Millicom International Cellular SA (TIGO) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Millicom Q4 2011 conference call. For your information, this call 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 the 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.

Thank you, and welcome to you all. As usual, you can find the slides for this call on our website. Please go to slide number 3.

In Q4, we recorded underlying local currency growth of 10.1%. Our focus remains on high value customers, and in Q4, 80% of our revenues were generated by 30% of our customers, who have an ARPU about $10.

We have seen a stabilization of ARPU in Latin America, in local currency, and in Africa, there has been a slowdown in the rates of ARPU erosion, despite our continuous focus on affordability.

Overall, the year on year decline in ARPU was close to half the decline in Q4 last year. We are seeing continuous strong development of (inaudible) across the Group. More specifically, in Latin America, our non-Voice vs contributes over one third of our recurring revenue, and half of our growth in recurring revenue is coming from Mobile Data services.

We produced an EBITDA margin of 45.5% for the quarter, and a high level of profitability in a period of the year when we traditionally invest more in commercial activity. In Q4, we returned $436 million to shareholders in formal dividends and a share buyback.

Slide 4. For the full year 2011, we recorded local currency revenue growth of 10.5%. We ended the year with an EBITDA margin of 46.1%, in line with our guidance, and reflecting our investments in innovative services.

In 2011, and for the second year in a row, we returned close to $1 billion to shareholders, half in dividends, and the other half through a share buyback program, and we ended the year with a net debt to EBITDA of 0.8 times.

The Board will propose to the AGM in May a dividend of $2.40 per share, to be paid to shareholders in June. This represents an increase of 33% over the 2010 dividend. In addition, a share buyback program of up to $300 million has been approved for 2012.

In line with our strategy of finding the right balance between growth and returns, in 2011, our ROIC increased to 28%, from an already high level of 26% in 2010.

Slide 5. Now let's look at the financial highlights for the fourth quarter in more detail.

Revenues for the quarter were $1.18 billion, up 10.1% year on year. The EBITDA margin was 45.5%, 1 percentage point lower than for the prior year, (inaudible) by the revenue mix in our products and markets.

In Q4, we invested $396 million, or 33.6% of revenues in CapEx, bringing the total for the year broadly in line with our guidance.

Despite our high investment in OpEx and CapEx in Q4, operating free cash flow generation in the quarter remained strong, at $300 million, including proceeds from the tower disposal of close to $100 million in Q4.

Slide 6. Our commercial investments in Data and Services in the fourth quarter amounted to $258 million, up around 5% of our Q4 2010. Subsidies were up 6.1%, less than in previous quarters, for three reasons. Firstly, our detailed analysis of ROIC per device that we shared with you at our Capital Market Day enabled us in Q4 to be more efficient and selective in our subsidies. Secondly, the decrease in smartphone prices reduced the total amount we spent per phone on subsidies in Q4. And thirdly, we were more active in the fourth quarter in marketing prepaid data bundles with lower commercial costs, to grow the addressable market for data services.

Overall in 2011, our sales and marketing costs increased by around 12%. We expect to increase our commercial investment further in 2012, in order to grow the penetration of 3G services. We expect the information category to be our largest growth driver again in 2012.

Slide 7. I have already highlighted our full year revenue growth of 10.5%, and our EBITDA margin of 46.1%, reflecting investments in 3G and services. I would also like to add here that despite our 20% increase in CapEx year on year, our cash flow generation in 2011 was the highest ever, at over $1.2 billion, even excluding the contribution from tower disposals.

Slide 8. For 2011 overall, we produced an average growth of 10.5%, only 0.8 points lower than in 2010, despite the more challenging economic environment. For 2012 and 2013, our ambition is to grow our revenues by 8% to 11% in local currency.

As you can see on this slide, we have experienced some volatility in revenue growth quarter on quarter, and we expect quarterly growth to be somewhat uneven in 2012.

Slide 9. Our focus on the quality of our customers, rather than on the absolute number, is what is driving our top line performance. Looking at the ARPU development by region, you can see that the Latin American ARPU was essentially stable year on year. In South America, ARPU has been growing positively for over a year. In Central America, a high level of low ARPU net additions in the festive season was responsible for the decline seen in Q4 ARPU.

In Africa, Mobile ARPU was 5.5% lower, but marked improvement over the year on year decline reported in Q3 '11. ARPU in Africa will continue to decline for some time as we pursue penetration gains and greater traffic volumes and minutes of use to affordability initiatives.

Slide 10. As you can see on this slide, we are seeing a positive shift toward greater revenue generation from higher value customers. Here, you have the data for Latin America. In Q4, 38% of our customers had an ARPU of $10 or more, and generated 86% of our revenues.

In Latin America, by focusing on less than 10 million customers, we will be able to allocate our resources more efficiently, for instance, by cross-selling Mobile Data services to the customer who can more easily afford to adopt them in this initial phase.

Slide 11. Looking at the breakdown of our revenues by service, you can see Voice and SMS revenues were more resilient in Q4 than in previous quarters. The 8% growth reported in SMS, combined with a 35.5% growth in non-SMS VAS produced a year on year growth in excess of 24% in all non-Voice service combined.

Slide 12. We have seen a 3.9 percentage point increase in the contribution of VAS to the Group revenue over the past year. Of the 28.5% contribution reported in Q4, 18.5 points are coming from non-SMS VAS, which is where we are concentrating our efforts.

Please move to slide 14. The (inaudible) revenue, by our five categories, is set out on slide 14. As we communicated last week, we are strengthening our organization structure to better serve the needs of our customers in our five categories. As you can see, the bulk of our growth in Q4 comes from Information, and in particular, from Mobile Data, which grew by 58% year on year.

We are pleased that our Solutions and SMS categories are already contributing a meaningful part of our growth. We look forward to growing the contribution further, thanks to our improved organization structure and our ongoing investments in these categories.

Slide 15 to 17. The next three slides provide details of performance of key services in our three fastest growing categories -- Mobile Data, in the Information category, [see your balance] products in the Solutions category, and Tigo Cash in MFS. In particular, we are pleased to share with you that in 2011, Tigo Lends You, our most successful product in the Solutions category, generated in excess of $30 million in revenues, and was used by more than 15 million customers. In the MFS category, the penetration of Tigo Cash in Tanzania has materially increased versus Q3, from 13% to 18%. And in Paraguay, the penetration is now 20%.

Revenues in the MFS category grew 64% quarter on quarter. In 2012, we will launch MFS in at least three more markets. We also plan to extend the range of services available in all our categories to meet the specific needs of all our customers in each market.

Now I would like to hand over to Francois-Xavier, who will talk you briefly through the results for each region and the financials.

Thank you, Mikael. We turn now to the regions, starting with Central America on slide 19.

Revenues from Mobile (inaudible) operations in Central America were up by 6.2% year on year in local currency. This solid top line performance is supported by strong growth in Data Services. We also saw a significant increase in net addition of lower ARPU customers in Q4, attracted by a seasonal promotion on prepaid data packages. These packages generated relatively low ARPU, but incurred limited subsidy costs.

Overall, we recorded a 20% year on year increase in total net additions in the region, which in turn had a dilutive impact on reported ARPU for the quarter. Our EBITDA margin remained stable, at 51.3%, with a more measured increase in subsidy level this quarter.

Slide 20. In South America, revenues increased by 14.4% in local currency, with all three markets reporting a strong performance. Mobile ARPU was up by 2.2% in local currency, as a consequence of our ongoing focus on Mobile Data (inaudible).

The increased commercial spending, combined with the one-off costs related to employee costs, contributed to a year on year decrease in the EBITDA margin to 41.9%.

Slide 21. Revenues for Africa were at $249 million, up 10.6% in local currency year on year, and the rate of ARPU erosion slowed down the quarter to 5.5%. We anticipate further ARPU erosion in Africa in 2012, as we focus on affordability initiatives to drive down growth in penetration and usage.

We recorded strong performances in Chad, Rwanda, Tanzania and Mauritius during the quarter, with Rwanda reaching EBITDA breakeven just two years since the launch of our operations.

In DRC, we experienced difficult trading conditions in December, in the aftermath of the election. In Ghana and Senegal, the situation remained challenging, but we have taken action in terms of pricing, which we expect to yield results over time.

EBITDA for Q4 was $102 million, but 9.2% year on year, and the EBITDA margin was 41%, down 0.7 percentage points year on year as a result of our focus on affordability, in particular, in Ghana and Senegal.

We recorded higher CapEx payments in Africa of $145 million, due to phasing. In 2011, we invested in excess of 15% of our revenues on 3G CapEx in Africa, where we expect a growing demand for data.

Now, let's look in more detail into the financials, starting with slide 23.

We see tax optimization as a good driver of EPS growth. We are pleased to report that our effective tax rate, excluding exceptional items, has come down in 2011 to 25.2%. We are confident that going forward, we will manage to retain an effective tax rate of less than 30% of our profit before tax, despite the fact that we are seeing increasing corporate -- we see increasing corporate tax rates. For example, in El Salvador, where the rate has increased from 25% to 30% as of the 1st of January, 2012.

Slide 24. Normalized EPS grew by 9% to $1.72, and was negatively impacted by foreign exchange losses and higher depreciation than last year. As a reminder, last year we extended the useful lifetime of our towers from 10 years to 15 years, which had a positive impact on depreciation, and resulted in a particularly low level of depreciation in Q4 2010.

Slide 25. Our normalized EPS grew 26% overall year on year in 2011, supported by an EBITDA growth, successful debt restructuring activities, and our tax efficiency initiatives.

Slide 26. Our free cash flow for the quarter was $248 million, 21% of revenues, amounting to $982 million for the full year 2011, a record free cash flow in a year of increased investments.

Slide 27. Supported by growth of 26% in normalized net income, the Board will propose to the AGM to be convened in May the payment of a $2.40 dividend per share. The buyback program of up to $300 million has been approved by the Board, and will be executed in all available platforms -- NASDAQ OMX, over the counter in the US, and through MTFs. We will remove the cap on purchases on the US market that we previously had in place.

We are also pleased to share with you our revised dividend policy. From 2012 onwards, we commit to pay at least $2.00 per share as an ordinary dividend, and no less than 30% of our normalized net profit. Our intention, in the absence of attractive external growth opportunities, is to return excess cash to shareholders as we did in the last two years.

Slide 28. By the end of the year, we had completed all tower closings in Ghana. In Q4, we completed the first closing in DRC, representing approximately 50% of the total number of towers committed in that market. We also completed additional closings in Tanzania, to bring the completion to around 70% of the objective.

In Colombia, by year-end, approximately 1,340 sites had been transferred to ATC Infraco, representing about two thirds of our total tower portfolio. We also acquired a 40% minority stake in ATC Infraco during Q4.

Total cash proceeds for towers in 2011 were $163 million, and we expect to receive another $140 million in 2012, and $30 million in 2013.

As we have previously stated, the five deals that we have done to date, three in Africa and two in Latin America, will generate a net present value in excess of $600 million, estimated on the conservative this year's basis. We will continue to pursue other opportunities to share passive infrastructure, which could include 3G or 4G networks on spectrum, enabling us to focus on our core activities.

Slide 29. At the end of Q4, our cash flow position was $916 million, and our leverage ratios to that, 0.8 times net debt to EBITDA.

Slide 30. Turning to our debt maturity, we see the average maturity of our gross debt at 3 years and 3 months. 54% of the debt is at fixed rates, meaning that we are less exposed to interest rate volatility today, whilst having reduced our total cost of debt.

Slide 31. In line with our achievements over the past two years, in 2012, we again aim to strike the right balance between revenue growth, profitability, cash flow generation, and return on invested capital. We guide for an EBITDA margin around the mid-40s in 2012, an operating free cash flow margin of around 20%, and a growth in CapEx, which, however, will not exceed 20% of our revenues. The increase of CapEx year on year demonstrates the confidence that we have in the growth opportunities in our businesses.

We also anticipate that the impact of taxes and regulatory intervention in our markets will be slightly higher in 2012 than in 2011, but as we have done in the past, we are working to mitigate this impact. We wish to reiterate that all our previously communicated mid-term ambitions remain valid.

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

Thank you, Francois-Xavier. Slide 32. I would just like to close with a quick summary here. We are pleased with the performance achieved in this quarter and throughout the year 2011. We grew our top line by 10.1% in Q4, and closed the year with an organic revenue growth of 10.5%, in line with our expectations.

In 2012, we are strengthening our organization structure so as to better serve the needs of our customers in our 14 markets and our 5 categories. This new structure is designed to support our strategic goals to accelerate the development of new products and categories, deepen our consumer understanding skills, and to bring innovation to our go-to-market strategies, while we continue to focus on increasing efficiency.

We would now be happy to take your questions. Operator, may we have the first question, please?

Thank you, sir. Our first question today comes from Mark Walker of Goldman Sachs. Please go ahead.

Hi, there, guys.

Hi.

I have a few questions, please. Number one, given the focus on ARPU that you've reiterated versus subscriber growth, could you just give us some more color on the addition of the low ARPU customers in Central America that has worsened the ARPU trend in that region? Then secondly, the spectrum purchases of $44 million occurred in the year, is that -- do you think that's at all indicative of the FY'12 incremental CapEx? And can you also confirm that there's no license expires in 2012?

And then the final question. Could you just give us some idea of what assumptions you're making around the penetration of sub-$100 smartphones in your revenue and EBITDA margin guidance? Thanks very much.

All right, that was a whole set of questions. Let's start with the lower ARPU customers added on in Central America. Typically around the festive season and the holidays, you get Central American immigrants from the US coming back to their home countries, and some of them pick up extra local phones that are not used that much. So that could be one driver. So we don't see anything strategic in that. That's more tactical for the season.

In terms of spectrum acquisitions, wherever we can, we like to buy spectrum. Normally you have good payback, because you've reduced the CapEx required. It's very difficult to give a guidance for 2012, because governments are not always, in advance, forthcoming on the exact dates and spectrum available for auction, so it's more a reactive process.

But as I said, whenever we can, we want to buy spectrum at the right price, and we normally get a good rate of return on that.

Yes, we don't have any licenses expiring in 2012. The next one is charted 2014, and (inaudible) 2015, so we still have time. But as always, we start working on it early enough.

You had a question on the penetration of the smartphones around $100. The good news is that a little bit more than a year ago, we had, let's say, the base -- the entry level smartphone was priced up to about $200. Now we get closer to $100, which means that this is going to increase the affordability of these for customers, and increase the penetration of 3G overall. And the other benefit is that it will reduce probably the amount of subsidy that we are spending, which you saw somewhat in Q4.

We don't have precise data on the penetration of such devices for the time being, but this is something that we will monitor in the future.

In general, you could assume that the 9.7 million customers in Latin America that generate 86% of the revenues and have an ARPU higher than $10 would be sort of a target for Mobile Data penetration.

Okay, very clear. Thanks a lot, guys.

Thank you.

And our next question today comes from Cesar Tiron of Morgan Stanley. Please go ahead.

Yes, hi. Congratulations on the strong results. I have two questions, please, the first one on the shareholders remuneration. You said you'd return the excess cash to shareholders. Does it mean that another buyback is possible in H2? And second, on the -- my second question is on Colombia. Could you please explain how you think the MTR cuts would impact the competitive landscape in the country? I understand that your strategy is mainly focused on data, but it should help you continue to gain market share in the country, and probably give some data points such as revenue growth in Colombia in the quarter, if possible. Thank you so much.

In terms of shareholder remuneration, so what we do now is quite similar to what we did in the last two years, which is to announce normal [ordinary] dividend, which increases by 33%, at -- to the $2.40 per share, which is quite a sizable increase, as well as the share buyback program of $300 million for the time being, which means in total, $550 million. And the -- there could be more coming.

It depends very much on what could happen on the M&A front. This was the case as well last year, so if we find any M&A opportunity, we may stop the shareholder remuneration at this level, at $550 million. If we don't find any opportunity, as was the case last year, so we have clearly mentioned our intention to return any excess cash to shareholders as we did last year.

I imagine that -- okay, you have the question, share buyback or extraordinary dividend. There is no decision at this stage, because for the time being, we just announced the $550 million shareholder return.

In terms of Colombia, we more -- have done a number of analyses of the possible impact on the MTR cuts. It's different either to see an upside or a downside, so we sort of feel, it's more or less a non-event, when it comes to us. And you also have to recall that today in Latin America, 33%, almost 34% of the revenues are non-Voice, and in Colombia, that number is even higher. So the impact is also less for the total. But we have assumed, really, no major impact.

In terms of disclosing the revenue numbers for Colombia, we will not do that.

Thank you. But those MTR cuts should still help you continue to gain market share, right?

Possible, but we are not building our plans based on that.

Thank you.

Welcome.

And our next question will come from Stefan Gauffin of Nordea. Please go ahead.

Yes, if I could just follow up on the buyback program. Do you intend to spread out the buyback during the entire 2012, or is this a first half 2012 event? And then, a question on -- you mentioned that you expect some ARPU decline in Africa in 2012. During 2011, the ARPU decline has been around 7%. Does that level reflect a fair level also for 2012, or should we expect more or less?

And finally, you mentioned the -- sort of the tax effect in El Salvador, but there's also tax increases in Bolivia and Honduras. Can you say approximately what the tax rate impact will be in 2012, if all else equal? Thank you.

For the share buyback, we don't give any information on the timing. We could technically start later this week, but this is a program that we announced for the whole of 2012, depending on market conditions. The only thing that we have said is that we could do it on any of the three platforms, NASDAQ OMX, on the [pink sheets] in the US, or MTFs, given that we will favor, as we did in the past, NASDAQ OMX and the US market.

In terms of tax pressure or regulatory pressure, indeed, we have indicated on the tax line the increase of the corporate income tax in El Salvador, from 25% to 30%. For the rest of it, we don't want to comment too much, because a lot of these taxes, maybe some of them have been -- the laws have been passed, but have not been enacted, so we are not even sure about the exact timing of their implementation. So we have disclosed all of them in our Q3 release, as well as in our Q4 release. But we can't say much, because we don't always know much more than what we have disclosed.

In terms of Africa ARPU, it's difficult to give a forecast on that one, because we have a number of factors impacting that number. But firstly, it's geographic mix. In 2011, we tended to grow at a higher rate the new subscriber addition in Rwanda, who had the lowest ARPU in Africa. So it's -- one is the country growth, in relation to each other.

Second, the key driver could be the growth of MFS. We know from experience in Tanzania that the people who use our services, and in the last quarter, it was 17% of our customer base, tend to generate additional ARPU that would lend itself to grow. And then we have the data segment.

So there's a lot of various factors that -- aiming to -- you know, that really impacts the ARPU growth or ARPU decline in Africa. So we are not in a position to give a forecast on it.

Okay. Could I just make a follow up on Africa? There was some subscriber losses in the quarter, and you say that you have made adjustments in both Ghana and Senegal. Do you see a reason to -- is the impact from this, sort of visible in ARPU already this quarter? Should we expect further ARPU impact from price reductions?

I think, you know, price reductions, because the majority of that reduction was across net, as you recall, across net pricing actions have lowered elasticity than on net.

We think the price -- the new pricing we put in place is sort of, more of a long-term builder rather than a short-term. So again, it's difficult to give a projection on that one.

Okay, thank you.

Welcome.

And our next question today comes from Mauricio Fernandes of Merrill Lynch. Please go ahead.

Thank you very much. Two questions, please. First, on the -- we've been hearing, and I think you commented about the flat monthly fees that could be introduced in Paraguay, or the flat rates, in order to charge the same for on net and off net calls. So, how -- the question is, how much would that impact Millicom's results there? And if you could share what is the level of MTRs in Paraguay at this point?

And the second question, there has been talks about the Colombian regulator changing the way America Movil can sell (inaudible) or publishes its pricing plans in Colombia, in a way that they would have to show their pricing plans before to the competitors, and if the competitors would match the plan, then it would be approved by the regular. Otherwise, it wouldn't. How do you see that coming, and whether that's feasible to happen? That would be a unique regulatory measure relative to other countries. Thank you.

Yes, let me start with the comment of Colombia. I think -- I don't want to give anything out on that one. It's a regulatory issue, and if they have their own agenda that they will pursue, let's see what comes out. But as a consolation, it looks somewhat unlikely.

In terms of Paraguay, be -- and again, it hasn't happened yet. There is a law, but no decree. The MTR is supposed to go from $0.06 to $0.04, US cents. We don't know when that will be valid.

In terms of being able to forecast the impact of going to a flat tariff on Voice, we would try to be creative around our packets, how we bundled products and so on. So it's too early to tell. And again, remember, in Paraguay, about 40% of the revenues is non-Voice. So we have many tools to operate with in that market.

Okay, that makes sense. Thank you very much, Mikael.

Welcome.

Thank you. (Operator instructions) And we'll take our next question, which comes from Miguel Garcia of Deutsche Bank. Please go ahead.

Yes, good morning.

Good morning.

I wanted to get your level of commitment to some of the African operations that are -- that seem to need some consolidation, right? Wouldn't it be a better use of your capital to sell some of those operations where you are less successful, and increase your presence in Latin America, and those markets that could generate synergies with your current operations. Thank you.

Well, to answer the questions, we are 120% committed to Africa. We don't feel we have any weaker operations. In fact, our growth in most markets tends to outperform our competitors. And in -- you know, we spent years building very strong -- either number one positions, or number two positions. So if someday, there is a consolidation in the market, we would plan to be consolidators, rather than consolidatees.

Okay, that's clear. And in the case -- with the -- I mean, regardless you're committed to Africa, would you be open to consider new markets in Latin America? Or are there new Latin America markets that are interesting for you, in terms of generating synergies?

Yes, as we said before, I don't believe in global scale, don't believe in regional, only be number one or number two in the markets you compete in. So, from a scale point of view, at this stage, we haven't felt the need to go into new markets. It's more of an opportunistic -- if you can find the right markets where we can see ourselves getting a number one or number two position over time, and a return that would exceed (inaudible), over time, we would do so. But those opportunities are not that many.

Very clear. Thanks a lot.

Welcome.

Thank you, sir. And we'll take our next question from Lena Osterberg of Carnegie. Please go ahead.

Yes. I'm sorry, I was cut off in the middle of the call, so I'm sorry if you already mentioned this. But I'm just wondering, how many of your towers you have transferred to date? And also, I'm wondering, out of the total tower base in all of the operations, what's the potential that you could transfer, that makes sense for you to transfer, just to see how much there remains? That's the first question.

And then the second, I'm a bit -- I'm wondering a bit, because you've said repeatedly over the year that you're focusing on higher value added customers, and now you've taken in some customers on the low end, which have diluted ARPU. What's the reasoning behind this? As you previously mentioned, I think it was 1% of your customers -- 33% of your customers generated less than 1% of revenues.

Yes, we are not -- just to be very clear, we are not denying anybody access to our network. So, if you have seasonal effects and people travel from their home countries to spend time with their families, you automatically end up picking up new customers who might not be there for long. So, there is -- we don't have any mechanics to hinder things.

The second element of this lower ARPU customer, sometimes they are part of an ecosystem. So you have a family father that might be a higher ARPU customer, who have children who they just like to be in contact with, and it's more -- just out -- incoming calls to these. That's once a week, or something like that.

So, we're not really doing anything to deny it, you know, to deny access. We are just focusing on really building the customer segment to whom the number is important, and you know, many of them -- so we didn't buy these extra customers in Central America. They just came on. There was no concerted effort to attract them.

On the towers, so in Ghana, we have transferred 100% of the towers. In Tanzania, DRC and Colombia, we have transferred, roughly speaking, two third of the towers. We still have about one third to transfer.

In terms of cash, we have got a little bit less than half, though, because there was a little bit of a delay in the payment. Do we have more opportunities in towers? Yes, a little bit, in Latin America and some African countries as well, but we believe that what is left is of a lower interest, at least in terms of value creation, which doesn't prevent us from working on it.

So we are, rather, moving to the next phase, which is to check what kind of other passive infrastructure we could share. There is certainly an interest in doing so for fiber, because fiber has a huge capacity, that we can obviously share it. And we have even more interest to share either 3G or 4G network of spectrum.

And for example, when we look at the situation in the Swedish market, for example, where the entire 2G, 3G, 4G -- I mean, networks on spectrum are shared. We know that it's an excellent driver to reduce both CapEx and OpEx, so that's what we are targeting at now.

And do you see any markets that would be ready for natural joint ventures?

We are looking at many markets. I would say the difficulty is to find an agreement with a competitor of ours, obviously, which is not easy. We know that this will take time, and this next page will be probably more complex than what we have down, especially when we have to build something with our competitors. But there is a possibility that something could happen before the end of 2012, at the [first] markets. But we are looking at all of them.

Okay, thank you.

Thank you. And we'll take our next question now from Erik Pers of Danske. Please go ahead.

Hello?

Hello, Mr. Pers? Please go ahead. Your line is open.

Can you hear me?

Yes, go ahead.

Okay, good. I have a question about Voice revenues, and your Voice revenues were almost flat in Q3, just 1% up, I think, in local currency. And now they reaccelerated to, I think it was 3.6% up, something like that? Quite a positive aspect in this report, I think. Could you give us some additional flavor, and sort of a detail on how that was achieved, which regions and services, or segments, rather? Thank you.

Yes, I think the number element, firstly, we had -- we are continuing to experience good growth on SMS. Particularly in Latin America, we don't see penetration, per se, increases, but we see the usage. So I think our SMS revenues were up 8% in the quarter.

On the Voice side, we have done a lot that we've discussed before. We've done a lot of customer segmentation, and we are also successfully tagging and triggering these customers, meaning that you are a customer who belong on a certain segment, you went out of balance, in the same split second, you get an SMS from us offering a tailored offer for you that fits your consumption needs. And it just continued refinement on this offer that has led to our customers are pleased with the value it brings, and basically, they're consuming more.

So it's continued refinement on customer segmentation --

Good for you --

-- and product design.

Okay. And your minutes of use? Can you comment on that?

We -- there is so much volatility on minutes to use, because -- so we don't normally comment on that, because you have things like promotional minutes and so on, so, impacting it. That's why we have more focus on ARPU, which is the amount of money people spend.

Thank you.

Welcome.

And we'll take our next question from Soomit Datta of New Street Research. Please go ahead.

Yes, hi, there. I was hoping just for a point of clarity on Paraguay, and to go back to the regulatory changes there. Are the on net prices you offer now equivalent to the off net prices? And --

No, they are not.

Okay, and when will they have to be by?

We don't know. That's the uncertainty here. We know that a law has been passed, but no decree issued yet to enact the law. So, it's slightly uncertain when that would come into place.

Okay, thank you. And then just as a follow up, could you just talk me through the rationale -- I'm not sure if this applies to Africa generally, or whether it was Ghana specifically, but why the reduction in off net tariff prices, versus, say, on net prices, given the elasticity comments. What's driving that decision?

Okay, without revealing too much on strategy here to our competitors, basically, our two competitors equalized their own net and off net price. And we didn't follow that, so we had a higher across our off and a lower on. And for the first half of the year, we didn't feel the impact of their activity. We then started to get, with market research, basically, customer complaints about our tariffs and our affordability perception. So we more or less copied their model.

And so -- that's the position we are in.

And is that just -- that was just Ghana. Was that more generally (multiple speakers) --

No, that was specifically Ghana.

Okay. Thank you very much.

You're welcome.

Our next question today will come from Thomas Heath of Handelsbanken. Please go ahead.

Thank you. Firstly, a question on the priority of your targets. I know some previous years, you changed your internal compensation targets for senior management in terms of growth margin and cash flow. I was just wondering if you made any changes due to your incentive schemes there.

And then, if you could have a word on the Senegal situation as well, that would be great. Thanks.

Yes. In -- as of 2012, we are incorporating ROIC as a component of our LTI, our long term incentives.

All right.

So that's the change.

And which --

(multiple speakers) -- yes?

Sorry. Which sort of factors are being -- are -- pave the way for ROIC, then?

The TSR, total shareholder return.

Okay, thank you.

You're welcome.

On Senegal, so the hearing managed by the World Bank or (inaudible), took place in December in Paris, and now we are waiting for the outcome from the tribunal. So we cannot comment on the situation. But we expect that probably we will hear the final decision probably at the end of Q1, or most probably, Q2.

Okay, thanks.

And our next question will come from Andreas Joelsson of [Roe Equity Research]. Please go ahead.

Or, SEB Enskilda, I think that should be. Two questions, if I may, on Data ARPU. And first of all, Data ARPU is sequentially down in the quarter. Could you please explain the dynamics on that? And then, also, given that handsets now are approaching $100, do you think the penetration of data users will accelerated in 2012 versus 2011?

Yes, let me just (inaudible) penetration, because yes, logically, the penetration should actually (inaudible), because as on the Voice side, normally the biggest hurdle is how to access the services, and not the monthly fees. So once you have a capability to access, it's easier to adopt to the bundled fees. So we would expect some increase in the penetration for falling handsets.

In terms of ARPU, you know, there could be some volatility. We had some focus in Central America on prepaid customer acquisition to try to drive that penetration. And normally, a prepaid customer comes with significantly lower ARPU, at least in the beginning, versus a postpaid.

Okay, thanks.

Welcome.

And our next question will come from Kevin Roe of Roe Equity Research. Please go ahead, sir.

Thank you. A couple questions. First, Mikael, thanks for reiterating your criteria for greenfield investments. Could you update us on your appetite for in-market consolidation cable broadband minority stakes? That would be helpful.

Okay. In general, we are a believer in market consolidation. In our industry, it's good to be number one or number two, and possibly number three. Be four, five or six, it's normally not a strong position to be in.

Africa, in particular, has too many operators. I don't believe that the regulatory environment is there yet for government to see the logic in this consolidation. I think it will happen over time, but I'm certain that it will take a few years until we get there.

And on the --

And on -- yes.

Cable and broadband, we are very pleased with what we have delivered with Amnet that we acquired three years ago. I mean, we have reached 12% (inaudible) annual growth over the last three years, and we have a margin which is not so far away from the average margin of Millicom, so we are very pleased with that.

So if we can -- if we find some other opportunities like this one in our market, even if there are very few of them in Africa to start with, we would go for it. Obviously, at the right price.

So from a sanity point of view, we believe in owning the last mile to the home. Not so much long-term for the pay TV or enterprise side, but finally, for the broadband opportunity. Demand for increased speed is going to grow our -- over time, (inaudible) use, as it's done in the developed world.

And do you think we could see some activity on minority stakes in 2012?

I think we have very strong and happy minority shareholders in our key markets, so I don't expect any movements there.

Happy is good. One last question. Senegal, your prepared remarks, you mentioned increasing the investment there. Is that a reflection of an increased confidence in that market?

Well, it's a shift of investment. We're still evaluating the outcome of the final hearing that we had early December. You know, we've been investing throughout the years when we had this dispute, and it's just now beginning to shape that investment to power, which was something that the government fell behind in delivering. And typically, in our sides, we had one generator that then could cope with a certain amount of outage, but can't cope with the outage at today's levels, so we are putting in a second generator. Which, from a logistic point of view, takes some time to put in place. So, we'll be able to build up investment in Q1, Q2.

Very good. Thank you.

You're welcome.

We'll move now to our next question, which comes from Barry Zeitoune of Berenberg Bank. Please go ahead.

Hi, good afternoon. It's Barry Zeitoune from Berenberg. First question is, you mentioned, obviously, a host of potential new taxes, the ones in Bolivia and El Salvador you've already detailed, and Honduras. From what you've said before, I believe the Bolivia tax would be a tax on revenues. I'm not sure about the Honduras tax.

Given the these are not yet in place, have they been built into your margin guidance, or are they excluded from your current margin guidance?

Second question is whether you can confirm if and how much was paid for the 40% stake in the Colombia tower co. Was that just simply offset by the cash amount that you received?

Then third question is on subsidies. You mentioned that the lower cost of smartphones has driven lower subsidies. I was also wondering whether you were seeing any less competitive intensity driving lower subsidies in Q4.

And then finally, I was just interested in -- I've been interested in some of the comments you've made on the smartphone pricing and data pricing. Do you think it might make sense at any point to lower the cost of data as the cost of smartphones is coming down, to try and promote uptake? Thank you.

Sorry. Can you repeat that last question? If it makes sense --

Yes, just -- I'm just wondering how you view your current data pricing. So, data pricing being high in the context of high smartphone prices might make sense. But as the price of smartphones comes down, do you feel it might make sense in terms of boosting penetration to lower the cost of data for the end user?

Okay. That was a whole host of questions. Let me start with the taxes and built in the guidance -- yes. You know, we more or less model different things when we build our plan. But remember, additional taxes and fees have always been a feature of the Millicom life. And I think we have had a very strong track record in trying to mitigate and find cost saving items to balance this, from anything from tower outsourcing to fiber network, rather than leased, to savings on the distribution, and so on. So we are constantly working on cost out, in order to be able to mitigate any additional taxes that come up.

In terms of data pricing, jump in a little bit, I think we are quite affordable as is today. And primarily, if you compare to the level of data pricing that we have in the developed markets. To us, it's more -- it goes to the question of giving value in terms of packaging, and so that we understand our customers' usage better. And as we have on the Voice side, we have packages, Data packages. So for instance, we have a [so-so] package, which is on a Blackberry, which gives you unlimited access to Facebook, e-mail, Blackberry Messenger, and voice. Doesn't allow you to go on YouTube, for example, so that's something that we can offer, tailor to a certain customer need.

So, we think the success in driving that penetration is more to understanding what the customer needs are, and tailor packages to match that.

And for the tower co in Colombia, the amount of equity that we have is around $26 million for our share of the equity, which is a 40% stake that we have. We have not paid entirely the full amount yet, but we have released already part of it, and the rest of it will come in 2012. We will obviously use part of the cash proceeds that we have got from that deal.

Okay, and just quickly, in terms of the level of competition that you're seeing, have you been able --

No, no change in the competitive landscape.

Okay. Thank you very much.

Welcome.

Thank you. (Operator instructions) And our next question today comes from Jean-Charles Lemardeley of JPMorgan. Please go ahead.

Yes, hello. I just wanted --

Hi.

Could you give us an idea of what kind of ARPU uplift you see from smartphone users, user switching to smartphones in Latin America? And then just on Africa, it seems that you have a wide range of performance, depending on the markets, some markets doing much better than others. Today we saw Vodacom reported 40% revenue growth in Tanzania, and roughly 20% in DRC. Can you give us an idea of how -- what is the high end, what is the bottom of the range, if you want, for local currency growth in Africa? And what do you see going forward from 10.6% revenue growth in the last period?

And then finally, if you could give us your -- a rough idea of your net interconnection position in Colombia, whether it's your net pay or net receiver, the market.

Let me start by Africa. We don't break out the individual markets, but we feel our growth is competitive in the markets where we are in, wherever we have access to our competitors' information, we look at that.

The performance is a little bit uneven in the Africa markets, depending on the intensity of the pricing situation, and other factors. So from quarter to quarter, you tend to have somewhat uneven performance, and we expect that to continue.

If you look at the ARPU, at least coming from Data, if you look at our average ARPU in Latin America, it's $12.70. If you look at the Data ARPU only for handsets, for example, it is already at $11.00, so it gives you an idea of the contribution of data in the ARPU, because for consumer, we're using ARPU, an average [$7] ARPU, which is basically 1% higher than the normal customer.

And that's for smartphone users, 3G handset users, you say?

We don't have smartphone in specifically, so we are looking at handsets. We break it -- so you have in the presentation, we break it between handset (inaudible) customers and Data (inaudible) customers. So handsets, you have an ARPU which is at about $11.00, which includes smartphones and featurephones.

Okay. And Colombia, on the interconnect?

Don't have that data. Remember, Colombia, less 40% is value added services. I think it's pretty even, possibly relatively even.

Okay, thank you.

Welcome.

And our next question comes from Bill Miller of Hartwell. Please go ahead.

Good morning.

Good morning.

You have a fair amount of debt coming due this year, and I'd like to know whether you plan to finance long or short-term, and what's the capacity of the market, since you'll probably push that down into the operating accounting levels. That's the first question. Second -- or if you'd like to comment on that.

Second is, you have had a history of being unable to complete the share buybacks -- witness last year, for instance. Why wouldn't you start that sooner, rather than later, so that you could, in fact, complete it as advertised this year, rather than having to go through hoops to get it done? Okay, thanks. Bye.

Actually, last year, it's not that we could not execute the share buybacks that we had announced during the year. It's that we rather decided to rebalance the shareholders remuneration between share buyback and dividends, to arrive at, roughly speaking, 50/50 distribution. We are not saying that we are not going to start now. We are just saying that this is $300 million program. We are not saying that we are going to do it in the next couple of months. We are just saying we are going to do it during the course of 2012.

And once again, I mean, we don't want to be sitting on piles of cash, so we have decided to return any excess to shareholders, but we don't commit on any specific number at this stage, and we don't commit on any specific way to do it.

Sorry, I could not hear the first part of your question. On capacity of debt. The fact that we have a lot of debt, short-term, part of it, we said -- more than half of it is really the cash that we are keeping for working capital purposes. For -- I mean, the normal course of business.

On the top of it, traditionally at the end of the year, we are accumulating a little bit more cash in the operations, because we distribute dividends in Q3. And this is especially true in Central America and in South America as well. So there is a little bit of a phase in issue at the end of the year.

So, you would not refinance any debt this year, or are you going to refinance it locally, or go out long term?

Yes, we already see an opportunity to refinance the unpaid debt locally, since we can secure [tax visibility] of the interest in that cash, and we can push down part of the counter risk, in that case, locally, especially if we can take non-recourse bets.

We do have to renew part of the debt this year, and we traditionally do, so we are working on a couple of refinancings as we speak, taking the opportunity of extremely low rates today.

Many thanks.

Thank you.

And we have a follow up question from Erik Pers Berglund of Danske Bank. Please go ahead.

Thank you. I have a question about the -- a follow up on the tower companies. You mentioned that you $26 million --

Sorry, can you repeat? We hear you very faintly. Can you move closer to the phone, or --

Yes, sorry about that. It's about a follow up on the tower companies. I think you mentioned you had $26 million of equity in the Colombian tower company. Could you provide us with a number for the total investment in all of your tower companies?

And secondly, if we should expect an impact in your P&L in the next couple of years from these associated companies? Thank you.

I don't have the number for the tower company in Africa. Given that -- you need to take into consideration the fact that we have a 40% stake to start with, and the second, that -- I mean, in Colombia, as we did in Africa, we are leveraging this company with our partners, it would be (inaudible) in Africa, American Tower in Colombia, as much as we can. So the amount of equity that we are left with, with our 40% and the maximum leverage, is not that high anyway.

Yes, we do have a significant positive impact in terms of EBITDA coming from these towers, that we said, that for example, for Africa, once we will have transferred all of these towers, it could be up to 2 percentage points of additional EBITDA in Africa, for example. We have already indicated to the market that we do not intend to keep this benefit, but we intend to reinvest them for further growth, and especially, for example, in the short-term on Data and the data growth on (inaudible).

So don't expect a significant increase of the EBITDA as a consequence, because we expect to reinvest these savings into the business for future growth.

Okay, but I thought the EBITDA positive impact was coming from savings you made on OpEx, because of the tower outsourcing. But is that -- I mean, is there also a contribution from them on the net profit level? Because I assume (multiple speakers) consolidated, that's -- you know (multiple speakers) --

Indeed there will be over time. And so, we take into consideration the fact that these companies, at the beginning, are not generating any positive net profit, because of the high leverage that we have. And this company needs to -- these tower companies need to gain new customers as well, because as you see, when we start -- the day we start with these companies, there is only one (inaudible), which is Millicom. But now, if we -- as we speak, for example, in Ghana, the first project that we started with, I think that the average (inaudible) tower is around 1.8. So obviously, over time, when these companies are renting out these towers and having more than one (inaudible) for power, obviously, we will get over -- find some positive contribution in terms of net profits.

That's clear. Thanks.

Thank you.

Ladies and gentlemen, our final question today is a follow up question from Stefan Gauffin of Nordea. Please go ahead.

Hello?

(multiple speakers), hello. Can you hear me?

Yes.

Yes. It's a follow up on -- sort of data, data ARPU question. But from another angle.

A lot of the European operators have seen voice and SMS declines as customers use over the top services. If -- can you protect your Voice or SMS revenues by blocking, for example, mobile voice traffic?

Well, in general, in life, you can't protect anything forever, so it's more about understanding the customer needs, and designing products and product combinations that make sense.

As I said, so far in Latin America, we still have strong growth of SMS. Our SMS revenues, in local currency, in Q4 in Latin America, was up 80%. Sorry, 8%. So we still see strong usage. And naturally, we have -- you know, when we design our data packages, and some of them, we include SMS packages, as a must. So we still think that we can get growth out of the SMS.

And in terms of Voice revenues, we were still positive, as a Group, at 3.6% for Millicom as a [total], so we did, you know, customer segmentation with a target figure and other model that we will bring to par, we are still determined to ensure that we will get Voice growth going forward, although even if it's single digits, we're still targeting growth.

Okay, thank you.

Thank you.

Ladies and gentlemen, that concludes our question and answer session today. I'd now like to turn you over to your hosts for any concluding or final remarks.

Yes, I would just like to thank you for joining the call today, and we look forward to seeing you soon. Thank you.