Millicom International Cellular S.A. (TIGO) Q1 2013 Earnings Report, Transcript and Summary

Good morning everyone. My name is Justine Dimovic. I am in-charge of Investor Relations at Millicom. I would like to welcome you all to our 2013 Capital Markets Day. I would like to remind you that the Safe Harbor statement will apply to these presentations and the subsequent Q&A sessions of course. What I would like to remind you as well when we are about logistics that if you need to get access to the WiFi network, you can do so with the codes that are on the booklets that you have on your chairs or appearing now on the screen. That’s it for the logistic (inaudible) I would like to say. Now if we turn to the agenda for today. We will start with a strategic update by our President and CEO, Hans-Holger Albrecht, proving you with the core elements of Millicom growth and how they will fit together. Then we will take some Q&A, short Q&A session. Then we’ll move after to – after a coffee break, we’ll move into a session with Mobile and Cable and Digital Media Updates by Mario Zanotti and Martin Lewerth, our EVP for Operations in Home and Digital Media. Then we are going to pause again for Q&A session, joint Q&A. And after that, we are going to break out for lunch. In the afternoon, Anders Nilsson, our EVP for Commerce and Services will take you through the opportunities in our market in Mobile Financial Services and Online. Then we are going again to pause for Q&A and a coffee break, and finish with the finance update basically providing you with all the numbers behind the plan. So without further delay, I would like to hand over to our President and CEO, Mr. Hans-Holger Albrecht.

Thank you, Justine, and good morning, welcome everyone to the Capital Markets Day of Millicom. For me it’s not the first Capital Markets Day obviously but, it is the first for Millicom. It’s a very important one for us ultimately because we’re going to try to demonstrate and will demonstrate today where do we see the company heading, and what’s the kind of the targets we have set for the next coming years and what kind of ambitions we have as an management team in the future. But maybe it’s a good start because I am new, I am new to the company, I am new to a few of you, a lot of you, some people and obviously but to most people I am new. To give you a bit of background about myself or more about what’s my motivation, why did I join Millicom, what’s the kind of things which drives me really on the daily work? And I think there are three main things which was for me motivation to join the company. I think the first one is Millicom in itself is a very exciting opportunity coming from the outside and being now for a couple of months in there. You really don’t see many companies like Millicom. It’s interesting because it’s a kind of trend shift in the industry, things are changing fast and rapidly. We can see the migration to new kind of forms like from voice to data. We see the integration of new services like music services, we have internet services and support and so forth, so it is a very trendsetting industry, it’s a very changing industry which is always fun of course for a CEO to manage. I think the second point which is very strong as well is that…

If you can just please state your name and company? Laurie Fitzjohn – Citigroup: Thank you. It’s Laurie Fitzjohn from Citigroup. First is just on the progression kind of growth. Given the importance of the MFS and your $9 billion target, should we assume that the organic progression is back-end loaded towards ’17 as MFS becomes a bigger portion of the group? Secondly, just on M&A and I realized you have said to folks is mobile cable, but can you talk about the likelihood of further M&A within the online space, and how significant this might be given a key concern is for the significant deals in this space? And then just very shortly just to confirm the targets rule, it’s clearly online the $9 billion, the 35% (inaudible) that’s excluding online? Thanks.

Yes. If you come to the first point, again we’re going to give the kind of EBITDA target per unit during the day. It’s not going to be linear, it’s of course on the MFS side you’re going to see faster growth, because we’re going to roll overall [ph] kind of business nowadays, on the cable side it depends on the M&A activities we do in the kind of Greenfield opportunities we are launching. So it’s not going to be always linear, it’s going to be growing more towards the end of this year as well but it doesn’t mean as I said everything comes – and something (inaudible) that’s what the industry like, like it is in the first round of budgets because normally from GMs in the world. So it is not linear, but it’s not back-loaded either in that respect. And then have a look at the presentation during the day. If it comes to the M&A side, as I said the philosophy is we’re going to look for consolidation opportunities, particularly for the mobile side and markets we are in. We don’t seem to be plan at this stage any kind of Greenfield or new market opportunities. We’re going to look for cable assets in the markets, we have mobile obviously we assume the potential and outside the markets where we don’t have mobile. If again opportunistic it makes sense. And when it comes to the internet space, I think we are pretty well covered right now with our working investment. There is no need for any other investments. We’re going to have smaller sized investments like we do in the SMS service for example in Africa and those kind of things, but they are very small and they may sometimes be over $10 million and those kind of elements. So it’s not that we‘re going to buy or have a kind of plan to buy huge internet companies at this stage. If it comes to the target, that would be very clear as well, the $9 billion target is without any online internet activities. Still doesn’t mean we don’t believe it in, but you’re going to see it later during the day. Cesar Tiron – Morgan Stanley: Hi, it’s Cesar Tiron from Morgan Stanley. I have two questions please. The first one is related to the $9 billion revenue target for 2017. Does it include the cable acquisition and any other M&A excluding the online? That’s first and second, are you going to give any guidance on the margins? Thank you.

Yes. I think when it comes to the acquisition, it includes the UNE transaction, the $9 billion target and you’re going to see it in the cable presentation. Beyond that there is nothing in there. So as I mentioned it will be – it will be on top. And Martin will talk about the status of UNE transaction and what kind of profile and opportunities we’re going to see in there. When it comes to the margins, Francois will talk about this one as well. We’re going to see – he will explain more in detail as if you are going to see a mix of the margin profile because we have lower EBITDA margin business going forward. But he will describe exactly how the mix will look like in the next coming years and what kind of margins we can anticipate, as a company, because as I said of the mix of the margin profile we have in the future, we believe it’s more interesting probably to look at free cash flow or CapEx or EBITDA margin minus CapEx for example as a type because the business will be more cash generative at the end of the day, even with all margins. But we’re going to come back to this at the end of the day or during the day.

Yes, thank you. Sven Sköld – Swedbank: Yes, hello Sven Sköld from Swedbank. Does it include success of mobile financial services in every market you’re in or is it – made you assume only success in a few markets inventories?

It requires success – sorry, success is a broad word obviously, but it requires success of the mobile financial services in all the markets. And if you’re going to be successful as much as you have been successful on the mobile side. In the end we’re going to show it to you today then you’re going to reach a target which is close to $1 billion target which we set out. If you have a little bit of swing or some markets are less attractive, you have EBITDA of whatever, smaller growth profile like $750 million for example, but still we took a kind of the lower end into the kind of $9 billion calculation. But in detail, again we’re going to show the MFS what we’re going to do there in the markets. But the key point is we – as I said, we anticipate we’re going to have the same market share model as like we have on the mobile side which is realistic in that respect and therefore it’s not completely undoable. And if you look at the successful market, very successful markets like Tanzania for example, Paraguay nowadays as well, you can see that the model and the way we do it works pretty well as well. So mobile financial services and do you then look and listen to Anders Nilsson and the COO of our Mobile Financial Services, George Oyen [ph] is somewhere in the room as well. You can talk during the break to him. It’s an execution game. It’s not a strategy game. If the model is there, the format is there, it’s an execution game. Lena Osterberg – Carnegie: Lena Osterberg, Carnegie. Just to clarify on the revenue target. That includes online, the $9 billion or is that excluding online?

No, to be very clear once and forever again. Lena Osterberg – Carnegie: Yes.

There is no – in the $9 billion target there is no online. So we wanted to be very clear and we’re going to show it again when we do the bridge you’re going to see it throughout the day. But we didn’t want to give the kind of story to you as investors and the financial market that we build our gross portfolio [ph] all of a sudden on the e-commerce business. Lena Osterberg – Carnegie: I also ask you the decision you made yesterday to exercise the option early, why did you decide to do it now rather than wait till September which would give you some more time to see where you’re going?

When you’re going to see Anders presentation, you will see how successful the venture of the business we have in Africa and Latin America during in the early months. And in the internet business – and he will do it more elegant probably than I do, but he will explain the internet business, the two driving force if at all you want to be successful. You have to be a proved model and you have to be the number one. If you are a proved model and you are the number one in the market, you have a substantial higher market and a better return on your investments. What we've seen with our investments so far after few months is they are proven models and they have the opportunities they are number ones in those markets. So what we decided is that accelerate the rollout, and do more and faster than we anticipated because now we know exactly how it works. We know what the customer wants and we know it’s going to be successful in those markets. And use the timeframe because it’s a time game as well, use the timeframe to do it faster. It doesn’t mean that we change our financial forecast or the kind of frame we give to the market originally. It’s still the same frame, it’s only a timing issue and more important as well, it’s not to give the money right away its more that we want to get clarity and continuity to the management team to execute on the plans. So the overall picture hasn’t changed. We are not storing more money in business which is new or we are not storing more money in business which is not performing. We are very focused on those activities which are working well to roll them out and to grab the opportunity which is huge. And if you bear with us a few hours then you see the details on that one.

If I may say, if the question can be about the strategy because we are going to deep dive into most of the topics later on today. So if you would like to ask any further question on the strategy and the pillars of the business.

There was queue [ph].

Okay.

No more? Folks thank you then I introduce Mr.

Now we are going to have a short break.

The coffee break, okay. Thank you.