Fitch Ratings has affirmed
In addition, Fitch has affirmed Millicom's senior unsecured debt at 'BB+'.
Millicom's ratings reflect geographic diversification, strong brand recognition, and network quality, all of which contribute to leading positions in key markets, a strong subscriber base, and solid operating cash flow generation.
Millicom's ratings are currently constrained by the operating environments and country ceilings of operations that contribute to significant dividend flow.
The Board of Directors has confirmed that a potential acquisition of all outstanding shares in Millicom is being discussed with
The Stable Outlook reflects Fitch's expectation that the company will maintain consolidated net leverage levels below 3.5x and that it will continue to lead in key markets.
Key Rating Drivers
Country Ceiling Constrained: Millicom's ratings are constrained by the 'BB' Country Ceiling of
Strong Market Positions: Millicom holds the No. 1 or No. 2 position in most of its markets. Fitch expects Millicom's strong market position to remain intact, supported by network quality and coverage and growing fixed-line home operations. These qualities across its footprint are expected to enable the company to continue to generate stable cash flows and support growth opportunities in underpenetrated mobile data and fixed broadband services.
Solid Cash Flow Generation: Millicom's strong market position supports EBITDA margins in the low-to mid-30% range and FFO margins around 20%, consistent with an investment-grade operator. Fitch expects modest FCF generation, with capex of around 18% of revenues. Increased competition in markets such as
Weak Operating Environment: Millicom's upgrade and downgrade net leverage rating sensitivities of 2.5x and 3.5x, respectively, are tighter than similarly rated issuers with strong business positions due to the weak operating environment in most of the countries in which it operates in
Moderate Deleveraging Expected: Millicom's debt-funded acquisitions of over the past few years have added pressure on its financial position. Fitch projects that the company's consolidated net debt to EBITDA ratio will fall to 3.0x in 2023 from an estimated 3.2x in 2022. Absent another acquisition or extraordinary dividends, net leverage should fall below 3.0x in 2024. Approximately
Derivation Summary
Millicom's ratings are well positioned relative to regional telecom peers in the 'BB' rating category, based on a solid financial profile and operational scale and diversification, as well as strong positions in key markets. These strengths are offset by high concentration in countries with low sovereign ratings in
Millicom has a much stronger financial profile than diversified integrated telecom operators in the region such as
When compared with integrated investment-grade operators, such as
Key Assumptions
Fitch's Key Assumptions Within the Rating Case for the Issuer Include:
Low-single-digit revenue growth in 2023, due mainly to pricing pressure in mobile, low-to-mid-single-digit revenue growth thereafter;
Stable EBITDA margins in the 34% range;
Average capex/sales (including spectrum) of 18% over the medium term;
No material shareholder distributions in the short term.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Material and consistent dividends from Millicom's subsidiaries in
An acquisition of EPM's ownership position in UNE EPM;
Total adjusted net debt/EBITDAR of 2.5x or below over the rating horizon.
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Consolidated total adjusted net debt/EBITDAR at 3.5x or above;
Holding company debt/upstream dividends received consistently above 4.5x;
A downgrade to
A change in financial policy could have negative implications for Millicom's ratings.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Strong Liquidity Profile: Millicom has a strong liquidity position, with a large cash position that fully covers short-term debt. As of
Issuer Profile
Summary of Financial Adjustments
Standard lease adjustments.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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