Millicom International Cellular S.A. (MICC) declared its first quarter of 2011 financial results. Net income for the first quarter of 2011 was $230 million or $2.17 per share compared with $156 million or $1.43 per share in the year-ago quarter. However, excluding one-time items, adjusted EPS in the reported quarter was $1.91, miles ahead of the Zacks Consensus Estimate of $1.53.
Total revenue for the quarter was $1,081 million, up 13% year over year and also abovethe Zacks Consensus Estimate of $1,057 million. This was primarily attributable to a double-digit growth in Latin America and Africa. Furthermore, highly penetrated Central American region also witnessed 5% revenue growth.
EBITDA in the first quarter was $509 million compared with $451 million in the prior-year quarter. Quarterly EBITDA margin was 47.1% compared with 47.3% in the year-ago quarter. Management announced that full-year 2011 EBITDA margin will decline further due to growing investment in brand development and several diversified value-added services (VAS) products. However, fiscal 2011 EBITDA margin will remain above 45%.
As of March 31, 2011, Millicom had approximately 39.763 million wireless subscribers, up 13% year over year. Among the subscribers, nearly 1.927 million were high-speed 3G subscribers. During the reported quarter, the company added 1.2 million net new mobile customers. Consolidated Average Revenue Per User (ARPU) in the fourth quarter was $9.4, remaining same year over year.
In the first quarter of 2011, operating free cash flow was $249 million compared with $234.3 million in the prior-year quarter. Total free cash flow, in the same quarter was $191.2 million compared with $200.1 million in the year-ago quarter.
At the end of the first quarter of 2011, Millicom had approximately $1,220.7 million of cash & cash equivalents compared with $1,023.5 million at the end of fiscal 2010. Total debt was approximately $2,338.3 million at the end of the first quarter of 2011 compared with roughly $2,090.5 million at the end of fiscal 2010. At the end of the reported quarter, debt-to-capitalization ratio was 0.34 compared with 0.39 at the end of fiscal 2010.
Region-wise Results
Central Americagenerated $455 million of quarterly revenue, up 5% year over year. South America generated $387 million of quarterly revenue, up 20% year over year. Africa generated $239 million of quarterly revenue, up 15% from the prior-year quarter.
Outlook
Millicom expects its EBITDA margin for the year 2011 to be above 45% and operating free cash flow to be in the high teens as a percentage of revenue for 2011.Millicom expects capital expenditures (excluding new spectrum expenditure) to surpass $850 million in 2011. The Board of Directors of Millicom has authorized an $800 million share buy-back program for fiscal 2011.
Our Recommendation
Millicom faces stiff competition from telecom giants such as Vodafone Group plc (VOD), Telefonica S.A. (TEF), and France Telecom S.A. (FTE), which may affect its market share. In order to maintain its market share, the company has reduced its price, thereby affecting the ARPU. We maintain our long-term Neutral recommendation on Millicom. Currently, it holds a short-term Zacks Rank # 3 (Hold) on the stock.
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