Millicom International Cellular S.A.

Hello everyone and welcome to our second quarter 2025 results call. This event is being recorded. Our speakers today will be our CEO Marcelo Benitez and myself, Bart van Haren, CFO of the company. The slides for today's presentation are available on our website, along with the earnings release and our financial statements. Now please turn to slide two for the safe harbor disclosure. We will be making forward looking statements, which involve risks and uncertainties and which could have a material impact on our results. On slide three, we define the non IFRS metrics that we will reference throughout this presentation. And you can find reconciliation tables at the back of our earnings release and on our website. With those disclaimers out of the way, let me turn the call over to our CEO Marcelo Benitez.

Thanks Bart. Good morning everyone. And thank you for joining us today. The second quarter of 2025 was a defining moment in our journey. One where strong operational execution met with strategic acceleration. We're firing on all cylinders across commercial, financial and strategic fronts, and we're doing it with discipline, focus and results. Most importantly, we are right on track to deliver our commitment of $750 million in equity free cashflow for the year. This was a quarter of strategic acceleration. We executed three major milestones in just a few weeks. Acquisition of Telefonica's Uruguay operations, definitive agreement for Telefonica Ecuador, and the partial closing of our infrastructure transaction with SBA. We are locked over $500 million in proceeds, declaring a special dividend of $2.5 per share. A clear sign of our confidence and capital discipline. To mark this pivotal momentum, we rang the NASDAQ opening bell in June, together with the TIGO top management team, a symbolic step forward as we deepen our footprint in South America and reaffirm our long-term commitment to the region and to shareholder value. Now turning to our performance. We added nearly 250,000 net postpaid customers up from 178,000 a year ago. Home gained 41,000 customers, nearly four times more than Q2 last year. Commercial traction and efficiencies are delivering profitable growth. Adjusted EBITDA reached a new high of 46.7%, up 3.2 points year over year. In this quarter, more than half of our operations achieved margins above 50%. Equity-free cash flow for the quarter came at $218 million, bringing our H1 total to $395 million, $126 million ahead of last year. Leverage dropped to 2.18 times, and we remain committed to keeping leverage below 2.5x. In short, we're not just growing, we're growing the right way. Now let's review each of these highlights in more detail, beginning with the mobile business on the next slide. Over the past quarter, we've seen promising results across our core business. Our mobile business outperformed expectations in Q2. On the right, you can see that our mobile business grew by mid-single digit this quarter, an acceleration from .1% in previous quarter. Zooming in into our main segments, prepaid fast-tracked on the back of higher ARPU, while post-pay continued propelled by momentum, with an amazing 14% growth in base, reaching near 9 million customers. We're executing the playbook, pre- to post-migrations, network upgrades, and convergence, all designed to build lifetime value and reduce churn. Now please turn to the next slide to look at our home business. We added 41,000 home customers in the quarter, about four times the intake we saw in Q2 last year. This is a remarkable growth of nearly 6% -on-year. Our broadband customer base was up roughly 8%. Paid TV is flat, while fixed telephony is in structural decline, mainly displayed by mobile. Although service revenue remains slightly negative at minus 1.4%, that's a major improvement from minus .1% last year. The trajectory suggests that our recovery efforts are gaining traction, and we're optimistic about positive growth in the second half of 2025. Our strategic playbook is fully in motion. We are scaling our networks through targeted capital deployment, delivering faster broadband experiences to more customers, boosting -to-market efficiency with smarter linear execution and accelerated convergence across mobile and fixed. Now please turn to the next slide for a brief glance at our B2B business. Service revenue grew nearly 4% organically, fueled by 16% K-GAR in digital services over the past two years, and 13% -on-year increase in mobile B2B, an acceleration from Q1. At the same time, we expanded our SME base by 6% -on-year, strengthening our position in this very important segment. Now let's review our performance in the three largest countries, beginning with Colombia on the next slide. This slide underscores three main takeaways. In Colombia, service revenue accelerated to nearly 5% year over year on an organic basis, stepping up from .6% in the previous quarter. This performance uplift is fueled by mobile post-paid with customer base growing by 15%, surpassing the 4 million mark, and home that did the same at the rate of 12% -on-year. All this, sustaining a notable adjusted EBITDA margin of 39.5%, despite higher commercial investment supporting top-line growth. Congratulations to our outstanding team in Colombia. Your strong commitment and disciplined execution are powering this extraordinary momentum. Now please turn to the next slide to look at Guatemala. We are delighted to see that our post-paid customer base expanded 20% year over year, triggering healthy growth in the mobile service revenue of more than 5% in real terms. Organically, the growth went from .5% in the previous quarter to 4%. As I mentioned in Q1, one of our levers is a migration of prepaid to post-paid, which is particularly relevant in Guatemala. And to cap it off, operating cashflow reached a record of 191 million this quarter, a clear reflection of strong execution and sustained financial momentum. Great work by our team in Guatemala. The combination of top-line growth recovery and focus on efficiency is delivering record-breaking financial results. Please turn to the next slide to look at Panama. This slide highlights another record high adjusted EBITDA margin this quarter, the second in a row. Mobile post-paid customer base grew about 20% year on year and mobile service revenues grew 4%. We continue to leverage our post-paid business as a foundational catalyst for steady growth in mobile. Before turning it over to Bark, let me close with our M&A update. We made decisive progress, closed the sale of Latiparaguay and executed the partial closing of the SBA tower deal, generating more than 500 million in proceeds. In Costa Rica, we await regulatory approval and target closing in Q126. In Uruguay and Ecuador, we sign definitive agreements and expect approval in Q3 and Q4 respectively. In Colombia, the coltel acquisition remains on track for Q126 closing. In parallel, we're in active discussions with EPM and aim to reach an agreement as soon as possible. Since negotiations are ongoing, I prefer not to comment further, but as soon as we land something, we'll communicate it to the market. Now let me turn the call over to Bark to review the financials for this quarter.

Thank you, Marcelo. Now let's look at our financial performance beginning on slide 14. Service revenue for the quarter totaled 1.28 billion, representing a year over year decline of .9% due to the adverse impact of foreign exchange this quarter, causing around 110 million in total FX headwinds. Now about 84 million of this originated in Bolivia, primarily due to the application of accounting standard IS21. Excluding FX impact, organic service revenue growth accelerated to .4% as our commercial push continues to drive performance. I think the story is clear and revenues progressing in line with expectations. Mobile postpaid is growing double digit, boosted by pre to postpaid migrations and FMC, while mobile prepaid remains on positive growth, creating the funnel for the future. B2B growth is driven by digital and our home's business was creating a drag to top line, but as Marcelo explained, we're almost getting to positive territory, which then in turn will naturally uplift our year over year growth rate later on. EBITDA was up .1% year on year to 641 million, now reaching a margin of 46.7%. On an organic basis, EBITDA grew a solid .3% in the quarter, up from 6.9 in Q125. This performance reflects ongoing discipline in cost optimization, which is now deep in our DNA and operating leverage, which continue to drive margin enhancement and operational efficiency. As a side note, I want to congratulate our Honduras and Nicaragua teams under the leadership of our GMs, Santiago and Mauricio, as well as our CFOs, Mauricio and Mario, in joining Club 50. These are our operations with 50% or more EBITDA margin. We now have five countries out of nine in Club 50. As a reminder, starting since last quarter, we've adopted the term adjusted EBITDA, a place of EBITDA to align with SEC interpretive guidance. In our case, this was simply a change in label. As there is no change to the underlying methodology we have historically applied, providing a consistent analytical view of the business. Equity-free cashflow was 218 million in the quarter and 395 million H1, up almost 126 million compared to 269 million in H1 of last year. This despite already prepaying around $20 million in capex, originally scheduled for 2026 in order to benefit from an exceptional supplier offer. We continue to make solid progress in working capital management with concrete actions to optimize cash conversion cycles and reduce the seasonality of our cashflow throughout the year. We were able to deliver a strong H1 despite the continued adverse foreign exchange impact, thanks to our efforts to reduce our FX exposure. Reduced FX exposure led to both more sustainable EBITDA margins and better EFCF generation. So we're very pleased to see all these initiatives are now contributing to delivering a strong H1 EFCF. Here as well, a reminder, our definition of EFCF includes also both the proceeds and the costs and taxes paid related to LAPD asset sales. In line with our approach to isolating recurring cash generation from one-off items, we've highlighted those in gray. The one-offs for the first half of 2025 relate all to Q1 transactions. Let's now look at it on a per country basis, per component. First, please turn to slide 15, where we will drill down further into the service revenue by country. Guatemala service revenue of $358 million represented -on-year growth of 1.9%. Growth in Guatemala is now sustainable and we hope to see a good second half of the year as we have a soft comparable from last year's second half. Colombia service revenue of $339 million grew a nice 4.9%. Our home business in Colombia is now in positive territory and you can immediately see the effects on top line. Panama service revenue was $170 million, nearly flat -on-year. The government contracts are now in maintenance stage, so are substantially lower. On top, we had some adverse effects from social unrest caused by social security reforms. Paraguay service revenue was $132 million, which is an increase of .6% -on-year. She's not bad at all. However, this is offset by adverse currency effects. Bolivia service revenue and local currency increased by 7%, effectively showing the results from our price increases. However, this is still largely insufficient to cover devaluation. On a positive note, the devaluation now seems to have stabilized, which if sustained will allow us to catch up again over time. Service revenue in our other markets, comprised of El Salvador, Nicaragua and Costa Rica, increased .4% in US dollar terms. Note that El Salvador is now larger than Bolivia and together with the possible upcoming inclusions of Ecuador and Uruguay, we may consider restructuring our management and reporting of the portfolio. Now please turn to the next slide for a look at EBITDA by country. Guatemala adjusted EBITDA increased .1% -on-year to $228 million, largely driven by sustained mobile top line growth. We can see here evidence of operational leverage in action. Colombia adjusted EBITDA increased .6% -on-year to $136 million, and the adjusted EBITDA margin was 39.5%. EBITDA growth slowed down compared to the previous quarter as we incurred higher commercial OPEX to support customer-based intake. Despite this, the operation was able to deliver better margins versus Q1. Panama adjusted EBITDA grew 2% -on-year to $92 million, and the adjusted EBITDA margin reached a new record of .7% driven by OPEX discipline. Paraguay adjusted EBITDA grew .2% to $69 million in Q2 2025, and the adjusted EBITDA margin was 50.5%, largely driven by top line, consistently delivering exceptional operational leverage. Bolivia increased .7% to $33 million, improving its margin to 45.5%, mainly from top line acceleration and cost efficiencies. As we made a massive effort on de-dollarization of the cost basis, the margins are sustainable and paved the way for operational leverage, even in an environment of devaluation. Adjusted EBITDA in our other segment increased .2% in US dollar terms. Now please turn to slide 17 for a look at equity-free cash flow and leverage. As we've already discussed, adjusted EBITDA for the quarter was $641 million. That's up $7 million from last year. Cash capex was $201 million, and that's up $47 million from last year, but again, includes a prepayment of about $20 million for capex scheduled in 2026. Spectrum was $5 million, down $17 million compared to last year due to an equal mix between one-offs last year on spectrum purchases, reduced payment schedule, and reduction of performance bond costs resulting from change regulations. Changes in working capital and others were positive at $30 million as we continue to focus on cash management with suppliers. However, this is also $31 million lower than last year as we are now catching up on payments that we froze in Bolivia due to the rapid devaluation and lower collections from government projects in Panama. Taxes paid were $106 million. This is an increase of $24 million, mainly due to increased profitability. Finance chargers were $82 million, an improvement of $22 million thanks to a lower commission in Bolivia as the devaluation is now recognized under the new IS-21 standard. Lease payments were $82 million, a decrease of $7 million. Undoers for patrication was $24 million in the quarter, which is very much in line with last year. As a result of all these factors, equity-free cashflow for the quarter was $218 million. This is down $50 million compared to Q2 2024, mainly due to the successful effort to stabilize EFCF between quarters and avoid the typical Q1 dip, as I indicated to you during the Q1 call. Under $25 million, dividends were paid as part of our approved dividend policy. Now please turn to the next slide to review our financial targets for 2025, which actually remain unchanged from what we communicated at our Q1 results with 2020-25, equity-free cashflow of around $750 million and year-end leverage below $2.5 million. These targets in general do not include the impact of any of the strategic M&A projects that Marcelo talked about, though depending on the date of closing of each of those projects, we still expect to have the leverage remain below $2.5 million at year-end. Finally, as we have just announced, the board approved an interim dividend of $2.5 million per share to be paid in two installments, first in October 2025 and then in April 2026. This represents an approximate aggregate dividend of $423 million and reflects our commitment to return value to our shareholders. We are now ready for your questions.