Investor presentation

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1 Investor presentation Millicom International Cellular S.A. October, 2018

2 Disclaimer This presentation may contain certain forward-looking statements with respect to Millicom s expectations and plans, strategy, management s objectives, future performance, costs, revenue, earnings and other trend information. It is important to note that Millicom s actual results in the future could differ materially from those anticipated in the forward-looking statements depending on various important factors. All forward-looking statements in this presentation are based on information available to Millicom on the date hereof. All written or oral forward-looking statements attributable to Millicom International Cellular S.A., any Millicom International Cellular S.A. employees or representatives acting on Millicom s behalf are expressly qualified in their entirety by the factors referred to above. Millicom does not intend to update these forward-looking statements. 2

3 Contents 1 Our journey... Big picture 2 Capital allocation and ROIC 3 Latin America service revenue and EBITDA 4 Currency exposure myths and reality 5 Latin America service revenue by business unit 6 Market structure by country 7 Spectrum and licenses 8 Latam snapshot - Macro 9 Latam snapshot - Micro 10 Latest results summary 3

4 1 Our journey big picture We have been transforming the company in many ways FROM Mobile-only Voice + SMS Prepaid Legacy network Analog Legacy IT STRATEGY NETWORK TO Cable + convergence High-speed data (4G) Subscription-driven Compliance leader Purpose driven State-of-the-Art (4G, HFC) Digital OTT like Product & Sales Driven CUSTOMER Customer Centric No Geographic Focus CAPITAL ALLOCATION High-speed data networks IT transformation Latam-only Deteriorating margins Dividend at risk Negative efcf RETURNS Improving margins Dividend covered Positive efcf 4

5 2 Capital allocation and ROIC Re-deploying capital to Latam allows us to accelerate network build and improve returns Total Capex Reported Capex (excl. Spectrum, licences and finance lease capitalization), $m, FY 15 FY17 OCF (EBITDA Capex) Reported Group EBITDA less capex, $m, FY 15 FY17 Return on Capital* Group return on invested capital, %, FY 15 FY 17 1,273 Africa +650 bps +450 bps 1, Latam Mobile Total Latam +4.6% 905 1,141 1, % 13.1% 16.2% Latam Fixed % of Revenue 18.9% 16.5% 16.5% % of 18.3% 19.9% Revenue 13.4% ROIC : NOPAT/Invested Capital 5

6 3 Latin America service revenue and EBITDA Contribution by country FY 2017 Service revenue EBITDA PY 12% ELS 8% PY 15% ELS 7% Full consolidation CO 32% GT 23% CO 22% GT 31% BO 11% HN 11% CR 3% BO 10% CR 3% HN 12% PY 17% ELS 11% PY 21% ELS 10% Proportionate Contribution CO 23% BO 15% CR 5% HN 11% GT 18% CO 15% BO 14% CR 4% HN 12% GT 24% ELS: El Salvador GT: Guatemala HN: Honduras CR: Costa Rica BO: Bolivia CO: Colombia PY: Paraguay

7 4 Currency exposure myths and reality Only 15% of our proportional EBITDA is from high volatility FX country 10-year FX trends Bloomberg Weekly FX rates vs USD, (Aug) Proportionate Latam EBITDA Latam EBITDA by country, adjusted for proportional Millicom ownership, and ranked by currency volatility, % BRL, CRC 4% COP 15% GTQ 24% MXN, HNL 12% 48% COP, % BOB 14% HNL, PYG, CRC, GTQ, 98.0 BOB, 90.4 PYG 21% Low volatility High volatility ELS 10% Moderate volatility ELS: El Salvador (US Dollar) GTQ: Guatemalan Quetzal HNL: Honduran Lempira CRC: Costa Rican Colon BOB: Bolivian Bolivianos COP: Colombian Pesos PYG: Paraguayan Guarani 7

8 5 Latam service revenue by business unit Service revenue, FY 2017 El Salvador Contribution in FY 2017 Guatemala Honduras B2B 15% Mobile B2C Data 23% Home 8% B2B 12% Mobile B2C Data 34% Home 8% B2B 15% Mobile B2C Data 25% Home 26% Mobile B2C Voice & Other 36% Mobile B2C Voice & Other 46% Mobile B2C Voice & Other 52% Bolivia Colombia Paraguay Home 12% B2B 13% Mobile B2C Voice & Other 30% Mobile B2C Data 45% B2B 29% Home 35% Mobile B2C Data 17% Mobile B2C Voice & Other 19% Home 24% B2B 13% Mobile B2C Voice & Other 34% Mobile B2C Data 29% 8

9 6 Market structure by country Bolivia El Salvador Mobile 2 nd 1 st 3 rd NA NA BBI 1 st 4 th NA 3 rd 2 nd PayTv 1 st 3 rd NA NA 2 nd Mobile 1 st 3 rd 2 nd 4 th NA NA BBI 2 nd 1 st NA NA NA NA PayTV 1 st 2 nd NA NA 4 th 3 rd Colombia Guatemala Mobile 3 rd 1 st 2 nd 6 th 4 th 5 th NA BBI 2 nd 1 st 3 rd 4 th NA NA 5 th PayTv 2 nd 1 st 4 th 5 th NA NA 3 rd Mobile 1 st 2 nd 3 rd BBI 2 nd 1 st NA PayTv 1 st 2 nd NA Paraguay Honduras Mobile 1 st 3 rd 2 nd 4 th BBI 1 st 3 rd 4 th 2 nd PayTV 1 st 2 nd 3 rd 5 th Mobile 1 st 2 nd NA NA NA NA BBI 1 st 3 rd 2 nd 4 th NA NA Pay TV 2 nd 3 rd 1 st 4 th Sources: MIC estimates

10 7 Spectrum and licenses Spectrum auctions possible in ELS, CO, HN, and GT and in next 3 years All amounts in 2xMHz El Salvador Guatemala Honduras Tigo Claro Movistar Digicel Tigo Claro Movistar Tigo Claro Hondutel Bolivia Colombia Paraguay Tigo Entel Viva Tigo Claro Movistar Tigo Claro Personal Vox Copaco Low band 2G/3G Low band 4G High band 2G/3G High band 4G 10

11 8 Latam snapshot - Macro FY 2017 Colombia Guatemala Bolivia Honduras Paraguay El Salvador Costa Rica GDP growth (2018e)* 2.8% 3.4% 4.0% 3.6% 4.0% 2.1% 3.8% GDP per capita (2018e)* $ 14,990 $ 8,440 $ 7,870 $ 5,730 $ 10,230 $ 9,260 $ 17,930 Inflation (2018e)* 3.1% 4.0% 5.0% 4.0% 4.0% 2.0% 3.0% Population (m) Homes (m) Mobile Subscribers (000) 7,851 10,169 3,303 4,625 3,167 2,796 - Homes Connected (000) 1, Mobile 113% 108% 91% 101% 107% 156% - Penetration** Broadband 48% 31% 11% 11% 14% 25% 42% PayTv 44% 32% 20% 44% 37% 23% 61% Market Position Mobile 3 of 5 1 of 3 2 of 3 1 of 3 1 of 4 1 of 4 NA Broadband 2 of 4 2 of 3 1 of >10 1 of 3 1 of 3 2 of 3 2 of 8 Pay TV 2 of 4 1 of 3 1 of 5 2 of 5 1 of 3 1 of 2 1 of 4 Sources: * IMF DataMapper World Economic Outlook ** Dataxis : Mobile penetration as % of population and Fixed Broadband penetration as % of households and JPMorgan : PayTV as % of households

12 9 Latam snapshot - Micro FY 2017 Colombia Guatemala Bolivia Honduras Paraguay El Salvador Costa Rica Revenue $ 1,739m $ 1,328m $ 555m $ 586m $ 662m $ 422m $ 149m EBITDA $ 469m $ 665m $ 217m $ 265m $ 318m $ 155m $ 62m Financials EBITDA% 27.0% 50.1% 39.1% 45.3% 48.0% 36.6% 41.5% Gross debt $ 1,130m $ 995m $ 352m $ 388m $ 488m $ 147m $ 76m Net debt $ 937m $ 686m $ 243m $ 366m $ 360m $ 116m $ 68m Leverage 2.0x 1.0x 1.1x 1.3x 1.1x 0.8x 1.2x MIC ownership 50% 55% 100% 66.7% 100% 100% 100%

13 10 Latest results summary 13

14 2018 Q3 results Cable expansion accelerating Mauricio Ramos, CEO Tim Pennington, CFO October 24 th, 2018 Millicom International Cellular S.A.

15 Disclaimer This presentation may contain certain forward-looking statements with respect to Millicom s expectations and plans, strategy, management s objectives, future performance, costs, revenue, earnings and other trend information. It is important to note that Millicom s actual results in the future could differ materially from those anticipated in the forward-looking statements depending on various important factors. All forward-looking statements in this presentation are based on information available to Millicom on the date hereof. All written or oral forward-looking statements attributable to Millicom International Cellular S.A., any Millicom International Cellular S.A. employees or representatives acting on Millicom s behalf are expressly qualified in their entirety by the factors referred to above. Millicom does not intend to update these forward-looking statements. This information was prior to this release inside information and is information that Millicom is obliged to make public pursuant to the EU Market Abuse Regulation. This information was submitted for publication, through the agency of the contact person set out above, at 22:00 CET on October 23 rd

16 1. CEO review Mauricio Ramos

17 Q3 Highlights Cable expansion accelerating Strong operating momentum continues Colombia growing Spotlight on Cable Cable Onda 17

18 1 Service revenue growth in line with plan Latam %YoY growth, Q1 16 Q3 18 Latam service revenue growth 5.5% 4.7% 2.9% 2.3% 3.1% 3.4% 0.9% -0.5% -1.3% -2.0% -2.3% Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Note: Q and Q figures re-presented to reflect application of IFRS 15 on wholesale international traffic business in Colombia. 18

19 1 All three business units growing Mobile B2C (58% of service rev) Mobile B2C service revenue LC %YoY, Q1 17 Q3 18 Home (25% of service revenue) Home service revenue LC %YoY, Q1 17 Q3 18 B2B (16% of service revenue) B2B service revenue LC %YoY, Q1 17 Q % 0.9% 0.2% 1.0% 12.6% 12.5% -0.9% 8.8% 6.6% 7.5% 7.3% 7.3% 7.1% 7.6% 5.7% 6.4% 6.5% -3.8% 2.5% -5.3% 1.4% Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Note: Q and Q B2B figures re-presented to reflect application of IFRS 15 on wholesale international traffic business in Colombia. 19

20 1 B2C Mobile growing in 4G and postpaid Steadily growing our 4G customer base Latam B2C Mobile 4G subscribers (millions), Q3 16 Q3 18 Improved performance in postpaid Latam B2C Mobile postpaid net additions, (000)s, 9M16 9M18 +52% 192% Q3 16 Q3 17 Q3 18 9M 16 9M 17 9M 18 20

21 1 Home growth drivers trending higher Connecting more HFC Homes Latam HFC homes connected (000) 9M M % Adding more HFC RGUs Latam HFC RGU net additions (000) 9M M % ARPU rising Latam Home ARPU ($/month) Q Q % M 16 9M 17 9M 18 9M 16 9M 17 9M 18 Q Q Q

22 2 Colombia investments starting to pay off in Home Colombia Home KPIs continue to improve HFC accelerating as copper churn moderates Colombia - LTM homes connected net additions, HFC and Other, Q316 Q318 Home ARPU rising Colombia Home ARPU $, Q3 16 Q % +7.7% +20% Q3 16 Q3 17 Q3 18 Q3 16 Q3 17 Q3 18 HFC Other Net 22

23 2 New initiatives to accelerate growth in Mobile Simplifying postpaid offer in Colombia Simplified the offer to just 3 plans ($18, $25 and $33 per month) Focus on experience, innovation, commercial offer, and devices 23

24 3 Home revenue 9% CAGR in USD in last 3 years Homes Passed HFC Homes Passed (000), Q3 15 Q3 18 Homes Connected HFC Homes Connected (000), Q3 15 Q % +16% +11% +18% +10% +12% Q Q Q Q Q Q Q Q HFC RGUs (000), Q3 15 Q3 18 RGUs Home Revenue Home & Content service revenue ($ millions), Q3 15 Q % +14% +17% +17% +6% +8% Q Q Q Q Q Q Q Q

25 3 Millicom Cable revenue annualizes to $2.2 billion 10 million Homes Passed 4 million Homes Connected $2.2 billion 7 million RGUs Fixed B2B Note: Based on annualized Millicom Q3 revenue for Home and B2B fixed, proforma for Cable Onda acquisition 25

26 3 Cable economics for Millicom 1. Standalone cable economics Low cost to build Unlevered Pre-tax ROI > 30% Pricing Power With scope to expand homes passed by 50% and grow B2B 2. Leveraging Millicom assets Brand + Network + Talent + Distribution 3. Preparing for the future Convergence + 5G Note: ROI calculation based on lifetime customer value assuming capex of $100 per home passed and $150 per home connected, penetration rate of homes passed of 33%, ARPU of $30, and Latam cable industry average churn and EBITDA margin assumptions.

27 4 Cable Onda Expected closing Q

28 4 Free cash flow continues to grow FCF growth is crucial to support our organic plans and pursue inorganic opportunities $m, Equity FCF up ~$400 million in last 3 years $m, 9M 16 9M 18 Equity FCF up 19% YTD % M 16 9M 17 9M 18 28

29 2. CFO review Tim Pennington

30 Financial Highlights On track with our 2018 goals KPIs driving sustain revenue growth EBITDA growth driven by core Latam businesses All P&L profit metrics improving and cashflow continues to strengthen 5 And net debt reduces again 30

31 1 Key financial metrics Q Sustained growth $m, Q3 17 Q3 18 Service Revenue a EBITDA a and Margins $m and %, Q3 17 Q3 18 Q3 OCF and Margins b $m and margin, Q3 17 Q % 2.6% 1,342 1, Q3 17 Q3 18 Q3 17 Q3 18 Q3 17 Q % 37.7% 20.7% 20.6% a) Q3 17 numbers are adjusted to Q3 18 FX rates and exclude Senegal, Rwanda and Ghana. Growth is presented on a like-for-like basis for the international wholesale business in Colombia b) Excluding Senegal, Rwanda and Ghana, spectrum & license costs 31

32 2 EBITDA Q Latam biggest contributor to EBITDA growth $ million, Q3 17 Q3 18 EBITDA evolution by region +2.6% % Ebitda Q3 17 FX and other Ebitda Q3 17 LatAm Africa Corporate Ebitda Q3 18 (constant currency) 37.0% as % of revenue 37.7% Q3 17 numbers are adjusted to Q3 18 FX rates and exclude Senegal, Rwanda and Ghana 32

33 2 Latam Solid growth returning to Latam Latam service revenue $m, Q3 17 Q3 18 Latam OCF $m and margin, Q3 17 Q % +1.4% 278 Latam EBITDA $m and margin, Q3 17 Q % 1,212 1, % 20.4% Q3 17 Q3 18 Q3 17 Q3 18 Q3 17 Q % 38.4% Capex / Revenue 16.8% 18.0% Notes: Growth rates are organic and exclude the impact of changes in FX rates and accounting changes. Q figures have been adjusted to reflect these organic growth rates. Capex/revenue excludes spectrum & license costs 33

34 2 Service revenue in our main Latam markets El Salvador Service revenue, year-on-year (%), Q1 16 Q % 2.1% 0.3% -1.6% -3.6% -1.4% -3.7% -4.8% -6.4% -7.7% -8.7% Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Guatemala 5.7% 6.4% 2.7% 3.5% 6.4% 3.4% -0.8% -3.9% -2.5% -4.8% -4.3% Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q % -1.6% -2.5% Honduras -0.7% -1.0% 0.0% -0.8% -0.1% 0.0% 0.3% 2.6% Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Bolivia Colombia* Paraguay 15.7% 9.1% 13.7% 5.5% 6.1% 6.5% 4.7% 2.0% 2.6% -0.8% 0.5% Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q % 2.3% 4.4% 0.6% 0.3% 0.6% -0.3% -0.2% -1.9% -2.9% -2.5% Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q % 6.2% 3.3% 2.9% 2.1% 4.5% 6.5% 8.9% 7.8% 6.2% 5.4% Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 * Q1 and Q numbers re-presented to reflect impact of IFRS 15 34

35 2 EBITDA progression by country Strong performance in Bolivia and a return to EBITDA growth in Colombia El Salvador EBITDA ($m), margin and year-on-year growth, Q3 17 Q (23.0%) 30 Guatemala +4.7% Honduras (3.1%) 3.7% Adj Q3 17 Q3 18 Q3 17 Q3 18 Q3 17 Q % 30.2% 50.5% 50.2% 52.0% 44.3% Adj 49.2% 44.4% Adj Bolivia Colombia Paraguay +11.2% 13.7% +7.7% Q3 17 Q3 18 Q3 17 Q3 18 Q3 17 Q % 38.1% 25.0% 30.4% 47.3% 49.4% EBITDA Margins 35

36 2 Cost review and margin progression Steady upward margin trend continues Group total OPEX base OPEX organic growth* YoY (in $), Q3 17 Q3 18 Last 12 month Group EBITDA margin Last 12-month EBITDA margin, Q Q % 541 (3.0%) +400 bps Sales and Marketing 33.6% 35.6% 36.9% General and Adminstration +9.6% 32.9% Q3 17 Q3 18 Q3 15 Q3 16 Q3 17 Q3 18 * Excludes FX and IFRS 15 36

37 3 P&L review Q Significant profit improvement below EBITDA P&L Summary US$ million Q3 18 Q3 17 % Var Revenue 1,498 1, % EBITDA % Depreciation & amortization (303) A (323) (6.0%) Other operating Operating profit % Net financial expense (114) B (133) (14.8%) Others non operating (21) 1 NM Associates (32) (15) 116.0% Profit before tax % Taxes (20) C (66) (70.2%) Minority interests (38) (25) 53.8% Key Observations A Lower D&A due to the full amortization of some intangibles in Colombia, Guatemala and Honduras B Lower average debt and refinancing charges partly offset by higher finance leases C Lower withholding taxes and deferred tax D Operating, Pre-tax, and Net Profit all up strongly Discontinued operations 0 8 (99.1%) Net income 68 D % EPS ($ per share) % 37

38 4 Cash flow 9M 2018 We generated $243 million of equity FCF year-to-date $ million 9M 2018 cash flow 688 1, Ebitda including discontinued operations Cash capex (ex-spectrum and licenses) Working capital and others Cash flow from operations Taxes paid Finance charges FCF Dividend to minorities efcf 36.6% 19.6% 8.6% as % of revenue 38

39 5 Capital structure In 9M net debt reduced by $284m and leverage at 1.82x Net debt evolution in 2018 $ million, 31 December September September 2018 Debt profile Geography Latam 74% HQ 20% Africa 5% 4,071 3,786 Source Bonds 53% Banks 40% Fin. Leases 7% Interest rates Fixed or Swapped 69% Variable 31% Net debt YE 2017 Equity FCF Spectrum Lease M&A capitalization and towers Dividend FX and others Net debt Q FX exposure Local 44% Hard currency 56% 1.86x Net debt/ltm EBITDA 1.70x 2.02x Proportionate Net debt/ Proportionate LTM EBITDA 1.82x Maturity Less than 5y 46% 5Y or more 54% 39

40 5 Debt profile Comfortable capital structure and liquidity with no major maturities until 2022 $ million Debt maturity profile Average life of 5.6 years* PY $300m GT $800m s $500m s $500m s $500m >2027 International Bonds Local Bonds (Colombia & Bolivia) Bank and DFI Finance leases Proforma * Proforma for the $500 million 2026 Notes issued in Q

41 On track Confirming our Latam segment full year targets 41

42 Recap Our strategy is working Sustained growth Solid financials and KPIs YTD 2018 outlook on track 5 Strengthened balance sheet and growing cash flow 6 Making progress on U.S. listing Nasdaq chosen 42

43 Q&A

44 Gross debt by country Central America: Total debt $1,834m 32% guaranteed South America: Total debt $1,901m 4% guaranteed Africa: Total debt $268m 57% guaranteed Corporate: Total debt $1,030m 0% guaranteed Total MIC Debt: $5,033m 16% Guaranteed Honduras: $401m (40% guaranteed) Guatemala: $988m (0% guaranteed) Chad: $62m (96% guaranteed) El Salvador: $298m (96% guaranteed) Costa Rica: $148m (100% guaranteed) Colombia $1,079m (0% guaranteed) Bolivia: $316m (4% guaranteed) Paraguay: $507m (12% guaranteed) Tanzania: $112m (0% guaranteed) Zantel: $93m (100% guaranteed) Including finance leases 44

45 Net debt by country Central America: $1,417m Leverage 1.24x South America: $1,601m Leverage 1.52x Africa: $109m Leverage 0.65x Corporate $659m Total Net Debt: $3,786m Leverage 1.70x Honduras: $361m Leverage 1.4x Guatemala: $698m Leverage 1.0x Chad: $44m El Salvador: $242m Leverage 1.7x Costa Rica: $120m Leverage 2.1x Tanzania: $(12)m Zantel: $78m Colombia: $907m Leverage 1.8x Bolivia: $259m Leverage 1.1x Paraguay: $436m Leverage 1.3x Including finance leases; Leverage is Net debt / LTM EBITDA 45

46 Currency exposure of debt September 2018 Debt including finance leases Cash Net debt US$ Local Total Total USD Local Total Latin America* 1,748 1,988 3, ,445 1,574 3,019 47% 53% 100% 48% 52% 100% Africa % 65% 100% 83% 17% 100% Corporate , % 5% 100% 94% 6% 100% Millicom 2,824 2,210 5,033 1,247 2,154 1,632 3,786 56% 44% 100% 57% 43% 100% *El Salvador has USD as functional currency (treated as local.) 46

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