Author Topic: TIGO - Millicom  (Read 7793 times)

Value92

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Re: TIGO - Millicom
« Reply #10 on: September 27, 2019, 06:29:44 AM »
How do you guys deal with the corrupt or even wanted minorities in Guatemala and Honduras? What are your thoughts about corruption in all of Millicoms markets?


StevieV

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Re: TIGO - Millicom
« Reply #11 on: October 24, 2019, 12:32:13 PM »
TIGO down big today on earnings.  Existing shareholders coming up next month.

valueinvestor

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Re: TIGO - Millicom
« Reply #12 on: October 24, 2019, 02:35:54 PM »
How do you guys deal with the corrupt or even wanted minorities in Guatemala and Honduras? What are your thoughts about corruption in all of Millicoms markets?

It's on a case-by-case basis and if the owner can do business in a corrupt environment. There are very real risks when dealing with these kind of assets, but it's hard to imagine someone wanting to harm the assets TIGO owns, or at the very least it wouldn't be smart. But as I read in another thread what should happen and what will happen is two different things. My twist is just because it is smart to do so, doesn't mean people do so...

Short answer: There's no gurantee against corruption. In fact, you should include it in your assesment whether the risk is worth it or not, because the market is discounting based on that too.

Update: Just because it is lip-smackingly tempting, does not mean it is a bad thing. I take it as a time-saver and it allows me to focus on companies with less hairs on them.
« Last Edit: October 24, 2019, 02:38:22 PM by valueinvestor »

jgyetzer

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Re: TIGO - Millicom
« Reply #13 on: October 25, 2019, 03:43:06 PM »
Listened to the cc today. This reminds me of CABO a few years ago or CHTR in 2018 when video subs and total revenues were in decline but healthy broadband. With TIGO revenue disappointed mostly due to prepaid mobile with healthy growth in broadband and subscription mobile even in the face of economic slowdown. Plus you’ve got a CEO connected to the Malone universe buying large blocks personally at prices higher than today. Over the next 6-12 months this might get really interesting as Kinnevik exits.  May be price insensitive selling, potentially changes in capital uses with regard to dividends versus repurchase...

dwy000

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Re: TIGO - Millicom
« Reply #14 on: October 25, 2019, 05:51:13 PM »
Listened to the cc today. This reminds me of CABO a few years ago or CHTR in 2018 when video subs and total revenues were in decline but healthy broadband. With TIGO revenue disappointed mostly due to prepaid mobile with healthy growth in broadband and subscription mobile even in the face of economic slowdown. Plus you’ve got a CEO connected to the Malone universe buying large blocks personally at prices higher than today. Over the next 6-12 months this might get really interesting as Kinnevik exits.  May be price insensitive selling, potentially changes in capital uses with regard to dividends versus repurchase...

I think you're right.  It's going to be tough for the next 3-6 months as the Kinnevik shareholders exit and they shift the capital allocation as a result (get rid of that ridiculously large and costly dividend). 

But long term the outlook is quite favorable.

alwaysinvert

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Re: TIGO - Millicom
« Reply #15 on: October 28, 2019, 06:47:43 AM »
Quote
Johanna Ahlqvist -- Analyst

Yes. Two questions, if I may. The first one actually relates to Africa or Tanzania and if you can give us any updates on sort of what's happening there. I know you mentioned that this process is taking longer than expected.

And I guess if you do not see sort of proceeds from Tanzania in the sort of foreseeable future, would you expect that -- would you consider to cut dividends to deleverage faster than you currently are? And then my second question, I guess you touched upon this topic before, but you mentioned that September is better than August and July. And I'm just wondering if you relate -- referred to competitive climate or macro or if it's a sort of general comment. Thank you.

Mauricio Ramos -- Chief Executive Officer

Yes. So I'm going to start with the last one because that's the one that's more present in my mind. The answer is very simple. We had subscriber intake come back in prepaid.

You've seen the numbers or we've alluded to the numbers, and with those renewed revenue. And we've been able to therefore stabilize the markets where we have the most competition. And as a result of that, September came back strong on subscriber intake. So that's I think the key reason for that.

It just wasn't as strong as we had hoped it would, and therefore my comments before. On Africa, I think indeed we've said before that Tanzania, you should just take a deep breath and allow us to do in Tanzania as we've done everywhere else. But we're going to have to take our timing and a moment to do that. In the meantime, as you saw, the IPO of HTA was accomplished and so was the HPO -- or the IPO of Jumia.

So those are assets that now sit a little bit more liquid and well within our treasury department to determine what to do with them and what the right time frame for that is. But I want to address the more important point I think you made just to not leave it sort of up there hanging. Regardless of Africa, and Africa has never factored into our decision making around our capital structure and our dividend or leverage policy. Because we've always known that as much as we're allocating capital from Africa into Latin America, the timing and our ability to execute, good as we have been on it, we've never fully controlled.

So it's never been part of our core plan, and I want to be super clear on that. We've never said that money is going to come in in Quarter A or Year 8 and it's going to be allocated to A, B or C. It's always been outside of our planning because we don't control it. And that continues to be true.

But I think the most important point here that I don't want to leave that hanging there is that going forward, we actually have on our capital remuneration, buyback, leverage, all of which is part of your question, a pretty good problem to solve going forward, regardless of Africa. If we were to execute on Africa sooner, then this good problem would be sooner and better, and that is that we have operating cash flow that is growing. We're getting pretty close to that 10% growth rate that we have targeted and I have been alluding to. And as Tim remarked, even if our equity free cash flow dips this year, we knew that, and it's coming as a result of the financing and the integration costs of the acquisitions on the back of which we have synergies, procurement savings and a significantly improved operating cash flow profile.

And even throughout this year, our equity free cash flow remains pretty solid for the year, and we'll soon go back to that. So what we really have is a pretty good problem on how to allocate that increasing EBITDA free cash flow regardless of Africa. Now, because I don't want to leave the question hanging, we have not changed either our leverage policy nor our dividend or capital remuneration policy, and we see no reason to do so on the back of the delay on Tanzania.

Johanna Ahlqvist -- Analyst

Crystal clear. Thank you.

This is rather interesting for a number of reasons. The analyst mentions Tanzania and then proceeds to ask about cutting the dividend. This is of course a general question which just flowed out of the fact that a potential source of liquidity might not be immediately forthcoming. But Ramos makes sure to carefully couple his answer to Tanzania - they will not cut because of Tanzania (but perhaps due to other reasons?). They have not changed their leverage policy (but perhaps they *will*). Leverage of course has moved from 1.6x a year ago to 3.25x today, albeit that it's somewhat lower on a going forward basis than a historical one due to recent debt-financed acquistions.

Also note his unprompted mention of buybacks. Millicom has never done buybacks in the past, although they do have a 5% authorization until next AGM.   

All in all, this non-denial denial really does seem to point to a further libertyfication of the company on the capital allocation front. And what would be the actual reason to keep the dividend except inertia when Kinnevik is gone?

Will they be ready to repurchase shares into the Kinnevik distribution in early December? Ramos quite clearly thinks the stock is cheap and internal use growth capex has a pretty high bar to clear against the current stock price. Cash 633m currently minus 133m dividend gives at least some room to work with (I don't know how much of that is at parent level and free to use).

If repurchasing is indeed the plan, I would expect a scrapping of the dividend shortly after the Nov 5 distribution rather than in connection with the next AGM. In such a case, it only makes sense to eliminate whatever support there could be for the stock price, even if the impact was only minor.
« Last Edit: October 28, 2019, 06:53:49 AM by alwaysinvert »

CookingByTheNumbers

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Re: TIGO - Millicom
« Reply #16 on: October 28, 2019, 12:56:41 PM »
Quote
Johanna Ahlqvist -- Analyst

Yes. Two questions, if I may. The first one actually relates to Africa or Tanzania and if you can give us any updates on sort of what's happening there. I know you mentioned that this process is taking longer than expected.

And I guess if you do not see sort of proceeds from Tanzania in the sort of foreseeable future, would you expect that -- would you consider to cut dividends to deleverage faster than you currently are? And then my second question, I guess you touched upon this topic before, but you mentioned that September is better than August and July. And I'm just wondering if you relate -- referred to competitive climate or macro or if it's a sort of general comment. Thank you.

Mauricio Ramos -- Chief Executive Officer

Yes. So I'm going to start with the last one because that's the one that's more present in my mind. The answer is very simple. We had subscriber intake come back in prepaid.

You've seen the numbers or we've alluded to the numbers, and with those renewed revenue. And we've been able to therefore stabilize the markets where we have the most competition. And as a result of that, September came back strong on subscriber intake. So that's I think the key reason for that.

It just wasn't as strong as we had hoped it would, and therefore my comments before. On Africa, I think indeed we've said before that Tanzania, you should just take a deep breath and allow us to do in Tanzania as we've done everywhere else. But we're going to have to take our timing and a moment to do that. In the meantime, as you saw, the IPO of HTA was accomplished and so was the HPO -- or the IPO of Jumia.

So those are assets that now sit a little bit more liquid and well within our treasury department to determine what to do with them and what the right time frame for that is. But I want to address the more important point I think you made just to not leave it sort of up there hanging. Regardless of Africa, and Africa has never factored into our decision making around our capital structure and our dividend or leverage policy. Because we've always known that as much as we're allocating capital from Africa into Latin America, the timing and our ability to execute, good as we have been on it, we've never fully controlled.

So it's never been part of our core plan, and I want to be super clear on that. We've never said that money is going to come in in Quarter A or Year 8 and it's going to be allocated to A, B or C. It's always been outside of our planning because we don't control it. And that continues to be true.

But I think the most important point here that I don't want to leave that hanging there is that going forward, we actually have on our capital remuneration, buyback, leverage, all of which is part of your question, a pretty good problem to solve going forward, regardless of Africa. If we were to execute on Africa sooner, then this good problem would be sooner and better, and that is that we have operating cash flow that is growing. We're getting pretty close to that 10% growth rate that we have targeted and I have been alluding to. And as Tim remarked, even if our equity free cash flow dips this year, we knew that, and it's coming as a result of the financing and the integration costs of the acquisitions on the back of which we have synergies, procurement savings and a significantly improved operating cash flow profile.

And even throughout this year, our equity free cash flow remains pretty solid for the year, and we'll soon go back to that. So what we really have is a pretty good problem on how to allocate that increasing EBITDA free cash flow regardless of Africa. Now, because I don't want to leave the question hanging, we have not changed either our leverage policy nor our dividend or capital remuneration policy, and we see no reason to do so on the back of the delay on Tanzania.

Johanna Ahlqvist -- Analyst

Crystal clear. Thank you.

This is rather interesting for a number of reasons. The analyst mentions Tanzania and then proceeds to ask about cutting the dividend. This is of course a general question which just flowed out of the fact that a potential source of liquidity might not be immediately forthcoming. But Ramos makes sure to carefully couple his answer to Tanzania - they will not cut because of Tanzania (but perhaps due to other reasons?). They have not changed their leverage policy (but perhaps they *will*). Leverage of course has moved from 1.6x a year ago to 3.25x today, albeit that it's somewhat lower on a going forward basis than a historical one due to recent debt-financed acquistions.

Also note his unprompted mention of buybacks. Millicom has never done buybacks in the past, although they do have a 5% authorization until next AGM.   

All in all, this non-denial denial really does seem to point to a further libertyfication of the company on the capital allocation front. And what would be the actual reason to keep the dividend except inertia when Kinnevik is gone?

Will they be ready to repurchase shares into the Kinnevik distribution in early December? Ramos quite clearly thinks the stock is cheap and internal use growth capex has a pretty high bar to clear against the current stock price. Cash 633m currently minus 133m dividend gives at least some room to work with (I don't know how much of that is at parent level and free to use).

If repurchasing is indeed the plan, I would expect a scrapping of the dividend shortly after the Nov 5 distribution rather than in connection with the next AGM. In such a case, it only makes sense to eliminate whatever support there could be for the stock price, even if the impact was only minor.

Solid points and excellent job reading between the lines. Just curious, whats your source for Nov. 5 share distribution? @alwaysinvert

alwaysinvert

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Re: TIGO - Millicom
« Reply #17 on: October 28, 2019, 02:23:12 PM »
I was probably being a bit confusing discussing both the share distribution and the upcoming dividend distribution.

Dec 5 is the day when Kinnevik stockholders will be able to sell their regular Millicom shares over the market if they do nothing with the subscription shares. Nov 5 is when Millicom trades ex-dividend ($1.32 in cash). Sources are the IR sites of respective companies.

Some further liquidity incoming today apparently: https://ml-eu.globenewswire.com/Resource/Download/c91a97ab-1103-43a1-b18f-7391ed68b482

kab60

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Re: TIGO - Millicom
« Reply #18 on: November 04, 2019, 12:23:30 PM »
I like the insight the CEO has into Charter (and I hate missing that boat after taking a good look last year), I like the Liberty put option and the insider buying, and I like how prepaid somewhat distorts the high growth in cable.

But how do you square the acquisitions versus buying back stock? This thing is trading around 4,4xFY19 ebitda estimates. Before synergies they paid 6,8x for the Telefónica assets (5,8x after) and 7,9x for Cable Ondas cable assets in Panama.

Between low float and the benefits of lower churn through convergence it might make good sense (and I definately see the attraction), but anyone care to take a stab at a reasonable price? Cable is growing, but they're still very dependant on mobile. And i hate hate hate their definition (and focus) on OCF (which they define as ebitda-capex).

Anyone did the homework on sorta steady state cash flow? There's obviously a lot of moving pieces with the two acquisitions as well as refi activity.

Update: Might've messep up their FY19 estimate (which I pulled from Sentieo). Seems like they "only" did 1,106m ebitda from jan-sep 2019 when backing out the non-controlled stakes in Guatemala and Honduras but that's also with only partly contributions from their acquisitions. Messy. :)
« Last Edit: November 04, 2019, 01:03:12 PM by kab60 »

WayWardCloud

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Re: TIGO - Millicom
« Reply #19 on: November 04, 2019, 11:38:36 PM »
Quote
But how do you square the acquisitions versus buying back stock? This thing is trading around 4,4xFY19 ebitda estimates. Before synergies they paid 6,8x for the Telefónica assets (5,8x after) and 7,9x for Cable Ondas cable assets in Panama.

That seems to be true of most cable assets everywhere these days. There's simply a big valuation gap between what public investors and private investors are willing to pay for them. Or, as Malone puts it: "In this industry you're often worth more dead than alive". So in theory a completely rational cable company should even go beyond not growing and buying back stocks, it should sell all its assets and distribute the money to its owners. That's what LBTYA seems to be doing so far. As much as the Liberty family (I count Ramos in, he's basically a cousin) loves buybacks, the growth mindset runs deep in their DNA. Or, as Malone puts it: "One cookie now or two cookies later".

I'd say there is a decent chance the dividend is about to get cut and replaced by buybacks, which would make me very happy. Like maybe 20-30%? Unfortunately, managements often have a hard time cutting dividends because it's perceived as a failure and sends the stock twirling down.

Quote
And i hate hate hate their definition (and focus) on OCF (which they define as ebitda-capex).

Could you please elaborate?