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LatAm, African telco’s CEO says he is navigating through sluggish macro-economic conditions.
Millicom on Thursday cut its full-year guidance for organic service revenue growth after a weaker-than-expected top line performance in the second quarter of the year.
The emerging markets operator posted revenues of US$1.57 billion for the three months to the end of June, down by 5.7% on the year-ago quarter and a 0.5% decline organically. Service revenue was down by 4.1% to $1.47 billion, representing organic growth of 2.1%.
"We need to navigate through the on-going sluggish macro-economic conditions," said Millicom CEO Mauricio Ramos in the telco’s Q2 report.
"The external environment continues to be very difficult in several markets, which is exacerbating the decline of our legacy voice/SMS business," Ramos said. "This left us with revenue weaker than expected; organic service revenue growth…was well below the rate we anticipated at the start of the year so we are revising downwards the revenue outlook for the remainder of the year."
Millicom now expects service revenue growth in the low to mid-single digits, having previously predicted mid-single digits.
The operator stuck by its earnings guidance though; it forecasts mid to high-single digit EBITDA growth for the full year.
"We are quickly adapting to this more challenging environment as we continue to drive profitability; the adjusted EBITDA margin was up 1.4 percentage points on last year and now sits above our medium term target of 35%," Ramos said.
Millicom’s adjusted EBIDA came in at $560 million in Q2, down 1.6% on the year-ago period. However, its EBITDA margin increased to 35.6% from 34.2%.
"Cash-flow generation was also robust and we now feel we can deliver the 2016 investment plan with lower capital expenditure than previously indicated," Ramos said.
Millicom lowered its capex outlook for 2016 to around $1.1 billion from $1.15 billion-$1.25 billion.
Latin America and Africa-focused Millicom is currently reshaping its portfolio, selling off certain businesses with a view to concentrating on its strongest markets.
In April it closed the sale of its Tigo operation in the Democratic Republic of Congo to Orange, and has since been the subject of speculation that it is negotiating the sale of other businesses to the French telco. It is reportedly considering offloading its operations in Senegal, Ghana and Chad.
Its Africa business was its growth engine in Q2, with organic revenue growth reaching 9.2%. However, Africa contributed just $222 million to group revenues during the quarter, while Latin America brought in $1.35 billion, down 0.7% organically.
In Africa, all countries reported good growth, Millicom said, although it conceded that it experienced a more difficult environment in Tanzania.
Latin America was impacted by macro headwinds and mobile competitive intensity in Colombia, it said.
