Millicom International Cellular Q1 2025 Earnings Report

Millicom International Cellular EPS Results

• Actual EPS: $1.14
• Consensus EPS: $0.91
• Beat/Miss: Beat by +$0.23
• One Year Ago EPS: $0.54

Millicom International Cellular Revenue Results

• Actual Revenue: $1.37 billion
• Expected Revenue: $1.45 billion
• Beat/Miss: Missed by -$77.95 million
• YoY Revenue Growth: -7.60%

Millicom International Cellular Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 8:00AM ET

Millicom International Cellular (NASDAQ:TIGO) provides cable and mobile services in Latin America. It offers mobile services, including mobile data and voice, and short message services; and mobile financial services, such as payments, money transfers, international remittances, savings, real-time loans, and micro-insurance. The company also operates TIGO Sports for local entertainment; Tigo Money that allows its customers to send and receive money without the need for a bank account; and TIGO ONEtv for pay TV. In addition, it provides fixed services, including broadband and fixed voice; and fixed-voice and data telecommunications services, managed services, cloud and security solutions, and value-added services; and tower infrastructure and services. The company serves small, medium, and large businesses, as well as residential consumers and governmental entities. It markets its products and services under the Tigo and Tigo Business brands. The company was founded in 1990 and is headquartered in Luxembourg.

Millicom International Cellular Q1 2025 Earnings Call Transcript

Presentation

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

Hello, everyone, and welcome to our First Quarter twenty twenty five Results Call. This event is being recorded. Our speakers today will be our CEO, Marcelo Benitez and our CFO, Bart Van Herren. 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.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

We will be making forward looking statements, which involve risks and uncertainties and could have a material impact on our results. On Slide three, we define the non IFRS metrics that we will reference throughout the presentation, and you can find reconciliation tables in 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.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Thanks, Michel, and hello, everyone. Thanks for joining us to review the company's performance in the first quarter. As you will see throughout today's presentation, the restructuring program that was completed in 2024 is paying off and that the benefits are visible in these Q1 results. And I am pleased to say that we are on track to deliver another excellent year in 2025. This includes a strong customer growth, increased profitability and cash flow generation and the closing of some important M and A transactions.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Please turn to Slide five for the highlights of the quarter. Postpaid net adds of 262,000 were up nearly 50,000 from a year ago, while home net adds of 62,000 compares to the decline of minus 13,000 that we saw in Q1 of last year. And as you will see later, our B2B business continues to perform very well. Meanwhile, our efficiency program continues to deliver higher profitability with the OCF margin up almost two percentage points to 36.7%, a level that is higher than many other Telco's EBITDA margins. And once again, our relentless focus on efficiency produced very strong equity free cash flow of €135,000,000 in Q1, which is typically our weakest quarter of the year in terms of cash flow generation.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Leverage ended the quarter at 2.47 times. As we had told you in our last call, leverage increased a little bit during the quarter due to the impact of the dividend and our share buyback program. These are things that Bart will talk about later. Now let's review each of these highlights in more detail, beginning with our mobile business on the next slide. Our mobile business performed well in Q1.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

On the right, you can see that mobile business grew just over 3% this quarter. This is a bit of a slowdown compared to the last several quarters. But keep in mind that in 2024, had an extra day on February, which is very meaningful in our prepaid business. And we also benefited somewhat from the cyber attack that impacted our main competitor last year. These two factors made for a tougher comparison this quarter, and this was embedded in our plans for the year.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

In fact, when we look more closely at our mobile service revenue growth in Q1, we see that postpaid accelerated, while prepaid was slightly negative because of the two items I just mentioned. Our strong mobile postpaid growth is a direct result of the key levers at the bottom of this page. We have talked about this in recent quarters, but today, we are adding channel productivity to the list. We have made a lot of changes in our distribution channel, traditional and digital. And we have seen a big increase in the overall sales productivity.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

The simplification of our service offering is also contributing to the increased productivity. Meanwhile, we continue to migrate our best prepaid customers to postpaid and to push fixed mobile convergent packages. All of these initiatives are increasing the lifetime customer value with a combination of higher ARPU and lower churn. Now please turn to the next slide to look at our Home business. As I mentioned earlier, we added 62,000 home customers in the quarter, and this is consistent with the trends we saw in the second half of last year.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

We are very pleased to see our second largest business continue to deliver solid commercial performance. Our HFC and FTTH customers is back above 4,000,000 and is up almost five percent year over year. As we discussed in our Q4 call, many of our new customers are broadband only. In fact, our broadband customer base went up almost 7%, while Pay TV is flat and fixed telephony is down more than 20%. One third of our home customers are now convergent.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

This means that they have both home and postpaid mobile services. One year ago, only one quarter of our home customers were convergent. So we have made great progress in a very short period of time, and we think there's still a lot potential here. In parallel, we have been reducing our exposure to our legacy DTH business, where our focus has been to improve profitability of the business. When you put all of this together, you see that we are building a strong foundation to drive profitable revenue growth in our Home business over the long term, centered around fast and reliable fixed broadband bundle with mobile services on the best network.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Please turn to the next slide for a quick look at our B2B business, which continues to perform well. As you know, we had two very large projects in Panama last year, and this disturbed the year on year comparisons. B2B services declined 6.4% organically, but this is entirely due to these large projects. To normalize for this, we think it's useful to look at the performance of B2B business over the past two years. And on this basis, you can see that B2B grew at 4% CAGR in dollars over the past two years.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Again, this growth is mainly driven by Digital Solutions, which are up 18% over the same time frame. Now let's review our performance in our three largest countries, beginning with Colombia on the next slide. Once again, the key highlight in this slide is the adjusted EBITDA margin, which reached 39.1%. That's up more than two percentage points year over year as we continue to reap the rewards of our restructuring program. And as you can also see on this slide, we continue to grow our postpaid mobile and home customer bases, which is a result of our continued investment in our networks combined with simplified offers and channel productivity.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

This strong commercial performance is now starting to show up in our service revenue, which accelerated to 3.6 in the quarter. This is our strongest quarter service revenue growth in two years. Now please turn to the next slide to look at Guatemala. As you know, this is a market that consolidated from three to two players five years ago when our competitor bought the third largest operator of the country. That transaction has created a more robust competitive dynamic throughout the country, and it allowed the government to successfully complete two spectrum auctions in 2023.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

This new spectrum has allowed us to optimize our network, which has resulted in expanded coverage and improved services. And we see this reflected in our customers' data consumption, which has increased significantly during this period. In fact, data consumption continues to increase rapidly, and we are meeting this challenge by investing to add capacity. And we are pricing our services in a way that compensates us for that growing traffic consumption. As I mentioned earlier, one of our levers is a migration from prepaid to postpaid, which is particularly relevant in Guatemala, where postpaid is still relatively small compared to the total base.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

You will notice that service revenue growth slowed a little bit this quarter. But as I mentioned earlier, there were some positive factors that helped us last year and made for a challenging year on year comparison, especially for our mobile business, but this is in line with our plans for the year. Finally, the key highlight in Guatemala this quarter is the OCF, which grew 10% and reached a new record of $190,000,000 in the quarter. Please turn to the next slide to look at Panama. Twenty Twenty Four was a truly exceptional year for our business in Panama, as you can see here.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Once again, the highlight this quarter is the profitability of the business, with an adjusted EBITDA margin reaching 51.2%, a new record. Our postpaid business remain an important growth engine, and this is helping us to sustain steady growth in our mobile business. We have more than tripled the size of our postpaid customer base since acquiring the business in 2019. Postpaid is only 16% of our customer base in Panama compared to 34% in Colombia. So we think there is a long runway of growth potential for our postpaid mobile business in Panama.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Finally, and before I turn the call over to Bart, I'd like to update you on the M and A projects that we have previously announced. First, regarding the sale of LATAM International to SBA, we fight antitrust approval in every country where this was required. We received approval in Nicaragua, and we closed that portion of the transaction during Q1. As for the other countries, we are still waiting for the approvals, but we continue to expect to close this on either Q2 or Q3. Separately, we also recently entered into a new agreement to sell our Latiparawai operations to Atis Group.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

This covers approximately two eighty sites, and we expect to close these transactions in coming weeks. Second, with respect to Colombia, this past March, we signed a binding agreement with Telefonica to acquire their 67.5% stake in Coltel. We also remain committed to offering the same price per share to their minority partner, the Government of Colombia. And we are pleased to see that they have now hired financial and legal advisers who will help them to launch and manage the process to sell their stake under the Privatization Law 02/26. We are also ready to acquire our partners' 50% stake in our Colombian operation.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

If EPM decides to sell, we will offer to pay up to the same price implied by the valuation multiple we agreed to pay for Cortel, which is the best possible valuation comparable for a transaction like this. Third and finally, in Costa Rica, where we've agreed to combine our operations with those of Liberty Latin America, the regulatory process is ongoing. We have no other updates for you here. Now let me turn the call over to Bart to review the financials for this quarter.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Thanks, Marcelo. Let's look at our financial performance beginning on Slide 14. Service revenue was $1,290,000,000 in the quarter, which is down 6.6% from EUR 1,380,000,000.00 a year ago. The impact of weaker foreign exchange rates was very significant this quarter due to a 40% devaluation of the Boliviano resulting from our adoption of accounting standard IAS 21. Excluding FX impact, organic service revenue was flat.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

As mentioned many times before, service revenue in Q4 twenty twenty three and q one twenty twenty four included a very significant contribution from two large b to b projects in Panama, as well as a smaller revenue pickup from a cyber attack that impacted our main competitor. Excluding these items, organic service revenue growth would have been more than 2%, which is in line with recent trends and more indicative of where we expect to see service revenue on a p times q basis. Adjusted EBITDA was up 0.6% year on year to $636,000,000, and the margin reached 46.3%, our highest ever. Excluding FX, organic growth was 6.9. Beginning this quarter, we are using the term adjusted EBITDA instead of EBITDA to confirm with the most recent SEC guidance on this topic.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

In our case, this is simply a change in label. In fact, EBITDA without adjustments would have been more than $100,000,000 higher this quarter due to the inclusion of nonrecurring items such as the gain on asset sales, foreign exchange gains and the share of profits from our Honduras joint venture. Including these kinds of items would make our EBITDA more volatile from quarter to quarter and in my mind, not contribute to useful analytics. Equity free cash flow, excluding EUR 42,000,000 net proceeds from tower disposals, was $135,000,000 in the first quarter. This is up $172,000,000 compared to the negative $37,000,000 or 1,000,000 including tower sales as reported in Q1 last year.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

A significant portion from the year on year improvement comes from having a better control over the working capital. In this quarter, only a negative $77,000,000 a difference of $116,000,000 compared to last year. This is the result of a deliberate and comprehensive effort to reduce the seasonality of our cash flow throughout the year. In other words, the strong performance in Q1 may revert somehow in the remaining quarters of the year, and you should not extrapolate from Q1. The other relevant takeaway on the equity free cash flow is that we were able to deliver a very strong Q1 despite facing a very adverse foreign exchange impact.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

This is in part the result of some very specific actions we have taken over the past year to reduce our FX exposure and volatility. Specifically, we look for opportunities to replace dollar denominated debt with more local currency debt financing. We have renegotiated a lot of contracts to local currency, and we have incentivized our local country CFOs by adding a new dollar exposure KPI that we use to determine near end bonuses. We are very pleased to see all of these initiatives paying off already in Q1. Please turn to the next slide to look at service revenue by country.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Guatemala service revenue of $349,000,000 represented year on year growth of 0.9% in local currency, driven primarily by mobile ARPU. Colombia service revenue of $334,000,000 grew 3.6% year on year. This is a nice improvement compared to flat performance in Q4. We're happy to see that now quarter on quarter, all three business units are growing. Panama service revenue was $170,000,000 down $15,000,000 year on year as sustained double digit growth in mobile was more than offset by the decline in B2B caused by the nonrecurring large government contracts in Q1 of twenty twenty four.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Excluding these projects from both years, service revenue growth would have been almost 5%. Paraguay service revenue was $131,000,000 increased 3.6% year on year, driven by double digit growth in B2B. Bolivia service revenue increased 3.4% in local currency with positive growth in mobile and B2B offset by a small decline in home, where we continue to prioritize profitability. In dollar terms, service revenue declined almost 40%, again, as we implemented IAS 21, which shaved off about $60,000,000 in the quarter. Service revenue in other markets comprised of El Salvador, Nicaragua and Costa Rica declined 3.1% in dollar terms, reflecting declines in Nicaragua and Costa Rica and flat performance in El Salvador.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

This segment was the big beneficiary of the cyber attack that impacted our main competitor in Q1 of last year, so suffers from a tough last year comparable. Please turn to the next slide for a look at adjusted EBITDA by country. I indicated already that the EBITDA margin for Q1 was 46.3% for the group. The key message on this slide will be that the margins expanded in all our largest markets over the past year. And now both Panama and Paraguay have joined Guatemala in the club 50, as I called it last quarter.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Congratulations. And, actually, Honduras and Nicaragua are knocking at the door. With this being said, let's look at it country by country. Guatemala adjusted EBITDA increased 1.9% year on year to 222,000,000, reflecting service revenue growth and efficiencies. As the margin increased another 90 points to 54.9%.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Colombia adjusted EBITDA increased 10.4% year on year to EUR 133,000,000, and the margin expanded by 2.6 percentage points to 39.1%, reflecting cost savings. Panama adjusted EBITDA grew 2.8% year on year to EUR 92,000,000, and the margin reached another record of 51.2, thanks to our efficiency program. Paraguay adjusted EBITDA grew 9% to $69,000,000 in Q1 twenty twenty five, and the margin was 51.2%. Bolivia adjusted EBITDA increased 12% to $43,000,000 and the margin increased 3.7 percentage points to 46.4% as we continue to focus on profitability in this market. Adjusted EBITDA in our other segment was flat in U.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

S. Dollar terms as savings from our efficiency program offset the decline in revenue. Please turn to the next slide for a look at equity free cash flow and leverage. As we've already discussed, adjusted EBITDA for the quarter was $636,000,000 That's up $4,000,000 from last year despite all the negative currency impacts. Cash CapEx was $140,000,000 and that's down 19,000,000 from last year.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Cash CapEx includes proceeds from asset sales of $64,000,000 in Q1 twenty twenty five and $39,000,000 in Q1 twenty twenty four. So excluding these items in both years, cash CapEx would have increased $7,000,000 year on year. So don't take this as underspending. Spectrum was $36,000,000 down $42,000,000 compared to last year due to lower spending on performance bonds, license fees, for instance, Colombia. Changes in working capital and other was negative EUR 77,000,000.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

As a reminder, working capital is usually a big drag on cash flow in the first quarter due to the timing of some payments such as taxes, fees, licenses, as well as employee bonuses. The good news is that working capital was significantly better this year with a year on year improvement of EUR 116,000,000, as mentioned earlier, coming from deliberate effort to reduce the seasonality of cash flow throughout the year. Taxes paid were EUR 66,000,000. This is an increase of EUR 28,000,000 due to higher profitability and capital gains taxes on the tower sale. Finance charges were EUR 107,000,000, down EUR 26,000,000 from last year due to lower debt levels and currency.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Lease payments were $82,000,000 up $10,000,000 due to last year's tower sale in Colombia. Honduras repatriation was $23,000,000 in the quarter, that's up $8,000,000 from 2024. As a result of all these factors, equity free cash flow for the quarter was $177,000,000 Excluding net proceeds from tower disposals in both years, EFCF was 135,000,000 up EUR 172,000,000 compared to last year. On the top right portion of the slide, you can see that net debt increased EUR 101,000,000 during Q1. And as we had warned you on our Q4 call, leverage increased slightly to 2.47, but stayed nicely below 2.5.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

This is a consequence of resumed shareholder remuneration, which included EUR 170,000,000 paid in dividends and €119,000,000 used to complete the €150,000,000 share repurchase program. Excluding these items, leverage would have dropped below 2.35. Now please turn to the next slide to review our financial targets for 2025, which remain unchanged from what we communicated at our Q4 results. We continue to target 2025 equity free cash flow of around $750,000,000 and we expect to end the year with a leverage below 2.5 times. These targets do not include the impact of any of the strategic M and A project that Marcelo talked about.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Finally, as we have previously communicated, the Board has proposed an annual dividend of $3 per share to be paid in four quarterly installments with the intent to sustain or grow this dividend every year. This is subject to shareholder approval at the AGM later this month. We are now ready for your questions.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

Okay. Thank you very much, Bart and Marcelo. We'll now begin the Q and A session. And as a reminder, if you would like to ask a question, please let us know by e mailing us at investorsmillicom dot com, and we will add you to the queue. So our first question today is going to come from Marcelo Santos from JPMorgan.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

Marcelo, the line is yours.

[Marcelo Santos, Equity Analyst at JP Morgan]

Thank you very much, Michel. Good morning to all. I have questions about the fixed business in Central America. We have been hearing American mobile being more vocal that they believe they are below their fair share there and they think they could gain more space. How is churn behaving for you guys in those regions?

[Marcelo Santos, Equity Analyst at JP Morgan]

And, how much of your home connections are with fiber or more or less roughly? Thank you.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Thanks for your question, Marcelo. Good to see you. As you remember last year, we started first on investing in the networks to improve the quality of the services in the fixed business and then to focus on the quality of our new gross adds. So we kept the customer base under control. And after that, we started to increase our commercial activity.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

The way we are doing that is by focusing node by node. So the nodes that has very low penetration, we are more aggressive. The nodes with high penetration, we are more defensive. Having said that, as you can see, we are producing positive net adds consistently in the last three quarters. Those positive net adds are going to have a full effect in revenues in Q3 and we expect to turn on positive revenues in the last month of Q2.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

So that is that is on on that front. On the front of Claro, yes, of course, are investing in in their mobile coverage and the fixed, but we do not see that we are being affected in our market share by those investments.

[Marcelo Santos, Equity Analyst at JP Morgan]

Thank you. Thank you very much for the answers.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

Okay. Thank you, Marcelo. So next, we'll go to Andreas Joelson from Carnegie. Andreas? Andreas, the line is yours.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

You're on mute. Okay. Maybe while we wait for Andreas to to connect, we'll I did receive a question via the chat. This, I think, is for you, Bart. It's from Andres Coyote at Scotiabank who's asking about any updates on joining any new indices now that our shares are listed only in The US.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Yep. So

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

so, yes, we delisted from Sweden, now only in The US. We're still a foreign private issuer reporting under IFRS. Getting into new indices is not something that is really under our control, But you will have seen that we have now declared officially our principal executive office to Dorel here in Florida, which may result in us being qualified to enter more indices and more notably, for instance, the Russell two thousand or 1,000, but it's not something we know. The rebalancing happens this month. And I think by the end of the month, there should be an official communication, and we are looking forward to it just like anyone else.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

Okay. Thanks, Bart. So, Andreas, I believe your line is should be open now.

[Andreas Joelsson, Senior Equity Research Analyst at Carnegie Investment Bank]

Yeah. I hope you can hear me now.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

Yes. Perfect.

[Andreas Joelsson, Senior Equity Research Analyst at Carnegie Investment Bank]

Sorry you can't see me, but I don't know what happened with the the video. But follow-up on on the service revenue side, moving to the mobile side. Given that you are now sort of behind on maybe some tougher comparison, should we expect this mobile service revenue growth to accelerate coming quarters? Is that what you plan? And secondly, you highlighted several times that you have a very high profitability also from an historical point of view.

[Andreas Joelsson, Senior Equity Research Analyst at Carnegie Investment Bank]

Should we see this level as sustainable going forward? Or is it given that it is all time high margins some risk on the downside? Thanks.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Thanks Andreas for your question. On the first question service revenue growth, as I said, the comparison in Q1 has a lot of components. On one hand, you have the exchange rate weakening of the Colombian pesos, the Paraguayan dollar and the Bolivianos and also you have the governmental projects. If you exclude those factors, we are growing at a rate of 2%. That 2% is the same rate we had in Q2 and Q3 where we didn't had these one offs or these exchange rates impact.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Having said that, if you see postpaid growth, which is still today very a very small it's only 20% of our customer base, we believe we should be in the long term at 50%. So we are growing consistently the postpaid base. And on the other hand, you can see Home coming to positive territory in Q2 and the B2B also growing consistently. We do see that in Q2, we are going to be more or less a little bit better than what we have been in the last run rate, 2%. And the impact is going of this of building this base is going to be more visible in the second half of the year.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

So we expect an acceleration there. On the profitability side, in 2025, we do see the full effect of all our efficiency programs as that has been our focus in the last two years. And on the other hand, you will see that the profitability of our new gross adds that has to do with BBI only, also with productivity of the channels, that's also coming with better margins. So we are not giving up on welcoming more countries to the Club fifty. So that the efficiency culture.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

It's here to stay.

[Andreas Joelsson, Senior Equity Research Analyst at Carnegie Investment Bank]

Excellent. And if I may have a question for Bart as well on the interesting topic of taxes. What how should we look at that? It's quite hard to predict, I think. It's volatile between the quarters, but your best assumption for the full year.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Yeah. So it it's true. It's it's complicated to to calculate because we have different tax regimes. In in some countries, we're taxed on revenues. In some countries, we have minimum taxes.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

In other word, we have tax losses carried forward. If you go really two, three levels down, you see an an ETR and an effective tax rate of around 25, 20 six percent, but this this is hard to calculate with with all the different normalization items. So this being said, maybe the the best I can say is if you look at the full year basis, the shorting look at it year on year, it will be slightly up in in taxes paid on the organic, so excluding m and a, mostly, you know, because the increased profitability. So there is an increase. It's not an enormous amount, but there will be a slight increase in taxes.

[Andreas Joelsson, Senior Equity Research Analyst at Carnegie Investment Bank]

That is good enough for me. Thank you.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

Thank you.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

Thank you, Andres. So next, we'll go to Eduardo Neto from JPMorgan. Eduardo?

[Eduardo Nieto Leal, Vice President at JPMorgan Chase]

Thanks, Michel, and thanks for taking my question. I think this one is for Bart. I'm looking at your maturity profile. There's some bond maturities in 2026, some I'm sorry, loan maturities in 'twenty six, bond maturities in 'twenty seven. You've made a comment that you would like to replace U.

[Eduardo Nieto Leal, Vice President at JPMorgan Chase]

S. Dollar debt with maybe local financing. So just curious where you see these opportunities and if you see any opportunity to issue bonds in the dollar market again for refi or for any other uses. That's my first one. And the second one is just you reiterated the 2.5 times leverage for this year, but I'm curious to hear if that's kind of the level where you're comfortable kind of in the longer term or if there's room to go lower than that.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

No. No. Thank you for thank you for the question. So, indeed, you know, our average maturity is now four and a half years. This is something that I would definitely would like to increase over time.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

I think we have an internal KPI. This is the average maturity more than five years. So there's definitely things to do. The the the reality is we have this m and a in Colombia going on. We have revenues coming in from from Latti.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

So at this moment, we are a bit pausing decisions on on what to do, where to do it. And then when we go when we go ahead, obviously, we want to, as we even mentioned, a big de dollarization effort within the group, prioritize new local currency debt and then repay US dollar debt if we have excess cash and then obviously focusing on on shorter term maturity. So that's the overall strategy. Let me not go into the details of of our plan and and and raise speculation. It's also something that we need to discuss with the board in in our plan.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

So today, there's no decisions made. There's no there's no official plan. First one to see about the exact timing of the m and a for the cash going out and then the cash coming in from from. On the leverage, 2.5. I think we always said in between two and two point five.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

So personally, I find we're a bit on the high side of our range, 2.47. I think if we exclude the shareholder remuneration this quarter because we did do about $300,000,000 in q one and then another hundred 25 already in April. If you would have excluded that, we would have ended the year closer to 2.335 in in that area. So I'm very comfortable with the cash flow generation, very comfortable with our distribution rate. And typically, our first quarter is our lowest cash flow quarter.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

So I think this this will continue to improve over the year.

[Eduardo Nieto Leal, Vice President at JPMorgan Chase]

Got it, Bart. Thanks so much.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

You're welcome. Thanks, Eduardo. So next, we're gonna go to, Gustavo Fabias from UBS. Gustavo?

[Gustavo Farias, Associate Director at UBS Group]

Everyone. Thanks for taking my questions. Two on my end as well. So the first one, regarding, the evolution we saw in working capital, I understand there is some seasonality, as you guys said. But, I'd like to know, any thoughts, any comments, on what if what do you guys expect for the whole year?

[Gustavo Farias, Associate Director at UBS Group]

If we should see, some upside to, equity free cash flow and other levers, for improvement, that you have planned for the year? Any color on that would be really helpful. The second one, I've seen B2B as a contributor for the growth in Colombia, Paraguay, Bolivia. If you could comment details on maybe the size of those contracts, how long are those contracts and anything we could use to access the sustainability of those revenues going forward? Thanks.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

I'll take the first one. On working capital, I'm launching an effort to stabilize our cash flow among the quarters. What you have seen historically is a lot of cash flow in q four, very negative in q one, and then run rates in q two and q three. I'm very happy that, you know, this quarter, we don't have this large negative equity free cash flow sorry, the negative working capital. It was around $77,000,000 which is more than $100,000,000 better than than last year, which was already significantly better than the year before.

[Bart Vanhaeren, CFO & VP of Corporate Finance at Millicom International Cellular]

So very happy that this effort brings more stability and comfort to to to the cash flow generation overall. For for the full year, I think, you know, we want to land our working capital for a full year slightly negative, which is inherent to to the business of a of a of a, you know, a lot of postpaid revenues as well as the structure with with with minorities. But, you know, it would relatively stable. That's the expectation.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

And then the next question on B2B.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Yes. On your question on B2B, Gustavo, in B2B, typically you have two sources of growth. One you have on one side is organic growth where digital solutions are the ones with highest demand today. What is digital solutions is private and public cloud, cybersecurity and data center services. So there is where we are increasing the penetration of these services over our existing customer base 18% growth.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

In the organic, you will see as well that the small business will start to pick up because we are replicating the same formula we're doing in B2C on channel productivity and channel boosting all for the SMB segment. And the third organic lever is convergence. I mean, the companies, they do want to have one stop shop, and we are covering, as we say, painting the customer in blue with fixed, mobile and digital solutions. Then you have the other dimensions that are projects and mainly is government, right? So that's why we thought it was better when if we can split these two sources of revenues because that's less predictable.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

And it's less predictable because they have to come under some certain conditions, right? First is the returns. They need to be attractive. Second, it has they have to be projects that are close to our core competence. And third, they cannot have an impact on our EFCF targets.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

So if these conditions are met, then we go and we move forward with the project. As you know, some of them we can mean, we can compete and some of them we cannot. So that is the story of B2B. Overall, we do see a 4% growth CAGR in the last two years, and we plan to sustain that.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

And Gustavo, just to complement, the vast majority of the B2B revenues are recurring. More than 95% are recurring. There's really the Panama projects were a bit of an outlier, and that's why we've called them out.

[Gustavo Farias, Associate Director at UBS Group]

All right. Very clear. Thank you very much.

[Michel Morin, VP Strategy, Investor Relations & Capital Management at Millicom International Cellular]

Okay. Thank you, Gustavo. Well, that was the last question for today. So thank you, everyone, for joining us, and we will see you next quarter.

[Marcelo Benitez, Chief Executive Officer at Millicom International Cellular]

Thank you. Thank you.

Participants

Executives

• Michel Morin, VP Strategy, Investor Relations & Capital Management
• Marcelo Benitez, Chief Executive Officer
• Bart Vanhaeren, CFO & VP of Corporate Finance

Analysts

• Marcelo Santos, Equity Analyst at JP Morgan
• Andreas Joelsson, Senior Equity Research Analyst at Carnegie Investment Bank
• Eduardo Nieto Leal, Vice President at JPMorgan Chase
• Gustavo Farias, Associate Director at UBS Group