Executive Summary / Key Takeaways

• Millicom International Cellular (TIGO) is executing a profound transformation, marked by rigorous operational efficiency and strategic M&A, which is visibly translating into robust financial performance.
• The company achieved record equity free cash flow of $728 million in 2024 and $395 million in H1 2025, alongside a significant reduction in leverage to 2.18x in Q2 2025, underscoring its disciplined capital allocation.
• Growth is being driven by a focused strategy on high-value mobile postpaid migrations, a recovering home broadband segment, and expanding B2B digital solutions, all supported by targeted network investments and convergence initiatives.
• Recent strategic acquisitions in Uruguay and Ecuador, coupled with infrastructure monetization through the SBA Communications tower deal, are enhancing Millicom's market position, diversifying cash flows, and strengthening financial flexibility.
• With a 2025 equity free cash flow target of approximately $750 million and a year-end leverage goal below 2.5x, Millicom is committed to sustained value creation and consistent shareholder returns, including a special interim dividend of $2.50 per share.

Millicom's Latin American Digital Highway: A Story of Transformation

Millicom International Cellular S.A. (TIGO), founded in 1990, has evolved into a leading provider of fixed and mobile telecommunications services across Latin America, operating under its well-recognized TIGO and Tigo Business brands. Headquartered in Luxembourg with principal executive offices in Doral, Florida, the company has strategically positioned itself as a key player in the region's digital transformation. As of June 30, 2025, Millicom, including its Honduras Joint Venture, serves over 46 million customers with mobile and fiber-cable services, boasting a fiber-cable footprint covering more than 14 million homes passed.

The company's overarching strategy is built on a foundation of operational efficiency, strategic mergers and acquisitions (M&A), and disciplined capital allocation. This approach is designed to capitalize on the burgeoning demand for data, with mobile traffic increasing around 15% annually, and the broader digitalization trends sweeping across its markets. Millicom operates in a dynamic competitive landscape, contending with major multinational players like América Móvil , Telefónica , and Orange , alongside various local and indirect competitors.

Technological Edge: Fueling Connectivity and Digital Transformation

Millicom's competitive advantage is significantly underpinned by its robust fixed and mobile networks and comprehensive digital platforms. The company offers a differentiated suite of services, including TIGO Money for mobile financial services, TIGO Sports for local entertainment, TIGO ONEtv for pay TV, high-speed data, voice, and sophisticated business-to-business (B2B) solutions such as cloud and security. These offerings are not merely products but integral components of a strategy to enhance customer lifetime value and build a sustainable competitive moat.

A key technological differentiator is Millicom's focus on convergence. Currently, 25% of all new sales are convergent, meaning customers bundle both home and postpaid mobile services. This strategy yields a tangible benefit: convergent customers exhibit half the churn rate of regular Home customers, directly contributing to increased customer lifetime value. This focus has already seen one-third of home customers become convergent, up from one-quarter just a year ago, demonstrating rapid progress. Furthermore, strategic network optimization, such as leveraging new spectrum acquired in Guatemala in 2023, has allowed for improved service delivery and CapEx savings.

Millicom is also actively investing in the digitalization of its customer interface journey and internal processes, utilizing advanced tools like machine learning and artificial intelligence. These initiatives are expected to significantly impact efficiency and customer experience in the coming year. The company's granular approach to CapEx allocation, prioritizing investments "site by site and node by node" in areas of high demand, ensures that capital is deployed where it can generate the highest returns, further solidifying its technological and service delivery capabilities.

Operational Excellence: The Engine of Profitability

Millicom's recent financial performance is a testament to its successful operational transformation. The restructuring program, largely completed in 2024, has been instrumental in making the company "leaner and more cash generative." This program drove the Operating Cash Flow (OCF) margin up by 8 percentage points to a new record of 31% in 2024.

The impact of these efficiency gains is clearly reflected in profitability metrics. Adjusted EBITDA reached a new high of 46.7% in Q2 2025, representing a 3.2 percentage point increase year-over-year. Notably, over half of Millicom's operations now achieve EBITDA margins above 50%, a benchmark the company internally refers to as "Club 50." This relentless focus on cost optimization and operational leverage is deeply embedded in the company's DNA, extending to a granular review of all purchase orders and the digitalization of internal processes.

Capital expenditure (CapEx) is managed with similar discipline. Millicom anticipates CapEx to be between $650 million and $700 million annually, representing 11% to 12% of revenues, a rate deemed both "recurring and sustainable." This is further optimized by strategic partnerships, such as the build-to-suit (BTS) agreement with SBA Communications for up to 2,500 new towers, which is expected to avoid approximately $30 million in CapEx per year.

Strategic Growth Pillars: Mobile, Home, and B2B

Millicom's growth strategy is meticulously executed across its core business segments: Mobile, Home, and B2B.

Mobile Business Momentum

The mobile segment is a primary growth driver, with a strong emphasis on migrating prepaid customers to higher-value postpaid plans. In Q2 2025, Millicom added nearly 250,000 net postpaid customers, an increase from 178,000 a year ago, expanding its postpaid base to nearly 9 million customers, representing 14% growth. For the full year 2024, mobile service revenue growth accelerated to 4.6%, up from 2.4% in 2023. With current postpaid penetration at 20% of the total mobile customer base and a long-term target of 50%, there is substantial runway for ARPU uplift, estimated at 50% compared to prepaid ARPU. Prepaid ARPU is also projected to increase by approximately 5% in 2025.

Country-specific performance highlights this momentum:

• Colombia: Mobile postpaid customer base grew by 15%, surpassing the 4 million mark.
• Guatemala: Postpaid customer base expanded 20% year-over-year.
• Panama: Mobile postpaid customer base grew approximately 20% year-on-year.

Home Business Recovery

The Home business is showing significant signs of recovery. In Q2 2025, the company added 41,000 Home customers, nearly four times the intake from Q2 last year. While service revenue remained slightly negative at -1.4% in Q2 2025, this marks a major improvement from -6.1% last year, with management expressing optimism for positive growth in the second half of 2025. The broadband customer base grew roughly 8% in Q2 2025, underscoring the focus on high-speed data. The accelerated adoption of convergent services within the Home segment is a key factor in reducing churn and enhancing customer lifetime value.

B2B Digital Solutions Driving Growth

The B2B segment continues its robust performance, with service revenue growing nearly 4% organically in Q2 2025. Digital solutions, including cloud, security, and smart connectivity, are a significant driver, exhibiting a 16% Compound Annual Growth Rate (CAGR) over the past two years and a 13% year-on-year increase in mobile B2B in Q2 2025. The Small and Medium Enterprise (SME) customer base expanded by 6% year-on-year in Q2 2025, strengthening Millicom's position in this vital segment. Over 95% of B2B revenues are recurring, providing a stable revenue stream. Large government projects, such as the $207 million teleradiology and telemedicine project in Panama, represent tactical and opportunistic growth avenues that leverage Millicom's specialized expertise.

Competitive Landscape and Strategic Positioning

Millicom operates in a highly competitive Latin American telecommunications market, facing off against established giants like América Móvil (AMX), Telefónica (TEF), and Orange (ORAN), as well as regional players. Millicom positions itself as a challenger, leveraging its strong brand presence in emerging markets and a localized, customer-centric approach.

Compared to América Móvil, Millicom's agility and innovative mobile financial services (TIGO Money) provide a distinct advantage in fostering customer loyalty, particularly in price-sensitive segments. While AMX often benefits from a larger scale, which can translate to broader market reach and potentially lower operational costs, Millicom's tailored offerings and deep understanding of local market dynamics allow it to compete effectively.

Against Telefónica, Millicom's regionally focused strategy emphasizes affordability and rapid deployment, contrasting with TEF's global brand and often more premium service offerings. Millicom's integrated mobile payment platforms offer superior accessibility in underserved regions, a key differentiator. However, Telefónica's technological edge in areas like advanced network speeds in urban centers can present challenges.

In markets where it competes with Orange, Millicom shares a focus on cost-effective solutions for mass markets. While Orange may lead in service reliability due to broader technological investments, Millicom's Tigo brand's accessibility and localized marketing efforts contribute to strong market share capture in underserved areas.

Millicom's competitive moats include its strong brand recognition, network effects from its extensive subscriber base, and unique distribution channels through local partnerships. Its proprietary mobile financial services technology offers tangible benefits by providing accessible payment solutions, which can enhance pricing power and improve gross margins. However, Millicom's smaller scale compared to its larger rivals can lead to higher operating costs and potential technological gaps in advanced network deployments like 5G, which could be exploited by competitors. Millicom addresses these vulnerabilities by focusing on ARPU development, convergence, and continuous network quality improvements, while strategically defending market share in competitive areas through a "playbook" centered on availability, affordability, and accessibility.

Financial Strength and Capital Allocation

Millicom's financial health has significantly strengthened, driven by its efficiency program and disciplined capital management. Equity free cash flow (EFCF) reached $395 million in H1 2025, a substantial $126 million increase over H1 2024. The company achieved a record EFCF of $728 million for the full year 2024.

This robust cash generation has enabled a rapid reduction in leverage. Net debt declined by $245 million in Q3 2024, bringing leverage down to 2.59x from 3.29x at the end of 2023. By Q2 2025, leverage further dropped to 2.18x, well within the company's target of keeping it below 2.5x.

Millicom is committed to returning value to shareholders. A special interim dividend of $2.50 per share was declared in Q2 2025, representing approximately 45% of the net proceeds from the SBA transaction, to be paid in two equal installments in October 2025 and April 2026. This is incremental to the proposed annual dividend of $3.00 per share, payable in four quarterly installments, with the explicit intent to sustain or grow it annually. The company's improved working capital management, evidenced by a $116 million year-over-year improvement in Q1 2025, further contributes to stable cash flow generation. Millicom has also proactively de-dollarized its debt and contracts and implemented FX exposure KPIs for local CFOs to mitigate currency volatility risks.

Strategic Initiatives and Future Outlook

Millicom's strategic roadmap for the future is characterized by targeted M&A and continued operational focus. The company is actively pursuing several key transactions:

• Telefónica Uruguay Acquisition: The $440 million acquisition is expected to be EFCF accretive as early as 2026, diversifying cash flow sources and leveraging Uruguay's stable, investment-grade economy. Regulatory approval is anticipated in Q3 2025.
• Telefónica Ecuador Acquisition: The $380 million acquisition reinforces Millicom's strategic position in Latin America and adds another stable, dollarized economy to its portfolio. Approval is expected in Q4 2025.
• Coltel Acquisition (Colombia): The acquisition of Telefónica's 67.5% stake in Coltel is on track for a Q1 2026 closing. Millicom is also committed to offering to acquire the minority partner EPM's stake.
• SBA Tower Deal: The partial closing of the infrastructure transaction with SBA Communications (SBA) generated approximately $600 million, with the remainder of the $975 million transaction expected to close in Q3 2025. This deal includes a build-to-suit agreement for up to 2,500 new towers, avoiding approximately $30 million in annual CapEx.
• Lati Paraguay Sale: The sale of Lati Paraguay operations to Atis Group, covering approximately 280 sites, further streamlines Millicom's asset portfolio.
• Costa Rica Combination: The regulatory process for combining operations with Liberty Latin America (LILA) is ongoing, with a target closing in Q1 2026.

For 2025, Millicom maintains its guidance of approximately $750 million in equity free cash flow and a year-end leverage ratio below 2.5x. While these targets generally exclude the impact of strategic M&A projects, management anticipates leverage will remain below 2.5x even with these transactions. The Home business is expected to achieve positive growth in the second half of 2025, and overall service revenue growth is projected to continue its upward trend from the 2.4% organic growth seen in Q2 2025.

Key Risks

Despite the positive momentum, Millicom faces several pertinent risks. The Bolivian currency devaluation remains a significant concern. The 40% devaluation of the Boliviano and the adoption of IAS 21 negatively impacted Q1 2025 service revenue by nearly 40% in dollar terms, shaving off about $60 million. While management has made substantial efforts to de-dollarize the cost basis in Bolivia and relies on its diversified portfolio, the situation presents ongoing volatility.

Competitive pressures are also a constant. In Guatemala, aggressive investments by Claro in previously underserved areas have led to increased pressure on ARPU and customer acquisition. Similarly, in Colombia, aggressive prepaid offers from WOM and Telefónica, and intense competition in fixed broadband, necessitate continuous strategic responses. In Costa Rica, aggressive convergence offers from major operators impact Millicom's customer base and ARPU.

Furthermore, legal disputes pose a financial risk, as evidenced by an $80 million provision taken in Q4 2024 for a negative ruling in a Costa Rica case with Telefonica. Finally, the integration of multiple M&A transactions, particularly the Coltel acquisition in Colombia, will require significant management attention and successful execution to realize anticipated synergies and avoid operational disruptions.

Conclusion

Millicom International Cellular is in the midst of a compelling transformation, successfully pivoting towards enhanced operational efficiency, strategic market consolidation, and disciplined capital returns. The company's commitment to leveraging its robust network infrastructure and innovative digital services, particularly in mobile financial services and convergent offerings, is creating a strong competitive position in its diverse Latin American markets. This technological differentiation, combined with a granular and return-focused approach to CapEx, underpins its ability to drive profitable growth.

The strong financial performance, marked by record equity free cash flow and a rapidly improving leverage profile, provides a solid foundation for future growth and shareholder remuneration. While macroeconomic volatility in certain markets and intense competition present ongoing challenges, Millicom's proactive strategies, including de-dollarization efforts and targeted M&A, are designed to mitigate these risks and expand its footprint in stable, dollarized economies. Investors looking for exposure to a dynamic Latin American telecom market, driven by a management team focused on efficiency, strategic expansion, and shareholder value, will find Millicom's story increasingly attractive, with its clear guidance for sustained EFCF and leverage targets serving as tangible indicators of its forward trajectory.