Millicom Intl Cellular Q1 2026 Earnings Call Transcript

Millicom Intl Cellular (NASDAQ:TIGO) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below. Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more. View the webcast at https://us02web.zoom.us/webinar/register/WN_4uPQQ9vGQaqXd2H_7iVlYA#/registration Summary Millicom International Cellular SA reported a strong start to 2026 with service revenue reaching $1.9 billion, a 45% year-on-year increase, driven by acquisitions and organic growth. Postpaid net additions were $5.6 million, with organic service revenue growth at 4.9% year-over-year, indicating continued momentum and a healthy customer base. Adjusted EBITDA for the quarter was $857 million with a margin of 43.2%, despite integration and restructuring charges, and equity free cash flow improved by $48 million year-over-year to $225 million. The company completed significant acquisitions in Colombia, including EPM and Telefonica's stakes, and is applying its operational playbook in Chile following the acquisition of Telefonica Chile. Millicom's strategy focuses on pre to postpaid migration, cost efficiencies, and network improvements, with strong performance noted in Guatemala and a positive outlook in Colombia and Chile. Management highlighted a successful integration in Ecuador and Uruguay, supporting adjusted EBITDA expansion and cash flow improvements, with ongoing initiatives to improve margins. The company expressed optimism about its strategic initiatives, particularly in Colombia and Chile, expecting them to contribute positively to future financial performance. Full Transcript OPERATOR Hello everyone and welcome to our first quarter 2026 results call. This event is being recorded. Our speakers today will be our CEO Marcelo Benitez and Bart Van Areen, CFO of the company. The slides for today's presentations are available on our website along with the earnings release and our financial statements. Now please turn to Slide 2 for the safe harbor disclosure. We will be making forward looking statements which involve risks and uncertainties which could have a material impact on our results on slide 3. We define the non IFRS metrics that we will be referencing throughout this 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 now turn the call over to our CEO Marcelo Benitez. Marcelo Benitez (Chief Executive Officer) Marcelo thank you Luca and thank you everyone for joining our call today. We are off to a solid start in 2026, both operationally and from a financial perspective. From an operational standpoint, postpaid net additions amounted to $5.6 million while home net adds amounted to $1.5 million. These significant increases reflect the relevance of the Colombia acquisition and the opportunity that lies ahead. Importantly, even excluding inorganic growth, postpaid net additions amounted to 250,000 and home net additions amounted to 46,000. This is a testament of the health of our underlying business and the strength of our customer value proposition. From the financial perspective, organic service revenue growth was a robust 4.9% year over year. This not only represents a solid continuation of the momentum achieved in our seasonally strong fourth quarter in 2025, but also reinforces the expectation of our top line acceleration throughout 2026. The quarter ranks among one of the strongest growth performances in recent history. As a result, total service revenue for the quarter reached $1.9 billion. This robust top line performance, combined with our tireless focus on cost efficiencies, delivered expanding operating leverage. As a result, adjusted EBITDA in The quarter totaled 857 million, representing a margin of 43.2%. This is a very solid outcome, particularly as it already reflects the impact of integration and restructuring charges related to the Coltel acquisition. Excluding Coltel, the adjusted EBITDA margin would have reached 47.9%. Our relentless focus on efficiencies also improved equity free cash flow by 48 million year over year, reaching a strong 225 million for the quarter. This is a robust entry point for the year, especially when considering that EFCF excluding LATAM transaction would have increased 90 million year over year. As we mentioned in our fourth quarter call. We acquired Telefónica Chile together with NJJ and we have started to apply the Millicom International Cellular playbook in that market. During the quarter, we also took important steps to strengthen our position in Colombia. We completed the purchase of EPM, 50% ownership stake in Tigo UnE and Telefónica's 2/3 stake in Coltel. Since we acquired the majority ownership of Coltel at the beginning of the quarter, we are already fully consolidating Coltel's performance in our results. Importantly, we finalized the transaction and acquired the remaining stake in Coltel from Lanacion just two weeks ago. By unifying these operations, we are creating the resilience and the scale that needed to move faster, invest more effectively and ensure that our infrastructure supports the long term sustainable development of the country. I will come back to both Colombia and Chile later in the call. Now let's turn to our mobile business performance on slide number six. Our mobile business continued to perform very well in the quarter. Underlying customer growth was 4% year on year, with postpaid customer increasing 25% and prepaid customers growth largely flat due to our pre to post migration efforts, seasonal effects and customer base cleanup initiatives including acquisitions. Reported growth was 38% reflecting the addition of Coltel. In Colombia, the customer base is steadily migrating toward postpay which now comprises roughly and 29% of our mobile customers, highlighting the substantial opportunity ahead to continue executing our pre to post migration strategy. In the center of this slide you can see the progress we are making on set Strategy. Today, almost 7 out of every 10 postpaid sales are migration sales, an increase of over 10% points year on year. This reflects the strong execution of our commercial teams and the attractive value proposition we are offering to our customers. Bringing all this together, mobile Service revenue totaled 1.1 billion, including 120 million contributions from two months of operation in Coltel. Excluding inorganic growth, mobile service revenue grew 7% or 63 million year on year. This represents a clear acceleration over previous quarter and shows that our commercial strategy continues to gain traction. Now let's turn to our home business on slide number seven. Our efforts to provide the best network experience and higher speeds continues to resonate with customers. Our home customer base expanded 4.6% organically year on year, reaching 4.2 million customers. This growth was mostly driven by broadband only customers which increased 5% year on year. Here too, the recent Coltel acquisition meaningfully increases our customer base, adding 1.5 million customers, reaching a total of 5.7 million customers. More importantly, the fixed Networks are highly complementary. Tigo is comparatively stronger in managing, whereas colortel is more dominant in Bogota. We have also made significant progress in fixed mobile convergence. Almost 36% of our customer base now have both fixed and at least one mobile line with us. This is important for two reasons. First, it shows that our convergent offer is compelling for customers and second, it materially improves the customer Lifetime value as churn for converging customers is almost 50% lower than for non convergent customers. We are very pleased with this progress and we will continue working to expand our convergent customer base. As a result, home service revenues continue its recovery trend reaching 374 million flat year on year. On an organic basis. We remain committed to building the right foundation to return this business to positive revenue growth in the near future. Now let's turn to B2B on slide number eight. Our B2B business continues to play an important role in our growth strategy. Digital service revenue, which increased almost 19% year over year, continues to be a key growth driver, supported mainly by strong demand for cybersecurity and cloud solutions. Both of these categories grew more than 20% year over year, reflecting the continued need from businesses and governments for a secure, reliable and scalable digital infrastructure. At the Same time, total B2B revenue reached 306 million for the quarter. Excluding Coltel, growth was driven primarily by the entrepreneur customer segment where the customer base increased more than 13% year over year. This expansion reflects the strength of our convergent fixed mobile offering which provides small businesses with a simple, reliable and convenient connectivity solution. Importantly, customer loyalty remains high, supported by the quality of our network, the value of our plans and the improvement that we have made in our customer service channels. Overall, B2B remains a strong platform for growth. Next, I would like to discuss our operation in Guatemala. Guatemala continues to deliver strong results. Our pre to post conversion strategy remains an important driver for growth. Postpaid customer growth was 20% year on year, reaching 1.5 million customers at quarter end. Thanks to our targeted sales offers, we continue to make progress on pre to post migration. More than 85% of our new sales in postpay are coming from our existing prepaid base. This strategy improves ARPU per customer and materially enhanced customer lifetime value. All in all, Guatemala remains a strong market for us with mobile revenues expanding 6.6% year on year, reaching 288 million for the quarter. Let's now turn to Slide 10 to review our performance in Colombia. We are very pleased with organic performance in Colombia. Postpaid customers increased almost 9% year on year. This combined with our streamlined commercial offering and our simple, easy to understand more for more pricing strategy allowed us to increase mobile ARPU 4.4% year over year. Importantly, with the Coltel acquisition We increased by 42% our prepay base. This creates a meaningful opportunity to apply our pre to post migration Strategy which increased 15 percentage points over the last 12 months to a much larger customer base. Home also continues on the positive trend we have now been seeing for the several quarters. Organic customer growth reached 8.3% year on year bringing Tigo Une base to 1.7 million customers. We also delivered improvements in fixed mobile penetration which reached 37.1%. And at the quarter end, as our most recent commercial efforts continue to resonate with customers. We are very pleased with this addition of Coltel's fiber network to our portfolio which added another 1.5 million customers to our client base which reached 3.2 million. We are particularly excited about this addition because of the complementary nature of the network. As I mentioned in my opening remarks, it strengthened our position in key urban areas and creates significant opportunities for convergence, cross selling and more efficient network investment. I would now like to discuss our vision for the integration in Colombia and the potential we see in the market. Since obtaining operational control, we have been working with urgency and discipline to ensure a smooth transition and rapid turnaround. Our integration plan is based on three key pillars. The first pillar is a reset of our cost base. This includes our rigorous cash management, a supplier payment program, debt renegotiation and liability management to align with the overall millicom capital structure. As part of our OPEX efficiency program, we have identified more than 100 million in expected savings to be achieved in year one. These opportunities include contract renegotiation, company rightsizing and sponsorship rationalization. The second pillar is network improvement. We are moving on two strategic fronts. First, we are improving the quality of our network, planning to increase four times our 5G coverage in 2026 and to add more than 1,000 new sites during the next 24 months. Second, we are focused to efficiently improve our network operating model. The objective here is to reduce complexity, improve execution and create a more efficient and scalable platform. The third pillar is commercial uplift. This includes simplification of commercial offers with a clear focus on profitability, accelerating pre to post migration and supporting ARPU improvement. It also includes increasing cross sell opportunities across complementary fixed networks which should help us drive high fixed mobile convergence. We have defined clear milestones together with the team in Colombia and we are already seeing encouraging early results. We are excited about the road ahead in Colombia. We believe this transaction gives us the scale, network, asset and customer base needed to create a stronger, more sustainable business in one of our most important markets. But this is not just theory. We have already put this approach in play in Ecuador and Uruguay and are seeing great results. On slide 12 you can see the tangible results of applying the Millicom International Cellular playbook in Ecuador and Uruguay. We are pleased with the progress we have made in both countries. In a short period of time, adjusted EBITDA expanded meaningfully reflecting the disciplined execution of our efficiency program. Importantly, both Ecuador and Uruguay are already operating above or in line with the Milligan average adjusted EBITDA margin. In practical terms, this means these businesses have quickly moved into what we would consider business as usual performance within our operating model. We also saw a material uplift in equity free cash flow in both countries. In Ecuador specifically, the improvement was offset by a 70 million payment related to spectrum in 700 MHz and 3.5 GHz bands which supports the long term quality and capacity of our network and comes up for renewal in 2038. Overall, the results achieved so far are encouraging. At the same time, we continue to fine tune our operations in both markets with a clear focus on driving sustainable margin expansion and stronger cash flow generation over time. Before turning the call over to bart, I want to spend a moment updating you on our operations in Chile. As you will recall, we acquired Telefónica operations in Chile jointly with NJJ on February 10th. Since then we have moved quickly. We appointed a new General Manager, a new CFO and a new cto. Within the first two weeks, the new leadership team began applying the Millicom International Cellular playbook. This includes a significant organization restructuring with an approximately 30% headcount reduction. We also took initial steps to improve the capital structure including 85 million debt reduction which lowered leverage by approximately 0.4 times. We launched our Mobile Network Enhancement Plan by optimizing the frequency layers, delivering rapid improvements in coverage and and service quality. Importantly, we have also identified key regional white spaces and we are committed to increasing our physical retail presence in those areas. Taken together, we are already seeing promising results from our turnaround plan. In the first two months, the business generated positive equity free cash flow before restructuring charges. We are therefore optimistic that Chile will meet its full year target of being neutral to equity from free cash flow. With that, let me turn the call over to BART who will walk you through our financial performance. Bart Van Areen (Chief Financial Officer) Thank you Marcelo. Before we dive into the numbers, just a heads up that this quarter is a bit more complex to read given the multiple acquisitions we've completed over the past six months. So please bear with me as I walk you through the results. With that out of the way, let's now look at our financial performance for the quarter. Service revenue increased 45% year on year to nearly 1.9 billion, benefiting from the consolidation of two months of operations of Coltel and our acquisitions in Ecuador and Uruguay, as well as a year on year increase across our business lines. Let me split this out for you. Coltel contributed approximately 243 million to service revenue in the quarter as shown on this slide. Excluding this inorganic contribution, service revenue would have increased 4.9% year on year. As a reminder, we are including Ecuador and Uruguay in both periods for purposes of organic growth. If we would exclude all M&A that we did, including the MFS business of Paraguay that is now recorded as an asset held for sale, that parameter grew a staggering 13%, continuing the trend we saw last year. Reported adjusted EBITDA reached 857 million for the quarter, increasing 35.5% year on year, with Coltel contributing 33 million. Organic adjusted EBITDA growth was 9.6%. All that translates to an adjusted EBITDA margin of 43.2%, a robust result particularly given that we incurred nearly 70 million in restructuring charges during the quarter, most of which related to a voluntary leave plan in Colombia. Excluding Coltel, adjusted EBITDA margin would have reached 47.9%. We are very pleased with the performance across the region thanks to our focus on sustainable margin improvement across all our business units and all our countries. But also here benefiting from FX tailwinds, equity free cash flow hits a new Millicom International Cellular first quarter record of 225 million. I remember two years ago when I had to report to you the first positive Q1 of Millicom International Cellular with just 1 million and actually that included some M&A. As we look at the year on year increase and exclude last year's one time asset sale proceeds, equity free cash flow increased by 66% or $90 million. This is a strong result, particularly given the increase in lease obligation following our infrastructure sale and incremental spectrum payments during the quarter, notably in Ecuador. Let's now review our performance country by country on slide 16. Starting with Guatemala. Service revenue reached 370 million, increasing 5.5% year on year. Growth was mainly driven by our pre to postpaid conversion strategy together with the price increase implemented in February and March which supported the ARPU improvement that Marcelo mentioned earlier. In Colombia, Service revenue reached 653 million, with Coltel contributing approximately 243 million. As mentioned earlier, adjusting for this inorganic contribution, Service revenue increased 8.4% year on year. Growth was driven by price increases in our B2C and home businesses as well as cybersecurity services provided to the government which Marcelo discussed earlier. In Panama, service revenue was flat year on year at 172 million. For the quarter, growth was slower than expected, but we remain optimistic that the top line momentum will improve. In Paraguay, service revenue increased a robust 4.9% year on year to 158 million. As mentioned before, our Paraguay and MFS business is now recorded as an asset held for sale and excluded from both reporting periods. Next, I would like to review Ecuador for the first time since our acquisition of Telefónica's operations in the fourth quarter of 2025. Please note that we are providing 2025 results as a reference point only. Service revenue reached 110 million, increasing about a percent compared to last year. We have reverted last year's negative revenue trend under former ownership and are convinced that our disciplined approach positions the business for more sustainable and higher growth over the medium term. Service revenue in our other markets, which now comprises El Salvador, Nicaragua, Costa Rica, Bolivia and Uruguay, increased 4.8% to 402 million. This was mainly due to robust top line growth in Nicaragua and Uruguay. Let's now move to our adjusted EBITDA performance. In Guatemala, adjusted EBITDA increased 6% year on year to 237 million, implying strong adjusted EBITDA margin of 55.4%. This was driven by service revenue expansion and continuous operating leverage. For Colombia, adjusted EBITDA reached 205 million with Coltel contributing 33 million. For the two months under our ownership, adjusted EBITDA margin was 30%, which includes 65 million of restructuring charges. When excluding Coltel, Colombia grew adjusted EBITDA 13.7%, reaching an adjusted EBITDA margin of 41%. Allow me a little sidestep here. Despite it being early days, we feel very positive about our turnaround of Coltel. As I mentioned last quarter, prior to the acquisition, we were thinking of Coltel as a risk factor and we're taking into consideration a possible negative equity free cash flow. But at this stage we believe it will be already a net contributor, fully offsetting the aforementioned restructuring charges as well as the acquisition financing costs. In Panama, adjusted EBITDA declined slightly to 91 million with an adjusted EBITDA margin of 50.7%. Turning to Paraguay, adjusted EBITDA increased 15% year on year to 92 million, delivering a record adjusted EBITDA margin of 56.3%. This growth came from the team's continued focus on operational efficiencies, some phasing and others so well deserved. Congratulations to our Paraguayan General Manager Roberto and our newly internally promoted CFO floor. Besides the stellar performance, we also benefited from FX in Paraguay, increasing the year on year growth of reported adjusted EBITDA to almost 39%. Turning to Ecuador, we are pleased with the initial performance. Our priority has been to stabilize the operation and expand margins sustainably. Adjusted EBITDA totaled 56 million in the quarter, corresponding to an adjusted EBITDA margin of 48.3%. In line with what I signaled to you already during our Q4 call, this represents a margin uplift of about 13% compared with Ecuador's reported profitability for 2025. I'm intentionally referring to a full year number here because last year under former ownership, Ecuador had an exceptionally high margin from one offs in the first quarter. So here as well, I would like to congratulate our General Manager Bobby and our initial CFO Paul leading the integration, who has now been succeeded by an internally promoted CFO, Fernanda. Congratulations. We are encouraged by the results achieved and continue to fine tune the operation to deliver meaningful and sustainable margin expansion over the coming quarters. Just to manage expectations, later in the year we will be rebranding so there will be some margin effects during the time. For one off marketing expenses, adjusted EBITDA in our other markets reached 202 million, increasing 11.4% year on year with an adjusted EBITDA margin of 47.7%. These robust results were particularly driven by Bolivia where continued cost focus and more stable effects supported margin expansion before discussing equity free cash flow, I also want to echo Marcelo's comments on Chile. We are pleased with the initial results from our joint operation with NJJ. The Chilean business generated approximately $200 million of revenues in the first two months of ownership and delivered positive equity free cash flow. This is a tremendous result for an operation which was losing $500,000 per day when we were handed the keys. I initially said we were looking at Chile as a calculated bet, entering the market with a low chip purchase option. We now see the operation delivering positive equity free cash flow already in year one. Despite the turnaround costs like severance and significant investments into the network as well as the retail footprint. This is a good start and we believe the business is moving in the right direction. Let's now turn to Slide 18 to walk through Equity Free Cash Flow for the quarter as we have already discussed, adjusted EBITDA for the quarter was 857 million up 221 million year on year. Despite the restructuring charges in quartet cash, capex was 221 million up 107 million year on year. This was mainly due to the 42 million one time impact related to last year's LATI sale in Nicaragua which was accounted as negative CAPEX considering an asset sale and increased CAPEX execution in Colombia and Bolivia as well as incremental capex related to our inorganic growth projects. A nice way of saying we are investing in the networks of the acquired businesses. Spectrum paid was 99 million, increasing 63 million year on year. This increase was mainly related to $70 million of spectrum payments in Ecuador. As Marcelo already mentioned, changes in working capital and other was negative 27 million for the quarter. This is common in the first quarter when working capital is usually a drag on cash flow due to the timing of certain payments, fees, licenses and employee bonuses. That said, working capital improved by 49 million year on year mostly due to payments phasing and improved collections. Taxes paid were 53 million representing a year on year reduction of 13 million. This was mainly because prior year taxes were elevated by one off incremental taxes on gains from infrastructure. Since finance charges were 126 million increasing 19 million year on year mainly due to incremental charges related to acquisition financing. Lease payments increased 58 million year on year to 140 million consistent with last year's tower sale which added approximately 22 million as well as our inorganic growth which contributed another 36 million leases. Dura's repatriation was 34 million for the quarter, improving 11 million year on year. As a result of these factors, equity free cash flow was a record 225 million for the first quarter of Medicom. Let me now briefly walk you through our net debt bridge on Slide 19. As just discussed, equity free cash flow was $225 million for the quarter. The opening balance sheet of Coltel added approximately $1.5 billion of net debt, increasing leverage by 0.6. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.