Millicom International Cellular SA (TIGO) 2006 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to today's Millicom 2006 fourth quarter and full year results conference call.

[OPERATOR INSTRUCTIONS].

I would now like to hand you over to the hosts of today's conference call, Mr. Marc Beuls, President and CEO and Mr. David Sach, CFO.

Please go ahead, sirs.

Thank you, Operator, and welcome to everyone who has joined us today. For this call both David and I will be using slides to run you through the results. It will be helpful to have the slides in front of you and you can find them on our home page at www.millicom.com. We will both be happy to answer any questions you have at the end, but first I would like to give you an overview of the results and run you through the performance of each cluster.

As you will have seen from the statement, we have presented our current and prior year results to exclude discontinued operations, the largest element being Paktel which no longer appears in our numbers other than as an asset held for sale on the balance sheet and as a single line on the P&L.

We announced last month that we had signed an agreement for the sale of our majority stake in Paktel to China Mobile, implying an underpriced value for Paktel of $460 million. And I was delighted to report the completion of that transaction yesterday. Consequently, we have merged the South Asia and the Southeast Asian cluster into one Asian cluster.

So turning to the headline numbers on Slide Number Two of the pack, the fourth quarter of 2006 was once again a record setting one, surpassing the third quarter. We added 3.7 million new subscribers in Q4, including 1.9 million from the acquisition of Colombia Movil, giving us a total intake for the year of 7.4 million and year-end position of 14.9 million subscribers.

The number of subscribers for Colombia are similar to that for Pakistan, so the treatment of Paktel as a discontinued operation and the consolidation of Colombia together have no material impact on the year-end subscriber numbers. We're delighted to have entered the Colombian market and today operations there and in Guatemala both have over two million subscribers.

Five of our other operations each have more than a million subscribers on their network. This strong subscriber growth of 99% from Q4 2005 has fueled revenues, also up 99% and EBITDA up 71%.

Millicom's CapEx for the quarter was $247 million, up from $116 million in Q4 2005, bringing to total for the year to $616 million excluding discontinued operations. We have invested in our networks in all of our regions, but particularly in our new Colombian business and in our operation in the Democratic Republic of Congo, and we are delighted that both these operations have now successfully launched the Tigo brand and are applying our Triple A strategy and customer focus business model centered on the core values of affordability, accessibility and availability.

The rollout of the Tigo brand is now almost complete across Millicom, with a launch in Laos scheduled for the first quarter of this year, and we look forward to seeing the real benefits of this in Africa and Asia progressively in the coming quarters.

As seen in Slide Number Three, Millicom added almost 3.7 million total subscribers in the fourth quarter, bringing the total to 14.9 at the end of December, representing a 99% increase over the fourth quarter of 2005. As I've said before, this subscriber growth indicates that Millicom's businesses are now well into the accelerated J curve of emerging market growth.

In Q4, subscribers in Central America grew by 89% year-on-year and in South America by 65% on a like-for-like basis. The acquisition of Colombia has virtually doubled our subscriber base in South America.

Africa reported year-on-year subscriber growth of 71% in Q4, which gives us confidence that we will be able to capitalize on the growth potential in Africa in the same way that we have across Latin America. However, in Africa, the population is far larger and so the long-term potential is even greater.

Attributable cellular subscribers calculated as 100% of subscribers in our subsidiary operations and our percentage ownership of subsidiaries in each joint venture increased by 105% from the fourth quarter of 2005 to 12.8 million at the end of December.

Slide Four shows that for Q4 we have recorded our highest ever quarterly revenue of $544 million, an increase of 99% from the fourth quarter of 2005. In Central America, where penetration is higher and networks are more developed, that new growth at 77% in Q4 is extremely strong. Both Guatemala and Honduras produced revenue growth of at least 80%.

South America, excluding Colombia, also produced revenue growth of 80%, which represented the strongest year-on-year organic growth for the quarter by any cluster. Revenues for Africa increased by 59% and revenues for Asia by 15%.

Turning to EBITDA growth and referring to Slide Number Five, EBITDA for the three months ended December 31, 2006 was $229 million, a 71% increase from the fourth quarter of 2005. The EBITDA margin was 42%.

So let's now look at the result of each cluster starting with Central America, which remains our largest cluster in terms of revenue and EBITDA. On Slide Six you can see that the total subscribers reached 5.2 million, up 89%. Over 900,000 new subscribers were added in the quarter, the highest addition recorded by any cluster, coinciding with the complete rollout of our second billing across the region and demonstrating the clear demand for affordable telephony as Tigo reaches previously unpenetrated rural areas.

Quarterly year-on-year revenue growth for Central America was 77% to $251 million for the fourth quarter of 2006. EBITDA for Central America increased by 62% to $131 million for the fourth quarter of 2006 and the EBITDA margin was 52%.

Please turn to Slide Number Seven to look at the results of South America in more detail. Subscribers grew by 224% to 4.3 million following the consolidation of Colombia Movil, which accounted for 2.1 million subscribers in the fourth quarter. Excluding Colombia, subscribers grew by 65%. Revenue for Q4 grew by 305% to $162 million relative to Q4 2005, or by 80% excluding Colombia.

EBITDA increased by 195% on a quarterly year-on-year basis to $49 million and excluding Colombia the growth was still a very impressive 109%, demonstrating the success of the continuing Tigo rollout and the launch of additional value-added services which continued to drive revenues and enhance earnings.

We launched Tigo in late November in Colombia and the change of the brand already made a small impact in the December. We're improving the accessibility of Tigo by increasing the number of distribution outlets and bringing this to a level comparable to our other Latin American markets.

The affordability of our services has improved and, with the continuing network build out, we expect the top-line growth to start accelerating later in the year 2007.

EBITDA margin for South America was 30%, down from the previous quarter as a consequence of the consolidation of Colombia Movil. Despite Colombia Movil's profitability being ahead of expectations, its lower margin will continue to result in a temporary reduction of Millicom's consolidated EBITDA margin for the medium term, until such time that the business operates at the average Millicom EBITDA margin. However, I'm pleased to report that the EBITDA margin in Paraguay again reached 50%, proof of the positive impact of per second billing and E PIN.

Turning to Slide Number Eight, you will see that in our Africa cluster, total subscribers increased by 71% to 3.4 million at the end of Q4 2006. The subscriber growth continued to a year-on-year increase in quarterly revenue of 59% or $92 million. And despite the heavy start-up costs of building out the new and extended networks in Africa, EBITDA increased by 53% to $33 million representing an EBITDA margin of 36%. The progress made in building a new network in Congo allowed us to launch the Tigo brand in January, and today that operation is serving more than 100,000 customers.

Slide Nine talks about Asia and, as I've mentioned, we have merged the South Asia and the Southeast Asia cluster into one Asian region following the sale of Paktel. And Slide Nine shows that subscribers in this new cluster increased by 42% from Q4 2005 to two million at the end of Q4 2006.

Revenue was $38 million for the fourth quarter, up 15% from Q4 2005, and EBITDA was $16 million, up 8%, producing an EBITDA margin of 42%. We have been investing heavily in the network in Sri Lanka and launched Tigo in January, which almost completes our planned roll out of the brand across Millicom. Laos will be the last one to follow in Asia soon.

Now I would like to have over to David to talk you through the financials. David, please go ahead.

Thank you, Marc. Please turn to Slide 10 where you will see the key financial ratios for the full year 2006 compared to last year. Overall, the EBITDA margin has decreased slightly from 47% last year to 46%. This is mainly due to the lower than average EBITDA margin from the recently acquired Colombian business, and the higher nonrecurring operating income in the prior year. Excluding Colombia, we would see a stable EBITDA margin of 47% in 2006, despite the lower nonrecurring income.

As mentioned on previous calls, we achieved economies of scale from growing our businesses. This growth has improved our gross margin because the greater percentage of our revenues come from calls within our own networks. These are highly profitable calls because there are no costs for us to connect with other mobile or fixed networks. In addition, we are beginning to see the benefits of expanding our value-added services, which help sustain ARPUs which in turn have a positive impact on gross margin.

Furthermore, the growth in our businesses grows economies of scale for our G&A costs, which enabled us to reduce these costs as a percentage of sales. Offsetting the gross margin and G&A cost percentage are slightly higher sales and marketing costs as a percentage of revenue. This is due to higher costs in Sri Lanka and the Congo in order to promote the recently launched Tigo brand in these operations.

Slide 11 shows the recent quarterly EBITDA trend. Excluding Colombia, EBITDA margins have been rising slightly. Including Colombia, the EBITDA margin was 42% in the fourth quarter. Looking forward, as we improve the EBITDA margins for our Colombian and Congolese businesses, we would expect the consolidated EBITDA margins to trend towards recent levels.

On Slide 12 you will see several items impacting the comparability of the results. Please note that the figures in both years have been presented to segregate the results of the discontinued operations, which are shown as a single line item below net profit after tax.

Firstly, corporate costs including stock compensation has increased by 24 million due to changes in the incentive plans resulting in higher stock compensation costs of 10 million, the one-off expenses of conducting the strategic review totaling roughly $6 million, and additional resources put into corporate during the second half of the year to help manage the growth of the businesses. Looking forward, we expect corporate costs to remain fairly stable at the current full-year levels.

Secondly, depreciation is higher mainly due to the rising CapEx and the Colombian acquisition.

Thirdly, interest expense is slightly higher because of increased operating company debt, but this was more than offset by the higher interest income from increased cash balances.

Please turn to Slide 13. On this slide, we have presented the quarterly CapEx from continuing operations. As you can see, CapEx has steadily risen from the third quarter of 2005 and reached a peak of 247 million during the fourth quarter of 2006. This brings the total CapEx spending for the year to $616 million, representing an average level of CapEx of 154 million per quarter in 2006 versus 65 million per quarter in 2005.

CapEx peaked in the fourth quarter as we invested in our new Colombian business and continued to invest even more heavily to support the Tigo launch for our Congolese business. With the addition of our Colombian business and continued increased spending on our existing businesses, particularly in Africa and Sri Lanka, absolute CapEx spend is likely to be even higher in 2007 but will decrease as a percentage of sales.

Slide 14 shows the quarterly breakdown of depreciation. You can see that depreciation started to increase at the beginning of 2005 when we began to accelerate the depreciation of our older technology networks. Depreciation has risen in 2006, mainly due to the higher level of CapEx that has steadily increased from the third quarter of 2005, but also due to depreciation and amortization related to the Colombian acquisition.

On Slide 15, we have presented a quarterly debt slide whereby you can see the impact of settling the 5% exchangeable notes in Q3 of 2006 when we transferred the Tele2 shares to the note holders. This resulted in a decrease of total debt to $943 million and in Q4 total debt rose to $1,494,000 due to the impact of the Colombian acquisition.

Please turn to Slide 16 to see the corresponding quarterly interest expense. The effective interest rate was reasonably stable throughout 2005 and the first half of 2006. Whilst the interest expense fell in Q3, the effective rate increased due to the settlement of the 5% exchangeable notes, which had a lower than average effective rate of 8%.

The effective rate increased again in Q4 due to the addition of the Colombian debt, which had an effective rate of almost 11%. In 2007, we are looking at the possibilities of refinancing the Colombian debt and reducing the effective rate.

Slide 17 provides an analysis of other income and costs. The positive variance is largely caused by foreign exchange movements due to the relative weakness of the U.S. dollar in 2006. The other movements were relatively minor.

Slide 18 shows that the blended tax rate for the operating companies was 24% in both years. Looking forward, this rate is likely to be higher for the next year or two as the Colombian and Congolese businesses incur losses without tax benefits and as they begin to represent a larger proportion of profit before tax for the total group.

Pleasingly, the overall group tax rate has fallen to 33% for the full year versus 40% in 2005. This is obviously due to the higher percentage of profits before tax generated by the operating companies compared to total group profits before tax, but also reflects the actions we are taking to better manage our tax position.

As mentioned on previous calls, we are taking steps to increase the management and brand fees that the companies pay to Corporate, especially now that Tigo has been rolled out in several more countries. This creates additional tax deductions in the operating companies but does not create taxable income at Corporate because of the corporate costs. As such, our overall group effective tax rate is lowered.

As you can see, the net nondeductible costs in Corporate are falling as a result of these tax planning actions. As our operating companies become even more profitable, we will be able to transfer even more income to Corporate, but are unlikely to fully offset the corporate costs until 2008 when the 10% bonds can be refinanced with local company debt. Afterwards, we might be able to get the overall group tax rate below 30%, but this will depend on the geographical mix of profits and the profitability of our Colombian and Congolese businesses.

On Slide 19, we have presented the cash flow from continuing operations separately by segregating the cash flow related to discontinued businesses. This slide shows that our strong operating cash flows are financing the increasing level of investments. We ended the period with a very strong cash position of $657 million.

Our net debt position increased to $837 million but is still at a very healthy 1.2 times EBITDA. The increase in net debt was due to the assumption of the existing debt as part of the Colombian acquisition. Looking forward, our growing operating cashflows put us in an extremely strong position to continue investing significantly in the businesses. c Slide 20 shows that there were three areas of investment in 2006. We invested $616 million in CapEx, $35 million in acquisitions by purchasing the remaining minority interest in Tanzania, Senegal, Paraguay and Sierra Leone, net of the cash assumed as part of the Colombian. And, lastly, we invested $35 million in licenses, mainly additional spectrum acquired in Guatemala and in El Salvador.

Thank you. Now I will hand you back to Marc.

Thanks, David. Fourth quarter has again delivered exceptional growth with revenues up by 99% to $544 million and EBITDA up by 71% to $229 million, driven by the addition of 3.7 million new subscribers who are attracted by our affordable, accessible and available services embodied in the Tigo brand.

The growth we have seen in 2006 is the result of a step up in CapEx, which totaled $616 million for the full year in our continuing operations. Growth in our 16 core markets will continue to be fueled by investments in the network and our operations, and for this year we are anticipating CapEx to be towards $800 million.

The focus will be on our most populous markets of Colombia and DRC Congo. It is early days for Tigo in these markets, but the initial signs are extremely encouraging. 2007 has started well for Millicom across all regions, with continuing momentum in Latin America benefiting from E PIN and per second billing.

In Africa we expect to see an acceleration in growth in the second year since Tigo was launched, replicating the growth patterns in Latin America. Asia should also start generating higher top-line growth in 2007, fueled by the increased CapEx in 2006. We look forward to reporting the results for the first quarter on April 24.

This concludes my comments and we will now be happy to take your questions.

So, Operator, may I please have the first question?

Thank you.

[OPERATOR INSTRUCTIONS].

We'll take our first question now from David Kestenbaum from Morgan Joseph. Please go ahead.

Okay, thanks a lot. Congratulations on a great quarter.

Thank you, David.

Thank you.

Okay. Your marketing costs have risen the last two quarters. Should we expect that to remain at the current level in the first quarter and then kind of trend down throughout the year?

Well, you know that the fourth quarter is always a quarter with a higher marketing spend because of the -- especially in Latin America, our largest region, because of the year-end promotions that we run at that point in time. So I would expect that, going forward, that the sales and marketing expenses would not stay at the level of the fourth quarter of last year. I think that is should go back to the levels you saw before.

Okay, even with some of the Tigo roll outs in the first quarter?

I think we've shown that introducing Tigo in the existing markets doesn't necessarily come as a huge cost. So I think the cost, for instance, for Congo is a cost we needed to do anyway to relaunch that network. And as I said on the call, that is going well. And also Sri Lanka in the last couple of months we have been holding back a little bit, so that money that we're spending now on the launch of Tigo. So I don't expect a surge in sales and marketing expenses as a result of that.

Okay. And now that you're sitting on a nice pile of cash, does that change your thinking? I know in the last call you said you would nine months before entering another acquisition, or at least looking, has that changed talk all?

I think in terms of our priorities they're still the same. First priority for us is fuel our growth, continue to fuel that growth by CapEx, and the CapEx guidance I gave of 800 million is higher than what we had for the previous year. So that is our top priority.

Secondly, we will continue to look at opportunities to increase our ownership in joint ventures and to ultimately maybe own 100% of those businesses. Those are the two most important, or the two highest priorities. And, you know, once we will have digested Congo and Colombia, who knows, maybe we'll look some new markets.

But we're not planning going in a large number of new markets. If we go ahead, it will be markets very close to where we are today and where we can leverage the Tigo brand and where we can create synergies for existing businesses.

Okay, and then finally, can you commented on Colombia. How long do you think it'll take you to get to EBITDAR margins that are similar to the rest of your markets? And can you give some color on what you're seeing there, what's the low-hanging fruit that you've been able to take advantage of at this point?

Well, what we see is that I think this is a great market, Colombia. It is a sophisticated market, but we also see that the Triple A model, as we call it, has not really well been rolled out by anybody else. So what we are focusing on so far is, first, introduction of the new brand, and I think that has gone well, first positive impact we saw in December and it continued in January.

Secondly, we have improved the affordability so we will focus much more on E PIN, low-denomination, recharge cards, reload cards. The big progress that needs to be made is on distribution, so we have as a percentage much lower points of distribution in Colombia than we have in other markets in Latin America, so we are working very hard on that.

And then we are continuing investing in the network, although that is not the big issue, I think. These are just investments that need to be done in order to cope with the growth going forward. So I would say most important for us is get that distribution improved and, secondly, also improve the affordability. And then, of course, also, as we have proven in other South American markets like Paraguay, the value-added services are something we will be focusing on a lot.

Okay, thanks.

Thank you, David.

Thank you. We'll take a question now from Morgan Stanley, Alexander Vislykh. Please go ahead.

Yes hi, just two questions, one on Colombia. You mentioned that margin is running ahead of your expectation. It actually works at about 16% if I'm right, if you back it out from the figures that you've presented in the press release.

Yes.

And do you think it would fair to expect those levels throughout 2007 rather than below single-digit margin as you initially indicated in the last conference call?

As I said, the profitability is higher in Colombia than we anticipated but we still have a long way to go. And as I said earlier, the distribution still needs to be put in place, we still need to paint Colombia blue with Tigo written over it. And blue paint costs money so it will have some costs. So I don't really see us increasing the margin much from where it was in the fourth quarter of last year.

Okay so 16% would be fair for --?

I think it's a good rate for the time being.

Okay good. And, secondly, for your EBITDA margin in Africa, there seems to be some weakness in the fourth quarter. It's about 36% margin down from 38% in the third quarter. I just wanted to understand the underlying reasons for that.

To what extent is that driven by seasonal factors or additional costs from launching the brand and Senegal in Tanzania? And, also, how did DRC contribute to the overall performance in Africa? How did the margin develop for existing business if we strip out the DRC operation?

Yes, I think there were some one-off adjustments in the fourth quarter in Africa. I think one of them was in Senegal and there were some, I think, in Sierra Leone also. So they have impacted the fourth quarter results. We are happy with the margin development in places like Ghana that is reporting margins over 50%. Also Chad is increasing its margins being it's still below the Millicom average.

And we also expect that Senegal and Tanzania, the two other big ones in Africa, will start producing higher EBITDA margins. We are, as I've said on previous calls, we are building out a massive network across Africa. That has a cost that is not, in the beginning, offset by revenues. You lease sites, you build towers, you make a lot of expenses and these are made ahead of the revenues coming in.

Also when you build a site, you have to build a full site. You can't fill it up on day one. So these are factors that mean that the costs at a certain point in time will continue to grow a little bit faster than the revenues, but I would expect that in the course of 2007 all of that is going to be history.

Okay. And what's approximately the impact of DRC operation, you didn't mention. I mean if you were to strip out DRC from your African numbers, where would the profitability be if that possible to comment?

[inaudible] because DRC runs at negative margins at this point in time and, although it is, or it was in the fourth quarter a tiny business with I think 40,000 or 50,000 business subscribers so it didn't represent much. But it had costs and we today run a network with more than 200 sites.

Building those, keep them going without having any revenues against that, that of course impacts the margins in Congo as well as across the region. But, again, I would expect that, bar Congo, that we should be able to start improving the margins in Africa as a result of increased top-line growth and increased subscriber intake.

Okay. Thanks very much.

Thank you, Alexander.

Thank you. We now have a question from Bill Miller from Hartwell. Please go ahead.

Well, Marc, that's not a bad quarter.

Thank you, Bill.

Congratulations. The question I have continues the margin theme. How soon do you think you'll be able to get these other outlying countries up to the other corporate levels? And do you think we'll get back to 50%? Can you see improvement over the 48% or 47% now as we go forward?

And the second question is on the level of CapEx, $800 million. Do you still seeing the same kind of returns that you've enjoyed over the last two years in your CapEx? At that time, you said you thought that CapEx would give you a two-year payback. Do you think that's still true or do you think we're looking at slightly less because of the kinds of CapEx expenditures you're making?

Let's start with the margin and then David will answer the question on the CapEx.

Because of the margins, I would expect that in Latin American we're there more or less, except for Colombia where, as I said before, we will need some time in order to get to that average 45% margin as we have in the previous quarters.

I think in Africa, I see room for improved margins, as I said before. Senegal, Tanzania I can see margin improvements, and also I think Congo once we get to a certain point should start producing some [inaudible]. So yes I think we can get that margin up.

And 42% in the fourth quarter was higher than what we had anticipated in our plans. So that's a very positive development which, as I said earlier before, is driven by the better profitability we see in Colombia and what we had planned for. So, yes, I think we're going to be able to increase that margin. Are we going to get back to 50? The future will tell us, Bill. That I can't tell you today.

So, David?

Well how about the timeframe, Marc? Is there a timeframe you can give us for getting back to say 48 across-the-board or corporate margins of 48? Is it 2007 or 2008? Or do you have a timeframe?

We're not going to get there in 2007. That is not within our plans. So at this point in time, building, because we seen that when you build networks you get the subscribers and then over time you get the returns. And I think that's what we should be doing rather than from day one focus on the return only, because that might hamper the growth.

David, can you talk about CapEx?

Sure. And as you know, Bill, we've got really different areas of payback on the CapEx. One is when we're putting in capacity that's basically network equipment and with those prices full and we're looking at paybacks of one to two years. On the coverage side when we start building [civils], okay that's obviously more expensive and the payback comes in two to three years. And then as you know, as we're doing major, major roll outs like with Sri Lanka, like with DRC, you know, obviously, those paybacks extend further on.

So I would expect next year, as we do more of these big rollouts in Sri Lanka and DRC, I think you can expect the payback, just through the blending of those three different types of CapEx, to start extending further than the two years that we've been seeing when we've mainly been putting in capacity onto the networks.

Great. Thank you very much.

You're welcome.

Thank you, Bill.

Thank you. We have a question now from [Anders Wennberg] from RAM. Please go ahead.

Hello, Anders Wennberg from RAM. Just wondered if you could talk a little bit more about South America excluding Colombia? It seems like you also went up about 7% year-on-year and a couple of percent q-on-q in Bolivia, Paraguay. And also margins expanded to 48%, which is 2 or 3 percentage points better than last quarter and 5, 6 percentage points, 7 percentage points better than last year. Can you see that trend continuing or it has there been any particular strong front in this quarter you expect also to continue rising or not?

Oh, as far as South America is concerned, this is a trend and we've spoken about this before. And I said on the call Paraguay is back at the 50% EBITDA margin, which is very good news, and that is driven by a focus which started about a year ago on E PIN and per second billing. And that has done terrific things for us because it has substantially improved the affordability factor for us and that's allowed us to tap into new market segments. So definitely that will continue.

And you also know that Paraguay is our leader as a world-class company when it comes to value-added services. And of course, value-added services can not only generate new revenue streams, but they also generate very attractive margins, so that drives it.

Secondly, in Bolivia, we've seen a very strong performance in Bolivia that this is really doing extremely well following the change to GSM technology late 2005. And as I said last year on one of the calls, I think for Bolivia the best still has to come because we know that it's only in the second year after the change of technology and the launch of Tigo that you're going to see the best results.

So, yes, South America has approached the levels almost of Central America in terms of profitability, EBITDA margin and in terms of top-line growth, at 80% top-line growth, even surpassed Central America in the fourth quarter.

Staying on South America, how much of the depreciation increase in intangible assets due to the Colombia acquisition are the goodwill type of depreciations?

Ask the question again please?

How much of the increase in depreciation is goodwill depreciation so, intangible assets depreciation in Colombia of that acquisition?

If you break down the acquisition prices of the 125 million, you can roughly go half was goodwill, which we don't amortize at all, and then was intangibles like the subscriber base and such, which we do amortize. The amortization on that was roughly $2 million to $3 million a quarter. But what we also do under the intangibles, we actually had to value the brand in Colombia.

And as you know, we rebranded to Tigo, so, unfortunately, when we had to put a value on that brand, it had no future use to us so we had to expense it over October and November, and that was close to $4 million or $5 million that we had to expense in Q4. So, that $4 million or $5 million plus the other $2 million to $3 million is the total amortization on the intangibles within Colombia.xxx

Okay. So the depreciation and amortization was a little bit higher than level in Q4 compared to the underlying levels let's say?

That was the amortization. Obviously, there is a depreciation on the fixed assets. We took on roughly $500 million of fixed assets from Colombia. So if you calculate the depreciation on that over six years, that's getting towards $20 million for the quarter.

Okay, thanks.

You're welcome.

Thank you. We now have a question from Peter Nielsen from Cheuvreux. Please go ahead, sir.

Excuse me. Thank you very much, Peter Kurt Nielsen from Cheuvreux. Just returning to your few comments on the sort of accelerating growth rates we've seen through this year, and you're saying that some of your markets would expect further acceleration. And the current growth rate you're reporting now actually, obviously, significantly exceeds your prognosis from earlier in the year. Would you be prepared at this stage to give us some indication about what kind of growth rates you would expect or be happy with for 2007? Thank you.

We don't give any guidance on the top-line growth, and so I won't be able to give you any hard numbers there. But what we have said is that we definitely expect that Africa is going to accelerate growth because we have been making substantial investment in the course of 2006 and they will only start generating revenues. And it's not only in Congo. This also goes for Tanzania, Senegal and other countries. But definitely will accelerate the growth in Africa.

Secondly, as you've seen, Asia growth was fairly low last year so with the investments we've been making in the course of 2006 in Sri Lanka, ahead of the launch of the Tigo brand in the end of January, we also expect that we're going to see accelerated growth in that part of the world.

Having said that, we continue -- as I said, the year 2007 started well for us so we continue to see good growth coming out of Latin America. So the growth is going to be everywhere and clearly we won't be able to continue growing Latin America at the same rate we have been growing them last year, but there will still be good growth in that region and the other ones we would expect accelerated growth.

Thank you.

Thank you.

Thank you. We've got a question now from Kevin Roe from Roe Equity Research. Please go ahead.

Thank you. Terrific quarter, gentlemen.

Thank you.

Thank you, Kevin.

Marc, stepping back from the numbers, strategically Asia is just, as you know, Cambodia, Laos, Sri Lanka, in this quarter, it was 7% of your total revenue. It's probably taking up a greater percentage of management time than its proportionate share of revenue. How do you look at that region strategically now that it's such a small piece of the pie?

Well I'd personally look at Asia in the same was as I look at any other region we are currently active. First of all, the characteristics we see in Asia are very similar to the characteristics we see in Africa in terms of mobile penetration, GDP growth and other drivers for our industry. So I think that's one reason why we should continue being in Asia.

Secondly, Asia is small compared to the rest and was not growing very rapidly last year, but I think it's the third region now that really is going to start benefiting from the Tigo impact and from much increased CapEx, which I would hope is going to increase the importance in Asia.

Thirdly, Asia, as you probably know, is probably the most competitive region in the whole world from a mobile telephony point of view. It's also a region where we historically have learned a lot of things which we then successfully implemented in other regions.

So I think it's important for us to keep an antenna out there to find out what are the developments in mobile telephony, not so much as technology does, but more in terms of services, and copy those services in our Asian operations first and then later on into our African and Latin American assets.

Let me give you a few examples. E PIN came out of Asia, micro prepaid came out of Asia, the mark-to-market distribution for us came out of Asia, so there are a number of very good concepts that we tested out in Asia first before we implemented them elsewhere.

So those I think are the reasons why we should be staying there in Asia. And for us it doesn't take more time than it takes for other countries we have, or other regions where we are active. I think in the years in Millicom we've all learned how to manage 16 countries irrespective of where they are on the globe.

So bottom line, it's strategic for a lot of different reasons?

I think it's important for us to really have antennas across the globe to figure out what is going on in this industry, yes.

On Africa, two quick questions. First can you give us a little more color on the I think it was 120,000 subscriber base adjustment in Tanzania? And in Congo, when should we start to see a net addition ramp like we have in Ghana, for instance, you know 100,000, 200,000 type net addition run rate. Is that towards the end of the year? Or could that happen in the first half of '07?

It's happening, Kevin.

Okay.

No, clearly, as you saw from the subscriber numbers in Congo, I think the start was very good, but I think it's too early to really say much more about that. We need to have a few months of results, not only subscriber intake, but also minutes of use, revenues and stuff like that before we can really form ourselves an opinion on the growth outlook in Congo. But at least the start was good.

In terms of Tanzania, what we're doing there is we stopped a late night option, or plan to have a plan which allows you to make calls for free in the middle of the night which attracted a lot of subscribers in the middle of last year. But those subscribers didn't come with the revenues and, therefore, we decided to stop that plan and take the subscriber reduction.

And what we've noticed is that that subscriber reduction did not come with a revenue reduction. As a matter of fact, revenues in Tanzania in December went up and we expect that that will continue. Also, ARPUs, of course, went up. So I think this was the right decision to take and we're building a better subscriber base with a lot more quality and with a better outlook in terms of ARPUs and revenue growth going forward.

Are there any other markets in Africa or elsewhere that you have the free night promotions still out there that may also be ending?

We don't have a similar situation in any other market.

Kevin Roe. Terrific. Thanks, guys.

Thanks, Kevin.

Thank you.

Thank you. We now have a question from Standard & Poor's, [Frank Mullreid]. Please go ahead.

Thank you very much, I guess I would like to ask regarding Colombia, the customer base, just comparing your number of roughly two million and then with the numbers represented by Colombia Movil. It's deviated roughly some 800,000 subscribers. I just wondered, the way you recognize the subscribers and how is that related to the revenue side? So, these other 800,000 that is not counted in your numbers, are they somehow contributing with revenues?

First of all I don't know where they get their numbers so I'll leave --.

Is that inflated numbers or what?

I don't know. I don't want to comment on them because I don't know where these numbers come from. I can only say how we calculate our subscribers across Millicom and for us, a subscriber is somebody who generates revenues, minutes within a period of 60 days. And if that doesn't happen then the customer is no longer active on our network. So that's how we calculate subscribers, because we want to have active revenue generating subscribers.

But could there be customers in your network that are not living up to the standards you're calculating in subscribers but they're contributing some kind of revenues?

If they contribute revenues within the 60 days then we account for them as a subscriber.

Okay. So it's clearly roughly 2.9 million subscribers in Colombia. Is that inflated numbers or--?

Like I said, I can't comment on a number that isn't mine, so I can only comment on our numbers and I can only say that our numbers are numbers of active subscribers.

All right, thank you very much.

Thank you.

Thank you. We'll take a question now from Andreas Joelsson from SEB Enskilda. Please go ahead.

Yes, good afternoon. I just was wondering on this one-offs that you had in Africa in Q4, are they solved and we should expect a normal Q1, so to say?

Yes. These are things that we've taking into our P&L and that's history so we don't expect them to be recurring.

Perfect, thanks.

Thank you.

Thank you. We'll take a question now from New Street Research, Soomit Datta. Please go ahead.

Hi there, yes, Soomit Datta from New Street Research. Just a couple of questions please. First of all, can I just get your latest thoughts when you look across the current Millicom universe. Are there any markets where you see potential new entrants coming in or potential new licenses being issued? I think the last time you commented on it there wasn't anything imminent, but if you've heard anything more that would be useful.

What I've said before is that there are two what I would call major markets where I think it is publicly known that there will be a third operator coming into the market. The first one is Honduras, the government is either privatizing Hondutel or inviting a third mobile operator.

And, secondly, there is Senegal where there is a process ongoing, although it has been ongoing for a while, invite a third operator to come to the market. So those are the two major markets where we expect an additional operator to come into the market.

Have you got any sort of sense of timing of what might be happening in Honduras and Senegal or is it difficult to say?

You know, I gave the same answer a year ago, so clearly it's taking the government longer than anticipated to make that happen. We don't mind.

Okay. And can I just ask a quick follow-up question on expansion. You sort of touched a little bit on the Asian region. Is it sort of ridiculous to think of Millicom moving into markets like Bangladesh, India, or are they simply too large? Or is that something you could look at in the future? Thanks.

We're looking at markets where we think we can play a role of a leading mobile operator. I don't think any of the two markets you just mentioned would allow us to do so we don't have any ambition to enter those markets.

Okay, thanks.

Thank you.

Thank you. We have a question now from Andreas Ekstrom from Handelsbanken. Please go ahead.

Yes hi, it's Andreas Ekstrom from Handelsbanken.

Marc, I had a question about Central America. In the fourth quarter the revenue figure was still very strong and the margins were also strong, but we know at the same time that America Movil has been trying to copy your concept by announcing their own Claro brand in relation to your Tigo brand. Is that something that you think will impact the numbers going forward? Is your phone on mute?

Thank you.

Okay, thank you. So we don't think that those actions will impact our results immediately. Of course, we will keep our eyes open on any kind of new development in the market which could kind of impact our situation in the market. We know that in Guatemala we're about to become the number one in the market there and also in El Salvador we have been getting market share and also in Honduras we've been holding on to our market share.

So we see positive things happening so it might be that it is not as simple as changing a brand. As you know, Tigo stands for a concept, stands for the Triple A, and I think that explains the success of Millicom in Central America, South America and other places. So it's not the brand as such that makes all the difference.

Thank you. We'll take a question now from Louis Sarkes from Chesapeake Partners. Please go ahead.

Hi, congratulations on a good quarter. I just -- also in terms of the financial priorities you indicated that increased CapEx and buying full ownership of joint ventures is a priority. Does share repurchase figure into that at all?

No, we don't have plans other than the ones I mentioned before, which is increased CapEx, increased investments and increase our ownership. Those are the two priorities for us going forward.

Okay. Thank you very much and congratulations.

Thank you.

Thank you.

[OPERATOR INSTRUCTIONS].

Thank you. Mr. Hartwell, your line is open now.

Marc, sorry to follow-up, Bill Miller here. Just on Asia, what's the status in Vietnam at the moment? Do you have any update for us? Or is it the same thing? Or where do we go?

Well, we have an update for you and that is that the BCC liquidation is signed. That was done over the last 24 hours. This is something we needed to do by law so BCC needs to be liquidated by the two parties, I mean for us Comvik and then VMS on the other side and that process now has come to an end. What does that mean?

Is that, MobiFone or VMS, is now I guess being prepared for what they call equitization. It's called a privatization, so we will follow that very closely and we hope that our Vietnamese friends and partners will live up to the commitments they have taken over the last couple of years with respect to giving us the right of first refusal, continuing the successful corporation that we have with them for 10 years.

Marc, how big has that gotten now? How big of a deal is Vietnam? How much expansion have we had in the previous joint venture now in the company itself?

Like I said, I don't have hard data on that venture, we are not actively involved in that business today, so I have to rely on what I read in the press in terms of what is happening in Vietnam. What I hear is it's a high growth market. Things are growing very, very fast, but it's also a market with, nowadays, I think five strong mobile operators. So the market has changed since we left that market in May of 2005.

Great, thanks very much.

Thank you, Bill:

Wonderful quarter.

Thank you.

Thank you. We have a question now from [Eric Peres] from [Con AG]. Please go ahead.

Thank you. I was wondering if I understood you correctly that you introduced now per second billing in Central America? And if not, when do you plan to introduce that? And what do you expect the short-term effect on ARPU and EBITDA margins will be for the next quarter after implementation? Thank you.

Yes, we did introduce per second billing in Central America I think about a week, 10 days ago. We expect to see the same impact as we saw in South America a year ago, the same impact we saw in other markets when we introduced per second billing. And it's not only per second billing. It's per second billing combined with E PIN I think. It's that combination that makes all the difference.

And so typically we see kind of a payback of about two to three months following that per second billing because the per second billing is a tariff reduction. But with the price elasticity we typically see in those markets, and that fact that we take a leadership introducing those concepts, we have experienced, in the past, fairly short pay backs and we would expect the same to happen in Central America.

Thank you. Do you plan any special marketing activities in connection with that introduction?

Of course, when you launch a per second billing you do launch certain campaigns. You want this to be known by the public and that means that there are promotions that are being run at that point in time. But word of mouth works well everywhere so people will find out how beneficial per second billing is and then they'll tell their friends and family and they will then hopefully join our network.

And with the price elasticity we should get higher revenues and higher profitability. As I mentioned on the call, South America has been doing very well in the 2006. I think you can more or less attribute all of that to per second billing and E PIN.

Thank you.

Thanks.

Thank you. We have a call now from Sven Skold from Swedbank. Please go ahead.

Thank you. Just some financial details to David, about the financial net. I thought it was a little bit higher during Q4. Since you got the money now for the sale of Paktel, don't you expect the cost of debt to go down from Q1, Q2 and onward?

And then did I understand correct that the underlying depreciation and amortization going forward is around 3 million to 4 million lower than in Q4? And then that is a seven-year time for depreciation on the investments that you do for the moment?

Hi, Sven. Okay, regarding the depreciation, yes, there was the 4 million -- well, I think it's almost 5 million for the brand. Yes, that was a one-off in Q4 so that will impact depreciation going forward. Also as you know we accelerated the older technology networks so you have that depreciation in 2006 that will --.

And that's ended now?

Pardon?

That's ended now?

Some of that's ended now. There'll be some that goes into 2007, but it will be lower. That accelerated depreciation will be lower in 2007. Plus obviously you've got the CapEx. Marc gave the number of 800 million in CapEx, so CapEx going up will obviously drive the depreciation higher in 2007. So you're going to have to factor all of those into the equation.

Absolutely, but the 800 million then, that should be spread over seven years in depreciation?

Oh and it would be phased throughout the year as well.

Okay I see.

You'll have to take into account the phasing of the CapEx.

Just a final question also on the total Latin American.

Oh, interest you wanted.

Oh sorry, yes, please.

I mean, the interest in Q4 has gone up and I gave you the quarterly breakdown, so obviously to help you in your forecasting, we did not have the cash yet in Q4 from Paktel. That's coming in, in Q1. So that cash of $284 million, we've received half of that cash already and should get the other half when the company is recapitalized by China Mobile and then they can repay us some inter-company loans.

So when we have that cash, yes, that will help reduce the net interest expense if you will. And as you say, a growing cash balance, if it's not spent on minority buyouts then, obviously, the additional CapEx will, obviously, help on the interest line.

Sure. And Marc, if you look at the total Latin America, is it possible that that really could add as many subscribers during 2007 as it did during 2006? Organically, I'm comparing the two years in absolute numbers.

I think in absolute numbers, I've said before, that I would not expect a slowdown. Percentage wise of course there will be a lower percentage this year than it was last year. But we can see continuous very strong growth in the whole of Latin America, and I would hope that with the introduction of per second billing in Central America that that will create another boost to the top-line growth and to the subscriber growth in that part of the world.

And also a final question and that's regarding the strong balance sheet that you have for the moment since you sold Paktel. How do you look upon that in going one, two or three years ahead from now? It's really strong for the moment and when you start to generate cash, I mean, not only before CapEx but also after CapEx, you will be very overcapitalized. What's your take on that?

I mean, I think having a strong balance sheet is an asset today because this business, as you know, has become a very capital-intensive business. And if there's anything we've learned in the past it is that you can't grow in this business if you don't have the money. So now we can invest the money, we grow exponentially, we get very good results, very good returns on those investments and that is what I would continue to focus on.

In terms of our structure, we do want to change or improve our balance sheet. David spoke about it last year. We want to push more debt into the operating company, get rid of the debt at the top company in order to improve the tax deductibility of our interest costs. So those are things we will be working on this year and next year in order to even more strengthen the balance sheet.

Okay, thanks.

Thanks.

You're welcome.

Thank you.

[OPERATOR INSTRUCTIONS].

We've got a question now from [Matthias von Ottenher] from [D&B Nor] Markets. Please go ahead.

Yes, good day. I have a few questions regarding Paktel Q4 numbers. First I would like to know what was the revenue in Pakistan in Q4?

I just opened this so I don't know, but what we have given, you know, the way we have presented the financials is that in revenues and EBITDA you no longer see Paktel. So the Paktel together with other discontinued operations is taken out as a line, which for the fourth quarter was about a loss of $18 million, $19 million and for the full year was around $75 million. So that's the number you can find in our P&L.

I see. And what about the depreciation in Pakistan, in Q4? And also there are some external debt that was in Paktel, and we're just curious what was the exact size of it?

We sell the business with the debt and so the same in terms of P&L that's happening on the balance sheet, you just find the line on the balance sheet and asset held for sale and that's the only thing you will find there.

I see.

So Paktel is out of our numbers except for those one lines you see in both balance sheet and P&L. And these are the same for 2005 so that makes it easier for you to compare the numbers on an ongoing basis.

Okay, thank you.

Thank you.

Thank you. [OPERATOR INSTRUCTIONS].

It appears there are no further questions at this time. Gentlemen, I'd like to turn the conference back over to you for any additional or closing remarks.

Thank you, Operator.

And, once again, to all of you who participated in this call, I would like to thank you for being here today. I hope we have been able to answer all of your questions. So I hope to see you soon at one of the IR activities we are planning in the next couple of weeks. In the meantime, thank you and goodbye.

Thank you, ladies and gentlemen. That will conclude today's conference. Have a good day now and please disconnect now.