Millicom International Cellular SA (TIGO) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Millicom Q3 results conference call. For your information, this conference is being recorded. At this time, I will turn the conference over to Justine Dimovic. Please go ahead.

Welcome, everyone, to the Millicom third quarter results presentation. My name is Justine Dimovic, and I am the Head of Investor Relations. I hope you all located the slides for today's presentation on our website, at millicom.com.

Before we start, I would like to remind everybody that this call is being recorded and audio streamed over the web. May I also remind you that the safe harbor statements apply to this presentation, and the subsequent Q&A session.

With me today on the call are our President and CEO, Mr. Mikael Grahne; and our CFO, Mr. Francois-Xavier Roger. We also have the pleasure to be joined by our President and CEO, as of November 1, Mr. Hans-Holger Albrecht.

Without further delay, I will now hand over to Mikael, who will present our Q3 results, and an update of the development of our categories.

Thank you, and welcome, everyone. Please turn to the agenda for the call on slide 4. I will first give an overview of the quarter, and an update on the development of our categories. And then Francois-Xavier will take you through our financial results in more detail. We will then take questions.

So let's start by looking at the key events in the quarter; turn to slide 6. In the third quarter, our revenues grew by 8.4%, supported by strong development of our innovative services, which grew by 31% in local currency in Q3, 2012. Our EBITDA margin was 42.3%, in line with our expectations, which leads us to reiterate our fiscal 2012 outlook.

Innovation has proved to be a strong enabler of churn reduction and growth. We are pleased to report a 16% reduction in the churn rate year on year in Q3. This, in turn, led to strong customer additions in this quarter.

During the quarter, we invested in external growth opportunities. Firstly, we acquired Cablevision in Paraguay, the leading pay-TV provider in the country. This acquisition will enable us to accelerate our entry into fixed broadband, further building upon our converted strategy initiated with the Amnet deal four years ago, which has delivered excellent results.

Secondly, we made our first investment in the online category, partnering with proven experts from Rocket Internet. The online industry is nascent in emerging markets, and through this partnership, we are being true to our [pioneering] roots. We are gaining first mobile advantage in a rapidly-growing sector, just as we did years ago in the mobile telephony.

So far this year, we have returned close to $435 million to shareholders through the payment of a $2.40 per share ordinary dividend in June, and share buyback. Today, we are announcing our intention to increase shareholder returns for the year to a total of around $735 million, with a special $3 dividend to be proposed to an AGM in December. Consequently, we will not buy back any more shares in Q4.

Slide 7; turning to the key financials, we recorded revenue growth of 8.4% for the quarter, which is in line with our expectation. This growth is excluding the contribution from the Online category, and is restated for one-off events as well. In Q3, ARPU was stable at the Group level, something we have been aiming to achieve for some time through the offering of innovative additional services to our existing customers.

Slide 8; our focus on new categories continues to deliver solid results. In Q3, value-added services accounted for close to 34% of our recurring revenues, up from 28% in the prior year. We believe we are firmly on track to meet our targets of 50% and 25% of revenues respectively in Latin America and Africa, being generated by VAS by 2015.

Slide 9; our accelerated investment in new growth categories, including staffing, network building, and handset subsidies, along with the change in our revenue mix, have resulted in the dilution of our EBITDA margin to 42.3%. As you can see in the chart, this investment for growth accounted for 1.7% of the decline versus Q3 '11, while pricing pressure accounted for 0.9 points.

Slide 10; this year we plan to return close to $735 million to shareholders, as previously stated. This will bring the total cash return to shareholders, over the past four years, to $2.8 billion, with two-thirds in dividends, and one-third through share buyback. After our recent acquisitions and the Senegal settlement, our pro-forma net debt LTM EBITDA will be close to a balanced gearing of 1 times net debt to EBITDA.

Slide 11; now let me give you an update on some of the categories.

Slide 12; I'd like to start by highlighting that, this quarter, we recorded absolute growth from innovation. We reported a record absolute growth from innovation of $77 million, year on year. Revenue generated outside of the Communication category grew by 31% year on year in Q3, up 5% quarter on quarter.

Slide 13; another benefit of our innovative approach, which sees us offering more services to existing customers, is a material reduction in churn. Indeed, MFS, or Mobile Financial Services, or zero balance products, are excellent loyalty tools. In Q3, our churn rate declined 16% versus Q3 last year. This, in turn, enabled us to report stronger customer additions than in the past quarter.

Slide 14; this quarter, we continued to achieve revenue growth in Communication, on the back of strong SMS growth. Our Information, Entertainment, Solutions, and MFS categories collectively contributed 86% of the growth.

Slide 15; within these four categories, our Tigo Lends You product, in the Solutions category, has the highest penetration of all [BAS] at 37.2%. The penetration of this simple product has been growing rapidly, quarter on quarter, but there is still plenty of room for further growth, as you can see from the difference between the lowest and the highest penetrated markets. Our impact on penetration has decreased in Q3, as we experienced some platform issues in one of our markets, and implemented measures to make billing of these services more transparent to customers.

Slide 16; now let's look at some of these categories in more detail, starting with Information. Information is our fastest-growing category, and within it, mobile data is the largest single contributor to revenue growth.

The strong correlation between revenue growth in mobile data and traffic growth shown on this chart demonstrates that we have the right pricing structure in place. We have recently seen an acceleration in traffic growth, which we are supporting given the rapid decline in the production cost of Internet access and our ability to monetize data.

Slide 17; our commercial investment in handset subsidies is supporting growth in penetration and usage for mobile data. We believe that this is the right time to make this investment in order to secure a leading market position in data, as we have in mobile voice in most of our markets. In Q3, our total subsidy costs increased by 22.1% year on year.

Slide 18; we now have 5.8 million data users in total, of which 4.4 million are in Latin America, representing 16.5% (sic - see presentation "16.1%") of our customer base in the region. We have seen a 12% increase in data revenues on the handsets in the quarter, thanks to our investment in subsidies. Data revenues as a percentage of total mobile recurring revenues have increased 6% quarter on quarter to 14.8%.

Slide 19; our Mobile Financial Service categories continues to develop well. At the end of Q3, 11% of our customers were using MFS in the seven countries where the service has been offered for over one quarter. In Tanzania, over one-third of our customers are now users of the Tigo Pesa service. In Paraguay, penetration of MFS has reached 21% of our customer base, and we are seeing a good momentum in the growth of international money transfers, thanks to our agreement with Western Union. In Rwanda, we have seen the rapid take-off on MFS since launch, and by the end of Q3, 16% of our customers were users of MFS. We are pleased to report our first breakthrough in Central America in this quarter. We have now close to 3% MFS penetration in El Salvador.

In July, we launched MFS services in DRC. We expect to be live with MFS in all our markets except Senegal and Columbia by the end of Q1, 2013. In Q3, we also launched the foreign remittance services in El Salvador with Western Union, and early signs are encouraging.

Slide 20; now let me give you a brief update on our newest category, the Online business. As I mentioned earlier, and as we outlined in our conference call to discuss our investment in this sector back in August, we believe there is a great opportunity to create value in the Online sector in Latin America and Africa.

Online has been one of the fastest-growing sectors in developed markets over the past ten years, with growth driven by the fact that people have gained access to the Internet. This sector is emergent in Latin America and Africa, but Internet penetration is growing rapidly. In the same way that we brought mobile telephony services to emerging market customers, we will now bring ecommerce and online services to markets where the fast-growing middle class is increasingly demanding access to goods and services that are not necessarily easy to find in the traditional bricks and mortar retail network.

Currently, Latin American Internet Holding, LIH, and Africa Internet Holding, AIH, the two subsidiaries of Rocket Internet in which we have invested, control seven operating businesses, mostly in ecommerce. Both holdings are required to launch a number of new businesses in Latin America and Africa over the next three years.

On the slide, you can see the consolidation of $2.5 million of revenue, and losses of $2.3 million for both EBITDA and net income from Online from September 1, 2012. The $2.3 million net loss is on a 100% basis, so our 20% share of that is $0.5 million. This is reported in Others this quarter, but Online will be reported as a separate category from Q4 2012.

Slide 21; the existing five businesses in LIH are in the marketplace, ecommerce, and subscription subsectors, and have been launched within the last 12 months in Brazil. As you can see on this slide, altogether 600 people currently work in the Online operations that have already been launched in that market.

I'd like to give you a bit more color on the competitive outlook in Brazil, which is probably the most advanced market in Online in Latin America. Kanui, our concept selling sporting goods, in Q3 moved to claim the number two market position, second only to a player which has been up and running for close to a decade. Tricae and Zocprint are market leaders. Airu is rapidly gaining on the leading player, through an innovative integrated payment solution. When it comes to YepDoc, the business is developing rapidly, as there is a clear need for a centralized place for people to seek appointments with doctors.

The next businesses in the pipeline are in the lead generation subsector, and will be launched in Brazil, Colombia, and Mexico. Colombia will, therefore, be the first market where we will be offering both online and mobile telephone services.

Slide 22; when it comes to the development of online in Africa, AIH reorganized its operations in the third quarter, merging several of its brands around the two strongest brands, Zando and Jumia. The first, Zando, offers fashion and lifestyle goods in South Africa, and the second, Jumia, offers fashion and general merchandise in Morocco, Nigeria, and Egypt. In Africa, there is competition in ecommerce, but we are leaders in the markets where we have launched.

AIH expects to launch further ecommerce businesses, as well as businesses in the lead generation and marketplace subsectors in several new markets, including Ghana and Senegal, in the coming months.

So as you can see, Online is rapidly moving to our Tigo markets, which will develop synergies for the partnership, over time.

I would like now to hand over to Francois-Xavier, who will give you an update on our financial results.

Thank you, Mikael. Slide 24; in Q3 we recorded local currency underlying revenue growth of 8.4%, excluding a one-off reclassification of $7 million in Colombia, impacting revenues and EBITDA. Including the Online contribution for one month, our underlying growth in local currency was 8.6%.

We produced an EBITDA margin of 42.3% for the quarter, down 3.7 percentage points from Q3, 2011, due to accelerated investment in our categories, as well as price declines in some markets in Africa and Central America.

In local currency, and restating for the one-off in Colombia, our Q3 EBITDA grew by 2.4%. We invested $183 million or 15.3% of revenues in CapEx during the quarter.

Our reported operating free cash flow declined in Q3, as a result of unfavorable ForEx moves and timing for payment of taxes on CapEx.

Now let's look at the performance in our three regions, starting with Central America on slide 25.

Revenues for our Mobile and Cable operations in Central America were up by 3.3% year on year in local currency. This quarter, we still experienced pricing pressure in El Salvador.

In Guatemala, the performance in Q3 was negatively impacted by a decrease in international revenues, which can be somewhat volatile between quarters. As a result, ARPU in local currency was down 5% in Q3.

Our EBITDA margin was 50.1% (sic - see presentation "50.3%") in Q3, declining 0.9 percentage points from the level at Q3, 2011. The reduction was essentially the result of increased investment in subsidies, combined with pricing pressure.

Operating free cash flow declined, due to the timing of tax on CapEx payments, some of which will revert in Q4.

Slide 26; in South America, revenues increased by 14.6% in local currency on an underlying basis. We added 528,000 new customers in the quarter.

Mobile ARPU was up by 3% in local currency as a consequence of our ongoing focus on mobile data and other VAS.

Increased subsidies and other investments, made to further accelerate the growth of our market share in data, contributed to a year-on-year decrease in the EBITDA margin of 5.1 percentage points to 37.8%. Excluding the one off in Colombia, our EBITDA margin was 38.6%.

With its large developed market and fast growing economy, Colombia is currently one of the most attractive growth opportunities. In Q3, we continued to invest to offer attractively priced data bundles, encouraging upgrades from prepaid to postpaid and from voice to data.

Our subsidy costs are recorded upfront when we gain customers. EBITDA margin in Colombia was below 25% in Q3. We will accept a lower level of profitability in Colombia in the coming quarter, i.e., an EBITDA margin below 25%, as we know that payback on such investment is rapid, and revenue growth is attractive.

Slide 27; now let's turn to Africa. Revenues in Africa grew by 6.8% in local currency in the third quarter and were negatively impacted by the strengthening of the US dollar against many of our operating currencies.

Performance in our African footprint remained mixed, with some operations performing strongly, such as Tanzania and Rwanda, while others reported revenue declines in an environment of continued pricing pressure and increasing competition like Ghana and Senegal.

We increased our net customer additions quarter on quarter, and saw a further slowdown in local currency ARPU erosion.

The EBITDA margin for the quarter was 37.3%, down 4.8 percentage points, as price competition on voice leads to lower levels of profitability for the industry overall.

CapEx in Africa in the quarter was $5 million higher than in Q3, 2011 and amounted to $81 million, of which $15 million was linked to the 3G license we received in DRC.

In 2013, we will have 3G licenses in all African markets but Chad, following the amicable resolution of our dispute in Senegal.

Slide 28; normalized EPS decreased by 19% year on year to $1.65. Half of the decline was the result of unfavorable foreign exchanges, leading to a lower EBITDA in US dollars this quarter than in Q3 last year.

The other half resulted from a combination of higher corporate costs linked with the staffing of our global functions and higher finance costs, as our gross debt increased in absolute value.

Slide 29; our normalized tax rate of 23.9% for the quarter was higher than in Q3 last year, due to a higher corporate tax rate this year, notably in Central America. We are confident that, going forward, we will manage to return and effective tax rate of less than 30% of our profit before tax, despite the fact that we see increasing tax rates in a number of our markets.

Slide 30; our free cash flow for the quarter was $172 million, reflecting lower operating free cash flow this quarter related to the timing of taxes on CapEx payments, along with ForEx pressure on EBITDA and increases in corporate costs and net interest paid.

Slide 31; at the end of Q3, our cash position stood at $1.2 billion, and our net debt to EBITDA ratio was 0.8 times. By the end of the year, we expect to be close to 1 times net debt to EBITDA following the acquisition of Cablevision Paraguay, the 20% stake in Rocket Internet Holdings, as well as the settlement in Senegal.

Slide 32; turning to our debt maturity, we have a fairly high level of short-term debt, which we intend to refinance rapidly, as we have several well advanced projects to do so, notably through the issuances of public debt. Our objective is for the average maturity of our gross debt to exceed three years, as it has been done in the past.

Slide 33; when it comes to the source of our debt financing, we are currently focused on growing the share of public debt in the mix, so as to be less dependent on bank financing, and so as to extend our average debt maturity.

Slide 34; at the end of Q3, 48% of the gross debt is at fixed rates, and 55% is in local currency.

Slide 35; 65% of Millicom's total debt of approximately $2.6 billion is non-recourse. We have $1.1 billion of debt in Central America, 9% of which is guaranteed. And in South America, 31% of our $912 million of debt is guaranteed. In Africa, we have $601 million of debt almost fully guaranteed.

Slide 36; I would now like to comment briefly on shareholder remuneration. Firstly, we paid a $2.40 per share ordinary dividend to shareholders in June. Secondly, by the end of Q3, we had bought back $190 million worth of shares.

The Board will propose to an EGM to be convened in December a special dividend of $3 per share. As a consequence, close to 100% of free cash flow will, once again, be paid to shareholders this year, with a total return of close to $735 million. There will no further share buyback in Q4.

Slide 37; on October 12, we filed a certification with the SEC on Form 15F, which effectively ends Millicom's registration with the SEC. Our shares will continue to trade over the counter in the US, as they have done since the consolidation of our listing on NASDAQ OMX in Stockholm in June last year. Our future disclosure will follow European Directives and NASDAQ OMX requirements, but we intend to maintain a comparable level of disclosure as in the past.

Slide 38; on the back of Q3 results, we confirm our full-year 2012 outlook, which excludes a contribution from online and Cablevision Paraguay.

In 2012, we again aim to strike the right balance between top line growth, profitability, cash flow generation and return on invested capital. We expect the full-year EBITDA margin to be approximately 43%, the operating free cash flow margin to be approximately 20%.

We expect CapEx in 2012 to increase in absolute terms, compared to last year, but not to exceed 20% of sales, excluding Spectrum acquisition, as we invest in IT and billing platform, and add further data capacity.

That concludes our presentation. Before we move to our Q&A session, I would like to take this opportunity to thank Mikael for his outstanding contribution over the past 11 years in making Millicom the Company it is today. On behalf of all us at Millicom, a warm thank you, Mikael. We wish you all the best for the future.

Operator, can we have the first question?

(Operator Instructions). JP Davids, Barclays.

Two questions to start, please. The first question is on the market reaction to your change or your increase in subsidy, particularly in South America. How do you see the competitors reacting to your change and to your investment in data?

And then the second question, a slightly broader question for Mikael. As you leave the business, what advice would you leave with Hans-Holger, as he takes the Millicom forward. Thank you.

Okay, let me answer the question. I think the subsidy increase is something that we worked on quarter by quarter. A key reason for us to increase that subsidy, as we said before, is the need to control the whole chain. So basically, from the fact that a customer gets the phone, we need to ensure that he and she immediately uses it for a data service that it will stick. So that's been a continuous trend. I think our competitors have been on a similar quest, but we believe we have a stronger data growth for the moment than our competitors.

In terms of advice to Hans-Holger, I don't feel there is a need to do anything. Hans-Holger is a very talented and experienced CEO and is inheriting a very talented and experienced management team. So I think he will be able to very quickly make up his mind what the right route for the Company is.

Thank you.

Mark Walker, Goldman Sachs.

I've three questions, please. Firstly, in Central America, I just wondered how you see from here the situation in El Salvador relating to the AMX/Digicel consolidation playing out, now that the competition authorities have rejected that merger. I just wanted you to comment on the likelihood that the price competition becomes more persistent as a result of that.

Secondly, still with Central America, can you just expand on the revenue trends you're seeing in Guatemala, and what is really driving the decline in international traffic there? Again, how persistent is that likely to be?

And then the last question is on the Online services business. I just wonder if you could tell us a bit more about the African Online businesses, Zando and Jumia. On slide 22, I don't think you've disclosed those before. My understanding is that Zando is a Zappos clone in South Africa, but I haven't really come across Jumia yet.

Also, I was wondering if from Q4 you intend to separately disclose AIH and LIH financial performance. Thank you very much.

Okay. Let me start with the competitive situation in El Salvador. It's still competitive; I think last week, America Movil and Digicel announced that they will abandon the takeover there. So we would expect that the competitive situation would be perhaps somewhat more normalized, going forward, since some of the operators there are subscale and probably are close to losing cash with their efforts there.

The international traffic into Guatemala, you tend to have some variation quarter by quarter; I wouldn't read any specific trend to that. As we said before, I think over the long term, there is a threat to the international traffic with more and more Skype-like services coming into place. And that's again, it's so important for us to own the last [line] to the home with broadband, as we do in Central America.

In terms of Online, I don't think -- with only one month ownership of the business, our intent is not to really go into more detail at this call on the Online business. It's, at this stage, progressing as per plan and we probably will have, at some later point of time, a Capital Markets Day reviewing more details around this.

But as far as disclosure is concerned, we intend to report the Online business as a separate segment from Q4 onwards. We didn't do it this quarter because it was only a month, so it didn't make a lot of sense, but we will do it with additional disclosure, and separate disclosure for this business for Q4 and the following quarters.

Sorry, just on disclosure, can you clarify that you'll separately report the African and the LatAm Online businesses?

We have not finalized the exact format of the reporting, so we'll see in the next quarter.

Okay, great. Thank you very much.

Peter Nielsen, Cheuvreux. We'll now move to our next question. Stefan Gauffin, Nordea.

A couple of questions, please. The first one is a data question relating to depreciation. The reported depreciation was $206 million in the quarter, and then on slide 28, you show that the normalized EPS, there you show a depreciation level of $196 million. So can you please explain the difference there?

Then secondly, you ended the buyback program early and instead, you announced an extraordinary dividend. Is this a strategy change in shareholder remuneration? And hence, is it more likely that we should see further shareholder remuneration in the form of extraordinary dividend rather than buybacks, i.e., for next year?

Regarding the shareholder remuneration, so we have actually done in the quarter what we said, which is to return excess cash to shareholders, which is the reason why we decided on this extraordinary dividend of $3 per share. That will be paid, most likely, subject to the approval of the EGM in December, which brings the total shareholder remuneration to $735 million for the full year, which is more or less equivalent to the free cash flow that we generate. So no specific changes there.

But just a follow-up there. You had a target on share buybacks of returning $300 million and now, I believe you came up to $190 million. So you could have continued -- delivered on the share buyback and delivered a $2 extraordinary dividend. So is this a change in the way you distribute excess cash?

No, it's a decision by the Board to go for an extraordinary dividend of $3 per share for the rest of the year. But structurally, there is no change.

As you can see, over the last four years, we have returned to shareholders a significant amount, out of which two-thirds was distributed as dividend, ordinary and extraordinary dividend, and the balance through share buyback. No, there is nothing specific to read there except that it was a final decision of the Board to distribute that way for the end of the year, which is not so much (inaudible).

Regarding your question on the depreciation, the difference between the two figures you are mentioning were actually amortization. If you look at the figure that is on slide 28, it relates to depreciation only, and the information that we have on the price really include the depreciation as well as amortization.

Okay, thank you.

Anders Wennberg, Brummer.

I'm a little bit interested in Colombia and the margin of 25%, or below 25%, you said for the quarter. Is this including or excluding the $7 million in negative one-offs you talked about earlier? And if it's including those $7 million, why are you guiding for margins to stay at the same level for the next few quarters as we had in Q3?

In Colombia, it does include, in the third quarter, the 25%, the $7 million adjustment. And we confirm that we intend to be below 25% in terms of EBITDA margin in the next coming quarters as a consequence of increased commercial investment, especially in subsidies. The Colombian market, as we flagged earlier, is one of the most attractive markets that we have.

As you know, we have a market share in data which is significantly higher, almost twice as high as the market share that we have on voice, and we see that there is a very good payback and a very good positive reaction from Colombian customers whenever we invest in subsidies. We believe it is the right time to do it; there is no point in waiting further. So this is the right time with the good payback, good return, which is the reason why we decided to accelerate this investment and, as a consequence, depress somewhat the EBITDA margin in the coming quarters to existing levels.

So basically, the $7 million is one-off this quarter, but going forward, you will increase your marketing investments by a similar amount?

As we did in Q3 as well.

Okay. Second question, if I may? There's been a bit of (inaudible) discussion about the ownership of the Rocket Internet asset, and if Kinnevik has had direct ownership in any of these assets. Can you confirm that, and how much was it in that case?

You need to ask Kinnevik what is their exact shareholding. The only thing I can confirm is that they are a shareholder at a higher level and they are a shareholder at a lower level, at operating level. But if you want to have more details about their stake in the different entities, you need to talk directly to them.

Okay, thanks.

Soomit Datta, New Street Research.

A couple of questions, please. First of all on Senegal, now you've put the dispute with the government behind you, what sort of implications will that have for the running of the business? Can you give a sense as to whether you could expect to see CapEx and your aggressive intentions step up a little bit in that market?

And secondly, just on Colombia, given the margins are lower than they have been in the past, shall we say, and the returns in that market are, I guess, lower than a number of other countries, what implications does that have as we approach the potential spectrum auctions in Colombia? And if there is anything you could say on timing of those auctions, will it be Q4 do you think; what's your best guess for when that may play out? Thank you very much.

Okay, let me grab that. I think the new spectrum auctions in Colombia have been delayed a number of times. I think the latest estimate was somewhere at the yearend, or it's probably more realistic that it will go to 2013. I think that the challenge we have in Colombia is really one of scale, and we are growing very rapidly on the data side, which truly is the future there. So we think it's prudent to take this opportunity to invest and driving the revenue on the data side which, over time, will give us the scale and improved EBITDA margin.

In terms of Senegal, we now, with the restated license, also have an ability to launch MFS, which we didn't have in the past, so we will simply accelerate our product offerings in that market. And that will also come with some increased CapEx. We are still in the process of building those plans for 2013, but we clearly are looking at the opportunity to reinvigorate growth in this market.

Okay, thank you.

Lena Osterberg, Carnegie.

I was just wondering if you could give us a little bit more detail on the timing of the license payments in Senegal? You've said that they will be, overall I think, three times you will pay? Roughly how much it will be this year and what we should expect for next year as well?

And then I was also wondering, you mentioned in your presentation now that this was your first investment into online. I was just wondering, should we expect further investments, or are you just referring to the additional investments that you will make into Rocket?

And then finally I was wondering, do you feel, as of today, that Rocket is on track to meet the full year revenue guidance of $35 million in revenues?

Regarding the license payment in Senegal, there has been a very minor adjustment against the initial agreement that we had with the Government of Senegal. We have actually paid the entire amount as we speak, so while we had initially a plan to pay the bulk of it this year, there was a slight delay in the balance of the payment, but we have already paid everything.

For the whole $103 million?

Yes, have been paid as we speak. We are not working on any additional online investment as we speak, although there could be changes in the future, but as we speak there is nothing additional there.

And regarding the performance of this Rocket business, for the time being it's too early to draw any conclusion, but we confirm what we said last time. We talked about an expectation to reach $1 billion of revenues by 2016 and there is no indication that we will not be able to reach it.

For the $35 million for this year, you're still confident on?

Yes, we have no change against what we said initially at this stage.

$35 million was not our share. $35 million was the total of the business for the full 2012.

Yes, I understand that, but you're still confident that that's the level you will reach?

Yes, we have no indication that it will be different at this stage. It's just an additional month against the last time we spoke about it.

Thank you.

Kevin Roe, Roe Equity Research.

Two questions; first, following up on El Salvador. Mikael, can you talk about your regulatory outlook for that market? Are we stuck with a five player market?

Well, I think there's basically four players in the market, so today --

Right, four real players yes, five on paper.

Yes, four real players. It looks to be like that for some time. I think, not knowing the specifics, I think just reading the reports that the regulatory authority asked for a return of spectrum from the two parties that wanted to merge, and they didn't feel it was appropriate so that somehow locked the transaction. Let's see what happens in the future.

Okay. And following up on Senegal, it's good to hear that you're going to be reinvesting for growth in that market. Can you help us understand how the market's doing overall there? Is the total market for mobile revenue growing, and is your market share stable, or growing, or declining?

The total market is not growing, for the moment. I think, without commenting on political leaders, I think the country went through a little bit difficult times here before the election, so I think the new Government is very keen on restarting growth.

They are working with IMF quite intensely to try and figure out what's the right plan for Senegal, so we are relatively optimistic that the country itself will start performing better. And naturally, we denied the customers in that market for a number of products and opportunities that we couldn't bring into the market, given the uncertainty around our license. So we think the combination of a better performing Senegal and a better performing Millicom in Senegal is going to be a good combination.

So the total market has declined a bit, and your share probably declined a bit too because of the restrictions?

Yes. Some marginal loss on share.

Very good. Well, good luck, Mikael, in the next chapter of your career. Thanks.

Thank you very much, thank you.

Andreas Joelsson, Enskilda.

Two questions, if I may? Could you please tell us a little bit of what happened in Central America; you've lost some subscribers in Honduras and El Salvador, and maybe explain a little bit more on the overall trends, especially then in Honduras?

And secondly, on South America, if Colombia has below 25% margin, Bolivia and Paraguay is doing quite well, do you see those margins as sustainable, going into 2013?

Well, we don't want to give a prediction on margins going into the future, and we will come with the guidance for 2013 at the time we come out with our Q4.

I don't see any sort of subscriber loss in Honduras; that can happen from quarter to quarter. Also remember that, on average in Millicom, 30% of our subscriber base have an ARPU less than $1 and actually contribute less than [a percent] of our revenues, so we can have some volatility at the lower end of the spectrum that really doesn't have any impact on our revenue growth.

Just a follow-up on that; do you plan to do similar investments in all of South America as you plan to do in Colombia?

No, I think the rest of the markets are performing, are invested as per our internal budget; in Colombia we are accelerating versus our internal budget.

Thank you very much.

Laurie Fitzjohn, Citi.

Just three questions. On Ghana, you seem to have seen quite an improvement in the customer numbers, despite the quite successful entry of Glo, I'm just wondering any particular reason for that success?

And then just more generally in terms of competition, at the start of the year there were four markets particularly which were a concern. Are there any new markets on the radar that are of concern to you in terms of competition?

And then lastly, just in terms of cash CapEx, it looks like the cash CapEx was quite a bit higher than the booked CapEx this quarter. Is this just a timing difference, and should we expect that to broadly correct by the end of the year? Thank you.

Let me start with the Ghana. Yes, we've done some tariff adjustments in Ghana, some go-to-market strategy changes and it's started to deliver some results there. It's early days, but clearly, there is a bit of a turnaround in the business there.

I think that in terms of a competitive situation, I think there are still a number of markets in Africa that have too many operators, and that's not really sustainable, going forward, and clearly, Ghana is one of these markets.

Regarding the CapEx, it is true that in Q3 we actually paid more CapEx than we actually booked. The best indication is what we gave as a guidance for the full year which we confirm and reiterated, which is our expectation to reach an operating free cash flow at around 20% of revenues for the full year.

And we confirmed, as well, that we expected CapEx to be, and CapEx this is booked CapEx, to be below 20% of revenues this year. That excludes any amount that we could book for additional licenses on spectrum, so which is in line with what we had communicated previously.

Great, thank you.

Erik Pers, Danske Markets.

First, a couple of detailed questions. In Colombia, could you please explain the one-off there as I understand that's a reclassification of three quarters of taxes. And is then one-third of the one-off actually underlying for the third quarter, and will that level continue, going forward? I suppose that accounting principle will prevail in coming quarters as well, so could you just clarify that, please?

And also, how much of Paraguay's revenues are currently interconnect as I see there is a quite sharp cut coming up?

And thirdly in Colombia, if you could shed some light on what the dynamics here are around the subsidies. You say it's a great investment for the future, but I was just wondering, is this a revenue opportunity that will come with a sustainably lower margin, or is there a -- let's say you continue with the current level of subsidies for a few quarters, will then the margin start to expand again and, in that case, how long does that take, please?

The adjustment on the taxes in Colombia, it is a reclassification of taxes that we used to book as corporate income tax, and that we have to book as net of deduction of revenues because they are considered actually, from an accounting point of view, as something similar to VAT. So we had to reclassify it; it has no implication whatsoever for the next quarter, Q4.

Regarding the subsidies in terms of margin, what is important, without speaking specifically of Colombia, but we see a very positive trend which is an increase of our gross margin on data, which gives you a good indication of the reason why we invest in 3G and in data as well, which we see as something very positive. That applies, obviously, to most of the countries.

In Paraguay, we have a leading position in the market and typically, when you are the leader in the market, the majority of your calls are on-net, so the impact of a change on the interconnect tend to be quite marginal.

Thank you.

Sven Skold, Swedbank.

I have a question about slide number 9, please, and I'm just wondering if you could share with us some thoughts on the margins for 2013. I know it's a bit early, but if you look at slide number 9 you have presented investment for growth impacting the margin negatively in this quarter, compared to last year.

Do you see this percentage drop of 1.7% to be as high next year as this year, or do expect that to be lower as a percentage of sales? What I want to hear is, are investments going to be higher related to sales or lower next year or in line?

We provide the guidance on EBITDA in February at the occasion of our Q4 and full year results, so I cannot provide any comment at this stage.

The only thing that I can tell you, which is something that we have already communicated to the market, is that we expect the EBITDA margin to suffer from a further erosion next year from the current level. And one of the reasons why is that the category mix isn't favorable because we grow faster in some categories like Entertainment Solution and MFS which have a lower EBITDA margin than the other categories.

So this [mere] impact is diluting margin [the] EBITDA margin. We are not, as we said over the last couple of quarters, we are not especially concerned about it because these three categories happen to be less capital intensive than voice and data, so over the medium term we see that as a positive driver of ROIC improvement.

So when you expect --

We will come with further details in February on the EBITDA margin.

Just a clarification; when you say that you expect further margin erosion, do you mean excluding Online then I assume?

Yes, obviously, I'm talking of the --

But we also know when you start up a new service, or when you push for example for data services, you have initial investment; subsidies are fairly high at the start at least as a percentage of revenue. So you don't expect that to mitigate the mix erosion?

No, the subsidies we give today we don't see these subsidies as just a one-off event; once we have started to give subsidies to customers we will have to do it. That being said, we need to take into consideration the fact that the price of devices is going down, so this will impact certainly the level of subsidies.

There is something that we will need to decide, is do we give more subsidies to more customers going forward, but this will be part of the communication that we will share with the market in February for our guidance for 2013.

Okay. Thank you.

Operator, we are going to take the last question, please.

Bill Miller, JM Hartwell.

Could you talk a little bit further about the Western Union involvement, and how you were going to get paid with Western Union? And as you've now launched it, can you give us any color on exactly what the potential for that will be?

And finally, just following along on the financial services, MFS, can you give us any thoughts on how, if at all, you're going to be able to integrate that with the Rocket financial service offering; whether you can take it elsewhere, the Western Union elsewhere, to Brazil, Mexico, etc?

And finally, Mikael, thank you very much from all of us for your stewardship of the Company, and best of luck in whatever you decide to do next.

Thank you, Bill. Let me start with the Western Union. We launched it so far in Paraguay; the total remittances, annual remittances to Paraguay are about $900 million. And the intent here, and why this makes sense for Western Union, is that we can tap into the market on smaller remittances at a more convenient cost, and the payment is in the form of a revenue share that we have agreed with Western Union.

We think, over time, this is going to be an attractive revenue opportunity. We can clearly see in Paraguay penetration growth week by week. The numbers are still small; it's about an education process. We have gone live in El Salvador and we will, over time, go live in the other markets. And just as you all recall, the total annual remittances to El Salvador is about $8 billion, so that's a significantly larger opportunity for us to tap in, over time. So we are excited about that.

If I can add something? First of all, on MFS, as you can see, we are growing nicely because we already have 11% of our customers in the market where we provide a service which we are using MFS, which is really something very attractive.

Regarding Western Union, what we are doing actually is the last mile, and I think it is a partnership that makes a lot of sense, because Western Union has the international -- the capability to raise money at international level, while we have the capability locally to carry out the last mile with our outstanding distribution platform. We have something like 650,000 points of sale, so there is an outstanding complementarity in what they do and what we can offer.

So it makes a lot of sense. As Mikael said, we already offer the service in Paraguay and El Salvador, and intend to extend it further.

One last comment on MFS. You may have seen that, as far as Africa is concerned, almost half of our revenue growth in the quarter is coming from MFS, essentially with two markets, namely Tanzania and Rwanda, which gives you an idea of the powerful tool that MFS represents. So we are, as you know, investing a lot in this category with attractive results.

And naturally, we will exploit our MFS services at the point of time we launch the Rocket concept in our market. And as we said, for Africa, Ghana and Senegal looks to be the next opportunity. So we are excited about that, because one of the challenges in the online is this whole payment thing, and with our MFS services, that is very easy to fulfill.

That's great. Thanks for that. Just because, you knew I was going to ask it, it looks like this year, [rather than] two-thirds of the payout coming in the form of cash, it's 75%, and I think the previous question was all about why have you changed that; why have you gone back on the stated declaration that you're going to have $300 million which would give it more balance, obviously, stock repurchases. And why did you all of a sudden change that?

Your stock price is down and so that would presumably make it more attractive. And since you want to get to one-to-one balance sheet anyway, why wouldn't you just take this opportunity to buy back more stock, not less, or finance, as you've said you will, public issue and buy back a lot more stock?

So I'm really confused, because the signals have been so mixed. Thanks, could you give us a little more color on that?

Yes, we didn't want to confuse anybody, obviously. But, no, what we wanted to do is to make sure that we complied with what we said, which is to return the excess cash to shareholders, which is the reason why we have decided to go for this exceptional dividend. Or since we decided on a dividend, the Board decided on a dividend of -- an extraordinary dividend for the year, they decided to do it for $3 per share.

There is nothing specific to read there. Once again, it's a commitment to return excess cash. We are happy as well to be able to return close to -- or a little bit less than $740 million to our shareholders this year, and to have returned a significant amount, as you could see, $2.8 billion over the last four years, two-thirds of it through dividend and one-third through share buyback.

So there is nothing to read with this small adjustment in the share buyback. The importance is the amount of money that we return to the shareholders.

Yes, Francois, I gather all that, but the indication had been that you were going to do it with a little different mix, and why have you changed that mix? That's my question. Why did you try to do much more in the way of a cash dividend and, obviously, nothing more in the way of a stock repurchase?

Bill, at this stage, that was just simply a more convenient solution, so I'd like to leave it at that.

Okay, thanks. And good luck again, Mikael.

Thank you very much for your support. Thank you, Bill. So I would just like to close with some concluding remarks.

The third quarter of the year was very similar to the first two quarters of this year. Sustained investment for future growth diluted our EBITDA margin, but enabled us to maintain high single-digit organic revenue growth in line with our expectation and reiterated outlook for fiscal 2012.

With our increased focus on innovation and sustainable investment, I'm confident that we have the right action plan to deliver ongoing profitability growth.

And as this is my last conference call before leaving Millicom at the end of the month, I would like to say a special thank you to all of you for your support and interest over the years. I have no doubt that Millicom will continue on its path of delivering ongoing profitable growth for shareholders under Hans-Holger's leadership. And as a shareholder myself, I look forward to following the next phases of development of this great Company.

Thank you very much.

Thank you. That concludes this conference call. Thank you for your participation, ladies and gentlemen, you may now disconnect.