Millicom International Cellular SA (TIGO) 2004 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to today’s Millicom 2004 third quarter results conference call. For your information, this conference is being recorded. May I also remind you that this call is being audio-streamed over the web, and is accessible at www.millicom.com together with a presentation summarizing the key features of the results. I would now like to hand you over to the host of today’s conference, Mr. Marc Beuls, President and CEO of Millicom International Cellular. Please go ahead, sir.

Thank you, Operator, and welcome to everyone who has joined me today to discuss the results for the quarter ended September 30, 2004. Bruno Newland is with me, and we’ll be happy to answer any questions you may have after first making some brief comments.

So let’s look at the highlights of the quarter ended September 30, 2004. Strong subscriber uptake continued in the third quarter, resulting, for the second consecutive quarter in a record quarterly increase if one excludes the reconsolidation of El Salvador in September 2003 and the discontinued operations.

The 29% increase in total cellular subscribers, year-on-year, led to a total of over 6.8 million subscribers at the end of September. Proportional cellular subscribers increased by 24% to 4.7 million. The sustained increase in minutes of use has continued to a total cellular minutes for the 3 months ended September 30, 2004, increasing by 50% from the same quarter of 2003.

Revenue for the quarter was $235.3m, up 51% from the quarter ended September 2003, and EBITDA increased by 42% to $117.4m. The EBITDA margin is maintained at 50%.

Before moving on to the general operating and financial overview of Millicom, I will be dealing with the subscriber revenue and EBITDA growth. I would like first to say a few words about Pakistan, more particular about Paktel and Pakcom, Millicom’s operations in Pakistan that are currently negotiating the launch of the GSM network and the renewal of those licenses with the government of Pakistan.

Good progress has been made over the last weeks after my visit to Mr. Shaukat Aziz, the Prime Minister of Pakistan. No final agreement has been reached yet, but if the talks continue in the same spirit, we hope to be able to reach an agreement soon, and we have, in the meantime, suspended all legal proceedings while we work towards this agreement.

It is Millicom’s intention to come to a solution that will resolve the contractual issues and the financing requirements with the objective to maximize the financing of Millicom’s investment and license commitments in Pakistan out of Paktel and Pakcom’s operational cash-flows. You will understand that given the recent experiences, I will only be able to give you more precise information once all agreements have been signed and closed.

Let’s focus now on the strong operating results for the third quarter. Let’s start with subscriber growth. During the 12 month period ended September 30, 2004, MIC’s worldwide cellular subscriber base grew by 29% to over 6.8 million. Proportional subscribers grew by 24% on an annual basis, to 4.7 million and 89% of whom are pre-paid.

A record 480,000 net new total cellular subscribers were added in the third quarter, partly as a result of an increased investment in CapEx and the success of our pre-paid mass market distribution and price leadership strategy. The South East Asian and African regions were the large contributors to this record subscriber increase.

Moving on to revenue growth. Millicom produced total revenues of $235.3m for the 3 months to September 30, 2004, an increase of 51% from the third quarter of 2003, reflecting the increasing trend of growth in our operations. Interestingly, if you exclude El Salvador, revenues increased by 31% in Q3 2004, compared to the same period of last year, indicating that Millicom’s organic growth passed the 30% level without an increase of revenues in the South Asian region.

MIC’s operations in Africa recorded quarterly revenue growth of 83% from the third quarter of 2003. The equivalent increase from MIC Asia was 26%, and the Latin America revenue increased by 70%, or by 21% if El Salvador is stripped out, pointing to a sustained recovery in the region.

Let’s focus on EBITDA now. EBITDA for the 3 months ended September 30, 2004 was $117.4m, an increase of 42% from September 2003, and MIC has maintained margins of 50% in combination with the record subscriber growth. EBITDA for Africa for the 3 months ending September 30, 2004 was $16.7m, increasing by 88% from the third quarter of 2003.

Latin America recorded EBITDA growth of 72% to $52.7m, and Asia recorded growth of 12% to $47.9m. Quarterly EBITDA growth of 14% in Latin America, 20% in Africa and 9% in South East Asia from the second quarter of 2004, shows the acceleration in earnings growth on a global basis.

So let’s look now at the result of each region, starting with Asia. Year-on-year growth in proportion to cellular subscribers was 35% in Asia, which contributes to the region’s increase in revenue of 26% to $87.6m and an EBITDA of 12% to $47.8m from the third quarter of 2003.

In South East Asia, Millicom’s second largest region by the way, comprising of Cambodia, Laos and Vietnam, proportional subscriber growth of 61% was recorded. In South Asia, comprising of Sri Lanka and Paktel and Pakcom in Pakistan, the increase was 18% from the third quarter of 2003.

Revenues for South East Asia and South Asia were $59.6m and $28m respectively, and EBITDA was $35.4m and $12.4m respectively. The EBITDA margin for Asia as a whole was 55%. Proportionally, the operating cost for Paktel in Pakistan for its GSM network has started eating into the EBITDA margin, given that we’re not generating any revenues yet. We expect the margin in South Asia to move back to the Millicom average once the start-up costs of the GSM network are behind us.

Moving on to Latin America, revenues for the third quarter for Millicom’s largest region, Latin America, increased by 70% from September 2003, to $107.8m. If El Salvador is stripped out, quarterly growth rate is 21%, relative to the third quarter of 2003. South America continued to demonstrate recovery, with revenues growing by 18% and Paraguay recorded its highest year-on-year quarterly increase in revenue for several years, of 27%.

The Central American market continued to perform well, showing 14% growth in proportional subscribers, contributing to an increase in revenues of 104% from the third quarter of 2003. That’s the highest of all clusters, by the way.

The EBITDA for Latin America increased by 72% to $52.7m for the second quarter of 2003, or by 18% if El Salvador is stripped out. The EBITDA margin was 49% for the region as a whole, 53% for America and 39% for South America. During the third quarter, MIC’s operations in Paraguay, Guatemala, El Salvador and Honduras launched GSM services in the 850 megahertz spectrum under the common brand name of Tigo.

MIC is committed to providing its customers with the most advanced technology, the best services and the widest regional coverage at the lowest tariffs, which will enable it to grow market share, and we expect the launch of GSM services to create added momentum in terms of both customer intake and revenue growth in Latin America.

Let’s move to our fastest growing region today, of Africa. In the 12 months to September 30, 2004, MIC Africa added 426,000 proportional subscribers, resulting in an increase of 117% from September 2003, and contributing to an increase in revenues of 83% to $38.8m, and an EBITDA of 88% to $16.7m.

Ghana performed particularly strongly, producing revenue growth of 118% from September 2003. The EBITDA margin was 43%, up from 40% last quarter, and we will continue to work towards bringing this up to 50% levels in the coming quarters.

That concludes my review of the operations. In the third quarter, Millicom has provided clear evidence of how fast it is able to grow its businesses organically, through the addition of 480,000 net total cellular subscribers - the highest on record.

The strongest growth has come from South East Asia, where price cuts are enabling Millicom to drive penetration at faster rates than was previously possible, and from Africa where the pace of subscriber acquisition continues to grow, quarter-on-quarter - the direct result of the increased level of investment and improved distribution of the region during the last year.

The strong subscriber numbers have been also translated in some exceptional strong financial numbers. Millicom reported a 57% increase in prepaid minutes of use, as lower tariffs encouraged greater use of telephony. Revenues are up 51% and EBITDA is up 42%, year-on-year, while Millicom has maintained margins of 50%.

The strong performance that we have reported for the third quarter makes us very positive for the future, and the resolution of the Pakistani issues will be accretive to the growth.

This concludes my comments, and we will now be happy to take your questions, so Operator, may I have the first question please.

Thank you, sir. [OPERATOR INSTRUCTIONS]. We will take our first question from Bill Miller of JM Hartwell. Please go ahead.

Marc, hi, great quarter, congratulations.

Thank you, Bill.

I’d like to just dwell on these margins for a second. How long do you think it’s going to be before Africa gets up to 50% and with the restoration of your license, etc, GSM turn-on in Pakistan, won’t you at some point in the foreseeable quarters be running at a better than 50% EBITDA margin, and is there improvement from there in any particular country that you’d like to signal?

Well, historically we’ve proven that we can go higher than 50%. I think as a matter of fact, in the third quarter of 2003, we were operating at a 63% margin which then came down as the result of the El Salvador issue. In this quarter, clearly, you know, the South Asian issues, you know, the Pakistan issues have depressed our margin a little bit.

To be specific in terms of Africa, you know, I think we should be able to be there, you know, at the end of the year, on a monthly basis - the 50%.

In terms of Pakistan, clearly, you know, once we get going with GSM, there are going to be costs related to that launch which will probably eat a little bit into the EBITDA margin, but once we get into next year, there’s no reason why they shouldn’t come back to 50% which could mean that, you know, we might be able, next year, to get over the 50% EBITDA margin. But our target at this point in time is to be around the 50% margin because we also want to, at the same time, be able to fuel growth and that means that we have to spend some money from time to time on sales and marketing.

Thank you, Marc.

Thank you, Bill.

We will take our next question from Andreas Ectram (ph) of Handelsbanken. Please go ahead.

Hi Marc, it’s Andreas Ectram at Handelsbanken. Just a question on Guatemala and the launch of GSM there. I see that you actually lost some 30,000 subscribers in Guatemala. Maybe you can give us an update, despite the GSM launch, why you lost subscribers in that market?

I think it is an indication that we have some churn there on, you know, of subscribers that came on board before we launched the GSM network, but clearly this did not have a revenue impact, because the revenues, as you see in Central America, you know, were very strong. So this is nothing unusual to have, once you do this GSM launch and you really focus on GSM, that you have some churn on the older network.

Okay. When it comes to Vietnam, Vietel, the fifth mobile operator in that country launched services last week, with the lowest price in the market. Do you think that this will lead to more price cutting in Q4, and maybe Q1 for Mobifone?

You know, prices are set by VMPT in Vietnam. What they told us after the last price increase was that there would not be any price reduction – sorry, price reduction last time. They said there would not be any price reductions this year. I guess Vietel is launching a service with a fairly small network, at least to start with, so I wouldn’t think that there is any need to really go, you know, or reduce prices aggressively at this stage.

Okay, and a final question regarding Pakistan, you obviously paid $11m to the PTA in Q3, but it wasn’t recorded in your books this quarter. Should we assume that you will take the remaining, or the $11m in Q4 and Q1, split even between the quarters, or?

No, what you should read between the lines is that this $11m, you know, should not be seen as a one-off cost for the GSM launch, but could be seen as a cost for the renewal of the overall license. And that’s why we have not taken it as a hit, or we don’t plan to take it as a hit in the 3 quarters between the payment and the expiry of the license.

Okay, but when we speak to the regulator in Pakistan, they claim that it’s not them that’s stopping you launching GSM, it’s the government, and that has also been in some papers in Pakistan. Is it the government that is blocking your activation of the GSM, and could that be seen as they would like to solve the 2 license renewals at the same time?

I think, you know, the PTA is the government at the end of the day is the regulator, and the regulator reports to the cabinet. What the Prime Minister told me when I met him a few weeks ago was that, you know, he wanted to see a level playing field in Pakistan, and I think that’s his concern. So that’s why we’re trying to work out a solution that would both satisfy their needs and our needs, and that’s what is currently on the table. But who’s holding back what, I don’t want to go into politics in Pakistan. I’ll leave that to somebody else.

Okay, thank you.

Thank you, bye.

Our next question comes from Willem Kadake (ph) of Kepler Equities. Please go ahead.

Yes, hi, good afternoon Marc.

Hi, Willem.

So, I mean, you are so fortunate you can go occasionally to Asia, nowadays, so that’s good. I’ve got 3 questions, Marc. Okay figures, but on a net kind of figure, could you explain why we suddenly are being confronted with a $12m ForEx hit? That’s one.

Secondly, on CapEx levels, $160m so far year to date. Can we just forecast, just pro rata a small increase going forward? And thirdly, could you now, and of course, we know now roughly how it works in Pakistan and confirm roughly my assessment that even, for instance, if Millicom want us to pay twice $240m, of which half cash, so in Spring next year, that, taking on board the financial position of Millicom at the moment, etc, that it all can be financed via debt or in a sense, not via XP related instruments? That’s it.

Okay. In terms of the ForEx, out of the $12m of losses, it is $10m that is related to the Tele2 mandatory changeable. So this is not an operational loss. This is the ForEx loss we take on the loan that it is in kronas, and we of course reported those.

Secondly, in terms of CapEx, we were, at the end of the quarter, at $160m. So we’re probably going to end the year slightly above $200m. And I think it’s justified given that this is not a second quarter in a row that we are putting in a record subscriber intake on paper, and this is even before Pakistan is coming on line. So clearly we have accelerated CapEx because we see that. When we build out networks, we see good intake of subscribers, minutes and revenues.

And then in terms of Pakistan, I don’t really want to start any speculation at this point in time on, you know, how much and how, and when. As I said in the call, I think, you know, the government has an interest to settle issues. We have an interest to settle the issues. What we want to achieve is that we can keep those licenses in Pakistan, and that the cost and the payment terms for those licenses will, to a large extent, be paid out of the operating cash-flow of Pakcom and Paktel so that the financial input Millicom from corporate would have to make, we would be able to pay that out of operational cash-flow going forward.

Okay, thanks but on the back of your first answer, I just wanted to make clear that if we go to the P&L, so we can be clear, because we see, basically, first a loss on the Tele2 and then a fair value of $61m plus in the sector. So that almost balances out each other but out of the $12m, then that’s Swedish krona versus US dollar?

Yes, that’s right. The loan is in krona, and we are reporting in dollars, and that explains, you know, the $10m exchange loss. But it’s not a cash loss, because, as you know, the loan is only to be settled – can only be settled in shares, in Tele2 shares.

Okay, fair enough. Okay, thanks Marc.

Okay, thanks Willem.

Our next question comes from Stephen Flynn of Morgan Stanley. Please go ahead.

Good afternoon. I have a housekeeping question and then a couple of other questions. First of all, can you give us what the cash upstream for the whole [inaudible] subsidiaries was in the quarter?

So for the first 9 months, the cash up-streaming was $108m.

1-0-8?

1-0-8, yes.

Year to date?

Year to date, yes.

Okay, great, thanks. And then can you talk a little bit about Vietnam? It seems that there was a significant increase in revenues, quarter-over-quarter, and I understand there was a tariff reduction on May 1, and then again on August 1, but it seemed to have a much more negative impact on second quarter revenues versus third quarter. Can you give us a little more detail about some of the pricing and volume trends in Vietnam?

Clearly, it confirms what I said on the last call when everybody got very worried about these price reductions. You know, it’s something you need to do in order to fuel growth and what you saw in the third quarter was really the positive impact of the price reductions in the second quarter, because there is about a 3 month, you know, pay-back, or it was even less than 3 months. So with a price reduction of May 1, you really start seeing the positive impact 3 months later. That means third quarter.

So that’s why I also expect the price reduction we saw in the third quarter, which was on August 1, that that also is going to continue having a positive impact in the fourth quarter in Vietnam. It shows again that there is an enormous amount of price elasticity in the emerging markets. That means that if you drive down prices, you know, you have a very short pay-back and you can see good revenues and profitability afterwards.

Okay, great. And Marc, sorry, just a follow-up to the first question, I think last quarter you talked about wanting to spend $160m up from the operating subsidiary to the hold co for the full year 2004, so that would leave about $52m left for the fourth quarter. Is that still a good figure for the full year?

Yes, that’s we expect for the fourth quarter.

Okay, great, thank you.

Okay, thank you.

Our next question comes from Romeo Rees of Jeffries & Co. Please go ahead.

Yes, good afternoon, a couple of questions.

Hello, Romeo.

Hi, how are you doing, Marc?

Good.

A couple of quick questions. I’m just trying to figure out on Pakistan. Are the launch of the GSM network and the licenses now linked? Is that going to be solved in one fell swoop or do you think that you’re still going to launch GSM first, or that you’d get that done first and then try to get the licenses?

And in terms of when you articulate that you’d like to use the cash-flows out of Pakistan to pay for the licenses, that, I guess implies that you still think that you would be able to pay for the license over 15 years. Is that still your current thinking?

And then just a second quick question, how much debt did you pay down in the quarter? It seems like your operating company debt has been reduced fairly significantly in the first 9 months of the year. Did you pay some down in the second quarter? Thanks.

I’ll start with the debt. So debt, you know, the cash debt if you exclude the mandatory changeables, net cash debt is now at $519m. So has come down again. This is, I think, the third or the fourth quarter that the debt has come down. It has come down as a result of some debt reductions at the subsidiary level. So there have been no reductions at the corporate level. The debt came down by –- I don’t know exactly how much it was but it was about $60m.

I think it is in line with what I have been saying and that is that we generate a lot of cash which allows us to not only pay for interest but also continue to reduce that at the subsidiary level.

In terms of the Pakistan situation, the idea is today to get a deal both on the GSM launch and the license renewal, but that does not mean that we will only have a deal in April in next year. So the one should not hold up the other for a long period of time.

In terms of the payment times, as I said before, I don’t want to start a public debate on that. But clearly, you know, we want to maximize the cash coming out of the Pakistan operations to pay for investments and license payments in that country, and then the difference, Millicom should be able to pay out of its operating cash-flow going forward. And you know that we are generating this year about $80m of free cash-flow, and next year, that number should be higher. That should allow us to take care of our financial needs for the one or the other operating company.

Great, thank you very much.

Thank you.

We will take our next question from Uzi Zennermann (ph) of KMT Capital. Please go ahead.

What was the cash at the holding company level?

Cash at the holding company was $106m at the end of the quarter, out of the $223m for the whole company.

Great, and for the Vietnam license, when is that expiring?

Sorry, could you say it again?

The Vietnam license, when does that expire?

The end of the second quarter next year.

And what’s the cost of renewing that? Is that also -– is that paid upfront, or is that paid over time? How does that work?

In Vietnam, what we have signed so far is an MOU with our partner. That was signed in February, which they want to, you know, renew the cooperation with us and currently we are negotiating, you know, the terms and the conditions and also the form this corporation is going to take going forward. But we suspect that it’s going to be a joint venture. The cost and the payment terms at this point in time are not known.

So can you give me some sort of an idea of what the range is, or is this something that may cost than $100m, less than that? I have no idea.

Well, what I have said publicly is that Pakistan has never been a free lunch for us. We have paid, over the last 9 years, around about $300m for both CapEx training, as well as operating cost and that has gone, you know, entirely to our P&L over the last 9 years. So you should make the assumption that going forward, that cost is not going to be lower than what it has been historically.

I’m sorry, was that for Vietnam or for Pakistan?

That was for Vietnam, sorry. Did I say Pakistan? Sorry, it’s Vietnam.

And for Pakistan, is this just a question of license renewals, just a question of money? It’s not a question of if, it’s just a question of how much at the end of the day?

That’s right, how much, and the payment terms.

And what of the government? What are they looking for?

I think that’s probably known, at $291m. I think that’s the public number.

$291m?

I mean, the official target is $291m, of which 50% is to be paid upfront and the remaining 50% is paid over 10 years.

I see, okay. Thank you.

Thank you.

Our next question comes from Raphael Buno (ph) of ABN Amro. Please go ahead.

Hi, my question is related to your Latin America GSM migration. I’d like to know what’s the current status of the deployment of the GSM network in Latin America, you know, how much was invested and how much is planned to be invested, and what’s the expected impact on EBITDA margins of the migration of customers?

Okay, you know this [is still], the impact on the GSM migration on the EBITDA margin has been zero, because I think the EBITDA margin of Central America this quarter was the same as the quarter before. So we’ve been able to do this migration without impacting our operating margins.

In terms of how much is invested, I don’t have that number, but what we have tried to achieve is to have the coverage for our GSM network similar to the coverage of our TDMA or CDMA network in the countries. But we will, of course, continue to invest in our floating capacity and coverage in those countries in order to keep our leading position in those markets.

Latin America, as you have seen, is by far our largest region at this point in time, and it’s also a very profitable region. So we don’t mind investing additional money in there, but I don’t have an exact amount of money for you.

Okay, but the migration is complete in terms of network?

I mean, the idea was to have, you know, a match in our GSM/TDMA that we have achieved, but you know, we will further grow coverage but of course also focusing on capacity going forward.

Okay, thanks a lot.

Thank you.

We now move to Sundip Biani (ph) of Lehman Brothers. Please go ahead.

Hi, Marc, good afternoon.

Hi, Sundip.

Hi. I would like to know about some of the new opportunities you are looking at, especially some [new] opportunities in Asia, leveraging on the Tele2 AB experience, as well as some new markets, and I also heard some talks on all the recharge and lower start-up packs in some markets in Asia.

And my second question, it’s related to South East Asia’s EBITDA margin. It seems to have fallen from 63% to 59% in Quarter 3. What is your guidance on this? Thank you.

In terms of MB&Os, we’re not currently negotiating anything on the MB&O. This is an idea, you know, we’ve been talking about, but this is something more for next year, I think. We know the MB&O concept very well out of the Tele2 company. But we will be looking, you know, for some opportunities in an opportunistic way to see whether we can get the returns in those businesses.

Over the air recharge, we are doing a trial, I think, in 3 markets as we speak. I think it’s in Tanzania, Cambodia and one other market which doesn’t come to my mind right now. So we’re going to implement that, and I think, what is more important in all of this is the micro-payments, you know, the scratch cards with very low denominations, you know, $2 or sometimes even lower, less than $2. These are things that are going to be very important to further implement our prepaid mass market distribution strategy.

I am a little bit confused about your question, Sundip. You said that the margins have come down, and I can’t remember which region were you referring to, Asia or South East Asia?

South East Asia.

Well, South East Asia, you know, margins have come down a little bit, you know, but margins were exceptionally high in the second quarter. But if you look at the margin of the third quarter, that is in line with the margin we had, for instance, in the first quarter of this year. So I think the margin in the second quarter was higher than what it usually was because of some reclassification.

And just another question, can you give us an update on the revolver facility of $100m which you had arranged in the last quarter?

Well, we haven’t arranged it yet, but we are close to finalizing the term sheets and the objective is still to have it all in place by year-end. But you know, we can turn the year with $100m of unused credit lines and then probably about $100m of cash in our bank account, so that gives us a buffer of $200m for next year.

Great, thank you.

Thank you, Sundip.

[OPERATOR INSTRUCTIONS]. We will take our next question from Irwin van Zoidem (ph). Please go ahead.

Yes, good afternoon, Irwin van Zoidem speaking from SS Capital Management. I have a couple of small questions concerning Pakistan. You mentioned that costs have arisen as a result of debt, the EBITDA had decreased in the first quarter. Could you give us some more information, because of course when you launched the GSM network, you will increase your marketing costs, which were, of course, also on schedule for Q3 but probably postponed.

The income from your GSM network will not be very high in the fourth quarter either. I assume with your start-up it will take some time. Should we therefore look for the South Asia region for a decline in EBITDA in the fourth quarter as well? Could you comment on that a bit?

The reason why the margin came down this quarter has to do with the fact that we have costs like, you know, sites, power and other costs. We did spend some money on marketing costs already, ahead of the launch. So that money has been spent and no revenues have been generated against that. So you can make the assumption, as I said, you know, in my script that there is going to be an impact on the margins in South Asia until such time that we get through what I would call, cruising speed for our Pakistani business which, you know, should be the first quarter of next year.

So there will be other start-up costs affecting it. It’s October 19 today and we’re still not up and running, so there are going to be some costs again this quarter and against those costs, there are not going to be any revenues, unfortunately.

So, will you also increase marketing costs in the fourth quarter in Pakistan, assuming that you will be able to launch the GSM at that point?

Yes, but what you will see is revenues, hopefully, and against those revenues, there will be, of course, a marketing cost which we don’t have at this point in time. But today, looking at operational costs without revenues, then you will have to be looking at operational costs plus sales and marketing, but against those revenues.

Previously you have stated also that you wanted an addition of 1 million subscribers within one year. Do you still think that is possible, counting from this quarter on, of course?

Yes, I stick to that number, yes, and once we launch, we should be able to add on 1 million.

And then a small technical question about your $11.1m. Initially it was meant to cover for the license costs for the 3 quarters. We have already lost 1 quarter. Will you take the costs in the coming 2 quarters, or how will you manage that?

As I just said to somebody else who asked this question, we don’t look at the $11m as a cost for the 3 quarters. We see it as a cost for the renewal of the license for the next 15 years.

So that will be capitalized and then be written off in 15 years?

That’s right, yes. That’s right, as we typically do for license fees.

Okay, thank you very much.

Thank you, Irwin.

We now move on to Kevin Rowe of Rowe Equities Research. Please go ahead.

Thanks. Marc, in Latin America, Bolivia showed a strong subscriber growth in the quarter after I think you had lost about 100,000 customers the previous 12 months. What happened in that market in the quarter?

Well, the customers we lost were lost in Paraguay in the first quarter, essentially, were 150,000 that we disconnected in Q1. And what we have seen as a whole in South America is increased performance. Clearly, Paraguay, backed by a GSM migration is outperforming Bolivia, but also Bolivia, we see good subscriber intake and with, I think, the macro-economic situation getting better now, I would expect that it’s going to start feeding through also in accelerated revenue growth, which will probably then lead us to also do a GSM migration there some time next year.

So it wasn’t any adjustment or anything, it’s purely the economy?

That’s right, yes.

Okay, and a clarification on Pakistan – the Pak Tribune yesterday reported that Paktel PTA talks had stalled. They characterized it as the talks had failed over the weekend and in your release, you stated that the talks were ongoing. Can you tell us exactly where you are? Are talks actually still happening as of yesterday, for instance?

Not as of yesterday and of today, so therefore I definitely don’t comment on press articles or rumors, so I can only confirm that talks are ongoing.

Okay, and on Vietnam, the price cuts continue to hold down EBITDA, as we saw in the second quarter. When do you expect to see a resumption of sequential EBITDA growth in that market?

I would expect this quarter, the fourth quarter, because as I said earlier, we would expect a full positive impact of the price reduction of August for us, you know, only to be noticed in the fourth quarter because it takes 3 months, just under 3 months, to pay-back.

Very good, thanks, Marc.

Thanks, Kevin.

Now we will take a follow-up question from Bill Miller of JM Hartwell. Please go ahead.

Marc, just could you comment a little bit on Iran just because you haven’t said anything about it, and could you also give us an update on the possibility, probability of buying out any minority interests?

In terms of Iran, the state is so. The project is up. Equipment has gone into the country, and I think it’s still in Customs as we speak. So hopefully that’s going to come out shortly, so that we can then look at the launch of the network in the first quarter of next year, although it would be a limited network, probably only covering the capital.

In terms of minority buy-outs, nothing happening at this point in time, so I don’t expect any to happen this year. Hopefully with the change of the license in Honduras, that will then allow us, you know, to buy out a minority shareholder there some time next year, but nothing before year-end.

Yes, thanks very much.

Thank you, Bill.

We take our next question from Michael Castleman (ph) of Merrill Lynch. Please go ahead.

Hi, that was actually my question, and it has been answered. Thank you.

Okay, thank you.

And now we move to Romeo Rees for a follow-up question. Please go ahead.

Yes, just a couple of quick questions on the dividend. How much of the dividends, Marc, are you getting from Pakistan, and how much are you getting from Vietnam? It’s just a question that keeps coming up, people asking me how much is coming from those 2 countries. Thanks.

Pakistan was a big contributor in the first quarter, but in line with the investments in the GSM network and then the other networks, we’re going to be making, you know, Pakistan was not a contributor in the second and the third quarter, and is not going to be one for the next 2 years, probably.

In terms of Vietnam, Vietnam is our largest contributor and contributes, I would say, maybe up to about around a quarter of our cash, or the cash we up-stream on an annual basis.

Great, thanks a lot.

Thank you.

And we have a follow-up from Uzi Zennermann of KMT Capital. Please go ahead.

My question has been answered, thanks.

Okay. So shall we take 2 more questions, Operator?

And we move to Sundip Biani of Lehman Brothers for a follow-up question.

Hello Marc, just another question on CapEx. What kind of pricing phone line are you getting, and who are your major vendors in all the 3 continents? And secondly, can you give us an update on Iran? Now, you said that in Quarter 4 you’d be launching on operations. Thank you.

No, as I said, in answer to a question on Iran, well, the equipment is in the country but still in Customs but we hope that it’s going to come out soon so that we can launch in the first quarter a small network in the capital.

In terms of the CapEx, we are buying from several suppliers, including some of the Asian and Chinese suppliers, but we continue to buy from the likes of Ericsson and Siemens. So we look at the credibility of the supplier, and we look at what the prices are, and what the payment terms are. We have not seen, since the last quarter a shift or reduction in the hardware prices or software prices for telecom equipment.

I mean, we know at what prices, like $40, like you have already indicated is between $40 and $50 whereas [inaudible].

That’s right, yes, for a new network, you know, I think for Iran I think we were around $60 which is a brand new network. If you build an overlay like we are doing in Pakistan, we were around $40. I think for Latin America we were for radio equipment only, I think we were, and for radio equipment only we were at, I think, $18, but that was a number at the end of last year.

Thank you.

Thank you.

[OPERATOR INSTRUCTIONS]. It appears that there are no further questions at this time. Mr. Beuls, I’d like to turn the call back over to you for any additional remarks. Thank you.

Thank you, Operator. Once again, I would like to thank you all for participating in today’s conference call. If there are any further issues you would like to discuss, I will be happy to deal with these on a one-to-one basis, if you wish to contact us directly, or alternatively, you can call our IR firm, Shared Value, on 44-207-3215010. Thank you very much, and have a good day. Goodbye.

Ladies and gentlemen, that concludes today’s conference. Thank you for your participation, and have a good day.