We believe that Millicom (- / Ba2 / BB +) will be able to increase its revenue in Latin America by more than $ 1 bln over the next five years ($ 4.1 bln in 2020, $ 4.3 bln in 1H21), increasing its operating free cash traffic by almost $ 400mn. In our view, the fixed-line segment is a key driver of growth in the medium term, which could increase sales by more than $ 550mn as Millicom moves its customers from broadband to high-speed cable networks.
The mobile segment could increase total sales by about $ 300-350 million due to the wider adoption of 4G mobile data. We do not expect the corporate segment to show significant growth, however, stable demand will be supported by improving macroeconomic conditions as markets emerge from the pandemic.
YTM
3.9%
RISK
- / Ba2 / BB+
DURATION
7.9
We like Millicom's credit profile. The company has a stable balance sheet, an adequate level of liquidity, strong market positions in all markets of geographic presence and an experienced management team. The ratio of net debt to EBITDA decreased in the first six months of this year from 3.5x to 3.3x and is at a completely controllable level. We also like that the company continues to focus heavily on reducing its total debt, which is why management refused to pay dividends in 2021 and said that share buybacks could be resumed no earlier than 2H21. Among Millicom Eurobonds, the issue with maturity in April 2031 (USL6388GHX18) looks attractive. The bonds offer a dollar yield of 3.9% with a duration of 7.9 years.
Millicom International Cellular (MIC) provides cellular phone service to more than 62 million wireless subscribers --most of them prepaid -- n more than a dozen emerging markets with limited wireline infrastructure. Latin America is the company's core service area; it does about 85% of its business across the region with 50 million mobile customers, in addition to a growing cable business. It also boasts cellular operations and licenses in Africa. MIC sells products and services under the Tigo brand in most of its markets. Its Tigo Business products and services are 14% of revenue. Swedish investment firm Kinnevik owns 38% of the company.