Millicom International Cellular SA (TIGO) 2013 Q3 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 Marc Zagar, interim 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.

Thank you. Good morning. Welcome, everyone, to the Millicom third quarter results presentation. My name is Justine Dimovic and I am the head of investor relations. Today's presentation slides can be found on our website, www.Millicom.com.

Before we start, I would like to remind everybody that the Safe Harbor statement will 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 acting CFO, Mr. Marc Zagar.

I will now hand over to Hans-Holger to give an overview of our Q3 results and operational performance, after which Marc will take you through the financials, and we will conclude with a Q&A session. Let me now pass over to Hans-Holger.

Thank you, Justine, and hello, everybody, and thanks for joining to our call today. I hope you had all the time to read the results that have been issued earlier this morning.

And as you can see, it has been an encouraging quarter for us with revenue accelerating now into double digits. Each of the four pillars of growth strategy have contributed to this, as our investments are beginning to show some results.

In Mobile, we added over 1.5 million customers in three months. In Africa we have begun to turn things around. As an example, our determination in this continent, in DRC, you can see we added 250,000 customers in just three months as we returned to the country's troubled Kivu region. So this was a strong point and a good effort from us for the future.

We see as well the strong shift to data continues with another million users added in the quarter. Now 50% more of our customers are using data that in September last year. This trend has been boosted by the doubling of smartphone sales in just six months as customers demand more from our services.

Many of you, I'm pretty sure, have smartphones which cost normally over $500. Those are -- most of our customers nowadays cost under $60 and perform equally well, so clearly those kind of handsets become attractive to our market as well.

Overall, I think the pace is fast. And in a few weeks' time we will be launching free mobile access to a leading social media network in one of our markets as another test case to transform our offering to the kind of digital lifestyle. And, obviously, there is much more to come.

In cable and digital we now have the prospect of a full lineup of cable services across Latin America. I can tell you today that last week we completed an agreement to purchase a pay-TV company in Bolivia, which means that if a merger with UNE in Columbia is also approved, Millicom will soon have the opportunity to offer a bundle of digital [lifestyle] services in every one of our Latin American markets.

Our TV entertainment services are also taking shape. Only last week was down when we saw the launch of Hey music channel on Tigo TV, and even more important, on the mobile in Paraguay. And if you want to see how the product looks, go to www.heymusica.com.

And there is much more to come there, too. In MFS for example, growth was strong again in the third quarter with penetration exceeding 11% of our total mobile customer base, up from 10% at the end of June. In Chad, an amazing 8.5% of our customers are already using the service since launching last December. And we are planning more launches in the coming months in Africa.

Last, in our online business organic growth reached 25% quarter on quarter and has accelerated while costs have been contained. So we now expect lower losses for the full year.

We are very proud of Jumia's award as retailer launch of the year, which it won earlier this month in Africa.

If you go to slide 4, you can see the results of the quarter. As mentioned, we have seen an ongoing acceleration in revenue growth reaching this quarter 10% on a like for like basis. This is a level of growth we have not seen since Q4 2011.

Our mobile business, which still represents (inaudible) the majority of our revenue, has again proven solid despite continuing competitive and regulatory pressures, growing by 3.3% in local currency, 5.2% on a like for like basis.

I think we are particularly pleased to report strong customer recruitment this quarter, both in voice [helped] by Africa and Columbia, in particular, and in data everywhere. With the 1 million new mobile data customers in Q3, we have now upgraded 5.7% of our global customer base to mobile data services in the first three quarters of the year.

In our cable and digital media business, our focus this quarter was on bundling and cross-selling. We added 16,000 new fixed broadband customers, a record for us, with the bulk of the growth coming from Paraguay. In Paraguay we are deploying our integrated strategy of cross-selling fixed broadband and pay-TV to our mobile customers, and improving quality with higher speeds and better content.

In mobile financial services, we continued to achieve growth, both in penetration and ARPU. At the end of Q3 our 11% of our total mobile customer base was using the service and surpassing 14% in the markets where we have launched.

Growth of our online business continued to accelerate by 25% quarter on quarter, as I mentioned before, and was revenue of $25 million in the quarter.

The underlying EBITDA margin for Q3 reached 38.6%, excluding online. Our margins declined this quarter, mostly due to the continued investments for growth, such as increased subsidies to meet the demand for data services in Latin America, and investments to reinvigorate our brand in Africa.

Looking at the year to date, our underlying EBITDA margin is 39.6%, in line with our expectations as we communicated earlier. And as stated earlier this year, we want to be able to seize opportunities to accelerate growth. We are doing this even if, in the near term, it puts pressure on our margins.

As you all know, the first building block for value creation is revenue growth, which over time translates into growth in cash generation. And we are pleased to see that growth is returning, particularly in Africa, once we started to increase our investments.

We keep our Group guidance for the year of, when it comes to EBITDA margins and CapEx, we had [reduced] anticipated revenues and losses for our Online unit in light of what was spent by the business year to date. And expect it to push during the year-end festive season.

Now let's look into Q3 performance in more detail and go to slide number 5. So let's start with having a look on our growth drivers for the quarter where, as mentioned, we returned to double-digit growth, 10% year-on-year on the like for like basis.

You will note that our sources of recurring revenue are well-balanced between our business units. In Q3 products and services outside our traditional mobile business generated 57% of recurring revenue growth. Mobile remained resilient this quarter, driven by good momentum in Africa as well as solid net additions in Colombia.

Moving to slide 6, let's look at our traditional voice business versus the new growth areas in digital, mobile, data, cable, and online. This quarter we have maintained the contribution of digital at 33%, while at the same time adding 1.5 million new mobile customers, which, of course, will further strengthen the voice business going forward.

If you then jump to slide number 8, you can see -- and starting with the mobile business growth in the third quarter accelerated to 3.3% in local currency from 2% in the second quarter and 1% in the first quarter.

Our revenue growth is all the more satisfying in light of continued regulatory pressure, which affected revenue growth by 1.9% percentage points this quarter. ARPU overall continued to decline by 2.7% this quarter, which, with the net adds and regulatory impact of this quarter, is not a surprise to us. If you exclude the regulatory impact, the dilution of ARPU would have been 0.6%.

And mobile data penetration continued to grow steadily, and by the end of the quarter over 9 million customers accessed data services, representing 18.4% of our total mobile customers.

Now on slide 9, if you look at mobile data in more detail, the close correlation continues between traffic and revenues, which rose again by 28% in the third quarter. The strong net additions in mobile data were driven partly by an increase in subsidies, 26% year on year, and on the mix of smartphones moving towards lower-cost devices.

We have been saying for some time that the arrival of more attractively priced smartphones to our markets will further accelerate uptake of mobile data. We are clearly seeing this now in Latin America, where smartphone sales have surged from [250,000] units in Q1 to 500,000 in Q3. This trend is likely to continue as device prices fall, which is pushing down subsidies per device and enabling more customers to get access to mobile data.

Moving on to slide number 10 and the cable and digital media business units. We are seeing there as well an acceleration in organic growth at 11.5% for the third quarter versus 8.7% in the second quarter.

Our focus this quarter was to capitalize on the excellent customer additions of previous quarters through cross-selling of services. As a result, we saw a good upward trend in all of our KPI's adding new pay-TV and fixed broadband and telephony customers. At the end of the quarter, our fixed broadband customer base amounted to 41% of our pay-TV customer base.

Continuing with cable, let me give you maybe a brief update on UNE. When completed, the planned transaction will allow us to significantly fast-track our ambitions in the cable business.

Many of you would have noted that earlier this month we announced the signing of the final agreement for the combination of Tigo and UNE in Colombia. We are now working hard with UNE to secure the final regulatory approvals to close the transaction.

They have no update other than that work is progressing and closing is expected during the first half of next year. And we, of course, remain very excited about this deal and the great opportunities it obviously represents to us and the business in Colombia.

If we then move over to the mobile financial services on slide number 12. The aim of the MFS team has been to increase penetration of the service using, again, very positive results this quarter. As you can see, progress is steady against this target, with penetration of service reaching 11% of our mobile customer base at the end of Q3 and around 14% for the customers where the service is available.

At the same time, as in previous quarters, we were able to increase ARPU, which is a testament to the stickiness of the service once adopted. In Q3, ARPU reached $1.4, an increase of 12.6%.

If you look geographically, penetration increased across the board in all countries. Penetration in Chad is rocketing, reaching 8.5% at only 10 months, making it our most successful launch to date in the Millicom sphere. Central America is still emerging, reaching 4% overall in Q3.

If we then move on to slide 13, the online business, and on the online side revenue was up 25% quarter-on-quarter. We had many developments in the business, as in previous quarters, with several new launches. We brought both existing services to new countries and introduced new ones in existing countries.

From the business development side, we have been preparing for the end of year festive season in our key markets of Brazil and Nigeria. We have enhanced our cooperation with the LIH and AIH venture and sought further synergies between our offering in both continents, such as cross-promotions and preinstalled apps.

We have also received recognition a commendation for our services with Jumia becoming the first African company to win best retailer launch of the year at the World Retailer Awards.

That's about the operations. I will now hand over to Marc, who will provide you with an update on our financial results and an update to our guidance when it comes to the online business. So Marc, over to you.

Thank you, Hans-Holger. So please turn to slide 15 for the financial highlights. Firstly, if we look at the developments in the revenue drivers in the quarter, we can say we made very good progress in all business units.

Turning to mobile, first of all, as Hans-Holger mentioned, we gained 1.5 million new mobile customers in the quarter of which 1.1 million came from Africa and 0.4 million from South America, a very good acceleration from the first half of the year, taking us now to a number of mobile active customers around 49 million.

In the cable and digital media area, we had year-on-year growth of 34% in our homes connected to 850,000, approximately. The MFS active customers ended at $5.5 million, and year-on-year growth of 65%, taking the MFS penetration over 11% at the end of quarter 3 and up from 10% in Q2.

The mobile ARPU continued to show some decline year on year, albeit at a slower pace than in Q2. The decline was 2.7% versus 4.7% in Q2. And if we exclude the regulatory impact, then the ARPU was only down 0.6% year on year.

The cable ARPU was up year on year in local currency, and despite heavier competition in Costa Rica, we still made good gains in customer numbers, as I mentioned. MFS showed a double-digit growth in the ARPU, reaching $1.4 in the quarter and obviously accompanied by a strong growth in the customers active in the penetration.

Revenue numbers showed a growth of 7.6% on the reported basis. And on the local currency and same perimeter basis, we had 8.1% growth in the quarter, which, if we adjust for the negative impact of regulatory in the quarter would have shown an underlying growth of 10%.

EBITDA this quarter of $459 million after online and one-off items. The EBITDA losses coming from online amounted to $18 million in the quarter. Consolidated EBITDA at 35.6% was 6.7 points below Q3 2012.

Excluding online and one-off items, underlying EBITDA margin in Q3 was 38.6%, or 39.6% on a year to date basis. We will come back to the EBITDA margin dilution a bit later.

Regarding CapEx, we invested $315 million in the quarter 3, including $42 million of spectrum in South America. On a year to date basis, we have spent, including spectrum, $662 million, representing 17.4% of revenue to date, the equivalent percentage to the situation year to date last year.

Turning to slide 16, the regional growth in revenue was once again driven by South America, but we saw this quarter also good revenue and growth from Africa, which outperformed Central America in terms of growth. Online contributed $23 million and the Cablevision business in Paraguay, $17 million to revenue growth in the quarter. Foreign currency negative impacts amounted to $25 million in the quarter.

Slide 17, you can see that all the four pillars contributed to growth. Mobile was the strongest contributor in the quarter with total revenues reaching $1.047 billion and up $34 million year on year. Cable, including Cablevision, contributed a strong $29 million extra revenue in the quarter with total revenues of $114 million.

MFS revenue grew by $11 million year on year on the back of the steady progress in the penetration and active customers, as mentioned. And online revenues increased by $23 million year on year.

On slide 18, turning to EBITDA development, in this quarter our EBITDA margin, including online and one-offs, was 35.6%. Looking deeper into the 6.7 percentage point year-on-year decline in margin year on year, we want to highlight essentially three elements which have been driving down the underlying margin -- regulatory pressure, pricing pressure, and investments for growth. Regulatory and pricing pressure particularly impacted Central America this quarter and reduced the margin by 0.8 points at Group level.

Secondly, we had stronger investments in the quarter for future growth, and that combined for an erosion of margin by 2.4 percentage points, slightly less than the 2.8% in Q2. In Q3, in particular, we continued strong investment in sales and marketing, predominantly to support the growth in mobile data and MFS, including subsidies which grew 26% year-on-year, in the quarter, and MFS commercial investments to drive penetration.

The margin was also pushed down by one-off events totaling $10.8 million in the quarter and mainly corresponding to provisions for potential tax increases in Africa. The one-offs had a negative impact of 0.8 percentage points of margin in the quarter.

Finally, the dilution arising from the online business losses, which amounted to $18 million in the quarter, and impacted the margin by 2.2 points. That leads us to the final EBITDA margin of 35.6% in Q3.

Slide 19, normalized EPS in the quarter. The normalization in Q3 mainly relates to adjusting for a negative non-cash movement regarding the Honduras put option for $100 million. Apart from the EBITDA development, which I commented on already, we have a year-on-year impact from higher corporate costs and increased financial costs, which are linked to the increase in the net debt, amounting to approximately $500 million year on year.

On slide 20, we are showing that the tax rate normalized remains below 30% for the Group.

Slide 21, cash generation is an area where we are making some progress quarter on quarter, and obviously will continue to apply strong focus going forward. The free cash flow in the Q3 was positive by $81 million. The decline year on year is mainly the result of the lower EBITDA, and also changing in working capital resulting from our data penetration and smartphone strategy and some seasonality effects.

The CapEx levels also remain close to the expected peak.

On slide 22, and looking at our net debt, the net debt to EBITDA ratio at 1.2 times remained stable versus Q2 2013. At September 30, we had $1.1 billion of cash, of which approximately $0.6 billion was either in US dollars or euros. The net debt totaled $2.26 billion, which is more or less stable on the level at the end of Q2 2013.

We have been working in the last year to extend the maturity of our debt with the issuance of new corporate bonds and the average maturity at the end of Q3 is 4.1 years versus 2.8 years at the end of Q3 2012. In October, we issued an eight-year, $800 million bond to fund the UNE transaction.

Slide 23, we are showing a diversified source for our debt. But in particular, if we look at the developments over the last 12 months, the share of financing represented by bonds has increased to 55% from 24%. This has allowed us in particular, as I mentioned, to increase the maturity of our debt.

On slide 24, some features of the debt management and hedging; 64% at the end of Q3 of the gross debt is denominated in local currency or not subject to foreign-exchange exposure. Secondly, on the interest rate front, 67% of the gross debt is at fixed rates, which, obviously, reduces our exposure to interest rate volatility.

Slide 25, we can see the geographical split of our debt. We have increased in the quarter slightly the debt at corporate level to $999 million from $785 million. The corporate debt includes the debt that we pushed down to Africa for $370 million in the quarter.

Turning to slide 26 and the guidance, which, for the most part, remains unchanged. We reiterate our guidance for the 2013 Group [is a bit down] to be around 40%, excluding online. This guidance excludes one-off items, which are $25 million to date. Our EBITDA margin year to date stood at 39.6%, excluding online and one-off items.

The guidance for our CapEx to revenue ratio also remains unchanged. We expect the ratio to peak at around 20%, excluding spectrum and licensed acquisition. As mentioned, year-to-date our CapEx to revenue ratio stood at above 17%.

We have amended our previous guidance for online as Hans-Holger mentioned. Revenue per the online division is now expected to exceed $80 million. The guidance for revenue is amended primarily due to the appreciation of the US dollar versus certain local currencies, in particular the Brazilian real, and also the change in the mix with the proportionately higher share in the portfolio of marketplace models, where revenues are accounted for at the service product commission level rather than on the total value transacted.

In light of the cash spent to date, also the mix between the different models and the expected push in the year-end festive season, we are also adjusting downward our guidance for EBITDA losses of the online division. We now expect losses to be in the range of $70 million to $90 million versus the previous $125 million to $150 million.

At the end of Q3, year to date revenue in online reached $56 million with EBITDA losses of $38 million. I will now hand back to Hans-Holger for his concluding remarks.

Thank you, Marc, and let me maybe conclude by confirming what I said last time. As you all have seen, we are in a very strong investment phase and this kind of phase will continue. This is what underpins the transformation of the Company into an all-around provider of diversified digital services.

It is done prudently, with great discipline and executed within all previous guidance. The important transaction such as in Bolivia and Colombia are so necessary to make the leap from a slow lane voice service to the fast-track digital lifestyle service provider.

So with this closing remark, we hand over now to the moderator to get the first question for the Q&A session.

(Operator Instructions) Laurie Fitzjohn, Citi.

Thank you. I have three questions, if I may. Firstly, as the regulatory headwinds reduced in Q4 and Q1, should we expect growth to accelerate further? Or are there headwinds that we are sure to be aware of offsetting that?

Secondly, on the negative working capital, you said this was due to smartphone. But I thought you expensed the handset cost. So if you could just explain how the smartphone subsidies are [eating into the] negative working capital.

And then, thirdly, MFS revenue is growing very strongly, but I think you previously said you expected $100 million revenue for this year. Year to date it is $56 million, making it a bit of a stretch. I'm just wondering what would be the [next surprise] there on the MFS revenue. Thanks.

If I maybe take the first question and the third question, then Marc can answer the second question. As you know, when it comes to regulatory impacts and taxes, it is a bit of a guessing. We don't anticipate going to the fourth quarter next year that we have such big impact like we had this year like at the beginning of the year.

So we are kind of more normal kind of pressure like we had before and remember it's about the kind of impact that we had when it comes to regulatory pressures coming down, the more we have the kind of reduction in those kind of charges. So overall, I think the regulatory situation should be more fine, but again you can never 100% forecast, obviously, what is happening there.

When it comes to MFS, I don't think we've changed any kind of guidance or we have never been very specific when it comes to the regulatory targets for this year. I think we see the kind of key driver for us on the positive side, which is kind of the penetration that we have in the markets we have been operating in for a while. And we see the kind of acceleration, in particular when it comes, as I said, to markets like Chad and Tanzania and Rwanda.

So I think everything when it comes to MFS side is in line. We can see that Western Africa takes a bit more time than Eastern Africa. And we have also launched [over sea] in Senegal during the fourth quarter, which would then accelerate growth as well.

And in Latin America, the picture is bit different where you can see good traction when it comes to Paraguay. The other markets still have to pick up. So in terms of guidance and forecast when it comes to the MFS, revenue is no major difference. I think the second question was about the handsets.

Yes. That's right.

So, Marc here. Yes, you're right. The subsidies and, therefore, the impact of the handsets, is brought through OPEX.

When we refer to the working capital impact of this, we are talking about the buildup of inventories because, obviously, as we significantly increase our -- continuously increase our data penetration and mobile data users over time, we need to build inventories in particular in preparation for the end of the year. So that was one of the key drivers that we mentioned.

Okay. Thank you.

Thank you.

JP Davids, Barclays.

Hi. Good afternoon, everyone. Firstly, on South America, a much stronger performance there. Specifically, can you touch on how things are progressing in Colombia and whether you are starting to recoup some of the subsidies that you have been pushing into that market?

Then, the second question is on Africa. You clearly got a more positive tone on this division. Is that really more around the longer-term prospects for Africa or is it that, within the next 12 to 18 months, you can see these assets return to inflation type growth? Thank you.

When it comes to South America, yes, it is a kind of fast-moving segment in the Group and Colombia has been a big part of this. I think we see the same momentum more or less like we had in the previous quarters where the data pick up has been very strong. And it has been, of course, supported by the things that we have been doing in terms of bundling, particularly with other services like music, for example; the Tigo music service is very strong.

And one of the other key drivers obviously has been the push of lower-cost handsets into the market, which fuel the growth as well. Plus we have been seeing the -- a kind of [revamp] as well when it comes to prepaid data sales in Colombia and Latin America, which has been positive for this kind of place as well.

So, what I think, it is a continuous performance we have accelerated a bit by, as I said, handsets and the marketing push, which we believe should fundamentally should continue since the Tigo brand is very strong. And once the UNE transaction will be approved, hopefully, then we can even accelerate those kind of double sales, like cable and mobile, stronger. So I think it's nothing extraordinary, it's just that you see the fruits of all the kind of changes and investments we did in the last couple of quarters.

When it comes to Africa, I think it -- what African performance indicates, one fundamental point which we have been saying before. There is growth potential and once we start to invest in Africa, we see a kind of correlation between investments and growth. So, the statement we have made earlier this year that it is not only a market issue, it is as well a kind of executional/operational issue, our level of investment to do is proven to be correct, and hence, growth is accelerating.

To what extent, we never gave that kind of forecast, but it should be a growth story. We are always going to reiterate the kind of three dynamics that we have when it comes to Africa that the [overall] penetration of mobile phones is around 50%. Over 40% of the population is younger than 18 years in the markets we operate in, and therefore the growth compared with the macro growth as well should be very positive going forward.

So we are positive when it comes to Africa. It is good results, but we still have a long way to go as well, because there are longer-term issues we have to fix like brand and other items. But it confirms that we have a positive outlook when it comes to Africa as such.

Okay. And now just a quick follow up on the investment related to Africa. So do you see this continuing to weigh on margins into 2014 or do you think you are at a sustainable level of investment currently? Thank you.

No. We are at a sustainable level of investments currently. [The basic] question in the five-year [rise], do we have -- there is a question of how fast you want to accelerate certain investments. And that has to be more tactical-driven than time-driven on our side, which we are looking to now in the budget process.

But on the fundamental level, we have on the right level. It is more you want to accelerate, but to accelerate that we have to decide ourselves.

Thank you.

Chris Grundberg, UBS.

Thanks very much. I just had a couple of quick ones, actually. First, whether you can just confirm the longer-term guidance on the online business hasn't changed, just in terms of the three-year picture.

And then, secondly, also on online, terms of the business mix, you obviously described that the classified segments have come through perhaps stronger. It just wondered if you could give a bit of color around that shift in the portfolio orientation. Was that something you were expecting or aiming for? I just wonder what has actually changed there to -- and whether it was deliberate or not. Thanks.

Yes. We can confirm the guidance we have been given on the online side. There is no change in respect to that. And let me maybe just draw the picture a bit wider so to give a kind of an understanding.

This is a business we have not been operating more than eight months now, or nine months, something like that. So it's a pretty young business. We are not through the first cycle. Hence, forecasts are always changing slightly of course, and you have to it adjust the guidance to you as well.

The underlying trends when you look to the kind of key KPIs in terms of customer, customer acquisition, tracking, and all those kinds of elements, is positive and the overall picture hasn't changed. And the other good news is that we keep a very disciplined correlation between growth in terms of revenues and cash burn.

But it has changed a bit, indeed, and this is what I think, this is what happens with a young business is the kind of revenue mix we have seen during the third quarter, and maybe going forward we will see as well, where classified is picking up and becoming one of the kind of revenue drivers. But even more important as well is on the e-commerce side, we are shifting a bit more away from pure e-commerce to a kind of combination of e-commerce and marketplace. So the kind of very successful model you have seen in China with Alibaba, we are trying to implement in our markets as well which, of course, will mean you have lower revenues on items you sell when it comes to marketplace, but you have, obviously, a much better margin when it comes to those kind of businesses.

So the mixture of those kind of elements is changing gradually, sometimes, forecasts. It doesn't change the kind of underlying business model and is nothing as a concern for us really.

If I could just follow up on that, then.

Sure.

Implicitly, if your medium-term guidance hasn't changed, but your revenue models have maybe altered fractionally in terms of this portfolio shift, does that actually imply more confidence on these classifieds businesses, if you are looking at the same revenues, because saying these are inherently lower revenue businesses?

No. I mean, we are too early to make a kind of clear breakout exactly where you're going. I think the biggest concern we have been always hearing from the market, which is what is the kind of cash burn, what is the kind of risk you're facing. And in that respect, as I said, the correlation is not -- hasn't changed. Where the revenues are coming in detail is to be seen, I think, after a couple of months as well.

And, secondly, when [do we either going to] peak of the investment, that may be [the first one] as well because it looks like the cash needed is not as high as it has been so far. So those are things that which are a bit of a moving target, but if you take it on the three- to five-year horizon, as we have always mentioned, it hasn't changed.

That's helpful. Thank you very much.

Thank you.

Stefan Gauffin, Nordea Bank.

Yes. Hello. I was also looking into this online classified business, but that was just responded to. I will follow up on data subscriber development. You have been pushing for data subscribers' intake in Latin America, but this quarter the data subscriber intake was primarily coming from Africa. Do you see that kind of intake could be ongoing or if this is a little bit too early for data growth in Africa? Thank you.

We hope, of course, it's going to be ongoing. I mean, it is actually underlying (inaudible) intake of data subscribers when it comes to Africa. To what extent you can push it, with what extent you open your regions, and to what extent can you get the kind of pipeline for customers up and running is a bit too early to say. But, structurally, obviously, just a reminder, data will grow in Africa as well over time. Absolutely.

Okay. Thank you.

Thank you.

Barry Zeitoune, Berenberg Bank.

I have just got a few questions. First of all, on the DRC expansion, can you give us some color in terms of how much EBITDA that cost you this quarter, how much EBITDA you expect it to cost you in coming quarters and whether you see further expansion opportunities in the coming quarters or years ahead within DRC?

And my second question is on subsidies. I was just wondering whether you could give us some color on where you expect subsidies to peak. Is there kind of a number of guidance number you can give us of where you would expect that number to peak during going forward?

And then my third question is just on cost cutting. It was something you call talked about last quarter. You have been quite quiet on it this quarter. Are we likely to see some benefit of cost cutting coming through in Q4 and is there any benefit that is evidenced in Q3?

And then my last question is just really on the voice revenue trends. They look to be a lot better this quarter than they have in recent quarters. You gave, obviously, quite a negative picture at your Capital Markets Day of a minus 3% to minus 5% CAGR going into 2017.

Do you think that you can better that minus 3% to minus 5%? Are you feeling more positive than you did in the past? Thank you.

Okay. Let's start with the first one, which was the DRC expansion. I don't think we're going to break out individual country levels what the impact will be on EBITDA, but obviously it will cost.

At the same time, the good thing is in DRC, particularly when you do kind of regional expansion, you'll see the impact on the revenue side immediately as well. And you will see the pickup in terms of customer. And, therefore, we do treat DRC like we would treat any other African country that we show as a kind of balanced expansion investment into new regions and new customer intake going forward.

DRC, as you all know, is probably the most interesting and the most challenging market you can be in Africa, simply because of the size of the market. So, there, you're going to see for a long time for the opportunities to invest and to see the growth at the same time. And that is the kind of game we want to capture. But, as I said, we don't break it down into individual markets.

I think the second question was about subsidies and the kind of level we have been in -- if it has peaked or if it is going to change going forward. It depends a bit on the consumer, obviously. It is not fully in our control on what kind of competitive level you have in each market and what kind of subsidies you have to give.

Long-term, as I said, we believe in the positive trend that handset prices in all markets are coming down to a price of below $60 now even, which will change fundamentally I think the way we can treat handsets, combined with the impact that most of our markets strong -- or brands are not as important when it comes to handset as it, for example, in the Western world. So structurally, I think we should benefit from those kind of changes and, therefore, subsidies should be controlled going forward. But on the short-term, as I said, it depends a bit on the market environment you are in.

That leads me then to the third point, which is the important point, the cost situation we have in Millicom, which is always a challenge and has been a bit complicated. We said at the Capital Markets Day we have initiated a cost-saving program to get $100 million out of cost. We are going to see for this year roughly $20 million already of this $100 million being executed.

At the same time, you have to remember as well that we invest in new things and new business areas. It may be on the cable side, may be on the music side, may be on the service, we are launching. So it is not always as easy to extract it out and therefore it is -- it may get lost by the kind of underlying cost-saving initiatives are there, and we executing on them as we discussed.

And we keep as well, which is even more important I think from a cash generation point of view, we keep the guidance that CapEx should come down to 15% of revenues in the coming year. So the focus hasn't changed. It is just something we have to look at.

[Musically] as well on this one, obviously it is a quarter by quarter exercise. And again, if you see kind of opportunities to invest like we have done during the third quarter, we invest into the growth.

And the last question is around the voice revenue trends, which is correct. At the Capital Markets Day we guided for a compound annual decline of 3% to 5%. Fundamentally, even this quarter was not better; I would not change it. I think that is the underlying business model we operate in. And so the picture hasn't changed and I would be -- I would remain cautious on that front.

Can I just ask a quick follow-up on CapEx? Because if I remember right, I think last quarter you mentioned the way you expected that CapEx [to fare off to trend to] 15% was that you would have the revenue growth. In absolute terms CapEx would probably stay reasonably flat. Do you still feel that that is probably the way in which you will get to the 15%?

Yes. Basically, the idea there is, exactly, the revenues are going up and the kind of absolute amount you spend stays the same. And, secondly, we still believe there is a lot of efficiency which we are pulling in right now into the system, particularly when it comes to a network design, procurement, and that will roll out.

And certainly you realize we have a peak of initiatives during this year when it comes to billing systems and TM systems, and those kind of things. So long-term I think the 15% target we have is fine, and in absolute terms it should be a pretty similar amount.

Perfect. Thank you.

Thank you.

Can I please ask everyone to limit to one question and one follow-up, as we are running out of time? Thank you.

Sven Skold, Swedbank.

Thank you. I will stick to one question, then. And I would like to focus on online. You lowered the guidance for EBITDA losses for this year, but you still have, I understand, keep the $340 million in operating losses for the three-year period. Is that correct? The losses should be increased next year over 2013? Is that right?

Yes. And of the knowledge we have today, we keep it exactly as it is. So there is no change in that.

Okay. Great. And the follow-up question, then. Could you give us the Colombian margin please?

The Colombian what? Excuse me?

The margin in Columbia.

This is very similar to what we have had in the past quarters.

Around 25%, 26%; is that -- ?

Yes. Exactly.

Thanks.

Thank you.

Torsten Achtmann, JPMorgan.

Good afternoon. You are pushing the growth button now for a few quarters, and so far you are taking lots of new customers. Are you seeing any reactions from competitors in the markets where you take share? And, if not, why do you think that is so? It seems they are just sitting there and you are taking all the growth out of the market. Thank you.

Yes. It depends, of course, on which market you talk and the where you are. If you make it very simplistic, in order to save a bit of time, I think in Africa it is more that we are coming back to keeping market share or taking a little bit of market share, but it is not a major shift. It is more that we participate in the kind of overall growth in those markets, if you can trust figures from some of the places there.

So I don't think that is a key issue and, therefore, we have not seen any kind of major reaction from competition on that front. Actually, it has even become a bit less competitive or less fierce competition when it comes to [traffic] for time being.

In Latin America, the picture depends on where you are, but in Colombia, yes, but as you know we have a regulatory support right now. So it is a bit helpful. In Paraguay it's more the overall market, which is positive, so no major changes there at this stage.

In Central America we feel the competition stronger. So, there, you can see it is a tough environment for us.

Okay. And any indication of that is increasing, or is it you are getting [softness] as broad as we can speak now, or changes?

If you take it for the full Group, I think it stays as it is. I mean, there is no major changes. There are things in individual markets, but from a Group level I don't think there are any major changes.

Great. Thank you.

Thank you.

Erik Pers, Danske Markets.

I have a question regarding cable business in Central America. You have a quite impressive growth in the number of households passed. And then I was wondering, first of all, how much of the [DCR's] CapEx is perhaps associated with that growth in households passed in Central America?

And also, there is a little bit of a lag, then, I suppose, in connecting these households. The number of households connected isn't growing as fast. Can you help us understand the timing here? Will these new households be connected in the near future or how does it look?

Yes. As it comes to the CapEx on the cable side, we don't break it individually what the rollout is costing but it is not (inaudible). It is not huge. But, remember, in those markets in contrary to [the other markets] now, we do the cable roll pole to pole so we don't dig the cable into it. So it's not that high.

What you have seen now is exactly the homes passed have increased, and now we have to turn those houses into customers, which is simply the kind of sales at what you have to do. So that is the kind of task for the next couple of quarters to convert passed homes into customer homes.

Okay. And that's going to take, you think, a few quarters before you can (multiple speakers) convert?

Yes. It will take a few quarters or a couple of quarters; depends on -- again, depends on the market. It was tough to talk so general, but depending on the market and the competitive landscape you are in. So, in some markets it would come faster. In very competitive markets, you may have to work a bit harder.

All right. Thanks.

Thank you.

Sergey Dluzhevskiy, Gabelli and Company.

(technical difficulty)

(Operator Instructions).

(inaudible) the answer.

I do apologize. There was no response from his line. Bill Miller, Hartwell. I do apologize. He has de-polled from the question. One moment, please.

Okay. Thank you. I think we will stop here. If there are some outstanding questions and some technical issues, please do contact the investor relations after the call. Thank you, everyone.

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