Digital Lifestyle: Cable & Digital Media Martin Lewerth, EVP Cable and Digital Media Miami, 24 September 2014

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1 Digital Lifestyle: Cable & Digital Media Martin Lewerth, EVP Cable and Digital Media Miami, 24 September 2014

2 Key message - growth on track 1 Cable is one of Millicom s fastest growing businesses 2 Ample room to continue trend by: 1) increasing coverage, 2) driving penetration and 3) upselling services 3 We have successfully completed our merger with UNE, our Colombian partner and are ready to grow our combined businesses 4 We are in good shape achieving our goals and stand by our 2017 guidance of building a $2bn B2C business 2

3 We are growing a $140m business to a $ 400m business Cable & digital media (res.) revenue growth 1 $m, FC Revenue split cable & digital media (res.) 1 %, 2009 and 2014FC 22% FC 9% 69% 2% 4% 27% 8% 29% 30% TV Digital TV Analog BBI Tel DTH Other Revenue CAGR of 23% - Of which 65% organic growth $324 Cable & digital media (res.) RGU growth 1 (000s), FC RGU CAGR of 19% $140 $154 $188 $238 1,084 1, FC FC 1) All 2014 FC numbers excluding UNE Source: Millicom 3

4 We have achieved a market leading position in our cable footprint Today the 7 th largest pay-tv and broadband operator in Latin America Market position TV BBi Costa Rica #1 #2 El Salvador #1 #2 Honduras #3 #2 Guatemala #2 #2 Paraguay #1 #1 Bolivia #2 n/a Colombia #2 #2 Source: Millicom, Dataxis 4

5 We are on track to meet our 2017 forecast Cable and Digital Media revenue growth 1,2,3 $m, $1,050 ~$2, FC Incremental B2C revenues $220 $150 $350 ~$1,200 $ Organic growth In market consolidation Strategic projects UNE 2017 Note:1) Residential business only, not including corporate revenues 2) In constant USD, 3) Pro forma revenue Source: Millicom 5

6 We believe in cable High-growth markets Strong underlying growth in the cable sector, driven by uptake of pay-tv and fixed broadband access Under-served markets with low quality/high price fixed line Telco offers Highly fragmented cable tv markets offering possibilities for consolidation High strategic fit with existing business Realizable synergies between fixed and mobile businesses Bundle and offer a complete end-user product portfolio with both fixed and mobile Opportunity to grow the corporate business through the addition of fixed business Working strategy Healthy growth of the cable business since 2010 Successful integration of new acquisitions, ex. Paraguay and Guatemala Proven successful greenfield and networks expansions 6

7 Two main drivers behind the cable market growth: pay-tv and broadband access Fixed broadband market potential Pay TV market potential % of households with pay-tv subscription, Target range 65% Target range 48% 49% 36% 34% 36% 23% 28% % of households with a fixed broadband subscription, % 44% 36% 29% 22% 11% 6% 10% 10% 10% BO PY GT HN SV CO CR CL AR BO PY GT HN SV CO CR CL AR HFC market potential 2 # (000s) of urban households over poverty line, July 2014 Market potential Homes passed ,027 1,391 1,841 8,749 HN SV CR PY BO GT CO HN SV CR PY BO GT CO During 2014 we will add >400,000 new cable homes passed However, under served markets with still many areas to cover with cable Demand for fixed broadband growing strongly as Internet access becomes available 1) These figures don t include piracy and sub-reporting, 2) 2 In PY and BO MIC has UHF and MMDS coverage, however this figures are not taken into account in the analysis, Only HFC, does not include UNE deployed copper Source: Dataxis, Millicom Market Trackers 7

8 Strong fit and synergies with our mobile business Customer reach and distribution Shared Services Cost Savings Bundling Cross Selling Example: Cost synergies from our acquisition of Cablevision ~20% of enterprise value Branding fixed mobile Backhaul network B2B TV/Internet Billing and CRM Content and services Source: Millicom 8

9 Focus on execution to reach our target Extend Reach & Coverage Network expansion/build-out Cable acquisitions/ market consolidation Increase Penetration Increase uptake of pay-tv Increase broadband penetration Upsell Serve Rural Areas Use satellite / DTH to expand to the rural market Bundle DTH with mobile BB Consumer Value Profit as owner and distributor of content High speed broadband Elevate Tigo from a Telco service provider to a digital lifestyle brand 9

10 Cable network expansion / build-out Expanding Cable homes passed (HFC, #k) Connecting Homes connected (HFC, #k) 2,039 2, June-13 June-14 June-13 June-14 Key indicators Economics of cable expansion Cost per home passed ~$100 Cost per home connected ~$100 Homes connected/homes passed 30-40% ARPU / month $20-30 Payback 1 < 4 years RGUs /Households (HFC) BBI/TV (HFC) Digital/TV (HFC) 45% 41% 29% 23% June-13 June-14 1) Additional costs (i.e capex) and take-up ratio included to calculate payback period Source: Millicom 10

11 In-market consolidation Before After 14 targets acquired in Guatemala from December 2011 to June 2014 Cablevision acquired in Paraguay in September 2012 Multivision acquired in Bolivia in December 2013 Merged with UNE in Colombia in August

12 UNE - a merger fully aligned with our strategy Become a full service provider in our largest and fastest growing market Creating scale; becoming the #2 player in Colombia - $ 1.3billion revenues 1-1 million pay-tv subs The rationale million broadband subs million telephony subs A continuation of our strategy Expand homes passed Increase penetration Grow number of services per household Realize synergies between cable and mobile 1) 2013 Revenue Source: Millicom 12

13 Satellite pay-tv / DTH - unlocking new revenue streams by accessing rural areas Rural Households % of households defined as rural Launched in 5 countries during the last 5 months 33% 39% 49% 39% 39% 40% DTH allows us to reach underserved segments and tap into a new client base Deployment leverage on Tigo mobile s unrivaled presence in rural areas (sales and payments) CR SV HN GT PY BO CR SV HN PY BO GT Opportunities for mobile broadband bundles Economics of DTH build Cost per Home Connected (CPE, sales commission and installation cost) 1 <$185 ARPU/month $16-20 Gross margin ~60-65% Payback 2 < 2 years 1) 1.5 TV connected per home 2) Analysis of single customer installation Source: Cepal, Millicom 13

14 The consumer proposition - creating value Speed the broadband differentiator Content the pay-tv differentiator Features HD, PVRs, VOD etc. 14

15 Amazing content FOX Channels Basic: 11 channels Digital: 5 channels Premium: 10 HD: 3 channels HBO Latin America Basic: 9 channels Digital: 1 Premium: 10 channels HD: 5 Channels Turner Basic: 9 channels Digital: 6 channels HD: 3 channels Televisa ESPN Discovery Basic: 8 channels Digital: 1 channel HD: 3 channels Basic 5 channels Digital 1 channel HD 2 channels Basic 6 channels Digital 3 channels HD 2 channels 15

16 Leading features 16

17 Tigo Sports: our own premium sport channels Recently launched two exclusive sport channels in Paraguay and Bolivia: Providing unique content will be a main driver of the digital lifestyle adoption Exclusive content brings a key differentiator Sports content natural starting point in Latam We bring a unique product - local sports content is fundamental but few local sports channels in our markets We can unlike others monetize across several platforms (cable, DTH, mobile, OTT) 17

18 What did we tell you in 2013? Key pillars presented during the 2013 CMD Realization & Status today 1 1 We run a successful cable business >20% YoY revenue and RGU growth 2 2 Great opportunities in growth in coverage & penetration In H we increased homes passed (HFC) by 7% (157k), with a reduction in penetration of only 1% 3 Synergies between our cable and mobile businesses 3 Paraguay Cable EBITDA levels increased dramatically after our take-over Bundling between Cable & Mobile started 4 Merge with UNE to fast track growth 4 Merger completed in August Further opportunities: DTH, content and OTT 5 Launched DTH and Tigo Sports, more to come soon We execute our strategy and deliver on our promises 18

19 Key messages On track vs. our revenue target building a $2bn business Strong market growth with large remaining potential Key building blocks in place with Tigo Sports, satellite pay-tv and UNE Strategy is working, now focus on execution 19

20 Tigo Star - our new umbrella brand for media and content driven initiatives 20