Millicom International Cellular SA (MICC: 88.59 0.00 0.00%) declared second quarter 2010 financial results. Quarterly total revenue grew 14% year-over-year to $928.6 million and was better than the Zacks Consensus Estimate of $921 million. This was mainly due to higher contribution from African and Latin American regions and the strengthening of the dollar against a number of local currencies.On a GAAP basis, net income in the second quarter 2010 was $134.3 million or $1.23 per share compared with a net income of $114.3 million or $1.05 per share in the prior-year quarter. However, second quarter EPS of $1.23 was well below the Zacks Consensus Estimate of $1.36, primarily due to a weak economic environment and the impact of new taxes and interconnects cuts introduced in previous quarters.
Quarterly gross margin came in at 78.9% compared with 79.1% in the year-ago quarter. EBITDA during the second quarter was $436.0 million compared with $371.2 million in the prior-year quarter and $423.8 million in the previous quarter. The growth in EBITDA stemmed from aggressive cost cutting measures taken by management in the past one year.
Quarterly EBITDA margin was 47.0% compared with 45.6% in the year-ago quarter and 46.8% in the previous quarter.
At the end of the quarter, Millicom had approximately 36.7 million wireless subscribers, up 19% year over year. Out of this number, 1.8 million were high-speed 3G subscribers. During the quarter, the company added 1.6 million net new mobile customers.
In the second quarter, operating free cash flow was $227 million. This resulted partly due to the strong margin performance and partly due to favorable capital expenditure phasing. Total free cash flow was $155 million in the same quarter compared with just $61 million in the year-ago quarter.
At end of the second quarter of 2010, Millicom had approximately $1,275.6 million of cash & marketable securities on its balance sheet compared with $1,511.2 million at the end of fiscal 2009. Total debt was approximately $1,240 million at the end of the same quarter compared with around $2,346.9 million at the end of fiscal 2009.
Segment Results
Central America generated $330 million of quarterly revenue, down 1.0% year over year. South America generated $323 million of quarterly revenue, up 19% year over year. Africa generated $219 million of quarterly revenue, up 23% year over year. Cable & Fixed Broadband segment generated the rest $56 million of quarterly revenue, up 9% year over year.
In June 2010, Millicom completed the first phase of Ghana tower deal with the transfer of 272 towers to Helios Towers Ghana and received $12 million cash consideration.
Outlook
Due to the strong margin performance in the first half of 2010 and the full consolidation of Honduras in the second half of the year Millicom raised its EBITDA margin guidance to around 47.0% from the mid 40s. Operating free cash flow margin guidance was raised to the high teens from the mid teens. Millicom continues to expect to invest approximately $700 million in capital expenditure for 2010 as a whole.
Millicom expects customer intake to continue to be quite volatile, due to variable factors including the macro environment, seasonality, SIM card registration, competitor promotions and marketing activities. In second half 2010, Millicom expects to see a temporary slowdown in customer additions in Africa, driven mainly by the compulsory registration of new customers in Ghana commencing in third quarter 2010 and in Tanzania commencing in fourth quarter 2010.
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