Millicom International Cellular SA (TIGO) 2007 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to today's Millicom 2007 first quarter results conference call. For your information, this conference is being recorded. May I also remind you that this call is being audio streamed over the Web and is accessible at www.millicom.com, together with a presentation summarizing the key features of the results.

I would now like to hand this over to the hosts of today's conference, Mr. Mark Beuls, President and CEO, and Mr. David Sach, CFO. Please go ahead, sirs.

Thank you, Operator, and welcome to everyone who 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 homepage 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 through the performance of each cluster.

Before moving on to the slides, I want to make a few short comments regarding Q1, a quarter during which a number of key events took place.

First, we introduced per-second billing in Central America, a region that represents 44% of our revenues and 55% of our EBITDA. I'm pleased to say that this 25% price reduction has already been paid back, thanks to the price elasticity we continue to see in our business.

Secondly, we launched Tigo in January in the Democratic Republic of Congo, our most populated market today. The first results are encouraging, although a lot remains to be done in terms of network buildout, distribution, and service offerings.

Thirdly, in Colombia, we have already reached an EBITDA margin of over 20%, six months after taking control of the business.

According to the country's industry and trade regulator, SIC, our percentage increase in quarterly subscribers was the highest of all mobile operators last quarter. As stated before, we think that the increased subscriber intake will lead to increased revenue growth in the second part of the year, only.

For the sale of Paktel for a profit of US$258 million in February allows us to fully concentrate on the three remaining businesses in Asia. The launches of Tigo in Sri Lanka and of per-second billing in Cambodia in Q1 will allow us to increase the growth rate of the region compared to 2006.

And lastly, last Friday we filed a 20F, and in it you will read that we are compliant under SOX 404 for foreign registrants, so we have been developing our corporate governance risk management and internal control framework over the last couple of years and will continue to focus on creating a best-in-class internal controls environment going forward.

So let's now turn to the slide and turn to slide number two, with the headline numbers for the first quarter of 2007, and once again, it was a record-setting one, surpassing the fourth quarter of 2006 in terms of both revenue and EBITDA, and it's worth pointing out that the fourth quarter is traditionally the strongest quarter of the year and the first quarter is the weakest.

We added 1.6 million new subscribers in Q1, giving us a total of 16.5 million subscribers as of March 31, 2007. The strong subscriber growth of 94% from Q1 2006 has fueled revenues, which were up 86% and EBITDA, which was up 74%.

Millicom's CapEx for the quarter was $183 million, which was more than double the CapEx for Q1 2006 and is in line with our stated target of investing $800 million for the year.

We have invested in our networks in all of our regions, but particularly in Central America, Colombia, Sri Lanka, and Africa and we are delighted that both our operations in Sri Lanka and DRC have now successfully launched the Tigo brand are applying our AAA strategy, a customer-focused business model, centered on the core values of affordability, accessibility, and availability.

The rollout of the Tigo brand across Millicom was completed with the launch in Laos in March 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 1.6 million total subscribers in the first quarter, bringing the total to 16.5 million at the end of March, representing a 94% increase over the first quarter of 2006. As I have said before, the subscriber growth indicates that Millicom's businesses are now well into the accelerated J-curve of emerging market growth.

In Q1, subscribers in Central America grew by 87% year-on-year and in South America by 53%, excluding the Colombian acquisition, and by 197% including Colombia. In Colombia, Millicom was the fastest-growing operator, taking 79,000 subscribers in the quarter.

Africa reported a year-on-year subscriber growth of 68% in Q1, and there's every indication that we will be able to capitalize on the growth potential in Africa in the same way that we have across Latin America as penetration rates rise steeply.

However, it's worth reminding that in Africa we have a population under license of 152 million, compared to 86 million in Latin America, and so the long-term potential is even greater, as Africa has a larger population and lower penetration rates.

At [this interval], cellular subscribers increased by 100% from the first quarter of 2006 to 14.2 million at the end of March 2007. Slide four shows that for Q1 we have recorded our highest-ever quarterly revenue of $563 million, an increase of 86% from the first quarter of 2006.

In Central America, where penetration is higher and networks are more developed, revenue growth at 59% in Q1 is very strong. South America, excluding Colombia, produced revenue growth of 70%, which represented the strongest year-on-year organic growth of the quarter for any cluster and it reflects the success of per-second billing and the leadership in value-added services by this cluster.

Revenues for Africa increased by 55% and revenues for Asia by 22%. Referring to slide five, EBITDA for the three months ended March 31, 2007, was $248 million, a 74% increase from the first quarter of 2006 and showing an increase of 19 million from Q4 2006, which is traditionally our strongest quarter of the year.

EBITDA margin was 44%. The strength in margin in Q1 was encouraging and reflected strong performance across the businesses.

So now let's look at the results of each cluster, starting with Central America, which remains our largest cluster, both in terms of revenue and EBITDA.

On slide six, you can see that the total subscribers reached 5.9 million, up 87%, with over 750,000 new subscribers added in the quarter, which was an encouraging result. Quarterly year-on-year revenue growth for Central America increased by 59% to $249 million for the first quarter of 2007, but revenues were flat compared to the seasonally strong fourth quarter.

The reasons for flat revenue was that on 7th of February per-second billing was launched in all three countries in Central America, bringing an effective tariff cut of 25%.

As we explained all of the first quarter in our Q4 presentations, we saw a similar pattern of slower revenue growth right after the introduction of per-second billing in Paraguay, took some two months to reach the prior position and the acceleration in growth in the markets was some months later.

It's early days, but our previous experience in Paraguay and the events of two months in Central America suggest that after an initial expansion of minutes of use, we expect to see the same price elasticity as we saw in Paraguay and we are hoping to see an acceleration in subscriber growth in the second half of 2007.

EBITDA for Central America increased by 73%, to $136 million for the first quarter of 2007 and the EBITDA margin was strong, at 55%. So please turn to slide number seven to look at the results for South America in more detail.

Subscribers grew by 197% to 4.5 million, following the consolidation of Colombia Movil, which accounted for 2.2 million subscribers in the first quarter. In total, looking at a quarterly year-on-year basis, revenue grew by 274% to $167 million and EBITDA grew by 203% to $56 million.

However, looking at the underlying growth, excluding Colombia, the numbers were still strong, with subscribers up 53%, revenues up 70%, and EBITDA up 98%.

The underlying numbers are very impressive and show that the success of the continuing Tigo rollout with ePIN and per-second billing, plus success of value-added services, which are continuing to drive revenues and enhance earnings.

It's very encouraging to see both ARPUs and EBITDA margins improve. In Colombia, we are 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.

Today, we are approaching some 70,000 outlets, which is almost a doubling of the outlets since launch. Once we have the three A's fully in place, we expect to see an acceleration in growth in the second half of 2007.

The EBITDA margin for South America was 33%, up 3% from the previous quarter and Colombia delivered a 21% margin, up from 16% in Q4. We do not expect to see any dramatic increase in the margin in Colombia, as in 2007 our focus is to grow the business aggressively.

Therefore, Colombia will continue to affect Millicom's consolidated EBITDA margin for the medium term. However, in the long term, we expect to see Colombia operate at the average Millicom EBITDA margin.

Turning to slide eight, in our Africa cluster, total subscribers increased by 68% to 3.8 million at the end of Q1 2007.

Following on from the strong subscriber growth, there was a year-on-year increase in quarterly revenue of 55% to $103 million and despite the heavy startup costs of building out the new and extended networks, in Africa, particularly, and DRC and [China] EBITDA increased by 30% to $39 million, representing an EBITDA margin of 37%.

For January, we have made sufficient progress building our new network in the DRC to allow us to launch the Tigo brand and today we have 139,000 customers who are using only ePIN, which is an attractive and low-cost method of distribution in such a large country, and they have access to per-second billing.

Turning to Asia, in Q4 we merged South Asia and Southeast Asia clusters into one Asia region, as Paktel was treated as an asset held for sale following the decision to sell the business in Q4.

On February 13, we finalized the sale of Paktel to China Mobile for an enterprise value of $460 million and on the sale Millicom recorded a net gain of $258 million.

Slide nine shows that the subscribers in the Asia cluster increased by 48% from Q1 2006 to 2.3 million at the end of Q1 2007. Revenue was $43 million for the fourth quarter, up 22% from Q1 2006 and EBITDA was $17 million, up 11%, producing an EBITDA margin of 41%.

I was very pleased to see a 15% increase in Colombia -- sorry, Cambodia versus the fourth quarter of 2006 following the introduction of per-second billing into this market in mid January. It usually takes over two months to offset the effective tariff reduction.

The remainder of the year looks promising as this price elasticity continues. We have invested heavily in the network in Sri Lanka and we are starting to see positive results following the launch of Tigo in January.

The launch of Tigo in Laos in March completes our planned rollout of the brand across our markets. Now I would like to hand over to David to talk you through the financials.

Thank you, Marc.

Please turn to slide 10, where you will see the key financial ratios for the first quarter of 2007 compared to quarter one last year. Revenues were up strongly by 86% and EBITDA by 74%, and despite the fast expansion of the business, we have held our margin at 44%, which is very encouraging.

Excluding the impact of Colombia, the overall group EBITDA margin would have been 49%.

The slide shows that in the last year sales and marketing costs as a percentage of revenues have increased slightly, which reflects the launch of Tigo in several markets, including Colombia in quarter four 2006 and the Congo, Sri Lanka and Laos in Q1 2007.

This is to be expected during launch periods. The G&A costs as a percentage of revenues are also up, but this is due to the impact of Colombia. Encouraging, cost of sales has fallen slightly as a percentage of revenues, demonstrating the economies of scale from growing our businesses and our continued focus on tight cost control.

In addition, expanding our value-added services has helped sustained ARPUs, which in turn had a positive impact on gross margin.

Slide 11 shows the recent quarterly EBITDA trend. Excluding Colombia, the consolidated EBITDA margin has been rising, but including Colombia, the EBITDA margin was reduced to 42% in quarter four 2006. Pleasingly, the EBITDA margin in Q1 has risen slightly to 44%.

We have room to increase margins in Africa, Asia and our new business in Colombia over time. This gives us confidence that we should be able to trend toward the levels experienced in the first three quarters of 2006.

On slide 12, you will see that there are several items affecting the results, and in the next four slides I will deal with CapEx and depreciation, debt and interest expense and taxes. The other two items worth mentioning are corporate costs and the gain on sale of Paktel.

Corporate costs have risen from $10 million to $15 million due to additional resources put into corporate during the past nine months to help manage the growth of the businesses and due to the new share scheme for the directors and senior management, which was introduced in the second quarter last year, following the annual general meeting.

Looking forward, we expect corporate costs to remain fairly stable at the current levels. The gain on sale of Paktel was $258 million. The gain was lower than the $270 million originally forecast in the year-end press release because the losses of Paktel in quarter one 2007 were less than expected, and, as such, our carrying value of Paktel was higher, thus reducing the gain.

In total, the gain on sale combined with the operating losses were as expected. Please turn to slide 13. On this slide, we have presented the quarterly CapEx, which shows that CapEx has risen steadily throughout the year in both 2005 and 2006. We expect a similar trend in 2007, albeit not as steep as in prior years.

We have invested in the networks across all regions in quarter one, with capacity added in Central America to handle the additional traffic from the move to per-second billing, with a step-up in the network buildout in Colombia, with significant investments in additional coverage throughout most African countries and with the continued investment in Sri Lanka.

In 2007, we are forecasting CapEx to rise to $800 million, or an average of $200 million per quarter. Although the absolute CapEx number will increase in 2007, it is likely to decrease as a percentage of revenues, and we expect that this will be a continuing trend going forward.

Slide 14 shows the quarterly breakdown of depreciation. Depreciation started to increase in 2005 when we began to accelerate the depreciation of the older technology networks. It has increased steadily thereafter from the rising levels of investment that we are making in our businesses.

The Q1 2007 depreciation of $78 million reflects this increased level of investment. The first quarter depreciation was lower than at Q4 2006 because a significant portion of the older technology assets were fully depreciated by the end of 2006.

Plus, we had a one-off expense of close to $5 million in the fourth quarter to depreciate the old brand that we purchased as part of the Colombian acquisition.

Looking forward, depreciation will trend towards the average CapEx spending of the past six to seven years, which has been rising steadily.

On slide 15, we have presented a quarterly debt slide whereby you can see the impact of settling the 5% exchangeable notes in quarter three of 2006, when we transferred the Tele2 shares to the noteholders.

This resulted in a decrease of total debt to $943 million. In Q4 2006, total debt rose to $1.5 million, due to the impact of the Colombia acquisition. Debt has stayed fairly constant in Q1 2007, but will likely rise during the year.

Due to our underlevered position, with net debt to EBITDA of roughly 0.5 to 1, we will increase debt to finance our CapEx spending in the operations.

This is likely to increase our cash balance even further. We are reviewing our capital structure to determine the most appropriate level of debt and to ensure that we utilize our cash in the best interests of shareholders.

We are considering further minority buyouts and will look to repay the corporate 10% notes in December 2008, when they become redeemable.

Please turn to slide 16 to see the corresponding quarterly interest expense. The simple effective interest rate was relatively stable throughout 2005 and 2006, taking into effect the timing of the debt movements, but rose in Q4 due to the addition of the Colombian debt, which had an effective rate of over 11%.

The simple effective rate for Q1 2007 has fallen back to 10%, with a slightly different mix of debt, but we would like to reduce the rate further, considering our strong cash flows and low leverage.

We are looking at refinancing the Colombian debt and repaying the corporate 10% notes when they become redeemable as possible actions to reduce the effective rate.

Slide 17 shows that the tax rate has risen year-on-year despite our initiatives to better manage our overall tax position.

We have been able to reduce the non-deductible net corporate expenses slightly, from $13 million to $12 million, by increasing the management and brand fees to offset the higher corporate costs. However, as anticipated at year end, the operations tax rate has risen due to the operating losses incurred at our Colombian and Congolese businesses that provide no tax benefits.

The operations tax rate is likely to stay at the 28% level, or might even rise further this year, as these companies represent a large proportion of profit before tax of the total group. Over time, this tax rate will likely fall as these businesses become profitable.

From 2009, we may be able to get the overall group tax rate to 30% or below, but this will depend on the geographical mix of profits, the profitability of our Colombian and Congolese businesses and our ability to reduce the corporate costs further, such as by repaying the corporate 10% notes.

On slide 18, we show the strong operating cash flows, which are more than financing the increasing level of investments within the business. As a result of the sale of Paktel, we ended the period with a very strong cash position of almost $1 billion.

Our net debt position was reduced to $514 million, representing a ratio of 0.5 to 1 against extrapolated full-year EBITDA. With such low levels of debt, Millicom is well placed to continue its significant investment program and is considering the best use of its cash to maximize shareholder value.

Slide 19 shows that there continues to be strong investment in the businesses. CapEx was $183 million in the first quarter 2007, compared to $80 million in the first quarter of 2006.

As mentioned previously, we expect to see CapEx trend upwards throughout the year and should reach $800 million by year end.

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

Thanks, David. Let me conclude. First quarter continued to see higher levels of growth, matching the growth we have seen in 2006. The numbers speak for themselves, revenues up by 86% from $303 million in Q1 2006 to $563 million in Q1 2007, and EBITDA rising by 74% to $248 million.

The group margin was an encouraging 44%.

2007 has started well and is expected to be another record year, fueled by projected CapEx of some $800 million, the launch of per-second billing, ePIN, and a greater focus on value-added services, which will help both revenue growth and profitability.

What is clear is that we have a winning offer for customers who are attracted by our affordable, accessible and available services embodied in the Tigo brand.

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

Thank you. [OPERATOR INSTRUCTIONS]

We'll take our first question from [Greg Johnson] from [Davenport Brokers]. Please go ahead.

Hey, Marc, nice quarter there.

Thank you, Greg.

A question I had for you, in Colombia, you had nice growth compared to your rivals there, and the question I had is to what extent was the growth from sort of rural parts of Colombia and the suburbs, versus the cities, where there might be more competition.

I think the growth was coming from across the network. I think the competition levels are very similar across Colombia, but I think we start seeing the first impact of our increased visibility and better distribution in the first quarter, although we still have to do a lot of work to increase the visibility of Tigo to the levels we've gotten used to seeing in Central America, for instance.

So there's still a lot more to b done, and that's why I've said on the call that we only expect revenues to really start moving in the second part of this year.

And, if you don't mind, just one follow-up question. To what extent are the new subscribers in Colombia derived from your rivals versus just new subscribers to wireless?

We don't know. I mean, it's a prepaid business to a large extent, so although people do fill out a form in Colombia, we don't know whether they are holding a second phone or whether this is their first experience to mobile telephony.

I would expect that with our attractive AAA offering, increased visibility and distribution that we should be able, like we have proven in markets like Guatemala over the last couple of years, that we should be able to attract some customers from the existing operators.

But, at the same time, I think the penetration levels in Colombia at probably just below 60%, still have room for a lot of growth going forward.

Great, thank you.

Thanks

Thank you. We've got a question now from [William Miller] from [Hartwell]. Please go ahead.

Marc, hi, terrific quarter.

Thank you, Bill.

Talking about a couple of things. One, you've said before that the debt markets seem to be open in the Central Americas. Will you tap those and be able to reduce your cost of debt, your average cost of debt, 10%?

More importantly, when you were talking about margins, which were terrific EBITDA margins, do we have a cap on these now or do we get them back towards the 15% that at one time we enjoyed, and I'm not talking about Colombia, because we take that out, but in the other regions, are we going to be able to get to 50 or more and eventually get Africa and Colombia up there?

Well, let me start with the margins. As we said on the call, yes, we do see some improved margins ahead of us, especially in Africa, I think we gained one point in an EBITDA margin from Q4 and I would expect with increased performance in some of the markets there smaller losses in Congo going forward that we should be able to get to a higher EBITDA margin, Africa, than the 30% we had in the first quarter.

So that should help us getting to that 50%, to this magical 50% EBITDA margin, which we all love so much. So we will be doing a lot there in order to get there, but also, as we said, Colombia, although you had excluded it, I think Colombia still has quite some upside going forward.

In terms of the debt markets, yes, our plan is to leverage our operating companies a lot more than they are leveraged today, and that's what we are looking at across Millicom, not only in Central America.

Our plan is that come next year that we get rid of the high-yield bond, which costs us 10% and which is very tax ineffective, given that we don't have enough operating income at the holding level, so that overall our debt structure should look a lot better. Interest costs should go down and also we should be able to improve our average tax rate for the company.

Just adding a little bit to that, obviously with the minority interests in Central America, Bill, that will have to be taken into account in terms of our ability to leverage up a Guatemala or a Honduras. But, yes, we are looking at possibly refinancing the debt in Colombia, and, a Marc says, we'll be looking to do things in Central America to the extent possible.

Just to follow on to your comments about Guatemala, obviously, they are refinancable with a minority interest there. Are you still planning to try to repurchase those and take those out? And I was intrigued, David, by your remark about the past use of cash and if you could give us a little amplification of that, as well?

No, we will try to, as we were successfully last year in Africa, buy out minority shareholders if we think that is the best way to use our cash. If that is not the best way, we can continue living with them, so it's a matter of whether we get the best returns investing there or investing elsewhere in the business.

So, as David said on the call, we are looking at what a better capital structure can be for the company going forward, and we will report to the market when we get to that point.

Marc, just the opportunity to buy some new licenses seem to be coming available in Peru and maybe in other countries. Are you involved in that, and can we still get the same kind of returns that we've enjoyed historically if we're able to capture those licenses?

I think I tall depends on the price of the entry tickets. If the price of the entry ticket is too high, then I think it's going to be difficult to reach those returns, but you also know that we typically stay away from auction processes and that we don't like to pay a high entry ticket.

So, yes, I do think that there are still some attractive opportunities out there, but competition for those opportunities for those new licenses is very high, so no guarantees that we will be able to be successful there.

But, yes, I would hope that going forward we would be able to roll out that successful model in some more markets, across Africa, Asia, and Latin America.

Thanks very much. Well done, really terrific.

Thank you, Bill.

Thank you. We've got a question now from [Anders Windberg from RAM]. Please go ahead.

Hello, Anders Windberg from RAM. I wonder if you can elaborate a little bit further on the ARPU development in particularly Central America. We know you introduced per-second billing.

You talked a little bit about that, but still 15% year-over-year and 16% Q on Q is a fairly big drop. Do you see an ARPU recovery through the remainder of the year when the per-second billing effect comes in or are we at all seeing a little bit of a tougher competition from [inaudible]?

Yes, I don't think this has anything to do with the tougher competition. If you just do the math, if you reduce prices by 25%, then with an identical number of minutes, your ARPU should go down by 25%.

The fact that it only went down according to your calculation about 15% to 16% I think is great news, so, again, that shows that the elasticity is there, that people do consume more minutes when you bring down the price, but of course we're only talking here about less than two months of that in Q1, because we only introduced the per-second billing on February 7th. Let's not forget that.

So we never said that you recuperate everything on day one. We said that it takes two to three months to recuperate the price reductions, and I think that's what is ongoing in Central America, so I don't think this has anything to do with the competitive environment.

If you look at our press release, you will note that we have now put the number one position in Guatemala there, which in the previous quarter was still number two, so I think, if anything, we are gaining market share in some of those markets.

I have not seen any of your competitors following with a similar type of pricing.

Oh, we are being copied all along and also for the per-second billing we are being copied, but we're not always copied with precision, which I think is good. But the concepts we introduce, whether it's prepaid, micro prepaid, ePIN, per-second billing, all of those concepts, after a while, sometimes faster, sometimes slower, are being adopted by our competitors.

But I think as we've always said before is that what is important vis-à-vis the client is the first mover advantage, because that's what the client will remember at the end of the day is who was the one who introduced per-second billing, who was it who made it easier for them to buy minutes, and that's what we want to do. We want to be that company.

Okay, thanks.

Thanks, Anders.

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

Thanks. A couple of questions. Following up on Central American revenue, the elasticity curve seems quite obvious to me, yet you're talking about in your prepared remarks resumption of growth in the second half.

Are we to assume another flat revenue quarter Q1 to Q2 in Central America, or should we see some resumption of revenue growth there?

Well, as you know, Kevin, we don't give guidance, so I have to disappoint you there, but what we said is that the price elasticity is working very well in Central America, so we think that the impact of the per-second billing is going to be a positive one and in the second quarter of this year we will just be in the third to fourth month, you know, of the launch of that per-second billing.

So in principal it should be better than the first and the second month, which it was in the first quarter, but are we going to achieve the same results after four months, which we achieved in Paraguay after 12 months?

Of course not, so you need to let time play it. So these things take time in order to get people back to the ARPUs they were at before. That's because just from the numbers we were moving in the right direction, there. Already we covered a lot of ground there.

Right. Turning to Ghana, it seems to the sub growth there decelerated quite materially. Any comments you can make there, any change in the competitive landscape?

I think there's no real change in competitive landscape. I think our Tigo model works extremely well. On top of that, I think the market is going very strong. As you know from your visit last year, Ghana is one of the best markets in Africa today with its very strong GDP and very strong GDP growth, so that of course fuels the market there.

And I think we are gaining market share compared to the number one in the market, as we speak.

And lastly, Marc, a follow-up on Peru. I understand your sensitivity to license cost, but putting that aside, can you give us a sense of why that market may or may not be attractive to you?

At this point in time, I can't really say much about that. It's a market that is on our radar screen. I don't know whether the timing is going to work for us. I don't know whether the returns we could achieve going forward are going to work for us, so I can't really say much about that.

I wasn't really specifically referring to Peru as a country with a high entry ticket or potentially a high entry ticket, but we don't have numbers at this point in time that would allow us to say, yes, we're going to go for it or we're not going to go for it.

Okay, thanks.

Thanks, Kevin.

Thank you. We've got a question now from [Sven Scorp, Sven Bank]. Please go ahead.

Yes, hello, this is Sven at Sven Bank in Stockholm. So I was just wondering about the margins in South America, excluding Colombia, because I understand that Colombia had around 20% EBITDA margin, but how was the margins excluding Colombia?

Well, the margins are the positive development in South America and, as you know, is driven by fantastic performance of Paraguay, but also Bolivia is doing very well. So we see as a result in Paraguay a per-second billing ePIN combined with value-added services, and in Bolivia, kind of copying that concept, maybe a little bit less value-added services, but the same ePIN and per-second billing, that's what is driving this margin improvement.

Also, when, as you know, in Bolivia, you gain market share, you get some more on-network traffic, which is also beneficial for the margin.

But if I remember correct, Bolivia, they were down, looking at subscriber figures in Q1.

But that doesn't mean the margin is down. The subscriber reduction has to do with a migration from TDMA to GSM, which we know you always lose some of the customers on the way, because some people might be using a TDMA phone and a GSM phone and when they give up one, of course they're just going to continue with the other phone.

So we've seen this in other markets, that when you do this technology change, that we see some customer loss. I think if you look at the margin in South America, we increased the margin from, was it, 41% I think first quarter of last year to 48% right now, so excluding Colombia, so I think it's fantastic margin improvement.

Okay, and if I may also ask about 3G licenses, because around the world it seems to be 3G licenses given out or auctioned out, so what is your take on that? Do you think that will be important in some markets and in other markets not, and how do you look upon that strategy with 3G and potentially WiMAX.

I mean, these are two different things, WiMAX and 3G. 3G is a technology you build on top of our existing 2, 2.5G business, and the great thing for us is that in Central America and in South America, so the whole of Latin America, we can run 3G in the frequencies we have today.

Also, the European Commission now has spoken about opening up the 900 and 1800 spectrum, the one we typically use in Africa and Asia to 3G technology. So this whole hype about 3G coming at a huge cost because of the high license fees, as we saw it in Europe, I don't think it's any longer a scenario.

And that will ask people to really do a step-by-step move from, let's say, one technology to another, which is not even from one technology to another. It's basically building a new technology on top of one that is going to be around for a long time.

WiMAX is something completely different. WiMAX is not a technology that today provides full mobility, and we see WiMAX and we're doing WiMAX in today live three countries but having licenses and frequencies in many more. We see it first as a defensive move.

In case Intel would develop a super-duper chip that would provide full mobility in that frequency, okay, we have it and we can keep our services with the customers.

We see it as a move to make some money in the three countries where we are running WiMAX that much today we're making good money because it's built on top of our mobile network, sharing infrastructure, and so it gives us attractive margins.

That's the reason why we're doing WiMAX. But you can't put WiMAX and 3G at the same level today. They're completely different things.

So we should not expect high 3G costs coming up from Millicom --

No, I can't see that anywhere. I mean, the two countries where we're today using 3G we're hardly paying anything for the frequency or the licenses. It's Mauritius and Cambodia, and, as I said, Latin America, we can do it in our existing spectrum.

You know that we bought additional spectrum both in Guatemala and El Salvador over the last couple of quarters, so this really allows us, if the time comes, to have that technology if we see that there is a customer demand for that technology. At this point in time, we don't see this.

I think the customers are very happy with the 2.5G offerings, including services like BlackBerries and stuff like that, and that's what the customers are looking for.

If we see that the customer wants us to move to the next generation of technology, then we'll start looking at implementing that, but I don't think you can assume that we'll see another European situation that creates an enormous cost for the operators. That will definitely not be the case for us.

Okay, thanks.

Thank you.

Thank you. We've got a question now from Stephen Mead from Anchor Capital Advisors. Please go ahead.

Hello, Marc.

Hey, there.

Just going back to Central America, when you introduced the new pricing in February, was that part of a marketing push, and as you look at the new ads in the first quarter, how much can you sort of attribute that to just sort of market growth versus the new pricing?

That's such a difficult one, Steve, but what I can say is that the move to per-second billing in Central America was very, very well prepared, both from an infrastructure point of view, because when you do this you see an immediate uptake in the number of minutes, almost 25%, so you need to get the capacity in place, and that's why we started increasing our investments in the networks in that part of the world I the fourth quarter of last year already.

Secondly, yes, we do of course run campaigns and, believe me, customers are very smart. You don't have to explain to them twice what the benefits or the upsides are of per-second billing versus per-minute rather billing, so people understand this right away. And it's a combination of two things. It's, yes, certain new customers will be attracted by the offer, new customers.

Secondly, you can see existing customers who might be moving away from other operators because our offering is so much more attractive and then, of course, you have the price elasticity, which makes the number of minutes go up, but it's almost impossible to measure, really, where the growth comes from.

We think that Latin American markets will continue to grow very strongly in the course of this year because all the indicators continue to be very strong, so it's a combination of different factors.

But, again, I'm repeating myself here. Look at the improvement in market position in Guatemala. We're now proudly saying we're number one in the market. Last quarter, you would still see a number two there, so clearly it is fueled by market growth but also improving our position in the market.

What does this take in terms of CapEx? As you look at, say, 2007 in terms of capital spending, how much of that is going to Central America and, also, do you have a sense of how your networks compare to the competitive networks as far as quality or any other kind of measurements?

David will give you the numbers in terms of CapEx, or not the numbers, but at least where we spend our money. In terms of the quality of the networks, I think we can say that in Central America we have the best network in all three countries today, both interesting terms of capacity or in terms of value-added services that are available on our networks, as well as coverage.

I'd like to remind you, Steve, that our success in Central America was to a large extent driven by our build up in the rural areas starting at the end of 2004, continuing in '05 and '06 and so people did join our networks or did join the company, service, because they felt we had the best service there.

And, David, you can maybe say something on the CapEx.

Sure. The only time we give a split of the CapEx by region is at year end, in the annual report, so if you go to the segment note, which is note nine, you will be able to see that last year, of the $616 million that we spent, $264 million was in Africa, $177 million was in Central America, $105 million was in Asia, and $71 million was in South America.

I think if you factor in, obviously, Colombia, and South America will obviously be a bigger percentage in 2007 because of the money that's going to be spent on Colombia, I think those percentages across the total obviously while not exactly the same in 2007 will be somewhat indicative if you factor in Colombia.

So I think use that as somewhat of a guide. We will obviously be investing in Africa again. There will be some more additional capacity that needs to go into Central America, obviously. I mentioned Colombia and we're going to continue rolling out network in Sri Lanka and Cambodia, so use those numbers as a guide.

All right, thanks.

You're welcome.

Thanks, Steve.

Thank you. We've got a question now from Nick Kershaw from Investec. Please go ahead.

Hi, good afternoon, gentlemen. Sorry, I've actually just canceled my call because it was answered on the previous question. Thanks very much.

Thank you anyway.

Thank you. We've got a question now from [Alexander Vassilk] from Morgan Stanley. Please go ahead.

Yes, hi, my question is about your margins in Central America. Your profitability there was quite strong, so your EBITDA margin expanded by 2.5 percentage points on the flat revenue. So have you seen any -- have there been any positive one-offs that had this impact or are you seeing structural improvement in your underlying profitability - in that region?

There are no one-offs at all in those numbers, so this is all from continuing operations. I think it confirms what David and I have been saying over the last 12 months is that when you grow your networks, you grow your market share, you get so much more traffic on your network and that of course you know - all that traffic comes at 100% gross margin.

And that of course impacts then your gross margin, your average gross margin, and your average EBITDA. I think that is one of the reasons, probably the main reason why we see this increase EBITDA margin across Central America.

So I think as long as we keep our market position, as long as we stay you know as the number one there, that we expect to continue seeing that traffic pattern and also the same EBITDA margin.

Okay and do you believe this run rate should be more sustainable going forward?

I'm not saying that we're going to add 2.5 points every quarter, so --

The current level of -

I think the current level from what I know today looks to me sustainable as there are no one-offs in those numbers.

Okay. And just quickly, on the introduction of per-second billing. Can you confirm that all of your subscribers in Central America have now been migrated to the per-second billing or should we expect any more campaigns to migrate more subscribers?

No, no this happens overnight. This [inaudible] for everybody.

Okay.

That's why you need to prepare it so well to make sure that you can handle the increase volumes.

Okay, thanks very much.

Thank you Alexander.

Thank you. We've got a question now from David Kestenbaum from Morgan Joseph Investment. Please go ahead.

Okay, thanks a lot. Hey David, can you just talk about what's driving this study into your corporate controls since you said you were in compliance with Sarbanes-Oxley, and then on Bolivia, you said you lost some subs obviously this quarter as they switch from TDMA to GSM - are you done with that process now, so in the second quarter, we should see a return to sub-growth?

You want to handle Bolivia and then --?

No, in terms of Bolivia - Bolivia is still an isolated case. As I said, it's not unique, it was something we've seen previously when you move technologies all the old technologies to new technologies. And you will see continues - across Latin America, as it was last year, as it was the year before, it started in 2004 when we launched GSM, you will see TDMA users moving to GSM.

What you see of course at the end is that you have a tail of subscribers with fairly low ARPUs, so that when they churn - I'm talking about very low ARPU's here, when they churn you know, it really hardly impacts revenues for the company.

But you expect that you know, as we will start turning off those TDMA networks in the course of this year and the last ones next year, you know, maybe some other subscribers might disappear. David?

Was he the first - I know it was SOX - what was the exact question David?

You said you were undergoing a study of corporate controls, your internal controls, what's driving that since you, you said you are in compliance with SOX at this point?

We just want to take our control to best-in-practice. There's a minimum level that you need to achieve in order to meet SOX, which is as we all know, quite demanding as it is. But we want to go even beyond that, particularly in places like revenue assurance where, obviously there's a cost to implementing SOX, but we also see the benefits.

So if you can insure that all the revenue, all the activity on your switches is properly reflected in your billing platforms and therefore you collect all that revenue, obviously that brings benefits to you. So, we just want to continue to improve our controls and be best-in-class, particularly in things like revenue assurance - and also, the fixed-assets, knowing where your fixed-assets are, so when you move them you keep track of that so your engineers know exactly where your equipment is so they can replace it quicker and stuff is one of the benefits of tracking your fixed-assets properly.

So that's where it's coming from.

Okay thanks.

Your welcome.

Thank you. [OPERATOR INSTRUCTIONS]

We have a question now from [Ruth Mastovme] from Standard Bank. Please go ahead.

Yes, hello gentlemen. Congratulations on good results.

Thank you Ruth.

I have a bunch of questions that are pretty short, so hopefully you can be patient with me - or otherwise I can call you back and we can talk later. But, one question is, I assume that each one of the entities pays management fees right to - and I was wondering, is that the case and are they paid to the [hold-toe] and are they based on revenues and what do they aggregate per-annum?

Okay. Most companies pay management fees - not all of them do because sometimes it's not tax efficient to have that in place. Sometimes it's more appropriate to have a dividend and that's more tax efficient, so we do whatever is most tax efficient based on local tax regulations.

And that money is obviously going from the operating companies to the holding company and usually, in fact in all our cases, it's based on the percentage of revenue and obviously there's limitations from the transfer pricing perspective as to what those levels will be, so we probably monitor that to make sure that they are reasonable and fully justified, which you need to do in order to charge these fees.

Okay and then the dollar amount that they aggregate per year?

We don't - we obviously don't disclose that, but it is a percentage of revenues for most companies?

Okay, okay, okay - that's good. And then, I'm just trying to get a sense of how much of revenues and I may not be posing this question exactly the right way, but how much of revenues is coming from distribution of hand-sets and how much of revenues is coming from actual sale of minutes, if you sort of give the breakdown per region?

Most of it comes from obviously the minutes. The handsets are a small piece of our total revenues.

Okay.

I don't know whether, I think that information could be in the 20-F, I don't have it immediately in front of me ready.

Okay, okay.

What I would like to add is that the minutes revenues are increasing year after year because are business model is focusing on the recurring revenue and on top of that, the cost of phones is coming down very rapidly and for those countries where we still have to deal with the phones, every quarter, a lower percentage of subscribers - when thy take a subscription from us require us to deal with the phones. So that revenue number will continue to come down - that number will continue to come down.

And what are you seeing the low-cost handsets costing now because I hear different ranges of prices?

[They can be] anything from $30-$40 to - going up to $500, so it depends on what you want to have.

Yes, okay. But none of the phones to pre-paid subscribers are subsidized, or are they? Are they subsidized in South and Central America?

We do deal in phones in Central and South America, but that it dealt to - not directly, but we deal through the dealers and they are being paid a commission to basically sell a subscription to the company, sorry to the customer and they might subsidize the phone out of that commission.

I see, okay.

Ruth, if you are looking at forecasting though, be aware that obviously that Colombia is one of the markets where we will subsidize the handsets, so and obviously you've only got one quarter of 2006 in your numbers, so you'll have to factor that in into any forecast, even though as Marc says, most of the time it's coming down.

Right. Okay, okay. And this is a stupid question, but who the fourth provider in Colombia? I know who the three are -

Avantel is a Mexican -

Avantel is a - okay, yes, okay. And then my final question is - well one tiny question about CapEx. In the network in each one of the countries are they 100% Millicom or kind of a blend of leased and owned or -

In the radio part of the core network, it is all ours. We do lease some fiber-optic and some transmission from other operator, but all the radio part of the core network is ours.

Okay. And then, in terms of leverage, what do you guys view as a good kind of target leverage overall and what do you think would be appropriate in terms of leverage at [opco] versus leverage at the [hold-co]?

Well, we've said historically that we would not go in the normal course of business, 2 to 1 debt to EBITDA leverage - or ratio, sorry. And we would like to make the hold-co completely debt-free because as David has explained several times, we don't get any tax benefits on having interest-cost debt. So all the debt should be at the operating companies going forward.

Okay. Okay.

Ruth, the revenues from equipment sales in 2006 was $76 million.

Okay great, thank you.

Thank you.

Thank you. We'll take a question now from [Mary Alston from PaxWorld Fund]. Please go ahead.

Yes, you were talking about taking out the high-yield bonds next year or refinancing them - do you think you'll decline them or tendering for them?

No, we have a, you know, the first cash pays in December of '08, so we'll probably wait until then.

Okay, thanks very much.

Thank you.

Thank you, we'll take a follow-up question from Sven Scorp from Sven Bank. Please go ahead.

Yes, I was just wondering about -- Congo seems to be a very strong start-up here in Q1. Can you discuss that going forward and also discuss the competition because at least in my opinion, what we saw in Ghana was that maybe not all players were that strong in the market. How is that in Congo?

In Congo, you have two big players -- [Qualicom] and [Celltell] who together have 90% of the market. And then there are two smaller ones, including ourselves as a number four. So there is a lot of work to be done in Congo and the start is encouraging in terms of subscriber intake, but it is far too early to really say much more than that at this point in time because we need to see what kind of revenues we will be generating in that country.

On top of that we still need to do a massive network build up because we just started with something like just over 200 base stations. We want to further grow that network and that then should hopefully allow us to continue growing the subscriber base and also get the revenues in.

But yes it is a tough market given the market share of the two big ones, but at the same time, it is a market where normal penetration is extremely low - 5%. So for an operator like us who has been successful in markets with low mobile penetration, it's an easier job for us to gain market share in a market where a %5 mobile penetration than gaining market share in a market where you have 80% mobile penetration.

But as always - it's never easy.

But to be honest, there are two main competitors and I mean, with big companies behind them and potential big investments - the two main competitors and then you hopefully.

Well, Sven, you know, big [assets] from other countries is not necessarily a guarantee for success, so I think it all comes down to how well we will be implementing our AAA strategy in Congo and that's what we are doing.

So hopefully we will be able to give you some more guidance in the second quarter because then we will have a couple of months of revenue under our belt and we'll have a better feel as to what is happening in the market.

But yes, we never have said that we will be number one or number two. What we wanted to become a number three in that market where there is 20% to 25% market share over time.

Sounds good, thanks.

Thanks.

Thank you. We have a question now from [inaudible] from Standard and Poor's Equity. Please go ahead.

Thank you very much. I was wondering first there - do you consider a possibility to do a partnership with other companies in order to deploy your [brand] or rather than make a straight acquisition as the prices have steadily been going up.

Not at this point in time. We just want to keep full control over our brand.

Okay. And then second, on Asia, there has been good growth there and Sri Lanka during the quarter, but have you made any change to your view on Asia and any news to report there on Vietnam?

What is happening in Asia is what I told after the Q4 release and that is that we expect Asia to grow faster this year and you can see this from both a subscriber point of view as well as from a revenue point of view. The only line that did not grow was EBITDA and that's the reason - the reason for that is that the revenue share changed in Cambodia last year in March.

So Q1 '06 still has a better revenue share in Colombia - in Cambodia than Q1, 2007. Q2, that will be gone, so I would expect that EBITDA would also start going up a little faster.

No news to report out of Vietnam other than we hear the government is preparing itself to privatize the mobile telephone companies.

I was just wondering, in CapEx there - you talked earlier that the share of engineering is increasing of the CapEx [being done] and the progress there in order to deploy the network of lower cost and that's expecting more coverage of the higher cost or more for the [inaudible]

I don't know who you are referring to, but I didn't say those words and so I don't know where you are talking about the engineering?

I mean the deployment of the physical cost, et cetera, I guess you are benefiting from lower cost, so to speak of the base station and switches, et cetera, while the other cost-part components is increasing of the total CapEx.

What we said in the past is that in the split of local and imported equipment, the imported came down over the years because of the price competition there between the different vendors where the local costs increased because there is less competition in the local markets and maybe we didn't do as good a job in terms of procurement as we've done with the imported equipment.

We now have a team - we are building a team that will be focusing on procurement of local infrastructure and hopefully we will be able to drive down those costs.

So roughly how big of a share is equipment and other construction costs, et cetera of your CapEx budget $800 million --

I mean, we split it between importers -- probably like 40 importers, 60 local. But local could be air conditioning and stuff like that. But it's what we buy locally. We don't import it.

Okay. And then my last question would be when it comes to your balance sheet, this year it's strong. You seem to be a healthy cash position. What about dividend going forward? What is your view on that?

There's no decision taken by the Board or by the shareholders to pay dividends is the only thing I can say.

All right. Thank you very much.

Thank you.

Thank you. We've got a question now from [Marcus Kelson] from Classic Fund Management. Please go ahead.

Hello. I'd like to come back to Central America once again and the great margins you had there. Just sequentially looking Q1 over Q4, the sales revenue down $1 million and EBITDA is up by $6 million -- $5 million. So what kind of costs are you taking out there?

What I said earlier on the call is that the reason why we see improved margins in Central America has to do with the call patterns that we get more all-net calls. All-net calls are calls made by customers on our network. And on those calls, you get 100% gross margin.

So the more of those calls you get as a percentage of the overall number of calls, the higher your margin gets. And that I think is the major reason why we see the development in the EBITDA margin in Central America.

So it's less --

Yes, of course, you also see economies of scale. The businesses are getting bigger. So it's probably also a little bit of that in there.

Thank you.

Thanks.

Thank you. We'll take a question now from [Eric Squirling] from Martin Currie. Please go ahead.

Hi there. And my apologies because I joined this call late. But you've obviously seen a slowdown in the number of new adds, particularly in Central, where you had this interruption in per second, which had driven the higher growth and also in Africa. In South America, were there any unusual things contributing to that or is it just kind of a base effect?

I don't think there was a slowdown at all. What you're comparing is Q4 with Q1.

Correct. Correct.

I mean, Q4 in the entire industry and the entire world is the strongest quarter of the year. So it's not like the growth has been slowing down. Otherwise, I don't think we would have been able to increase our subscriber base by 94%. And on an attributable basis, even 100%. So, no, I don't think there's a slowdown -- this is just seasonality.

Okay. And in both South America and in Africa, your increase in costs was higher than what one would have expected, given the number of new subscribers. Can we put that down to anything in particular?

Was, for example, Congo, a lot of OpEx in Congo in Q1 the cause of that?

Of course. You work with high operating costs. There are very few -- very, very limited revenues in Congo, and that makes the ratio doesn't look good.

As we will grow the business, that ratio will start looking a lot better. And then I will come back to what I said before is that we should start improving the margin in Africa going forward.

Okay. And in South America?

South America, I don't know. But I think the margin, we gained seven points in the EBITDA, excluding Colombia over the last --

Which was all pricing, basically, though.

No, it's driven by value-added services, E-pin, second billing in that part of the world because I've been driving this trend of EBITDA growing faster than revenues, and the revenues growing faster than the subscribers.

Yes. Forgive me, but what I meant was that ARPU, ex Colombia, was positive. That, actually, if you look at the increase in OpEx, it was higher than in other quarters where you've had more subscriber growth. So I guess was there any kind of investment and anything or --

No, nothing special to report. No.

Okay. Just a technical one on Democratic Republic of Congo, where you have 193,000. Then you put a little note saying that you cleaned out some inactive customers. So you had a big increase in customers despite the clean-up. Is that the correct way of interpreting that?

No, what we've taken -- we look at the daily aging of our subscriber base across the world, including Congo, and we think that a number of subscribers -- 50,000 -- will not be able to continue to live up to our definition of a subscriber going forward. So that's why we kind of took them out.

But we had 193,000 subscribers at the end -- active subscribers, who generated calls within 30 days in the first quarter of this year. And so, that is up from I think 45,000 or 50,000 that we had at the end of last year.

So it's almost like 140,000, 150,000 net new subscribers in Congo in, let's say, a little bit over two months because we launched Tigo in the middle of January. So I think it's a pretty good result.

Okay. All right. Well, thank you very much.

Thank you.

[OPERATOR INSTRUCTIONS] We'll take a question now from [Olmert Slo] from Libertas Partners. Please go ahead.

Good morning, gentlemen. Congratulations on a solid quarter. Looking to the CapEx for '07, $800 million buildout, could you guys talk a little bit more in detail about the network growth?

How long it takes typically from plan to execution when you guys can have subscribers up on a given tower and talk about what the structure is of the backhaul -- what type of backhaul there is across the network in South America in particular?

We plan our network buildouts. We build a budget, which we then look at after a couple of months and do re-forecasting and in relation to that we then place our orders with the suppliers and some equipment you get very quickly. Some takes a number of months. So for a growing concern, the delays aren't that big.

If you do a start-up like Congo, of course, you know there it takes a year to build a network. But for an ongoing business, we plan those to make sure that we don't get bottlenecks in the network as we go forward.

The way we carry our traffic, more and more of our traffic nowadays is carried, especially in the cities, on fiber optic. We have our own fiber optic rings in some of the cities in Latin America.

We started looking at that in Africa, too, because the volumes have increased so much that microwave is no longer a solution in some of those places.

Sometimes, as I said earlier on the call, we will lease capacity from incumbents or from other operators. So we look at the best solution, the lowest-cost solution, combined with providing a quality service to our customers.

Okay. Thank you.

Thank you.

Thank you. We'll take a question now from [Emma Wigger] from SEB. Please go ahead.

Hello?

Hello, Emma. Your line is open now.

Hello?

Yes?

Yes, now you can hear me. Okay. I just have two questions. First, is it reasonable to believe that you can add an equal number of subscribers in 2007 as you did in 2006 in Latin America if you exclude Colombia?

You know we don't give guidance. So I can't answer that question. But you've seen the subscriber number in Latin America in the first quarter was a very strong one -- 750,000 subscribers in Central America.

So we started well. So we'll see how the second billing and the stuff like that will sort of develop in the next quarters, and then we'll have a better idea as to what the subscriber number is going to be.

Okay. And then I would just like to ask if we can expect the same margin that you had guided before for Colombia, [60%] for the full year 2007?

Well, we are 21% now. So what we say is that we don't expect that to grow from the current level, that we will be focusing on top-line growth. That will be our top priority.

Having said that, I don't see the margin going down in Colombia going forward. I think it will probably only go up. But [not all] this year because of the top line -- the priority on top-line growth.

Okay. Thank you.

Thank you.

Thank you. Mr. Beuls, there are no further questions at this time. Are there any other points you wish to raise at this time?

Thank you, operator. Once again, I would like to thank all of you for joining us today. And if you have any follow-up questions, don't hesitate to give us a call.

Thank you, and have a good day.

That will conclude today's conference, ladies and gentlemen. Thank you for your participation, and have a good day. You may now disconnect.