Millicom International Cellular SA (TIGO) 2005 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to Millicom's 2005 third quarter results conference call. [OPERATOR INSTRUCTIONS] 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 Millicom's results for the third quarter of 2005. David Sach our new Chief Financial Office is with me. And we will be happy to answer any questions you may have, after first making some brief comments.

As in the second quarter we have again included a pro forma P&L end of statement, which excludes Vietnam, and includes the increased ownership in Honduras for the third quarter last year, the second quarter, and the third quarter of this year. To allow you to get a better understanding of the size, growth and profitability of Millicom post Vietnam. These numbers are referred to as pro forma.

The third quarter of 2005 was a very strong one, looking at the pro forma numbers. Revenues increased by 31% compared to the same period last year. Central America was for the second quarter in a row, the fastest growing region in Millicom, with revenue growth of 55% over the third quarter of 2004. Africa improved from the slower second quarter with a 5% sequential growth, and a 30% growth over the third quarter of 2004. The record proportional subscriber growth in Africa indicates that it will become Millicom's fastest growing region, driven by organic growth, the start of our operation in Chard. And of course, the acquisition of Oasis in the Democratic Republic of Congo a month ago.

At Millicom we have decided to concentrate on our GSM business in Pakistan, Paktel. And divest from Pakcom our TDMA operation in Pakistan. We have started negotiating on the sale of our shareholding in Pakcom. This will halve our license cost in Pakistan, which will mean we will be able to invest substantial amounts in Paktel. As of today we have committed to spend in total $250m in Paktel in addition to the license cost of $291m.

Let's turn to the operating results now, starting with subscriber growth. Total subscribers at the end of September amounted to 7.9m representing a 15% increase over the third quarter of 2004. The pro forma increase is 50%. Proportional cellular subscribers increased by 35% from the third quarter of 2004 to 6.4m or by 53% on a pro forma basis, 94 of whom are pre-paid today. In terms of additions in the third quarter, Millicom added almost 707,000 net new subscribers, and over 573,000 proportional subscribers.

I am also pleased to report that we now have more than 8m subscribers across our operations having reached this milestone last week. The sustained increased in minutes of use has continued to a total cellular minutes for the three months ended September 30, 2005 increasing by 19% from the same quarter of 2004. On a pro forma basis total minutes increased by 50% and pre-paid minutes by 59%.

Let's turn to revenue growth. The strong subscriber growth translated in total revenues for Millicom of $261m for the three months to September 30, 2005, an increase of 11% or 31% on a pro forma basis from the third quarter of 2004, reflecting the trend of increasing growth in our operations. We are approaching our record revenue level of the first quarter of earlier this year. The highest growth relevant to the third quarter of 2004 was 93% recorded in Honduras. It is interesting, in the light of the decision to sell Pakcom, that the underlying revenue growth excluding Pakcom would have been higher.

EBITDA for the three months ended September 30, 2005 was $110.8m a decrease of 6% from the third quarter 2004, due to the loss of some $30m of EBITDA as a result of the end of the BCC in Vietnam. EBIDTA on a pro forma basis increased by 22%. Millicom's EBIDTA margin was 42.4%. Over the last couple of quarters Millicom's consolidated EBITDA margin has been under pressure as a result of the Paktel GSM start up costs. Millicom's priority today is growing its top line and taking advantage of the opportunities in this market. This might have an impact on the EBITDA margin as well as on the CapEx spent.

Operating cash flow for the nine months ended September 2005 was $260m, funding investments of $265m compared to just $83m last year. And Millicom's net debt to EBITDA ratio is below 1 to 1 enabling significant future investments. CapEx was $91.7m for the third quarter and $184.8m for the nine months to September 30.

Let's turn now to the regional results, starting with South East Asia. Proportional subscribers to the South East Asia cluster declined by 53% from the third quarter of 2004, due to the end of the BCC in Vietnam. On a pro forma basis, however, proportional subscriber growth for Cambodia and Laos increased by 30% from the third quarter of 2004, to a total of 468,000 at September 30, 2005. Revenue for South East Asia was $21.8m for the third quarter, up 22% on a pro forma basis. EBITDA was $6.6m for the third quarter, up 22% on a pro forma basis from the third quarter of 2004. The EBITDA margin was 30%.

In South Asia proportional subscribers increased by 65% from September 30, 2004 to 1,787m at September 30, 2005. GSM subscribers for Paktel at the end of the third quarter of 2005, amounted to 747,000. Revenue for South Asia was $30.5m for the third quarter, an increase of 9% from the third quarter of 2004. Revenues for Paktel were $13.6m for the quarter, ARPU for Paktel was kept at $5 despite the reduction of the interconnect tariffs and the price pressure on the local and long distance tariffs. Paktel has decided to focus on the profitable subscribers in Pakistan. The further improvement in coverage capacity and value added services will help the company to achieve this goal. EBITDA was $6.1m and the EBITDA margin was 20%.

As you know EBITDA margins have been impacted by the up-front sales and marketing costs associated with the GSM launch by Paktel. The heavy investment in the sales and marketing in Pakistan will continue to impact the South Asia margin. And it will take until 2007 before the region again attains average group margins.

The Central American cluster comprising our operations in Guatemala, Honduras and El Salvador remains the star performer, showing a 57% annual growth in proportional subscribers to 1,652m at September 30, 2005. On a pro forma basis proportional subscribers grew by 48%. Revenue grew by 55% from the third quarter of 2004 to $120.4m for the second quarter of 2005, or by 45% on a pro forma basis. EBITDA for Central America increased by 52% to $62.5m for the second quarter 2005, and by 41% on a pro forma basis. The EBITDA margin for Central America was 52%.

The improved quality and coverage of the networks, combined with the strong Tigo brand, to drive growth in the region. And we will be demonstrating this next week to those of you joining us for our investor trip to Central America. If you are not already part of the group, and you would like to join us please contact Shared Value after this call.

Moving to the South America cluster, proportional subscribers grew by 37% to reach 1,128m at September 30, 2005. Revenue for Q3 grew by 21% to $36.6m relative to the third quarter of 2004. And Bolivia and Paraguay produced revenue increases of 33% and 51% respectively over the same period. EBITDA increased by 21% from the third quarter of 2004, to $14.1m for the third quarter of 2005. And the EBITDA margin was 39%.

We will introduce GSM services in Bolivia before the end of the year, and expect a positive impact on subscriber and revenue growth, similar to what we saw in the four other Latin American markets last year and the beginning of this year. In our Africa cluster 231 proportional subscribers were added in the third quarter, the highest amount ever. And more than double the amount added in the second quarter. This resulted in a 73% increase in the subscribers for September 30, 2004 to almost 1.4m proportional subscribers at the end of the third quarter 2005.

It is important to note that we have not included any subscribers from the Democratic Republic of Congo in this total, as following our acquisition of Oasis in September we need to recalculate the subscribers according to our standards.

The growth is on a like-for-like basis and it contributes to an increase in revenue of 30% to $50.4m for the third quarter, relative to the third quarter of 2004. EBITDA increased by 31% from the third quarter 2004 to $21.9m for the third quarter, the EBITDA margin was 44%. As well as purchasing the Oasis business in the Congo in the third quarter, we also launched our operation in Chad with state of the art GSM services. These two countries increase our population under license in Africa by 70m to 146m and we are confident that we will quickly gain market share in both countries. So I am happy to report that within the first week of the launch of our business in Chad we already have 35,000 subscribers.

So let me conclude and summarize. Millicom's underlying business grew strongly in the third quarter, that was stronger in the third quarter than in the second quarter with an 8% quarter-on-quarter increase in pro forma revenues. Pro forma EBITDA increased by 6% from the second quarter 2005. The main driver of this revenue growth was a 13% increase in revenues in Central America, 10% in South America, and the 5% growth in revenues in Africa, which continues to be our star performers. The Latin American market has seen a strong acceleration in subscriber growth since the launch of GSM and the Tigo brand in 2004. And this has continued to gather momentum as Millicom continues to take market share in Central American.

In Africa, Ghana and Senegal were particularly strong markets. And Tanzania is beginning to improve its performance. We are negotiating the sale of our shares in Pakcom, our second operation in Pakistan, as we have decided to concentrate our investment in Pakistan into Paktel. Paktel has growth strongly and by the end of the third quarter had 945,000 subscribers. As of today, we have committed to spend a total of $250m in Paktel, not including license costs. And we anticipate further strong subscriber growth in this market.

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

Thank you sir. [OPERATOR INSTRUCTIONS] We will take our first question from Erwin van Zuidan of Aster-x Capital Management, please go ahead.

Good afternoon I am speaking from Aster-x, a couple of questions. First with Pakistan, why did you decide to divest Pakcom after you had just have bought the license? And secondly do you expect to be able to sell Pakcom? And what kind of losses should you expect in the near future on that one? Thirdly, the subscriber growth of Paktel was not very high. Can you explain that?

And then I have a couple of financial questions. Tax payments were pretty high this quarter, and also the G&A increased substantially. Maybe you could give some explanation for that as well? Thank you.

Okay. So I will answer the first part on Pakistan and then David will answer the two last questions.

So in terms of the timing of the Pakcom sale, as I have said before, we have a number of or a couple of hundred thousand TDMA subscribers still on our networks. And if we had not renewed the license in April of this year, those TDMA subscribers would have been without service overnight, and we thought that was not the right thing to do. The same time, of course, we would also have lost, what was at that point in time, still a substantial amount of revenue. In the meantime the revenue and subscriber number, of course, for the TDMA business has come down. As for Paktel we are now actively moving people from the TDMA network to the GSM network and as we have said previously, we don't expect to have many TDMA subscribers on the Paktel by the end of this year. So that's the reason why the timing of the sale now and not earlier by not renewing the license.

Secondly, will we be able to sell that business? We would expect so. We have received, in the past, interest from several parties to buy that business from us in Pakistan, so there is interest from other investors and operators to enter the Pakistani market. And we already have taken a $6m loss, as you can see in our press release, to reflect the sale of the Pakcom asset. We don't expect any more losses there.

The subscriber growth in the third quarter for Paktel was not as high as it was in the previous quarter. The reason for that is two-fold. First of all we know that Pakistan is a multiple sim country, so subscribers carry around multiple sims. We, as always have been focusing on the profitable subscribers that means subscribers that have good recurring revenues, and that have enough recurring revenue in order to make a profit on them. So you will not be surprised to see that, for instance, our ARPU of $5 is still the same as it was in the second quarter. So we will be focusing on those subscribers that make money for us, knowing that keeping a subscriber on your network whether it's your switch or your pre-paid platform have the costs in the form of license fees made this cost, support costs. So we want to minimize that cost by only having active subscribers on our network. So David can you answer the two last questions.

Sure, the tax rate is just a mix issue, whereby we've got -- in places where we do pay taxes in mainly in Latin America, you can see that a greater proportion of that are profits are in those countries. So that's causing the tax rate to go up slightly.

On the G&A issue, again that's a mix issue here with -- you can see the EBITDA margins in Central America in South America and in Africa are relatively consistent. And what's causing that rise is in South East Asia obviously the effect is Vietnam is causing a change in the G&A percentage there, and obviously in Pakistan as well. So in South Asia we've got a higher percentage of G&A there as well. So another mix issue.

On G&A it's not only as percentage higher but also in absolute terms, despite the fact that the total operation didn't increase as substantially in the first quarter.

Part of what's driving the higher absolute amounts is obviously growth in the business. So places where the EBITDA margin has stayed constant, in places like Central America, obviously those G&A in absolute terms is going up. Plus you see in Africa as well there's start up in Chad, there's expenses in Chad with no revenue, because the revenue comes in the -- in Q4. So there's an absolute increase in Africa as well. So that's what's causing your increase in absolute terms.

Okay. Then I have a question on the tax rate. Does that mean that a lot of regions you are not profitable despite the relatively high EBITDA margins you report?

I don't have a -- I don't have the exact mix in front of me, but yes we pay -- there's different blends of tax rates in -- across our regions.

And a final question on Pakistan, how do you get the more attractive subscribers instead of the ones who switch every time? How do you select them?

By disconnecting the unattractive ones. So we want to make sure that the ones that are on our network are generating revenue. And so we will make sure that when we acquire customers that they generate revenues, and that we don't allow the dealer, for instance, to connect subscribers onto our network that will generate a nice dealer commission for them, but will not generate any revenue for us. And there are ways to deal with that in the way you structure the dealer commission for instance.

So the dealers are getting recurring revenue stream from further business, from the same client or?

That will be one of the ways to do it, but there are other ways to do that. But you can clearly see that despite the high growth you've seen in the overall Pakistani market. And also despite the substantial drop in interconnect tariffs since August 1, as well as a continuous pressure on tariffs, local and also international long-distance tariffs, we manage to keep the $5 ARPU, which I think myself is a fantastic performance.

Okay. Thank you very much.

Thank you Erwin.

Our next question comes from Andreas Ekstrom of Handelsbanken. Please go ahead sir.

Thank you. A lot of my questions have already been answered. But maybe a question on the regulatory situation in Pakistan. Do you expect any regulatory problems with you selling that license Marc? Or is that a non-issue for you?

We wouldn't expect any problems there, of course, the PTA would have to approve the new owner of Pakcom, or the new owners of Pakcom. But we take a view that I think Pakistan is interested to have good and strong operators, that are ready to invest a lot of money into the telecommunication sector in the country. And that the new owner would plan on doing that, we wouldn't expect there to be any problems.

Okay. Did I get it correctly that you don't expect any more losses due to this divestment?

That's the view we take now, yes.

Okay. Have you seen any impact of the earthquake in the market as such? Has that led to any [inaudible] on your ongoing operations?

No, not much. For those who are not familiar with Pakistan, the earthquake centre was in Kashmir. Kashmir is a region where today none of the commercial operators are allowed to offer services, so none of them have network there. That's why there was very little damage to the networks. We had an issue with our administrative office, or one of our administrative offices in Islamabad, which we had to evacuate because there was structural damage. But in that office there is no network critical equipment such like switches, they are all -- they are all in other buildings. So we can say that we hardly have any damage as a result of the earthquake.

Okay. Thank you.

Thank you Andreas.

Our next question comes from Adrian Dawes of Hartwell. Please go ahead sir.

Congratulations on a great set of numbers.

Thank you Adrian.

Can you give us a sense -- how you feel about EBITDA margins as we look forward, giving the multiple new investments going on in GSM networks, in Latin America and also the roll out in Africa? How significant stepped up marketing expenses may be? And what kind of pay back period you are thinking about?

I think the EBITDA margins for the existing businesses, I think are under control. We don't expect a lot of pressure on the margins. You are going to see pressure on the margins for new start up's like Chad, as David said has impacted our G&A in the third quarter. But as soon as they start generating revenue that will improve. In DFC and new business more or less will, of course, not be a bit contributor, albeit the EBITDA that will in the initial days, so or months, so that will have a negative impact on EBITDA. And then it all depends on what new start-up's we might want to do or what acquisitions we might want to do going forward. And the EBITDA those new businesses will generate.

But for the existing businesses I think Central America has now proved, sorry the whole of Latin America has proven to be pretty consistent in terms of the margins. So its EBITDA margins in Central America at or above 50% in South America around 40%. I think Africa, depending on the one to the other quarter between 45% to 50%. So I think that's pretty consistent.

Where we see the pressure, of course, is in South East Asia, the South Asia part, sorry with Pakistan, but I would expect that that going forward will also improve as we will start to go to a breakeven point from the EBITDA point of view, and then we'll start building EBITDA in that part of the world.

Is there any reason structurally why South America, with the rollout of GSM, can't have margins approaching those in Central America?

I think if you split it up, I think Paraguay has higher margins than the Bolivia. And as previously, Bolivia has a structural issue because we -- I don't think we are in a perfectly regulated market there, and so we pay quite a lot of money for transmission. We have lower ARPUs. We have probably not a perfect interconnect agreement with some players in the market there. Which makes that in Bolivia we'll probably never get to those margins.

But we've seen improvements in Paraguay when that country starts growing again. So Paraguay, I think. Maybe over time we'll get into Central America, at least Bolivia, I don't think so.

Final question. Any update on Iran? Have we got some clearer definition over some of the technical interconnect rates and so forth? And how would you characterize the success of -- in Iran?

As you've read, we have about, I think 400,000 -- just over 400,000 customers in Iran but they're not our customers. We manage them. We still don't have full clarity on the interconnect situation in the country, and that is the reason why at this point in time we still haven't exercised that option.

Great, thanks a lot. And again, great quarter.

Thanks Adrian. Bye.

From Enskilda Securities we now have a question from Lena Osterberg. Please go ahead madam.

Yes, hello. I was just going to ask you on CapEx and CapEx guidance going forward, because it's quite clear with this quarter that you've spent a lot of the allocated budget already. So I was wondering was some -- from certain comments it seems like will you increase your CapEx budget going forward. What would you say for the full year, and maybe also some guidance for next year?

Yes. Well I just said, Lena, that in the previous conference call the second quarter CapEx was very low but that was just a consequence. And that tells you that the CapEx going forward into next year was going to be substantially higher. And I think what you see here now is a confirmation that, as some people feared, we're not under-spending in CapEx. We are spending the CapEx that is needed, and we would expect that for the full year we will be around the 250 level. And I think that's a level we expect to be at next year.

Okay. So this will not cause you to exceed the 250?

We don't expect so but, as you know, if we were to exceed CapEx that is great news. Because that means that the amount was higher than anticipated, and that we only make CapEx decision based on good returns. That means more CapEx means more EBITDA at the end of the day for us.

Also can I ask you on depreciation, you are running compared to your storage levels quite high now, because you're replacing the analog network. Can you give an indication of how long this would continue?

We will have fully depreciated our analog and TDMA networks by, I think, at the end of 2007. So there's another two years and then they will be completely out of our books.

Okay, thank you.

Thank you Lena. Bye.

Our next question comes from Brian Lowe of Morgan Stanley. Please go ahead.

Hi. I have a couple of questions for you guys. First, could you give us holding company liquidity as of the end of the quarter, and also the amount of cash upstream from subsidiaries? And then just also, did you guys have any thoughts on how you were going to spend the proceeds from the sale of Pakcom? And also the liquidity of your balance sheet right now, any guidance on use approaches there?

Okay. So I'll answer the second question and David will answer the first question, but let's start with the second. The intention is that we would use our cash resources, and they are around $0.5b, or close to $0.5b at the corporate level as we speak. In existing businesses as such as Pakistan, as you can read in our press release, we've committed a lot of money to Pakistan, and that will require some support from corporate.

Secondly, we did -- we bought a business in Congo but ultimately the price of buying it was that high, that's it's -- there's going to be a cost to growing the network in Congo. And that could be a cost of over $100m, so that's where part of the proceeds will be used. And then a smaller market, of course also Chad, where we will be spending money.

And thirdly, we are looking at buying out local partners, so that might be a way to spend that money. We're also looking at eventually doing some other start ups or buying into existing businesses, in regions or close to countries where we are currently operating in business. So that's how we are planning to spend that money, this year and in the course of next year. David, can you give the answer to numbers?

Sure. Yes, the upstreaming we did in the third quarter was $31m, which brings the total for the year-to-date to $114m of cash upstreaming. And we have $477m of cash sitting in corporate.

Great, thank you.

You're welcome.

Thank you.

Our next question comes Willem Kajek of Kepler Equities. Please go ahead.

Yes, good afternoon Marc.

Hi Willem. How you doing?

I'm okay. I've got essentially three questions. I got in only after 10 minutes but taking on board, the whole Africa situation is surprising me somewhat. You've got 230,000 extra subscribers, etc. Is it purely chance that the EBITDA went down, or is there something like what they call a price erosion? That's one.

And secondly on Congo, you made the point and I think that's an okay deal for $100m investment, etc., but what are the ARPUs Like in Congo? I've heard and I've seen figures like ARPUs of $25 per month. So that on that angle that will be okay. And then lastly on the u-turn Pakcom, etc. Of course, you spent quite a lot of money on the license, etc.

Has the situation in the -- What has really changed compared to, say, 9, 12 month ago that you decide that basically to go for one brand and one license? Because unless, of course, you're able to get $300m for this operation, you may also be confronted with a book loss there.

Well, let me start with Pakcom. There should not be an additional book log than one we have provided for this quarter, which is around $6m. The reason why we're doing this now and not earlier is that, as I said early on the call, we have hundreds of thousands of subscribers on the -- both the TDMA networks Paktel and Pakcom. So we wanted to protect those revenues and allow those customers to continue having service.

In the meantime the number of TDMA subscribers, especially on the Paktel network, has come down tremendously, and we would expect that the TDMA subscribers on Paktel will be more or less gone by the end of this year. So that allows now to focus on, what you call, this one company, one brand strategy, and one technology strategy also. And that's what we will be doing going forward.

In terms of Africa, Africa's a high growth region as you imagine yourself, 230,000 subscribers. The EBITDA impact was primarily coming out of Chad where, of course, we have been building up in the course of the third quarter and organization. Also start building a network, which increased the cost but without having any kind of revenue there. Revenue will start coming in last week and, as I said, we now have about 35,000 customers on our network-- active customers on our network in Chad.

There was also in the second quarter a peak in the EBITDA in Ghana, I think, and that levels off now back to the normal levels. And I think those two combined made us EBITDA in Africa, and this quarter was slightly lower than last quarter. I cannot comment at this point in time on the ARPUs in Congo. We have our people on the ground now. We are looking at the organization using the Millicom reporting standards.

So unfortunately you will have to wait until the fourth quarter call before we will be able to give you some indication, on the ARPUs and other KPIs in Congo. So we think it's a great market to be. It's a very low penetration. A lot of people, 60m people living in that country. A country that, I think, after the elections that will be organized there shortly will, I think, improve a lot, both politically and from an economic point of view.

So we really look forward to operating in that country.

Okay, thanks. Thanks Marc.

Thank you Willem. Bye.

[OPERATOR INSTRUCTIONS]. We'll take our next question from Shirley [Zan] of Montpelier. Please go ahead madam.

Hello, good afternoon. Maybe you could expand -- Once the sale of Pakcom could impact further market competition in Pakistan?

I don't think --

If you sell this -- If the existing operator buy this Pakcom, do you think that will be bring the competition situation more intense -- intensive or less?

For the first part, the new owner -- There's a terrible echo on the line right now, I apologize for this. It will depend on what the new owner will do with Pakcom, how it will position the company in the market. As you know we have certain ideas as to how to do that, as a high talk and low cost network. So, depending on how they're going to position the market, that might or might not change the competitive environment for the mobile operators in the market.

Or maybe even for the wireless local loop operators in the market, because don't forget that Pakcom also uses CDMA. So that's a similar technology as being used by the wireless local loop operators today. Pakistan is a very competitive market today. Can it become even more competitive than it is today? I think the future will tell. It's very hard to say much more about that right now.

Thanks.

Thank you, Shirley.

Thank you.

Our next question comes from [Zank Molead] of Nordea. Please go ahead sir.

[inaudible] the current situation, and do you still keep the people on the ground, some 14 consultants? And secondly, I just wonder regarding CapEx. Are you benefiting from any enhanced price erosion on equipment, as you're able to buy more capacity for less money?

I think I missed the beginning of your question, but I think it has to do with Vietnam?

Yes. I just wonder if you could give an update there? What is the current situation there?

Okay. But there's no change from the second quarter call. We continue to hear warm words from the Vietnamese government, but at the same time we don't get to see a lot of transparency in terms of the projects that are being run by the government. But at least we still hear the right things, and so compared to what I said at the end of the second quarter there's no change.

We keep our people, or we've kept a certain number of people on the ground. The number today is lower than it was at the end of the second quarter. We need to have a number of people in countries to close down the BCC, and that's what we're doing. And at the same time our former partner, PMS, has asked for some support which we have start offering to them, and that's the reason why we keep a certain number of people on the ground in the country.

Hut basically have you changed your view on the possibility to get licensed there, regarding this right first to refuse them?

That's the view we take, is that, given the agreements that have been signed between us and PMS, as well as the agreements signed between the European Union, or the European Commission and Vietnam. And I'm referring to the market access agreement. We take the view that, yes, we have a right of first refusal. So that's to a co-operation with mobile phone with PMS, yes.

Okay. And then secondly regarding the CapEx and the prices on the equipment?

Well, we continue to see an erosion at the CapEx level -- sorry, the prices of CapEx. This is driven, I think, by two things. First of all we, of course, are buying more than we were buying in the past and we're buying one of the same technology today whereas in the past we were buying CapEx coming from -- or different technologies.

And secondly, there is intense competition between the major suppliers in this world, and that makes that prices continue to erode by 10%, 15%, 20%, in the year.

Okay, thank you.

Thank you.

Our next question comes from Peter Irblad of Absolute Capital. Please go ahead.

Yes, hello. I just have a clarification. When you say $6m in losses for Pakcom, is that in the EBITDA number or is it a write-off, or what [inaudible].

Yes, that's a provision we've made. So, if you might remember, the license fee in Pakistan was -- is not to be paid upfront. So the payment that had been made by Pakcom so far had been fairly low, and had more or less been paid out of operating cash flow. So this $291m number everybody has been talking about, is not a number that we have -- we paid upfront and that we need to recover from the one or the other. Given that the payments will be, or are being spread over the total 13 years.

So when we talk about this provision as a provision we've made for, I think, intercompany loans, intercompany receivables, we had on Pakcom.

And it is -- the $6m is the bulk of that write-off in Q3.

I'm sorry, can you repeat that?

Yes. The $6m is the bulk of the write-off, the 7 --

Yes, okay.

Write-off, if that was your question?

Yes, exactly. Okay, so that's was -- it was not in the EBITDA numbers?

No, it's not. It's in the $7m.

Alright. Can I also ask, in Africa it seems that the ARPU number was quite weak. You had a lot of subscribers but revenues didn't go up much. Is there any particular reason for that? I know the EBITDA number was under pressure because of your startups in Chad. But in terms of your revenues, is there anything exceptional there why the ARPU was a bit weaker?

No. We've seen a build-up of subscribers in the third quarter, and these subscribers have not been generating revenues for the full quarter. As you remember, the second quarter was a slower quarter in Africa because of issues we have on capacity, on the prepaid platforms, and the network. I think these things were addressed, and now we starting to see subscribers coming in, and I'm sure that the ARPU will follow going forward.

Okay, thank you.

Thank you.

Our next question comes from Barry Fernstein of Fernstein Capital. Please go ahead.

Barry?

Mr. Fernstein, your line is now open.

Shall we go to the next one, operator?

We have no further questions at this time.

Okay. So, thank you very much for participating in this telephone conference call regarding the third quarter results. If there are any further issues you wish to discuss, I will be happy to deal with those on a one-to-one basis, if you wish to contact us directly. Or alternative you can talk to Shared Value, on 44-207-321-5010. Thank you very much and have a great day. Goodbye.

That will conclude today's telephone conference. Ladies and gentlemen, thank you for your participation. You may now disconnect.