Millicom International Cellular SA (TIGO) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen. And welcome to today's Millicom 2007 fourth quarter results conference call. (OPERATOR INSTRUCTION) I would now like to hand you over to the host of today's conference, Mr. Marc Beuls, President and CEO; and Mr. Andrew Best, Head of Investor Relations. Please go ahead.

Thank you, operator. And welcome to everyone who has joined us today. I am with Andrew Best today. Unfortunately, David Sach, our CFO, is in bed with the flu today so he won't be able to join us. So we will be using slides to run you through these results and it will be helpful to have those 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 we start running through the slides I just wanted to draw your attention to what I see as the headlines for these results. 2007 was a great year for us and we are pleased to say that 2008 has started well. Q4 was a fantastic quarter rounding off a year in which we had broken many new records for the Company. In Q4 we added a record 3.4m subscribers which I'm sure exceeded all your expectations and we have to admit that it was in excess of our own forecast from early in 2007. We added a record 1.4m subscribers in Central America in Q4 and for the first time more than 1m new customers in Africa during the quarter.

Driving this growth has been our ability to invest over $1b of CapEx. During the year we moved up our CapEx as with our strong balance sheet and the opportunities that we saw in the market we were encouraged to accelerate our CapEx plan.

Last but not least the Board will propose to the General Shareholders Meeting in May that the Company pay a dividend, the first in Millicom's history. This is a special dividend relating to the upstreaming of cash from the sale of our business in Pakistan and because we have an extremely strong balance sheet we wish to return this capital to shareholders.

Moving on to slide number two I want to reiterate that it's investing that is driving our business and we see a one off opportunity while penetration rates are still relatively low to accelerate the build out of our networks and to increase the affordability of our offerings. This will enable us to capture a large market share in 16 of the fastest growing markets in the world today.

So turning to the headline number on slide number two of the pack, revenues for the fourth quarter grew by 41% over the fourth quarter of 2007 and EBITDA grew by 34%. We added a record of 3.4m new subscribers in the fourth quarter. Even excluding Colombia, underlying organic revenue and EBITDA grew by 47% and 45%, respectively, which is a very strong performance.

Millicom's CapEx during the quarter was $298m, which represents a 21% increase over the Q4 2007 fixed rate and brings the CapEx for the full year 2007 to over $1b, a 68% increase over the prior year. We also expect to spend over $1b in 2008. As I've said before, this CapEx is a good indicator as to how positively we view the prospects for growth.

Slide three. The results of accelerating investment can be seen clearly in terms of the rate of subscriber acquisition during the quarter. Millicom added a record 3.4m total subscribers in Q4 and as you can see on slide three, bringing the total to over 23m at the end of December and representing a 56% increase over the fourth quarter of 2006. It is important to point out that 50% of the subscribers were added in the month of December.

A total of 8.4m new subscribers were added during 2007 but our run rate of subscriber additions in the second half of the year was considerably higher than our run rate in the first half of the year, as we managed to invest faster than we had expected. If, as we anticipate, we are able to maintain our level of CapEx in the coming quarters, subscriber intake will continue to be strong. But bear in mind that seasonality, Q4 is typically the strongest quarter for Millicom in terms of net additions.

Attributable cellular subscribers increased by 55% from the fourth quarter of 2006 to just 19.8m at the end of December 2007.

It's worth reiterating that Millicom has one of the strictest definitions in the industry for what constitutes a subscriber. Reported subscribers are those that have generated revenues within a 60 day period, or in the case of new subscribers those that have started to generate revenues. This tighter definition for new subscribers was introduced in Q3 2007 to ensure that we count only those customers who have initiated a revenue generating activity so that we report only genuine subscribers to Tigo products and services.

The phasing out of our legacy TDMA and CDMA networks has been completed in all markets except Bolivia where at the end of December 320,000 subscribers remained on the TDMA networks. During Q4 we took out approximately 300,000 from our numbers in Central America and in Paraguay and this process resulted in slightly higher churn. The phasing out of these networks has released spectrum in the 850 and 1900 bands for 3G services, which we are planning to launch in our existing spectrum bands based on current licenses in Latin America during 2008 and 2009. We expect the remaining TDMA subs in Bolivia to be churned off by the end of 2008.

Slide four shows that for Q4 we have recorded quarterly revenue of $768m, an increase of 41% from the fourth quarter of 2006 and excluding Colombia the underlying organic revenue growth was a healthy 47%. For the full year revenue was $2.630b up 67% on the result of 2006. Revenue growth in Q4 was the highest in Africa up 57%. South America recorded revenue growth of 47%. For Central America it was 31% and for Asia it was 43%. I will expand more on the results for the individual clusters and the underlying trends in a few moments.

Referring to slide number five, EBITDA for the three months ended December 31, 2007 was $307m, a 34% increase from the fourth quarter of 2006. EBITDA for the full year was over $1.1b, up 55% from 2006. The EBITDA margin was 40% for the fourth quarter and 42% for the full year, which is very encouraging particularly in this period of aggressive growth that we are currently experiencing.

So let's now look at the results for each cluster starting with Central America, which today accounts for 44% of Group revenue and 55% of Group EBITDA. On slide six you can see that the total subscribers reached 8.8m up 71% year on year and 19% over Q3. During the quarter, 1.4m new subscribers were added, which was a quarterly record for any cluster. The subscriber increase was particularly strong in December through our seasonal promotions and sales and marketing campaigns to improve visibility and highlight the attractiveness of the brand and value added services.

ARPUs fell slightly from Q3 as a significant portion of the subscriber intake occurred at the end of the quarter. Our focus on value added services is helping sustain ARPUs as it enables us time for a pick up.

In Honduras a third operator has launched services and a fourth license was awarded in Q4. While we expect the entrance of these two new operators to bring about an increase in commercial activity in Honduras, we expect to retain our strong number one position.

Fourth quarter revenue for Central America grew by 31% from Q4 2006 to $329m. EBITDA for Central America increased by 28% to $168m for the fourth quarter of 2007 and the EBITDA margin at 51% was down slightly from the previous quarter due to record subscriber intake and the related costs of handset subsidies which were needed to attract additional high value subscribers ahead of the launch of 3G services this year. Our strong market share in Central America gives a high percentage of on-net traffic, which means that we should be able to maintain our margin over 50% in Central America.

Please turn to slide seven to look at the results for South America in more detail. Subscribers grew by 36% to 5.9m of which Colombia accounted for 2.8m. Revenues grew by 47% to $239m in Q4 and EBITDA grew by 54% to $75m.

EBITDA for the region was slightly lower than for Q3 as a result of the interconnect cost Colombia. As we have already announced the regulator halved interconnect rates $0.12 to $0.06 on December 7th and this impacted revenue and EBITDA by $7m and $5m, respectively as Tigo has historically had more incoming than outgoing calls. Due to the price elasticity that we believe exists in Colombia we expect to offset the impact of the interconnect change gradually during 2008. In the long term we believe that the impact will be beneficial for Tigo and we will put pressure on the largest operator.

In South America we continue to see higher growth rates for EBITDA than for revenue, which in turn is higher than subscriber growth. Our particularly strong success with value added services is helping to drive this trend and we hope to see this replicated in all our markets in the future. EBITDA margin for Q4 was 31% affected by our efforts to grow our business in Colombia more aggressively.

Turning to slide number eight, the strong top line performance and subscriber growth of our African cluster has been the most encouraging out of the fourth quarter results. For the first time, over 1m subscribers were added during the quarter in Africa bringing the total at the end of December to 5.7m. This increase was due to the affordability initiatives introduced earlier in the year and continued to be a factor in Ghana, Tanzania and Senegal.

In DRC and Chad are also gaining traction but unfortunately we had to shut down most of our network in Chad at the end of January because of the rebel attacks on the capital city, N'Djamena. Our people are safe and the network is undamaged. I'm happy to report that we are asked by the government to switch on the network at midday today except for some parts of the east of the country.

Revenue for Africa for the fourth quarter was $145m, up 57% from Q4 2006. There was a cost of this growth in terms of margin but this is a cost that we are willing to incur in the short term.

In spite of the heavy cost of building up a new and extended network in Africa, particularly in DRC and Chad where there is a lack of transportation and power infrastructure, we still reported a quarterly year on year increase of EBITDA of 34% to $44m resulting in an EBITDA margin of 30%. We believe that we saw the bottom in terms of EBITDA margin in Q3 and from a growing revenue base that will help drive economies of scale, we expect to be able to continue to improve the overall EBITDA margin in Africa despite continued aggressive expansion.

Slide nine shows that the subscribers in the Asian cluster increased by 46% from Q4 2006 to just under 3m at the end of Q4 2007. Revenue for Asia was $55m for the fourth quarter up 43% from Q4 2006. And EBITDA was $20m up 27%, producing an EBITDA margin of 37%.

EBITDA margin was impacted by the settlement of a revenue share dispute in Cambodia relating to the international gateway which had an adverse impact of $2.1m. Without the settlement costs, the EBITDA margin in Q4 would have been 41%. We're likely continue to grow strongly with EBITDA margins in excess of 50%.

Now I would like to hand over to Andrew to talk you through the financials.

Thanks, Marc. Please turn to slide 10 where you will see the key financial ratios for the full year 2007 compared to 2006. Cost of sales has fallen as a percentage of revenues reflecting the economies of scale that we are achieving as our market shares rise. As Marc and David have stated many times it is vital for Millicom's AAA model that we continue to keep a tight rein on costs, which enable us to make ourselves more affordable for our customers. Greater affordability enables us to penetrate deeper into our markets and target lower ARPU customers. The Group will continue to be dependent on those lower ARPU subscribers going forward.

In addition, we continue to expand our value added services particularly in Latin America. These services tend to have little incremental costs and therefore are highly profitable which positively impacts our gross margin. These services also enable us to attract the higher quality customers in our markets, which help sustain ARPUs. Predicting the exact blend of the ARPUs is difficult but we're confident that we can continue to sell more minutes at profitable rates.

We continue to increase significantly in the Tigo brand in all our markets, which has resulted in higher sales and marketing costs as a percentage of revenues. As the quarter four results have shown these investments are crucial towards helping drive strong subscriber growth. The G&A costs are also up slightly, which again reflects the higher percentage costs in newer markets such as DRC and Colombia where there are significant roll outs in progress. Pleasingly though, the EBITDA margin excluding Colombia, has remained steady at 47%.

Slide 11 shows that EBITDA margins have fallen in quarter four 2007 to 40% having been fairly stable at around 43% for the previous quarters. This was due to a two percentage point increase in sales and marketing costs to drive subscriber growth and to several non-recurring items that impacted gross margin by 1 percentage point.

The two main non-recurring items are the previously announced change in interconnect in Colombia which has temporarily hurt gross margin in quarter four by $5m but which will be beneficial over time and a settlement of a revenue sharing dispute in Cambodia related to the international gateway which impacted gross margin in Q4 by $2m. Over time we remain confident that we will see our margins trend back up to the mid 40s as soon as we achieve critical mass and gain market share in these newer markets.

On slide 12 you'll see an overview of the P&L. The areas that we wish to bring to your attention are the increased depreciation and amortization reflecting the much higher level of CapEx, the higher interest costs reflected in both an increase in the gearing and the decision to redeem the remaining 10% notes in 2008, a goodwill write down in Colombia, the decrease in tax rate and the gain from discontinued operations which had a positive impact of $259m due to the successful sale of Paktel in quarter one. The net result of the above was an increase in full year net profit from $169m in 2006 to almost $700m in 2007.

Please turn to slide 13. The slide shows the CapEx for Q4 was $298m as against $247m in Q4 2006, bringing total CapEx for the full year 2007 to over $1b. As Marc mentioned earlier, CapEx is a good indicator as to how we view our future potential. We demand a channel rate return in excess of 20% and pay back normally in the range of one to three years, which means we only invest where we see good growth opportunities. For the capacity expansion, which is where most of our Latin American CapEx is now spent, we expect to see returns within one to two years. We have needed to add substantially to our network as the second billing and market growth have driven the volume of minutes across all of Latin America.

The network coverage, which is where the majority of our African and Asian CapEx is spent, we are targeting returns of three years in most operations and five years in our greenfield build out of the Congo. Coverage CapEx is to stay more weighted to the cost of building sites including towers, buildings and fences rather than the cost of imported equipment. In recent periods the cost of steel and concrete has been rising whereas the prices of network equipment has been falling. As such, the rates of return and paybacks for coverage CapEx are lower than capacity expansion. Overall, the current blended rates of return are considered above historical averages.

Due to the difficulties in accurately predicting the timing of CapEx spending we remain cautious in our forecasts on a quarterly basis, but we predict full year CapEx for 2008 in excess of $1b. Having predicted the CapEx to sales ratio to fall in 2007 and having got it wrong I know David will wish me to say that we are now hanging up the Merlin hat for this ratio. What I do know is that there continue to be wonderful opportunities to invest in our markets and we will continue to do so aggressively and as wisely as possible.

Slide 14 shows that depreciation has risen considerably from an average of $57m a quarter in 2006 to $89m a quarter on average in 2007 due to higher capital expenditure and the impact of the Colombia Movil acquisition. With the quarterly CapEx rising substantially over the past several years and forecasted to stay above $250m on average over the next few quarters, we can expect to see depreciation continuing to rise for several years. As a guide, depreciation as a percentage of revenues has stayed fairly constant and we expect this to remain the case even when investment in 3G technologies begins in this year.

On slide 15 you will see the debt has increased throughout the year each quarter and now stands at $1.5b at the year end. Total debt increased by $340m during the year despite repurchase of $90m face value of 10% Senior Notes as part of our ongoing program to improve balance sheet efficiency by replacing debt at the corporate level with debt in the operating companies, which is tax beneficial for us. We will continue to lower the corporate debt by exercising our right to redeem the remaining 10% notes in December 2008.

As a result of this planned early redemption, we accrued the bulk of the 5% redemption premium in the fourth quarter, which increased our debt and interest expense by $31m. Since the year end we have also brought a conversion of our $200m convertible bond which has produced interest saving of approximately $15.8m at the corporate level over the next two years.

Despite increased total debt in 2008, Millicom is still in an under-levered position with net debt to EBITDA of 0.6 to one and we recognize the need to increase gearing over time. Our target level is a ratio of two to one in terms of net debt to EBITDA and we are looking at several opportunities to strength our position in our existing markets and to enter new markets that could justify an increase in debt to give us a more efficient balance sheet and the ability to utilize our cash in the best interest of shareholders.

However, these opportunities could take time to complete. In the meantime due to our extremely strong cash position the Board today announced an extraordinary dividend of $2.4 per share as a result of the one time net cash flow benefit attributable to the sale of Paktel. This dividend will be paid following the AGM in May as a means of returning some value to our shareholders.

The Board's view on future dividends will be on the basis of the development of free cash flow in the coming years. Free cash flows should be viewed as EBITDA less interest, taxes and CapEx, which might include acquisitions.

On slide 16 you can see the additional interest charge booked in quarter four of $31m relating to the planned redemption of the remaining 10% notes December 2008. Excluding this one off charge, average quarterly interest expense for 2007 was $41m compared to $31m in 2006. The higher interest expense reflects increased total borrowing. By paying some of the 10% note and replacing it with local Company borrowings we were able to reduce the simple effective interest rate to 9% in quarter four. Better yet, we are able to obtain tax deductions on the local debt resulting in a significantly lower tax interest rate.

The benefit of this strategy can be seen in the overall tax rate, which I will discuss shortly. We will continue to seek ways of reducing our interest costs and hope to be able to continue borrowing at attractive rates at the local level as we eliminate the corporate debt.

Our overall Group tax position is summarized on slide 17 where you can see that our effective tax rate for the operations fell to 11% despite the operating losses and Colombia and the Congo, which have kept the effective tax rate up. This is due to a deferred tax benefit of $86m that we booked in our Colombian operation relating to the net operating loss assumed as part of the acquisition and the losses incurred since the acquisition date. We were able to book this benefit because of the better than expected results during the year and the anticipated strength of this operation looking forward.

On this slide you can also see that we've been able to reduce the difference between the operations effective tax rate and the overall Group rate by reducing the non-deductible tax corporate expense. We've done this by increasing the management and brand fees that we charge our operating companies and of course through the repurchase of the 10% Senior Notes, replacing the non-tax deductible corporate debt and the local company borrowing lowers our overall Group effective tax rate.

On slide 18 you can see my template showing you the normalized tax rate for 2007. There were two non-nonrecurring, non-tax deductible items in 2007 that have significant impacted profit before taxes. These were the $31m interest accrual relating to the planned redemption of the remaining 10% notes and the $24m goodwill adjustment in Colombia. As previously mentioned, we recorded a deferred tax benefit of $86m for the net operating losses assumed as part of the acquisition of Colombia and the losses incurred since the acquisition day.

As mandated by IFRS, the portion of tax benefit relating to the pre-acquisition losses must reduce the carried value of goodwill even if the goodwill is not impaired. The reduction to goodwill was $24m and was recorded as a write down of assets impact operating profit. We stress that goodwill was not impaired. When I adjust for the above items I believe that normalized Group effective tax rate was 29% for 2007. This is lower than the 33% rate in 2006 due to our efforts to reduce the non-deductible corporate costs.

Looking forward it should be possible to keep our tax rate below 30% for a more balanced geographical mix of profit and our ability to transfer more income to corporate to fully offset the remaining non-tax deductible costs.

Please now turn to slide 19 which shows that Millicom has been able to finance its increased level of investment from internal cash generation and that free cash flow, cash from the operating activities less total investment, was positive. The closing balance of $1.2b in cash means that we have net debt of $660m and are well positioned to continue with our accelerated investment program for our existing businesses and to explore the other options as we have already discussed.

Slide 20 illustrates how the investment breaks down across our businesses. CapEx was over $1b for the full year 2007 and as mentioned previously, we expect a slightly higher CapEx figure for the full year 2008. Thank you. Now I will hand you back to Marc.

Thank you, Andrew. To summarize the past quarter I can say that Q4 has been a fantastic quarter for Millicom and one that was characterized by an acceleration in subscriber addition driven by the high level of investment across our operation and concluded a record breaking year in real style in which the Board has recommended Millicom's first dividend.

The results for our African cluster were particularly exciting as strong growth was experienced across both the new and the more established markets as we have made our services affordable to a greater part of the population. As we start to enter the siege stage of the J-curve of penetration growth and target the mass market.

Central America was still the strongest cluster in terms of subscriber acquisitions demonstrating that strong growth continues to be achievable in markets that are higher up the penetration curve. This is because there is always a tendency to underestimate the levels of penetration achievable and we're happy to admit that we along with the rest of the market have been guilty of this underestimation of the growth potential in our markets.

South America and Asia also showed strong top line growth with respective revenue increases in Q4 of 47% and 43%, respectively over Q4 2006. EBITDA margin for the Group as a whole was 40% Q4, slightly lower than previous quarters due to the increased subscriber addition and some one offs in the quarter. We expect the margin to go up from that level.

Today Millicom has a very strong balance sheet which will enable the Company to continue to exploit its strong market position in 16 of the best growth markets in the world. This financial strength with very low leverage enables us to look at a wide variety of options to generate shareholder value as in this uncertain economic climate there might be more opportunities for well capitalized companies. We are pleased to say that after such a great year that 2008 has started well and we remain confident that our AAA business model continues to deliver great value to shareholders.

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

Thank you, sir. (OPERATOR INSTRUCTION) Our first question today comes from Anders Wennberg with RAM. Please go ahead.

Hello and congratulations with a very strong quarter and fantastic net adds.

Thank you.

Very good to see. I've a couple of questions regarding margins. First on Central America I wonder if you can help us back out how much better would the margin have been with the normal net adds, i.e. how much is customer acquisition costs?

Secondly, you write that you are going to start handset subsidies, or you've already started with handset subsidies. Is that going to burden margin going into '08 in Central America?

And thirdly, if you could comment a little bit on the Colombia, the $5m effect on EBITDA in December from interconnect. $5m times three would be $15m. Is that the negative impact on Q1 that would drive down margins to maybe 10%, 11% in Colombia? Is that correct interpretation or wrong? Thank you.

Okay. So thank you, Anders. So yes, what is a normal level of net additions in Central America because we've had a couple of very strong numbers over the last couple of quarters? I think that it's quite normal that Q4 where we have been adding a lot of subscribers on the back of very strong promotions that typically are run around the year end period has a slightly lower EBITDA margin. I don't see anything structurally in here. This is a one off. What would the margin have been with a lower subscriber intake? Frankly I don't know and I don't really want to speculate. We were extremely happy with the 1.4m new subscribers in Central America and I'm sure that the margins will recover in the first quarter.

The handset subsidies is nothing new in Central America. We've always had that in Central America because the way the market is organized that we do some handset subsidies because that's the way business is being done there. And we would plan on continuing doing that. And if and when we move -- or when we move to 3G in that part of the world we might have to do some retention. But again Anders, at the time when we launch GSM you're probably not even going to notice that in our P&L.

In terms of Colombia interconnect, we launched interconnect in Colombia -- sorry, the new interconnect was launched in Columbia on December 7th. The impact on the EBITDA was $5m for the month. And so if you were to extrapolate that going forward you have to of course take into account that reduction of EBITDA will get smaller and smaller as we go forward in the year 2008 as we get more calls, we get more on-net calls, we get a better balance of our incoming and outgoing calls, we get better economies of scale. So we expect that loss of EBITDA, let's call it that way, will get smaller as we go through the year. But for the fourth quarter that was the number.

We think that as we said on the call, we think that this will be ultimately positive for the Company and we expect that once we get into 2009 you'll hardly see any impact of this reduction of the interconnect costs.

Okay, thank you. So very limited impact in '09, but is it correct that the impact in Q1 could push down margins to about 10% in Colombia?

We were at margins I think around the mid 20s to low 20s in the third quarter. I think you should be looking at margins for the first quarter probably between 10% to 15%. So that's where I expect margins to be if you could apply the same impact on the margins as we have in Q4.

Okay, thanks.

Thank you.

Our next question today will come from Ric Prentiss with Raymond James. Please go ahead.

Yes, good morning.

Hi there.

A couple of questions for you guys. One, Marc you talked about the uncertain economy. Clearly here in the United States a lot of investors are looking at the economies around the world. Can you update us as far as what you are seeing in your 16 markets as far as what the economies seem to be doing and their strength?

The second question, also you mentioned that sometimes economic climate can create M&A opportunities. How do you look at that? What markets might be of interest, or how would you prioritize what market's characteristics might be interesting to you?

I'm not going to do the tour of the whole world. But at this point in time I can say that I have not seen an impact of the potential slowdown of the U.S. economy in any of our markets. Q4 was very strong. I said on the call that we started the year very well. So at this stage, it doesn't look like the economy in our markets is slowing down and that people would start buying fewer minutes or fewer people would start buying SIM cards.

In terms of the M&A activities, we've always said that our M&A efforts will be focused on Africa and Latin America, and that we will be looking for opportunities -- continuously look for opportunities. We've spoken about a triple -- third operator strategy in Latin America similar to what we did in Columbia. We will look at the new -- potential new markets in Central America, like Panama. We're working on -- there might be other opportunities that may become available later in the year. And also in Africa we will continue to look at new opportunities there. So at this point in time, there's no specific M&A activity to report.

Sure. And then on the data front, you mentioned starting to spend some CapEx in '08 and '09 on data. What are your thoughts as far as how data materializes in your markets? How will the customers respond to it? What do you think the initial services would be, and just what your thoughts are as far as returns on data spending?

Let me first say that data is not a new thing for Millicom. Today our data revenues -- our value added services revenues as we call them, represent over 10% of our recurring revenues, with one champion in there, Paraguay that has more than 30% of its recurring revenue coming from value added services. So launching data is not new.

So what we're doing is we're just taking it to the next level so that we allow people to start using high speed data solutions to the offering of HSDPA on 3G networks. And we think that given our customer profile in Latin America where we have a lot of A and B market segment customers, we think that this is a service that is going to be well received by the market.

And as always, we will continue building out those networks once they are up and running, in relation to the demands we see in those market segments. And again, I think it's important to underscore here that going to 3G is not creating an additional cost for me -- sorry, for Millicom, in terms of network cost. The equipment for 3G on a traffic basic -- basis is not more expensive than the equipment in 2G or 2.5G equipment we are currently using.

Great. Good luck guys.

Thank you.

Our next question today will come from Bill Miller with Hartwell. Please go ahead.

Mark, congratulations.

Hello.

Wonderful quarter again.

Thank you.

I'm curious -- several things. As you look out through the course of the year can you give us a new set of goals or recurring goals for this year, as you look forward?

And secondly, could you give us a pattern of your CapEx?

And thirdly, is there anything that makes Paraguay unique or is 30% a number we could expect from other markets, in terms of value added?

First, in terms of the goals, as you know, we don't really communicate any goals. We don't give any guidance to the market. As I said on the call, year 2008 started well for us. So we think that 2008 is going to be a good year for us again.

Secondly on CapEx, we passed the $1b CapEx in 2007. Given that we don't expect to see a slowdown of the growth, we expect that our CapEx for 2008 is going to be at, or higher than, the level we saw in 2007. So I would say it's $1b plus from what I see today. But as we've done before, we will of course update that number as we progress through the year.

In terms of value added services side, I wish we could get every market up to 30%. Maybe one day we'll get there. I think why is Paraguay at that level is because I think we have a fantastic team in that country that is pushing value added services and has taken it to levels that are substantially higher than the levels we even see here in Europe. Having said that, we see value added services growing strong across a number of markets in Millicom.

I think Central America, today, is among the fastest growing regions when it comes to value added services. And needless to say, of course, that Central America represents 44% of our revenues today. So today we will see a bigger impact of value added services, hence again, the reason for introducing the next generation of technology.

Marc just -- I didn't even mean to suggest you should give us any goals for growth. However, last year you did suggest, or you said some of your goals were complete build out in Africa. Make -- buy the minority interest in various locations, etc. Those were the kinds of goals that I --

Okay.

-- thought maybe you could come up with in terms of the pattern of your CapEx I wondered whether you were going to front load the CapEx. Your third and fourth quarter last year were by far the biggest CapEx expenditures. So I didn't know whether you were going to have a period that was more fallow here in the first couple of quarters and then load the last two, or whether you were going to have a continuation of what went on in the fourth quarter. That's the pattern I was getting at.

Okay. Sorry, I didn't understand it that way. But in terms of the CapEx, I think the CapEx is going to be fairly well spread across the year. So I don't expect any peaks in the course of 2008. We know where we need to spend the money. We know how much we have to spend. And our focus is very much on making sure that that CapEx is being spent, because if we were to start spending less CapEx, that would be an indication of a slowdown or the inability to basically implement CapEx as quickly as we would like to do.

We know that Africa is top on our list because that's where the penetration levels are the lowest. That's where we are building out a lot of network today. And I visited, myself, Congo very recently. I made a tour of the whole country. And I can tell you that there are plenty of opportunities in that country and that one of our top priorities is building the network in that country because there are a lot of unserved customers. But at the same time, countries like Senegal, Tanzania, Ghana, are fantastic opportunities where we will continue improving the quality and the size of our networks. And that's what we will be focusing on. And that, I think, is one of my top targets.

The other target is, of course, to make sure that 3G gets implemented in Latin America whilst we continue growing Latin America at a strong pace. And we will be monitoring very closely the performance of the 3G networks if and when they get turned on, probably starting the third quarter of this year.

I think in Asia, I think is a very similar picture as Africa. A lot of CapEx is going into countries like Cambodia and Sri Lanka. We see very -- we see great opportunities there. And so we accelerated CapEx there. And again, we want to make sure that that CapEx gets spent, that those networks get built because that means that we can continue taking on more and more subscribers. I would say those are the targets.

We will continue to follow the buyout opportunities, but again, nothing is happening, or has happened over the past quarter. But we will continue following those things and we will also continue following a new market in Latin America and maybe also Africa. And we will always be looking for new opportunities in the markets where we are to better service our customers.

That's terrific. Well done. Thank you.

Thank you. We'll move now to Peter Nielsen from Cheuvreux. Please go ahead.

Thank you. Peter Kurt Nielsen from Cheuvreux. I know you don't give financial guidance, Marc. But since you've opened up with the dividend, I think it's fair to ask, would you expect a positive cash flow, based on your own definition, for 2008?

And secondly, just following up on this, given the special dividend here, is that -- can we see that as an indication that a buyout of minorities is not something which you would expect in the very near term? Thank you.

To start with the last, I've always said that prior to this announcement of the dividend that we have sufficient cash resources capabilities to leverage the Company to do a number of things, including returning money to shareholders, buy out minority shareholders, fuel the growth in our markets. So the one doesn't necessarily not exclude the other.

We have a leverage of 0.6 to 1, net debt to EBITDA on leverage, so that is very low, which will allow us to leverage local balance sheets even more if we want to. So the one doesn't exclude the other.

I think our cash flow position going forward will, of course, impact us, or can be impacted by our speed of the CapEx spending. Also, if we were to buy out some minority shareholders, if we were to go into new markets, those are factors that could pull -- impact our cash flow. And that's one of the reasons why we will, in the course of 2008, think about probably a dividend policy, so which we will then -- I think it's a bit too early to really answer that question.

Okay, thank you.

Our next question comes from David Kestenbaum with Morgan Joseph. Please go ahead.

Great. Thanks Marc. Can you follow up on -- just following up on the first question. As far as your SAC, you've always said it's about $25. Is that where it remains? And where is that headed. Do you think it's going to be flatter with the phone subsidization? Do we see that going up?

No, I can tell you that our SAC has not gone up. I think our SAC might even have gone on a little bit. But let's say that it's more or less at the same level, which is across Millicom, which is $25.

(Multiple speakers).

(Multiple speakers) ARPUS of around $12 for prepaid customer we're still looking at payback below three months and over 21 months we were making money on the customer. So nothing has changed in that respect.

And going forward, even with the subsidization, do you think it will still stay around $25?

Yes, I don't see any change there. So again, the subsidies in Latin America is something we've always been doing, so there is no change there. And we're very happy with this 1.4m subscribers in Central America, for instance. So that is a very, very strong number. And again, it shows what the positive impact has been of the launch of the second billing in 2007. I've always said that the impact of the second billing you don't see, necessarily in the first month or the second month or the third month. This is an impact you see over time. And I think the subscriber number is just another proof of that.

And then likewise, on churn you said that was up if you include the TDMA subs, but if you exclude them, was that at historical levels or --

Churn was the same, around the 4% level for prepaid. So if you were to split this TDMA migration out of it -- TDMA, CDMA migration out of it.

Okay. And then can you update us with Panama, what's happening there with the whole greenfield opportunity?

At this point in time we, amongst some others, I think we just shortlist it and the government expects us to submit our financial bids by end of March, I think. So we will keep the market updated when we approach that date.

Okay. And is there anything else that's imminent on the greenfield opportunity?

Not at this point in time, nothing on -- we are always constantly looking at things, but nothing specific to report at this stage.

Okay, thanks.

Thank you.

We'll move now to Stephen Patterson with Kaupthing Bank. Please go ahead.

Yes, hello. Stefan Peterson, Kaupthing Bank. Once again terrific subscriber intake. I would like to look at the subscriber intake in Central America in relation to the ARPU. There's a sequential fall in the ARPU, but then you stated that a majority of the subscriber base was taken in in the end of the quarter, in December. How much did that affect ARPU and do you expect the ARPU to come back to closer to your $20 going forward?

Definitely when (technical difficult), by definition that puts pressure on the ARPUs because you get from those subscribers at best, one month of revenue. So that pulls down the quarter. As always, I'm not going to give any outlook for ARPUs going forward. But clearly, there's a reason. That is the reason why ARPUs have -- were lower in Q4, because we have almost like 700,000 subscribers that were added across the month of December. So you can make the calculation yourself, what impact that has had on ARPU.

Stefan Peterson. Yes, thank you.

You're welcome.

We'll move now to Sven Skold with Swedbank. Please go ahead.

Okay, thanks. I would like to discuss the subscriber intake going forward. Do you think we should calculate with the traditional seasonality in Latin America in Q1? And second, should we expect also traditional seasonality in Africa or will that be different, because those markets are pretty young? How should we look at it going forward?

In Q4 you always have seasonality, both in Latin America and in Africa. So I think Q4 will always be a better, and has always been a better quarter for Millicom than any of the other quarters in the year. So I don't think that is going to be different going forward.

And I don't think that we're looking at substantial slowdown in Q1, because from what we see in the beginning of the quarter, we -- it looks like we started the year very well.

Okay. And may I also ask you about the 30% value added service in Paraguay? Is that mainly SMS or is that other kind of services now?

No. SMS represents about 65% of those revenues. The other 35% are ring tone downloads, music downloads, of course browsing of the Internet. We also launched BlackBerry services in Q4 in Latin America. So that makes up for the difference.

Okay. And have you been looking at other services, such as e-banking, for example, which I know is not common but there are examples of it in Africa.

We have not launched our own e-banking initiatives because we're not looking at e-banking. There what we are looking at are electronic transfers of money. And so that is something we are looking at, and we might be launching a service in one or the other market in the course of 2008.

Okay, thanks.

Thank you.

We'll take our next question from Lena Osterberg with SEB Enskilda. Please go ahead.

Yes, hello.

Hello.

Once again, congratulations. I guess you heard it enough now. But --

I don't mind.

A few questions regarding back again, regarding to Central America. Could you just specify how much was the differences between -- you said that you had a large intake in SMEs or corporate customers. (technical difficulty). Are you pushing ahead aggressively or is it?

Lena, you're breaking up. We don't hear you very well. Could you ask the question again?

Yes, sorry. I'll just take my headset off. On SAC in Central America, the question was you wrote in your report that you were pressing ahead in the corporate segment. Could you just say how much higher the acquisition costs are on the corporate side and maybe if you will disclose the portion of subscribers that are corporate customers?

No, I don't think we spoke specific on the corporate market segment. I think we're looking at getting higher value. And we're looking a lot at value added services, whereas Central America just is one of our fastest growing regions when it comes to value added services. But we're not looking specifically at the corporate segment.

By the way, I think the corporate segment in Central America is more or less done so the growth comes primarily out of the retail market segment. And as I said before, the average SAC in Millicom has not gone up. I think it might even have gone down slightly. And I think the picture for Central America -- I don't have the data here, but I think that picture in Central America is very similar.

Can I also ask a question on CapEx again? It seems rather conservative, $1b CapEx guidance, given that your revenue growth is so strong. Is it fair to assume that CapEx to sales will stay stable for 2008?

No. I think CapEx to sale will come down in 2008. I'm not looking at increasing CapEx at the same rate that we are increasing EBITDA in -- will be increasing EBITDA in 2008.

Okay. Thank you.

Okay, thanks.

Your next question comes from Drake Johnson with Davenport. Please go ahead.

Hello there.

Hello Drake.

The question I had for you, you had mentioned that Millicom was increasing the amount spent for subsidiaries to corporate headquarters. And I note that in the fourth quarter of 2007 that your corporate cost had stepped up fairly dramatically the third quarter. Is that the reason why the corporate cost went up so much?

I don't know what I said about headquarter cost, but I don't think I said anything, Drake. So what are you referring to, specifically here?

A corporate cost of $16.97m in Q4. Do you expect costs to be at those levels or higher going forward on a quarterly basis?

Again, I can't give you any guidance on cost, but I don't think there was any specific reasons why corporate costs went up in Q4. I think, of course, as our business grow and as with the complexity of our business with the whole Sarbanes-Oxley process and stuff like that, spending more time on procurement and also on the technical side, that might have increased -- a small increase in head office in our cost. But it's not like we're spending money on new buildings or stuff like that. No, nothing of that. So we're just renting a building in Luxembourg. That's the only thing we do.

Okay. And then I'm not sure I caught it. In Columbia, you had talked about margins in Q3 and Q4 and sort of expectation in Q1. Could you review that the margin in Columbia in Q3, Q4 and also expectation of Q1 '08?

What I said is that the margin impact as a result of the change in interconnect will be bigger in the first quarters and will become small as we move on in the year. That's what I said, and that the impact will be more or less negligible in 2009.

I think you all mentioned that your margin in Columbia was 25% in Q3. Did you mention the actual level of the margin in Q4?

I said that we were looking for a margin in Q1 between 10% to 15%.

Okay, great. Thank you.

Thank you.

We'll move now to Kevin Roe from Roe Research. Please go ahead.

Thank you. Great quarter, Marc and hi Andrew.

Hi.

Thank you, Kevin.

A couple questions. First, on the dividend, which is terrific, and considering, or possibly considering a recurring dividend, does that preclude share repurchases possibly happening in 2008?

No, this dividend doesn't preclude anything. We had almost $1.2b of cash at the end of the year, so the only dividend we have -- I don't know what the exact absolute demand is but I think it must be around $250m or $260m. So that still leaves us with almost $1b of cash in the system and with a balance sheet that is still very lowly leveraged. So we have enough capacity to do the things that we want to do, which could be buying minority shareholders, accelerate growth, go into a new market and as we said, returning money to shareholders at a certain point in time.

Right, including share repurchase. That's great. Regarding your minority partners in Honduras and Guatemala, I know you can't comment on anything happening today, but are you optimistic you can get a transaction done in 2008 in one or both of those businesses?

I don't know, Kevin, because we have been in discussions with those people over a number of years. So it is very, very difficult to really say anything about that. So we will see. We are interested in buying out the minority shareholders, as we said, if it is accretive to Millicom. If it's not accretive, we will not -- we're not interested.

And lastly, on margins you've mentioned maintaining or increasing Central American margins, increasing your margin in Africa. We've had a thorough discussion about South America. I don't think you mentioned your margin expectation, directionally, for Asia for 2008. But when we mix that all together, should we expect '08 margin, consolidated, to be higher than the 42% reported in 2007?

That's what I've said about Asia last year. I'm repeating what I said. I don't expect any margin improvements in Asia for the simple reason that our largest market, revenue wise, Columbia, we have a revenue share which keeps the margin -- It's like Cambodia, sorry, which keeps the revenue share -- a revenue share which keeps the margin low, so I don't really see any economies of scale there. Sri Lanka, we already have 50% EBITDA margin, so I don't really see any upside on the margin there.

And then on a consolidated basis, when you put that all together for '08 versus '07 directionally, do you expect '08 to be up versus '07?

Well with the impact of Columbia, you're going to see of course, and then the margin in 2008, because there we lose margin as the result of the new interconnect. And yes, we will strive to increase our -- further increase our margin in Africa as we build economies of scale. And I think that the reduction we saw in the margin in Q4 for Central America, I don't think we're going to see that, for instance, in this quarter. So I expect that we should be able to get back to the similar margin levels, yes.

Okay, thank you.

Thank you.

We'll move now to Alexander Vassiouk from Morgan Stanley. Please go ahead.

Yes, hi. I just wanted to get back to the Columbian interconnect story. And you're mentioning in your press release that your EBITDA margin came in at 16% in Columbia. So that's a 9 percentage point drop from -- around 9 percentage point drop from Q3 level. So if we add back the losses from interconnect, 7m of -- to revenues and 5m to EBITDA, the underlying margin works out at around 19%. So that's still around 6% lower than in the previous quarter. Can you explain what else was happening during the quarter that has taken your margin down?

I don't think anything specific has happened in Columbia any different from what we saw in other countries and that is fourth quarter is a very strong quarter in terms of subscriber intake. I think that is definitely impacting the number. And I think as a result of the interconnect change you probably have a slightly change in calling patterns. So I think -- in terms of Columbia, I think it's really too early to really come conclusions as to what is the margin going to be going forward?

We only have a little bit over two months under our belt of the new interconnect. And we know that the -- with the new tariff packages we have introduced in order to take advantage of the lower interconnect costs. So it improved affordability of the services, which I'm sure also impacted the margin in Q4. I think we need to see how these things play out. We think that these things will play out positively. But again, let's not come to any conclusions after two months.

I think this is a similar issue as we had last year around this time with the second billing. Let's not come to conclusions too early. These things have an impact and will have an impact on the performance -- of our performance in those countries in the short term, but even also in the medium and the long term. So give it a couple of months and then we'll be able to report better after Q1 what the first quarter has given us after the interconnect changes in Columbia.

Okay, great. Thank you very much.

Thank you

(OPERATOR INSTRUCTIONS) We'll move now to [Bant Morridge] with Handelsbanken. Please go ahead.

Thank you very much. Bant Morridge, Handelsbanken. You used to --on the subscribers -- that if you could clarify regarding the definition there, what is stipulating a customer.

And then secondly, are you still -- has your view on Asia changed or are you still committed to that area or is there a possibility to expand there?

And then thirdly, when it comes to CapEx, are you thinking along the lines to move faster with the 3G and go for mobile data or mobile access to Internet as a growth driver in Central America, for example? Thank you.

In terms of subscriber definition, yes, we changed that definition in Q3 and said that our clients or our customers are somebody who generates revenues within a period of 60 days or somebody who starts generating revenues for us when it comes to new customers. So I think it is the expected definition in the industry.

Asia continues to be important for us. All three markets, you know where we are, are important for us and you can see that the results in 2007 in Asia were better than the results in the year 2006. So that is very encouraging. We're not really looking at any acquisition in Asia. We of course continue to follow developments in Vietnam, but I think that's about the only thing we are currently looking at.

In terms of CapEx, you --

I was just thinking along the lines such as you're scaling up the CapEx or was your thinking of updating network in order to respond to using for data-com communications?

Yes, so that's what -- we will start launching those services of this year in Latin -- at least some Latin American markets. And for us this is both, I would say, a proactive move in terms of wanting to further accelerate or increase our value added services income or revenues. And at the same time, we want to makes sure that our A and B market segment customers, which are amongst our best customers, that they also get access to the newest technologies.

So those are the reasons why we want to launch those services in Latin America. We are focusing primarily on the data revenue using the HSDPA in our technology. So that's what we are focusing on. We will continue to use our 2G network for many, many years to come because they still have a long economic life ahead of them.

If I may just follow up there, when it comes to the situation of subscriber, did you say that the average revenue for 60 days or alternatively if they start to paying or --

No, no. It's depending on whether you are a customer or whether you become a customer. When you are a customer, you have to generate revenues within a period of 60 days. When you buy a SIM card -- and also the fact that you buy a SIM card, that makes you're a customer, you need to start making -- or you're creating revenues for the Company. That's when we start reporting you as a subscriber.

If I may ask, you're using the same definition in all your markets?

Yes.

Okay. Thank you very much.

Thank you.

(OPERATOR INSTRUCTIONS)

Okay.

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

Okay. I would like to thank all of you for being on the call today and have a great day. Goodbye.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.