Colombia - Millicom

Colombia
Esteban Iriarte, General Manager Colombia
Capital Markets Day, 24 September 2014
1
Key Messages
1
Colombia is one of the most attractive emerging markets for investment in Latin America
2
Separately, Millicom and UNE are already very successful in Colombia
3
Together, Tigo and UNE are aiming to become the #2 Telecom player in the market
4
We have a clear strategy to capture growth and build a full digital lifestyle company
2
Colombia is one of the most attractive emerging markets for
investment in Latin America
3rd largest Latam
country
Strong growth
economy
Population (m, 2013)
GDP growth1 (%)
World Bank Index2
Historic
198
Brazil
Forecast
6.1
Peru
5.2
Regulatory
Quality
64
116
Mexico
5.1
Chile
4.3
47
Colombia
42
Argentina
Peru
Stable political
country
Govt.
Effectiveness
5.0
Colombia
57
4.5
Ease of
Doing Business
31
Mexico
3.0
43
3.3
31
Chile
18
Brazil
2.1
2.4
Political
Stability
17
1. Forecast Avg. growth ’14 F-’16F, Historic Avg. 2010-13 2. Doing business rank out of 198 countries in 2014; All other parameters out of 207
countries in 2012. Source: Focus Consensus, World Bank, Millicom, DANE
3
Colombia is a vast country with a very regionalized market
Some Highlights
Barranquilla
Pop. 9.8m (21%)
14.8% of national GDP
Bucaramanga
Pop. 4.8m (11%)
13.0% of national GDP
 Vast land area (26th in the world)
 Mostly urban (75% of pop.)
 Highly regionalized with
Medellin
Pop. 9.2m (20%)
17.3% of national GDP
Cali
Pop. 7.4m (16%)
12.2% of national
GDP
mountainous terrain
Bogotá
Pop. 14.1m (31%)
41.9% of national GDP
Amazon region
Pop. ~1% population
Source: DANE, Regional Information 2011
4
The telecoms market has grown rapidly and there is potential for
future growth
The Telecoms market has grown
at 7% p.a. for the last 2 years
Telecoms market revenue1 ($b)
…and there is potential to significantly
increase consumer spend
Consumer spending on Telecoms
(% of income, 2012)
+7%
12.2
12.7
5.0%
5.0%
4.9%
11.1
3.8%
Potential
increase
1.2%
2011
2012
2013
USA
1. Includes 5% revenue assumption for DirecTV, other small fixed players & MVNOs
Source: Company Data, Frost and Sullivan, INEGI-Mexico, INE-Chile, DANE-Colombia, INEC- Ecuador
5
Tigo mobile has already been very successful in Colombia
Tigo has grown at more than double the
market rate for the last 2 years
Quarterly mobile revenue growth (%)
Gaining mobile market share
and strong position in data
Tigo mobile revenue market share (%)
+3.5pp
28
15.4%
11.8%
20
2012
2014
Mobile data revenue market share (%, Q1 2014)
10
Industry
Avg.
49%
24%
0
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
2014
Source: Quarterly Reports AMX and TEF; Company quarterly reports; ICT Ministry
6
Claro
23%
Driven by innovation and expansion of the digital lifestyle especially
music services
Our approach differentiates us
from the rest of the Industry
Tigo is the largest music provider in
Colombia, driving the digital lifestyle
Colombian music average monthly revenue1
 >33k new users per month from Jan to
Jun 2014
Top 4 players have
~70% market share
 Unique experience with live artist & user
sessions
Deezer
Vevo
YouTube
 Music in Tigo’s DNA - music in 90% of
data plans
Itunes
 Experienced music experts driving the
offer
 Tigo’s brand is linked to music - 40% see
us as brand that lives music
1: Internal estimations
7
UNE is the #2 fixed BB and PayTV operator in Colombia
UNE Revenue and EBITDA ($m, 2013)
Market share (Q1 14)
Business Description
1,335
Pay TV
 Fixed line, fixed / mobile BB, PayTV
 70% urban pop. coverage (~3m HH
22%
passed)
314
 Medellin region focus
BBI
 Mostly HFC and DSL
Revenue
EBITDA
7.6% CAGR11-13
23.5% Margin
30%
 Premium content (HD and bundles)
Subsidiaries
Fixed (voice, BB, TV)
Largest BPO & call
center player in CO
Fixed (voice, BB, TV)
Assumed control of UNE 14 August 2014
Source: Millicom; Market Research
8
Wholesale data /
voice, retail calling
cards
UNE has grown above market average and offers innovative
propositions
UNE has grown above the industry…
…with leading, innovative propositions
Fixed revenue growth (%)
HD TV
Smart Play
30
UNE has around
half the households
passed of Claro
 Unique operator offering
>60 HD channels
 150k clients in one year
20
 First operator to offer
scheduled and ondemand TV programs in
a single package
10
Industry
UNE MAS
 Only fixed operator to
0
offer a loyalty program
 >500k clients registered
within 2 years
-10
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
2014
Source: Quarterly reports AMX, TEF & ETB and Company data. UNE figures don’t include subsidiaries.
9
UNE Store
 First operator to expand
to a digital store selling
its portfolio products
Together, UNE and Tigo are aiming to become the second operator
Market share by users (Q1 2014)
Other
8%
14%
19%
21%
4%
11%
24%
19%
7%
22%
8%
16%
21%
30%
27%
56%
44%
32%
17%
PayTV
Fixed
Telephony
Broadband
Internet
Mobile
Telephony
#2
#1
#2
#3
Source: Millicom; Company Data; Market Research
10
There is a clear strategy in place for the merged companies to
capture growth
VISION
“Become the leading telecoms digital lifestyle player in Colombia.”
1
 Focus on data and digital services, offering tailored and segmented services
Mobile
 Provide excellent customer experience, special focus in Bogotá, Medellín and the Coast
 Actively look for cost efficiencies to be reinvested in the business
2
 Increase homes passed reaching over 5m by 2020
Home
 Increase penetration outside Medellín, focusing on Bogotá and other major cities
 Grow the home connected ratio to above 40% by end of 2020
3
 Offer segmented products and customer support for SMEs, Large companies and Govt.
B2B
 Increase mobile market share leveraging UNE's positioning in fixed services
 Increase profitability through operational excellence
11
Develop integrated offer
STRATEGY
Tigo and UNE have highly complementary footprints and services
Comprehensive digital Telco offer
matching Claro and Movistar
Highly complementary geographic footprints
Bogotá
Mobile
 
  
Fixed
line
 
  
 
 
 
  
  
  
 
  
B2B
Fixed
Internet
Competitive strength
Region
Opportunity
Medellin
High cross-selling mobile potential
Barranquilla
High cross-selling fixed potential
Central
Leverage infrastructure & coverage
Bogota
Expand on data & B2B strengths
Other
Low (<1.5% population)
Key
Strong
Med
Niche
Cable
TV
Satellite
TV
Weak
12
We will provide an integrated offer to our Customers
Bundle offers
Mobile
Content &
Entertainment
PayTV
Fixed BB &
Telephony
13
There is a clear integration plan in place since merger August 14, 2014
Sep – Jan 2015 (5 months)
Aug 2014
Integration
setup
1
Setup

 Set-up
integration
teams
From Feb 2015
Implementation
Integration planning
2
Mobilizing
 Mobilize the
organization
3
Define future
state business
plans
 Develop
4 Implement-
ation planning
 Develop detailed
integrated
integration
 Define baseline
company
plans
business plans
blueprint
 Formalize
Merger completed
August 14, 2014
business plan
impact
End goal is to enable full scale implementation
at the end of the five setup and planning steps
14
5
Implementation
 Implement
strategy
The combined business with approximately $2.3b revenue
2013
2013
Synergies
Combined1
Includes subsidiaries
Revenue
in m$
2,276
>$600m NPV
Cross-selling
and bundling
1,335
969
Transmission &
internet acces
for Tigo
EBITDA
EBITDA margin
237
24.4%
311
23.3%
548
24.1%
Improved sales
and distribution
Capex
Capex %
166
17.2%
250
18.7%
416
18.3%
Other OPEX and
CAPEX savings
(E – Cap) / Rev
7.2%
4.6%
5.8%
Employees (k)
6.2
18.7
24.9
in m$
1. UNE 2013 figures in IFRS including intercompany eliminations
15
We have identified and prioritized over 200 projects
to explore the synergies
Impact
Quick wins
Prioritized
High
Medium
Long term savings
63
Projects
109
Projects
Low
Second order savings
18
Projects
Low priority savings
0 Projects
12
Projects
Low
Deprioritized
Medium
High
Complexity
16
We have an experienced Executive team with strong leadership
Esteban Iriarte, General Manager
• Tigo GM appointed in May-12
• Previously Global CO Home & Corporate for MIC
• +5yrs experience with MIC
• 17 years in Telecoms
Leopoldo Gutierrez
CFO
Ana Marina Jimenez
Legal & Corp Affairs
Jaime A Plaza
Regulatory
César Lopez
Operations
• Appointed in May-12
• +5yrs experience with
MIC
• Previously Operational
Latam CFO for MIC
• Appointed in May-05
• Previously VP Legal &
Regulatory Affairs for
Avantel
• +20yrs in Telecoms
• Appointed in Jun-07
• Previously Manager
Regulatory Affairs &
Inst Rel. at UNE
• +20yrs in Telecoms
• Appointed in Jun-14
• Previously Corporate
VP of Operations for
Grupo Orbis
Marcelo Cataldo
Mobile
Jose Miguel Guzman
Cable
Santiago Londoño
B2B
Alvaro Sanchez
Marketing
• Appointed in Jan-13
• +4yrs experience at MIC
• Previously Global Chief
Officer Solutions for MIC
• +6yrs in Telecoms
• Appointed Aug 2014
• Previously at Lojack
Corp., Arcadia Capital
and Booz
• +20yrs of business
experience incl. TMT
• Appointed in Aug-10
• Previously President
and CEO of Orbitel
• +10yrs in Telecoms
• Appointed in May-14
• Previously Director
Marketing & Innovation
for SAB Miller Latam
Marie Claude Joachim
Strategic HR
DanielTorras
Torras
Daniel
Integration
Integration
Rodrigo Ferreira
Customer Operations
Jhon Jairo Vasquez
Chief Audit Officer
• Appointed in Jun-14
• Previously HR &
Communication
Manager for FENOCO
• Appointed
in Aug• Appointed
in Aug-14
14
• Previously Associate
• Previously
Partner
at Delta Associate
PartnersPartner at Delta
Partners
• +20yrs in
Telecoms
• +20 years in Telco
17
• Appointed in Feb-09
• Previously President
of Emtelco
• +20yrs in Telecoms
• Appointed in Sep-14
• Previously Corporate
Auditor for ISA
Recap: Key Messages
1
Colombia is one of the most attractive emerging markets for investment in Latin America
2
Separately, Millicom and UNE are already very successful in Colombia
3
Together, Tigo and UNE are aiming to become the #2 Telecom player in the market
4
We have a clear strategy to capture growth and build a full digital lifestyle company
18
19