Latam strategy Mario Zanotti, Senior EVP Operations Capital Markets Day, 24 September 2014
Key Messages 1 Millicom is building a high value / high stickiness integrated digital ecosystem 2 There is strong growth potential in all areas of the business 3 We relentlessly look for additional operational efficiency 2
Latam represents over 86% of MIC revenues from 8 countries across the region Latam represents 86% of group sales Exposure across the Latam region Revenue breakdown (incl. UNE), H1 14 Country weight % of revenues in Latam (incl. UNE), H1 14 86% 14% 100% 10% 7% 2% 0.15% 100% 34% Including UNE 8% 20% 19% 40% 12% 33% South America (excl. UNE) UNE Central America Africa MIC Group CO PY BO GT HN SV CR NI MIC Latam 1: Figures are pro forma, demonstrating UNE s hypothetical impact had it been part of Millicom in H1 2014 and not considering elimination of intra-company between Tigo and UNE 3
We have established a foundation for a digital ecosystem by building a strong market position in markets with great potential GT GDP CAGR (14-17, %) GDP/Capita (2013, USDk) 5.5 7.3 MOBILE MFS HOME B2B HN GDP CAGR (14-17, %) GDP/Capita (2013, USDk) 5.1 4.6 MOBILE MFS HOME B2B SV GDP CAGR (14-17, %) GDP/Capita (2013, USDk) 3.8 7.8 MOBILE MFS HOME B2B NI GDP CAGR (14-17, %) GDP/Capita (2013, USDk) 6.0 4.6 MOBILE MFS HOME B2B CR GDP CAGR (14-17, %) GDP/Capita (2013, USDk) 6.3 13.9 MOBILE MFS HOME B2B CO GDP CAGR (14-17, %) GDP/Capita (2013, USDk) 6.5 12.4 MOBILE MFS HOME B2B BO GDP CAGR (14-17, %) GDP/Capita (2013, USDk) 7.0 6.1 MOBILE MFS HOME B2B PY GDP CAGR (14-17, %) GDP/Capita (2013, USDk) 6.5 8.0 MOBILE MFS HOME B2B Note: GDP based on PPP valuation Source: IMF and World Bank, MIC internal analysis 4
We are building a high value/high stickiness integrated digital ecosystem Our aims and objectives in Latam One Consumer Anything/Anywhere Consumer centric offers Integrated/bundled offers Unique Digital Experience Exciting entertainment offers Flawless customer experience Available on all screens Highly Valued Brand New brand architecture to enhance Tigo positioning Positively valued brand Owning digital attributes 5
We are building an integrated ecosystem to attract and engage consumers with our brand Tigo Sports Sports 2013 Music 2014 Smart Apps 2015 Verticals Evolution Tigo Music Music Unlimited Music + Games, VOD, Football Video Most successful 360 o music streaming experience in Latam >0.5 m active Music users 30% local content Exclusivity rights 1.4 M downloads, 4- stars rating USD 1.37M incremental revenue in 1 st month Apps Mobile TV 6
Our strategy is to maximize growth from the most significant opportunities Latam Winning Strategy 1 Mobile 2 Home 3 B2B 4 MFS From Volume to Value Building a $2bn Business Capturing the Opportunity Creating a Blockbuster 5 EXPERIENCE ECOSYSTEM EFFICIENCY ENTREPRENEURSHIP To drive PREFERENCE To drive ADOPTION To drive SUSTAINABILITY To drive OWNERSHIP 7
8 Mobile Business Unit
Mobile from Volume to Value, Tigo the preferred operator for the smartphone user 1 MOBILE Mobile Strategy Highlights Revenue vs. Traffic Evolution a b c Increase Smartphone penetration accelerating data penetration Develop digital products and services focusing on unique Entertainment VAS Data monetization and cost reduction leveraging bundles smart pricing Traffic Benchmark 1 Data Rev. Benchmark 2 3.4x Traffic Data Revenue Gross Margin 1H12 2H12 1H13 Growth in High Value Customers Subscribers ( 000) and yoy growth (%) 2H13 1H14 2.4x 2.0x 1.8x 1.3x d Win with digital customers differentiating quality of experience HVC (>$20) 28,443 4,166 29,823 4,627 +5% +11% e Optimize channel network innovating along trade channels to reach customers anytime, anywhere 24,277 25,196 1H13 1H14 +4% 1: 61% CAGR Global Data Traffic Forecast CISCO Visual Networking Index: 2013-2018 2: 12.4% CAGR Data Service Revenue Forecast Informa/OVUM 9
Growing Digital segments (3X avg ARPU) 2X faster 1 MOBILE Jul 14 Digital 12% Non Digital 88% +117% Digital 26% Non Digital 74% Competitors Digital 12% Non Digital 88% +67% Digital 20% Non Digital 80% Jun 2013 Jul 2014 Brand Tracker Jul 14 vs Jun 13 (excl. Honduras). n= 2200/3300 10
In summary, we are delivering against what we promised in the last CMD 1 MOBILE What we promised What we delivered in Latam Smartphone penetration Mobile data growth Data monetization and cost reduction Cross selling across BU s Innovative business model Quality devices < USD 60 Increased SP sales by 276% from Q1-13 to Q2-14 Forecast to reach 30+% SP penetration by the end of 14 YoY revenue growth of 28% and 29% in 13 and 14 YTD Reduce weight of datacard revenues by 50+% by end 14 Production cost per GB reduced by 24% and GM increased by 2 pp Savings on device subsidy of over USD 26M during Jan-Jul 14 Consumer based segmentation to better target sales and bundling Churn significantly lower when bundling across BU s Move forward with digital verticals like Music and Sports Provide the best digital experience through Smart Apps, MFS App and other digital products 11
12 B2B Business Unit
Capturing the B2B opportunity, Tigo the preferred business partner 3 B2B B2B Strategy Highlights Latam B2B ambition a Redefine market position from service provider to solution provider focusing brand on digital work style B2B as % of total revenue in Latam Tigo Latam Latam Benchmark b Develop segmented approach to companies targeting all business sizes 25% 35% c Offer appropriate product/solution mix and increase diversification 9,5% 10,5% 10,7% 12-15% d Optimize sales process and customer interface improving customer experience while maximizing cross-sell 2012 2013 H1 14 Ambition Operator A 2013 Operator B 2013 13
A segmented approach allows us to appropriately address the market 3 B2B Business Segmentation Commercial Approach FTEs Sales Product Customer care Positioning Multi-national CAM Regional Account Manager Cross country solutions Central and local dedicated support Primary and secondary Large 250+ 100-250 Direct sales Tailored products & solutions with focus on profitability Local dedicated support Primary and secondary provider 50-100 Medium Small Micro 20-50 10-20 1-9 Indirect sales; shops, online, partners Avoid complexity w/ standardized packages and bundles Shared support Primary provider 14
15 MFS Business Unit
Creating a blockbuster, Tigo brings digital access to a full range of consumer financial services 4 MFS MFS Strategy Highlights MFS penetration ambition a Focus on customer needs understanding that each market has a unique framework and set of needs % of Tigo Latin America mobile subscribers +30% b Migrate to a wallet based product enabling our key markets to accelerate financial inclusion and product utility c Continue to innovate introducing smartphone products to LatAM markets 6% 13% d International Remittance develop and widen with the addition of new partners and receipt models 2012 H1 14 Ambition 16
We deliver successful products and services to move customers into the mobile wallet ecosystem and keep them there 4 MFS Results El Salvador International Remittances Money transfers 140K transactions totaling USD 20M in 2014 Developing relationships with the largest transfer companies that together reach approximately 70% of the market Wallet Services Paraguay Microloans Joint scoring for loans $ 32K microloans totaling USD 8M in 2014 First ever loan for 83% of the customers Financial Education program in alliance with IADB 1 and local bank Honduras Government to Person Assistance program Bono 10,000 program with Government, World Bank, IADB, and CABEI 2 Tigo Money selected as vehicle for assistance because safer, easier, and more convenient El Salvador Utility Payments $ Number 2 in the market for bill payments 20% market share reached in 8 months Largest physical network 1. Inter-American Development Bank 2. Central American Bank for Economic Integration 17
We relentlessly look for additional operational efficiency 5 EFFICIENCY Delivering OpEx savings Developing in-market OpEx efficiency plans We plan to deliver results already in 2014 a Capacity planning Optimizing CapEx Country Example b Coverage planning Efficiency Program 12-week diagnosis project 27 OpEx efficiency opportunities identified Procurement centralization and pricing c targets Efficiency priorities Network operations Mobile / B2B synergies Contact Center Sales Organization Operating model changes and d improvements e Technical specifications 18
Recap Key Messages 1 Millicom is building a high value / high stickiness integrated digital ecosystem 2 There is strong growth potential in all areas of the business 3 We relentlessly look for additional operational efficiency 19