Millicom International Cellular SA (TIGO) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Millicom Q1 2008 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 you over to the hosts of today's conference, Mr. Marc Beuls, President and CEO, and Mr. David Sach, CFO. Please go ahead.

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

Before we start running through the slides, I just wanted to cover a few general operating themes, as I'm sure you are already familiar with the main numbers that we have announced earlier today, which saw Millicom maintain sector-leading growth numbers in terms of subscribers, revenue and net profits. We were very pleased with the results which were above all our internal forecasts.

The themes that I wish to discuss are, firstly, the profile of Millicom's customers in Latin America, as penetration rates rise across these markets. Secondly, the geographical balance within Millicom's portfolio with the emergence of Africa and Asia and, thirdly, the Broadband opportunity in Latin America and, eventually, across all of our markets.

The profile of Millicom's customers inevitably changes as we drive penetration rates across our markets and, of course, it is most marked in the higher penetration countries in Latin America where, today, penetration is approaching 70%.

Our business model in Latin America is based on the assumption that, as penetration rates rise, the incremental subscriber will have less disposable income. We have two key target market segments for marketing purposes. Firstly, there is a high value and business segment, which is a relatively small group of highly profitable customers that are prime targets, as they have very high usage and are the innovators in the sector and will eventually be the initial users of Broadband services.

Secondly there is a mass market segment, where subscribers have less disposable income. [We keep this] focus on serving -- servicing the mass market segments where the greatest number of customers exist by providing value for money, although we have always said we love our post-paid and high revenue pre-paid customers as well.

We realized early on, operating in Latin America, that once we had secured the high value market segments that the only way to take market share and to build a nationwide brand was to have a value-based service, with appeal to the lower ARPU segments of the market. And this became our highly successful AAA strategy.

Our high growth of subscribers that you've seen so clearly in Q4 2007, and in Q1 2008, is driven by this strategy, and this is why we are continuing to take market share from our competitors. However, what the Q1 numbers also illustrate is that, as we drive affordability into our market, it will result in lower overall ARPUs. Furthermore, the higher volumes of subscribers will change the mix of customer base. This ARPU trend is very positive for us, as lower ARPUs help drive scale which continues to positively impact our EBITDA margin.

I will now move on to my second theme, which is the geographic profile of Millicom's businesses. The first quarter of 2008 was a defining moment as, today, Africa is for the first time, the fastest growing part of Millicom's business in terms of subscribers and revenues. And Asia is growing at a rate not far behind.

In terms of net subscriber additions, Africa and Asia today, account for 45% of the total, against only 39% in Q1 2007. What this means is that over the next few years Africa and Asia are going to become an increasingly important parts of the business. And with 160m people under license in Africa, and 42m people in Asia, it means that some 70% of our potential market is in these regions.

So, out of those countries in which we operate in Africa and Asia is considerably lower and so our value offering through the [theme of] AAA strategy is even more important, as subscribers have less disposable income.

My final theme is the Broadband opportunity in Latin America, which will become an opportunity in our other markets over time as well. In Latin America our strategy today is to build a volume business by selling Mobile Voice services to the mass market. But we are determined not to overlook another opportunity, which is to sell Broadband services to our higher value customers. This is important, as if we do not provide these high value customers with Broadband, our competitors will do so and we might lose these valuable customers.

We've talked a great deal about how value-added services and Broadband are growing across Latin America, and our Q1 results showed how fast. And Broadband is now 33% of our business in Paraguay. We expect this trend to continue in other Latin American markets.

Our Broadband strategy is to expand staff aggressively by replicating the successful marketing strategy devised in Paraguay into other markets. We're also expanding our WiMAX business by buying additional spectrum and again replicating the success of WiMAX in Paraguay, where the business is growing strongly.

We're also set to launch 3G across Latin America in Q3 and Q4 of this year. To make a success of our Broadband offering, we need to continue to invest in our IP backbone and to minimize the microwave component in the networks, as IP brings the right reliability and bandwidth that is crucial to quality.

We have already built a fully IP fiber optic ring for many of our markets and we'll continue to add to these networks. I believe that over the long-term Broadband will migrate from today's position as a niche product for higher value customers, to a must-have product for the mass market. At the point when our markets are fully penetrated, Broadband will become the way for us to increase revenues per subscriber and to continue to drive top-line growth.

Now, we will turn briefly to the summary slides. So I want to pick up on two items on slide number two, headed Key Data. Revenue growth was 42%, against 41% in Q4 in 2007. Margins are a healthy 42%, and when considering the much lower margins of South America due to Colombia, this is a very encouraging performance. And our view is that Group margins should gradually improve from here on.

CapEx, at $265m, was above the run rate needed to achieve our forecast of $1b plus in CapEx over 2008. And Q1 is normally the quietest quarter in CapEx, so we may be able to invest more than we had originally envisioned.

Subscriber growth, shown in slide three, continues to be extremely strong which demonstrates our success in building market share, as penetration rates -- penetration increases across our market. And increasing levels of subscriber growth three quarters in a row shows the overall trend.

Turning to slide four on revenue, it's interesting to look at the year-on-year revenue growth rates on a quarterly basis. As we have grown our business, the law of big numbers means that it becomes harder to increase the rate of growth and so, quarter on quarter, we've seen a slow, downward trend in growth rates.

Q1 saw a slightly stronger growth against this trend for several reasons, the main one being the fact that a high portion of the subscriber intake in Q4 came late in the quarter. Slide five; again, it's interesting to see that the same trends for EBITDA growth but I don't want to dwell on this, except to point out that we continued to grow profitably.

Turning to slide number six on Central America, it's interesting to see that our strong number-one position has enabled us to maintain EBITDA margin at 55%. Central America shows clearly the trend of a much higher subscriber growth, at 65%, enabling us to keep strong revenue growth at 36%.

Slide seven on South America; the numbers show the impact of lower margins in Colombia in line with expectations, and the impact this has had on the business following the reduction in Interconnect rates in Q4. So, what is very encouraging about Colombia is that we are continuing to see -- continuing to increase our market share of reloads, which will mean that linked to good elasticity we will be able to improve margins during 2008. In 2009 the expectation is that we will be back on course to our original plans.

Yesterday, the Regulator in Colombia released numbers which show that Millicom is growing three times faster than the market and in the first quarter, increased market share by 0.74% to 10.1%.

On slide eight, for Africa, there are two very encouraging points to make. Firstly, Africa is now the fastest growing region in Millicom and, secondly, the EBITDA margin of 31% shows a gradual improvement in margins quarter on quarter; a trend we expect to continue from here on.

Ghana goes from strength to strength, adding 371,000 subscribers during the quarter, with revenues up by 51% year on year. Since the quarter end, the government has introduced a 6% tax for all operators on the outgoing revenues, which the subscribers will pay. During the quarter, Tanzania added 262,000 subscribers and Senegal added 214,000, which shows the increasing strength and balance of our African operations.

Finally, slide nine shows that Asia today is now Millicom's second fastest growing region, which is a major improvement from a year ago. This shift to taking in more subscribers from Africa and Asia will change the balance of our subscriber intake and, as I have already mentioned, and as we win market share in Africa and Asia, a higher proportion of our new net subscriber additions come with a lower ARPU.

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

Thank you, Mark.

On slide 10 you can see our key financial ratios for the quarter. Cost of sales continues to fall as a percentage of revenues; now 25% versus 27% in the first quarter of last year, reflecting the economies of scale that we are achieving as our market shares rise.

In order to achieve these increases in market share, we have been aggressively investing in our brand and promoting new, lower tariff plans and new innovative products and services. This investment has resulted in higher sales and marketing costs, which have risen to 21% of revenues; up from 16% in Q1 2007.

The effects of these investments can be seen in that strong net subscriber additions for the quarter. As you know, it is vital for our business model that our costs are tightly controlled and this is illustrated by the lowest G&A percentage of revenues, now at 12% versus 13% in quarter one 2007.

On slide 11 you can see how the EBITDA margin compares with previous quarters. Growing sales and marketing spend in the past few quarters, as we invested in our brand, reduced our EBITDA margin. Now that we are seeing the benefits of scale from these investments and our sales and marketing has stabilized as a percentage of sales, we are seeing our EBITDA margin start to improve. Both cost of sales and G&A as a percentage of revenues are at the lowest level for the past five quarters.

We are on track to deliver our target margin in the mid-40s as we achieve critical mass and gain market share in our newer markets.

On slide 12 we have set out an overview of the P&L. The areas that we wish to bring to your attention are the increase in depreciation and amortization, reflecting the much higher level of CapEx, and the decrease in the tax rate. The net result of the above was a year-on-year increase in net profit before discontinued operations, from $89m in quarter one 2007, to $158m for quarter one 2008; an increase of 78%.

Please turn to slide 13. The slide shows the CapEx for Q1 was $265m, as against the $183m in Q1 2007, and $6m more than the average quarterly CapEx in 2007. As we have said before, CapEx is a good indicator as to how we view our future potential.

There continue to be wonderful opportunities to invest in our markets and we will continue to do so, as aggressively and as wisely as possible. We predict full-year CapEx for 2008 in excess of $1b, and that the CapEx to sales ratio will fall over time. As the ratio falls, the business will become increasingly cash generative.

Slide 14 shows that depreciation for quarter one, at $111m, has risen considerably, from an average of $89m a quarter in 2007 due to higher capital expenditures. With the quarterly CapEx rising substantially over the past several years, and forecast 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 stood at $1.7b at the end of the first quarter; down from $1.8b at the end of quarter four last year. This follows the fourth conversion of the $200m 4% Convertible Notes, due 2010, in January, 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 beneficial to our tax rate.

This will reduce interest expense by approximately $35m over the next two years. We will continue to lower the corporate debt by exercising our right to redeem the remaining 10% Notes, due in 2013, in December 2008, later this year.

Millicom is still in an under-levered position, with net debt to EBITDA of 0.4 to 1, and we recognize the benefits of a higher leverage ratio. Our target level is a ratio of 2 to 1[se1] in terms of net debt to EBITDA and we are looking at several opportunities to strengthen our position in our existing markets and to enter new markets.

On slide 16 you can see that interest expense has risen gradually in line with debt, and that the gross interest rate has stayed fairly constant at 10%. We have been replacing our corporate debt with local debt, which significantly reduces the after-tax cost of borrowings. The benefits of these actions are reflected in our overall Group effective tax rate, as seen on the next slide.

Our overall Group tax position is summarized on slide 17, where you can see that our effective tax rate for the operations fell to 21% due to a more balanced geographical mix of pre-tax profits, despite the operating losses in Colombia and The Congo, which has kept the effective tax rate up.

On this slide, you can also see that corporate is much less of a drag on the overall Group effective tax rate. And when we are able to repay the remaining corporate debt at the end of this year, corporate should no longer be a drag on our overall Group tax rate. As a result of these initiatives, we now expect that the overall Group tax rate will be below 30% for this year.

Please turn to slide 18, which shows that Millicom has been able to finance its increased level investment from internal cash generation and that free cash flows, cash from operating activities less total investments, was positive. The closing balance of $1.2b in cash means that we have net debt of $523m and are well positioned to continue with our accelerated investment program for our existing businesses, and to explore the other options that we have already discussed.

Slide 19 shows the cash flow impact from our CapEx investments of $265m for the quarter.

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

Thank you, David.

In conclusion, Q1 has been an excellent quarter for us, as we have delivered higher revenue growth than in Q4. The main driver of this strong growth has been the emergence of Africa as our fastest-growing region for the first time in Q1, together with the strong growth in Asia, which became the second fastest growing region, almost keeping pace with Africa.

Our operations in Latin America continue to outperform the industry locally, achieving market-leading growth as we continue to capture market share.

One of the most exciting aspects of the Latin American result was the dramatic increase in VAS and Broadband across all of our operations, which gives us confidence ahead of the launch of 3G in the second half of 2008. As David has just mentioned, we continue to invest heavily the $265m of CapEx in the first quarter, and expectations of $1b plus for the full year, as we see increasing opportunities in our markets.

The outlook for Millicom is positive and we believe that in Africa and Asia we are only just starting to see the benefit of the J curve which is driving our Latin American operations today.

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

Thank you very much. (OPERATOR INSTRUCTIONS). And our first question comes from Rick Prentiss of Raymond James and Associates.

-- questions for you. First, if you could touch on maybe the current status on some of the new license opportunities in Panama, just what the update is? And we're hearing some rumblings out of Costa Rica as well.

And then, a second question. Here, in the U.S., we get a lot of reports about commodity prices but also the cost of food. Have you seen any issues as far as the cost of food in your different markets?

In terms of the new licenses, yes, we are short-listed in Panama and I think the date by which we need to submit our final offer is May, in the month of May of this year, so it's next month.

Secondly, for Costa Rica, yes, I think (inaudible) I'm told by the constitutional court that they had a de facto monopoly but not a legal monopoly. So that means that other operators, I guess, are going to be allowed in, either later this year or next year. So we will be following that situation fairly closely.

In terms of commodity and food prices, yes, commodity prices, as you know, have gone up quite a lot and a lot of our countries are exporters of commodities, and agricultural products, also minerals, so that's positive.

In terms of food prices, yes, I'm sure that all of you have seen the increases in the food prices worldwide. So far as you can see from the results again in Q1, it has not been impacting our business. It could be that a lot of the food that is consumed in our countries is produced locally and never really makes it to the world market and, as a result of that, is subject to a different price mechanism.

And I think, also, Mobile telephony is, as we all know, the most aspirational product and service to have today. So, when people have to make a choice, they probably would like to buy medicine maybe, not buy other fast-moving consumer goods, although, as we all know, food will go first, of course.

Right, okay. Thanks, guys.

You're welcome.

Our next question comes from Sven Skold of Swedbank. Please go ahead, Sven.

We have lost Sven Skold for a moment. I'll ask Sven to press 01 again in a moment. Next, we go to Anders Wennberg of RAM. Please go ahead, Anders.

Hello, this is Anders Wennberg at RAM. Congratulations, once again, to a very strong customer intake. Can you help us understand a little bit regarding the customer intake versus ARPU development? You've had a couple of quarters in a row with better intake than expected but worse ARPU decline than expected, and revenue has been sitting around 40% revenue growth -- 40%, 42%.

Should we expect that revenue growth to be sustainable or should that come down a little bit?

And the second question regarding customer intake, the biggest surprises were Honduras and Ghana. We know there are coming in new competition in those two countries later this year from Digitel in Spain. Is there a little bit of an extra push from your side in those two countries ahead of the new competition, or how should we view those two positive surprises?

Okay. Let me first answer the question on the customer intake versus ARPU. As you know, Anders -- and thank you for the compliment. As you know, Anders, we have always been focusing on the pre-paid market segments, and I've been saying for years that at the end of the day I want every inhabitant of one country, have a mobile phone. Because the more users of mobile phones, the more phone calls will be made at the end of the day.

Given that in Latin America, going into market segments, there is a disposable income, given that we're growing faster in Africa and Asia than we were in the past, you see a different mix of our subscribers and we're getting subscribers with lower disposable income, which we're very happy with them because they allow me to sell more, or to a larger group of people, to new market segments. And if they come with lower ARPUs than other subscribers came in the past, you know, that doesn't bother to me.

It doesn't bother me because with the economies of scale we create with the increased number of calls, that generates increased revenue growth and, as well, great economies of scale which would lead, going forward, to even better margins than we have today. And leading to the mid-40 EBITDA margin which, you know, is one of our targets.

In terms of the revenue growth, as we said, you know you have the rule of the bigger numbers; the bigger the base, the slower the growth will be. And I think we're going to be subject to that rule too. That's a rule like gravity. You can't escape from those things. And so you will see revenue growth trending down, as it trended down last year. So I don't think we should expect any surprises there.

In terms of Honduras and Ghana, I think the reason why we're doing so well has nothing to do that we're doing extra things ahead of newcomers into the markets. I think we have just great teams on the ground there, as we have in our other markets. They're just doing a fantastic job. First, building out networks, growing the quality and the coverage of the networks, growing the distribution, make sure that we have affordable services. And that makes us -- as I said on the call, makes us grow faster than other telephone companies in the country and gives us growth that is higher than the sector gives us.

So these are places where we're doing a fantastic job and, as far as Ghana is concerned, you could say that we are catching up with some things we didn't do in the past because of lack of funds and whatever else. So I think we're now getting back to the position where we probably should have been all along.

Is (inaudible) still having trouble with the network capacity in Ghana or have they solved that issue?

I think you should ask them. I have not heard recently any news on that, but I suggest you ask them the question.

Okay. Do you know anything about when Spain will launch in Ghana and Digitel in Honduras, or should I ask them also?

Well, what I've read again is that Digitel is going to launch some time in the second part of the year in Honduras. As far as Zane is concerned, September, so, third, fourth quarter I guess of this year. But we'll see when it happens. We are well prepared to face any operator in any of the 16 markets where we are today.

Okay. Thank you.

Thanks, Anders.

Our next question comes from Sven Skold of Swedbank in Stockholm. Please go ahead, Sven.

Okay, thanks. I was just wondering about the churn trends in Latin America. And also do you expect acquisition costs to go down as ARPU goes down, or is that fixed at the same level? Thanks.

In terms of the churn, we don't see a change in our churn numbers. The churn is more or less the same for pre-paid customers, round about 4% on a monthly basis, so the average life of a customer is still around two years, the life, economic life on our network.

And also, our subscriber acquisition cost is not trending up. I think you could say that it's still below $25. It may be slightly trending down, but I think that is very, very, very small. So I think our subscriber acquisition cost is stable. What we see is that with the higher subscriber intake, the bigger businesses we have now, we get better economies of scale, which should allow us to still maintain our margins, or even increase our margins going forward.

Okay, thanks. Can you also discuss ARPU for a subscriber in any Latin American country? I mean an old subscriber, not the new ones which are diluting ARPU. Is the trend positive in general, or stable, or --?

Well, we don't see an ARPU erosion for existing customers because, as I've always said, an existing customer, yes, of course, by us improving the affordability, there will be pressure on the ARPU. But, by us, at the same time pushing value-added services very hard, that will generate incremental revenue for existing subscribers. And that means that they will spend more or less the same amount, maybe slightly more, monthly on their telephone. Of course, it's the new subscribers that come in with lower ARPUs, as I just said.

Okay, thanks.

Thanks, Sven.

Our next question comes from Lena Osterberg of Enskilda. Please go ahead, Lena.

Yes, hello. I have a few questions here. First of all, on the tax rate, as you went through in the presentation material, what you said before is that usually you get dividends from the local companies in Q1 and that's usually made a seasonality, so that you have a high tax rate in Q1, and now you had a very low one, which was good for you.

So I was wondering is there any delays in the dividends, or what was the reason for the decline, or was the dividend trend still normal, so we should expect even lower tax rates going forward or what should we expect?

And then one question on CapEx. You've mentioned a lot about your investment plans and I was wondering if you could give us some more detail on the split between CapEx for expansion and CapEx going into Mobile Data, and the backbone investments that you mentioned, and microwave links to facilitate for the Mobile Data push?

And, thirdly, I was wondering, on the ARPU decline which you highlighted, you will see lower disposable income customers come in and you see a geographical mix towards Africa and Asia, do you expect that trend to be in line with what you saw in Q1, or do you expect a further erosion of that? How should we interpret the comments?

Okay. Let me first talk about the ARPU and then David can answer the tax and the CapEx question.

Yes, the change in mix which we highlighted today, in terms of subscriber acquisition, will continue because, as we said a few minutes ago, 70% of our potential subscribers are in Africa and Asia. That's where Mobile penetrations are substantially lower than in Latin America, one could say, less than half what they are in Latin America.

That means that we're going to get more and more of those African/Asian subscribers on our networks and we're very, very pleased about that. Because that will allow us to create the same J curve as we have been able to create in Latin America. So that mix will continue and that's why we discussed the different themes up front, about the different geographical mix and the new profile, or the profile of the new customers that we're adding onto our networks in Latin America.

So, David, could you talk about --

Can I just ask you, would you expect the decline -- the year-on-year decline to accelerate from here, or do you expect it to stay on the levels that you've seen in this quarter?

But you know my team, Lena, ARPUs in the emerging markets only go south. So -- and that's what we will have to continue doing and work on affordability, go into new market segments and that means that we get to new groups of free people, increased Mobile penetration. And if that comes with the lower ARPUs, so be it. I think that is great news for Millicom. David?

Hello, Lena. Yes, regarding the tax rate, it's more driven this quarter in just the geographical mix of the profit. So less losses in some of the African countries; you've seen how they're improving. And that's had much more of an impact on the tax rate than withholding taxes.

Yes, we are trying to spread the -- withhold the payments of those dividends more rateably up throughout the year as we develop more consistency in those -- the ones who pay out the dividends which were in Central America. So, yes, there is a little bit of an impact from the withholding taxes that were becoming less seasonal for us, but it really is the seasonable mix of the profits. And we'll have to wait for Q2 and Q3 before we really have a better idea of the full year rate.

But you haven't changed your tax rate for the full year, the guidance, despite having a very low tax rate in the quarter. That's why I'm wondering if we should expect continued low rates, or if you expect to trend up significantly?

Yes, this time last year if I was predicting below 30, rather than being on a limb, you'd probably think that I was on the smallest little twig. So there is an element of just cautiously watching that mix.

If you go to last year, or the Annual Report was just posted up on the website. So if you go there, note 13, you can see the weighted average effective statutory reconciliation and our blended rate -- weighted average rate across all the countries is -- last year, it was 23%.

So, obviously, there's a cost of the withholding tax and last year that drove the 23% up to 27%, and then we have two big impacts which are the loss-making companies which bring down the effective tax rate -- sorry, bring up the effective tax rate and then, obviously, those companies that are based on revenues, which bring it down.

And so you can see there's quite a mix there. So I would think that 23% plus 4% withholding and then, depending upon the other two factors and how they blend out, that will be where the full year rate ends up. So, right now, I'm going to stick with below 30%, if you don't mind.

Okay.

Thanks.

CapEx? You want to talk about the CapEx then?

Sorry, what was the -- we haven't given the split between CapEx expansion and backbone. But, yes, as we start getting into things like 3G in Latin America, there obviously will be -- more of the CapEx will go on the backbone and putting fiber backbones in place, and maybe even WiMAX backbone in place, as we start to migrate towards a -- trying to get towards a full IT network.

So, yes, more of the spend will be on the backbone and then, obviously, we're building out aggressively in Africa and Asia so there's quite a bit of coverage CapEx there. And then, obviously, in Latin America with the buildouts in recent years there's more capacity there. So there continues to be quite a mix in CapEx but, yet, slightly more on the backbone.

Okay. But given that you are guiding up -- I guess you -- what you were saying in the presentation is that we should at least a slightly higher CapEx than what we saw last year. Is it fair to assume that you will spend as much on expansion as you did last year, and that the 3G Data investments will come on top so we can expect the same subscriber growth rates, at least?

Well, in terms of CapEx I think a big spend for Millicom this year will continue to be in expanding our networks, and this will be focusing a lot on Africa. I think we're probably spending half of our CapEx, or will be spending half, or a little bit under than half -- less than half of our CapEx in Africa this year, and that's where the networks are the smallest today.

The same with Africa. That's where we will be spending a lot of money but, at the same time, we will be what I would call upgrade our networks in Latin America, start upgrading our networks to the next technology, and improve the quality of networks by doing these fiber optic rings and stuff like that. So -- that is still the bulk of our CapEx is expanding in countries in Africa and Asia.

Okay. Thank you.

Thanks.

You're welcome.

Our next question comes from Drake Johnston. Please go ahead.

Hello, guys. Nice quarter!

Thank you, Drake.

A question I have for you, I understand the overall trends across markets with a moderation and revenue growth and subscriber growth but, that being said, I know you have also indicated that usually Q1 is your weakest quarter and subscriber growth generally improves over the course of the year. So I guess one question is do you expect some improvements Q2 and a gradual improvement for the course of the year and out to Q4 is always the strongest? That's one question.

And the following question is it seems that your -- in your high (inaudible) market, Central and Latin America, that that sort of steady downward trending growth of subscribers and revenue should be in place, but it does seem in Africa, perhaps in Asia, you're actually seeing some acceleration in subscriber growth, so I was wondering if you can just comment this point.

Okay. I'm not sure whether I got your second question, Drake. The first question, I thought that Q1 was a great quarter so -- because we accelerated the growth on a comparable basis from Q4 to Q1. And I think that hasn't happened too often in Millicom's history. So I think that came from, first, continued very strong performance in the Latin American countries and then, Asia and Africa, as I said on the call, things are just starting.

As far as your second question is concerned, I'm not sure whether I got your second question. Did you got the question?

More Asia subs.

Could you repeat that question again, Drake?

Yes. The question is it seems that you will have a moderation in the growth in your subscribers and revenue in Central and Latin America, South America. But the question I have is it looked like your growth ticked up in Africa and Asia, so I was wondering if you had some comments on those regions in terms of both revenue and subscriber growth.

The -- in absolute terms, Africa -- sorry, Latin America continues to perform extremely, extremely well. So, of course, in percentage terms, given the rather bigger numbers, that gives you a lower percentage growth. But, still, in absolute terms Central America and South America is very strong and we continue to outperform our competitors. And I gave you the numbers on Columbia where we grow three times faster than the market.

In Asia and Africa, the result -- the fact that we now have -- that they have become the two fastest growing regions within Millicom is the result of increased CapEx which we start doing in 2006 there, and you start seeing the first results in, I would say, the second part of 2007. And this continues in 2008, and this will continue in 2009.

And the later years, for the reason as I just said, as you know, a big chunk of our CapEx is going into those parts of the world. And that will continue to grow or to drive growth, and you're going to see a rebalancing as to where Millicom's growth is coming from. Historically, it has been more from Latin America. I think, going forward, it's going to be more out of Asia and Africa.

Okay. Thank you.

Thanks, Drake.

Our next question comes from Soomit Datta of New Street Research. Please go ahead, Soomit.

Hello, there. Can I just ask, on Ghana, with the tax being introduced, can you go into any more detail on the timing and what you think the impact might be of that tax. I'm talking about the 6% revenue tax. And do you think there's a danger that other African countries or, indeed, other emerging market governments, look at the profits some of the mobile operators are making and think this is a fairly easy way to plug a budgetary deficit? That's the first question.

The second question is just on CapEx, which you've talked about a little bit. Is it -- the year-on-year growth in the CapEx, and that's looking at Q1 '08 versus Q1 '07, is not quite 50%, but getting on for that. Is it ridiculous to think that Group CapEx could be approaching $1.5b in 2008? Is that just slightly off the chart?

And then -- sorry to go on, but the final question is just on the currencies. Obviously, the dollar weakness has been supporting your dollar-reported revenues. Have you tried to, or could you try and quantify at all how much boost you're getting from the currency movements at the moment? Thanks very much.

Okay. So first, on Ghana, let me say that the government took two decisions. The first one is that they abolished an import duty, or import tax on mobile phones, probably because there was no effective way to collect that tax in the country.

Second, they introduced a tax of 6% on outgoing revenues on all operators, which we will charge on to the customer. The tax will be introduced from, I think, May 1 onwards, and we haven't seen an impact yet. Ghana, as you can see, is one of our fastest growing markets at this point in time, so I hope that such a small issue will not really change the growth outlook for Ghana. But we'll be in a better position in July when we report the second quarter results to give you some feedback on that one.

Is this going to happen in other places? Things can happen, but we have not seen any other -- we have not seen similar initiatives in any of our other markets. It also depends a little bit as to how governments want to tax their companies or customers in any given country, so I don't think this is going to spread like the flu.

In terms of CapEx, yes, you put a big number on the table there, $1.5b. The answer to that, I don't know. I don't think we're going to see such a big increase from what I know today, but we typically wait until we get to the middle of the year, then we have a much better view as to what CapEx has gone in in the first six months and what CapEx has been ordered to go in in the following six months.

Again, I think in July we will be able to give you a better number, or a more precise number there, but we've always been talking about a $1b plus number. So we always said that CapEx in 2008 was going to be higher than CapEx next year -- sorry, last year.

Currency impact, it's very difficult. Do you want to say something about that, David?

Yes. The currency impact, obviously, from a translation perspective, is on every line of the P&L, so it's probably less than you think. Because, obviously, in Central America a lot of those countries, a lot of those currencies are linked to the dollar so -- and that's a big part of our revenues and process today. So, obviously, that's a little bit of a hedge.

Obviously, we also try to put in -- and we are trying to put in more local debt and get rid of the corporate debt, as you know. Wherever possible, we look to put that debt in place in local currency, and that provides a natural hedge against our cash flows in those countries, so we have that hedging mechanism available to ourselves as well. So, whilst this currency impacting almost every line, it really isn't impacting the trends today -- the overall trends, and probably less than you might otherwise think because of those natural hedges, as I just discussed.

Okay, thanks. That's very helpful. Thank you.

You're welcome.

Thank you.

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

Okay. Thanks a lot. First of all, can you just tell us how many TDMA subs are still left on your platform?

TDMA, the only country where we still have TDMAs is Bolivia. I would say, 200,000 approximately, so we're planning on shutting that network down later this year as we want to launch 3G also in Bolivia in part of this country, but that's going to be a smooth process. We've learned from the processes in the other Latin American countries last year, so you're not going to notice that in the numbers.

Okay. Can you just talk about margins in Central America? You saw a nice boost sequentially. Can you just talk about what happened there and just what we can expect going forward?

I think the margins in Central America are just back to where they were last year in Q1. And we said that Q4 is always an exceptional quarter where a lot of money is being spent on year-end campaigns, Christmas campaigns, and they eat into our sales and marketing costs, and that's why the margins, typically, are lower in the fourth quarter.

And as a result of a lot of the subscribers coming in fairly late in the fourth quarter in Central America, these guys start generating great numbers and great revenues for us in Q1, and that gives that boost to the EBITDA margin. But it's still at the same level as it was last year which is quite an achievement, given the affordability initiatives, we've taken over 2007, the fact that we're getting subscribers in from market segments with lower purchasing power. I think this EBITDA margin is just fantastic.

Okay. And, finally, when you look at the competitive landscape and you start talking more about the Broadband strategy, are you early to introduce Broadband or are some of your competitors? And maybe you can talk about which markets have they entered into that market?

I think Broadband is not a matter of being first. If you are launching it within, let's say, the same year more or less, that's what is happening. I think our competitors are -- in some markets they have launched and in some markets they are planning launching. And where they have launched, we don't see any impact at this point in time because our customers know that we will be launching it later this year.

What you need to do when you launch Broadband is not just talk about technologies, and I think that's what I see a lot of operators are still doing. So it looks like people have not learned from the European experience. When we launched those new services -- this new technology, we will be talking about the services we provide to our customers, and the benefits they can get from using these new networks.

So it will be, again, a customer-focused approach, developing new services, continuously pushing VAS which grows very rapidly, you know, over 33% of recurring revenues in Paraguay and now 15% of recurring revenues in Central America, which is a substantial increase from where it was last year. So 3G and then Broadband will help us in that effort.

Okay, thank you.

Thanks.

Our next question comes from Bengt Molleryd of Handelsbanken. Please go ahead.

Thank you very much. First, congratulations; very strong and impressive customer intake in the quarter. Just regarding Asia, I was wondering, what have you done differently there this quarter, with the strong subscriber growth there?

And also in connection with that, the subscriber intake, has that been spread out evenly over the quarter or is more back-end loaded?

And then, thirdly, I just wondered, you're talking about the interest of spending more money to gear up. Are you looking at acquisitions, and what would that be of -- what would be of interest for you?

Okay. In Asia, we've just been doing the same thing as we have been doing in Africa. That means substantially increased the reach -- the coverage of our network, the quality of our network, continuously improve the affordability concept, like in Sri Lanka we launched a second [billing] at the end of last year, so -- and that is leading to similar results we see in Africa where, again, we've being the same thing.

And I've always been saying that Asia -- the Asian markets where we are, and the African markets where we are, are very similar in terms of Mobile penetration, GDP per capita, so we're not surprised to see the same positive impact in terms of subscriber intake in Asia. And it's not only the subscribers, it's also revenues, which have also improved profitability from their previous quarter.

Subscriber intake across all regions this quarter has been spread very evenly, so it's only in the fourth quarter that you had this peak in the month of December, but the other 12 -- 11 months of the year, subscriber intake is fairly spread across the month and across the quarter.

In terms of acquisitions, Bengt, I think we spoke earlier on the call about some new opportunities we're looking at in Central America. So we always keep an opportunistic view of the world of mobile telecommunications, and we will go for those opportunities that give us the opportunity to create great shareholder value, but that's all that I can say at this point in time.

If I may follow up then, is that, in Central America, beyond the recent new areas, like in Panama or Costa Rica, or would you be interested by a smaller operator, or what are your --?

Well, what I've said is, historically, that we're always interested to do another Columbian look-alike transaction if we look for -- we find a turnaround situation, a third or fourth operator struggling to compete in the market, we would more than happy to have a look at that and eventually to go in there. But I don't think there are that many of those opportunities around at this point in time, but we always keep an eye out on those things.

Just when it comes to Broadband addition, have you seen any reason to alter your view on sticking to strictly Mobile or just with an increased interest of Broadband for neither a backbone, or considering to also looking at fixed line services?

As I've just said, when we look at Broadband we don't look at it from a technology point of view. We look at what is the customer looking for. Some customers are looking for very low Broadband usage, some are looking for higher and some, like corporates and the higher end of the market, are looking for what I would call big pipes to get access to the Web.

And, in principle, we will be providing solutions for those customers, depending on what their needs are. And we will choose the technology which best takes care of the needs of our customers. And there are different -- we're doing -- we'll be doing 3G, we will do WiMAX I think for some corporates. In Latin America, we have fiber to their offices today already, so that will allow us to -- or we can do that off our existing backbone. So we provide the access in relation to the needs of our customers.

Yes. Just if I conclude then, have you made any -- seen any reason to change your view on the market? You said that the subscriber take was surprisingly strong. Are you surprised at the take-off rate there in Asia, as well as some of the African countries there during the quarter?

No. No longer. I think after the two good quarters we had last year in Africa, this quarter is what we expected there from Africa. And also in Asia, as I just said, we just have been doing the same thing as we have been doing in Africa, so we expected similar results. And, again, we have great teams on the ground there who consistently implement Millicom's AAA strategy, and that leads to these great results.

Thank you very much.

Thank you.

Our next question comes from [Peter Brennan] of [Window Investment]. Please go ahead, Peter. Peter Brennan, you may go ahead and ask your question.

Hello. Good morning, gentlemen. My question is, you've already briefly touched on the Panama Mobile license. How aggressive will you be pursuing that license, as we understood there are currently three competitors?

Yes. We -- for any new opportunities, we will look at our business plan and we will make a judgment based on what returns we can make in that market. And if we think that we can make great returns, then we'll push very hard. If we think that the returns are not at a level where we want them to be, then we might be less aggressive, but we'll let you know in the month of May where we stand in Panama.

Okay. Thank you very much.

Thank you.

Our next question comes from [Malana Bonnier] of [Vubul Capital Fovelle]. Please go ahead, [Malana].

Hello. I wanted to ask a question regarding the African market. You [write] that the EBITDA margins are expected to rise gradually over the medium term, to the Millicom average target in the mid 40s. What ARPUs and SACs are based on these expectations, and when do you believe this to take place?

Yes. We continue -- we want to continue increasing margins in Africa by, not only increasing the volumes by a very, very strong subscriber intake, but also by lowering the costs. SAC is one part of the cost, but Africa has historically always been the region with relatively lower subscriber acquisition costs.

I think Latin America is the region with the much higher subscriber acquisition costs, so the subscriber acquisition costs in Africa are substantially lower than the $25 I mentioned earlier today, which means that we still get fantastic paybacks in Africa with the lower ARPUs we generate there per subscriber.

We want to continue pushing that approach, but we also want to create cost savings on the network side because some countries like, let's say, Congo, that network is still relatively small so we have pretty high CapEx per subscriber at this point in time. And by increasing the volume and increasing the size of the business, we will be able to bring the cost down going forward. And that will be one of the ways to increase that EBITDA margin gradually in Africa.

But there are other countries where we see opportunities to increase our EBITDA margin, so we expect to be at the mid-40 levels as far as the EBITDA margin is concerned in Africa.

Could you say how low the SACs are expected to be?

Sorry? How low the SACs?

Yes.

I don't have the number for Africa, but I know it's substantially lower than what it is, the $25.

Okay. And their expected ARPU, given that it's been falling during the last three quarters?

Yes, as I said before, if you want to do business in emerging markets you have to live with lower ARPUs. If you can't live with that, you shouldn't go in.

Yes, I realize that. I was just wondering if you had an estimate of the levels.

For the levels, we know you can't set the level of ARPU. ARPU is an output, it's not an input, so we don't set the ARPU levels; it's the customer who does. The only thing we can do is that we provide affordable services to customers -- potential customers that are not using the service today. By having affordable services, they become a customer and they generate ARPU.

We know that in places like Sri Lanka, to go into Asia, we are making a lot of money in a business that has ARPUs below $5. So we are a Company that has learned over the years to live with lower ARPUs and make money at the same time, so low ARPUs are not an issue for us. I love every customer that comes in with a $5 ARPU. I love them so -- because I know that they will allow us to build an even more successful business.

Okay.

Thank you.

Our next question comes from Mark Horrocks of Credit Suisse. Please go ahead, Mark.

Our question's actually been covered. Thank you.

In that case, we next go to Adrian Dawes of J.M. Hartwell. Please go ahead, Adrian.

Congratulations; great quarter. It's actually Bill Miller but, anyway, congratulations.

Thank you.

Marc, two questions basically. One, how sustainable do you think this kind of growth is? You did a lot of things that were really terrific in this first quarter. Can you visualize being able to improve on the subscriber growth etc. etc.? I'm not talking about margins; you've already gone into that. But just the level of growth that you have, do you think that's sustainable? Is there something that's going on that is repeatable in the second, third and fourth quarters?

And the second question is if you were trying to -- as you look out over your markets, and I'm sure it varies by region, how would you suggest that we in the investment community correlate your potential for growth with the various regions that you have, whether they're macro factors or simply a series of micro factors, or if you can just give us a little heads up on all that, appreciate it.

Thank you, Bill. I think the current subscriber intake is sustainable. We have now seen three months of, I think, some subscriber intake that has led to 2.8m subscribers for the quarter, and we still have a long way to go in some of our markets. So we might be able, as we've always done in the history of Millicom, be able to outperform that number in Q4, as we did last year also. But let's wait until we get there, but I think that this number is a sustainable number.

In terms of potential for growth from a macro point of view, a number of our countries, especially in Africa and Asia, are countries that are just opening up. So their economies are just being built and are driven, to a certain extent, by very strong commodity prices. A number of them have huge amounts of minerals. And you just name them; I'm sure that you will find them in one of our countries, or one of the countries we operate.

And that creates wealth in the country that has never ever been there before. And that creates a very good base for us to build a successful telephone Company. So we create wealth by providing communication services, but I'm sure that in much improved economies, in most of the markets where we are, also creates growth for us as a mobile telephone Company.

In terms of the micro environments I think, as you know, we have a better way -- we've found a better way to operate in emerging markets. I think we are better operators with our AAA business model, which is really earmarked to the market segments where the growth is happening today. In Latin America, in Africa and Asia, the AAA model focusing a lot on affordability is really what makes things work in all of those markets.

And, again, given that 70% of our potential is still in Africa and Asia, again, we still have a long way to go there. I have the feeling, as I just said on the call, that things are just starting in Africa and Asia in the same way as things started going a lot faster in Latin America in the year 2004/2005. So that's the feeling I have, and you can see that from the subscriber numbers now over the last couple of quarters, combined with the very strong revenue numbers.

Well, thank you very much. So, basically, if we're looking at a macro basis, we should look at the GDP in the various countries you operate in, and maybe even look at the GDP per capita to see how that's progressing, to give a better gauge on a macro basis. And on the micro basis, the AAA model trumps the macro every time. Is that correct?

Yes. Yes.

Sounds good to me. Thank you.

Okay. Thanks, Bill.

Thanks, Bill.

Are there any further questions? (OPERATOR INSTRUCTIONS). I have a question now from Alex Vassiouk from Morgan Stanley. Please go ahead, Alex.

Yes. Hello. You're saying you ran out of capacity in Congo. I was just wondering how soon do you expect you could resolve these capacity issues and, especially given that the network rollout in DRC can be particularly challenging. Is that a question of several months, and do you think you might not be able to add new subscribers in Q2? Thanks.

No. The subscribers -- the capacity issue was a January/February issue. I think towards end of March I think things start coming back. The picture of Congo is a very positive one in a sense that during that period of time we have seen good revenue growth, growth of the ARPUs of our customers in Congo.

And what does that mean is that -- it means that, yes, you probably churn out the discount buyers, as I call them, but what you keep are the people who are looking for a good service, a good network, with good coverage, and also with affordable services. And I think that's where we have made great progress in Congo over the last two quarters.

We are adding capacity as we're speaking and we will continue to do so but, as you know, that is difficult, that's challenging at times and we also will be opening up a couple more cities in the course of this quarter which will allow us to continue growing in that country.

Thanks. So, basically, for Q2 you think you're not going to be restricted in terms of your subscriber growth from the capacity point of view?

We don't expect to be constrained in our subscribers.

Okay, thanks. And also, my second question, would it be possible to give the revenue figure for Columbia? You used to disclose that in the past, just for consistency.

No. The reason why we disclosed Columbia at the time was to allow you to compare apples with apples. Now this quarter, Q1 in '07, we have Columbia in there, so now Columbia goes in line with all the others. That means that we only release revenue and other numbers on a regional basis.

All right. Okay. Thank you.

Thanks.

Our next question comes from Marcus Baumer of UBS. Please go ahead, Marcus.

I've got a quick question, please, on the deferred tax assets. I realize that these increased by about $80m in the quarter, and I wonder what the background to that is, and if at all it's impacted the tax rate, please.

Yes. The increase in the deferred tax assets is Columbia. So, as you know, in Q4 last year we booked a significant tax asset because now that we've had that business for almost a year and a half now, we do believe that it is going to be a successful business and generate profits. And, therefore, under the accounting rules, you can start booking deferred tax assets when you're reasonably sure that there'll be profits from that business. So that's what's driving that deferred tax asset.

So you did book a deferred tax asset in the first quarter as well?

Yes. And then what happens is the losses in Columbia don't have any expiration date, so we're sure that the current losses will eventually -- we'll be able to recognize the tax benefit on that. So, as in Columbia, as we are generating losses, we are booking deferred tax assets against those losses, which is partly the reason why there was such a significant impact on the overall tax rate as well.

So the $80m is about accurate as what you booked as deferred assets and deferred tax asset. Is that correct? So the normal tax rate would have been 30% if you wouldn't have done that. Is that correct?

No. In Q4, there was a one-off catch-up of the deferred tax assets, and we spoke about that on the year-end call. In this quarter, all we have done is booked a tax asset relating to the current quarter losses, so that's why our overall tax rate, at 22%, is much closer to the weighted average statutory rate that I discussed that's in last year's Annual Report of 23%.

So we should be much closer now to that 23% because the Columbian losses aren't negatively impacting our overall tax rate, because we're booking deferred tax assets against them. Hopefully, that's very clear.

Excellent. Thanks a lot.

You're welcome.

Our next question comes from Anders Wennberg of RAM. Please go ahead, Anders.

Just a follow-up question. You talk about the cash upstreaming of 90m in the quarter. Can you mention a little bit how much cash downstreaming there are to the areas for negative cash flow, for example, Columbia and The Congo?

Well, we don't have a number for you there, but Columbia doesn't get any cash. I think, there, we can raise the financing in the Company. Congo, clearly, you know there's cash coming in there but, at the same time, a lot of the investments are financed through with the Chinese development bank.

Yes. The downstreaming is mainly Africa, as you would imagine. So it's the places like Sierra Leona, Senegal, and the downstreaming is significantly less than the 90m. So in the quarter it's 10m to 15m.

Okay. And then the debt in Columbia, that is guaranteed by you and the minority owner corporation or mainly by you, or how does that work?

The existing debt in Columbia, when we took over that business, was guaranteed by the partners, and that deal is that we will -- any new debt that goes in, that will be guaranteed by us until we reach parity. So, until there's equality, which is the only fair thing to do, we will guarantee any new debt going in there.

Okay, thanks.

You're welcome.

Our next question comes from Adrian Dawes of J.M. Hartwell. Please go ahead, Adrian.

Just a quick question. There's been some turmoil in the debt markets around the world. Do you still think there is a capacity in the countries you operate in, obviously not Africa, to raise money in some of the Latin America and Central America countries so that you can put the debt at that level? Or are those markets constrained the way some of the other markets around the world are? That's one.

Two, the Annual General Meeting is in the middle of May and I'm wondering if the plan is still to pay a dividend out and, if so, what the timing of that is?

[Further debt], David?

Sure. When we look at our markets, we raise debts in local markets with relationship banks and, obviously, they still need to borrow depending upon the overall level. Because the way they set their debt constraints is by market and by industry, so they'll obviously only lend so much in a particular country, to a particular industry and we have found those markets are not tapped out. And I think people's perception of companies in emerging markets has changed dramatically and that, obviously, helps us.

And the other thing too that helps us is there's a whole bunch of sovereign institutions set up specifically to provide liquidity in the emerging market, like [Proparko] and so on. So that's a source of liquidity that just doesn't exist for developed country companies. So that obviously helps us as well, so I'm fairly confident we'll be able to borrow what we need within our local markets. Those sources have definitely not dried up.

Yes. The AGM is at the end of May. I think it's May 20 -- 27, sorry. And, yes, the Board has proposed a dividend of $2.4 a share, and that will be put up for voting. Payment will be, I think, early June. Yes.

Thanks, again. Great quarter.

Thank you, Bill.

Thank you.

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

No. I would like to thank everybody for being on the call today, and have a great day. Goodbye.

Goodbye.

This concludes our call. Thank you for attending.

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