The Board of Directors of Millicom International Cellular S.A. (MICC) has decided to enhance shareholders’ value through a combination of special dividend and share buyback program. The company will return altogether $800 million through this unique combination.
Management has taken a decision to pay a special dividend of $4.60 per share in addition to the proposed 2009 annual dividend of $1.40. The special dividend will be worth $500 million. The rest $300 million will be paid through a share buyback program from open market purchase on NASDAQ by the end of 2010. Both of these decisions are however subject to the approval of shareholders at the Annual General Meeting on May 25, 2010.
Millicom is a leading international operator of mobile telephony services in 13 countries of Latin & Central America, and Africa. The company commands a market share of around 53% in the Central American regions, 16.3% in Latin America, and 30.8% in Africa.
Recently, the company divested almost all of its operations in Asia for more than $550 million. The company has started generating sustainable cash flow. EBITDA margin has exceeded the long-run target of 45% announced by management. Moreover, the high-margin value-added services revenue now constitutes more than 21% of total recurring revenues. This may further improve the bottom-line going forward.
Since a major part of fiscal 2008 capital spending was earmarked to improve network coverage, it is expected that Millicom will now benefit from service expansion. The company stated that capital spending will decrease to $700 million in 2010 compared to $737 million in the previous year, improving the company’s ability to generate sizable positive free cash.
All these positive developments enable management to enhance shareholders’ wealth. The company stated that net debt to EBITDA ratio will remain less than 1 even after the payment of dividends and the completion of the proposed share buyback program.
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