Operator enters phase two of its COVID-19 response strategy, with plans to focus capex on improving capacity rather than building new networks and other cost cuts.
Millicom, the Luxembourg-based operator that provides fixed-and-mobile services in Latin America and Africa under the Tigo brand, remains in protective mode for what it terms phase two of its response to COVID-19.
The operator has already been engaged in crisis management activities for around nine weeks, with a primary focus on protecting employees while maintaining connectivity for customers. During the next phase, it is turning its attention to protecting cash flow by suspending all non-essential investment, instead prioritizing adding network capacity, and reducing capex by $200 million-$300 million. Furthermore, it is implementing an "ambitious" plan to reduce costs by at least $100 million, and it has decided to scrap dividend payments for 2020 and suspend a share buyback program.
According to CEO Mauricio Ramosm, "We expect these actions will enhance our 2020 cash flow by more than $550 million and position us to resume the execution of our plans once the pandemic passes."
Millicom indicated that its revenue has been impacted by lockdowns imposed to reduce the spread of the coronavirus. In Latin America, it estimates that service revenue was reduced by about $10 million in the first quarter of 2020, "stemming in large part from the immediate impact of lock-downs on our prepaid mobile business." The operator said early signs suggest a 6-7% impact on group organic service revenue in April, although it noted there have been signs of modest improvement since Easter.
As things stand, Millicom has decided to leave unchanged its medium-term goals of mid-single-digit organic service revenue growth, mid-to-high single-digit organic EBITDA growth, and around 10% OCF (EBITDA less capex) organic growth for the LatAm segment. However, the company said operating and financial performance in Q2 and for the full year will be "materially weaker than we had anticipated."
The operator was still able to report year-on-year revenue growth of 5.1% to $1.09 billion in the first quarter of 2020. However, operating profit fell by 17.1% to $134 million because of higher depreciation and amortization due to acquisitions. It posted a net loss of $122 million.
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— Anne Morris, Contributing Editor, Light Reading
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