TIGO - Millicom

[alwaysinvert]

Tigo exited Africa completely today. Price for Tanzania not disclosed. The only non-core holding left is now the stake in Helios Towers (worth about $200m).

Cristina Stenbeck sold all her shares during March, which seems to have soured the market on the stock lately.

There have been some significant developments in Colombia - a political scandal around EPM in which the mayor of Medellin tried to establish more direct control over the company by hiring a crony as CEO. The guy was forced to step down almost immediately because he got caught lying in his CV. Lots of twists and turns in that, not all that interesting, but since the mayor has said that he wants to sell EPM's ownership part in Tigo UNE it does have some implications for Millicom. I'm interested as to what extent this sales process is making Tigo hold on to their cash for the time being.

Meanwhile WOM is just about to enter the mobile market now, which has spurred a price war. Planes WOM en Colombia: cuál será el costo de los planes de Movistar, Tigo, Claro... - AS Colombia

In this interview "Vamos por más instalaciones y en abril llegaremos a 300 antenas nuevas en el país" (larepublica.co), the CEO of Tigo Colombia seems to be revealing good subscriber growth numbers in the first part of the year.

Google translated:

Today we have more than 13 million customers. We have overcome the barrier of 10 million customers in the mobile business. To that we must add the almost 2 million customers in the fixed business, we must also add the SMEs that are more than 150,000 and more customers in the corporate world and the businesses we have with the entities.

It's obviously only rough figures here, but this can be compared to 10m mobile customers and 1.74m home customers end of Q4. The total and fixed numbers that he gives seem to indicate robust QoQ growth of ~1 million total users and a continued good pace for the HFC (which was 1.48 of the 1.74m). So it's hard to see how Colombia will come in below expectations for Q1 on that front.

[alwaysinvert]

Millicom | Tigo - Q1 2021 results webcast - YouTube

This quarter was good (in line with my expectations after hearing the Colombia subscriber numbers in advance and reading America Movil's Q1). For once, management was pretty much unreservedly bullish - they saw acceleration throughout the quarter and are expecting remittances to stay strong going forward. Fixed is looking strong everywhere and good signals for beginning of Q2 on the mobile side in Colombia.

The way they talked about Tanzania (competitive sales process), I'd expect that they got at least something like 5x ebitda for the business. I could be wrong here - maybe African assets have even more of a discount against Latam than that. This would mean above $600m, with taxes and other costs that could probably come out at $450-500m when it closes. With the step-up in ebitda and the sales proceeds going to debt repayment leverage ratio is going down fast.

Of course, I would prefer if they just started buying back stock right now. I don't think the debt is an issue here and it doesn't really need to come down more. But anyway, these numbers add up fast no matter which way you choose to go. And Ramos mentioning internal M&A tells me what we almost already knew, that they have an eye towards owning 100% in Colombia soon.

[NotSoWise]

After reading the results I have similar view. Great operating performance but somewhat muted price reaction. Nevertheless I think the price will catch up over the next 6-8 months (multiple re-rate, more EBITDA, less debt and possibly buybacks).

[alwaysinvert]

Who knows what the stock will do, but it is still orphaned. No strong owner (except Bill Miller, maybe he should go and plug it on CNBC right after bitcoin and AMZN), no dividend, no buyback, not a compounder. Being yanked around by index flows and with a tilt to EM, telecom and oil. Not exactly the most hot themes around. There's not any special reason why it should have underperformed LILA this much lately, except that LILA probably still has some more observers willing to dip in when they think the sucker could be turning. Even if almost everyone burned themselves out on that one too, it still has that Malone tag. Yes, LILA got some support out there for the stock with the subsea comments, but that still seems a couple of quarters away from being separated out properly.

Had this quarter from Tigo been coupled with a reintroduced buyback, I wouldn't have been surprised to see the stock pop 20-25%. Earlier this year, I saw the exact same scenario with another Swedish traded SDB that had to postpone a large buyback program last spring - it popped a lot on the news of its introduction even though it was obvious what was going to happen to anyone following the company. Well, except if you thought management were liars for no good reason whatsoever.

The risks from covid are all but over and what's left is just the regular old EM risk. Nothing to scoff at of course. But a way more unfocused and prepaid heavy Millicom traded at twice the current levels when it still offered a high dividend. Was that a bit too rich? Probably. But it is still says something, there's no rule that says the stock should have this level of discount just because it's EM. 

I may not agree with or understand exactly what they are doing on the financing side, but it looks like they are operationally being very methodical and looking long-term.

[dwy000]

1 hour ago, alwaysinvert said:

Who knows what the stock will do, but it is still orphaned. No strong owner (except Bill Miller, maybe he should go and plug it on CNBC right after bitcoin and AMZN), no dividend, no buyback, not a compounder. Being yanked around by index flows and with a tilt to EM, telecom and oil. Not exactly the most hot themes around. There's not any special reason why it should have underperformed LILA this much lately, except that LILA probably still has some more observers willing to dip in when they think the sucker could be turning. Even if almost everyone burned themselves out on that one too, it still has that Malone tag. Yes, LILA got some support out there for the stock with the subsea comments, but that still seems a couple of quarters away from being separated out properly.

Had this quarter from Tigo been coupled with a reintroduced buyback, I wouldn't have been surprised to see the stock pop 20-25%. Earlier this year, I saw the exact same scenario with another Swedish traded SDB that had to postpone a large buyback program last spring - it popped a lot on the news of its introduction even though it was obvious what was going to happen to anyone following the company. Well, except if you thought management were liars for no good reason whatsoever.

The risks from covid are all but over and what's left is just the regular old EM risk. Nothing to scoff at of course. But a way more unfocused and prepaid heavy Millicom traded at twice the current levels when it still offered a high dividend. Was that a bit too rich? Probably. But it is still says something, there's no rule that says the stock should have this level of discount just because it's EM. 

I may not agree with or understand exactly what they are doing on the financing side, but it looks like they are operationally being very methodical and looking long-term.

Great summary AlwaysInvert.  Completely agree.  Its still a small stock ($4bn mkt cap) and has the taint of EM, slow growth, complexity (they don't own 100% of some of the major markets).  Mgmt has done a great job of refocusing by getting out of African markets.  They still need a couple of underperformers to turn around (Bolivia, Honduras).  ARPU remains problematic even as customers grow but hopefully that fixes as the economies reopen.

I'm not looking for a double here or massive stock pop.  This should be a slow but consistent outperformer for years to come and i kind of like that it flies under the radar screen.  I'd also prefer if mgmt avoided a dividend and didn't rush to stock buybacks while there are opportunities to add to existing markets or build out geographic growth in the region. 

[NotSoWise]

Most likely, in 6 months we will have 3 consecutive quarters of customer growth, higher reve, EBITDA, FCF and probably buybacks in place, this should be enough for multiple re-rate. With higher valuations of blue chips, at some point people will start to look for cheaper and growing businesses, even smaller ones. On the other hand, with so much money in index funds vs active funds, I also think there is a risk it may take a bit longer than usual for the price to go up.

As for ARPU in USD, which may be concerning, I think its not yet CEO's main focus point plus its hard to manage, due to:

1.       CEO plays CHTR tried playbook – have good quality network, full product offer, get customers/ market share and lower churn. CHTR so far hasn’t been focusing on raising prices.

2.       ARPU in USD fluctuates due to FX, CEO cant change pricing in local currency on a monthly or quarterly basis back and forth

3.       Also politically not ideal time to raise prices

I see TIGO as 2x-3x in 5 years from the current level, the upper part of returns depending on the extent of multiple re-rate. CEO was buying large amounts pre-COVID at  around +/- USD 60 (also with credit, as when price went down he had a margin call and had to sell some). Buying at USD 60, I think his number was at least USD 120, maybe even USD 150. Otherwise why buy at margin?

Edited May 1, 2021 by NotSoWise

[alwaysinvert]

Ramos is talking up the prospects of Millicom in the largest Swedish business daily: Millicoms vd Mauricio Ramos lyfter fram ”dold vacker juvel” (di.se)

He mentions hidden infrastructure assets within the company (9,000 towers, 3,000 more getting built and 150,000 km of cable) and says they haven't decided what to do with them, naming spinoffs or sales as possibilities.

They haven't shown much care for the stock price before. Merger talks on the horizon? Or maybe they just saw the reaction to the subsea cable comments by LILA. They have already had a quarterly call since then with plenty of opportunity to push that angle though.

He also says buybacks could start in Q2 or Q3 (slight positive change from the earlier second half of the year), talks up the cable growth and brags about their ESG rating.

[NotSoWise]

Talking up share price would not have worked over the past 12 months with deteriorating numbers, so he didnt bother. However, now that the numbers have started growing, he could actually succeed in TIGO multiple re-rating (maybe even +1x by the end of year). I think they have already started buybacks 2-3 weeks ago, but I would not bet my house on this. Like you said, this might come in handy for M&A.

PS. Maybe LILAK CEO should also do an interview for this Swedish newspaper...

[alwaysinvert]

They haven't restarted the buybacks yet. You are probably confusing that with the authorization at the AGM.

 

You can view buyback activity on the Stockholm exchange here, it gets reported usually with a few days delay: Corporate Actions Stockholm - Repurchases of Own Shares - Nasdaq (nasdaqomx.com)

 

When they start repurchases they will probably issue a press release with their criteria like they did last year, although strictly speaking that is not necessary to do as far as I'm aware (this could be impacted by their Luxembourg domicile, though).

[NotSoWise]

You are right. Thanks for pointing this out.

[alwaysinvert]

The board of EPM has now officially decided to sell its part in UNE Tigo. This is probably not the final word, as it now enters a political process of which I don't understand all the intricacies. But some progress from the perspective of Millicom. Hopefully a deal can be finalized in the next 12 months.

 

Junta de EPM aprobó la enajenación de su participación accionaria en UNE y Telco (larepublica.co)

[alwaysinvert]

Millicom to sell remaining stake in Helios Towers (globenewswire.com)

This completes the transformation into a Latin American pure play. With proceeds of about $180m if they sell at market price it should also give a good push to the upcoming buybacks. 

[MattR]

3 hours ago, alwaysinvert said:

Millicom to sell remaining stake in Helios Towers (globenewswire.com)

This completes the transformation into a Latin American pure play. With proceeds of about $180m if they sell at market price it should also give a good push to the upcoming buybacks. 

I hope that drives down the price of Helios Towers. Helios Towers seem like a good play.