Millicom International Cellular SA (TIGO) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the Millicom Q2 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 your host today for 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. Before we start, I would like to point out that all the figures we are presenting today exclude our three Asian operations which have been reclassified as discontinued operations from January 1, 2009, under IFRS. They also continue to exclude Sierra Leone. All historical figures have been restated to provide a comparable base.

Now please turn slide number three. We are very pleased that the Q2 results continue to show the benefits of management actions taken over the last 12 months to increase both margins and cash flow generation. Our EBITDA margin moved up to 45.6%, which is above our long term target margin for the Group as we tighten cost controls and adapt our product offering to changing market conditions. Cash flow continues to improve strongly year-on-year, with free cash flow standing at 7% of revenues in Q2.

Value-added services are a clear success story, reflecting our focus on providing innovative services to customers. Constant currency VAS levels were up 47% year-on-year in Q2 and now represent 18% of recurring revenues across the Group. The longer-term opportunities in data and other mobile services are significant.

Slide four. Year-on-year subscriber growth in second quarter was 25%. And we ended the quarter with 30.8m customers. Revenue grew by 5% year-on-year to $814m and by 11% organically at constant currency. EBITDA increased by 14% to $371m for the quarter, producing an EBITDA margin of 45.6%, which was up 340 basis points year-on-year. Net profit for the quarter amounted to $114m, with operating free cash flow reaching $120m, equivalent to 15% of revenues.

Slide five. In terms of sequential growth, some 1.7m subscribers were added in the quarter, representing a growth of 6% over Q1. Revenues were up by 5%, EBITDA was up by 6%. And we recorded an increase in the margin of 39 basis points. CapEx in Q2 at $157m was 15% lower than in Q1.

Slide six. ForEx continued to have an impact. Revenues were up 11% in local currency for Mobile operations. And 17% in total, including Amnet and Navega. Net depreciation of currencies against the dollar eroded 12 percentage points, so growth from the top line equivalent to $92m. We expect the impact of ForEx to begin to stabilize in H2 as the major currencies move out of last year -- moves over last year begin to annualize.

Slide seven. The most severely affected regions are Africa and South America. The underlying growth in local currency remained strong in Africa at 23% and in South America at 16%. There was no local currency revenue growth in Central America, primarily as result of slower economic growth with declining remittances from the US. Minus 13% for Q2 09 versus Q2 08. Our revenue performance was an improvement on the Q1 trend, despite an acceleration in remittance declines.

Slide eight. Looking at revenues by category, the elements I would like again to highlight is VAS/SMS/3G, which has grown 47% in local currencies since Q2 08, accounted for 18% of Mobile revenues in Q2 09. Data and other Non-Voice services will be a significant secular growth story, particularly in our geographies where fixed line penetration is likely to remain low. In addition, they are an important component of customer loyalty.

Slide nine. Whilst the share of revenue accounted for by SMS traffic has remained constant over the last three months at 10%, other VAS revenues, including Non-Voice services daytime content, has increased from 6% to 8% of recurring revenue quarter-on-quarter. This growth has resulted from our efforts to get to know our customers and understand and meet their needs. We expect to see Voice, Data and Content VAS growing strongly strongly in the coming years.

Slide 10. Just to give you two examples on how we've been innovative in our services, in South America local PC penetration is a barrier to take-up of 3G services. So we have to introduce the proposition whereby a customer can pay for a laptop over the life of the contract when they sign up to a 3G data-card service.

Slide 11. Two other hurdles to VAS revenue growth are non-configured phones and customers who don't know how to use the services available. In Bolivia, we have some trainers out to the streets to configure phones, demonstrate services to customers and encourage take-up through training.

Slide 12. At the end of June, 2009, Millicom's total market share on a weighted basis stood at 27.9%, up 0.9 percentage points from H1 08 due to our growing market share in Africa.

Slide 13. At the end of second quarter, average churn for the Group as a whole stood at 4.7%, down 0.4% from Q1. The improvement was greatest in Central America at 1 percentage point as a result of our focus on higher revenue generating and more loyal customers.

Slide 14. Emerging market economies continue to be affected by strong headwinds. Remittance into Central America continued to fall sharply in the second quarter, down 13% year-on-year. And this has lead to a slowing of these economies. Our own revenue trend in the region, however, has shown some signs of stabilization. So, while the phenomenon is definitely a drag on growth, our own actions in the market are mitigating the impact to some extent.

We have also seen a return of inflation in Ghana and a decline in tourists, which has impacted the economies of Senegal, Tanzania and Mauritius. 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 2.4% lower in local currency in Q2 than in Q1 09.

Slide 15. We are responding to changes in our markets by seeking ways to increase our proximity to the consumers and developing customer segmentations with tailored service offering. We continue to support affordability by staying in lower denomination [vehicles]. And by developing loyalty programs and reward promotions we have seen a reduction in churn.

We have also focused on our cost structure and we are seeking to replicate proven cost saving techniques across our markets. We have also adjusted our CapEx in light of these market conditions.

Please turn to slide 17. Now let's look at the clusters in more detail. In Central America, subscribers grew 18% year-on-year, with 588,000 subscribers added in the quarter. With average penetration in our Central American markets of around 83%, it is understandable that subscriber growth slows down as with Voice traffic growth. That's why we are increasing our focus on VAS daytime broadband services in these more mature markets.

Revenues for Q2 were $332m, down 3% year-on-year as a reflection of economic conditions, including lower remittances from the US. EBITDA reached $187m, which was flat year-on-year but up 3% in local currency. Tigo's strong number one position means that Central America continues to have an excellent EBITDA margin of 56%, with very strong cash generation. CapEx in Central America was $20m in Q2, 79% lower than in Q2 08.

Slide 18. In South America, subscribers increased by 17%. And revenues increased by 16% in local currency, although the strong dollar continued to impact the top line, resulting in a 2% decline in reported revenue numbers. EBITDA for Q2 was $98m and the EBITDA margin was 39%, up almost 7 percentage points from the same period last year, which is a reflection of our focus on profitability through product mix and cost reduction initiatives.

Slide 19. In Africa, 762,000 subscribers were added across the region in the second quarter, which represents a year-on-year increase in total subscribers of 41%. The highest net additions were in Tanzania, Senegal and Chad, reflecting the considerable investment we made in these markets. Revenue growth at 23% in local currency remained strong, taking into consideration the economic environment. But continued depreciation of African currencies year-on-year has put pressure on growth in dollar terms.

We have, however, witnessed a more stable foreign exchange environment in the second quarter. And this is reflected in the sequential growth in revenue of 7%. EBITDA margin for Q2 reached $62m, up 9% year-on-year. And the EBITDA margin was 34%, an increase of approximately 2 percentage points year-on-year. CapEx for the region as a whole was $72m, representing 39% of revenues for the region, which is an indication of our confidence in the medium to long-term growth potential of Africa despite the current challenges.

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 were operating free cash flow neutral in Africa, a very important landmark. Future cash flow performance will depend to some extent on phasing of CapEx.

Slide 20. Revenues for Amnet and Navega were $50m and EBITDA was $25m, producing an EBITDA margin of 47%, including intercompany revenues. Amnet accounted for $44m of revenue and $17m of EBITDA. CapEx in Q2, excluding installation CapEx, was high at $20m due to phasing.

Slide 21. The opportunity for Millicom is to use its marketing skill to up-sell broadband services to existing cable customers. And we are pleased with our progress to date. We achieved 24% year-on-year growth in broadband revenues in Q2. And increases of 18% and 12% respectively in revenue generating units and homes passed.

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

Thank you, Mikael. Please turn to slide 23 where you can see that CapEx for the second quarter was $157m, down 40 -- 54% year-on-year. So that the CapEx revenue ratio has fallen to 19% for the quarter. We have adjusted our expectations for CapEx for the year to $750m, which now excludes around $100m for Asia.

Millicom has tight control on CapEx and is very focused on returns on new investments. We are now closely monitoring CapEx levels in relation to EBITDA levels and to the growth potential on a territory by territory basis.

Slide 24. Our depreciation in the second quarter, at $145m, was higher than in Q1 due to the level of CapEx invested in previous quarters.

On slide 25, you will see that our net debt to EBITDA ratio remained at 1 time, an appropriate level for the current environment.

Slide 26. At the end of the second quarter, Millicom had $537m of short-term debt set against $833m in cash, giving us flexibility in terms of financing. Our objective is to keep extending maturities. And, today, our average maturity is above three years, as shown in slide 26.

At the -- after the quarter end, four banks have committed $200m over two years to refinance the Amnet debt at a rate which is below our current average cost of borrowing. The remaining $337m of short-term debt is mainly composed of overdraft facilities that are rolled over on an ongoing basis.

On slide 27, you can see that the effective interest rate in Q2 remained at 8% as we are benefiting from decreasing interest rates on the portion of our debt that is structured with variable interest rates. Our target is to achieve a 50/50 split of variable and fixed rate debt.

Please turn to slide 28. Taxes amounted to $51m in the quarter at an effective rate of 32%. Our tax rate was lower than Q1 2009, but higher than last year due to a zero tax base in Columbia and DRC.

Slide 29. EPS is down on Q2 2008, as a result of foreign exchange losses this year and foreign exchange gains in the equivalent period last year. Rising depreciation has also been a factor.

Slide 30. The benefits of increased EBITDA on controlled CapEx contributed to a positive free cash flow which we expect to deliver for the whole of 2009 for the first time. In Q2, free cash flow amounted to $59m or 7% of revenues. It declined slightly from Q1 2009 as a result of the biannual payment of interest in the high yield bond in the second quarter of 2009.

As you can see on slide 31, most of our cash generation comes from Latin America, while we are still in an investment position in Africa. Cash flow has improved in Latin America in 2009 as last year we were building out 3G and still had some coverage CapEx to complete. We are very pleased to see operating free cash flow being positive in all regions, including Africa in [Q2].

Please turn to the summary cash flow statement on slide 32. Our closing cash balance at the end of the quarter was $833m. We will be generating free cash flow this year and we expect to see cash flow growing in subsequent years. To summarize, for the full year we are now expecting CapEx for the -- to be, for the year 2009, around $750m, excluding CapEx for Asia, around -- of around $100m.

Our EBITDA margin is expected to be maintained at the current level for the full year. And we deliver -- and we will deliver operating free cash flow for the full year, which, as a percentage of revenues is expected to be in the mid-teens.

Slide 34 and 35. Before handing back to Mikael, I would like to add that we expect to complete the sale of our Asian assets by Q1 2010 at the latest. Goldman Sachs has been appointed to advise on the process. And, to date, expressions of interest have been received from a number of parties for the three assets.

As for our plans for the use of the cash proceeds of the sale, we are looking at opportunities to expand, either through acquisition or new licenses, as we believe in our proven business model. Any external growth opportunity will have to offer both attractive returns and potential leading position over time. There is no rush to make acquisition. Getting the right opportunity is more important than making a quick deal. If there is no immediate opportunity we will either redeem the high yield bond, which is not tax efficient in Luxembourg, or return funds to shareholders.

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

Thank you, Francois. Overall, the Q2 results are encouraging. We had -- we have delivered improved revenue growth from Q1, a better margin, strong cash generation and growing market share. We are confident that our strategy will continue to deliver superior performance compared to our competitors. And we have a robust business which can adapt to changing market conditions.

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

Certainly. Thank you, sir. (Operator Instructions). We'll now move to our first question from Sergey Fedoseev from HSBC. Please go ahead.

Good afternoon. Congratulations with an encouraging set of results. Just two questions, one is a strategic one and another one is more technical. The first one, could you please comment how you would deploy the money from the Asian assets? Would you go to the Africa or to the Latin? Which region would you see as a priority for this money?

And second question, just more technical. I've noticed that on the Q1 press release and the Q2 press release you have the same comment, exactly the same sentence, saying net profit for the period after a net charge of $55m as a result of two one-off events. Could you please comment on that? Is it accidentally copying part mistake or it's meant to be like that? And what are these two events then?

Yes, thank you. I will take the first question of use of proceeds. And we'll try to see where the -- if Francois the second question then.

Our natural growth grounds are Latin America and Africa. And, as Francois said, we would look for opportunities that would give us the mid-term ability to build a leading brand in the markets. And, as Francois said, we are not in a hurry, we'd rather take time and find the right asset rather than rush into anything quick. So we will look for opportunities in Latin America and in Africa. And that's where -- that's in the process we are right now.

Do you have a priority? Sorry, just to clarify, do you have a priority which continent will be more important (multiple speakers)?

No, I think the priority is more the right opportunity.

Okay.

That's the driving priority.

Regarding your second question, for the net profit for the period we are relating, we are talking about the full year 2008, which is the reason why we had the same number for -- in our Q1 and Q2 press release.

All right okay. And could you please comment as well on the one-offs on 2009? What's impact going to be?

In 2009, the main one-off that we had were related to some impairment that we did on Sierra Leone. As you know that we have decided to dispose of this asset last year, we are close to finalizing a deal on that one. But we had to impair somewhat the value of this asset in our books, which we did in between Q1 and Q2. It was spread between the two quarters.

Thank you.

Thank you. We now move to our next question from Sven Skold of Swedbank. Please go ahead.

Thank you. Just a few questions. First, about the African margin which actually was down in Q2 compared to Q1. Can you discuss around that development? And how you look at the margin also going forward, when you say that the margin will be stable in the Group from Q2 into Q3 and Q4, how do you see the mix there? Should we still expect the margin in Africa to improve?

Second question on depreciation, which was fairly high in this quarter. Do you expect it to stay at this level now as depreciation and CapEx, it's approximately, I think it is about the same compared to sales? Which should stay at this level then, that's the question. Or if it will continue up?

And a third question on M&A. Can you provide us with the information, the operational information for the Asian assets? I mean you still own these assets and it's relevant to see the sales and EBITDA figures for those two businesses. That would be helpful.

And a -- just a follow-up on that. I've seen some discussions in media about the price for Cambodia being US$500m and $200m for Sri Lanka. Is that a price that you consider to be fair?

Thank you.

Okay. I'll -- I will deal with the Africa margin question. And I will just comment -- we are not commenting on -- about any media reports on pricing, so no comment from our side there.

On the Africa margin, we are confident that we can lift those margins. We have given the guidance that we are looking about the 3% margin growth per year. Quarter-to-quarter, there could be some stabilization depending on the allocation of expenses. But we are confident that we can lift the margin in this year in the quarters that remain.

Okay.

As far as depreciation is concerned, you need to appreciate the fact that, in Q1, depreciation in absolute value went down, which was mainly the consequence of foreign exchange parities. So, bar any change in foreign exchange parities, I think depreciation should not increase materially from now on because we have -- we are declining fairly significantly in terms of CapEx that we invest.

And can you provide the financial information later on for Asia?

As far as Asia is concerned, I mean these assets have been reclassified as assets for sale. So I mean we don't provide any information related to the performance of these businesses apart from what we have to do according to IFRS regulation, which is we provide it as one single line for all of these assets combined.

Okay. Thank you very much.

Thank you. We now move to our next question from William Miller of Hartwell. Please go ahead.

I just wonder if you could review briefly where you stand with the Senegalese situation, and also in Columbia, with the interconnect charges?

All right. In Senegal, as we said before, we have a parallel process. Each of the two parties in the dispute, that is us and the Senegalese Government, is pursuing the case in respective courts. The Senegalese Government in Senegal and Millicom in an arbitration process in Washington. So that -- that's continuing. In parallel, we have had a series of meetings and those are continuing.

So I think it's going to be a few months still until we have worked into a solution. But both parties have displaced -- have expressed an interest of finding an amicable solution to this issue.

In Columbia, there has been no more movement since the regulatory body announced the intended changes on the status of the America Movil, labeled them as a significant market operator. And there has been -- continued to be some dialog with the regulatory body on various options around that, including asymmetric interconnect rates. Which means that we, as the smaller operator, would pay less, when we call them and they would be more. But there is no firm decisions on implementation of this yet in the market.

Do you expect that to be resolved this year as the (multiple speakers)?

I would expect some -- yes, I would expect some movement towards the end of the year on this issue.

Great. Thanks a lot.

Thank you.

Thank you. We now move onto our next question from Rick Prentiss of Raymond James. Please go ahead.

Yes, thank you. In your attachments there's a very interesting slide in Central America showing churn reduced significantly from 3.5% to 2.5%. Can you talk a little bit about what you're seeing in those marketplaces, which competition has increased in and yet your churn's come down?

And also I think you mentioned that you reduced handset subsidies in the region and your market share stayed up. Just a little discussion on Central America, please.

Yes, I think that in 2008 there was a quite strong attempt by the industry to continue to drive strong subscriber growth which resulted in, I would say, multiple SIM, increase in multiple SIM users. I think we and the rest of the industry players realized that the growth opportunities were less in this market environment. So, there's been a little bit more of a rational behavior in terms of subsidies that have gone into the market. We've been focusing very much on the high quality subscribers and the key driver for that is our value added services that very much appeal to the active user. So, it's a combination of industry behavior and our ability to attract a better customer compared to our competitors.

And on value added services, you're making quite a big point about that on your slide presentation as well. Pretty impressive growth in value added services revenue, also in absolute dollar terms. Can you talk to us a little bit what you think the opportunities are over the next several years as far as growing value added services? And what you think the big applications will be?

Well, we think the mid-term target there is to get value added services up to 25% of our revenues and key there is to continue to innovate. Our objective is to be first in the market with the right kind of a product. We are doing a lot of consumer research, improving our consumer insights to be able to really fine tailor products for various customer segments. So, at this stage I wouldn't like to reveal our hand in what we are planning there. But, there are lots of activities and lots of new products coming out in that arena. As I said, mid-term target 25% of revenues in value added services.

Great. Thank you a lot.

Thank you. We now move to our next question from David Kestenbaum of Morgan Joseph. Please go ahead.

Okay, thank you. Francois, can you talk about the tax implications of the sale? Maybe you won't quantify what the basis is, but can you talk about, I mean are you planning on getting that price higher than the basis and exactly how would you be taxed locally?

I can't provide you with the details but we don't expect to suffer from a heavy tax burden on the sale.

Okay.

It would be limited due to the legal structure that we have currently, we can minimize the tax implications.

Okay. And then as you move -- it seems like you're moving a lot of people to Miami. How will that affect the corporate overhead line on your financials?

I think our objective is to try to either keep or reduce that line and we feel by moving people closer to the market we get more effective. In other words, we probably need less people than we have today, or had today.

And then finally, can you talk about the Amnet acquisition. 5% growth, can we get that higher do you think and where is the inflection point, what do you have to do to get that growth accelerated?

Regarding Amnet, first of all, Amnet is a combination of several businesses because you have broadband, you have corporate services, you have TV services. So, as far as broadband is concerned we were pleased to see that the business grew by about 25%. The growth on the TV services was much lower, although it was still positive. So, it's a combination of different services as far Amnet is concerned.

Our main interest is obviously in the broadband services.

If you look, for example, at growth potential I think in Chile which is naturally more advanced than our Central American market, the broadband, the cable operator there run at about 60% of their customers have also a broadband connection. In Central America today we are at about 30%, so we are halfway there. So, we would like to achieve similar numbers also in Latin America.

And that operator grows in double digit growth though right?

Yes.

Okay, thanks.

Thank you. We now move to our next question from Peter Nielsen of Cheuvreux. Please go ahead.

Yes, Peter Kurt Nielsen from Cheuvreux. Just a question related to customer intake in the quarter which is obviously quite solid and up from the past two quarters. Is this the level you would expect to be able to maintain in the second half as well, given your feelings about how the economy is developing in these markets? Thank you.

I think Q2 for us was a quite ordinary quarter in that respect. So, we don't really do forecasts -- give forward guidance for subscriber growth. But, that looked to us as a kind of a normal quarter in terms of growth.

Okay, thank you.

Thank you. We now move to our next question from Lena Osterberg of SEB. Please go ahead.

Yes, hello. A few questions here if I may. Continuing on the subscriber intake it was good to see Colombia pick up again and I was wondering do you expect to be able to keep up the growth rate, the higher growth rates, in Colombia, while maintaining margins? And what's the driver behind the growth, because previously, if I remember correctly, you said you would refocus geographically. Are you now expanding outside the coastal regions, or is it there where your growth is?

And then also Africa. Looking at the churn rates they are still quite high. What measures can you implement to get the churn rates down in the African segment?

And then finally, if you were to make acquisitions at what leverage would you feel financially comfortable?

Okay, I'll grab the two first questions and Francois will take the leverage question.

First, let me comment about Colombia. As I said before, our focus is on the urban, young and cool customer. We are driving the attraction to that segment by our very strong focus on value added services. That growth in Colombia has been very strong and so we are basically now getting traction on our programs. We think we are also getting a stronger brand recognition out there and a lot of word of mouth about the services we are offering. So, in terms of a future guidance there in terms of growth I would say our aspiration would be to continue on that growth track focusing on the young, urban, cool customer.

As far as Africa churn, that's a basically typical phenomenon in that part of the market. The people don't have that much disposable income and tend to basically react to various offers between the operators, more of a short term basis. Again, in Africa, two things that we are doing, trying to focus on value added services as we've done elsewhere, trying to attract the more higher end customer. And also second, for the lower end part, we are looking at various loyalty promotions that hopefully can result over time in lower churn.

As far as the leverage is concerned, we have low leverage today with a net debt to EBITDA ratio of 1. We are happy with that level. We did say in the past that we didn't want to exceed net debt to EBITDA ratio of 2. Confirm that position. And we are fully aware obviously of the more difficult environment in financial markets today. We are perfectly aware of the fact that it's more difficult to raise financing today than it was, let's say, a year ago. And as a consequence we are very pleased with our current net debt to EBITDA level of today.

Can I just ask you, if you were to make acquisitions how much further could you go there?

Well, we said we will not go further than 2.

Okay.

I'm not saying this is what we want to do. I'm just saying we don't want to go further than 2 and we are happy with 1.

Okay.

Thank you. We now move to our next question from Soomit Datta of New Street Research. Please go ahead.

Hi there. I was hoping you could just help me understand the Navega business a bit more. It's obviously a small business but the margin you reported in that business is about 80% at the EBITDA level. Is that some sort of anomaly, is that write-back of provisions or something? Is there anything strange happening there? And if not, that sort of $30m annual run rate, is that what we can expect as an EBITDA contribution going forward?

Navega is actually a very attractive business from a margin point of view. But, you need to understand that we, Millicom, as a rule as well as Amnet are significant customers of Navega. So, we have to eliminate the intercompany revenues, which means that we take only part of the revenues while we take 100% of the margin now, because we did not consolidate that business before. So, which is the reason why you see a margin level which is artificially high. But also, I confirm it's a highly profitable business.

Have any of the transfer prices between Millicom and Navega changed since the business was consolidated?

No, we did not, we could do it but at the end of the day it's margin that we get. And it's margin that is made at market prices, the transfer price is market related.

Okay. That's great, thanks.

Thank you. We now move to our next question from Kevin Roe of Roe Equity Research. Please go ahead.

Thank you. Mikael, could you give us an update on the competitive landscape in Ghana. It seems one of the new entrants has made some significant market share gains. Maybe an update on pricing and promotions there.

And back to Colombia, in your release you mention margins stabilizing at 20%. Do you still expect -- I believe last call you expected margins over the longer term to reach company average levels, is that still your expectation?

Okay, let me start with Colombia, just to be very, very clear. We said that in terms of the next three years we think in Colombia we are looking at mid 30s margins. In terms of the statement that we see the margin stabilizing, since we have been quite successful in our marketing efforts, we are going to make a test in the next quarter, a little bit higher marketing spend to see if we can raise subscriber growth, and that's one of the reasons why we said that we might temporarily lock the margin in at 20%.

In terms of Ghana, yes, highly competitive. I think there is a lot of activity in trying to drive subscribers on new network, which is Zain's network as well as Vodafone. Again, we are focusing on the higher end customer in that market. Although we lost a little bit of market share in terms of subscribers we think we've been more successful to hold on to our share of the real revenues in the marketplace. But, quarter to date there is no sign of a letup on the competitive activities.

Okay. And lastly, Francois, in your prepared remarks you mentioned the possibility to return funds to shareholders. Is it still your preference for dividends in terms of returning cash or do you have a preference between dividends or share repurchases?

The Board will have to make a decision in due time. But, as you can see, this is not our preferred option. But, if we don't see any opportunity for external growth then we will consider either repaying -- redeeming the high yield bond or returning funds to shareholders. So, the Board will have to decide in which or in what kind of shape and form we will do it, if we go that route.

Okay, thanks.

Thank you. We now move to our next question from Stefan Pettersson of Nordea. Please go ahead.

Yes, hello. Congratulations to a good set of numbers. If we start with Central America, I saw that after that Q1 report America Movil talked about stabilization of the ARPU trend and I think this is also visible for you. Looking at the broader picture, you increased subscriber intake quite substantially quarter on quarter, and despite this we saw the ARPU stabilizing and even more importantly EBITDA margin, is up sequentially. Can you explain to us how that is possible?

Yes, as we said here in the beginning and in previous earnings call, we are heavily focused on value added services that really allows us to appeal to the higher end customers, our competitor's higher end customers. So, we think we are seeing basically a loss of subscriber potentially at the lower end but picking in subscriber at the average or to the higher end. And that basically helps us to maintain our ARPUs close to the Q1 numbers, even if we are adding a substantial amount of subscribers. So, it's the mix, it's the ARPU, it's the mix of the subscribers in terms of ARPU generation that is helping us there.

Do you see this also going forward?

Well, that's our activation to continue to focus on value added services. We are industry leaders in Latin America in that respect. We tend to be first out with the new services and our objective is to maintain that initiative.

Okay. Another question relates to the tax rate. The tax rate is high this quarter as well as in the second quarter 2008. Can you explain why it's high in the second quarter and how should we consider tax rates going forward during this year?

Last year it was exceptionally high because there were some exceptional items related to the surtax asset in Colombia. In the second quarter of 2009 it is indeed a higher rate than over the last couple of quarters, which is mainly linked to the fact that we don't have any tax [bays] in DRC and in Colombia. Looking forward, we don't give any statements and you need to appreciate the fact that our tax rate is a combination of tax on revenues and tax on profits.

If we look at the situation in the first half of 2009 we are at about 29% average effective tax rate. Without looking too much into the future we might be maybe a little bit higher for the rest of the year, but we should be around 30%.

Okay, thank you for that. Two more questions that relates to the information that you've provided this quarter. The first one with revenues per country in local currency. And the question is if you can provide us with that for earlier periods.

And also you had information on slide eight in the presentation relating to air time, value added services and other [specials] of the revenues. And the question if you can supply us with that information on earlier periods.

Well, this slide eight, we have been doing it in Q2 and in Q1 as well, and we'll continue doing it. And as far as the revenues by country we will provide the information going forward.

But, could you provide us with historical information to make us a forecast on that level?

I think the world changed quite a lot. I don't know how relevant the historic data is on that one. And on the local currency data probably our database is not that strong. So, we feel confident, we increased our database significantly going into this economic situation. So, we feel very comfortable of the accuracy of the data we are giving you right now. We would feel probably less confident about the data going back.

Okay. Then we'll just have to wait and look at the numbers as they come. Thank you.

Thank you. We now move to our next question from Jan Dworsky of Handelsbanken. Please go ahead.

Thank you. Most of my questions have been answered. Just a clarification on the process in relation to the disposal of Asia. Is -- given that you -- (technical difficulty).

Hello?

Your line is still connected, Mr. Dworsky.

We dropped.

My apologies, we'll move on to our next question. Our next question comes now from Sven Skold from Swedbank. Please go ahead.

Yes, if you could just discuss the political situation in Honduras and if it has affected your business. I know that it can sometimes gain mobile operators when there is a political crisis, but it's also sometimes, it can be -- the network can be shut down or something like that by the government. Have you seen any such signs?

First, I would like to state all our people and all our assets are safe. When this incident escalated we put in place business continuity management efforts, including how to contact people, how to leave food in the office, and so on. Luckily, we didn't have to take any actions around that. In the beginning of this incident we actually had a significant increase in traffic because of the confusion around that. Today, our business is more or less back to normal in terms of either air time consumed or gross to or net to subscribers coming to our network. So, from a business point of view it's steady as go.

That sounds good. Thanks.

Thank you. (Operator Instructions). We have a follow up question now from Lena Osterberg of SEB. Please go ahead.

Yes, I was wondering if you could give us a little bit more detail. You said which countries you had exposure to US dollar debt. But could you maybe give us more detailed split between the countries so that we can try to calculate the FX effects better on the debt the translation.

No, we don't provide details of debt by country. We give you the countries where we are exposed to currency fluctuation as far as debt is concerned. But, we don't provide with the detail of the information by country.

That makes it very difficult to try to calculate the effect. Can you just say which one of the countries is the biggest?

Well, the four of them -- I think we gave four from memory, I think the four of them have an amount which is quite similar in terms of size. There is no dominating country. On the top of this, we don't provide information because it may fluctuate over time, depending on maturities of debt and new debt that we contract.

Okay.

Thank you. We now have a follow up question from Rick Prentiss from Raymond James. Please go ahead.

Actually a follow up on that line. As you look at the Asia process how much debt is there in maybe the region of Asia that we should think about would be getting paid off with the disposal of assets there?

And also, Francois, you mentioned as far as use of proceeds for further look at extending your operations, but you mentioned obviously wanting to get return on invested capital over your WACC. Can you talk a little bit about what your expected WACCs would be in the different areas of Latin America and Africa?

Okay. As far as the debt is concerned for Asia the net debt as at the end of June was $67m. Regarding the WACC obviously we have a different WACC by country, which we extract from using different WACCs provided by different banks in order to make sure that we have a fair WACC. So, it depends very much from one country to the other. I can't give you the detail of all of the countries now.

Okay, thank you.

Thank you. As we have no further questions I would like to turn the call back over to you gentlemen for any additional or closing remarks.

I would just like to thank you for joining the call today and we look forward to seeing some of you on our road shows this week. I would also like to highlight the Capital Markets Day planned for October 27 in Miami, which I hope will be accessible enough for many of you to get there. So, thank you very much and goodbye.

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