the impact of the full consolidation of Honduras was an increase of 14.6%. We are not aiming to increase our margins further as we prepare to invest behind our brands and services.
Slide #10. Voice revenues grew by 10% in the quarter up from 7% last quarter and 5% in Q1. This is evidence that our branding and distribution focus helps to resist voice commoditization.
VAS growth continues to be strong, up by 25.7%. Breaking down VAS in more detail, we grew non-SMS VAS in other words, most sophisticated and differentiated services at 46% in local currency, showing our commitment to innovation. We still value peer-to-peer SMS, which is a highly effective way introducing customers to a range of new non-voice services.