Low-Cost Competition And High Capex Will Weaken Latin American Networks

Key Takeaways

• Rising competition, heavy capital investments, and currency volatility threaten revenue growth, cash flow, and margins despite digital transformation opportunities in Latin America.
  
• Market share and long-term earnings are at risk from global tech disruption, high leverage, and exposure to refinancing and rising interest rates.
  
• Solid organic growth, operational efficiency, successful M&A, prudent cash management, and convergence strategy position Millicom for sustained earnings stability and long-term value creation.

Catalysts

Provides cable and mobile services in Latin America.

• The market may be overestimating Millicom's future revenue growth by assuming that rapid postpaid penetration and ARPU uplift, driven by digital transformation and rising data demand in Latin America, will consistently materialize despite increasing price competition from low-cost entrants and aggressive offers (e.g., WOM, Telefonica), which could cap ARPU and slow subscriber acquisition, negatively impacting top-line growth.
  
• Sustained high capital expenditures required to expand and modernize mobile/fixed networks, and fund incremental 5G rollouts as device penetration increases, are likely to weigh on free cash flow and net margins in the coming years, especially as management projects steady annual investment at $650–$700 million (11–12% of revenues), potentially outpacing revenue gains.
  
• The company's exposure to volatile emerging market currencies remains a substantial risk-continued or renewed devaluation (as seen in Bolivia) could suppress reported revenues and EBITDA margins, leading to earnings shortfalls relative to bullish expectations.
  
• Investors seem to be underestimating the risk posed by accelerating digital disruption from global tech players entering connectivity and digital financial services markets, which may erode Millicom's future market share and growth in its mobile and fintech platforms, pressuring revenue and limiting sustainable long-term earnings expansion.
  
• While the company is returning significant capital via special and regular dividends, the combination of large-scale M&A, elevated leverage near 2.5x, and ongoing refinancing needs could constrain future shareholder returns and increase vulnerability to rising interest rates, with an adverse effect on net earnings if market conditions or funding costs deteriorate.

Millicom International Cellular Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Millicom International Cellular's revenue will grow by 1.7% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 17.0% today to 10.7% in 3 years time.
• Analysts expect earnings to reach $628.3 million (and earnings per share of $3.71) by about August 2028, down from $955.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $725 million in earnings, and the most bearish expecting $560 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.2x on those 2028 earnings, up from 7.7x today. This future PE is lower than the current PE for the GB Wireless Telecom industry at 22.7x.
• Analysts expect the number of shares outstanding to decline by 2.6% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.8%, as per the Simply Wall St company report.

Millicom International Cellular Future Earnings Per Share Growth

Risks

• The company is experiencing sustained organic growth in key markets, with strong momentum in postpaid mobile (20%+ growth in markets like Guatemala and Panama) and improving Home business trends; strategic migration from prepaid to postpaid and market ARPU (average revenue per user) initiatives signal a long runway for higher revenues and expanding net margins.
  
• Operational efficiency initiatives and cost discipline have driven record-high adjusted EBITDA margins (above 50% in 5 out of 9 countries), and the company reports continued progress in digitalization and AI-automation, suggesting further room for net margin and earnings improvement as opex is optimized.
  
• Successful execution of strategic M&A (such as acquisitions in Uruguay and Ecuador, as well as the Coltel deal in Colombia) and portfolio diversification (adding "dollarized" and investment-grade markets) reduce financial and market concentration risks, positioning Millicom for revenue and earnings stability over the long term.
  
• Equity free cash flow is materially increasing year-over-year ($395M in H1 2025 vs. $269M H1 2024), leverage is declining (2.18x vs. target <2.5x), and special dividends have been issued, signaling strong cash flow generation, prudent balance sheet management, and healthy shareholder returns that could support higher valuations.
  
• Accelerating demand for data and gradual 5G rollouts, combined with granular, return-driven capital allocation and "convergence" strategy (bundling services for reduced churn and stable ARPU), position Millicom to capitalize on secular trends in digital adoption, supporting revenue, margin, and earnings growth over the long run.

Valuation

• The analysts have a consensus price target of $44.06 for Millicom International Cellular based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $55.0, and the most bearish reporting a price target of just $36.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.9 billion, earnings will come to $628.3 million, and it would be trading on a PE ratio of 13.2x, assuming you use a discount rate of 6.8%.
• Given the current share price of $44.15, the analyst price target of $44.06 is 0.2% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.