Millicom International Cellular SA (TIGO) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Millicom Q1 2009 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. Mikael Grahne, President and CEO, and Francois-Xavier Roger, CFO. Please go ahead, gentlemen.

Thank you, operator, and welcome to everyone who has joined us today. You can find the slides for this call on our website. Now, please, to turn slide number two.

The first quarter results demonstrate our strong management control, through the positive outputs of two financial and three operational drivers. The financial areas we have highlighted were, firstly, a strong margin on 44.5% as a result of cost controls and favorable product mix and, secondly, we were cash flow positive in Q1.

In operational terms, the growth in VAS was up 45% in local currency. Our prepaid churn was down by 0.6 percentage points, which reflects a greater focus on our better customer. And our market share was stable on a weighted basis, and up by 1% in both Central America and Africa. These are all very positive indicators, showing that we are reasonably well equipped to weather the economic crisis in spite of significant headwinds. Indeed, the slowing global economy means lower remittances, decreasing raw material prices and less tourism, all being key drivers in our local economies which affect our customers.

We continue to be confident in the medium and long-term prospects for Millicom, despite the adverse economic environment. Revenues grew by 9% in local currency, although the overall results have been impacted by foreign exchange movements. There have been some changing -- changes in consumer behaviors in our local market. And we will continue to innovate to provide our customers with best service that is targeted towards their specific needs by greater market segmentation, among other initiatives.

Turning to the financial highlights for the quarter on slide three, you will see that the year-on-year subscriber growth in the first quarter was 29% and we ended the quarter with 33.6m customers. Revenues grew by 6% year on year, to $846m. And EBITDA increased by 11% to $376m for the quarter, producing an EBITDA margin on 44.5%, which was up by 219 basis points. Net profits for the quarter amounted to $140m and free cash flow reached $48m, equivalent to approximately 6% of revenues.

On slide four, you can see that revenues were up 9% in local currency for Mobile operations and 15% in total. Net depreciations of currencies against the dollar eroded nine percentage points of growth, equivalent to $70m from the top line. Looking at this ForEx effect by region, on slide five, you can see that most -- the most severely affected regions are South America and Africa. The underlying growth in local currency remained strong in South America at 16% and, in Africa, at 25%. In Central America we have seen a slowdown in local currency terms, primarily as a result of slower economic growth, with declining remittances from the US minus 8% at the end of February versus year ago.

On slide six you can see that, in terms of EBITDA, underlying growth was 14%, leading to an improvement in EBITDA margin. Looking at the foreign exchange effect on EBITDA by region, on slide seven, you can see that South America recorded a 42% increase in EBITDA in local currency and Africa recorded a 36% increase in local currency, demonstrating that our efforts to bring these two regions to the average Company margin are starting to pay off.

Slide eight shows our revenue split by category. And the element I would like to highlight is VAS, SMS and 3G, which have grown by 45% in local currencies in Q1 '08 and accounted for 15% of Cellular revenues in Q1 '09. VAS/SMS/3G is a highly profitable business for us and an important driver of revenue and margin. VAS also offers the advantages of being more difficult to copy, and we expect to see VAS growing strongly in the coming years.

On slide nine you can see that the total subscribers for the quarter increased by 29% year on year, and we ended the quarter with 33.6m subscribers. Tanzania, DRC, Chad and Laos all recorded subscriber growth in excess of 75%. In Latin America, Bolivia increased its subscriber base by 43% and Paraguay recorded an increase of more than 20%. With average Mobile penetration of some 41%, there remains a substantial growth opportunity across our markets.

In the first quarter we've seen a decrease in churn in the three clusters, as you can see on slide 10. For the Group as a whole, churn decreased by 0.6 percentage points in the quarter. This improvement in churn is a reflection on our renewed focus on the higher revenue generating and more loyal customers.

Slide 11. Emerging market economies have been affected by strong headwinds. In Central America we have seen remittances down by some 8% in the first two months of the year and this has led to a slowing of these economies. We have also seen a drop in raw material prices, such as oil, mining commodities and soya beans, especially in Chad, DRC and Paraguay, and a decline in tourists in Senegal, Mauritius and Asia. These factors are now producing some changes in consumer behavior, such as more on-net, but less cross-net calling, less roaming and fewer incoming international calls, more buying on promotions and more multiple SIM users. These changes are reflected in ARPU, which was 3.2% lower in local currency in Q1 compared to Q4 '08.

Slide 12. Millicom is responding to changes in our markets by seeking ways of increasing proximity to the consumer and developing cost -- customer segmentations with tailored service offerings. We continue to support affordability by selling in lower-denomination reloads and by developing loyalty programs, which helps to reduce churn, and reload promotions that retain existing users. Overall, our objective is to enhance the Tigo brand as the value proposition in our markets without resorting to tariff cuts.

Now, let's look at the clusters in more detail. Turning to slide 14, on Central America, you can see that subscribers grew 18% year on year, with 353,000 subscribers added in the quarter. With the average penetration in our Central American markets of around 80%, it is understandable that subscriber growth slows down, as will Voice traffic growth. That is why we are increasing our focus on VAS, Data and Broadband services in these more mature markets.

Revenues for Q1 were $327m, down 4% year on year as a reflection of economic conditions, including lower remittances from the US. EBITDA reached $183m, down 2% year on year. Tigo's strong number one positions means that Central America continues to have an excellent EBITDA margin of 56%. CapEx in Central America was $27m in Q1, 59% lower than in Q1 '08. The cost-saving initiatives that have been introduced in light of current trading conditions will allow us to keep the margins in the low to mid 50s.

Slide 15 on South America shows that the subscribers increased by 20% and revenues increased by 16% in local currency, although they have been impacted by the strong dollar. EBITDA for the quarter one was $94m and EBITDA margin was 40%, up eight percentage points from the same period last year. The main factor driving the improved profitability is cost reduction, coupled with favorable product mixes across the business, including Colombia, which produced an EBITDA margin of 20%.

Quarterly highlights for Africa are shown on slide 16. 764,000 subscribers were added across the region in the first quarter, which represents a year-on-year increase in total subscribers of 52% helped, in part, by a resumption of subscriber growth in Senegal. The highest net additions were in DRC, Chad and Tanzania, as a reflection of the considerable investment in these markets. Revenue growth, at 25% in local currency, remains strong, taking into consideration the economic environment. EBITDA for Q1 reached $59m, up 12% year on year, and the EBITDA margin was 34%, an increase of more than two percentage points year on year.

CapEx for the region as a whole was $107m, up 23% year on year and representing 62% of revenues. The rollout of our network in Rwanda is going well and we are on track to launch services there before the end of the year. We will continue to invest heavily in CapEx and marketing and promotional activities in order to capitalize on the future growth in Mobile development across Africa, as penetration is still very low and we expect the slowdown to be temporary due to the economic situation. However, in Africa, it has been important to refocus our investment into the most attractive areas in order to maintain our hurdle rates of return on new investments.

Finally, slide 17 shows that, in Q1, Asia recorded subscriber growth of 34%, revenue growth of 7% and a decrease in EBITDA of 7%. The EBITDA margin softened to 36% as a result of increased competitive activity. We have taken the decision to carry out a strategic review of our Asian assets, which could lead to a full or partial divestment of our business in the region. But decisions about the future of the cluster will be made following this review.

On slide 18, you can see Amnet's performance in Q1. Revenues were $43m and EBITDA was $16m, producing an EBITDA margin of 37%. Without the restructuring cost of $2m, as a result of outsourcing to increase efficiencies, the EBITDA margin would have been 42%. CapEx in Q1, excluding installation CapEx of $14m -- excluding installation CapEx was $14m, and we anticipate CapEx for Amnet of approximately 20% of revenues in 2009, excluding installation costs.

Slide 19. The opportunity for Millicom is to use its marketing skills to sell Broadband services to existing cable customers, and we are pleased with our progress to date. On this -- the slide you can see that we have achieved 22% year-on-year growth in Broadband subscribers. We already have a market share in Broadband of 49% in Honduras and we aim to increase our market share in the other Amnet markets.

And now, I would like to hand over to Francois-Xavier, who will take you briefly through the financials.

Thank you, Mikael. Please turn to slide 21, where you can see that CapEx for the first quarter was $210m, down 20% year on year, so that the CapEx to sales ratio has fallen to 25% for the quarter.

We have adjusted our expectations for CapEx for the year to $850m, compared to the $1.4b in 2008. Last year was a peak year for CapEx, as we were rolling out 3G in Latin America and building coverage, both in Latin America and in Africa. But following these rollouts in Latin America, the need for CapEx is less. The current economic climate has, in addition, made us reassess our needs in 2009.

Millicom has tight control on CapEx and is very focused on returns on new investments. We are determined that we shall continue to achieve the targeted internal rate of returns on new investments in excess of 20%. We are now closely monitoring CapEx levels in relation to both EBITDA levels and to the growth potential on a territory-by-territory basis.

Please move to slide 22. Our depreciation in the first quarter was lower than in Q4, at $147m, as a result of a combination of currency depreciation and CapEx slowdown.

On slide 23, you will see that net debt to EBITDA remains just below one times. In the first quarter of 2009 we managed to secure close to $200m of additional debt financing for Cambodia with IFC and, in Guatemala, with local banks.

Please move to slide 24. At the end of the first quarter Millicom had $548m of short-term debt, set against $729m in cash, giving us flexibility in terms of financing. Our objective is to keep extending maturities and, today, the average maturity is above three years, as shown on slide 24. The $229m short-term debt related to the Amnet acquisition will be refinanced in the coming months. The remaining $319m of short-term debt is mainly composed of overdraft facilities that are rolled over on an ongoing basis.

On slide 25 you can see that the effective interest rate in Q1 was down to 8% for the quarter, as we are benefiting from decreasing interest rate on the portion of our debt that is structured with variable interest rates.

Please move to slide 26. You can see that our overall tax rate continues to be below 30% and, in Q1, the effective tax rate was 25%. Taxes amounted to $43m. We continue to benefit from a favorable country mix and from effective tax planning. We expect the effective tax rate for 2009 to remain below 30%.

On slide 27 you can see that EPS is up from Q4 2008 to Q1 2009. Excluding discontinued operation and the effect of the deferred tax assets in Colombia in Q4 2008, Millicom reached a normalized EPS of 1.33 in Q1, up 19% from the last quarter. The benefit of increased EBITDA on controlled CapEx contributed to a positive free cash flow, which we expect to deliver as well for the whole of 2009 for the first time, and that we can see on slide 28. In Q1, free cash flow amounted to 5.7% of revenues.

On slide 29 you can see that most of our cash generation in Q1 is coming from Latin America, while we are still in an investment position in Africa. Cash flow has improved in Central and South America in 2009, as last year we were building out 3G and we still had some coverage CapEx to complete. Cash flow in Africa has temporarily decreased in Q1 as a consequence of working capital movement, mainly linked to a supplier's payment in Q1 2009.

Please turn to the summary cash flow statement on slide 30. Our closing cash balance at the end of the quarter was $729m. We will be generating free cash flow this year and we expect to see cash flow growing in subsequent years. I would now like to hand over to Mikael for his final comments.

Thank you, Francois. As I said in our press release, there are some strong indicators in these results which demonstrates how, through tight management control, we can continue to grow the business in a difficult environment. With a margin of 44.5% and a good free cash flow generation of $48m, both our profitability and cash position are strong.

VAS/SMS/3G are growing rapidly, up by 45% year on year, and now account for 15% of Mobile revenues. This segment will be important -- will be an important driver of growth going forward. Churn was down and market share was stable on a weighted basis, although we achieved market share increases in Central America and Africa, which shows that we are outperforming our competitors in these key markets.

So despite the adverse economic environment, we continue to be confident in our medium and long-term prospects for Millicom. We are on target to maintain our current EBITDA margin for 2009, we are on track to be free cash flow positive for the first time in 2009 and we have revised our CapEx forecast to approximately $850m for the full year.

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

Thank you, sir. (Operator Instructions). I'll pause for a moment to assemble the queue. Our first question comes from Sven Skold with Swedbank. Please go ahead.

Thank you. First, a question on the churn rate that you showed on one of the pages. How has churn developed year on year, and not compared to the fourth quarter of 2008? The reason for my question is, of course, the much higher churn figures that you showed in your 20-F filing in the US.

My second question is regarding Colombia. What has improved in Colombia this quarter compared to the previous quarters? Thanks.

Okay, thank you. Let me first address the churn question. I don't have the data [pre-data]. But I think normally with the deeper penetration you get some increase in churn, because you [have] basically put on subscribers from the lower economic rata. But I don't -- I have to look at the data and come back for the past.

In terms of Colombia, it's a combination of cost control as well as a product mix. We had a very strong growth of VAS revenues. We were up 51% in Q1 versus Q1 -- in '09 versus Q1 '08. We also had strong growth in postpaid revenues, strong growth on cross-net revenues as well as on-net revenues. So it was a combination of all of this, basically, product mix and cost control, that grow the margin.

Have you refocused the Colombian business so that you only focus on a few areas in Colombia now, or --?

I think we continued what we were already doing. We have a very strong focus on the value-added services because, this way, we can attract the higher end, the more active user base, so that's core for us. Second, we have also reactivated the postpaid segment, which will offer attractive growth in the short and medium term.

Okay, thanks.

Thank you. Our next question today will come from Stefan Pettersson with Nordea. Please go ahead.

Yes, hello. I'm curious about the strategic review that you're about to make in the Asian markets. The last time you initiated a strategic review this was based on external interest in your assets. Is it the same this time, that you have received interest for a particular asset? And, in that case, which asset?

Secondly, given the depressed markets, we've seen market values coming down. Do you believe you can maximize the value by selling during this economic crisis? Thank you.

Okay. The strategic review on Asia is internally generated. We have very good positions in Asia. We are either number two or one in the markets we are in, and with relatively low penetration rate, so we have a lot of growth ahead of us. However, we lack scale in Asia, so we are going to review the relevance of our presence in these markets.

And at this stage I just want to emphasize that no decision has been made. And this review could lead to a potential disposal of these assets, but we don't want to comment at this stage any more of that. I -- the market will set the price if we get that, but at this stage we have no active sales plans.

Okay, thank you.

We'll take our next question from William Miller with JM Hartwell. Please go ahead.

Morning. I'm curious on the cash you're going to generate and the Amnet financing, which seems to be going well. Where -- what are you going to do with your cash? Particularly if you decide you will do something in the way of a sale or whatever in Asia, you're going to be really overburdened, to some ways of thinking, with cash. And I'm just wondering how -- with CapEx coming down, margins going up, Amnet financing seemingly going well, what your plans are for the cash.

Okay. So, first of all, no decision has been made regarding the outcome of the strategic review. But, let's say, should a sale happen, Millicom will have several opportunities to use this -- the sales proceed, such as external growth, dividend distribution, debt repayment or share buybacks. The Board will review these options in due time and has not reviewed them yet.

The outcome could potentially a combination of several of these options. However, we believe that it is unlikely that any proceeds will be fully distributed as dividends and that the cash retention option is not ideal either, as cash returns are historically low. So we won't keep the cash, but we won't distribute all of it in dividends either, should a sale happen, once again.

Francois, that's terrific. But would you put a priority, then, on what you will do with the cash? If you could list four or five things in the order of what you feel your priority is, because you're -- whether you sell any in Asia or not, you're going to have a hell of a lot of cash on the balance sheet which, as you've pointed out, is earning 22% or something like that. You've got debt which is costing 10%. You've got stock which is selling at a -- looks like a reasonably low valuation. And I just wonder what the other opportunities are. So could you therefore prioritize what you think you will be doing with whatever cash -- excess cash you feel you have?

I think we are very early on in this process and it would be premature to put any emphasis. We just begun this -- we just begin this process with this announcement. So I think it's simply too early to come up with a statement in this area.

Okay. Well, I'm suggesting that, even if you do nothing with Asia, you're still going to have a hell of a lot of cash running around, and I'm just curious what you will be doing with it.

Okay.

Thank you. We move now to a question from Kevin Roe with Roe Equity Research. Please go ahead.

Thank you, gentlemen. A few questions, first, on the strategic review in Asia. What's the timing expectation there? Is this something you hope to move quickly on, on the review, or could this take till year end? Any color there would be great.

And, Francois-Xavier, could you give us a sense of what the proportionate net debt is in Asia for your three properties?

And, turning to Africa, the Senegal license you mention in your release, no real update there. But when are you hoping to have resolution of this? Is this also a 2009 event? Any -- if you could share any of your expectations there, that would be terrific. Thank you.

Okay, Kevin. I will deal with the Asia review time and the Senegal license, and Francois will come back on the debt situation. I think any strategic review, call it a three to six-months' process. I think that would be a normal time.

Second, on the Senegal license, we have an active dialogue with the government. We are each pursuing our cases in respective accords and I think this will take some time to sort out. So I would look at more towards the end of '09 for resolution on this issue.

As far as the debt in Asia, we have -- we are fairly highly leveraged in Asia, actually. And, as you could see in the press release, we have just arranged, in fact, some financing, namely, $100m in Cambodia with IFC, and we have a fairly high level of leverage as well in Sri Lanka. So we have more leverage than the average of Millicom.

And lastly, in Central America, could you give us an update on the competitive landscape, specifically Digicel? In the past few quarters they've been very aggressive on promotional activity. Have they pulled back at all on that aggressive [stance]?

I think we have seen some signs of relative rational behaviors by our competitors in Central America broadly. In this situation with slowing growth, we have pulled down on the subsidy levels we've given to new subscribers. In general, our competitors have followed that. In Honduras, we've seen some sign of Digicel pulling back. They used to sell prepaid phones at about $10 on a subsidized basis and, reportedly, now they are doing it at $20, so some signs of more rational behaviors also from Digicel.

Thank you. That's helpful.

Welcome.

Thank you. Our next question today will come from Rick Prentiss with Raymond James. Please go ahead.

Yes. First, on the balance sheet, you mentioned the refinancing in the coming months on Amnet. Can you talk a little bit about what your options there are as far as refinancing, what markets you're looking at and what kind of rates? Just as we watch the credit markets start to open up a little bit, just curious what you're seeing.

Okay. We have basically two options. One is to go for the high-yield bond route, which is not our preferred option. Although the market has eased a little bit lately, but this is not our preferred option. Our preferred option is to go for an extension of a banking facility for a couple of years, which is our main option that we are working upon. On the top of it we would deal in that case with flexible rates, which is more favorable as well in terms of cost. So this is still work in progress, but we expect to finalize that in the next coming months.

Okay. And then, I think you talked a little bit about how you look at your CapEx spending and related to your IRR thoughts. Can you walk us through maybe a little more detail about the hurdle rates and how you're looking at the economy and adjusting the CapEx to make sure you get free cash flow positive? Are you quarterly -- or how often are you looking at the CapEx program to refresh your thoughts?

Yes, we are looking at it quarterly, obviously, and so we are targeting at all times at least a 20% internal rate of return for each and every single project. And we carry out, as well, post-mortem analysis for all projects that we carry out in order to check that we get that return, which is absolutely critical to us.

We also do a simplified site -- payback by site on a monthly basis, which allows us to take fast actions if we have underperforming sites.

Okay. And then, a final question for you. You mentioned the remittances, how they've dropped off in the Central American region. Have you seen anything in Africa or -- I'm not just familiar with how the remittances flow to there, but you mentioned tourism's been affected, but I wonder if remittances are having any effect in Africa also?

We have -- we don't have the same level of data for Africa as we would have for Central America. We are still looking for that. But one would assume, logically, that they would be down too.

Okay, very good. Thanks, guys.

Thank you. We'll take our next question today from [Anders Fenberg] with [RAM]. Please go ahead.

Hello, Anders Fenberg from RAM. Congratulations on a fantastic cash flow --

Thank you.

-- particularly in Central America and South America, I guess Latin America's $154m in the quarter. And if you -- I would guess if you exclude Columbia, which is cash flow negative, I would assume, it's probably $170m, $180m, or [$700m] on an annual run rate. But that cash flow is [clouding] losses in Columbia. What kind of patience do you have in Columbia regarding the losses there?

And secondly it's going into Africa, where you have 62% CapEx to sales. How much can CapEx to sales come down there? How much can actually the cash for the total Group come up?

Okay. Let me start by Columbia. We are encouraged by the quarter results in Columbia. We know it's a step by step building here. And, as we said before, we think in the next three years' time we will get up to the average margins in Columbia, similar to what we have today. So it's basically a question of blocking and tackling to get there in Columbia.

In terms of the Africa investments, in 2007 and 2008 we built significant coverage in the African markets. We were behind competition. That's now behind us. The new CapEx is going in more on capacity. But in terms of cash flow now we have some payments stemming from that period that is coming due, and that's impacting the cash flow in Africa. Over time, of course, the -- CapEx to sales is going to come down also for Africa, but 2009 is still going to be a heavy investment year for Africa for us.

And in terms of -- in Central America, for example, the minimum level in CapEx is probably around 10%, which is maintenance CapEx. So the amount in Q1 was probably a little bit lower than that, but it's probably exceptional, and we are rather forgetting that maintenance CapEx around 10%.

And a follow-up question, first, on Columbia. Are you getting any support from the regulator in terms of help against the very aggressive on-net pricing, the comps that you have seen?

And on Africa, a follow-up question. Could we get the CapEx to sales down in kind of the 20s, mid-20s range or something like that in one or two years' time? What kind of long-term CapEx-to-sales target are you having there?

Okay. Let's talk about Columbia first. About four weeks ago the regulatory body in Columbia pronounced America Mobile having a significant market power. And, as such, the regulator has said that they would set the inter -- the across-net call rate.

We -- this is a private agreement between America Mobile and the regulator. We are not privy to the details of it. But it's fair to say that, over time, we expect some help from the regulatory side to drive our business forward. But we think we have a lot to do also on our own to improve our operating performance. So we think, over time, the regulatory environment will be more fair than it's -- compared to where it is today.

CapEx, I think, to sales in Africa, I think we still will have, in 2009, 2010, relatively high investments. These are large territories, lots of opportunities to find business and we're going to invest to capture those.

A final follow-up question on Columbia. Can we do anything with your geographical regional exposure there to focus even harder on the [Campiana Banquela] coastal area where you have a strong position, and not give up, but focus less on the less populated area further inland? Or --?

Well, we are really treating Columbia as basically five different markets. So we have a territory management structure, each market led by what we will call a mini general manager. And what we're trying to do is optimize the opportunities in each market area. And naturally, it's easier, sometimes, to build on strength rather than turnaround a weakness. So we have quite strong plans to accelerate our presence also in the [Valencia] territory.

Thanks.

We'll move now to a question from [Louis Sarkes] with Chesapeake Partners. Please go ahead.

Hi, thank you. I had just a couple of quick questions. One, the $33m gain on the write-up that you took in -- on the -- taking in of the JVs, did that flow through to the income statement or not?

Yes, it does, yes, in the other income line.

Okay. So that should be really backed out of (multiple speakers).

You don't really see because it's offset by a similar amount which [cover] the foreign exchange losses. And both amounts are fairly similar, one to each other; one is $32m, the other is $33m. So [take] one to each other.

Okay. Okay.

The second question is, I think it was on slide 16, where you show the one-to-one debt over EBITDA. The EBITDA is annualized on that slide, I assume?

If we take the EBITDA of the last quarter that we annualized, indeed.

Okay. So that's not really a -- do you have any sense in terms of what you think it will be in Q4, looking ahead?

Well, I can't -- because we don't give any guidance in terms of EBITDA, so I can't give you. You have to do the math.

Okay. Thank you very much.

But, obviously, it will be a little bit lower because we are still growing in the long terms.

Thank you.

Okay.

Thank you. Your next question today comes from Lena Osterberg with SEB. Please go ahead.

Yes, hello, Mikael. Welcome.

Hi.

I guess I shouldn't say welcome. You've been there for a while, but it's the first time we get to speak to you.

As a new CEO, I have just a few questions on your view of the Company and the strategy because in a very short time there's been several assets put up for sale; Sierra Leone is one and now Asia. So how do you view Millicom going forward, because it's rapidly transforming from a growth stock into a more cash flow sort of stock? And the proceeds that you get, will you invest those?

And there are a few licenses coming up in, I think, in Nicaragua, Costa Rica, there's some assets for sale in Africa. Is that where you're looking into or is it more that we should see it as a smaller, more regionally-focused Company which focuses on cash flows? How do you view the Company going forward? That's my first question.

And then, also, a previous guidance on Africa was that you would continue to expand margins by roughly one percentage point quarter on quarter. This quarter you actually contracted margins by one percentage point. Are you still committed to the old guidance on Africa, or how should we view it going forward?

And then, also, I was wondering if you could shed some light on the rates that you refinanced on the recent refinancing of $200m?

Okay. Let me start by Africa maybe first there. I think we are confident that we can expand the margin. I think, quarter to quarter, we might have some volatility. But I think we've said that over a three-year period we would expect to be at the Millicom average, and we still have that target.

In terms of vision, I think at this stage it's just simply too early to say what we would do with any proceeds from the Asia strategic review that may or may not lead to asset sales. But I think in this environment it's very important to focus on what I would call operational excellence. And that you drive by continued innovation, both around revenue generation as well as cost efficiencies and cost out, and we're going to focus heavily on that one. If there are growth opportunities that fit our return requirements, both in Africa and in Latin America, we would naturally look at those when they come up.

So I should view it that you would not change your strategy? You will still look to be a growth Company. Because when the macro-environment turns, there's an opportunity to grow still?

Yes, absolutely. And, as you saw from the results, and you know we still had good growth in local currency and, naturally, we -- our objective is to continue to do that.

Can you just maybe let us know why you decided to enter -- exit Sierra Leone, because I don't think that that was properly explained last quarter?

Well, Sierra Leone is a quite small market with a large number of operators and quite complex regulatory environment. So, basically, we had two choices, either to basically consolidate and maybe take over some of our competitors to create economies of scale, or exit. And given the fact that it's, as a market, is quite small and it would have been work intense to do, we decided to exit.

Okay.

In terms of refinancing rate on the new financing that we just secured, they are very much in line with the average interest rate that we have globally for Millicom. I would say it's slightly lower as well, due to the fact that they are on variable rates as well.

Okay, thank you.

Welcome.

We will take our next question from David Kestenbaum with Morgan Joseph. Please go ahead.

Okay, thanks.

As far as the Company, in the past, you've been conditioned to think that CapEx is rising, growth expectations are rising. So now that you're cutting CapEx, do you expect your long-term growth to decline? Or are you -- or is this more just a reaction in the short term to the market -- slowing market in the short term, but we'll see CapEx rise in the future as your growth expectations increase?

I think that there are two elements of this reducing CapEx. 2007 and 2008, we had a very strong in primarily geographic growth in Africa, but as well as some opportunities in Latin America.

In 2009 our CapEx plan called for more capacity investment than coverage. And capacity is a significantly less investment and quicker returns because you -- hang radio treatment normally on an existing tower already, so that was the plan.

In this environment, the economic environment we live, we further refined that plan and put on hold some geographic developments, primarily in Africa, and shifted that CapEx to build out capacity where we are already present. If you -- if and when the economic environment improves, we'll probably go back to some coverage buildup, primarily in Africa, but we haven't seen that yet.

And let's not forget that we are still investing 25% of revenues, which is still high, especially taking into consideration the fact that the rate is much lower in Central America, due to the fact that we don't invest any more in 3G, because we did it last year, and we don't invest anymore, as Mikael just said, in coverage.

Okay.

Now, as far as ARPU, are you seeing any signs of stabilization? Obviously, you've had massive declines in the last few quarters?

Well, I think a three-point-something decline in ARPU in this economic environment is a quite low decline. And I think we've been hit on ARPU, primarily in Central America, where we have a clear decline in international incoming calls. It's a reflection of the recession in US, where you have a lot of Central American migrant workers, and also reflection of the decreased interconnect we get from those calls as well as some extra taxes put on by the governments in two of the three countries at the end of '08. So you have a clear sign of that.

Difficult to forecast but, when we look at the decline in Q1, we find that actually it's quite small, given the circumstances. And, as I said, we are focusing -- increasing our emphasis with our value services to attract the more active customer. So we hope that that could be a complement against increased -- the subscriber growth we get from increased penetration.

Okay. And then, finally, on the sale of Asia, how do we read the -- your commitment to Sri Lanka? Is that necessarily going to go if you sell camp -- Laos and Cambodia, which makes sense geographically? Or do you think that they'll be sold in one fell swoop.

As I said, we just announced the beginning of the strategic review so it's too premature to comment on that at this stage.

Thanks.

Thank you. We'll move now to Chris King with Stifel Nicolaus. Please go ahead.

Good morning. Just a quick question regarding minutes of use trends throughout your various regions. It looks to us, at least, that your South American MOUs held up probably a little bit better than we had expected. I just was wondering, with your ARPU down a little over 3% sequentially, are there widening disparities between the various regions on your MOU trends, particularly on the prepaid side? Is any one region doing materially better than the rest from an MOU standpoint?

There are no big variation. The -- actually, the MOU per user is also a little bit dependent on promotions that we run. So if we have a lot of promotions around double balance or whatever the new reload, that drives higher usage. I think the trends we've seen is less incoming international, less across-net calls and more on-net calls. Those are the trends we see.

And then those are trends really being seen across all four regions?

Yes. But the international income is more pronounced in Central America, where the -- where we have a larger portion of the minutes in international incoming.

Understood, thank you.

You're welcome.

We'll move now to a question from Soomit Datta with New Street Research. Please go ahead.

Hi, there --

Hi.

-- yes, Soomit at New Street. A couple of things. First of all, please, Honduras. Are you able to quantify, at the revenue and EBITDA level, the impact of the interconnect cut, please, in Q1?

And then, secondly, could you talk a little bit about Ghana? There is a bit of reference in the text. But I noticed MTN had a good couple of first months in terms of subscriber net adds. I suspect the new entrants have also done quite well. I've also heard you're cutting back your CapEx in Ghana, and whether that's true or not, I'm not sure. But if it is, is it a good time to be cutting back CapEx, given your market share is under pressure? Thanks very much.

Let me start by Ghana. In Q1 there has been a significant slowdown in the total gross new in the market as a reflection of the deteriorated economic situation. So we believe, on average, we perhaps lost one point of market share in that environment. We believe our competitors are also going to report a reduced sub intake in Q1.

In terms of CapEx, we have ample of capacity in Ghana. In all our markets we measure our peak hour capacity, and we have lots of capacity in Ghana to react to when the markets return or run promotions to try to drive revenues.

In terms of the Honduras impact, I think it's -- the impacts are in terms of millions of dollars, probably, versus the 2008 numbers.

In revenues, the impact in EBITDA is more limited because we save on the interconnect that we pay as well, plus we have entered into cost-saving initiatives. So the impact in EBITDA has been limited.

Okay. So on a quarter basis, it's -- at the revenue level, is it perhaps low single-digit millions of dollars or --?

$4m, $5m something, versus 2008 revenue generation.

Okay, thanks.

You're welcome.

Thank you. Our next question today comes from Jason Willey of Standard and Poor's. Please go ahead.

Yes, good afternoon, Jason Willey, Standard and Poor's Equity Research. Just a quick strategic question. I was wondering how you're thinking about the Broadband or the fixed assets in Latin American and opportunity to potentially expand your presence there. I guess it goes back to some of the original questions on the amount of cash that you currently have, and then maybe some potential proceeds in the future. Wondering about what your interest is in potentially building out that footprint. Thank you.

Yes, I think it's also Broadband. We are pursuing the Mobile brand -- Broadband by our 3G investments, and that's doing well. In terms of fixed Broadband via the cable network, as we have in Amnet, we have no further plans for the moment. We are busy just trying to improve the performance of Amnet, infusing the Millicom type of sales and marketing and customer service focus on this business. So we have no further plans on expansion on Broadband at this moment.

Thank you.

You're welcome.

We now have a follow-up question from Stefan Pettersson with Nordea. Please go ahead.

Yes, hello. I have two questions. The first one relates to depreciation. You invested quite heavily in the fourth quarter. And, despite this, we did not see an increase in depreciation in the first quarter compared to the fourth quarter. Do you expect the depreciation to sales level to remain at this level throughout the year and, hence, we shouldn't expect the depreciation to decrease that much during this year?

Secondly, it relates to the financial net. Would you say that the financial cost for debt is approximately at the level we should expect throughout the year, at around 8%?

Okay. Regarding the depreciation, the depreciation has declined in absolute value in Q1 versus Q4 of last year. This is mainly the consequence of currency depreciation. Indeed, because we have invested massively last year, $1.4b, so, as a consequence, we should see our -- and especially in Q4 as well. So we should see our depreciation increase in absolute terms.

And I don't expect that if currency -- if foreign exchange rates remain where they are today, I don't expect that the depreciation will decrease, but probably marginally increase in the coming months, given that we continue investing around $200m to $250m every quarter.

Regarding the financial costs, much depends on the growth -- on the evolution of the interest rate in the market. You need to understand that, outside of the high-yield bonds, which is at the fixed rate of 10%, 90% plus -- yes, 90 -- 95% of our debt is at variable rates. So much depends on what the variable rates will be. If they remain at current level, it could probably remain at this level or probably decrease a little bit further.

Okay, thank you.

Thank you. Jan Dworsky of Handelsbanken has our next question. Please go ahead.

Thank you. Sorry for coming back to the strategic review in Asia. In relation to the minority shareholders in two of those countries, have they been asked how they see that situation or --?

Well, they are aware of our announcement.

And then, secondly, you had strong subscriber intake in Bolivia and Guatemala in the quarter. Is there anything special worth highlighting in relation to that?

No. I think just that's good sales and marketing efforts, basically. And I think in Bolivia we have been expanding the network and entering into new smaller cities and that has also drive up -- been driving the subscriber growth. And Guatemala is a continuation of the marketing efforts we have in place.

And then, in Central America, can you comment anything in relation to -- of course the markets are affected by the weaker economy. It's -- when you look at the situation in March, April, is that worse than the beginning of the quarter, or is there signs of -- any signs of stabilization in that region?

Well, I can't really comment about the new quarter, but we are waiting for the remittance data for March, which we expect to continue to be down versus a year ago. So I don't see anything short-term changing in the economic environment in Central America.

But when you look at your own business in March compared to the beginning of the quarter, was there -- is there a stable force within the quarter?

Within the quarter, it was quite stable, within the quarter.

Okay, thank you.

Thank you. Sven Skold with Swedbank has our follow-up question. Please go ahead.

Yes. Hi, again.

Hi.

I was just wondering about -- is it possible to [being] cash out of every country that you're in, or do you see any changes there?

And, second, do you see taxes changes in any other countries, telecom-specific taxes?

Okay. As far as cash repatriation is concerned, we didn't see any change in spite of the deteriorating economic environment. So we didn't face any issue regarding cash repatriation. We have been able to repatriate whatever funds we needed to repatriate, be it in the form of dividends or technical service fees or repayment of shareholder loans, if any.

As far as taxes are concerned, no major changes apart from what we said in Honduras, in terms of interconnection rates. And a new tax has been introduced in [ERC] that will [cheat] the tax on revenues, so it will not impact our P&L directly, but it will slow down the growth of the market because the consumer is going to pay for it. It's kind of the VAT tax, which is going to increase over time. I think it has been introduced with a 4% rate for the time being, and it will go up to 10% over the last year or so.

Okay, great. Thanks.

Thank you. And our final question today will come from William Miller with JM Hartwell. Please go ahead.

Is there any macro-variable? I know in Central America you just said you were looking at remittances. Is there anything anywhere else that you can look at and say, gee, that should do us a lot of good or that should do us some harm? And could you share that with us either by region or on a country-by-country-basis? Or are you just going to wait and see what happens?

Well, we haven't found really a single other economic indicator as powerful as the -- basically, the remittance. It's because there is also this sort of natural behavior that the money you make yourself you might not spend as easily, but the money that somebody sends to you more easily goes to consumption. So we believe that the reduction of these remittances really have a quite significant impact from people's spending behavior.

Great, thanks very much.

Yes, okay.

Ladies and gentlemen, that will conclude today's question and answer session. And I'd would now like to turn the conference back over to your hosts for any additional or closing remarks.

Well, I would just like to thank you for joining the call today, and we look forward to seeing some of you in our upcoming road shows. So thank you very much, and goodbye.

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