Millicom's Debt Refinancing Strategy and Its Implications for Shareholder Value

Millicom International Cellular S.A. (Tigo) has embarked on a strategic debt refinancing initiative in 2025 that underscores its commitment to capital structure optimization and credit risk mitigation. After navigating a period of financial stress marked by a peak default probability of 0.613% in May 2023 and a credit rating downgrade to B4, the company has made significant strides in stabilizing its balance sheet. As of March 31, 2025, Millicom’s gross debt stood at $5.772 billion, a $44 million reduction from December 2024, reflecting disciplined debt management [1]. This progress, coupled with a leverage ratio below 2.5x and a target to maintain this threshold for the remainder of 2025, signals a recalibration of its capital structure to prioritize long-term financial resilience [2].

Strategic Refinancing and Leverage Reduction

Millicom’s refinancing strategy has been bolstered by asset sales and operational efficiencies. In October 2024, the company agreed to sell over 7,000 communication sites in Central America to SBA Communications for $975 million in cash, a transaction expected to close in 2025 [3]. This move not only accelerates debt reduction but also aligns with a broader trend of monetizing non-core assets to strengthen liquidity. The proceeds from such sales, combined with robust equity free cash flow of $750 million in 2025, position Millicom to fund strategic initiatives while maintaining flexibility [2].

The company’s leverage reduction is further supported by strong earnings performance. Q2 2025 results revealed an EPS surge to $4.03, exceeding forecasts by 646.3%, driven by operational improvements and market expansion in Colombia, Ecuador, and Uruguay [2]. These gains have translated into improved EBITDA margins, a key factor in Fitch Ratings’ affirmation of Millicom’s BB+ rating with a stable outlook [1].

Credit Risk Mitigation and Credit Profile Recovery

Millicom’s credit risk profile has undergone a marked transformation. By August 2025, its probability of default had fallen to 0.153%, a more than 60% decline from 2021 levels [1]. This improvement is attributed to a combination of strategic acquisitions, which expanded its customer base and diversified revenue streams, and proactive management of foreign exchange headwinds in emerging markets [1]. The company’s credit rating has also improved from B3 to B2 by February 2024, with subsequent stabilization reflecting confidence in its operational and financial resilience [1].

Shareholder Value Implications

The interplay of debt reduction, credit risk mitigation, and operational performance has significant implications for shareholder value. Millicom’s Q1 2025 revenue of $1.37 billion and net income of $193 million demonstrate its ability to generate cash flow despite macroeconomic challenges [1]. With leverage now below 2.5x, the company is better positioned to pursue growth opportunities without overburdening its balance sheet. Analysts note that the combination of a stable credit profile and disciplined capital allocation could enhance investor confidence, potentially unlocking valuation upside.

However, risks remain. Emerging market volatility, particularly currency fluctuations, and sector-specific challenges such as competitive pressures in Latin America and Africa could test Millicom’s refinancing strategy [1]. The company’s ability to sustain its current leverage trajectory while navigating these headwinds will be critical to maintaining its credit gains.

Conclusion

Millicom’s 2025 refinancing strategy exemplifies a balanced approach to capital structure optimization, combining debt reduction, asset monetization, and operational discipline. By stabilizing its credit profile and reducing default risk, the company has laid the groundwork for sustainable shareholder value creation. While macroeconomic uncertainties persist, the progress made thus far suggests Millicom is well-positioned to navigate its refinancing timeline with confidence.

Source:
[1] Millicom (Tigo) [https://martini.ai/pages/research/Millicom%20(Tigo)-2ae67344e0c9f94186f668aeafef2089]
[2] Earnings call transcript: Millicom's Q2 2025 EPS Surges [https://www.investing.com/news/transcripts/earnings-call-transcript-millicoms-q2-2025-eps-surges-stock-climbs-93CH-4204315]
[3] millicom international cellular sa [https://www.sec.gov/Archives/edgar/data/912958/000095010325005846/dp228664_6k.htm]