Millicom International Cellular SA (TIGO) 2008 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Millicom Q3 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 host of today's conference, Mr. Marc Beuls, President and CEO, and Francois-Xavier Roger, CFO. Please go ahead.

Thank you, operator. And welcome to everyone who has joined us today. While I allow you time to find the slides on our website it's perhaps helpful to give a brief overview.

As you all know, there has been a dramatic change in the global economic climate in the last few months, and that has also impacted our business in the past quarter, and which we expect will continue to do so in the quarters to come. We have made a number of adjustments in our planning so that Millicom has the flexibility to continue to operate profitably in the current environment.

We are closely monitoring our subscriber additions in all markets, as well as measuring the usage and ARPUs of existing customers, so that we can react quickly to any changes in customers' behavior.

We expect CapEx in 2008 to be below the $1.5 billion that we previously suggested, and CapEx for 2009 will be substantially lower again, which will lead to an improvement in the CapEx-to-sales ratio, and better cash flow generation. We had always expected to be generating free cash flow in 2009, but lower CapEx will speed our generation of cash reserves within the business.

Millicom's balance sheet is under-levered, and in the current market, we are happy to maintain this position. We will not be calling the $460 million 10% 2013 notes in December, as in the current market, the terms are reasonable, and our intention is to maximize liquidity in the current circumstances.

At the end of September, we had $274 million of short-term debt, and over $1 billion in cash, with a net debt to EBITDA of 0.6 times, which even after the Amnet acquisition, only moves up to 0.9 times.

It's vital to understand the growth potential across most of our businesses, and for this reason, we will continue to invest in order to capture greater market share, in particular, in Africa and Asia, which will take a larger share in CapEx over time. We believe we can make continue to make substantial inroads against our competitors by continuing to take market share.

In Latin America, we expect to maintain our four number one positions in El Salvador, Guatemala, Honduras and Paraguay while achieving strong margins, and to gradually improve our market share in Colombia and Bolivia over time.

Our recent move to launch broadband through 3G, and the acquisition of Amnet, is an important part of our long-term strategy.

Now, let me turn to the summary slides for this call.

Turning to the financial highlights for the quarter on slide two, you will see that year-on-year subscriber growth in the third quarter was 53%, and we ended September with 30.6 million subscribers. Revenues grew by 27% year-on-year, to $869 million, and EBITDA increased by 25% to $369 million, producing an EBITDA margin of 42%. This strong EBITDA margin is reflected in the net profit of $161 million, up 17% year-on-year.

Slide three shows our revenue split by category, and the element that stands out is VAS/SMS, which has grown by 88% since quarter three 2007, and now accounts for 13% of Group revenue.

On slide four, showing the composition of quarterly revenues. You can see how the EBITDA margin has remained at 42% over the past three quarters. Sales and marketing spend was 20%, down 1 percentage point from the past three quarters. The cost of sales was at the same low level as last quarter, and G&A, at 12%, was 1 percent point lower than the last quarter.

As we start to see the benefits of scale from these investments, and start to achieve critical mass and gain market share in our newer markets, we expect to see EBITDA margin improve.

On slide six, you can see that the total subscribers for the quarter increased by 53% year-on-year. Laos, Honduras, DRC, Ghana, Senegal and Tanzania all produced year-on-year growth in total subscribers of over 70% for the quarter.

Revenues for the quarter increased by 27%, which although lower due to macroeconomic factors, still remains one of the best top line growth rates among telecom operators. The strong dollar impacted our revenues in translation in a number of markets, with the real impact coming through in September. And rising inflation in essential goods during the quarter affected consumers' disposable income, with the result that there was less to spend on mobile services.

EBITDA growth for the Group, which is shown on slide eight, was 25%, again, reflecting the impact of macroeconomic factors during the third quarter.

Turning to slide 10, on Central America, you can see that subscribers grew by a very healthy 46% year-on-year, and we added 570,000 subscribers in the third quarter, to end September with 10.8 million subscribers in Central America. Revenues for Central America for Q3 were $340 million, up 13% year-on-year, but down slightly from the second quarter. And EBITDA was $185 million, up 15% year-on-year, but also down sequentially, reflecting the more difficult trading conditions we are seeing in these markets.

In El Salvador and Guatemala, we saw a decrease in remittances in absolute terms between July and August, which is a function of the slowing U.S. economy. Year-on-year inflation rates doubled, and are now in double digits, with the price of certain basic foods such as rice rising by over 40%. Such rises affect consumption patterns and also, in Honduras and El Salvador, taxes on incoming international calls of $0.03 to $0.04 a minute have increased the cost of calling, and have reduced minutes of use.

tiGO's strong number one position, and all the benefits that they bring in terms of economies of scale, mean that Central America continues to have an excellent EBITDA margin of 54%, and the cost saving initiatives that we have, that have been introduced in the light of the current trading conditions, will help to maintain it.

In the third quarter, we launched 3G services in all three markets, and we announced the acquisition of Amnet, the cable and broadband business, with 350,000 customers across Central America. The opportunity for Millicom is to use tiGO's marketing skills to sell broadband services to existing cable customers, and to provide a fixed element to our broadband offer. Amnet has a number one position in its three main markets, which will give Millicom critical mass in this important market segment, which we expect to be a major driver of growth going forward.

Slide 11 on South America shows that subscribers increased by 36%, and revenues by 27%, year-on-year. Paraguay and Bolivia both produced a very good top line growth of 74% and 59% respectively.

Colombia continues to be impacted by the halving of interconnect rates in December 2007, but has begun to grow at a top line, quarter on quarter, despite the impact of a weaker Colombian peso.

EBITDA for South America was up $97 million, and the EBITDA margin increased from 32% last quarter to 35%, as a result of the 2 percentage point margin improvements, the 14% for Colombia, and cost-cutting initiatives across the region. As the margin in Colombia gradually improves in 2009, helped by elasticity and growth, we expect the margin for South America as a whole to move up to what is the Group average.

The success of VAS in South America has led to a demand amongst more wealthy customers to use broadband services, and tiGO is seeking to satisfy this demand through a combination of 3G services launched in the quarter, and the existing WiMax business.

Quarterly highlights for Africa are shown on slide 12 -- 989,000 subscribers were added across our fastest-growing region in the third quarter, which represents a year-on-year increase in total subscribers of 86%. Revenue growth at 55% was slower than the previous three quarters, as results for Senegal and Chad were impacted by the stronger dollar against the euro. Our results for Ghana were impacted by the fall in the Ghanaian cedi. The currency weakness in these three markets were particularly offset, however, by very strong performances in DRC, Tanzania, with revenues up by 113% and 74% year-on-year.

EBITDA growth was 85%, and the EBITDA margin was higher at 33% as a result of the positive EBITDA margin reported in DRC less than two years after the launch of tiGO. The quarter was characterized by continued network expansion, and a buildup of capacity to accommodate the projected subscriber growth in the coming years. We expect to see a gradual improvement in margin as we increase market share and get economies of scale from spreading the cost over a wider base.

Finally, slide 13 shows that Asia continues to be Millicom's second-fastest growing region, with subscriber growth of 52%, revenue growth of 34%, and EBITDA growth of 17%, reflecting an increase in CapEx across all three businesses to extend and upgrade the network. This will give us an important competitive advantage ahead of the launch of services by new market entrants.

Now I would like to hand it over to Francois-Xavier, who will talk you briefly through the financials.

Thank you, Marc. Please turn to slide 15, where you can see that CapEx for the third quarter was $328 million, down 7% year-on-year, and down by 14% from the second quarter, giving a lower CapEx-to-sales ratio of 38% for the quarter.

Millicom is very focused on returns on new investments, and therefore, in slightly slower markets, we expect to see slightly slower CapEx, as we are determined that we shall continue to achieve the targeted internal rate of returns on new investments in excess of 20%. We have begun to put more emphasis on cash flow generation while securing growth, and we are closely monitoring CapEx level in relations to both EBITDA levels and growth potential on a country by country basis, and at Group level.

In the nine months to the end of September, 2008, CapEx amounted to $975 million. As Marc has already mentioned, we expect our CapEx for the full year to be below $1.5 billion, and CapEx for 2009 will be lower than for this year, so improving the CapEx-to-sales ratio and the cash flow generation.

Slide 16 shows the depreciation, at $136 million for Q3, has risen due to higher capital expenditure, but as a percentage of revenues, it has stayed fairly constant, and we expect this to remain the case going forward. The Group's CapEx plans are being reviewed with the idea to allowing CapEx, and therefore, depreciation levels, with revenue on cash generation of (inaudible).

On slide 17, you will see that debt stood at $1.8 billion at the end of the third quarter, up from $1.7 billion at the end of Q1. In Q1, we saw the conversion of the $200 million 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 at the -- in the operating companies, which is beneficial to our tax rate. Given the current economic environment, we have decided not to convert the $460 million 10% 2013 notes this December.

At the end of the third quarter, Millicom had only $274 million of short-term debt, debt against $1 billion in cash, and our net debt to EBITDA was 0.6 times, putting us in a strong financial position. Even after the Amnet acquisition in early October, our net debt to EBITDA ratio will be only 0.9 times, well below our ceiling of 2.0 times.

On slide 18, you can see our quarterly interest expense. Our decision to maintain the high yield notes triggered the reclassification of the debt from short-term to long-term, and accounting one-off gain corresponding to the non-payment of the 5% premium that had been booked last year.

Our overall tax position is summarized in slide 19. The tax rate for the year to date is 26%, declining as a consequence of the February (inaudible) country mixed on our effective tax planning. We expect the effective tax rate for 2008 to be below 30%.

Please turn to the summary cash flow statement on slide 20. During the first half, Millicom made a special dividend payment of $260 million. Our closing cash balance at the end of the third quarter was $1 billion. The acquisition of Amnet, which we completed on the first of October, was financed by $200 million of local debt, and by $210 million of Millicom equity funding. As we have already mentioned, lower CapEx in 2009 will mean that we will be generating free cash flow next year, and building cash reserves within the business.

I would like now to hand over to Marc for his final comments.

Thank you, Francois. In Q3, Millicom continued to take market share across its 16 markets, delivering 27% year-on-year revenue growth, which places the Company amongst the leaders in its sector, with high or rising EBITDA margins at the top of our peer group of telecom operators.

We remain confident in the long-term growth story, which is based on our ability to grow subscribers and revenue, as penetration rates rise strongly across our markets.

We continue to invest heavily in the lower penetrated countries in Africa and Asia, and we continue to build on our market leading position in Latin America. With the launch of 3G across the region -- since the launch of 3G in September, we have more than 100,000 new 3G customers. The acquisition of Amnet will allow us to grow our broadband offer, which will be a key part of our Latin American strategy.

Millicom is today well placed, by way of its proven [3A] strategy and its financial strength to benefit from the uncertain times.

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

(Operator instructions) Mr. Anders Wennberg, from RAM.

Hello -- Anders Wennberg from RAM.

Hi, Anders.

Hello. A few questions regarding things further down in the P&L. The tax rate was very high last quarter, 38%, I think was the writedown in Colombia. But this quarter, only 18%. How should we think about the tax rate going forward?

And also, the minority interest is still very high, implying a huge loss in Colombia. I guess this is half of the loss in Colombia. When will we see this loss in Colombia move down, and thus, the minority interest disappear? Can you help explain these items, which are very important for EPS? Thanks.

Okay.

Regarding the tax rate, indeed, the effective tax rate in Q3 was lower, around 18%. A large part of it is due to the fact that we took that one-off gain for the [conciliation] of the repayment of the high yield bonds, so we took a one-off gain of $29 million, which is not taxable.

So as a consequence, it distorted a little bit the effective tax rate for Q3. And we expect to be below 30% for the full year.

Minority interest -- indeed, a large portion of the minority interest is linked to Colombia, but not only. Obviously, there are other countries involved.

So do you expect the tax rate to be below 30% going forward, or above, or --?

No, no, no. Below 30%, going forward.

Okay. Another question, if I may. On Central America, I understand the markets have been maturing there, and you've not had any significant growth or no growth for the last two quarters. For those regions where you have not had any currency depreciation, which you've had in some other regions, what should we expect? Should we -- how will you get back to a growth path here? With the no growth in the last two quarters, there's also no growth in local currencies.

But, the no growth over the last two quarters in Central America is clearly driven by macroeconomic factors. We've seen, for the first time, I guess, in a long time, lower remittances, sequential remittances from July into August in El Salvador and Guatemala. And we know that this money is a major driver for the economy in that part of the world.

So I think the growth in Central America, or the future of Central America, is very closely linked to the developments, I guess, in the U.S., and so we'll have to see now what happens there.

There of course are currency impacts in Honduras, so the Honduras currency is losing against the U.S. dollar. It's only El Salvador that has the dollar as the -- as its currency. But the others, of course, have their local currency. There is also a currency impact in that part of the world.

Okay, thank you.

Thank you, Anders.

Sven Skold, from Swedbank.

Thank you. This is Sven Skold from Swedbank. I have many questions, but first of all, what have you actually seen in your business from the weak macroeconomic environment? I mean, can you specify how much it had affected your business?

And a follow-up on that, I know that inflation rates were exceptionally high in Q2 and also in Q3. But what we are seeing now is that inflation rates actually comes down -- it should do with that, as a consequence of lower oil prices, food prices, as we have seen. So, how do you look upon that going forward?

And second, if I may, move to Africa and the margin improvements in Africa. Is that driven by improvements in DRC, or what is the underlying factor for the margin improvement in Africa?

Okay. So, what do we see in the businesses? I think with Central America, what we have seen is that we have seen lower usage. But that, of course, is also, to a large extent, as a result of the taxes on international calls that have been introduced over the last couple of quarters. And international calls represent -- incoming international calls represent a big chunk of our traffic in Central America. So there are fewer calls that are coming into the network in countries like El Salvador, and Honduras. So these are very concrete things we have seen in two markets in Central America.

In the other markets, we continue to see that the minutes of use and the usage of the network to go up. So it's not that we are -- the business is falling off a cliff. But there, in some markets, we are impacted by the currency, as in Ghana with the cedi, in Senegal and Chad -- those two countries that have this CFA as a currency, which is linked to the euro. That clearly -- we see an impact in the form of translation, you know, the local currency to the dollar, and that is impacting the numbers we report to the market, as we report in dollars.

So, but exception made for those two markets (technical difficulty) -- inflation. At least, it looks like inflation is coming down, fuel prices and prices of foodstuff. But that's not necessarily what we see today in the local markets. I think there might be some delay there before those lower prices will be seen in our markets. And we've seen that -- you know, we have not seen a substantial decrease, for instance, of prices of fuel yet. But I guess this has to do with the fact that people order those things months in advance, so we don't see the full upside of the lower fuel prices. I think it's the same with the food prices.

But I think what is important is also that -- again, in Central America, it's the remittances that of course have an impact, the level of the remittances that have a major impact on people's spending in that part of the world.

Okay. If you --

Africa -- sorry.

Continue.

Yes? You want me to continue with Africa?

Yes, continue with Africa.

Okay, good. So the African margin improvement comes, to some extent, out of the DRC, but we have seen, as a result of the economies of scale we are creating in markets like Tanzania, that is going extremely strong. Senegal -- although Senegal and Chad were a little bit lower this quarter because of Ramadan in the month of September, so that also has an impact on the business there, at least for that month.

But we think that this margin improvement is sustainable, and that, as I've been saying before, we will be moving to the Group averages in our -- over the next couple of years. So -- and this is the result from all the actions we took in Africa. Increased CapEx, the extreme promotions we've been running, improvement in market share, improvement in the market position. These are the ones that are delivering this margin improvement.

You don't see the same effect of inflation and weaker business cycle in Africa as in Latin America or --?

I think we of course do see inflation, and we've spoken in the past about the high costs for fuel, for us to run our generators at the base stations. But that said, as I've said before, I think Central America is a much more open economy than most of the economies are of our African countries. And by definition, you see the impact of inflation there being lower than in more open economies. That's probably the difference.

Second is, of course, the penetration levels in the markets where we are active in Africa are a lot lower than they are in Latin America.

Okay, thanks.

Thanks, Sven.

Soomit Datta from New Street Research.

Hi, yes, it's Soomit from New Street Research.

Hi, there.

Just going back to Central America, and the tax impact in El Salvador and Honduras, are you able to -- I mean, perhaps first of all, say what percentage of traffic is coming from international calls? You said it's a big chunk. Can you help sort of quantify that a little bit more?

And maybe, just sort of talk through the timing of the El Salvador tax change. I think Honduras kicked in in the second quarter. Could you tell us when the El Salvador tax change was?

And then maybe just sort of help us understand, is this a significant part of revenues, or is it something relatively minor compared to some of the macro impacts? And so, anything more on that would be really helpful.

I don't have an exact number for you, what the percentage is of international calls, of the total calls that are made on our network. But it is an important number, and hence, the impact of the -- on revenues, of the introduction of the tax in Honduras in Q3 -- Q2, sorry, and in El Salvador, I think, somewhere in the beginning of Q3.

So, these things create what I would call negative elasticity, because the cost of a call from somebody, primarily in the U.S., to make a call to his friends or relatives in Central America, has gone up by $0.03 to $0.04 at least, and so these people call less. And that is what is also impacting the revenues in Central America.

Okay, and is that something which is being considered -- the introduction in Guatemala, do you have any sort of knowledge --?

Not that we know. Not that we know.

Okay. And then, just a follow-up, if I may, on Central America.

Yes?

You talked a little bit about some of the cost saving initiatives which have supported the margin a bit. Could you sort of elaborate a bit more on what they were -- maybe what impact they have, how sustainable they are?

So what we've spoken about before in Central America is creating synergies across the region, the three businesses across the region, by sharing platforms, by sharing best practices, by making sure that when we negotiate with our dealers that we keep the commissions under control. So there are a number of those initiatives that have been taken in order to keep the costs under control.

With the acquisition of Amnet, we also will be able to look again at savings for the transmission, because of the fiber optic network. We also bought that, so there are still some improvements there.

And I've said before that these savings allow us to keep the margins at the current levels, despite that we see pressure on the margins from lower tariffs, and of course, lower ARPUs.

So a very strong performance that we've managed to keep the margin at the almost mid-50 level in the third quarter in Central America, and we think we can continue keeping it around that level.

And then, so -- final question -- for how long do you think you can keep it at that level?

We've been at that level for -- I don't know how many years. So as I've said before, I don't see any indicators at this point in time that would lead us to planning for margins lower than what we've seen before. And what I've said before is that we're looking at low to mid-50s margins in Central America.

Okay, that's very helpful. Thank you.

Thank you.

Bill Miller from Hartwell.

Marc, with the fortress of the balance sheet you're going to have, are there opportunities to either bid on, or get new licenses, or make other inroads in markets you're either not in, or use your cash effectively to grow the business in some other way?

We will be primarily using our cash to grow our existing businesses, because we continue to see good opportunities in those businesses, and by growing businesses especially in Africa, for instance, and also in Asia, we will be able to get better economies of scale, and that will lead to improvements in the -- of the margin, in those regions. I'd say the same also for Colombia and in South America. So our focus will be on our existing markets.

Are there any licenses that are up for grabs, or any new areas that will be having auctions at all that you will be involved in?

Nothing new that we know about, other than the ones we've mentioned before -- Costa Rica, Nicaragua, and Central America, and Africa. We are -- in Rwanda we are shortlisted, we're shortlisted in Malawi. So, we are looking at a few things at this point in time.

Great. Thanks.

Thank you.

Alexander Vassiouk from Morgan Stanley.

Yes, hi. Several questions. First of all, on the subscriber intake, you had quite a significant drop in the rate of net additions in Ghana and Guatemala. I was just wondering if there have been any market related or competitive reasons why your net additions have slowed down significantly, as opposed to broader macro issues in those markets.

I don't think there have been any changes in market share in those markets. We continue to hold our market share in Ghana. We've been increasing it over the last couple of quarters, to around 30%, similar to Guatemala. We also have been keeping our 43% market share in that market, something we have been building up from 30% level, as you know, over the last couple of years.

So, we clearly don't see us taking fewer subscribers than we used to do, compared to our competitors in those markets.

Okay. So, it looks like it's a significant slowdown in the rate of market growth. So I'm just wondering why, in Guatemala, it should be different from El Salvador, for example, where -- I mean, El Salvador, it looks like you still have the relatively good net additions.

But in El Salvador, as you remember, and you might remember, in the second quarter, we made a correction in our subscriber numbers, which by definition then reduces the churn in the following quarter. So when you do a cleanup, and of course, in Guatemala, we have been just building up our subscriber base over the quarter, so there was no correction there.

Okay, but if I make that correction, it still looks like your subscribers in El Salvador are -- the intake, the run rate for the intake is still a lot better than in Guatemala, so I was just wondering, maybe there are any market specific reasons why Guatemala is suffering more severely compared to El Salvador?

No, not that we know. I think the cleanup we did in the second quarter in El Salvador, which by definition impacts your churn rates, i.e., your net subscriber numbers in the months to come, I think that is the major reason. And there have not been any specific events in Guatemala, other than the macroeconomic events we have been talking about before.

Okay, and then maybe just a question on the overall macro impact, and how it affects consumers. Maybe we could -- can you just elaborate, if you (inaudible) all the currency issues, and what are you seeing in terms of the behavior of your existing customers? Are people generally using phone less, or are they topping up less frequently? Have they reduced the duration of their calls, or frequency of the calls? And what kind of changes are you seeing in the subscriber behavior, in response to those tougher market conditions, for your existing subscribers?

Yes, for existing subscribers -- so, we need to be very specific. In Central America, I spoke about the impact of the international calls, so that has reduced the number of calls over the past quarter, because of the importance of international incoming calling in that part of the world.

In other markets, we have not seen lower usage of our network, so we continue to see increased usage of our network, and we are monitoring very closely the usage of new customers and existing customers on a country by country basis, which I think would be too laborious to really go into those details at this point in time, but we're really focusing on those things very, very closely.

I think in other markets, like in South America with Colombia, and in Africa with Ghana, Senegal and Chad, it's a currency impact that's had -- especially in September, although Ghana has been going on for a while. But in September, those two countries, Chad and Senegal, has had the dramatic impact on our numbers.

So we continue to see very strong subscriber intake in those markets -- we continue to see good results. But when you translate it to dollars, it's a smaller amount.

Okay. And then maybe finally, just in terms of your lower expectations for CapEx in '08 and '09. Can you specify, and what are the main regions where you think most of the savings can be achieved? Is it going to be proportionately overall CapEx structure across the board?

Clearly, the CapEx will be spent there where we see the growth, and then you can see yourself where the growth is coming from now, the top line growth -- Africa and Asia, and also South America. So that's where, of course, we will be focusing on, from a CapEx point of view.

When we gave CapEx guidance after the second quarter, we said that it was going to be up to $1.5 billion. Now we say it's going to be below $1.5 billion. But you've seen that we have more or less spent close to $1 billion now of CapEx for the first nine months, so that's not going to be a big difference in 2008.

In 2009, I already have -- for 2009, I already flagged, after the second quarter call, that our CapEx spending would be lower in 2009, for the simple reason that in a number of our big markets, especially in Latin America, the build out, especially covered build out, has more or less come to an end, and that we're focusing a lot more on capacity. And that, of course, comes at a lower CapEx per subscriber, and a lower overall CapEx spending.

But we will continue to spend the money where we continue to get good returns, where we continue to see the growth, we will continue to spend in the CapEx, because we want to take advantage of the opportunities we see in those markets.

Okay. And just maybe in terms of the overall subscriber growth for the Group. Do you think the figure of 2.8 million, which I think you were mentioning as an average run rate that you felt comfortable with on a quarterly basis -- do you think that figure going forward is less realistic?

Well, you know, when we spoke about 2.8 million subscribers a quarter, I think the world looked a lot different than it does today, so -- and we know that the fourth quarter historically has always been -- has shown a lot of seasonality. It was a strong quarter, so we'll see how that fourth quarter is going to go. But for the full year, clearly, that 2.8 million number was given at a time when we thought that the world was going to continue showing good economic growth across all continents.

Okay, thank you.

Thank you, Alex.

Peter Nielsen from Cheuvreux.

Thank you. Peter Kurt Nielsen from Cheuvreux. A couple of questions, please. You already commented on the CapEx, but I'd like to ask, could you elaborate perhaps a bit on the CFO's comments about reviewing CapEx going forward? Is this just a reflection of the slow growth that you just mentioned, Marc, or is it a changed investment philosophy when it comes to CapEx spend?

Second question. You talked a lot about liquidity today, liquidity concerns -- not concerns, but considerations. The Board, earlier in the year, indicated that it might consider Millicom paying a dividend going forward. Is there any of what you just talked about today, Marc, liquidity issues, that might change the Board thinking, or delay such a dividend payment?

And thirdly, it seems to me that the corporate cost level has gone up in this quarter, quite significant versus previous quarters. Any particular reason to this? Is this a new level we should just factor in going forward?

Thank you.

In terms of the CapEx philosophy, we have not changed anything. We will continue to spend the money where we see the good returns, and those good returns are typically found in those places where we see good growth. So we will continue taking advantage of those opportunities, growth opportunities. So there's no change there.

But as I just said, some of our markets, the spending -- the CapEx spending, the nature of CapEx spending has changed. More capacity focused, less coverage, because of the percentage of the population or the country we are currently covering.

In terms of the liquidity, yes, we do focus on liquidity. I think cash is king in today's world. We -- I did not say that we were going to pay a dividend next year. What I said is that we would write a dividend policy at a certain point of time, which we would share with the market. So, at this point in time, there is no decision taken whatsoever, when it comes to that.

Go on. (technical difficulty) He's gone? Yes.

Pardon the interruption. Mr. Nielsen, your line is still open. Has this answered your question?

No, not the last one -- I was cut off.

Okay. Go ahead.

No, the conference was cut off from here.

Right. So the -- I was saying that the corporate costs have increased indeed in Q2, from 14.4% to 18.5% in Q3, as we have allocated costs of some local employees working on Group projects. So even if they are based in the -- in our [local theatre] working on some global projects. And so we have taken these costs as a Group project, and as corporate costs. So it's more reclassification of local costs into central costs.

So this is --

There is a one-off severance payment as well, which is not such a big amount, but which is contributing to the increase as well.

So this has been a recurring -- I mean, sustainable, going forward?

To a certain extent, yes. Depending on if we pursue this global project, but to a certain extent, we can consider that it is a recurring item.

Thank you.

But it's not an increase of costs for Millicom Global, based on costs for Millicom.

I understand.

So it is just a reallocation of the costs, local versus central.

I understand. Thank you.

Andreas Ekstrom from Carnegie.

Thank you. Three questions, if I may. One, Marc, is regarding the minutes of use. You are one of the few companies that do not disclose the minutes of use, but I still would like to ask you about that. We have seen some quite weak signs from China Mobile yesterday, and IDI in India, for example yesterday as well. Could you tell us about the minutes of use trend in -- throughout your operation?

Yes. I don't have the specific minutes of use, but I looked at where the use of [airlinks] on the network, country by country. And as I said before, there we see a negative impact in Central America in two of the countries because of the international call tax. But we continue to see other markets growing, some of them even aggressively, and you can guess yourself where we are growing aggressively, because of all of the CapEx we're spending there and because of the promotions we're running there.

But we are closely monitoring those things to make sure that we can correct, if need be, our investments in the one or the other market, depending on whether minutes of use are going down or up. But at this point in time, it's not like people have stopped using the phone in our markets.

Is that something that you could consider releasing information about, do you think, going forward? I think that would be helpful to a lot of investors.

Maybe we'll look at that. But as I've always said, minutes of use is not a very good indicator, only because there are a lot of minutes that are given away for free, promotional minutes, and that doesn't really say anything about your effective revenue -- the revenue you generate per subscriber. So, one has to be careful with that number.

Okay. Two more questions -- one on Colombia. The margin went up, as you said, from 12% to 14%, but on the other hand, the subscriber impact was basically flat during the quarter. Is that something you have done on purpose to get the margins up, or have you changed strategy when it comes to growth versus margin in that market, short-term or medium-term?

I think the third quarter was a quarter where we kind of started repositioning ourselves in Colombia. As you know, I spoke about a different approach in terms of targeting more groups rather than individuals, in order to get more on-net calling. And that change we brought about in the third quarter, and I think with this change we brought about, I think that's kind of slowed things down.

The increased margin, to put it that way, is not something we fabricated by -- on purpose, holding back on subscriber growth. We would like to continue growing subscribers, and again, according to the official statistics, we now have a market share, I think, of over 11%, almost 11.5%, so we continue to gain market share compared to the two other operators.

But clearly, the change in interconnect in December last year has changed the profitability and the top line growth for the Company. But we are in the process of repairing those things, and that's why we said that we look at a continuous improvement in the margins into 2009 in Colombia.

But despite that, you are expecting subscriber intake to pick up again, maybe already in Q4 and definitely in '09?

We would expect that to pick up, given the slightly changed product we've taken in the course of the third quarter.

Okay. Finally, just a short question on Senegal. I saw something in your release about a -- regarding your license in Senegal. Could you just clarify what that was all about?

The license in Senegal, we are in negotiations with the government about what I would call an enhancement of the license, following an agreement we signed with the government in 2002, about four years after we got our license. And so, this is something we've disclosed before. And so we will see what the outcome is of that negotiation. We, of course, would like to get into 3G, and get probably more spectrum, so enhance our license, in order to be able to continue growing our business there.

Okay, Marc. Thanks.

Thanks.

Kevin Roe, from Roe Equity Research.

Thank you. Quickly, on Senegal -- what is the government asking for in that negotiation?

I don't want to go into the details of the negotiation, but the triggering event, there has been the award of this third license, I think about a year ago, now. And we agreed with the government back in 2002 that we would go into a negotiation when it comes to the existing license, and the enhancement of our license, in the light of that operator, or the award of the third operator's license in the country.

We don't have any intention to have a similar license, because that's a full universal license. We have no interest in being a universal operator. In Senegal, we're only interested in being a mobile business.

You'd expect ultimately, this to result in some sort of a cash payment for a license extension?

That's right, yes. (multiple speakers) enhancement, that's what we would expect, yes.

So, on CapEx --.

So similar to what we've done, if I may add, Kevin, similar to what we've seen in Ghana, where a number of years ago we renewed our license, and we're currently -- the entire industry is talking about the 3G license and 3G spectrum. So these are recurring things.

Got it. Marc, on CapEx, you mentioned in the release, a substantial reduction, is the wording in your release. I'm just trying to get a handle on, what is a substantial reduction? Is a ballpark $1 billion for '09 reasonable, or could it be less than that? Any comment would be helpful.

Yes, I'm not going to be helpful here, so I'm not going to give you any clarification on that number. So we had always planned to see a lower CapEx number in 2009, given the stage in network build out we are, and the more mature markets. So -- but I won't be able to give you any guidance as to what that number for 2009 is going to be.

Okay. And lastly, Marc, on Central America, you've given us a lot of color on your operations there. And I know the visibility is poor, given the macroeconomic environment. But when do you expect to return to revenue growth, sequential revenue growth in that market? Maybe to ask it another way, what are your expectations for ARPU dilution for 2009 in that region?

You're talking Latin America, Central America, what?

In Central America specifically, where -- you know.

Well, in Central America we've been hurt over the last couple of quarters by a number of what I would call external factors -- increased taxation on international calls, and then the lower remittances. The taxations, it's in the numbers now for both countries, Honduras and El Salvador, so we don't know of any new taxes that will be introduced, so that's there. So that's history. But of course, it will be something that will be in the numbers going forward.

In terms of the remittances, yes, that's a question mark, I think, for everybody, as to what is going to be the macroeconomic outlook for the region, and that's why it's very difficult at this point in time for anybody to really take a view as to what is going to happen in Central America. We remain very positive about the region as a whole. We remain very positive about our market position in that part of the world, so we're keeping, slash, slightly increasing our market position. So I think we're doing all the right things at this point in time in that part of the world. But yes, we'll all be subject to the macroeconomic outlook.

So is -- in your budgeting, which of course drives your CapEx expenditures for next year, are you anticipating internally revenue growth in Central America for over the next 12 months?

Well, we would hope to see some revenue growth, of course, over time. I don't think we've come to the point in Central America where everything is going to go in reverse. So as I said, there were external factors that created this impact on the revenue -- call it flattish revenues for over the last two quarters. So hopefully there will not be any external factors in the nearby future that would have the same impact.

So we remain optimistic about the region, but yes, there's no number I can give you in terms of what we think the revenue is going to look like next year.

Thanks, Marc.

Bengt Molleryd from Handelsbanken.

Thank you. Bengt Molleryd from Handelsbanken. Just, when it comes to Central America and Colombia with (inaudible), has the churn rate come up in the -- during the third quarter? Have you seen other behavior from your competitors there in the region?

And then, on CapEx, what do you expect to spend during the fourth quarter? Is that in line with '07, around $300 million, or what could we expect there?

Okay, as I just said, in Central America, and I said the same about Colombia. Colombia, I said that we -- according to the official numbers, we're now in our over 11%, almost 11.5% market share, so clearly we're not losing against our competitors in that country, our market share against our competitors. And the same goes for the three Central American countries as we speak.

In terms of CapEx, I won't be able to give you any guidance for CapEx for Q4, but as I said, the total number will be below $1.5 billion for the year 2008.

But when it comes to churn rate, is there increased experience -- how is churn doing the third quarter? Is it behind your revised planning regarding CapEx?

No. No. But as I said, in Central America, with the growth slower than what it used to be, although growth in terms of subscriber intake in Q3 was higher than in Q2, but it's a lower number than it has been historically. And by definition, you spend less CapEx, given that the growth of the business is slower than what it used to be.

So -- but that's in line with expectations. We've seen the growth rate in Central America coming down quarter after quarter now.

And in Colombia, regarding churn? Is it up or down? Or unchanged?

I think churn -- because of the change in approach we've taken, probably it was up, and then the third quarter in Colombia, but that has nothing to do with the macroeconomic environment. I think that's kind of the change we took in, you know, how do we want to approach the market, and form Group focus versus individual focus.

So is fair to do the assumption that you don't see any change in the market climate, competition, or activities for your competitors, but it's primarily external factors and macroeconomic factors that are influencing your business there in Central America? Is that the right meaning?

That's the right conclusion, yes.

Okay, thank you.

Rama Rao from RR Capital Management.

Thank you, guys. Good morning.

Good morning.

Excellent quarter, considering the very difficult environment. I have two questions. How do you expect, or what strategy you have to sail through this financial crisis? Do you think that it is a permanent destruction of the demand of your product?

Well, as I've said before, the impact of the macroeconomic -- the change of macroeconomic environment has clearly impacted consumer spending in places like Central America, so we discussed earlier today. And I'm sure that the higher inflation we've seen over the last couple of quarters makes that people have to do more with less money, at the end of the day.

So, yes, that will and has impacted people's, or customers' spending pattern. But what we have not seen, except for the two countries in Central America, what we have not seen is, we have not seen traffic coming down on the networks. So we continue to see growth in the system. We continue to see growth in the markets where we are. And we are at least growing at the speed of our competitors, so given the market share gains, or us keeping our markets shares, and our markets.

So we're doing well, given the situation. But clearly, we will always monitor, as we have done in the past, our CapEx, make sure we make the returns, our paybacks, so we will continue doing those things going forward, as we've done before, and as I've said. We are clearly looking, creating synergies, making sure that we can get OpEx down in order to make the margins we have in a number of countries sustainable, and other markets we would like to increase the margin.

So, if the financial crisis is over, you think the demand will come back?

Well, when is this crisis going to be over? I don't know when it's going to be over. So I think we are following things very closely, and so we monitor it, and we will take a decision in line with what we see happening in the markets. That's -- you know, the financial crisis, for us, it's more a slowdown of the economy. I think the financial crisis is not something that is hitting our business. It's more the slowdown in the economy, I guess, in some places.

And last question. How confident you are that you can meet the next quarter's expectation?

We don't give forecasts to the markets. So I can't comment on that question.

Thank you.

Thank you.

Lena Osterberg from SEB Enskilda.

Yes, this is Lena Osterberg, calling from SEB Enskilda in Stockholm. I was going to ask you a few questions. First of all, on Colombia, you previously indicated that you need roughly about 20% market share to gain critical mass. Has that target changed with your focus, going from targeting individual customers to more groups of customers to get more, or is it still a 20% market share that you are looking for?

And then, second question is, on CapEx cuts. Could you maybe say a little bit more on where and what it is that you're cutting?

And thirdly, we've seen some tax introductions in a few countries over the past few months here. Do you expect in any other countries that the poor economic development in these economies will force governments to look for a new tax income, and you will see more tax increases on (technical difficulty) in some other countries?

Okay. In Colombia, I don't think anything else in Colombia has changed, in terms of our outlook, and in terms of market share, in terms of returns we are targeting, profitability we're targeting. What has changed is that it's taking more time than what we anticipated. With the change of interconnect, we've lost anything between 18 months to 24 months in terms of the timing. But all the other targets we have set still remain.

In terms of CapEx spend, as I said before, we will spend the CapEx where the growth is. So, because it doesn't make sense to spend CapEx in places where there is no growth, because we want to make sure that we protect the returns on our investments. As you know, we are looking at internal rates of returns of over 20% when it comes to our investments.

In terms of tax introductions, yes, you're right. There have been quite a few new taxes introduced over the last 12 months -- more than we had hoped for. So -- but, are there going to be more? I'm -- the answer is probably yes. Where? Don't know. I think taxes are something one has to live with. And hopefully, the taxes that will be an increase, will be not of such a level that it will impact our business.

But at this point in time, I'm not aware of any major tax to be introduced in any of our markets.

Okay, thank you.

Thank you.

Sergey Fedoseev, from HSBC.

Hi. A number of my questions have actually been answered -- just two left. First of all, could you please comment on the interest expense decline? In Q2 you had $42 million, and in Q3 it went down to $14 million.

And second question. I actually look for two numbers -- the total number of bonds that you're going to repay next year, and total number of bank loans that you're going to repay next year.

And the very last question, you seem to be pushing all the debt from the Group level to the operating level, which makes a lot of sense from a tax perspective. But from the reporting perspective, the transparency kind of goes down. Are you planning to start reporting on a country level? Thank you.

Okay. Francois, can you maybe answer questions?

Yes. On the interest, the decline, what happened is last year, when we thought that we would repay the high yield bond, so we accrue in Q4 2007 for the faster (inaudible) repayment premium that we had to pay, which is the reason why the interest charge increased last year. Since we decided not to repay the bond now, we have reversed that expense in Q3 2008, which is the reason why it goes down to $14 million.

And the second question, regarding the bank loans. So indeed, we have some -- I think $240 million of short-term debt. This mainly corresponds to our overdraft facility, to cover the seasonal needs of the business. There are some minor amounts as well, corresponding to short-term measures, which is of long-term financing, but there is no real concern there.

Regarding the debt, indeed, we are pushing as much debt as we can locally, for tax reasons, as you mentioned. But we don't plan to report figures on a country basis.

Thank you. Just to check with, $240 million, is it like bank loans? Or is it bonds, it's a combined number?

No, it's the sum of different bank loans.

The sum of different bank loans?

Yes.

And the bonds? You don't have bonds next year, to be repaid, right?

The bonds go -- (inaudible, multiple speakers)

The bonds -- (inaudible, multiple speakers)

Yes, okay. Thank you.

Sven Skold, from Swedbank.

Yes, just a follow-up question there. Did you see any differences in Q3 between July, August and September, when it comes to minutes of use or subscriber growth? And when we now look into Q4, should we expect seasonal pickup in subscriber growth, in, for example, Latin America? Or is the market maturing so much that it shouldn't grow even in Q4 compared to Q3? A discussion about that would be helpful.

In terms of -- I don't think the differences in the subscriber intake between the months in the third quarter was important. What we did see in Q3 was that the month of September was particularly bad when it came to the foreign currency impact, compared to the two other months. But no major differences in customer behavior there.

Q4 historically has always been the best quarter of the year, so we hope that it's going to be the same this year. But again, with the changed macroeconomic environment, yes, we will have to wait and see. We continue to plan certain promotions around year-end, so it's not like we're going to be holding our horses. We will be -- make sure that there will be attractive promotions in the market, and hopefully that will give us a good quarter then.

Okay, thanks.

Scott Bruce from [Synvest].

Hey, guys. You know, I was on and off, so I might have missed this. but can you tell me how your thoughts around a buyback might have evolved here, now that you've been rethinking what CapEx looks like the balance of this year, and into '09?

The buyback of --?

Your shares.

Okay. Back, meaning we have the authorization, as you know, which was given to us at the AGM in the month of May, but as you understand, I can't give any comments on the -- what our plans are when it comes to buyback.

Bill Miller from Hartwell.

Marc, I understand that you averaged during your quarter for foreign exchange, and therefore, it's not a weighted average, when September has fallen down more significantly than the other two quarters. Do you plan on doing anything -- not in the methodology, but in terms of hedging on foreign exchange, or any other way that you could either take advantage of, or mitigate the strength of the dollar?

Well, if we could do it, if we could take some hedging, we would do it. Unfortunately, for most of the countries where we operate, there is no real market for hedging. So it's a little bit complicated to do it, as a consequence. So the translation risk is definitely difficult to handle through that type of instrument, unfortunately.

But we have a policy that we try to match costs and revenue, in terms of the currency. We will try to convert our local currency into dollars as quickly as we can, so there are a number of things we do, and we have been doing those for years. And by doing so, we can limit the strong dollar impact.

But yes, the derivative markets for the [Grande and the Gonzales], they either don't exist, or they're extremely small, so we can't use them.

What we are doing as well is to try to push down as much debt as we can, to the operations, and to take it in local currency. So that whenever there is a depreciation of the currency, we don't have any minus in terms of asset value, but we have some liabilities that go down as well.

So but unfortunately, it is not always possible either, to take local debt in local currency, so we have very often to take the debt in [hard] currencies. But we try whenever we can.

Have you seen any diminution or change in the local debt markets over the last three to four months, so that you'd be unable to do that, or unable to raise money locally? And if there's no change, what approximately are the interest rates that are now available or not available in the local markets?

We have not seen any change in the last couple of months, so but we are monitoring closely the situation. We are using as much as we can, financial -- international financial institution as well, such as direct financial institution on the exposed credit agencies, sponsored by different governments around the world, which is working well, and with attractive interest rates. But we did not notice any issue locally to raise debts in our operations.

Great. Thanks a lot.

(Operator Instructions) Stefan Pettersson from Nordea.

Yes, hello. I've been cut off once, so excuse me if you have already answered this question. But in Africa, you had an ARPU fall of 19% year-over-year. And could you tell us what the currency effect of this was and what we should expect going forward in terms of ARPU development in Africa?

I don't have an exact number for you there, but in Ghana, the largest market, Millicom's largest market in Africa, we saw a big devaluation of the cedi rate in the second quarter, and that continued into the third quarter. There was Senegal and Chad in September. So to what extent -- but that clearly has impacted the ARPUs, if you translate the ARPUs into dollars.

However, I think the biggest reason why we've seen a reduction in ARPU is because of the extreme strong subscriber intake. We took almost a million subscribers in this quarter, we did about the same the previous quarter. These are new subscribers, and they don't necessarily come with the same ARPUs as the subscribers we have on our network.

So, this is kind of a normal development, to a large extent, following the strong subscriber intake this year in Africa.

Okay, thank you.

Thank you.

[Mandeep Singh] from Morgan Stanley.

Hi, there -- thank you. I had two questions, please, one on Ghana and one on Cambodia. You're seeing sort of heavyweight new entrants in Ghana through Vodafone, and two new entrants in Cambodia with Vympelcom and [Selia Sonera]. So I just wanted to understand how you feel your position in those markets could evolve in the face of such heavyweight competition, and just an update on how you see those two markets developing, please.

I think that increased competition could lead to an acceleration of growth, because you could probably say that in Ghana, there have only been two real major operators, and are going very strong -- it was MTN and ourselves. We both have similar size of networks nowadays, with very good coverage across the country. And that will protect us, as Millicom or tiGO in Ghana, for any new entrant coming into the market.

So we don't expect that we're going to see any major changes in terms of our market share going forward as a result of those two new entrants. Zain, we know -- we're competing with them in a number of markets in Africa. And you've seen the market share gains we have been generating in most of our African markets. Yes, Vodafone is a newcomer to us, so we'll have to see how they're going to operate in Ghana. So it will be kind of a learning curve for us there, but of course, we look at both operators as fair operators.

Same in Cambodia, I think. Cambodia has probably suffered from -- for many years too little investment in infrastructure. We've been investing a lot out there; other operators have not been doing so. I think when new operators coming into the market -- yes, we will lose market share there in Cambodia, there's no doubt, because we know we have market share in the 60s. So it would be nice to believe that we're going to keep that market share going forward, but we don't think that will be possible. But we think that -- you know, for those new operators coming, and there's also VFL coming to the market, will give an increase of the growth rates for the industry in that country.

Just as a quick follow-up, in Cambodia, you mentioned yourself in the press release that Cambodian revenues have actually -- not growing sequentially anyway. So can you envisage just an area where your revenues in Cambodia start to go backwards with the new competitors?

No, I don't think so. I think we're going to continue seeing growth in that market.

Okay, thank you.

As there are no further questions, I would now like to turn the call back over to your host for any additional or closing remarks.

Thank you, operator. Let me just thank you all for joining the call today, and we look forward to seeing those of you who are coming to our investor trip to Paraguay in a couple of days. So, thank you, and goodbye, and see some of you in Asuncion on Thursday.

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