Millicom International Cellular SA (TIGO) 2013 Q1 法說會逐字稿

Good morning and good afternoon, ladies and gentlemen, and welcome to the Millicom financial results conference call. Today's call will be hosted by Hans-Holger Albrecht, President and CEO, and Francois--Xavier Roger, CFO. Following the formal presentation by Millicom's management an interactive Q&A session will be available.

I would now like to hand the call over to Justine Dimovic, Head of Investor Relations. Please go ahead.

Welcome, everyone, to the Millicom first quarter results presentation. My name is Justine Dimovic, and I'm in charge of Investor Relations at Millicom. Today's presentation slides can be found on our website at www.millicom.com.

Before we start I would like to remind everybody that the safe harbor statements would apply to this presentation and the subsequent Q&A session.

With me today on the call are our President and CEO, Mr. Hans-Holger Albrecht, and our CFO, Mr. Francois--Xavier Roger.

I will now hand over to Hans-Holger to give an overview of our Q1 results and operational performance, after which Francois--Xavier will take you through the financials and we will finish with a Q&A session. Without any further delay, I will now pass over to Hans-Holger.

Thank you, Justine, and good morning and good afternoon, everyone, and welcome to our conference call for the first quarter.

Let me start with an overview of where we are at the end of this quarter, which has been another successful one for Millicom as far as I can see. Our underlying revenue growth accelerated to over 8% year on year, which is a strong achievement as we progress, as you all know through a transition from Mobile Voice to a digital lifestyle.

And last month at our capital markets day we outlined our mid-term ambition to double the revenue by the end of 2017, while maintaining strong profitability and enhancing cash flow generation. And subsequently as well transforming Millicom into the digital lifestyle company of choice for the emerging markets we are operating in.

And just to remind everyone where it is coming from, I think the success rests on five pillars, on which we have made good progress in this quarter. The first one and the most important one, obviously, still is mobile; we will build a highly value-orientated mobile access business, providing a full spectrum of innovative mobile services beyond Mobile Voice.

We have achieved good results, I think, in this quarter by adding the highest ever number of new Mobile Data customers in Millicom's history, which obviously, as you all know, is the future. The total Mobile Data customer base now passes over 7 million customers.

The second pillar is Cable and Digital Media as we call it. By tapping into this unique opportunity, as you can see, in the Latin American region, we want to build in the next coming years a $2 billion business. This quarter we are seeing the success of our acquisition strategy as we are benefiting from the integration of Cablevision in Paraguay, and this is even faster than we had anticipated.

The third pillar of growth is MFS. Each of our current customers is a potential customer of Mobile Financial Services. Progress in the first quarter has been good, again with over $500 million passing through our mobile money services network in March. In our most advanced market the amount transferred on one month was the equivalent of the 15% of the country's GDP.

The [third] pillar is Online. We're investing in high growth Internet models and bring the full spectrum of Digital Lifestyle Services to the emerging market. In the first quarter we launched several new services and integrating online with the existing Millicom Services.

And the fifth pillar of our success is cost and CapEx optimization, which we started to kick off as well. We will focus on streamlining both OpEx and CapEx at global and at a country level. And as a key development in the first quarter we identified an annual cost reduction opportunities of $100 million, which can be realized within the next three years.

So, obviously, we are still at the early days of our new strategy and starting to implement, but the kind of foundation to execute on this strategy, we can see, is there. So much about that, let's now go into the presentation of the first quarter, a little bit more in detail and start by looking at the key events in the quarter. So if you go to slide number 6.

You can see that in the first quarter of this year Millicom maintained momentum with like-for-like growth at 8.3% year on year. And our EBITDA margin was in line with our expectations at 39.7%, 40.5% excluding Online just as a reference point.

Our Mobile business grew by 1.3% in local currency, despite strong regulatory pressure and some specific one-off events in the quarter. Like-for-like growth was 5% and what is very encouraging, this was a record quarter, as I mentioned, earlier for new Mobile Data customers, an 18% increase compared to the fourth quarter in 2012.

And as I mentioned in my introduction and as seen in this quarter, our new divisions are increasingly contributing to revenue and growth. In Q1 we announced plans to create a leading integrated operator when it comes to Cable and Mobile in Colombia, through a merger of the holding company that owns 50% of Colombian Mobile, Tigo, and UNE, EPM. The exclusive negotiations are progressing well and I expect it to conclude as scheduled during the second quarter of 2013.

In Mobile Financial Services we remitted $500 million of cash through our system in March. Customer penetration increased to 12.6% in the markets where our services have been offered for more than one quarter.

And in Q1 we also extracted the first synergies between our Online division and existing business with customers of the Hellofood online food ordering service being able to pay for their order using Tigo Cash in Ghana, for example. Existing business such as Jumia and Kanui continue to perform well, and we expanded into a number of new markets on both Africa and the Latin American continent.

If you flip to slide number 7, turning to the key financials. As mentioned, if you take the like-for-like look the currency revenue growth was 8.3% for the quarter, accelerating from the fourth quarter in 2012.

Looking at the contribution to revenue growth by division, slightly over half of the Group recurring revenue growth came from Mobile; 19% from Online; 16% from MFS; and the remainder from our Cable and Digital Media division. I think this demonstrates the progress in diversifying our sources of revenue growth, while at the same time maintaining the growth in our core business.

And as you can see on slide 8, in Q1 2013 non-voice products and services, or digital if you want to call them like this, accounted for close to 40% of all recurring revenues, up 7 percentage points from Q1 2012. From Q1 2012 Digital has contributed $99 million in incremental reported revenue, which is a strong figure as well. And notably, the non-voice contribution to revenue is expanding beyond Mobile value-added services, with an increasing contribution of Cable and Digital Media, MFS and Online.

Now let me give you an update on our operating performance in the quarter. Starting with the Mobile side on slide 10, as you can see Mobile revenue grew 1.3% in Q1, 5% on a like-for-like basis.

Mobile ARPU declined by 6.8%, or 3.3% excluding new regulatory impacts. The regulatory pressure that mainly came from MTR cuts was particularly strong in this quarter on Group level. In fact, I think it was 3 times more than all of full year in 2012, so you see the kind of scale. However, we're encouraged by the progress of mobile RGUs per customer, demonstrating the diversification of revenue streams in our Mobile business.

We are pleased with the continued solid growth of Mobile Data revenue; in this quarter we had the highest number of net adds in Mobile Data in Millicom history as I said, with 788,000 new customers in the quarter. With this I think our Mobile Data customer base passed 7 million, and is now representing 15% of our customer base. The potential for future growth remains very high in that field, especially when looking at the fact that over one-third of our customer base has an ARPU greater than $10 today.

And in Q1 we experienced very strong growth, if you go to the next slide, in Mobile Data traffic. And revenues at Group level, recurring revenues of the Mobile information category grew by close to 35%. We maintained a strong pace of commercial investments in subsidies in our Latin American markets again in the first quarter, as we continue to see unmet demand for access to the Internet and, obviously, opportunities for rapid return on subsidies within a year.

Net subsidies in local currency grew by close 17.1% in the first quarter. The growing availability of attractively priced Smartphones and lowering production cost for content is starting to accelerate mobile Internet uptake, which is reflected in the record breaking net additions in the quarter.

If we then move to slide number 12, and the Cable and Digital Media business we can see we're building momentum, with revenue growing at 10% year-on-year excluding Cablevision. Overall, I think the quarter showed a solid upward trend across the board in the Cable business. Residential Cable ARPU in the first quarter was over $30, growing 1.7% year on year. This is a good sign, I think, that our new customers we are getting in are of good quality.

We added 85,000 new homes passed in the first quarter and we could see the Cablevision acquisition bearing fruit with half of our 10,000 new cable customers coming from Paraguay in the first quarter.

Moving over to MFS on slide 13, MFS revenues increased again strongly in the first quarter; in local currency I think it's plus 147%. MFS penetration, which is our current focus, however reached 12.6% of Millicom's mobile customer base in the countries where the service has been offered for more than one quarter. And our leading market, in terms of penetration, was again Tanzania, with close to 40% of penetration by the end of the quarter.

Rwanda and Paraguay are also growing, with 26% penetration in both markets at the end of first quarter. And in Central America we are approaching the inflection point as we can see as of today. We launched Mobile Financial Services in Bolivia in January and, again, early signs are positive. At the end of the first quarter we had made foreign [remittances] available to our customers in all our markets in Central America.

ARPU from MFS, which we now report separately for Mobile ARPUs, have risen by 10% year on year, despite the strong growth in adoption of the service.

Moving forward to slide 14 and the Online business. In Q1 the Online category generated revenues of $11 million and an EBITDA loss of $6 million. Despite growth being impacted by usual seasonality following the strong end of the year festive season, we continue to be very excited by the opportunities in the Online division.

I think most important, we saw the first synergies with Tigo Cash being used to pay for Online services, and we expect many more of those synergies going forward, as we presented as well at the Capital Markets day.

Let's summarize in a nutshell the kind of operational performance. I will now hand over to Francois who will provide you with an update on the financial results.

Thank you, Hans-Holger. Please turn to slide 16 of the financial highlights.

Starting with revenue drivers, you will see that we are bringing more granularity to customers on ARPU data to show our progress in our three strategic divisions, Mobile, Cable & Digital Media as well as Mobile Financial Services.

In Q1 our Mobile Data customer growth was the strongest ever reported by Millicom, especially with smartphone users growing at the fastest rate we ever achieved. Overall, in Q1, which is seasonally the weakest for customer intake, customer numbers increased by 175,000, an 8% increase year on year to 47.4 million at the end of the quarter. Customer growth in Q1 was negatively impacted by an ongoing clean-up of the customer base in a number of our markets. This will continue in Q2 to some extent.

MFS customer growth was strong at 50% year on year.

ARPU in the Mobile division declined by 6.8% in local currency, affected by regulatory changes notably. In Q1 regulatory pressures were 3 times higher than in 2012, resulting in a 2.4 percentage point loss of revenue versus 0.8 percentage points in the whole of 2012.

In addition, looking at year-on-year comparison, 2012 was a leap year and in prepaid markets this one day difference made quite an impact. Revenue in Q1 totaled $1,246 million or 6.6% reported growth. On a like-for-like basis, revenues grew by 8.3%, representing a slight acceleration compared to Q4 2012.

The growth in Q1 is the same level as what we experienced overall in 2012, which shows the sustainability of our underlying growth. It is particularly impressive as the year-on-year trend was negatively impacted by the fact the quiet Easter period fell in Q1 this year and in Q2 last year.

Reported EBITDA for the quarter was $494 million, down 4.4% from Q1 2012. EBITDA losses from Online amounted to $6.2 million in the quarter. Consolidated EBITDA margin at 39.7% was 4.5 percentage points lower than in Q1 2012. Excluding Online, EBITDA margin in Q1 reached 40.5%. The decline is coming from our continuing investment for future growth and is in line with our guidance and expectation. We will discuss the EBITDA margin in more detail later on.

We invested $193 million in CapEx during the first quarter, which includes $70 million in spectrum in South America. This is about equivalent to 15.5% of revenues and it included $70 million of spectrum investments.

Please turn to slide 17 for the financial performance on regional and divisional levels. Year on year, South America was the strongest region for revenue growth this quarter at plus 8.7% with Central America fairly flat and Africa up by 2.8% in local currency. The former Cablevision business in Paraguay is showing very positive results and exceeding expectations, contributing $16 million to revenues in Q1.

Slide 18; if we look at revenue evolution by division, Mobile remains the strongest contributor with revenue reaching $1,031 million in Q1 2013. All four pillars contribute almost equally, which illustrates very well the relatively low risk and well-diversified profile of our growth.

The Cable & Digital Media division contributed $10 million revenue growth with external growth in Paraguay contributing an additional $16 million. We see a good acceleration in growth since the rebranding to Tigo, with Cablevision assets showing growth at 26.4% year on year.

In MFS revenue grew again strongly this quarter with revenue growth up $10 million. Our MFS RGUs increased by 416,000 in the first quarter, with Africa again leading penetration growth.

Another encouraging sign of the system growth in MFS is the increasing money flows. As an example, as Hans-Holger said, in March we transferred over $500 million through our mobile money system. The Online division contributed 19% of recurring revenue growth in the quarter with revenue of $11 million and EBITDA losses of $6 million.

Q1 is seasonally a slower quarter than the Q4 end of year festive season for Online. In Q1 we transferred our commitment to Online and EUR85 million will be downstream as needed to finance growth by September 2013. We expect a significant takeoff of our Online revenue in Q2 as the new initiatives launched in Q1 are ramping up.

Slide 19; moving to profitability, as mentioned the decline in EBITDA margin this quarter was predominantly created by investments in our growth areas. If we take a closer look at the effect of each of these lines, we can see that we have almost entirely offset pricing pressure on Voice by efficiency in gross margin, as it was the case in Q4 2012.

We continue to invest in growth, even if it led to a 2.4 percentage point erosion in margin in Q1. For example, in Q1 we increased sales and marketing costs by $35 million to support growth in Mobile Data and MFS, mainly with subsidies, and we spent as well an additional $33 million in building category scales and organizations.

Other one-off events reduced the margin by another 0.9 percentage points. And, finally, the EBITDA losses of Online diluted the EBITDA margin further to 39.7%. To be clear, this is absolutely within our guidance for 2013 and this is within our expectation for the quarter.

Slide 20; normalized net profit reached $143 million, down 10% (sic - see slide 20 "18%"), while normalized EPS was down 8% (sic - see slide 20 "17%") to $1.43 per share. These developments are linked to the decline in reported EBITDA as a result of investments for growth, increases in corporate costs, network amortization and higher gross debt, all of which have been partially offset by lower tax.

As you can see on slide 21, our tax rate is below 30%. In Q1 we continued our tax planning efforts and our effective tax rate was 26.5% versus 26.8% a year ago.

Slide 22; free cash flow for Q1 2013 was negative by $57 million. This was the result of an increase in network and spectrum investments, a higher level of tax paid and negative changes in working capital versus Q1 2012. We are seeing more pressure in working capital from the increasingly postpaid nature of our business. Having said that, the change versus last year was minimal. $253 million of cash have been upstream during Q1 through a combination of dividends, management fees and royalties.

Slide 23; net debt to EBITDA was stable versus last year, at 1 times at the end of the quarter. Millicom has over $1.2 billion of cash on hand with approximately two-thirds kept in both US dollar and euro.

Slide 24; about 57% of the Group gross debt, excluding financial leases, is denominated in local currency, limiting off local foreign exchange exposure. US dollar-denominated debt is used in countries where long-term debt in local currency is either too expensive or not available. At the end of Q1 2013 57% of gross debt was at fixed interest rates, reducing our exposure to interest rate volatility.

Slide 25; given the limited change in our debt structure, our guaranteed debt remained stable at 35% at the end of Q1 compared to 36% in Q4 last year. Out of the approximately $1.1 billion of debt in Central America, only 9% is guaranteed and in South America it's 11% of $1.1 billion of debt. In Africa we have $634 million of debt, which is almost fully guaranteed.

Slide 26; Group EBITDA margin is expected to be above 40%, excluding Online, and to decline at a lower rate than ever in the -- than over the last 12 months. We expect to start seeing the initial results of our saving program in H2 2013.

The CapEx to revenue ratio will peak at around 20%, excluding spectrum acquisitions.

The Online division is expected to deliver in excess of $100 million of revenues and EBITDA losses are in the range of -- will be in the range of $125 million to $200 million. Losses will be on the high side of the range if we see an opportunity to accelerate growth and to ramp up launch of new businesses.

Slide 27; shareholder remuneration is important to us and the Board will propose to the AGM to be convened on May 28. The proposal to the AGM will be the payment of an ordinary dividend of $2.64 which represents a 10% increase versus the 2011 payroll. Such dividend is to be paid on June 7. We reiterate our progressive dividend policy for no less than $2 per share and at least 30% of normalized net income.

I would like now to hand back to Hans-Holger for his concluding remarks.

Thank you, Francois.

And just to summarize, at the end of Q4, I think, I spoke of Millicom's ambitions of remaining a growth company and how Mobile Data was one of the cornerstones of our future growth and, obviously, profitability. This quarter we gained more Mobile Data customers than ever in our history. To me this speaks of Millicom's unmatched focus on -- and relentless drive for new opportunities, and the speed with which we are able to execute those significant transformations.

We have a new clear growth strategy, as we presented at the Capital Markets Day, and the medium target that we -- we want to double the size of the Company within the next five years.

I think the strategy is obvious; now, it's all about execution with the new management team we have in place. And it reflects as well the kind of changes we announced today when it comes to the Board of Millicom, which I would like to draw your attention as well to, in case you haven't seen this release. As you can see by this quarter, I think, we are well on course and showing growth at a time when we are simultaneously building foundation for our new pillars.

So I hope you are as excited as I am, and my management team, about the journey we have ahead of us. And we are open now to go to the Q&A session.

(Operator Instructions). Mark Walker, Goldman Sachs.

My first couple are on MFS, Tanzania mobile money transfers now represents 15% of GDP. I just wondered if you could give us an idea of where this is in your other MFS markets and where it can go to? And more specifically, if you could talk about the opportunity in Colombia, given that that market represents such a high GDP in your footprint?

The second question is, I wonder if there's anything you can say about the commission rate on mobile money transfers. I think in places transactions fee is 1%.

The third question is on Cable. I just wonder if you could update us on the UNE deal in terms of specifically the extent to which you see potential synergies achievable from -- on the cost side from that deal.

And then the final question on Africa. You lost 100,000 customers this quarter. I wonder if you could just update us on what you're seeing in terms of competition, and also to what extent MFS can potentially improve churn in that market. Thank you.

If I take some of the questions, then I may hand over to Francois on some of them. If you talk about the opportunity when it comes to MFS in Tanzania, which is probably the most developed and most advanced market, we still see growth of the unit going forward there in terms of penetration and in terms of [volume growing too].

It is obvious that in those markets, particularly when it comes to Africa, we are the only choice, an alternative [people] if they want to do financial transactions or banking. And therefore what we've seen in Tanzania there is a growth potential and it should be exactly the same in the other markets where we have launched MFS.

Africa, clearly the dominant growth area but we can see in Paraguay and in Latin America as well that the growth potential is there in terms of penetration and in terms of volume you transfer and [issue].

If you talk about Colombia we are about to, or we are analyzing the situation there. There is a great potential for us. It's a slightly different market and a slightly different market position for us, because we are mainly -- we are very strong when it comes to data. In that respect it's probably more going to be a data-based OTT solution, but the kind of system that we have developed and the expertise we have developed in the other market should help us as well to go to Colombia.

The fee is in the range what you said as well, presentation 1% range, so we don't see any -- there's no major difference to what you have seen on other competitors.

I think the second question was about the cable, deals and opportunities we have in terms of expanding the services. And as we said at the Capital Markets Day, for us, the prime goal obviously is to look for consolidation opportunities and cable opportunities in markets where we are present today. We are strong believers in the combination of mobile and cable. We are strong believers in the bundling effect and the benefits you get in terms of churns and revenues.

So this is the first time we look and we can't to concrete obviously to talk about deals in the pipeline. However, next to this we still see opportunities as well for cable outside the mobile footprint, particularly when it comes to Latin America, so we would look opportunistic at opportunities there as well. But the main focus right now is on closing the transaction when it comes to Colombia with UNE, which will be a big acceleration for the Cable business.

And then the last point I think was the situation in Africa and the fact that we lost 100,000 customers. We can see, except maybe for DRC where the situation is a bit tougher, that the competitor landscape is easing. Ghana seems to be more stable. Tanzania seems to be more stable and Senegal we are recovering from a tougher situation. So we believe towards that towards the second half of the year the outlook should be better in Africa. The competitive level is decreasing, with the exception for DRC. We have a new team in place that work on Africa dedicated and looking to a new sales approach and marketing initiatives in order to regain the momentum. So by the second half of this year we should be out of the worst when it comes to the Africa situation.

DRC is a special case. It's very competitive and more complicated, but that's the only market where -- which I would flag at this time.

Actually just -- sorry, if I just briefly follow up on the Africa answer, is it the case that you can use MFS as a genuine competitive opportunity to reduce churn, or do you think that this lead time on these services is too short for that to provide that kind of opportunity? Thanks.

Laurie Fitzjohn, Citi.

Just two questions. Firstly on growth, as you say, the underlying growth was strong at 8%, but obviously the more reported local currency growth fell from 5.5% to 4.0% in Q1. Could you give us some more color around how you expect the headwinds to change going forward? For example, MTR headwind in Q1, will that lessen through the year and then maybe some more color around how big was the impact from the leap day, Easter falling in Q1, just to get an idea of that gap between the underlying and unreported would be very useful?

And then secondly on the increase in the subsidy of smartphones, should -- with the increase in that net adds was that driven by a step-up in your subsidy level, and therefore should we see that benefiting growth later on in the year? Thanks.

We apologize for the pause in the presentation. Please remain on the line. Thank you. Please go ahead.

I do apologize. You'll need to repeat your question. Thank you.

Apologies. Okay. So first question on growth, just to understand more the gap between the underlying growth of 8% and the reported growth decline from 5.5% to 4.0%, if you could give some more color around the headwinds going forwards; for example, the MTR headwind Q1, how you see that developing. And then also how big was the headwind from the lap in the leap day and Easter falling in Q1 to understand more how that gap between the underlying and reported will converge hopefully through the year?

And then secondly, on the increased take-up of smartphones, was this driven by an increased subsidy level, and therefore should we see that benefit growth later on in the year? Thanks.

On the underlying growth, we had -- in the first quarter of 2013, we lost about 2.4 percentage points of growth in revenues linked to MTR cuts, which happened versus the first quarter of 2012. It happened in a very significant way in Honduras. We had two decreases of the interconnection rights in Q1. We had some decrease in interconnection rights in Paraguay and Bolivia last year and we had this in Tanzania as well by 70%.

So you know what happened, we may go through different cycles. I must say that in 2011 we had very little of it; in the first nine months of 2012 we had little of it; and then we had the loss in Q4 last year and Q1 this year. So once again, 2.4 percentage points of growth lost in Q1.

If we look at the same comparison over the whole of 2012, we had lost only 0.8 percentage point of growth, which means that we have lost this quarter 3 times more, so it's very significant.

We are less exposed to the good news as we are far less exposed to interconnection rights. It accounts only for 6.2 -- for 6.5% of our total revenues today. So even if they decrease further in the future, we are far, far less exposed. And I think we have the most diversified portfolio of revenues and sources of revenues as well.

Regarding -- I'm going to take the opportunity to answer the other question. On smartphones, there is indeed a decline of the cost of smartphones. We start seeing very good smartphones with the good customer experience around $60, which is good. But the additional penetration of data services, which has been really extremely attractive this quarter as you could see, is a combination of an easier access from a financial point of view to the category with the lower cost of smartphone, as well as increased subsidy on our side.

We increased again subsidies year on year this quarter by 17%, which is roughly speaking twice as high as the level of revenue growth. We had the same level about last year. We believe this is the right time to acquire additional customers in data now on its framework, because we see that data revenues have been growing at 35% in the quarter year on year.

Thank you. One very quick follow-up if I may. With the 2.4 percentage headwind in Q1, can you say what you expect that to be for the rest of the year based on the current announced MTR cuts, [for example]?

When you have it you carry it basically for a year except that we can take a certain number of steps, so we can expect that the impact will soften a little bit over time. So we certainly have a similar impact in Q2. Might even be slightly higher, because some of this -- for example in Tanzania it has been introduced at the beginning of March and we'll see a little bit more of it in Q2, but let say Q3 probably similar. Q4 far less, because we started to have some of these new measures implemented in Q4 last year and in Q3 we should start seeing a little bit some positive impact of a couple of decisions that we have made to counteract it.

Great, thank you.

JP Davids, Barclays.

I've got a follow-up on M&A/expansion and then a question on e-Commerce. Firstly on the M&A side, did you look at NIHD Peru when it was up for sale?

And secondly just in terms of expansion, maybe you can touch on your chances of success with the Myanmar license where you are shortlisted.

Then, secondly, in terms of e-commerce, just wanted to find out if you'd seen any notable step-up in competitive intensity on that front, in terms of other challengers trying to drive traffic onto their own platforms? Any color there would be appreciated. Thank you.

If we come to the first question, Peru we didn't look at, so we can be pretty straight forward that's a no.

If it comes to Myanmar and the challenges there, it's we are now at the stage where we received yesterday the full document about the application, the license conditions and the process. So this one we have to analyze now carefully and make a judgment call; how do we proceed and if we proceed, and then obviously it depends on the decision by the government. So at this stage we are turning the kind of page where we analyze the situation and then come with a recommendation a bit later. And that's all we can say really at this stage. There's been more kind of informal process, not informal process but a kind of [ease] process now it becomes more serious, and then we come back with a clear state.

If it comes to the e-commerce side and the kind of landscape, we don't see any kind of change compared to previous quarters. The operations are still performing well, as you mentioned before, and there is no new competitors coming and there is nobody of the big competitors coming in in our market. In Africa for sure not and in Latin America as well, on the kind of areas we have been focusing on, there is no change in the competitor landscape. So, the opportunity is still exactly the same and the market conditions are exactly the same, as we have presented at the Capital Markets Day or during the last quarter call.

Thank you.

Thank you.

Andreas Joelsson, SEB.

Just a more detailed question regarding mobile ARPU. You have cleaned up some subscribers in Latin America and normally that would have a positive impact, I guess, but it's difficult to see. Could you say anything if that should have a positive impact on ARPU by cleaning up from those subscribers?

And secondly, regarding your mobile growth ambitions for 2017, should we see that entirely expected to be generated by existing customers?

On the mobile ARPU you're absolutely right that any clean-up of the bands which should have been increasing the ARPU, which actually happened in Q1 2013, but that has been very strongly offset by the MTR cuts, and especially in Honduras where we moved from very attractive positive growth last year to slightly negative. So it impacted -- it offset finally this positive impact.

If we come to the growth for 2017 on the mobile side, it impacts as well subscriber growth. Obviously we, believe there is still subscriber intake opportunities, particularly when it comes to Africa, driven by population growth, driven by urbanization growth and the kind of very young demographics we have currently, coming into a kind of mobile age, which in Africa is actually a bit earlier than it is in other places.

So, it's subscriber growth but it's ARPU growth opportunity as well and it's a transition to high value customer, but to make to answer the question directly, you have to have subscriber growth as well.

Perfect. Thanks.

Thank you.

Chris Grundberg, UBS.

Just a couple from me. First up, I wondered if you could comment a little further on the cost reductions and the savings you're hoping to make in the second half. And specifically, with a little bit more detail, what we should be expecting in terms of the Group margin profile, quarter by quarter, through the year in terms of how really back-end loaded that is likely to be?

And then second question on Tanzania, I wonder if you can comment, just in terms of your initial reactions, or what you've seen, specifically on the competitive reaction to the MTR reductions there. And, if possible, any comments around the elasticity of demand that you might or might not have seen there as well. That would be very helpful. Thanks.

On the cost reductions we have indicated that we were targeting at yearly savings on our current cost base of $100 million within three years. We will get some of it already this year. So we are working -- we have started already the implementation phase, which means that we will get some of the benefits already in Q3/Q4; which mean that if you look at our 40.5% EBITDA margin announced this quarter on what we had said for the full year, which we will be above 40% with lower reduction than last year, which basically mean that we expect to have an EBITDA margin which will be fairly close to where we were in Q1.

To get there, obviously the cost reduction program will be a contributor, one of the contributor to it.

And if I may add one thing to the cost side, because it's important to have, we are -- of course, this year we are in a bit in a transition year, because we're investing into new business areas. We're building, of course, a new infrastructure when it comes to the Cable side, the roll out of MFS and so forth, so there is always a kind of blended, of course, number coming out, because this year in particular is a different year.

If it comes to Tanzania, the competitive pressure we have seen so far is in limited. There is, of course, some movement on price and marketing. But when you talk to the GM so far it's nothing which we expect to have a significant impact, at least at this stage. So it's pretty much business as usual there.

And can you comment, has that surprised you? Would you have expected some of the competitors to perhaps take advantage of those MTR reductions or is this what you expected, given the quantum of the MTR reduction. I'd just be curious to what you thought.

It could have been a threat. At the same time if somebody moves, of course, the other side always moves as well, so there is a kind of flexible response kind of approach from both sides. So therefore, so far, it's fine. You could have expected something else but it's not there yet.

Great, thank you.

Kevin Roe, Roe Equity Research.

A couple of questions; on the EPM transaction, what approvals have you secured to date and what approvals are still outstanding? And I've read some press reports about EPM union protests. Is that a legitimate risk to the deal, or maybe to new Co. after close?

And then I have a couple of follow ups.

If it comes to the political landscape and the situation with the unions it is, of course, a more public deal and a deal which attracts a certain kind of political attention as well. So then it goes completely quiet, of course, is unusual, but there is nothing where we would say it's concerning, or nothing which we deem to be at this stage risky to the deal.

Most parties we have been speaking to have been pretty supportive. And it's more the kind of usual questions and answers we have to give when it comes to merging two companies in terms of employees and all those kind of things, headcount numbers and how do you perform the business.

So from our judgment and from the judgment of our local people as well, at this stage, there is no indication that there's any kind of risk on that side.

In terms of approval, I'm going to go to Francois who has been involved in those ones.

The objective today is to sign the transaction in the course of Q2, before the end of June. So we expect signing to take place in the next couple of weeks and after that there will be regulatory approval required at national level. And it's not only with the City of [Medina], that will take a couple of months and we expect closing to happen in Q4, probably around November.

Okay, that's helpful. And switching to Central America, could you give us a sense of the revenue decline and the EBITDA decline sequentially in Central America. How much of that was due to competitive forces versus the MTR regulatory impact?

It was more or less everything to the MTR everything to the MTR impact. So it's not really competitive, it's the MTR and -- well, I said, actually; nothing more.

Okay. And lastly Bolivia jumped out at me; I think it's been six years since Bolivia showed a decline in subscribers there, any explanation behind that?

There was a clean-up of the customer base, with zero-balance customers, which is purely a one-off. So there is nothing substantial there.

Very good. Thanks, gentlemen.

Thank you.

Anders Wennberg, Brummer.

I have a few questions regarding the mobile international services. We had revenues $14 million last quarter; $16 million this quarter. I think you said on the Capital Markets Day that they had 13% month-on-month growth, but it seems to be a bit slower than that. Can you help us explain a little bit the growth patterns, Q on Q, month on month? Has it slowed or was it seasonally very strong Q4?

And the second question is regarding the take rate. You say that in March you had $500 million in transaction volume. If you divide that by the revenues, I get about 1.2% average take rate. As far as I remember from the Capital Markets Day, I think you said more like 2%, 3%, 4%, something like that. Am I missing something, have I done my calculations wrong or is, actually, the take rate of 1.2% a more reasonable average to use in our calculations? Thank you.

Regarding MFS, there is some kind of seasonality, and Q4 is traditionally much stronger, which explain especially December is much stronger and January is much weaker, which by the way doesn't happen (inaudible) in MFS, it happens even for mobile. So it's purely a seasonable impact, because the momentum that we find today is exactly the same as what we communicated to you a couple of weeks ago.

Regarding the $500 million of transaction, first of all, the commission that we charge is different by country and different by type of transaction. If you do a cash transaction it can go up to 3% to 4%; if you do a cash less transaction it can be at 1% or even lower. So it's a mix of different type of transactions, plus promotional activities that we can do. So it's a bit difficult to calculate it the way you calculate it.

But, roughly speaking, it's much more expensive for the consumer to do a cash transaction, the reason being that we have to remunerate the point of sale, that cashes the money in or out. What if we do a cash less transaction, we charge far less, but there is hardly any cost for us, so it's very high margin business.

Okay, thanks.

Soomit Datta, New Street Research.

I have a couple of questions please. Firstly on MFS, I'd heard that one of your competitors, I think Airtel had introduced zero commission financial service products into one or more markets. I haven't seen the detail on it, but I just wondered whether you'd been conscious of that and if so what risks you saw potentially for commission rate on MFS going forwards?

And then secondly please, quick question on the Online businesses, I think last month you said to expect revenues and EBITDA losses to be in the higher end of the range. The rhetoric in the press release is slightly more balanced. I don't know whether there's a change in thinking on the guidance for that this year. Thank you.

If I start with the MFS side and the zero commission offered from Airtel. They're at the starting point. They have just launched, more or less, the service, so I think for them it's an ambition to buy market share. It doesn't change our outlook and we don't believe it's a commission war coming up now.

The MFS product is more complex. It depends really on many factors, down to what kind of retail network you have, what kind of education levels you have, how easy you make the whole transaction. So, it's not a price or commission-driven business, it's really a service driven business and, therefore, at this stage we take it very relaxed what Airtel is doing there.

If it comes to the e-commerce side, there is no change in guidance. It's absolutely exactly the same as we always said. $100 million dollars in revenues we're aiming for and the decline of losses between $125 million and $200 million depending on how fast we accelerate the business. And just to reiterate this point as well, the higher end -- if we reach the higher end of the loss scale, it means that the business is doing very well and we have good opportunities to extend our market leading position.

And in terms of revenues as well, just to be very clear as well, we will see the acceleration coming now in this sector, particularly in the second quarter and in the second half when it comes to e-commerce side, because then we are in full swing. And the first quarter is a seasonally weaker quarter after the Christmas season; so, no change in the outlook on e-commerce.

Okay thank you.

Thank you.

Bill Miller, Hartwell.

If you were looking forward in looking at your 2017 projection, can you give us outsiders a way of benchmarking you as you go along, so that we can gauge your progress in achieving this?

In terms of external guidance or benchmarking you can always look, of course, to companies like Virgin or you can look to American companies. I think the way we look at this is that each of the individual divisions [and still it] has its own targets and that one we should -- and we want to be measured against.

So when we talk about the growth of the Mobile side, where we said the kind of single digit growth, because that's the one we're going measure and the same when it comes then onto Cable and to MFS.

And then when it comes to the bundling and cross-selling opportunities, as you know, we haven't factored them too much into the budget targets, but they would come on top. But to have -- one company which you would benchmark us exactly against, I would lead to some analysts and [search] for us a bit.

That's fine. But I was thinking of the internal projections, where we look at you individually. What kind of benchmarks you'd look at for MFS for this year/next year. What kind of growth rate would we expect so that we can see what you are getting there in terms of a 2017 projection.

What we did is that in the material that we provided in the Capital Market Day, so we gave in these targets for 2017, but for most of these KPIs we actually gave as well an indication of the milestones per year, in terms of revenues especially. So I think it is relatively easy from that point to check each and every single year, where we are against that objective.

For margin-wise we didn't give a target per year, but we gave it in intermediary steps as well, especially for 2014. So I think that you have a reasonable way to understand exactly where we have to be in 2013, in order to reach our target in 2014.

Great, thanks.

Lena Osterberg; Carnegie.

I have a question on Mobile Financial Services. I was wondering where you see your offers going longer term, if you benchmark yourselves versus your most advanced markets and also some of your competitors which have launched earlier. And also, what penetration rates do you see that you will reach longer term?

And then also I was wondering a little bit Online. You've already said that seasonality impacted revenues. But is there also some delayed launches? Should we expect more launches to come over the next quarters, or will you reach your $100 million of revenues, based on the launches you've made so far?

Regarding the MFS ARPU, we are very happy to see that it's growing fast. You could see that it has been growing fast in Q4 since Q3 and then Q1 over Q4, which is even better when taking into consideration the fact that we enroll a lot of new customers each and every single quarter. So what we are very pleased with is the fact of not having any dilution in spite of a very strong growth.

We have indicated during our Capital Market Day that we expected to reach an ARPU of more than $2 by 2017. I personally believe that it's even on the conservative side, but let's see over time; that's we published. But we see that it's moving, really, in the right direction quarter after quarter, so that's very good.

In terms of penetration rate, we are already with a 12% penetration in our market given that we launch in some market very recently, for example, in Chad we launched in December, but this is included even in the 12%.

And we have indicated as well that we expected to have a penetration rate above 50% in 2017, which once again may look conservative if you look at a country like Kenya, where the penetration is even north of 80%, for example, for the leading operator there.

So, which gives you an indication that there is probably a possibility in some markets to go even bigger, but the 50% that we gave as an indication was on average, which I think is a reasonable assumption for 2017. And which really shows the ambition that we have both as a combination and in terms of revenue growth and margin growth, both in terms of penetration and monetization and ARPU.

Please, sir, could you maybe say something about your most advanced market where your APRU levels are for customers who have been using this service for a while. So if you exclude the dilutive effect?

Actually, it has a very positive impact in terms of this is what you are relating to. The MFS usage has a very positive impact in terms of churn on mobile, so it reduces churn tremendously. Is it what your question was about, I'm not sure to --?

No, I'm just trying to understand the -- an old MFS user, which has been with you for a while in a more mature market, what sort of ARPU is that customer generating. Is it closer to $2 already or where are they today?

They are to a higher level, because there is an increase in usage as well, which we will see with the -- probably increasing even with GDP growth and it's very much linked to GDP. But we see the ARPU increasing largely as a consequence of increased usage by -- especially by long-time users.

But you cannot share where the long-term users are currently?

No.

No, okay.

There are big differences between countries, depending on the purchasing power of the customer that we have. So it's difficult to say that the most advanced markets are necessarily the ones with the highest ARPU, even for the long-term users, because it is highly correlated to GDP as well, or purchasing power in that case.

Okay, then Online the $100 million of revenues, will that be generated with the existing launches or will you launch more ventures?

Largely by the existing ventures but there will be more coming in, because we are launching new projects almost every month. But, obviously, before they really contribute it takes a little bit of time, so the bulk of the revenues are with projects that have already been marketed.

Can I just ask one more question, it's on the voice revenue growth? I just saw communications revenues was down I think just a little bit more than 4%, but how much is voice revenue down?

The voice revenues is down by a little bit more than 5% actually, if we take into consideration the regulatory impact in the quarter.

Okay, thank you.

Stephen Mead, Anchor Capital Advisors.

Going back to the long-term projections in terms of revenue growth, can you talk -- and you probably did it on the Capital Day. But in terms of the CapEx needs to support that kind of revenue growth, what does that look like in terms of what you need to spend on spectrum; what you need to spend on the effort in terms of online launches? Can you break that down a little bit into the components of what kind of capital requirements you have?

Yes, the first point, as we said at the Capital Markets Day as well, that we have a target of CapEx spend versus revenue of 15% to be achieved in the next coming years. And that is due to the fact that, except for Spectrum where you have investments, we are probably this year in a peak in terms of investments we have to do in the infrastructure.

Second point, remember as well that a lot of the new services or many of the new services we are launching like online, when it comes to e-commerce, MFS, media and so forth and so forth are not very CapEx intensive business; they are more riding on the existing infrastructure. So it's not a big CapEx requirement. And therefore, we feel very safe with the statement, CapEx 15% of revenues, which just to illustrate as well does mean we have to save cost going forward, it's just we more or less keep the level we have currently, but revenue is growing faster than that.

And then are you still maintaining throughout this period the same debt to EBITDA targets in terms of how far you would go, in terms of how large of an acquisition you would make, and how much debt or how much leveraging of the balance sheet you would do to achieve the revenue growth targets?

We have indicated that we wanted to be at nearly 1 times net debt to EBITDA, which we achieved at the end of last year. We have said that with the merger, the combined entity in Columbia with UNE, we expect it to be below 1.5 times in terms of net debt to EBITDA post-merger.

And after that we have said as well over the year that we did not want to have a net debt to EBITDA. We wanted to be below 2 in case of additional M&A activity with the ambition to come back to a more reasonable level, probably around 1.

Okay, and then one other question, do you see the -- in terms of what's going on in some of the African nations, in terms of the impact of competition on ARPU, when do you see consolidation taking place in some of your markets?

Well, I think we always had the kind of philosophy that some markets are up for consolidation, particularly Ghana, for example, which has been very competitive and a lot of operators. Other markets we have that we operate in we still have a dual operator situation.

So it has to be market by market, but our philosophy is where there is a consolidation opportunity, obviously, we would look at. And those markets which are most obvious, obviously, are -- is the market in Ghana.

But it's always -- as you know, it takes two people to tango, so consolidations are, in theory, good in practice and they take some time sometimes.

All right, thank you.

Thank you.

Thank you. There are no questions at this time, I would like to hand the call back to Hans-Holger Albrecht, please go ahead.

Yes, thank you operator and thanks everyone for listening in to this call. If there are any more questions please do not hesitate to call me or Francois, or Justine. Otherwise, we hope to see you all again or listen to you again at the next conference call. Thanks and goodbye.

Thank you. This concludes Millicom's financial results conference call. Thank you for your participation. You may now disconnect.