Millicom International Cellular SA (TIGO) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Millicom Q2 2011 Conference Call. For your information, this call is being recorded. May I also remind you that this call is being audio streamed off the web and is accessible at www.millicom.com, together with the presentation, summarizing the key features of the results. I would now like to hand the call over to your hosts of today's conference, Mr. Mikael Grahne, President and CEO, and Mr. Francois-Xavier Roger, CFO. Please go ahead, gentlemen.

Thank you, Operator, and welcome to you all. As usual, you can find the slides for this call on our website. Please go to slide number three. In Q2, we recorded underlying local currency revenue growth of 11%. We are pleased to see the continued momentum in ARPU, with positive growth, once again, in both Central and South America, which is a testament to our focus on VAS and on attracting and retaining higher-value customers.

VAS revenues now account for almost one-third of total revenues in Latin America and half of the revenue growth for the region. Despite accelerated commercial investment in 3G, services and increased advertising and promotional activities, we reported a strong underlying EBITDA margin of 46.2%.

Normalized EPS increased by 40%, year-on-year, due to the reduction of tax losses at operating and corporate level, as well as our focus on tax planning and capital restructuring. We returned a total of $359 million to shareholders in the second quarter, through a combination of dividend payments and share buy-backs.

Now let's look at the financial highlights for the quarter in more detail, as shown on slide four. Revenues for the quarter were $1.1 billion, up 15% year-on-year, or 11% on an underlying basis, excluding exceptional items. The underlying EBITDA margin was 46.2%, 0.9 percentage points lower than for Q1, reflecting greater investment in 3G and services. We ended the quarter with 41.3 million customers, up 12% year-on-year.

CapEx for the quarter was $151 million, or 13% of revenues. As we have stated previously, CapEx should be significantly higher in H2 and we restate our full-year guidance of around $850 million for the full year. Operating free cash flow at $268 million, or 24% of revenues, was higher than last year.

On slide five, you can see how our focus on higher value customers is being reflected in our subsidy costs, which are almost 40% higher than in Q2, than in absolute terms, as we aim to support data development. Sales and marketing costs, excluding subsidies, were 13% higher year-on-year. The strategy of accelerated investment in 3G and services aimed to address growing demand for the data and new services and to sustain double-digit growth in the medium term.

On slide six, we have set out our local currency mobile revenue growth over the last 10 quarters. Underlying local currency growth was 11.5% for the first half, 4.2 percentage points higher than the average for 2010, confirming our ability to produce double-digit growth.

ARPU erosion continues to improve, as you can see on slide seven, primarily as a result of data development, but also due to our focus on higher quality customers and on other non-voice revenue streams.

Looking at the ARPU development by region on slide eight, you can see that in Central America we have recorded a year-on-year increase of 1% and in South America, local currency ARPU, which has developed positively for over a year now, was up by 3%. ARPU was 6% lower in Africa, year-on-year, and we continue to decline as we pursue penetration gains and greater traffic volumes.

On slide nine, you can see our distribution of our customers by ARPU level. We have used Latin America for this analysis, as this is where our focus on higher-value customers is most applicable, given that the 3G services in Africa are still very limited. At the end of the second quarter, 35.7% of our customers generated an ARPU of more than $10, up 1.6 points year-on-year. We expect a greater proportion of our customers in Latin America to fall into this category over time, as we accelerate investment in data and other value-added services.

Slide 10, voice revenues continued to grow and we are up by 4% in the quarter for the Group as a whole in local currency, thanks to our focus on branding and distribution and our innovative product packages designed for specific customer segments. VAS growth continued to be strong, up by 33.6%, and we are seeing increasing momentum in non-SMS VAS, which grew by 50% in local currency.

SMS, which is a highly effective tool for introducing customers to a new range -- to range our new non-voice services, grew by 12%. Our suite on -- our suite of value-added services on track -- is on track to generate over $1 billion of revenues in 2011.

Slide 11, having crossed the 25% landmark for VAS contribution to revenues last quarter, we were pleased to see an additional 1.5 percentage point increase this quarter. VAS now represents 27.1% of recording revenues for the Group as a whole, up 4.9 percentage points year-on-year. VAS is delivering a robust revenue stream that generates greater customer interest and loyalty. Non-SMS services, our main area of focus, have increased from 12.7% to 17.3% over the last 12 months.

In Latin America, almost one-third of our revenues comes from VAS today. And we expect this figure to reach 50% by 2015. In Africa, VAS now represents 10.5% of revenues. And here, too, the non-SMS VAS segment is growing faster, up 0.7 percentage points quarter-on-quarter, to 6.2% of revenues, and showing attractive potential when looking at the VAS performance in Latin America. Our aim is for VAS to account for 25% of revenues in Africa by 2015.

The split of revenues -- the split of revenue by our core customer offerings is set out on slide 12. The communication category grew by 8% year-on-year, information by 64%, entertainment by 14% and solutions by 46%. As you can see, we are seeing the strongest growth in the information and solution categories, which combined are contributing more than 13% of revenues.

We expect the strong growth to continue, as we expand our 3G capacity and coverage this year, and as we develop TIGO Cash and other mobile financial services. We will be providing a more detailed look at these two categories amongst other VAS at our capital markets day in London on 13th of September.

On slide 13, you can see the penetration levels of the main VAS products in each of our four categories. As you can see from looking at the data between the highest and lowest penetration figures, there is still room for further growth through increased penetration of all these products and services.

Slide 14, let's look at the data a bit more closely. Today, 2G and 3G data revenues combined represent 10.7% of all recording revenues in Latin America. Data use has totaled 7.3 million at the end of the quarter, up 4% quarter-on-quarter and 2 million of these were 3G data users. Of the $81 million of data revenues generated in Latin America in Q2, more than 50% come from handsets.

On slide 15, you can see how data revenues have grown over the past 10 quarters. There has been an acceleration over the past three quarters, as we have increased our commercial investment and today half of the revenue growth we enjoyed in Latin America comes from data. Given the pent-up demand for affordable data services, we see this as the largest growth opportunity for Millicom in the medium term.

Our TIGO Cash services was first launched in Paraguay in Q3 '10 and we are steadily gaining traction, as you can see on slide 16. By the end of June, the service has reached a penetration level of 13% of our customer base. In Tanzania, where TIGO Cash was launched in Q4 2010, penetration has reached 6% after eight months. The TIGO service -- TIGO Cash service is now available in seven of our operations, which collectively contributes over 60% of Group revenues.

Slide 17, our market share increased by 0.6 percentage points, quarter-on-quarter to 30.5%, comparative basis, with seven markets gaining share and five markets losing share. In Central America, our market share was stable at 54.4%. In South America, we gained 0.4 percentage points in share and in Africa we saw an increase of 0.9 percentage points. In the short term, we expect continued volatility in market share in Africa, driven by promotional activities.

Like customer intake, market share is becoming a less relevant indicator of performance, as we are putting more emphasis on growing our share of higher-value customers. We can only mention our customer market share today, due to the lack of information on value a share, which would be a more relevant indicator, given our strategy.

On slide 18, you can see that on a Group basis, we have been -- we have seen a slight quarter-on-quarter decline in churn to 4.6%, supported by the success of our products and services, designed to increase customer loyalty. In Africa, mandatory registration is reducing the number of multiple SIMs. Now I would like to hand over to Francois-Xavier, who will talk you briefly through the results for each cluster and the financials.

Thank you, Mikael. We turn now to the regional clusters, starting with Central America on slide 20. Revenues from mobile and cable operations in Central America increased by 3.4% year-on-year on an underlying basis, the second quarter of resumed growth in the region, as we start to see the results of our investments in data.

We have, again, seen an improvement in ARPU, driven by our investment in value-added services and in particular in data. Development of data growth, which is mainly coming from post-paid customers, has the effect of increasing ARPU and revenues, but also of decreasing margin slightly, since we record more T&E sales with negative or zero margin. The product mix adds to these negative effects, as data with a lower margin is replacing international traffic with a higher margin. Central America generated $112 million of operating free cash flow or 24.9% of revenues in the quarter.

Slide 21, in South America, revenues increased by 19.5% in local currency. All three markets reported a strong performance, with ARPU up 3% year-on-year, demonstrating the success of customer segmentation and of our smart pricing of both data and voice services.

EBITDA for Q2 was up 18.4% in local currency, and the EBITDA margin was 42.8%, essentially flat year-on-year. Operating free cash flow generation for South America was $92 million, or 21.6% of revenues.

Slide 22, revenues for Africa were $246 million, up 11.9% in local currency year-on-year. We have seen more stable pricing activity in the first half of 2011, compared with the second half of 2010, but there has -- there has been little evidence of elasticity following last year's cross-net tariff reduction.

ARPU for the quarter was $5.1, a decline of 6% year-on-year. We expect ARPU to continue to decline, however, as we focus on maintaining the affordability of our products and services in order to drive further penetration growth and increase minutes of use.

EBITDA for Q2 was $100 million, up 22.1% on -- year-on-year in local currency and the EBITDA margin was 40.4%. CapEx in Africa in the quarter amounted to $46 million, or around 18% of revenues, and the region generated $36 million of operating free cash flow, or 14.7% of revenues.

Slide 24, now let's look in more detail at the financials. Our effective tax rate for the quarter was low, at 23%, as we start to harvest the benefits of our tax planning initiatives, including the push-down of debt from the corporate to the operating level.

The rate is also low due to the fact that two of our operations and the holding company are reducing their losses and now have a positive taxable base. The effective tax rate is expected to increase from the current level, as more operations start paying taxes, and after we recognize deferred tax assets in our former loss-making operations.

Slide 25. We are pleased to see a 40% increase in the normalized EPS for Q2, to $1.73. Some months ago, we highlighted our increased forecast on EPS. Now that we are paying dividends, and we are starting to see the initial results of our capital restructuring and tax planning initiatives.

Slide 26, our operating free cash flow for the quarter was $268 million, or 24% of revenues, despite the high tax payments that typically occur in the second quarter. Slide 27 shows our free cash flow for the quarter, of $215 million, or 19.2% of revenues.

Slide 28, we have continued to make progress in our asset productivity initiatives and we have now signed new tower deals in Guatemala and Colombia, which complete the bulk of our tower sharing plans. We now have over 7,000 towers committed to be shared. The five deals that we have done to date, three in Africa and two in Latin America, generate a net present value in excess of $600 million, estimated on a conservative this year basis. We will continue to pursue other opportunities to share passive infrastructure, which could include 3G and 4G networks and spectrum, enabling us to focus on outgoing activities.

Slide 29, last quarter, we announced a total share buy-back program for the full year of $800 million, which demonstrates our commitment both to enhancing shareholder returns and to improving the efficiency of our capital structure. In the second quarter, we bought back some 1.6 million shares at an average price slightly above $107, or a total consideration of $170 million.

Shares were bought back exclusively in the US before the delisting and we commenced the program in Sweden before our black-out period. A total of 4.2 million shares, both in 2010 and in 2011, before this year's AGM, were canceled in May, bringing the total number of shares outstanding to 104.9 million at the end of June, out of which 453,000 were treasury shares.

We will be in a position to resume the share buy-back in Stockholm when this current black-out period ends on the 22nd of July and it is our intention to complete the full $800 million program by the end of the year.

Slide 30, at the end of Q2, our cash position was $1.60 billion and our leverage ratio stood at 0.6 times net debt to EBITDA. At the end of the year, our net debt to EBITDA ratio is expected to be around 0.75 times, once we have completed our $800 million share buy-back program.

Slide 31, turning to our debt maturity, we see the average maturity of our gross debt at three years and one month. 45% of the debt is at fixed rates, meaning that we are less disposed to interest rate volatility today, without having increased our total cost of debt.

Slide 32, I would like to say a few words on the consolidation of our listing and how the share conversion is progressing. As of June 3rd, our primary listing is on NASDAQ OMX in Stockholm, following our delisting from NASDAQ in the US at the end of May. We exceeded the -- we exited the NASDAQ 100 Index upon delisting, and we joined the OMX Stockholm Benchmark Index in June, following the annual review.

When we announced the consolidation of our listing, we encouraged holders of ordinary shares in the US to convert them into SDRs in order to benefit from trading on the liquid, unregulated exchange. We are pleased to report that the conversion has progressed well, with about 80% of ordinary shares have been -- having been converted to SDRs to date. We now have more than 90% of our total shares outstanding in the form of SDRs. We are also seeing trading volumes in Stockholm steadily increasing since the beginning of June and volumes in Sweden are now at around 80% of the total, compared with 20% in May.

Slide 33. We reiterate our EBITDA margin guidance of above 45% for 2011 and our CapEx guidance of around $850 million, which excludes any potential new spectrum, investments in greenfield cable assets and the capitalization of leasing costs for towers, which is a non-cash item. As we now have greater visibility on our cash flow, we are raising our operating free cash flow margin guidance for 2011 to around 20%. I would now like to hand over to Mikael, for his final comments.

Thank you, Francois-Xavier. I would just like to close with a quick summary. We made good progress in the second quarter with ARPU growth in Latin America. Given our focus on higher value customers and on developing VAS, ARPU development is a key KPI for Millicom. We believe that our performance in the first half of the year, with underlying top-line growth of 11.5% is a good reflection of prevailing business conditions. We would now be happy to take your questions. Operator, may we have the first question, please?

Certainly. Thank you. (Operator Instructions). We'll now move to our first question today, which comes from Bill Miller from JM Hartwell. Please go ahead.

Nice quarter, gentlemen. Thank you very much.

Thank you Bill.

We have -- the question I have is, as we look out over the remainder of the year, how would you like to be judged, what is it? The ARPU increased, margin stabilization. What is it -- what are the -- what are the two or three items that we should be looking at to consider, over time, that you're doing the job you say you're doing, which I agree you are doing, which is value-added services, data, et cetera? And when do we get a cross-over in the margins between the seeding of these services now and, ultimately, the higher margins that they represent?

Okay. I think the core driver, going forward, is, if you look at Millicom as a whole, is going to be data services in Latin America, including other VAS opportunities. And voice penetration -- continued voice growth and penetration in Africa. I think data services have a good contribution to profitability, both in terms of ROIC as well as EBITDA.

The TIGO Cash services, though, are more of a longer-term profit generator. So we believe that's more on a three to five-year basis when we start to see a real incremental EBITDA coming in from these services. So it's really -- it's on the TIGO Cash services, penetration is a key, key driver for growth. We want to have as many of our customers as possible try these services, so we can start generating the scale that, in long term, will give the required -- the needed profitability.

So, Mikael, should we look at ARPU by market? Or what --?

Yes. We no longer report ARPU by detailed market, but naturally, as I said, in my closing remarks, ARPU is a key KPI for us in Millicom, with the increasing higher penetration levels, primarily in Latin America, to drive revenue over the long term, you need to grow ARPU. And that's the challenge and task we put for ourselves and so far the strategy has worked well for us.

Thanks very much.

Thank you.

Thank you. We now move to our next question, which comes from Ric Prentiss from Raymond James. Please go ahead.

Thanks. Good day. Two questions, if I may. First, on the handset costs, can you update us as far as what's the costs you're seeing in the marketplace for smartphones are today? And how the trend has been continuing on the downward path?

And the second question is, Colombia is one of those markets where you did not have the number one or number two market share position. How are data offerings being seen in Colombia? What are you doing there as far as targeting segments and results?

Okay. Handsets have continued to come down in price. I think we have -- we are starting to see good high-end smartphones, probably in the range of $140, $150, Android-based. In Latin America, which is our focus for data, Android, to date, is not a known concept. But we expect customer adaptation is going to be quite rapid. So I think we are seeing an Android-based smartphone in and around $150. So there's a continued decline.

In terms of Colombia, we are indeed more successful on data than we are on voice. So basically, we have a higher share -- market share or revenue share on data amongst our -- vis-a-vis the competitive benchmark that we have on voice. So the more data we sell, the more we improve our competitive position. And as you have seen, for the South America as a whole, where Colombia is an important component, we are still double -- growing at double-digits in this market.

Why do you think --?

We basically have a growth that is outpacing our competitors. So month after month, we are adding share.

Why do you think you're more successful at the data than the voice? What are you doing differently or what are you targeting differently?

Well, we, for a long time, we basically positioned ourselves as the sort of urban, young and cool brand. We have superior VAS offerings versus competition and it's just in the whole way we do business, the way we go to the market, the way we educate customers, the way we sort our price -- smart pricing or render services, the way we do market segmentation. So it's just a combination of all of that.

Great, thanks, Mikael.

Welcome.

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

Yes. Hello. I have a question about slide number 10 in your presentation. It's a very good description of voice and value-added services growth. I understand this is a Group description and that voice is up 7%. But if you would split this up for Latin America versus Africa, is voice flat then in Latin America? Or is it down? Or is it up?

No, if you look up -- if you look at the local currency, which is the more important, when you considered our voice is up 4% for the group and in Latin America as a whole, it's 2%, and in Africa, it's up 10%. So you can see that growth -- voice is still a key growth component in Africa, less of a growth component in -- less of a growth component in Latin America.

Okay. Do you have different segments of the market that now see or face lower voice volume or lower voice ARPU?

Could you please clarify that question? What --?

I'm just wondering if you -- if all markets see rising voice revenue also in Latin America, you said 2% up on the average. But do you have different markets or different segments?

There are some volatility from markets, for markets. I think Central America, we have some pressure on international incoming revenues, which are sort of reducing the growth we get out from the voice.

Yes. Okay. Thank you.

Alright, welcome.

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

Yes. Hello. I have a couple of questions. First of all, you have earlier talked about below 30% tax rate for the year. With this low tax rate, this quarter, are we now talking closer to 25% for full year?

We don't give any guidance for tax rate, but we have flagged the fact that this quarter, and it is the same for the last quarter, the tax rate is, I would say, artificially low due to the fact that we have a couple of operations, two operations, plus the holding company in Luxembourg, which are either reducing their losses or moving from before tax situation that was a loss to a profit now, which is reducing, artificially I would say, the tax base.

What happened is that going forward, there is a certain likelihood that we may activate some deferred tax assets, in some countries, which will have the impact of triggering a one-off gain, but it will have the impact as well, going down in the -- over time, to increase our tax rate. We have always indicated it was an indicative number that we expected to be below 30%, which we maintain, without being the guidance.

Okay.

So the 23% or 24% number that you see today is on the low side.

Yes. Okay. Then there's a statement that Bolivia may change to a tender process for the license. This is happening in 2015. What's the situation in Paraguay that's due 2011 and Colombia, 2013?

In Paraguay, there is a sort of all the licenses we have are five years with automatic renewal clauses in there. And so far we have repeated, renewed these licenses. Basically there is a simple formula where you calculate the -- you give a forecast on your CapEx forecast for the next five years and you pre-pay a certain percentage of that as a license fee. So we went through many renewals in Paraguay.

In Bolivia, we are waiting for this new law. We don't have visibility yet, what's in there, and we will adopt and adjust, depending on what's in there. But in general, we are in -- we are engaging in a negotiation with whatever authorities, well in advance of the expiry of our licenses, so that we get that secured well ahead of any sort of last days.

And in Colombia, similar, there are new -- there are quite clear license renewal processes for part of our spectrum and we expect that the ones, which we bought later on, will have the same renewal clauses as we have on the majority of the spectrums we have.

Finally, could you just state some more information regarding the impact from regulatory or governmental changes in South America? I guess the revenue tax in Bolivia should have an impact of $8 million. What about Paraguay?

The Bolivia one is a -- I think is a forward statement. We haven't had any impact yet to date. I don't think we are, at this stage, able to break out. Every year, we have some movement in terms of either taxes or fee changes and so far we're very -- we have a strong history of finding offsetting cost items, so we still can keep our business going forward and improve our profitability.

Yes. Okay. Thank you.

You're welcome.

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

Yes. Hello. I was wondering a little bit, if you could say something, maybe, about the seasonality of your subscriber acquisition costs? Because it seems you had a lot of costs in Q4, quite low SACs in Q1 and now you have significantly higher SAC levels again. Is there any seasonality or you're just steering sort of opportunistically, depending on what your competitors do? And also, maybe, if you could give us the actual dollar number in SACs? Because you very nicely outlined them last quarter and they're not there in this presentation, this time around.

And also I'm wondering, on the operating free cash flow margin guidance, you've had very nice margins so far. But I was also wondering, given that you have only spent $240 million out of the $850 million in CapEx, so far, do you then expect that positive working capital improvement to be so significant, so you can compensate?

Let me start with this seasonality. It is part promotional, as it is even part seasonality, given that Latin America is our biggest market area, you tend to have a little bit stronger Q4 in many of the Latin American markets, that is of 14 salary paid, in December. And that has an impact on consumption. And then there is a number of holidays in January, basically countries disappear. So January starts very low. So there is the built-in seasonality and coupled with promotional activity.

As far as the operating free cash flow guidance, so indeed, we have increased the guidance to around 20%. And there are -- there is a fairly strong disconnection between the actual amount of CapEx and the operating free cash flow because there is a timing impact. We have payment -- specific payment terms with suppliers, which makes the -- for example, the CapEx that we -- the fairly higher CapEx that we expect to book in H2 2011, we will pay part of it in 2012 only.

Okay.

So -- which is the reason why at the beginning of the year we are always quite careful in giving the OSCF of guidance and now that we are moving forward into the year, we are in a better position to do so.

And also, on page five in the investor presentation you will see the cost of the subsidy and cost of sales and marketing costs, broken out Q2 '11 versus Q2 '10.

Sorry, I missed that.

Page five.

Okay. Thank you. Thank you.

Thank you.

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

Thank you. Hello, gentlemen.

Hello.

Two questions. First on Africa, Rwanda and Tanzania, you called out in the release, as having pretty significant sequential increase in subscribers. Are those high-quality ARPU adds in general or is this similar to Senegal last quarter? I'm trying to get a sense of if these additions will accelerate growth -- revenue growth in those markets in Q3?

In general, we have significant lower ARPUs in Rwanda than in Tanzania. So a strong ARPU -- a strong subscriber growth in Rwanda will impact average ARPUs for Latin America. And as in -- sorry for Africa, as in Latin America, we are focused on the high-value customers. We have less -- we basically have less service offerings to these customers today because we are not that advanced of data. But the intent is, again, like in Latin America, to try to attract the high-value customers. But at this stage, we don't have any new data on the sort of the quality of this net that we have in Tanzania.

Okay. But I would assume -- I assume they're dilutive, though, to ARPU?

Not necessarily. Not necessarily.

Okay. And secondly, on Bolivia, just to clarify, Mikael. Have talks begun on the license renewal in Bolivia? And what are your expectations there in terms of timing and price? Do you expect to write a large check to renew the license there or some sort of an annual fee? Just trying to get a sense for how that will evolve.

Yes, I don't think we want to comment publicly on where we are or not with the -- any negotiation we would undertake with the government. So --.

Okay. Thank you.

Alright thank you.

Thank you. We now move to our next question from Andreas Joelsson from SEB. Please go ahead.

Hello. Good afternoon.

Hi.

Just a few questions on the share buy-back program, if you could tell us how much is left and sort of the rules for the buy-backs. Are you in black-outs or, say, a month before the reports? And how much of daily volumes can you buy?

Okay. So we did $171 million in Q2. We didn't do any in Q1. So we have confirmed the fact that we intend to reach the $800 million for the full year, which means that we $630 million to go. The rules are quite similar to the US except that the black-out is a little bit longer.

We cannot buy the two weeks prior to the end of the quarter, which means that we could not buy from mid-June and we do not -- we will not be able to buy from mid-September, for example. The -- and three days after we issue our quarterly report, we can start buying back again. But we are confident that we have enough days in order to achieve the remaining $630 million, if needed. The other thing is the fact that we do the share buy-back in Stockholm provides more transparency as well to investors. Because you can look on the NASDAQ OMX site, whatever we buy on a daily basis.

Perfect. Then a more operational question. It seems like data performance is a little bit stronger in South America versus Central America. Can you elaborate a little bit about the difference between those two regions, when it comes to data?

Well, we don't really break out the data between South and Central America. We show Latin America as a whole. But in general, the performance is quite similar, given that we started in Paraguay first. That tends to be a little bit of a lead market. And then given that Colombia has the highest GDP per capita, that's another pillar in that growth.

Okay. Thanks.

You're welcome.

Thank you. We'll now move to our next question from Luigi Minerva from HSBC. Please go ahead.

Yes, good morning. I wanted to ask you about the pricing environment in Africa. Clearly, an improvement so far versus last year. I was wondering if you -- if you are concerned that Bharti may become more aggressive at some point later in the year, given that they are making some good progress on the cost cutting side.

And the second question is on value-added services, based on healthcare. It looks like, in theory, a great area of growth. I was wondering if you are testing some applications in that field or if you are thinking of launching with entries, short to medium term? Thanks.

Okay. On the pricing, as we said, it's be more stable. There was a series or sharp reductions in Q3, but primarily in Q4. Many of them are cross-net that tended to have less elasticity. The pricing environment are most -- will be more stabilizing. But if you talk about Bharti, I think they, sort of, in their latest statements, said that the key issue in Africa is high costs. We fully agree to that. And I don't know whether you picked up evidence but they have significantly reduced their cost base. So far, the quarterly data we've seen from them hasn't really indicated that.

Okay. And on the second one, on healthcare?

Yes, on healthcare, that's something that we're going to look over in time. And in fact, we have some small experiments going on that, it's at this stage, no materiality to discuss with the broader market.

Okay. Thank you.

Thank you. (Operator Instructions). We'll now move to our next question from Mark Walker from Goldman Sachs. Please go ahead.

Hi, there. My first question is on Central America. You mentioned that the reason for the year-on-year lower EBITDA was a higher data in the mix, which requires higher investment. I just wondered if that was essentially handset subsidies? And also, the Central American ARPU growth fell from the Q1 level, despite this higher contribution from data and higher levels of promotional spending on 3G. I was just wondering if you could give us a bit more color on the reasons for that, please?

And then my second question is also on Central America. I just wondered what the current time line for the AMX, Digicel asset swap is and how you see that affecting your ability to grow profitably in those markets, going forward? Thanks very much.

Okay. We have, indeed, very strong growth in Central America on value-added services, including the ARPU components that we bring too. We have some reduction on international incoming calls, which sort of normally is at 100% gross margin. So that has some impact on the EBITDA side. So we are growing very strongly on the key components, key drivers for the longer term, which is the data, and having some losses as we expected, on the international business side. In terms of Honduras and AMX and Digicel, we really have no visibility into that process.

Okay. Thank you very much.

You're welcome.

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

Okay. Thanks. I just wanted to follow-up on that prior question. You had said that that there would be -- you talked a lot about it in the press release, about affordability in Africa. And I'm just wondering, you don't really see much promotional activity in the back half of the year. I just wanted to confirm that. And then, Francois, can you talk about the $7.5 million accounting adjustment in Guatemala?

Yes, let me comment about Africa. There are promotional activities going on in Africa on a daily basis. I think what we -- there were some very steep price decreases in Q3 and primarily in Q4. We haven't seen price decreases to that magnitude in the first half of 2011.

Okay. Regarding the adjustment in Guatemala, what happened is that we did in Guatemala some other booking of revenues on a specific product, which is a fairly sophisticated product, a mix between prepaid and post-paid services.

This is an amount, a little bit higher than $6 million, accumulated over two years, so it's not material to Guatemalan revenues in any of the quarters, by the way. It is a non-cash item, it's a pure accounting adjustment. It's a non-cash item that doesn't hit either any of the invoicing to the customers. So it's a pure accounting adjustment.

And that service was specific to Guatemala, not any other country?

Yes. We checked that the issue that we had been facing in Guatemala did not happen in other markets and it did not. So it's a pure Guatemala issue.

Okay. Thanks.

Thank you. We now move to our next question from Justine Dimovic from Exane BNP Paribas. Please go ahead.

Thank you very much. Just three quick questions please. The first one is related to the tower sharing deals that have been announced and notably the one yesterday. The price per tower implied by the cash up front to be received appears relatively low, compared to other deals we have seen. Can we understand this as meaning that the value of the deal is more skewed to, in your case, the lowering the OpEx base and maximizing the short-term cash up front? And if this is the case, do you see that as enough to offset some of the pressures you mentioned, related to new taxes being introduced in Central America, in some markets?

That's going to be the first question, please. The second one is related to your M&A or external growth strategy. If you can provide an update, if there is anything update us on? Notably, you talked in the past, if I recall correctly, about developing new services, notably in financial services, and looking for partnerships. I was wondering if you have anything to share on that front.

And as well on the ETB situation, if there is anything new. And then, sorry, it's a bit long, lastly, on spectrum auctions, is there anything coming soon on 3G or 4G in any of your markets that you could share with us, that would be great. Thank you very much.

Just on the tower sharing, so indeed, we are very happy to have signed these two deals in Latin America, which are the first ones that we have in Latin America and which bring us close to the final stages of our tower sharing initiatives, given that we have done most of the markets.

In Colombia, the reason why the price per tower is a little bit lower is due to the fact that we have a large number of towers, which are actually rooftops, which cannot be shared with other operators, which limits the benefit for the company managing the towers. And as well, as we have a certain number of towers, which are already shared with one of our competitors, so which cannot be shared further with another one for win-load reasons, technical reasons.

In terms of M&A, as we said many times, don't believe in global scale, don't believe in regional scale. The only scale that counts is be number one or number two in the markets you operate. If there is an opportunity to find an asset that would sort of match that description and would generate a return that, over time, would exceed country [back], we would have an interest. But because it's not a strategic component in the way we think, we tend to have an opportunistic approach to these opportunities.

In terms of ETB, there is really no news. There are some spectrum auctions taking place. There is one in Colombia, on the 1,900 spectrum, it's going to take place in a few weeks' time. And there could be some other primarily existing, not 3G or LTE spectrum, opportunities to buy more spectrum on the existing -- on the existing bands, which is of interest to us, because normally you've got to use CapEx if you have more spectrum.

Thank you very much.

You're welcome.

Thank you. (Operator Instructions). We now have a question from Erik Pers from Danske Markets. Please go ahead.

Thank you. I have a question on -- or a couple of questions about tower sharing agreements, just to get a better understanding. In Colombia, will the new agreement eventually make it possible or more likely to share -- to get access to competitors' towers? More than you already have? I understand you already share some towers there.

And in Africa, have any other operators joined your tower sharing companies there or -- and if not, when do you expect that to actually happen? And also, on the cash received up front from the various tower sharing agreements, have you -- how much has been received so far and how -- on which line does it occur in the cash flow statements? Thank you.

Okay. In Colombia, yes, we expect that we will have the opportunity to get access to some of the towers of the competition. But the -- anyway, we have a build-to-suit agreement with the tower operator, according to which the tower operator has to build a site whenever we require one. So we give -- we get access to either the towers that they have -- by the way, American Towers with whom we partnered in Colombia, has already its own subsidiary with a couple of hundred towers, in Colombia. So we will get access to these ones as well.

In Africa, the only project that we almost completed so far is in Ghana, which is the first one that started more than a year ago. We started, I think we had a little bit more than one tenant per tower on average. Today we are close to 1.4 tenant per tower already, in the partnership in the tower company that we have in partnership with Helios. So it's moving in the right direction. And it is increasing month-to-month. The cash that we got up front, we completed almost entirely the transaction in Ghana. So we got most of the cash, which appears in the operating free cash flow line.

Okay. Thank you.

Thank you. As there are no further questions in the queue, I'd like to turn the call back over to you gentlemen for any closing or additional remarks. Thank you.

Before we end, I would just like to remind everyone that our investor day this year will be held in London on 30th of September. The theme this year is Beyond Voice. So for more information and to register, please contact investor relations. Finally, I would like to thank you for joining the call today and we look forward to seeing you soon. Thank you.

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