Millicom International Cellular SA (TIGO) 2005 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to today's Millicom 2005 first quarter results conference call. [OPERATOR INSTRUCTIONS]. I would now like to hand the call over to your host today 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 March 31, 2005. Bruno Nieuwland is with me and we'll be happy to answer any questions you may have after first making some brief comments.

Before commenting on the operating results, I would like to take -- talk briefly about our operations in Pakistan and Vietnam. You will have seen that earlier this week Pakcom agreed payment terms with the Pakistani regulator, the PTA, for the renewal of its license for 15 years. The payment terms are similar to the terms agreed in 2004 by our other Pakistan subsidiary Paktel. Pakcom will pay a license fee of $291m with 50% payable over 3 years and the remaining 50% payable over the following 10 years. Pakcom's license represents the opportunity to replicate the success we have seen in Paktel since the launch in October 2004.

When it comes to Vietnam it's important to point out that our long term view has not changed and we're still positive about the final outcome of our negotiations. However, these negotiations on the continuation of our cooperation have not yet led to an agreement between the parties. The Comvik International Vietnam Millicom's subsidiary in Vietnam continues to negotiate with the Vietnamese Post and Telecom and with its subsidiary VMS on the creation of a Joint Stock Company as agreed, by the way, between the parties by signing the MOU last November in Stockholm.

The Government of Vietnam has agreed to equitize VMS our partner under the current BCC. As I have stated several times before Comvik is again breaking ground and as such equitization has not happened in the telecommunication sector in Vietnam before. That explains why at present no information is available to us as to the process of this equitization. However, we do know that changes are needed under legislation to allow any future joint venture between VMS and Comvik. Needless to say that the terms and conditions of such a potential joint venture are unknown to us today. It is unlikely that this process will have started by the end of the BCC on May 18 and without agreement between the parties at that date we will no longer be able to consolidate the Vietnam numbers. We will communicate on progress during the second quarter.

So, let's now turn to the operating result starting with subscriber growth. 2005 started with impressive subscriber growth with 828,000 net new total cellular subscribers added in the first quarter as a result of the launch of GSM services in Latin America and Pakistan in 2004. Proportional subscriber additions in the quarter were 627,000, which is the highest on record excluding the third quarter 2003 when El Salvador was reconsolidated.

A 45% increase in total cellular subscribers year on year led to a total of over 8.5m subscribers by the end of March 2005. Proportional cellular subscribers increased by 44% on an annual basis to over 5.9m, 90% of whom are prepaid. The sustained increased in minutes of use has continued with total sales on minutes of these 3 months ended March 31, 2005 increasing by 40% from the same quarter of 2004.

Turning to revenue growth, the strong subscriber growth translated in total revenue -- total revenues for Millicom of $268m for the 3 months to March 31, 2005, an increase of 26% from the first quarter of 2004 reflecting the trend of increasing growth in our operations. The highest growth relative to the first quarter 2004 was 88% recorded in Laos.

EBITA for the 3 months ended March 31, 2005 was $126.5m an increase of 19% from March 2004. Millicom's EBITDA margin was 47% for the quarter. It is important to note that the quarter 1 2005 EBITDA margin is already higher than the quarter 4 2004 margin if the 1 off adjustments in quarter 4 2004 are excluded, but quarter 4 2004 was the first quarter with the increased sales and marketing costs for the GSM network in Pakistan.

So, now let's look at the results for each cluster starting with South East Asia which is Millicom's second largest region comprising our operations in Cambodia, Laos and Vietnam. Proportional subscribers growth of 57% was recorded from the first quarter 2004 bringing the proportional subscriber base to a total of 1.227m at March 31, 2005. Revenue for South East Asia was $70.3m for the first quarter increasing by 26%. EBITA was $43.5m for the quarter and an increase of 32% from the same period in 2004. And the EBITDA margin was 62%.

The strong performance was partly the result of a series of tariff reductions introduced by the Vietnamese Post and Telecoms in Vietnam during the year, which effectively lowered a barrier to entry in this market. Further tariff reductions were introduced on February 1, 2005.

In South Asia comprising Sri Lanka, Paktel and Pakcom in Pakistan took our proportional subscribers increased by 41% for March 31, 2004 to 1.447m at March 31, 2005, which is the largest proportional subscriber base of all Millicom's clusters. We are well on track to meet our target of adding 1m new subscribers in Pakistan in the first 12 months since the launch of the GSM services.

Revenue for South Asia was $29.7m for the first quarter, a decrease of 3% from the first quarter 2004 owing to the delay in launching GSM services in Pakistan. However, it is important to point out that the revenues for South Asia in the first quarter of 2005 were 19% higher than the previous quarter.

EBITA for South Asia decreased by $4.9m and the EBITDA margin was 17%. As I mentioned last quarter, there is an upfront sales and marketing cost associated with the GSM launch by Paktel, which has impacted the EBITDA margin and it's likely to take until 2007 before group average margins can be reestablished in Pakistan.

The Central America cluster comprising our operations in Guatemala, Honduras and El Salvador continue to perform well showing a 27% growth in proportional subscribers to 1.251m at March 31, 2005. Revenue grew by 29% from the first quarter of 2004 to $88.6m for the first quarter of 2005. EBITA for Central America increased by 31% to $44.3m for the first quarter of 2005 and the EBITDA margin was 50%.

The strong growth in Central America was driven predominantly by the roll out of GSM services during 2004 under the common brand Tigo. Millicom's committed to providing its customers with the most advanced technology, the best services and the widest regional coverage at the lowest tariffs and the value added services offered by Tigo have enabled our operations to attract more affluent customers with greater spending power.

Moving to South America cluster, which comprises our operations in Bolivia and Paraguay, proportional subscribers grew by 34% to reach 964,000 at March 31, 2005. Revenue for Q1 grew by 25% to $31.2m relative to Q1 2004 and Paraguay and Bolivia produced revenue increases of 27 and 22% respectively over the same period. EBITA increased by 27% from the first quarter of 2004 to $12.4m for the first quarter of 2005 and the EBITDA margin was 40%.

In our African cluster, which comprises our operations in Ghana, Mauritius, Senegal, Sierra Leone and Tanzania, a record 148,000 proportional subscribers were added in the first quarter resulting in a 75% increase in subscribers from March 31, 2004 to over 1m proportional subscribers at the end of Q1 2005. This was the strongest subscriber growth of all clusters and it continued in -- to an increase in revenue of 51% to $48m for the first quarter relative to the first quarter 2004. Senegal performed particularly strongly producing revenue growth of 67% over the same period. EBITA increased by 59% from Q1 2004 to $21.2m for the first quarter.

That concludes my reviews of -- review of operations. To summarize, Millicom has started the year strong with good subscriber growth effecting both increased investment particularly in the new GSM network in 2004 and growing demand in its key markets. Millicom has some 8.5m subscribers and with penetration rates taking off in Asia and Africa the prospects are excellent. Excluding the third quarter of 2003, when we reconsolidated the El Salvador numbers, the first quarter of this year set a new proportional subscriber intake record.

Paktel is on track to meet its target of adding 1m subscribers in the first year since the launch of GSM services despite increased competition. And Pakcom has agreed payment terms for its license it can start implementing the conversion to CDMA which should be ready by the fourth quarter of this year. It is Pakcom's intention to continue operating the CDMA network in parallel for another 3 years.

The heavy investment in sales and marketing in Pakistan will continue to impact the South East -- South Asia margin and it will take until 2007 before this region again attains average group margins.

Africa remains the fastest growing market showing growth in total subscribers of 70% over the first quarter of 2004 and is today the third largest region in terms of revenues after Central America and South East Asia. There will continue to be opportunities to expand in new territories in Africa the latest being Millicom's license in Chad which is expected to be operational later this year.

Again now, just to reiterate, the negotiations on the creation of a Joint Stock Company are continuing but legislation is needed to create joint ventures in the telecom sector and it's unlikely that this process will have started by the end of the Business Corporation Contract on May 18. Without agreement between the parties at that date we will therefore no longer be able to consolidate the Vietnam numbers and we will, of course, communicate on progress during the quarter to the market.

Millicom today is well funded with cash reserves over half a million -- half a billion dollars and generating free cash. These resources will allow the Company to exploit multiple opportunities that are currently available in the market.

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

Thank you. [OPERATOR INSTRUCTIONS]. We will take our first question from Andreas Ekstrom of Handelsbank. Please go ahead.

Yes, hello, 2 questions if I may. Although that you will deconsolidate Vietnam will you still be able to recognize any revenues after May 18 i.e. will you provide services to mobile phone in the form of consultancy management etc. or should we expect the revenues to be zero from May 18 and onwards?

The question in term -- first of all, we don't envisage to have a consultancy agreement of any kind. The question as to whether we will be able to consolidate or generate revenues and then be able to consolidate the revenues after May 18 will depend on the agreement that we hope to sign with VMS and VMPT.

But I said this on the call the terms and the conditions of that agreement are not known at this point in time. So, I can't answer that question by yes or no. I don't know because it depends on what the agreement will look like, what that agreement will say.

Okay. And the second question is that you already guided on CapEx for the full year of $240m approximately. Does that include a conversion to CDMA in Pakcom or can we expect a higher number?

In our budget we have anticipated the conversion to CDMA for this year.

That is reflected in that calculation.

Definitely.

Okay, thank you.

Thank you. We will take our next question from Lena Osterberg of Enskilda Securities.

Hello, just a quick question again on Vietnam. Should I interpret your answer that you gave to Andreas that you will be able possibly to backdate the new agreement so that you could get revenues retroactively from May 18?

Again, I can't answer that question. As I said to Andreas, we don't know at this point in time. We have a contract that expires on May 18 and at this point in time I don't have an agreement in place that will allow me to consolidate revenues after that date.

There is a process or there's a negotiation ongoing with our partners trying to establish a Joint Stock Company or a joint venture company. And, as you know, this process and these negotiations have been ongoing for quite a while. These negotiations continue. There's no guarantee that there will be an agreement between -- before May 18 of this year. And no, I can't speculate at this point in time what we will be entitled to if and when an agreement would be signed either before May 18 or at a later date.

Could you say anything about the timing?

No, I don't want to speculate on this. We know that this process unfortunately has -- is taking much more time than we had anticipated. And 1 of the reasons for that is that we are breaking ground. As I said on the call, this is completely new. This has never been done before in Vietnam in the telecommunications sector. And there are certain rules to be followed by VMS and VMPT which does not allow them to go fast.

Okay, thank you.

Thank you.

Our next question comes from Bill Miller of Hartwell. Please go ahead.

Alright?

Hello Bill, how are you doing?

Fine thanks. I'm interested in what percentage of South East Asia Vietnam represented.

And secondly, can you give us any further color on what's going on in Iran and where you stand? And when you might turn on and what you think the demand will be and just give us some idea of what the picture there is too?

Okay. So in terms of Vietnam, Vietnam represented in the first quarter of this year about 20 -- sorry, 13.6% of the proportional subscribers for Millicom, represented 18.4% of revenue and represented 27.6% of EBITA. Okay, so that gives you the order of importance for Vietnam in the first quarter of 2005.

Great, thanks.

Second question in terms of Iran, the build out of the network is happening slower than what we anticipated. I'm hopeful that we will be able to switch on a network sometime in the middle of this year.

The -- I think the issues are pure of site location, getting the towers erected, getting the equipment on those towers. So, there's no -- to our knowledge there's no regulatory or a similar issue that is slowing down the build out of the network. Again, also here we are breaking ground. This is the first time that a private operator is building a network in that country.

Can you turn on part of the system like in Tehran or some place like that and accommodate some of the people that are lined up or do you have to wait for the full system to be out and what happens?

No, we will not have to wait until the full system. That's means a 2m subscriber system will be built out. But, of course, we need to have a network that would at least cover the greater Tehran in order to provide a certain quality service.

And that's what's going to -- even that part is going to take until mid year?

That's what I -- what I think at this point in time. But, as I said, there have been serious delays on the ground in terms of the build out of the network.

Okay, great thanks very much.

Thank you Bill.

We will now move to Uzi Zimmerman of G&G Capital. Please go ahead.

Could you tell me how much cash was upstreamed in the quarter to the [indiscernible]?

I think the first quarter we have spent about $35m.

That's fine. Do you have any guidance what you think you're going to do this year?

No, we have not given any guidance.

And how much cash was at the whole flow at the end of the quarter?

The whole flow about $591m.

$551m.

51 sorry.

551?

Yes.

And what was CapEx on the quarter?

$47 -- $47m.

$47m. Tell me I don't quite understand this, come May 18 when the contract expires are you still in business there, running a business without a contract? You're still going to be getting -- generating EBITDA or is it going to go away? How do -- is the economic still going to be there?

No, like I said we will not be able to consolidate any revenues or EBITDA because the contract will have -- will expire on May 18. So, we no longer going to benefit from a revenue share as we currently do under the BCC.

Right. So, effectively the business is shut down, is that right?

No, the business is not shut down. According to the BCC the assets will be transferred to VMS, our partner, for a nominal consideration and they will continue operating the network, a network that today hosts more than 2m subscribers.

Okay.

So, the network will stay there. The value will stay there. We will not benefit from any revenue share i.e. no EBITA and stuff like that. Of course, we will not have any financial commitments in terms of CapEx, training, etc.

So, there's no economic benefit accruing to the Company after that point. In other words you're not getting income to your -- as an equity holder or anything like that?

That's what I've said, yes.

Okay. Thank you.

Thank you.

From Rowe Equity Research we have a question from Kevin Rowe. Please go ahead.

Thanks. Marc how much of the upstream cash that $35m was from Vietnam in the quarter?

I don't -- I don't have the number, $6m.

The biggest upstream is -- today which is what most of you guys forget are the Latin American countries and also Africa now has really started kicking in.

Got it. On Vietnam Comvik, your entity in Vietnam, I'm sure there's some cost of maintaining your presence there and your staff at Comvik that you're paying for. What does -- what does that cost you when you -- it -- when the contract expires and if you don't have an agreement by May 18, what's your ongoing cost of maintaining a presence and keeping Comvik running until there's clarity on what your presence will be there longer term?

Well, we've not taken any decision as to what is going to happen after May, 18. That depends on where we stand in the negotiation and then we will take the decision at that point in time.

It is our intention to continue negotiating with the VMPT and VMS and the idea is to hammer out an agreement that will give us indications as to how we're going to go forward. And then we will decide that. So, what we will do with Comvik International Vietnam.

And could -- could you share with us what the current cost of Comvik is right now, standalone?

I don't have that number for you.

And last question for you, if this does become an equitization process is there a possibility as -- as some have reported that you could actually be forced to compete for an equity stake in the open market against other wireless operators around the world?

Well, what we see and what we hear today does not point in that direction. First, we signed the 2 MOUs last year. As I said, we continue to be negotiating with the VMPT and VMS. We also continue to have in contacts at the highest level in Vietnam today is some [indiscernible] -- sorry, not today this week Vigo Carlund, 1 of the Millicom Members of the Board, was in Vietnam and he had a meeting with the President of the country. He had meetings with the Deputy Prime Minister and the Minister of the Ministry of Planning and Investment.

So, these contacts continue to be ongoing and that shows that there is still an intention at the Vietnamese level to continue doing business with Comvik. So, we don't see any indication today that we would be put in competition with others. Clearly, as I've stated before, the valuation will need to be done and we expected that we will be paying a market price for any interest we -- we would obtain in that joint venture.

Thanks Marc.

Thank you.

From Jeffries and Company we'll take our next question from Ronald Rees. Please go ahead.

Yes, good afternoon Marc.

Hello there.

Hello. Just wanted to see if you could perhaps review the Comvik situation, how much of the Vietnamese operations you actually own right now? And if you'd let us know how that revenue sharing actually works? And [indiscernible] --

Sorry, could you repeat that for the first part of your question again?

How much do you own in Vietnam right now?

Okay, well we own since -- since last 10 years is 80% interest in Comvik International Vietnam. And Comvik has signed a Business Corporation Contract with the Vietnamese Government through VMS and that allows Comvik to share 50% of the revenues after common costs such as marketing costs are being deducted. Out of that the 50% Comvik pays investments in CapEx, pays for training and the cost of its own office in the country.

So, the Government gets 30% of the revenues right off the top but they don't -- they don't pay for any of the expenses?

Of course they have the local CapEx. They have the local expenses and they provide frequency and they provide, of course, the license.

Okay. And I guess you can't really say what the [point board] agreement is -- might look like? But how -- do you have a sense of how much that could deviate from what you have today?

Again, I don't want to start speculating on what we will own or not own and how much we're going to be paying for that. So, we will inform the market as soon as we have more information.

Right, right, right. Is there a possibility that you just buy the license from the Government and then you own the business?

I don't think that is an option.

Okay. Alright, that sounds good. Thanks a lot.

Thanks, bye.

We have a question now from Bob Thomas of UBS. Please go ahead.

Hello, Marc.

Hello.

Hello, a question on -- a question on Vietnam [and I have another] question. I was just wondering did I understand this correctly that you were talking of transfer of assets to VMS as May 18 is that -- is that right?

Yes, that's -- that's what is provided for in the contract.

Right and do you get any cash for that?

A dollar. That has always been in the contract terms. So, there's nothing new there.

Right. Now secondly, on Latin and Africa you have some very, very strong customer growth but you also had some ARPU declines. I'm just wondering whether you could break that down in -- in currency impact and underlying trend.

I don't think we have much of a currency impact in those regions. I think overall in Millicom there was not much of, if any, currency impact, other than the fluctuation a dollar krone for the 5% tally to give us a convertible bond -- a mandatory convertible bond.

No, what we see is that there's -- this is what we've been saying all the time is that when you increase your subscriber intake and you penetrate deeper into the market you deal with lower ARPUs. But I think we've shown in the past that we can deal with lower ARPUs given our low cost approach -- low acquisition cost approach amongst others and that we can continue growing the business when it's possible.

And what is your feeling about your market share? Has that -- has that indeed increased in Q1 in both Latin and Africa or is that off the guided market trend?

There have not been massive changes. As I've said before in Latin America the move to GSM has done great things to us. So, I think we have moved somewhat up in the market and I think we've gained market share in the somewhat higher market segments.

Clearly in Pakistan, with the GSM network on now, we are gaining market share. And also in Africa where, over years, you know, we did not invest enough. Now that we are investing a lot, we are gaining probably some market share.

And one final question on Vietnam is, your OpEx. For the OpEx of the joint ventures that's similar to the CapEx? Or is there a major difference between the 2?

Well, under the BCC we have CapEx requirements, or commitments sorry, over $200m. And, we will have, paid for all of those at the end of the BCC. And we have an office, or 2 offices for Comvik - 1 in Hanoi and 1 in Ho Chi Min City, and we will decide, depending on the stage of the negotiations, what we will do from that point onwards.

Right, and if the, obviously it's speculation, but if the structure of the contract, which would result in a joint split of both operating costs and CapEx. Would that be neutral on your EBIT margin?

As I said, I don't want to speculate what the deal is going to look like. We know what the economics are of the BCC today. I think that we have explained that. We don't know today what the terms and the conditions are going to be of this agreement we are negotiating. So I can't really answer that question.

Thank you.

Thank you Bob.

Our next question comes from Jordan [Deramo] of MacKay Shields. Please go ahead.

Hey, how are you.

Hi there.

When did you guys -- I just want to get some -- try and understand. If you knew it was going to take a legislative act which I would assume would take a very long time, when did you start these negotiations? Because it just seems like you are lax about the whole things, and meanwhile in a month, you know, 28% of the EBITDA is going away.

Well if you were on the previous conference call for the fourth quarter of last year, I did point it out that there was serious delays in the negotiations of, you know, the joint stock company, and that it would be my words the Vietnamese were not ready for this. So I did point it out at that point in time that there were issues in the negotiations, and that it would require a number of changes in Vietnam in order to allow any foreign company to hold a stake in the telephone company in that country.

They weren't ready meaning they just weren't -- just because of the current laws in place, or, I mean, because if that's the case wouldn't you have known this and started negotiations?

But there was a decision taken by the Prime Minister a few weeks ago, which is a decision that is needed, to equitize VMS. Without that decision, you know, no joint venture could even be set up. So this is a process where several steps are being taken, so this equitization step was taken a few weeks ago. And, you know, now a number of more steps need to be taken.

Right. When did you actually start focusing on doing these negotiations? That's what I am trying to understand, your management of this process.

As you know, we signed an MOU in February last year, so more than a year ago, saying that there would be a long term corporation. We signed a second MOU in November of last year, saying that the corporation was taking the form of a joint stock company. So, these are not new elements. These are, you know, several steps that are being taken in a process. And as I have said, more steps will have to be taken.

Am I wrong in thinking that a legislative -- I mean, can you ballpark what a legislative act, how long that takes in Vietnam? I mean, do you have any experience with that?

No. This is the first time that this is going to happen, so the intention --

You mean it could be 2, 3 years from now?

I don't know. I don't know. The fact that decisions are being taken clearly indicates there is an intention to move forward in that direction, which as I have said several times before, Vietnam has the intention to join the WTO in the course of this year. Vietnam has signed agreements in 2003 with the United States. With the E.U. in 2004, that became effective this year. With respect to opening up its markets, including the telecommunications market to European companies. So there is a framework that is being created to allow these things to happen. How much time that is going to take, unfortunately I can't answer that question today.

The next question. Regarding your EBITDA was about $20m or so higher, you know quarter-over -- you know Q1 '05 as Q1 '04, and the upstream was about $8m, $9m lower. What's going on there?

Well the fluctuations, you know, we've had, you know, higher and lower quarters in terms of upstreaming of the money. Last year, you know, we had in the first quarter, an important upstreaming out of Pakistan. [Together] with the license commitments in Pakistan that money is being used, sort of similar is being used to pay for the license fee and for the CapEx commitments we have there.

But at the same time we see very strong upstreaming of cash coming out of the Latin American markets. We see that Africa, you know, that was still very small in 2003 in terms of cash flow upstreaming, became somewhat more important in 2004, and will become again more important in 2005.

So, as I have said on the previous call in February, we get much better balanced cash flow upstreaming in 2005 than we had in 2004.

And then just lastly. In terms of the convert, you seem to book some of it as equity on your books, and some as debt. Why would you book any as equity, given it's so out of the money?

Well this is an IFRS accounting treatment, and [as far as] the convertible bond, a portion of that has to be allocated to equity. For the way that this works, that we need to compute the future, or the total, cash inflows and outflows, and discounts at an effective interest rate, which is not 4%, but is at a rate that we have on similar loans that we would take, if they were not convertible. So we are talking [approximately] 9%, between 9% and 9.5%, and discounted that, and basically the difference between that discount and the net cash inflow, makes the portion that goes to equity.

You are just doing what the rules say. You are not trying to be aggressive, in terms of putting the debt, or showing debt or equity on the books?

Of course we are playing by the rules. We have to.

Okay. That's all.

Thank you.

Our next question comes from [Weng Mulroyd] from [Esleybank]. Please go ahead.

Yes, this is regarding Africa. Do you see any possibility of the [compensate] like in Vietnam? Also considering recent acquisition of the mobile operation by the Kuwaiti telecom operations, [do you see] the possibility to gain some new contracts down in Africa?

Sorry, could you repeat that question because I didn't --

How do you see the possibility of gaining some contracts down in Africa, and what kind of connections do you have? Or have you identified any key markets where you see a potential there to break into?

Well we are looking at a number of markets in Africa. As we said before, we will not disclose the names of the countries, but we hope that we will be able, over the next 18 months, you know, to add a number of new markets to our existing Africa portfolio. And I think there are still a lot of interesting markets with very low penetration in Africa, where I think the entry costs are still going to be low, or reasonable.

Okay, and then second, regarding the CapEx. Do you still stick, or [can you] clarify the levels for the full year here? Was it $230m?

$240m to be precise yes.

$240m. And giving the high traffic growth of the minutes of usage you point out in your report, how is the value [for free money], or your price -- the capacity, buying the capacity from the vendors here?

Well in terms of the revenues in the minutes, we are on budget. So there is no need to increase that number of $240m.

Okay, despite the traffic being up considerable?

Yes, but we have anticipated for an increase in traffic, and an increase in revenues, because we saw last year that we were setting quarter after quarter, a new subscriber intake record. So, we knew that 2005 was also going to be a good year.

Okay. And then on the CDMA side in Pakistan. Are you considering testing [Xuave's] equipment?

Are we considering what?

Xuave, the Chinese vendor.

We are talking to a number of vendors and we never discuss these things, you know, publicly.

Okay, thank you.

From [Advent Capital], we have a question from [Drew Hanson]. Please go ahead.

Good morning Marc.

Hi Drew.

Maybe a couple of questions just to clarify, you answered a number of things. On the legislation that was disclosed, on the process of legislation, can you help us understand whether that's simply a declaratory statement by the Ministry of Telecommunications, or the prime minister to simply allow for this foreign ownership of telecom company takes place that is an act, or is there some type of actual voting process that must occur in any of the legislator bodies that may reside within Vietnam? That's 1 question.

And then, 2, if you could answer regarding looking at your liquidity today, which I know certainly it suggests to be very strong. But with the advent of both the 2 licenses in Pakistan and the upfront payment of 50% of those, and I think you spoke in the past about your GSM re-build costs there, and then obviously some longer terms debt maturities at [holcol]. It struck me that the big swing factor was, and you discussed this on your convertible call last year, the potential, as you refer today, market value that you may have to pay for the hopeful joint venture into Vietnam. And I think from that call, you put a $300m number on it, I'm not sure, I won't state that specifically, but I believe that was the case.

So I don't know if you can elaborate a little bit about your view on the liquidity of the company looking out over the next 2 years, in terms of cash flow going out for those payments of the licenses, your off term debt maturities, and then what you expect - because I think you didn't answer that - but in terms of cash flow upstream from the OpCos.

Yes. In terms of the change first, that's the first question. The changes that are needed in Vietnam. Most of these decisions are taken at the top level in the government so, [indiscernible] who know all the decisions, all decisions that have to be taken in the government as to how, you know, this process is to be run. So, to my knowledge there is no specific voting process in congress or so needed for this.

Secondly, in terms of the liquidity, we have very good liquidity at this point in time, and the reason why we raised the equity in the convert last year, was primarily to deal with the 2 license renewals in Pakistan, as well as the renewal of our corporation in Vietnam, which I indeed said that I expected the minimum cost to be $300m. Why $300m? Because that's the money we paid to do business in Vietnam over the last 10 years.

So, given that, you know, the 2 licenses in Pakistan are, you know, 1 is [indiscernible] operation, the other one we have agreed payment terms. We are still negotiating on the exact specter of allocation. So, some money will be needed there, and, of course, you know, we will keep the money aside for the time being, until such time that we know what the deal in Vietnam is going to look like.

So liquidity wise, we are in a very strong position, not only because of the cash we have, but also because of the cash flow we generate. Even if you look at our cash year end, 2004, end of the quarter, first quarter 2005, even if you exclude the proceeds of the convert, that was paid in January to us, you will see that the cash has gone up again. So we generate cash, free cash flow, at the corporate level.

Right, so your statement would be the liquidity of the Company from the [holcol] level, is sufficient even without the upstreaming of dividends for the next several years, to pay the license requirements which, I guess, have to come from the [holcol], as opposed to funding it at the offing level on Pakistan.

Yes but we are only talking about, you know, reduced inflow from 2 countries - 1 is Pakistan as I just mentioned, and the other one is Vietnam, where after May 18, as things stand now, we don't expect any further payments. But all the other 15 countries will continue to do the same as they have been doing, and probably even more than what they have been doing last year. And this is this first quarter, okay. [Appreciate] you know cash flow upstreaming to the Company.

I appreciate that. Can I ask if you had given what, for Pakistan representative of the upstream dividends say for last year?

A number I know was that $60m was paid in the first quarter, I think, last year. And then I think from the second and third quarter onwards, I don't think any money was paid any longer, because that money was used to buy equipment to build out the GSM network.

In the operations itself.

Correct.

Okay. And the funding agreement is already in place to do your expected capital expenditures in Pakistan right now?

We are working on those. Some are [to] our suppliers, you know, and some will be to banking. So these are things we are currently working on.

Okay. And then just in light of the last question, some of the transactions that have been announced maybe in Eastern Europe, in Africa on, you know, wireless properties. Have you had any heightened interests at all with, or discussions at all in general, with other national or global or wireless companies on parts of your properties?

You know that I can't answer those questions. These are speculative questions. The only asset that is currently for sale for us is the small broadband business we have in Peru, and all the other assets, we are operating them as good as we can.

Okay. Alright, thank you very much Marc.

Thank you.

Our next question comes from Richard Marshall of Senvest. Please go ahead.

Hi Marc.

Hi there.

I just wanted to clarify once again on the Vietnam. Now that you are going to stop operating, I guess, in a month, do you have employees there that you just pull out and stop working? How do they function without you guys? Are they going to be paying you a fee for some services, or can they easily run the company without you guys?

We would expect that the Vietnamese can run their operation without us. As a matter of fact they do most of the day-to-day stuff. The role Comvik has had over the last 10 years is a role of providing, you know, support and assistance in terms of technology, build up networks, selection of suppliers. And over the last couple of years [we were] a very important impact in terms of, you know, distribution, sales, marketing, branding. Comvik has made an enormous contribution to, not only to BCC, but I would say to the Vietnam telecommunications market as a whole.

And those have been recognized several times by the Vietnamese. We have been getting medals, you know, for our contribution to the telecoms sector of Vietnam. Sorry, Comvik again last year was given the "Golden Dragon" for the best telephone company in the country. The VMS technically can, of course, continue to operate that without us. Whether they are going to be successful, you know, afterwards than before, that the future will show.

So that's really what you are counting on, I guess, is that they see that the, whatever it is, I guess, while they are running it without you in this period, they will see the value that you have added in the past, and be encouraged to sign a new deal with you. That's sort of, that's what you are counting on.

Well what we are counting on is that we have had 10 fantastic years. We have established an extremely good relation with our partner, VMS and [indiscernible] VNPT. We have, you know, extremely good relations with the decision takers in the country, and what we hear from those decision takers is that they want Comvik to continue doing business in Vietnam, with VMS. And to that effect, 2 MOUs were signed last year, and that is the basis of our negotiation to, you know, negotiate a joint stock company with VMS.

That is what encourages us to continuing negotiating. And as I said, you know, a member of the Board of Millicom, you know, was received by the president of the country this week, and by other, you know, people high up, which for us gives, you know, confirmation of the intention that the Vietnamese want to continue doing business. At the same time, of course, there are negotiations on the [ground base] taking place with VMS and VNPT. So it's not only at a higher level, but it's also at the day-to-day level that the contacts are taking place every day.

Have you put a rough timeframe out there, when you expect this to be completed, like a year, 6 months? I mean, have you given any kind of timeframe?

I don't want to start working in deadlines. This is a process we don't control ourselves and, therefore, I don't think, you know, I cannot give you a deadline there.

Okay, thanks Marc.

Thank you.

From Triage Capital, we have a question from Mark Whitman. Please go ahead.

Good morning. I was just going to ask a question, I think you have personally already answered, which was, they're dependence on you in Vietnam for running the operations. I guess it's [alright to ask] is are there any people that are Millicom employees that you might pull out so that they feel more compelled to get you back in there, helping them run the company?

As I said before, we have not decided what we are going to do after May 18. That will depend on where we stand under the negotiations at that point in time. So, I can't answer that question today Mark.

Okay.

Operator.

Will we move to our next question?

I think so.

We will take our next question from Steve Flynn of Morgan Stanley. Please go ahead.

Great. Good morning, I have 2 questions. First, March, I was a little uncertain. You talk a little bit about a CapEx commitment left in Vietnam. Could you talk a little bit about that? I thought you had spent most of the money that you required to over the 10 year license agreement. Is there any monies left to be spent in Vietnam before May 18?

Yes. We have our CapEx commitment that is over $200m. You will remember last year there was an investigation ongoing in the Vietnamese [Post in] telecom, which prevented them, [or rather the result that] for almost 12 months, no investments, you know, were approved for the BCC between Comvik and VMS. So there was a delay in the decision over the investments.

That means that, you know, some of the investments, you know, that should have been made last year, are going ahead now only. Or, you know, will only be delivered, once the BCC is extended. And that's exactly the reason why we have done this asset impairment on some of the equipment at Vietnam. That equipment, unfortunately, we will not be able to generate revenue from, because of the delays that we experienced last year. Outside our control unfortunately.

Okay, so will this actually be a $200m in CapEx and recorded in the second quarter?

No. We have been, you know, writing down our CapEx. Bruno what is still left of CapEx, you know, in Vietnam, [taking in] the second quarter?

Around $19m.

Okay.

$209m was the total commitment throughout the BCC agreement.

Okay, great, okay. And then, second question. You talk about a lot of money being upstreaming from Central and South America. Can you update us on El Salvador? I thought you were keeping money at El Salvador for your commitment to re-purchase some of the minority equity shareholders. Have you been keeping money there or have you been spending --?

No. We fully -- we paid off the, you know, local shareholders at the end of last year, because we organized a local credit in El Salvador, and that now allows us to upstream money out of El Salvador.

Okay, great. Okay, thank you.

Thank you.

[OPERATOR INSTRUCTIONS]. We pause again for just a moment to give everyone an opportunity to signal again for questions.

Are there any questions left operator?

Gentlemen, that will conclude today's question and answer session. At this time I would like to turn the conference back over to you, for any additional or closing remarks.

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 wish 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 on +44 207 321 5010. Thank you and goodbye.

Ladies and gentlemen, that will conclude today's Millicom 2005 first quarter results conference call. Thank you for your participation, you may now disconnect.