Millicom, the telecommunications giant operating under the TIGO brand across Latin America, has quietly undergone a remarkable transformation. While analysts have focused on the company's impressive cost-cutting measures and stabilizing markets, a more subtle shift in strategy is quietly fueling a cash flow surge – a shift best described as a return to Millicom's roots and an embrace of the unique "Sangre TIGO" culture.

For years, Millicom pursued a dual strategy: building a robust telecommunications network and establishing itself as a fintech player through TIGO Money. This ambition was evident in previous calls, where expansion of TIGO Money was a constant refrain. However, the recent Q1 2024 earnings transcript reveals a deliberate change in approach, a move away from the crowded and complex fintech arena to a laser focus on leveraging TIGO Money to enhance its core telecommunications business.

This strategic pivot isn't just a matter of cutting losses in a challenging market. It's about recognizing the unique strength of Millicom's "Sangre TIGO", a phrase used repeatedly in the transcript to describe the company's vibrant and deeply ingrained culture. This culture, built over decades and fostered by leaders who rose through the ranks, understands the nuances of the Latin American market and the value of tight integration across business units.

Key Decisions Driven by "Sangre TIGO"

Millicom's renewed focus on "Sangre TIGO" is evident in several key decisions:

Appointment of Marcelo Benitez as CEO:

A 30-year veteran who started in a Paraguayan call center, Benitez's appointment signals a commitment to internal talent and a deep understanding of the company's culture. This internal appointment, lauded as a unanimous decision by the board, speaks volumes about the trust placed in the "Sangre TIGO" and its ability to guide the company's future.

Refocusing of TIGO Money:

Instead of pursuing an independent fintech strategy, TIGO Money is now being tightly integrated into the core telecommunications business. This integration focuses on high-impact, low-risk use cases like prepaid reloads and bill payments, strategically leveraging TIGO Money to reduce churn and enhance ARPU in core mobile markets.

Financial Performance: Reaping the Rewards

The results of this shift are already evident in Millicom's financial performance. The company delivered a remarkable 20% organic EBITDA growth in Q1 2024, driven by a combination of service revenue acceleration and the ongoing success of Project Everest, its efficiency program. While large government contracts in Panama boosted service revenue, the underlying trend of mobile ARPU growth, driven by price increases and postpaid migration, points to a sustainable upward trajectory.

The TIGO Money Hypothesis

While Millicom doesn't break down TIGO Money's contribution to overall revenue, it's reasonable to assume that its integration with the core business is playing a significant role in these positive trends. The transcript highlights TIGO Money's effectiveness in reducing churn, a key factor in driving profitability, especially in the Home business.

"Colombia Case Study: Colombia, a market where Millicom has actively prioritized profitability over growth in Home, achieved a record EBITDA margin of 36.5% in Q1. This margin jumps to an even more impressive 41.4% when excluding severance costs. This suggests that TIGO Money's integration, combined with price discipline, is creating a potent formula for sustained profitability."

Sustained Growth and Profitability

Furthermore, the company's confidence in its "Sangre TIGO" is reflected in its decision to maintain its target equity free cash flow of around $550 million for 2024, despite acknowledging potential risks and tailwinds that might impact future performance. This confidence stems not just from financial projections, but from a deep belief in the company's culture and its ability to navigate complex market dynamics.

EBITDA Growth by Country

The following chart shows the organic EBITDA growth across Millicom's key markets in Q1 2024. Notice the double-digit growth in most countries.

Millicom's story is a compelling example of how a deep-rooted cultural understanding of the market, combined with a strategic pivot away from a crowded and complex industry, can unlock a surge of cash flow. While the efficiency gains of Project Everest are undeniably impressive, it's the subtle shift in focus from Fintech aspirations to "Sangre TIGO" that truly sets Millicom apart, positioning the company as a hidden gem poised for sustained growth and profitability in the years to come.

"Fun Fact: "Sangre TIGO" translates to "TIGO blood" in Spanish, signifying the deep passion, commitment, and shared values that run through the veins of the company."