Millicom Intl Cellular (NASDAQ:TIGO) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Summary
Millicom Intl Cellular reported a strong second quarter with service revenue reaching $2 billion, a 5% organic year-over-year increase, and a record adjusted EBITDA of $1 billion.
The company raised its 2026 equity free cash flow guidance from $900 million to around $1.1 billion and improved its year-end leverage target to below 2.5 times.
Operational highlights include successful integration and performance in Colombia, a strong mobile pre-to-post strategy, and solid growth in digital services within the B2B segment.
The company announced an additional interim dividend of $1.50 per share, reflecting confidence in its cash-generating capacity.
Management emphasized the success of its efficiency initiatives and the positive impact of recent acquisitions on cash flow and profitability.
Full Transcript
OPERATOR
Hello everyone and welcome to our second quarter 2026 results call. This event is being recorded. Our speakers today will be our CEO, Marcelo Benitez, and Bart Van Areen, CFO of the company. The slides for today's presentation are available on our website along with the earnings release and our financial statements. Please turn to Slide 2 for the safe harbor disclosure. We will be making forward-looking statements which involve risks and uncertainties which could have a material impact on our results.
On Slide 3, we define the non-IFRS metrics that we will be referencing throughout the presentation, and you can find the reconciliation table in the back of our earnings release and on our website. With those disclaimers out of the way, let me now turn the call over to our CEO, Marcelo Benitez.
Bart Van Areen (Chief Financial Officer)
Thank you, Marcelo. The second quarter of this year has truly been an exceptional quarter. Service revenue reached $2 billion, increasing 60.1% year on year on a reported basis. On an organic basis, service revenue increased a solid 5.4% year on year. This is more than twice the growth rate we reported in the second quarter of last year. As Marcelo discussed, this acceleration was supported by our pre- to postpaid migration strategy, disciplined pricing, and offer management across our business lines.
Adjusted EBITDA reached $1 billion for the quarter. On an organic basis, adjusted EBITDA increased 9.1% year on year, once again growing faster than organic service revenue and demonstrating the operating leverage built into our business. I want to highlight the 58% year-on-year reported EBITDA growth, almost as fast as the reported revenue growth. Despite having acquired lower-margin businesses and despite having incurred approximately $35 million restructuring charges in Q2, our strong operating performance drove a record $327 million of equity free cash flow, an increase of more than 50% year on year.
This means our recent acquisitions are contributing positively to equity free cash flow within their first year of ownership. Achieving that level of accretion so quickly underscores the strength of our M&A execution, the effectiveness of our integration efforts, and our ability to convert acquired earnings into tangible cash flows. The second quarter equity free cash flow benefited from favorable expense timing and working capital movements. Therefore, please remain cautious forecasting the remainder of the year.
With that, let's review our performance by country, starting for the first time with Colombia. Given its increased relevance in our portfolio, we are very pleased with the progress achieved so far. Organic service revenue increased 11% year on year to $816 million as we began applying our commercial strategies across a significantly larger customer base. Importantly, all three business lines, Mobile, Home, and B2B, contributed to the growth. This broad-based performance is encouraging and demonstrates a commercial opportunity created by the combined operation.
Turning to Guatemala, service revenue increased 5.9% year on year to $382 million. As Marcelo explained, growth was driven primarily by our prepaid-to-postpaid migration strategy together with pricing and offer management. Overall, this was a record quarter for one of our strongest operations. In Panama, service revenue grew 3.1% year over year to $175 million, marking a return to top-line growth. As a reminder, first-quarter performance was impacted by the temporary suspension of a price increase following regulatory intervention.
With the price adjustment reinstated in the second quarter, the business returned to growth, and we remain focused on sustaining this trend. In Paraguay, service revenue increased 3.4% year on year to $169 million. Growth was supported by a 10% expansion in our postpaid customer base together with a low single-digit increase in mobile ARPU. This combination of customer growth and disciplined monetization supported another healthy quarter. Turning to Ecuador, service revenue was broadly flat year on year at $112 million, which means we reversed the service revenue erosion observed under prior ownership and stabilized the business.
Note that the second quarter 2025 results are provided on a pro forma basis for comparison purposes only. In our other markets, comprising Nicaragua, El Salvador, Costa Rica, Bolivia, and Uruguay, service revenue increased 2.8% year on year to $398 million. Let's now turn to the profitability of our operations, starting again with Colombia. Our cost-saving initiatives are running ahead of plan, and Kalteo's profitability has already moved towards levels comparable with our legacy TIGO UNE operation.
Adjusted EBITDA reached $336 million for the quarter, increasing 3.9% year on year. This result includes more than $30 million of severance payments executed during the quarter and roughly $100 million year-to-date. Despite these costs, the operation delivered an adjusted EBITDA margin of 39.4%. While there is still work to be completed, the results reinforce our confidence that the integration and efficiency program is progressing very well. Turning to Guatemala, adjusted EBITDA increased 6.3% year on year to $245 million.
The adjusted EBITDA margin reached 55.6%, improving by almost 1 percentage point year on year. This expansion was driven mainly by operating leverage, together with the solid service revenue growth I just discussed. In Panama, adjusted EBITDA was broadly stable year on year at $92 million. The adjusted EBITDA margin was 50.7%. We remain focused on converting the renewed top-line growth into stronger operating leverage over time. Next, let's turn to Paraguay, which delivered another excellent quarter.
Adjusted EBITDA increased almost 17% year on year to $100 million. The adjusted EBITDA margin expanded by 6.4 percentage points to a company record of 56.9%. This improvement is a testimony to the team's relentless focus on efficiency, particularly within direct costs, while also benefiting from FX tailwinds. I would like to congratulate our General Manager in Paraguay, Roberto, supported by Flor, our new Paraguay CFO that moved from our Guatemalan operation, as well as the entire team for these excellent results.
Turning to Ecuador, the Millicom playbook continues to produce solid results. Adjusted EBITDA increased almost 40% year on year on a pro forma basis to $58 million. The adjusted EBITDA margin reached 48.9%, an improvement of 15.4 percentage points year on year. This represents substantial progress in a relatively short period and is a direct result of the continuous execution of our efficiency initiatives. That said, I want to manage expectation for the second half.
We plan to launch a Tigo brand in Ecuador later this year. This will require incremental marketing and promotional investments, and we therefore expect margin to contract a few percentage points during the remainder of 2026. Adjusted EBITDA in our other markets reached $194 million, increasing 4.7% year on year, faster than the growth, again demonstrating our operational leverage. The adjusted EBITDA margin was 46.3%. Let's now review the equity free cash flow bridge for the quarter.
As discussed, adjusted EBITDA reached $1 billion for the quarter, increasing $369 million year on year. Cash CapEx totaled $274 million, up $72 million compared to prior year, and this increase mainly reflects continued investment in our recently acquired businesses together with higher spending on leased mobile devices under Colombia's customer device leasing program. Spectrum payments were $41 million during the quarter, mainly related to Colombia.
Working capital and other contributed $47 million, representing an improvement of $17 million year on year, benefiting from payment phasing and improved inventory management. Taxes paid increased $40 million year on year in line with the increased contribution from our acquired businesses. Finance charges were $131 million, increasing $49 million year on year, mainly as a result of the additional financing associated with our acquisitions. Lease payments increased $79 million year on year to $161 million.
As in the first quarter, the increase was primarily the result of the expansion in our operating perimeter and the impact of the tower sale and leaseback transaction last year. Putting all of these factors together, equity free cash flow increased by more than 50% year on year to a company record of $327 million. Let's now turn to our net debt and leverage progression. We began the quarter with net debt of $7.6 billion and leverage of 2.76 times.
Equity free cash flow of $327 million and EBITDA growth reduced leverage by approximately 0.11 times. This benefit was largely offset by shareholder distributions. During the quarter we paid $125 million in ordinary dividends, but also $210 million in extraordinary dividends related to last year's tower transaction, for total dividend payments of $335 million. In addition, we made $221 million of M&A-related payments, mainly associated with the acquisition of the remaining call tel stake previously held by Lanacion that does not come with incremental consolidated EBITDA.
Finally, we also have an increase of net debt that is predominantly related to the appreciation of local currency denominated debt. The key takeaway is that despite the increase in net debt to $8.1 billion, leverage actually declined modestly from 2.76 times to 2.73 times, better than I expected during our Q1 call, giving us a solid starting point from which to reduce leverage further during the remainder of the year. That brings me to our 2026 financial targets.
When we last spoke, I committed to updating our 2026 guidance once we had greater visibility into the progress of our turnaround initiatives, integration costs, and the performance of the combined businesses. First, based on the strong operating and financial performance achieved during the first half of this year, we are raising our full-year equity free cash flow guidance. We now expect 2026 equity free cash flow of around $1.1 billion compared with our previous target of at least $900 million.
Second, our first-half performance strengthens our conviction in achieving our leverage objectives. We continue to expect leverage to improve now to below 2.5 times, a level at which we are comfortable operating the business. This updated guidance reflects the strength of the underlying business, continued progress on integration initiatives, and greater visibility into the cash-generating potential of the expanded portfolio. Our strong performance allowed the Board to approve an incremental interim dividend of $1.50 payable in two equal installments in January and April 2027.
At the same time, we remain focused on disciplined execution, including the delivery of our integration plans, investment in our networks, and prudent management of leverage. With that, let me now open the call for questions. Thank you.
OPERATOR
We'll now begin our question and answer session. As a reminder, if you'd like to ask a question, please let us know by emailing us at investorslicom.com and we'll add you to the queue. Our first question for the day comes from Andreas Jolson from DNB.
Andreas Jolson, Analyst at DNB
Good morning and good afternoon. Don't know where you are. Very strong result I must say, so congratulations. I have three questions. First of all, what can you say about phasing of cash flow for the remainder of the year? I think after or in connection to the Q1 conference call, we said that cash flow is mainly generated in Q1–Q4. Now we have a very strong Q2. So how should we look at the phasing of the cash flow for the remainder of the year? And secondly, ARPU levels are coming up quite nicely. Do you agree that we could see that as sort of a leading indicator for further continuous service revenue growth going forward? Or is there something extraordinary in the ARPU numbers for Q2 that we should be aware of? And thirdly, we managed to keep the improved profitability in the, so to say, old Millicom countries. What is the main challenge you see to continue this sustainable improved profitability?
Is there a risk that there is a sort of cost-discipline fatigue in the organization as we have had a strong cost discipline for quite some time now? How should we see that? Thanks a lot.
Marcelo Benitez, Chief Executive Officer
So let me take two and three, and Bart, you take the first one. Hello, Andres, good to see you. I mean, we are here in Tegucigalpa, Honduras, visiting the operations and having this call at the same time. On the ARPU topic, let me just go back over where the strategy, what was the strategy from the beginning? First we invested in strengthening our networks with a very granular approach, looking site by site, sector by sector, node by node and understanding where the untapped demand is. So this untapped demand starts in mobile with prepaid, where prepaid customers are just connected 15 days per month, and nobody wants to be connected only 15 days per month.
So what we are doing is we are extending the days connected, starting in prepaid with more allowances and more days connected with a slightly higher ticket. And through a very, very well-designed and very mature analytics model, we are selecting and pre-approving prepaid customers that are ready to move to postpaid. In combination, this is increasing the total ARPU of the base. In Home, the challenge is a little bit different and the results do have a one-off.
So the challenge in Home has to do with stabilizing churn, again with a very granular investment on the network, and also has to do with calibrating the ARPU. So the new offers are coming with a high ARPU and, as I mentioned in the call, we do see good response from the industry from that perspective. Promotional heat and activities are coming a little bit down. So that, in combination with low churn, is creating a new inflection point towards growth.
The one-off we have in Home has to do with the World Cup rights. We did have, in almost all our countries, exclusivity on all the games for the World Cup and it was a total success. The revenues coming from the World Cup have to do with selling packages to watch the games, more data packages, more pop-ups, more sales in Home, and advertising revenues. So you will see a 3% growth in Home, but 80% of that growth comes from the World Cup effect. You will see this effect in Q2 and in Q3—60% of the World Cup effect is in Q2 and 40% is in Q3.
So that was the first question. The second question was on profitability. No. Okay. Fatigue. Well, I would say we are in a very healthy cultural momentum. We did incorporate the efficiency model as business-as-usual. So we don't see any fatigue at this time. It's more now an obsession to fight inertia. From the countries, we started the purchase order review. As you may understand, at the beginning there was a lot of pushback from the center, but now that pushback is gone because basically the operations and the countries are already adopting this new criteria on where to put each dollar in OPEX and capex.
So it's part of business-as-usual and we do see the results. Also, it is clear that that is the model we want to follow. Incremental efficiencies is something that we are looking at using AI tools and automating mainly the contacts from the customers and internal operational heavy transactional operations.
Bart Van Areen (Chief Financial Officer)
Yep. Then on the phasing, Andreas, I think you know, the equity free cash flow is not made in Q4–Q1. It's more the business is made in Q4–Q1 in the sense that, you know, the entry point customer is the one that will generate 12 months of revenue. So Q4, you win them for the entry point; Q1, you keep them; and then the rest of the year, you know, if a customer won in Q4 will add much less to equity free cash flow than one gained in general. But, you know, we do have phasing in the rest of the year.
I think we have on spectrum, we have on interest charges, we have a little bit of working capital. So we have, you know, some phasing in the first half of the year. Our Q2 is an absolute record equity free cash flow for the company. So that's why I wanted to be a bit cautious. Don't just do Q2 with another two-fourths in Q3 and Q4. I think it will look a little bit like the first half of the year. I think that's a fair way to look at it for the rest of the year: a lower Q3 and then a strong Q4 to end the year.
Andreas Jolson, Analyst at DNB
Very good. Thanks a lot.
Marcelo Benitez, Chief Executive Officer
Thank you, Andres.
OPERATOR
Our next question comes from Vanikanamuri from HSBC.
Vanikanamuri, Analyst at HSBC
Hi. Thanks, Marcelo. Thanks, Bart. So the first question is on how you see the competition or disruption from satellite players. In the light of SpaceX initiation, Space IPO, do you see them as complementary? Is there a potential for partnership with them? The second one is on the integration costs. How do you see the phasing of integration costs over the next couple of quarters? And do you stick with your guidance from last quarter that the full-year guidance for Colombia EBITDA margin would be similar to 2025?
Thank you.
Marcelo Benitez, Chief Executive Officer
Thank you, Fanny. Good to see you. We'll take the first one and Bart's going to take the second. SpaceX and Starlink solutions in our countries—if you analyze it from the mobile perspective, the benefits and experience are still very limited: very poor indoor coverage and very low throughput. As you may understand, in our countries we almost have deployed 4G at 100% of our coverage and in parallel we are launching new coverage and investing in 5G.
So if you compare the experience of SpaceX satellite-to-the-phone compared with 4G and 5G, I think there is a long way for SpaceX to improve their technology. When we go to the fixed business, it is a very good solution for remote areas where we don't have coverage. So there we do see SpaceX gaining a small piece of customers. For example, in Paraguay there is a lot of cattle. These are very far and distant places. So SpaceX is a great solution for them.
But for urban areas it is very difficult, or it is a very, very poor experience compared to fiber still. So in a nutshell, we do see it as a complement product for our customers, but we don't see it as a threat.
Bart Van Areen (Chief Financial Officer)
Yep. On the restructuring charges, Fanny, you know, overall for the group, I mean it's not that we want to lock ourselves—and you see how fast we are restructuring. I mean every week we find new opportunities in the operation and it shows in the margin expansion. So what I have visibility to today, I would say that we have roughly restructuring charges for the full year in between $160–$170 million. Right. We already have booked 60% of that roughly in H1, but on a paid basis we probably already have paid 50.
So 50% in H1 and then another 50%. So roughly $80 million in H1 and another $80 million in H2, let's say.
Vanikanamuri, Analyst at HSBC
Okay. And then on Colombia full-year margin, do we still expect to be in line with FY25 as you had indicated in the previous conference call?
Bart Van Areen (Chief Financial Officer)
Yeah, roughly. Roughly.
Vanikanamuri, Analyst at HSBC
Okay, thank you. Thanks, everyone.
OPERATOR
Thank you. Our next question comes from Gustavo Farias with UBS. Gustavo, you're on mute.
Gustavo Farias, Analyst at UBS
There we go. Sorry for the technical issues. Thanks for taking the time to answer questions. So two questions. First one, the numbers came a little bit below what we expected, so if you could comment on the outlook for capex ahead, if there's any timing-related things to consider, and specifically about the Colombia capex, if this has already reached its run rate. The second question is related to Argentina. We've seen new remedies of the Telefónica Argentina and Telefonica deal.
The regulator requires a third player in the mobile market. Just wondering, does it change anything on your current strategy or not, or there is nothing to be said here? Thank you.
Marcelo Benitez, Chief Executive Officer
I will take the first one, Bart, and you take the second one. With relation to capex, yes, there is a phasing. We are investing in Colombia with a very aggressive approach. We plan to have full 5G coverage and also an additional 1,000 sites to be deployed in the next 12–18 months. So there is going to be an acceleration there, but it's going to be more or less on the rate where we are very comfortable. Today you will see more or less 11%—I mean including the new perimeter—of capex over revenues, and we expect to be full year around 12%.
So that's going to be the effect in the second half and mainly because of Colombia.
Bart Van Areen (Chief Financial Officer)
Maybe to just add a little bit in terms of numbers, I think on a cash basis—so cash capex—we are probably 50% of the year, and on a booked basis it's indeed what Marcelo said: we were 40% of the year, and then so ramping up a little bit in the year. To go to your question on Argentina, I think in previous calls we kind of mentioned Argentina is not on the radar for us. Same for Brazil or Mexico. So we don't have that on the radar.
Gustavo Farias, Analyst at UBS
All right. Directly here. Thank you.
OPERATOR
Thank you. Our next question comes from Gabriel Vaz de Lima from Morgan Stanley.
Gabriel Vaz de Lima, Analyst at Morgan Stanley
Hey everyone. Thanks for the opportunity of asking questions. Congratulations on the results. And just one question on my end—just wanted to get your thoughts on how competition has been in Chile. We've seen some movements on the front-book prices in the last few weeks, so just wanted to get your thoughts on how you're seeing the market.
Marcelo Benitez, Chief Executive Officer
Thank you, Gabriel. Let me step back on Chile first. We saw this as an opportunity to apply our playbook into a Telefónica operation. That playbook starts with efficiencies. So that first phase is doing very well. The execution is going as planned. Just to give you an example, if you compare the last quarter, the EFCF was only 2% over revenues and this quarter we are talking about 13% over revenues. So the first job of our playbook is producing immediate results.
When it has to do with competition, we recognize that it's a very tough market. It's a very fragmented market, very low ARPUs, and strong promotional activities from all the players. Nevertheless, we did see a movement in pricing two weeks ago, as you mentioned, Gabriel, and we see this as a very positive sign from the industry that, of course, we look at with good eyes because it is absolutely key to make the investments in the long term sustainable for all the operators.
But our primary focus is what is under our control—that is to end Phase One that has to do with efficiency, focus, and simplification of how we operate in Chile.
Gabriel Vaz de Lima, Analyst at Morgan Stanley
Thank you very much.
OPERATOR
Our next question comes from Lytovata from Tepimoord.
Lytovata, Analyst at Tepimoord
Hi everyone. Sorry, I was not hearing at first. Good morning. Thank you for the opportunity to ask questions. I have two. First, I would like you to elaborate a little bit on the margin outlook for Colombia. Could you provide an update on the outlook for 2026 and also for the long term? And the second one is regarding Paraguay. You mentioned in your release a phasing effect impacting margins. Can you elaborate a little bit what was the driver and what we can expect on this operation?
Thank you.
Bart Van Areen (Chief Financial Officer)
Yeah. So on the Colombia margin, Q2 is 39.4%. I think we have a very good and solid second quarter. We have, you know, year-on-year revenue growth organically of 11%, so that drives operational efficiencies. We have some tailwinds from currency. So I think, all to say, we want to still be a little bit conservative for the year to go. We also have some rebranding efforts and things like this. So there will be a little bit of contraction from the additional cost.
But at the same time we have some savings from run-rate ERC costs, so employee-related cost and stuff like that. So I don't think there will be a dramatic shift in the margin for the full year. But, you know, as we look at it month to month, we may start with some contraction and then end the year strongly again. But I wouldn't expect—it's also currency driven—no major changes. Second question, it's on the phasing effect, the peak of Q2. Yeah, but why? I think so again we are growing nicely. It's a bit the same story. We're growing nicely. The team is putting a ton of efforts on efficiencies, but the underlying element is nice growth comes with operational leverage, hence margin expansion and good equity free cash flow. If you look at the year to go, the risk is always currency. So Paraguay, Colombia, Bolivia, those are the three countries where I always want to be a little bit conservative as currencies affect our equity free cash flow generation.
Now we did localize a lot of our P&L, meaning we transferred everything to local currencies. We're hedging debts by incurring local currency debt and accepting a little bit of a higher interest rate. So we did all the work there over the last couple years. But still, you know, strong currency will get more, we'll get more equity free cash flow. Yeah, so we just announced additional dividends, a dollar and a half payable in two equal installments in January and April. And if you think about it, we raised our guidance of equity free cash flow to 1.1. Historically I always said, listen, I like to distribute two-thirds of our equity free cash flow. Another way to see that is having 150% coverage of your dividends. And so far the board has followed that recommendation and the AGM as well. So now that we are guiding to 1.1 billion, two-thirds, 750 million, 169 million shares, you get to the four and a half dollars that we will now distribute from AGM to AGM.
On the back of Q4 we will issue new guidance for 2027. And, you know, it will be the privilege of the board to recommend to the AGM a dividend policy for 2027. If you look at my recommendation, that will be again two-thirds of the equity free cash flow that we will guide on the back of Q4 results. Thank you.
OPERATOR
Our next question comes from Marcelo Santos from JP Morgan. Marcelo,
Marcelo Santos, Analyst at JP Morgan
Hi. Actually I'm together with Livia here. But what I would just double down a bit on is the margin part of Paraguay. You mentioned phasing effects on the margin when you discussed the P&L. At least that's what I understood from reading the release. Was there anything that was unusual about the margin in Paraguay that should revert in the coming quarters, or is that Paraguay margin sustainable? That's what we wanted to know about Paraguay.
Marcelo Benitez, Chief Executive Officer
I think what is really outstanding is the currency appreciation, Marcelo, because we do have, even though we did lots of efforts to localize all the costs, we do have heavy soccer rights, local soccer rights, and also content rights that, a lot of them, are still in dollars. So the more it appreciates, the lower the cost is in dollars. So that's more or less what's having an inorganic impact in Q2. Of course we are not experts, even if we tried, to predict currency movements in the future.
But it is at an all-time low, the dollar compared to the guaraní.
Marcelo Santos, Analyst at JP Morgan
Okay, pretty clear. Thank you very much.
OPERATOR
Thank you, Marcelo. This was our last question for today and concludes our question and answer session.
Marcelo Benitez, Chief Executive Officer
Thank you very much everyone.
OPERATOR
Thank you.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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