Millicom set to start cost efficiency plan

Luxembourg-based telecoms group Millicom aims to achieve run rate benefits of more than US$100mn by year-end 2024 as part of an efficiency project called Everest.  

The Everest plan involves focusing on efficiencies in convergence, commercial opex, network opex, IT and capex.  

Nevertheless, Millicom CEO Mauricio Ramos is not expecting much savings on the capex side. “There’re some opportunities there on capex. I think that’s also more from what we’re spending than reduction in spend,” Ramos said during a conference call with investors.

“We're coming out of a big investment cycle,” said Ramos, noting that most of the company's big investments, like replacing mobile cores to support 5G, expanding coverage and deploying 700MHz in Columbia, have already been done.  

The company is now focusing on the deployment of fiber and the migration of copper lines. “We've got maybe 200,000-300,000 homes still with copper,” Ramos said. 

Last February, Millicom said that its investments in Latin America will average US$1bn per year for the next three years. The company also recently announced additional capex of US$350mn for Central America.

The company invested US$957 million in 2022.  

“Slower home customer growth also means that we spend less than expected on installs and customer premise equipment, which is typically one of the biggest components of our annual capex spend,” Millicom’s CFO Sheldon Bruha said during the investor call.  

The slowdown in home additions was concentrated in the second half of 2022, which Millicom said was due to macroeconomics. “That makes sense to us. People are watching their consumption a little bit more and that’s also consistent with mobile versus home in the context of coming out of the pandemic,” Ramos said.  

Even though there is some “short-term pain,” Ramos considers the home business “very valuable”, so it will continue to build the network. “In the short term, yes, we need to slow down according to the demand,” he noted. 

Millicom added 822,00 homes passed in 2022, with 40% of them being via FTTH. At the end of 2022, the company reached a total of 12.6mn homes passed, of which 730,000 are FTTH. 

“We’re happy with what we’re seeing in terms of deploying our network. 800,000 is a good rhythm,” Ramos said.  

Millicom's home business has 8.7mn revenue-generating units, with an ARPU of US$25.4.  

“Home ARPU declined 3.2%, reflecting increased competition and a shift in mix toward broadband-only customers, which generate lower ARPU, as well as lower cost and capex,” the company said in its earnings release.  

OTHER BUSINESS 

Millicom said it is “on track” with its business plan and expects to carve out its tower business this year. The company is also seeking investors for its financial services business.  

During the investor call, no mention was made of the possible acquisition of Millicom by two investment funds, as reported recently.  

“We focused even more on our customers and we invested further in our networks and in our people. All of these produced strong financial results, organic OCF [operating cash flow] growth was strong at 8.4% and equity-free cash flow was US$171mn,” Ramos said. Leverage was down to three times at year-end.  

“Tigo money continues to execute its own plans to accelerate growth, which we expect will generate interest from potential investors who bring expertise and capital to help the business flourish and get to the next level,” he added.  

Millicom's total revenue reached US$5.62bn in 2022, up 32% from 2021. Its operating profit roses 47.9% to US$915mn.