Millicom International Cellular S.A. (TIGO) Q3 2007 Earnings Report, Transcript and Summary

Third Quarter Results. For your information, today’s conference is being recorded. At this time, I would like to turn the call over to your host for today Marc Beuls, CEO; and David Sach, CFO. Please go ahead. Marc Beauls – President and Chief Executive Officer Thank you operator and welcome to every one who has joined us today. For this call both David and I will be using slides to run you through the results. It will be helpful to have the slides in front of you and you can find them on our homepage at www.millicom.com. We will both be happy to answer any questions you have at the end. But first I would like to give you an overview of the results and run through the performance of each cluster. So let’s start with slide number two. Quarter three has been an excellent quarter for Millicom as we have seen growth based growth across all of our regions. During the quarter we substantially increased our rate of investment as we show opportunities and a number of our markets to accelerate our build out and capture market share. Africa and Columbia have taken a lion share of this investments as we want to build Senegal’s market share quickly in these fast growing markets. This work commencing especially for Africa as we were a number as there were a number of one ops in quarter two, which was also the slight a lower growth in these markets and then quarter three our African operations regained a former retalitidy. Africa as a region grew by 52% as underlying this growth was an acceleration and subscriber acquisitions growing at a strong 17% quarter-on-quarter. So, turning to the headline numbers on slide two of the pack, revenue for the third quarter grew 77% over the third quarter of 2006 and EBITDA grew by 60%. We added 2 million new subscribers in Q3 giving us a total of 20 million subscribers at the end of September 30th, 2007. Even allowing for the acquisition of Columbian underlying organic revenues grew by 46% which is a very strong performance. As I have already mentioned, Millicom’s CapEx increased substantially during the quarter and was under $350 million which represents a 109% increase over a year ago and 67% increase over the last quarter and bring the CapEx for the year-to-date to 738 million. As you can see CapEx is increasing significantly throughout the year and consequently we have increased our CapEx forecast for the full year from over 800 million to over 1 billion. We are expecting CapEx for 2008 to be at the similar level. This CapEx is a good indicator as to how possibly we viewed the prospects for growth. On slide three, the results for accelerating investments can be seen clearly in terms of the rate of subscriber acquisitions during the quarter. Millicom have a 2 million total subscribes in Q3 as you can see on slide number three bring the total to 20 million at the end of September, and representing a 77% increase over the third quarter of 2006. This result was considerably higher than our previous run rates in the first half of the year as we managed to thus far than we have expected. If you are able to maintain our level of CapEx spending in Q4, the subscriber intake should be similarly strong. In Q3, subscribers in Central America grew by 74% year-on-year and South America subscribers grew by 42% excluding the Columbian acquisition and by a 170% including Columbia. In Columbia Millicom added a 211,000 subscribers in the quarter showing that we are beginning to get traction in this markets. Africa reported year-on-year subscriber growth of 44% but even more presently, a growth rate of the 17% from the last quarter as we caught up from what have been a slower second quarter in terms of subscribers. Asia increased by 43%. Attributable and total subscribers increased by 79% from the third quarter of 2006 to just under 17 million at the end of September 2007. Millicom has one of the strictest definitions in the industry for what substitutes and subscribers. Reported subscribers are those that have generated revenues within the 60 base periods or in the case of new subscribers those that have started to generate revenues. We have introduced this type of definition for new subscribers, to count only those customers who have initiate the revenue generating activity so that we report only general subscribers to [inaudible] products and services. We will stop reporting TDMA and CDMA customers in all Latin American operations except for Bolivia at the end of 2007. The phasing out of our legacy TDMA and CDMA networks is continuing and at the end of the third quarter less than 700,000 subscribers, 400,000 of which our Bolivia remained on these networks. During Q3 we took out 300,000 from our numbers and this process has resulting a slightly higher than average on but will be finished by the end of Q4 in Central America, and Paraguay and probably by the end of 2008 in Bolivia. While the higher ARPU customers have mostly over the migrated to our [inaudible] works at his likely that a number of the remaining TDMA and CDMA customers might not migrate. However, though lots from the networks will have little impact on revenues are very low ARPU customers with less than a $1 per month. [Inaudible] this whole TDMA and CDMA networks is important as they will release spectrum in the 850 and 1900 banks for 3G services which we are planning for launch in our existing spectrum band space on current license in Latin America during 2008 and 2009. Slide four shows that for Q3 we have recorded quarterly revenue of $686 million, an increase of 77% from the third quarter of 2006 and excluding Columbia the underlying organic revenue growth was a healthy 46%. Organic revenue growth was once again highest in South America at 53% excluding Columbia demonstrating the success of the second billing and value-added services, which today constitute over 25% operating use in Paraguay. The Central America with the average penetration of our markets to 46% revenue growth at 45% and Q3 is very strong. The third quarter revenues for Africa were also very strong increasing by 52% year-on-year beginning their momentum after slowest second quarter. The prospect in Africa continues to look good. The Asia -- for Asia the growth rates was 30%, with strong performance in both Sri Lanka and Laos. We turn to slide five. EBITDA for the three months ended September 30, 2007, was $296 million, a 60% increase from the third quarter of 2006 and showing an increase of 33 million or 13% from Q2, 2007. EBITDA margin of 43% which is very encouraging particularly in this period of aggressive growth that we are currently experiencing. So let’s look at the results for each cluster starting with Central America which day accounts for 44% of the group’s revenue and 54% of the group B results. While slide six, you can see that the total subscriber reached 7.4 million, up 74% year-on-year and 10% over Q2. Nearly 700,000 new subscribers were added in the quarter showing the effect of the second billing on the cluster. The second billing was introduced across the region on February 7 and these results show the attraction of the tigo offering today. ARPU in Central America was stable at $20, which is above the Latin America average of about $17 reported by research and markets that serving a common. They really reduced profits by some 25% of rate 2007 to the move in the second billing, it was a logical that ARPU would fall but due to the good [inaudible] of this ARPU fell by far less than the price goes. Since then we have seen the ARPU state stabilized. We believe our higher than average ARPU is due to the fact that tigo has attracted a higher fortune of the best customers in our markets and because we maintained the most conservative this definition of subscribers and the stating of numbers compared to our competitors. This increase is ARPU. The third quarter revenue for Central America grew by 45% from Q3 2006 and by 11% from the previous quarter to $300 million. EBITDA for Central America also increased by 45% to a $161 million for the third quarter of 2007 and EBITDA margin was strong at 54% due to our market leading position which means that we have a largest share of the more profitable on that traffic. We have been able to sustain over 50% margin for several year and expect to be able to do so, going forward. Please turn to slide seven to look the results for South America in more details. Subscriber grew by a 170% to 5.3 million including Columbia which accounted for 2.5 million subscribers in the third quarter. And total looking at a quarter year-on-year basis, revenue grew by 245% to 215 million and EBITDA grew by 181% to $80 million. However, looking at the underlying growth excluding Columbia the numbers were still strong with subscribers up 42%, revenue up by 53% and the EBITDA up by 76% showing clearly how we can achieve inverse growth rates by focusing on value-added services, which means we can achieve fast EBITDA growth than revenue growth which exceeds subscriber growth. Some day we will have to see this dynamic in all of our markets. The EBITDA margin for Q3 was 37% affected by our assets to grow our business in Columbia more aggressively. The EBITDA margin in Columbia for the quarter was stable at 25% despite the sanction quarter-on-quarter revenue growth and as a consequence of our constant efforts over recent months to built our institution networks. As you may recall we were pleased with the results of our recent [inaudible] survey that put us just fractionally below the market leader in terms of number of points of sale with inventory across the country. A official figures were lead by the regulatory for Q3 shows that tigo subscribed the group by 11% quarter-on-quarter plus 3.2% for the market as the whole. Reporting term of the accounting subscribers tigo have 211,000 net new subscribers in Columbia during the quarter indicating that the operation is having momentum and we look forward to showcasing our Columbian operation to those of you were joining us for archive for market trip next week. Turning to slide number eight, the strong top line performance as subscriber growth of our African cluster have been the most encouraging aspects of the third quarter results. Over 660,000 subscribers were had a view in the quarter bringing the total at the end of the September to 4.6 million and revenue for the third quarter increased by 52% year-on-year to $122 million. There was a cost to this both in terms of margin but this cost that be willing to incur in the short-term. Despite the heavy cost of building out in you and extend the networks to Africa, particularly shop whether there is like of transportation and power infrastructure we still reports of the quarter year-on-year increase in EBITDA of an 8% to $34 million resulting in an EBITDA margin of 28%. We took a where you delivered decision in the third quarter to trace growth rather than margin in the short-term, but we expect that we can continue to invest in the future and we will margins return to the levels we achieve historically as we achieve critical scale. Slide nine shows that revenue for Asia was $50 million for the third quarter of 30% from Q3 2006 and EBITDA was $21 million at 41% reducing an EBITDA margin of 43%. Subscribers in the Asian cluster increased by 43% from Q3 2006 to 2.6 million at the end of Q3 2007. The stronger results for Asia reflects substantial investments at the [inaudible] Asia since 2006 prior to the report of the second billing in Cambodia and the launch of tigo in Sri Lanka allows in Q1 of this year. We have been very pleased with the development of Sri Lanka with following substantially expanded through the network we are growing revenues in excess of 50% year-on-year while maintaining margins at over 50%. Laos continues to perform well and Cambodia still has some much room for growth. Now we would like to hand over to David, talk you through the financials.

Thank you, Marc. Please turn to slide 10, where you will see the key financial ratios for the first nine months of 2007 compared to the first nine months of 2006. We continue to invest significantly in the tigo brand in all our markets which has resulted in higher sales to marketing cost as a percentage of revenues. We believe that these investments are helping to drive the strong subscriber growth. The GNA cost are also up which again reflects the higher cost in new markets such as DRC in Columbia with their significant roll out and progress. Pleasingly though, GNA costs as a percentage of sales, excluding Columbia have not risen. Cost of sales have fallen slightly as a percentage of revenues reflecting the economies of scale that we were achieving as our market shares rise. It is vital for Millicom’s Triple model that we continue to keep a tight rain on cost, which enabled us to reduce prices to our customers. Lower prices enabled us to penetrate deeper into our market and target lower ARPU customers. Growth will be driven by these lower ARPUs subscribers going forward. In addition, we continue to expand our value-added services particularly in Latin America. These services tend to have little incremental cost which also positively impact our gross margin. Slide 11 shows that EBITDA margins have been stable across the 43% in the past year have been fallen in Q4 of 2006 reflecting the expenditure of the rolled out of tigo in Columbia, DRC and Chad. Excluding Columbia the EBITDA margin for the first nine months of 2007 was 47% the same as last year. Over time we remain confident that we will see our margins trend back up to the high 40s as soon as we achieve critical math and take further market share in these three markets. On slide 12, you will see an overview of the profit and the loss. The areas that we wish to bring to your attention of the increase in depreciation and amortization was collecting the much higher level of CapEx, the decrease in the tax rate and the gains from discontinued operations which have a positive impact of $258 million due to the successful sale of Paktel in Q1. Please turn to slide 13. The slide shows a strong growth in CapEx in Q3 to $347 million as against $208 million in Q2 and against the $166 million in Q3 2006 with rises of 67% and 109% respectively. As Marc mentioned earlier, CapEx is a good indicator as to how we view our future potential. We designed internal rates of returns of between 20% to 25% and pay backs of 153 years which means we only invest where we see good growth opportunities. The capacity expansion which is where most of our Latin American CapEx is now spent, we expect to see returns within one to two years. We have needed to add substantially to our networks as per second billing and market growth have driven the volume of minutes across all of Latin America. For network coverage which is where the maturity of that African and Asian CapEx is spent we are targeting returns of two to three years. Coverage CapEx is today more waited to the cost of building sides including towers buildings and fences where in the cost of imported equipment. In recent periods the cost of steel and concrete have been rising where as the prices of network equipment have been falling. As such the rates of return and pay backs for coverage CapEx a lower in capacity expansion. Overall the current blended rates of return are consistent with our historical averages. It is dare to say that we were surprised in Q3 at the rate in which we have been able to invest. Africa presents some particularly difficult challenges in building out the networks with adequate roads and infrastructure, limited electricity on certain regulatory environments and a lack of highly qualified experience personnel. It is encouraging that we progress well this quarter with our expansion but stress that it is difficult to actually predict the timing of that CapEx spending going forward. The higher level of CapEx in Q3 should help sustain subscriber growth in Q4, which in turn will help sustain revenue growth in 2008. Due to the difficulties and actually predicting the timing of CapEx spending we remain cautious in our forecasting and predict full year CapEx of just over $1 billion. However, we do expect that the CapEx the sales ratio will continue to trend down with. Slide 14 shows that depreciation has risen considerably from the level of roughly 50 million in the quarter in the first nine months of 2006 to roughly $85 million a quarter on average during the past year. With CapEx rising substantially in quarter three, and forecast to stay above $250 million on average over the next five quarters, we can’t expect to see depreciation continuing to rise for several years. Depreciation will converge to the average CapEx spending over the past six to seven year period. As a guide, depreciation as a percentage of revenues has stayed fairly constant that we expect this to remain the case even when investment in 3G technologies begins in 2008. On slide 15, you will see the debtor stay steady from quarter two to the quarter three with debt at the end of quarter three of $1.6 billion. We have increased -- we have continued to increase debt in the operating companies but took the opportunity to repurchase $45 million of the senior notes due in 2013. Moving their firm corporate to the operating companies is tax beneficial to us. Today Millicom is an un-delivered position with net debt to EBITDA of 0.5 to 1 and we recognize the need to increase gearing overtime. Our target level is a ratio of two to one in terms of net debt-to-EBITDA and we are all at investment opportunities that could justify and increase in debt to give us some more efficient balance sheet and ability to utilize our cash in the best interest of shareholders. Our priorities to maximize shareholder value are our first lead to grow our existing businesses. Secondly to buy out minority partners if possible. Thirdly to enter new markets and finally to return capital to shareholders. Given that the buyer of the minority partners and external acquisitions are opportunistic and not fully in our control we have retained approval at the last AGM to buyback shares up to 5% for the share capital. Please turn to slide 16. You will be able to see that interest expense has stabilized in the last four quarters and the simple effective rate has been constant at a approximately 10%. We are still looking at ways of reducing our interest cost and importantly we have been exploring how we can borrow more at the local level in our subsidiaries where the interest payments on local debt are tax deductible against local profits. We will re perceive additional senior notes if the opportunity rises because the interest on these notes is not fully tax deductible since their inefficient income at the corporate holding company. As mentioned in previous calls, the notes are redeemable in December 2008 so we will very likely redeem any outstanding notes then. We are paying these tax and efficient notes with local operating company debt improves that overall good tax rate. Our overall group tax position is summarized on slide 17 where you can see that our operations effective tax rate has risen owing to the operating losses in Columbia and DRC. We expect this trend to reverse in future as these operations become profitable. You can also see that we have been able to reduce the difference between the operations effective tax rate and the overall group rate by reducing the non deductible net corporate expenses. We have done this by increasing the management and branches that we charge our operating companies and very recently by reducing our corporate interest by repurchasing some of the senior notes. Reducing this different lowers our overall group effective tax rate. In this quarter we benefited from one of item to help reduce our overall group tax rate to below 30% Bolivia has traditionally paid taxes on revenues but now that is becoming profitable, it will likely to start paying taxes on profits as such we have recorded a deferred tax assets in anticipation of this change. We anticipate that the quarter for tax rate will be slightly higher and the full year rate will be closer to 30%. Going for this should be possible to keep our tax rates as over 30% with a more balanced geographic mix of profits further repayment of that corporate 10% notes and our ability to transfer more income to corporate to full offset the remaining non tax deductible cost. Please turn to slide 18, which shows that today, Millicom can finance its increase level investment from internal cash generation. The closing balance of $1.1 billion in cash means that we have net debt of $584 million and a well positioned to continue with our accelerated investment program and to explore the other options that we have already discussed. Slide 19 illustrates how the investment breaks down across that businesses. CapEx was $738 million in the nine months of 2007 and is trending towards the full year CapEx figure of over $1 billion. Thank you. now I will hand you back to Marc. Marc Beauls – President and Chief Executive Officer Thanks David. To summarize the past quarter and looking forward I can say that Q3 has been an excellent quarter and we expect 2007 to be another record year. In Q3 we have managed to increase the quarterly rate of investments and this has spread through highest subscriber numbers than we anticipated. We have raised our CapEx forecast in $1 billion for 2007 and expect the similar level CapEx in 2008. In Central America we have slightly improved our market position despite the competitive environment that we operate within with stable offers of $20 and EBITDA margin of 54% we are performing strongly. Introduction of second billing has improved, the affordability of our services leading to our high subscriber intake. For Latin American, value-added services will become increasingly important and this is why we are planning gradually to introduce 3G alongside of 2.5 services within our current frequencies of life during 2008 and 2009. We are closing down TDMA and CDMA networks to ensure that we have enough spectrum available for 3G. South America has performed strongly and the underlying revenue growth ex Columbia was encouraging 53%, operation in Columbia is getting attraction and we are excited about showing many of you the operation during our IRR visit next week especially how we are building the foundations for our future growth on the back of much improved accessibility of the people pre paid services. And Africa along with all operators we are facing challenges owning to the like of basic infrastructure which at times flows development and leads to higher OpEx, OpEx in the near term. Today tigo has an aggressive expansion in Africa, as you have seen from our numbers in Q3 we are making good progress. We continue to see great opportunities in Africa at the mobile penetration is low and the growth prospects are exciting. And system implementation of our Triple A strategy will allow us to take advantage of those opportunities and we expect that Africa will become our fastest growing region. In Asia we have improved our service offering by introducing the second billing in Cambodia and large in tigo, Sri Lanka, and Laos. Growth rate in that region have improved particularly in the Sri Lanka and we expect to see Asia performing in line with the two other regions. That concludes my comments and we will now be happy to take your questions. So, operator, can I please have the first question. Question and Answer

Thank you. Ladies and gentlemen, today’s question-and-answer session will be conducted electronically. [Operator Instructions] We will pause for a moment to allow everyone to signal. David Kestenbaum from Morgan Joseph is on the phone with the question.

Okay, thanks. Nice quarter guys.

Thanks.

Can you put more color on the CapEx exactly where you are going to spend incremental 200 million, is that all going to be that color what between Africa and Central America and South America?

I think today Africa and South America beside is specifically Columbia are the regions where we are spending the biggest amount of CapEx and that’s how I can see this going forward that also get is an Africa that which is the always mobile penetration rates and that’s where they need for additional infrastructure is the highest.

Okay. And then ARPU I have calculating and I went up a lot of tough to America on a sequential basis, you talk about why the reasons for that was that based on the new success with the services?

Definitely as you know our guys is our champion when it comes to value-added services with 25% of the recurring revenues coming from those services and that we also seen continuous part of impact of the second billing which we introduced about three years ago and Paraguay and then the of course with Columbia where we are improving our opposition in the markets as we are going faster than the markets and it all be changes in our fact as we have been over the last couple of quarters that gives us better clients and better revenues from those clients and that explains these ARPU.

Okay. And then what do you think I mean this your view on the effect of second million ARPU can’t change overtime, so where do you think that stands going forward, I mean do you think ARPUs will come back to the point where they were at one point or you think that they will continue to contract now over time?

You know my view in terms of ARPU has no change to ARPU is over time will come down and what we have seen now in Central America is that we see stable ARPUs these are things and certain by number of factors increase usage of the result of the effective productions. Secondly we also have value added services as ARPU coming in bigger part of operating new in Central America and there be I think without being into new markets or new markets segments rather in Central America, you know, people who were not able to afford the phone before, now with the second billing can afford a phone and buy minutes on a early basis. I think those are the drivers of ARPUs but again the value-added services will become also much bigger part of revenues in Central America going forward.

Okay, thank you.

Thank you, David.

How you doing [inaudible] from [inaudible] with a question.

Yeah, terrific quarter I just can’t believe how good it was. I’m delighted however. Two questions, one short-term, one longer term. The… what are your expectations for getting margins in Colombia up to the average of the other contiguous countries? Do you think that’s far fetched, do you think it will happen, if so, when and secondly the longer term question is your last statement about we’re under leveraged as David pointed out in his discussion of CapEx and we expect to be able to generate that outstanding opportunities. Can you talk little bit about some of those and how soon you think it’s going to happen and what the barriers to those happening are or how you feel about that generally? Thank you. Marc Beauls – President and Chief Executive Officer So far as Colombia is concerned you know that at this point and time our top priorities is growing the top line and that were to cost a little bit of the EBITDA level that’s fine with us because we know that’s we need to grow our market share and we need to get the better economies of scale in order to grow that margin going forward. We think we are going to need a couple of years to get through the call of Millicom average EBITDA margin in Colombia. In terms of the balance sheet structure and what we are going to do with the cash we have and the ability to raise it is as we said before our top priority is to buyout our local partners but at times, the difference in project expectations are very high and we only want to buy minority shareholders if we think its accretive to our you know office to our share prices. So that’s in a sense kind of a level as to how much we can pay. Secondly in terms of new markets we continuously looking at new markets primarily focusing on Africa and Latin America where we see new opportunities, new licenses in Central America are just around the corner and we might be looking at some other new markets in order to repeat the success stories that we have seen so far in Colombia and also present day Africa as take advantage of the good to growth outlook we see in our existing businesses. So that’s how we prefer to spend our money and as David said, we also have the option to buyback stock if everything that is the best way to spend the money.

Marc, in terms of the improvement in the Colombian operations do you think it will be a gradual improvement over those two years, or do you think we’ll see a step function and you didn’t include any Asian activities in your discussion of potential acquisitions of new licenses et cetera, can you comment on both those please? Marc Beauls – President and Chief Executive Officer Yeah. I think its going to be gradual improvement in Colombia as you know we have a market share of say around 10% now and we want to grow that market share to like the mid 20s and that will take time and as we grow with a very good distribution network there which we will show to the participants to our capital markets next week in Colombia, you know, we will get there, but it’s going to be gradually. I don’t think they are going to be any big steps that will be taken as a gradual process. In terms of Asia, yeah, at this point and time, we’re not actively looking at new assets in Asia, we don’t really see any attractive opportunities at this point in time, other than of course, we continue to follow the events in Vietnam but I don’t think anything will happen there in the course of 2007.

Well, since 2007 is open is over, can you see any visibility at all there or is it just more static? Marc Beauls – President and Chief Executive Officer Well we don’t know Bill, I think this process is going to go into 2008 and rumors are it could be like by the middle of 2008 before anything is going to happen there given that a number of privatizations apparently have to happen before privatizations in the telecommunications sector which would be started.

Okay thanks. Just absolutely marvelous quarter, professionally.

Thank you, Bill.

Thanks.

[Inaudible] from [inaudible] on the phone with a question.

Going off basis, great quarter that really shows the strength of the Tigo brand and your concept. Still we have to check and be a little bit can you remind us what competition could be increasing? I’ve heard that entities create fourth and our recent wonder if you confirm that and if you have any new competitors coming in Guatemala or Honduras and now the important countries? Marc Beauls – President and Chief Executive Officer Yeah that’s correct NBT bought themself into an existing operator in Ghana so that is not a new operator not an increase in the number of operators but that does near as fresh so, we don’t know what else is going to happen what we will be doing. Just focus on growth and profitability in Ghana and as you have seen the subscriber in take has continuous to be very, or has been very strong again, in Africa so I think that is very encouraging. In terms of other markets, I think Honduras everybody is familiar with that. There’s a process ongoing about the phone operator and I am sure you’ve read the names of the companies interested in Fort Washington and I think they are usual suspects. In Guatemala you have all the kind of rumor as to whether that phone operator is going to be launch service or not. Latest rumor I heard was that it was not going to happen but we don’t know. As a matter of fact, we already sitting there and waiting until this happens and all markets we just continue to take advantage of the growth opportunities and we will see how we can deal with competition so far we have been dealing very successfully with competition in our 16 markets.

Okay, thanks a lot.

Thanks.

[Inaudible] phone with the question.

Yeah hi guys. Just two quick questions on Colombia first of all the ARPU number that I have just divide revenues by I think we are picking up nicely on the quarterly basis is stick to reason do you talk about $20 up and above and across Central America is that ARPU number that you will be targeting for the Colombian business and that’s the first question. Marc Beauls – President and Chief Executive Officer Okay. For Colombia yeah I think it’s a combination of first of all improving the quality of our subscribers we have number of very low quality subscribers in the subscriber base when entered the business a year ago and due to some changes in the customer base on some customers leaving us and better customers joining us we have been able to increase the quality of our subscriber base, thanks to our much improved distribution network so the accessibility there but also the availability network is really getting a lot better and needless to say that we have taken a number of initiatives in sound affordability that I think is driving that ARPU in Colombia. I can’t give you any guidance as to where we think that ARPU is going to end up but we think that’s we should be able to bring going forward good customers on board in Colombia as we have done in other markets where we call same strategy.

And just as a quick follow-up on Colombia, can you give us a sense of what the percentage of revenues of the handsets sales? Marc Beauls – President and Chief Executive Officer Well it’s a fairly small percentage but I don’t have the number for you, right here, but its not important number.

Okay. Fine. And then so the second question was just on Africa obviously you are taking a slight hit to OpEx in the short term can you give us a sense of whether you are sort of hurried to get back historic margins of perhaps pay 40% is that going to come in the next couple of quarters are we talking maybe a couple of years? Marc Beauls – President and Chief Executive Officer I don’t think its going to be a couple of years away. I think in Africa when we are facing a specific issues which we spoken about before but at the same time we have some fantastic opportunities we want to take advantage of those opportunities we are gaining market share getting more subscribers on our network now that I think we have gotten into a certain momentum but I do think the markets really get back to the historical levels and spent up will be we will report to the market but that remains very positive about Africa both in terms of subscriber and as well as margin development.

Okay, thanks very much. Marc Beauls – President and Chief Executive Officer Thanks.

Steven Met from Bancroft Capital is on the phone with a question. Yes, Mark.

Hi there.

Hi. Just going back to Central America and the ARPU, I was trying to get a sense on the value added services. You know, what does that ARPU look like and what other services that people are paying for at this point Marc Beauls – President and Chief Executive Officer They end up paying for everything they use as value added services so we don’t give the house away for free and about 60% to 70%, depending on one country to the other is SMS. Be it peer to peer SMS, could be premium SMS also ring tone downloads, music downloads, all of those things and we see the brand new coming out of value added services at this point of time growing at a faster rate than we see voice revenue growing so it will become a bigger part of our business going forwards and again some countries like empowered, I can’t remember the exact percent, but its is a very high percentage of our customers, our overall customer base post paid and pre paid that are using value added services because they focus on those services and pay early on. We now doing the same. That means we are educating, we are teaching people how to use value added services so we expect that also in other Latin American markets we’re going to see more and more of our subscriber base using those services empowered by a number. It’s a very high number today already.

Do you have a push? I mean, in terms of the ARPU or value added services, typical value added service customer like in Central America what does that ARPU look like? Marc Beauls – President and Chief Executive Officer The ARPU, is like you said, the top for value added services market in Paraguay with 25% of recurring revenue. I think it may come as an average today. I think we’re around 10%. I think Central America is probably slightly higher than that a few points higher than that I would think. So you can calculate yourself as to what kind of recurring revenue, sorry, of ARPUs are coming out of value added services in Central America.

Okay and then can you talk a little bit more about sort of what the conditions on the ground are like in Congo and relative to what we read about in the Economist and stuff like that? Marc Beauls – President and Chief Executive Officer What I read in the Economist is that they are all convinced that mobile telephony has a long way to go in Africa and then that’s why we’re here and yet conditions on the ground are challenging but we’ve been focusing on the larger cities and of course that’s the idea of growth to network. We will be going more into the rural areas where these challenges will be bigger. I think the country is relatively stable at this point in time except for certain areas in the eastern part of the country around Kievl [ph] where we have a small network and overall we see that more or our traffic nowadays is coming from cities other than Kinshasa. Somewhere in the beginning it was primarily focused on Kinshasa. We now see that traffic in other cities is growing faster than in Kinshasa which is good, which requires, as you know, we are rolling out our network which remains challenging that roll out.

Just going back to Africa in general as you look at the countries, you’re either two or three in those markets in terms of operators and going forward what’s the mix in terms of growth taking market share versus the incremental growth in those markets and just can you comment on that just generally? Marc Beauls – President and Chief Executive Officer Yes, focus is on market share not at any price. I said historically that we happy to be a possible number two so we don’t necessarily need to be a number one at any price. We know that a number two in those African markets can be very attractive can give us a lot of traffic and traffic with good approxability. You’ve seen in our third quarter results we’re now focusing a little bit more on the top line growth. why because I think we now benefit infrastructure wise people wise with some changes we did in the management for example in Tanzania where we see excellent results being produced and that makes us focus a little bit more on the top line growth. But yes, we do want to be a number two at least that’s the lowest position we want to happen in the African markets so that’s what we’re targeting for.

Then one other question on the ship buy back can you talk about the specifics of the authorization and where would the cash flow come from for repurchases? Marc Beauls – President and Chief Executive Officer I can’t really say much about that, Steve, at this point in time, because it’s just one of the ways to use our cash and that where the cash is. There’s about a billion over a billion on our bank accounts, and as you know we have a very low leverage at this point in time. I can’t really say more about that.

You don’t have an actual authorization? You talked about the 5%? Marc Beauls – President and Chief Executive Officer Well, we have an authorization from the shareholders. They gave us an authorization in the month of May at the AGM, and we can buy up to 5% of our outstanding shares provided we distribute the full reserves which we have today.

And have you bought that many shares? Marc Beauls – President and Chief Executive Officer No, otherwise we would have informed the market.

Okay, thanks Mark. Marc Beauls – President and Chief Executive Officer Thanks Steve.

Kevin [inaudible] from Lowe Equity Research is on the phone with a question.

Thank you. Terrific quarter, gentlemen. Marc Beauls – President and Chief Executive Officer Thank you, Kevin.

A couple of questions. You’ve spent a lot of time on margins. You told us you expect Central American margins to be a 50% or better so sustainable there, Africa returning to historical levels, up side in margins in Colombia. You didn’t mention anything about Asia. Is there the 43% margin we saw in the quarter is there up side there? Is that level sustainable? Marc Beauls – President and Chief Executive Officer I think that’s the level that is sustainable although I don’t see it growing because of for instance the revenue share agreement we have with the government in Colombia and also because of some new taxes that were recently introduced in Sri Lanka so I don’t really see any growth in that EBITDA margin.

You mean Cambodia not Colombia. Right? Marc Beauls – President and Chief Executive Officer Sorry Colombia. Sorry.

That’s helpful, switching to new license opportunities can you give us any update on the new license opportunity in Panama? Marc Beauls – President and Chief Executive Officer As I said before we are following that very closely. We have a team people working out of Central America and you know we will participate and I am sure you guys have seen our name on the lists of interested parties so we will be going into that process the same as we intend to do for Costa Rica and Nicaragua, and may be other markets in South America and in Africa.

And lastly Colombia and Congo the two big engines of growth for the near term and beyond. We’ve seen nice, sequential net add growth the last several quarters and particularly in the third quarter both countries ramped nicely. Do you expect through into the fourth quarter into 2008 that the absolute number of net adds will continue to grow from these levels? Is there incremental growth up side? Marc Beauls – President and Chief Executive Officer I think in Colombia and in Congo I don’t think we have gone all the way yet. I think there is still up side there. That’s as far is Congo is concerned. It will be driven by our network build outs so we need to continue investing which you have seen is always challenging and if we continue to do so I would expect that we are going to continue to see very, very strong subscriber intake. Same in Colombia. I think there it’s a matter of growing that network and also growing our points of distribution and maybe who knows, taking one or the other initiative to improve the affordability of our services combined with of course also value added services, value added services or percentage of value added services of recurring revenues in Colombia is amongst the lowest within the comment at this point in time. So despite Colombia being the country with probably the highest GDP per capita, so these are the things we will be focusing on which makes will make TiVo a very aspirational brand and hopefully that’s going to attract more customers.

Terrific. To you all in Bogota. Marc Beauls – President and Chief Executive Officer See you there.

See you there.

Peter Neilson from Chivus on the phone with a question.

Thank you. A piece of good news. Just two questions at this stage please. Firstly you obviously see if you can repeat your own guidance for customer and given the level of CapEx you are investing at the moment. Is this the current level, not something we should anticipate in the future quarters as well. and secondly just to clarify didn’t understand David corrected the text going forward would be around 30%. Thank you. Marc Beauls – President and Chief Executive Officer Yes we’ve now reached a 2 million subscriber mark. We expect the fourth quarter is going to be a very strong quarter and given that our focus will be a lot on Africa whether it’s a lot of subscriber growth ahead of us we expect to continue producing very, very strong subscriber numbers going forward. David Sach – Chief Financial Officer: We are slightly more optimistic on the tax rate issue. As you can see on the tax slide you know the difference between the operations effective rate and the group rate has come down through the initiatives that I have talked about on several calls that we are implementing and we have been successful there which I think is good news. I have talked about the operating losses in Colombia and in the Congo and the impact that’s had. You know that’s been quite positive. Colombia in particular, the progress we are making there with that net losses has been good so yes I do expect the tax rate to be at 30% approximately and below going forward.

Thank you very much. David Sach – Chief Financial Officer: You’re welcome.

Alex [inaudible] from Morgan Stanley is on the phone with a question.

Yes hello, just wanted to clarify two points on the African margins. One is do you expect any further dilution of the [inaudible] margin in this region or do you feel the margins have now bottomed out? Marc Beauls – President and Chief Executive Officer I think given that we had a very strong quarter of subscriber intake in Africa and that of course impacted the margin. I don’t think we will see a lower margin than what we saw this quarter because this is a combination of high growth and lower margins. I think we will see more margins going forward specially that the subscribers we get, we got into the third quarter they will start regenerating revenue and EBITDA in the fourth quarter and then the subsequent quarters

I think… and also would it be possible for you to clarify to what extent the margin pressure in Africa currently is coming from DRC as opposed to other established markets? So would you say the pressure is mainly concentrated within DRC and other countries are holding more or less stable? Marc Beauls – President and Chief Executive Officer No I think the pressure, and the growth lets put it that way the growth is coming from all of our markets of course some of the markets were a little bit slow because of Ramadan at the end of the third quarter. But I would say that the impact has been kind of across Africa. There wasn’t really one market that disappointed us during the third quarter different from the second quarter where you know there were couple of square markets that disappointed. That wasn’t the case so it’s good. So it’s a well spread effort here and also well spread costs across the seven markets in Africa.

Yea because correct me if I’m wrong but I think a few months ago in the investor meetings you were indicating that you would expect DRC to breakeven at the EBITDA level in 2008. How has that expectation changed or are you still confident about 2008 as a breakeven? Marc Beauls – President and Chief Executive Officer I think we can see that happening in 2008 it all depends on how hard we will push in terms of network build out and subscriber intake and as you see from this quarter or from the third quarter we at times want to push a little bit harder because we see those opportunities in those markets and without being better prepared to take advantage of the opportunities in Africa largely also because of some great guys we have out there and are running our businesses and at time are very difficult circumstances I think that is making the difference at this point in time. We might not be as well prepared lets say a year ago or two years ago when we really start looking at you know investing more money in Africa.

Okay, thank you very much.

Thank you.

Ed [inaudible] from MNG [ph] is on the phone with a question.

Congratulations on a lot of happy shareholders out there.

Thank you.

I have a question just regarding new value added services. Can you just talk a little bit about of what you see in terms of opportunities for music, gambling, and payment talk or banking services? Marc Beauls – President and Chief Executive Officer Well I’m sure in the music and in the gambling I’m sure our customers are using those services not that they are offered by ourselves probably music downloads some of them are but not the gambling that I guess they can do themselves but I think the big push for us going forward will be the introduction of 3G where specially for the higher users column the post paid users and not the high end pre paid users we will allow them to get access to high-end speeds when it comes to data downloads and I think that will allow us to take on some new traffic on our network which we don’t have today. At the same time you know we have some very creative [inaudible] in Paraguay who will come up every month almost with some new things nowadays that come up with service that allows people to produce their own ring tone and share it without so you know every time there is something new banking services as such I don’t really see as a big revenue generator in the short term or medium term. I think banking penetration is still very low in most of the markets where we are today. What I can see maybe are some money transfer services that we might introduce and others might introduce all the time but the banking the web banking as we know it here in Europe for instance, I don’t really see that as a major revenue generator going forward or as a big value added service going forward.

Thanks. And what markets are going to be your first to be upgraded to 3G. Marc Beauls – President and Chief Executive Officer For the first one will be Paraguay the order were placed, you know, I think a month or so ago and we expect to start launching our first services in I think second quarter of next year and then the other markets will follow. As you know Paraguay is our best market when it comes to value added services so that’s where we are going to try out some things first and then we will copy them into the other markets as we have done that before with other value added services.

Thanks. Marc Beauls – President and Chief Executive Officer Thank you.

Thank you. [inaudible] on the phone with a question.

Thank you very much, congratulations a very strong report there. I just curious on the ARPU, making the calculation error because however big of a share are corporate users in the network there in South and Central America? Marc Beauls – President and Chief Executive Officer You can make the assumption that most of our post paid subscribers are coming out of Latin America exception made for I think some in Mauritius and Cambodia I think that all other post paid subscribers are primarily based out of Latin America and they do represent relatively small percentage of the over all subscribers they of course do represent a much bigger part of our revenue and I don’t have the exact number at this point in time but I think post-paid is probably about three times, four times the level of our pre-paid subscribers so you can make the calculation yourself more or less.

And when it comes to interconnect I mean if you would make a calculation or average been for you sir? Can you say anything on that? I mean revenue is coming from other sources down there or supporting ARPU? Marc Beauls – President and Chief Executive Officer Yes, well ARPU represents all of that so ARPU represents all kinds of traffic incoming, outgoing, voice, value-added services all in one and the same.

Can you give any idea of how big of a share of interconnect in value terms or share in percentage of ARPU that is… Marc Beauls – President and Chief Executive Officer Again, it very much varies from one country to another because it all depends on what the cost is of interconnect. We have countries with very low interconnect and we have countries with much higher interconnect so I don’t really have an average for you there.

Okay. Then comes the CapEx. How important is the transmission to to the base station in your planning horizon, going towards 3G increasing capacity et cetera. Marc Beauls – President and Chief Executive Officer As becoming more and more important and that’s one of the reasons why we have been laying ourselves. You know, no fiber optics here, no networks and then the countries starting with Central America and also South America and we have stopped doing the same in Africa in a place like Gana for instance we start doing that so given that the volume of traffic is increasing we are moving in some part of the network away from a microwave to fiber optic but also increases the availability of the network going forward given that we work with risk, so that is important for our growth going forward.

Are you also as part of your expansion plans considering to go into fixed or in a portfolio not on the mobile but the wireless and IP communication in a broader offering to the customers in different markets? Marc Beauls – President and Chief Executive Officer Our core business will be mobile going forward but at the same time we will be doing some wiremax in some of the markets and so that, that works but it’s a niche product at this point in time.

Okay and finally when it comes to describing accounting… Have you done any changes to the matrix or the standard or procedure you have there? Have you previously in the measuring the numbers of subscribers?

Yes as you know we took a few provisions against that PD Mae, CD Mae subscribers in Latin America so there is… we are obviously churning those up and we are going to churn them up all before year end and then in terms of tightening up the definition we have tightened when we were counting new subscribers so we want to make sure that new subscribers actually create a revenue generating activity before they become a subscriber and don’t, you know, in the case of giving a SIM away, we don’t count that as a subscriber unless they actually generate revenue for us. So we tightened up the definition there as well so we want to make sure. Go ahead.

Is it different applied during the third quarter compared to the second quarter like for example in Colombia? Have you done a different metric here, a different definition? David Sach – Chief Financial Officer: A slightly different definition was introduced in the third quarter so that yes there was a one time only catch up impact from changing that new subscriber definition slightly in Q3.

So explaining the 200 plus chance in customers it’s also that you have expanded or changed the definition of what an active customer is. Marc Beauls – President and Chief Executive Officer Yes, we have changed it but that has not increased the number of subscribers if that’s what you are trying to say.

You have come to understand there’s a very strong intake in the quarter if that thought of explanation if a regulator has had a higher number than what you have presented. Marc Beauls – President and Chief Executive Officer Yes but regulators are a different definition. David Sach – Chief Financial Officer: That’s in Colombia and that’s on a 90 day res, and not 60 day. But no the subscriber intake is very genuine so again the only thing we’ve done is we’ve taken some provisions against older technology subscribers in Latin America so that would actually reduce slightly the intake and then obviously we‘ve changed the definition of new subscribers slightly which again will slightly reduce the intake.

I’m just curious there. In the change that could have supported the very strong intake in the quarter. Marc Beauls – President and Chief Executive Officer Let me put it very clearly so that there is no misunderstanding there. Had we not changed the definition of our subscribers we would have had a higher subscriber intake in the third quarter.

Thank you very much.

Now we have [inaudible] from Carnegie for the following question. Unidentified Analyst – Carnegie Investment Bank Ab: Yes, hi. My question has already been answered. Thank you.

[inaudible] from Raymond James Financial is on the phone with the following question.

Yes good afternoon. Could you probe a little further on the 3G that you mentioned, you mentioned that you were launching in Paraguay I think in the second quarter. Can you talk to us a little bit about the CapEx costs as you look at deploying that into Paraguay and other markets, how much are we looking to spend and also does that lead back to that same IRR hurdle of the 20% to 25% you mentioned earlier in the call? Marc Beauls – President and Chief Executive Officer Yes although we look at 3G as a new business so that we apply the same criteria’s we do for a new business that means that we are looking at a IRR at that level for a period up to 5 years and giving that you know we will be tapping into a completely new revenue to the kind of revenue which we don’t have today. We will be spending an important part of our CapEx next year on 3G although the way technology works nowadays when you buy equipment for what they call low traffic areas when you buy equipment you basically buy two 2G and 3G in one and the same box so going forward its gong to be very difficult to basically kind of split in those things so its only in the high traffic areas where you will buy specifically 3G equipment and put it on top of the 2G equipments.

Would we expect to be putting the 3G equipment put on there in the high traffic areas or will it be kind of throughout? How do you prioritize where to put 3G? Marc Beauls – President and Chief Executive Officer You will you know by definition go for the cities in the high traffic areas but if we were to buy our new network or go into new cities you know there we would probably rely on the new equipments with 2G and 3G in one and the same box but you know for the big cities like Paraguay yes that will be 3G on top of 2G.

Great, thanks a lot.

[inaudible] from [inaudible] with a question.

Mike, I just want to make sure I’ve understood this correctly. The value-added services you’re offering obviously have higher margins, so they’re adopted more widely from what they are now and only 10% is adopted from the company actually increase your margin. That’s I’m afraid the question. Therefore shouldn’t the ARPU margins go up? That’s the first part. Secondly in as much you have already said and knew I think, the per capita income in the various countries does relate to ARPU and does relate to penetration et cetera, and Colombia as you said has a higher per capita income than the other country shouldn’t they both adapt the higher margin services and because they have a [inaudible] higher per capita income shouldn’t they actually eventually have higher margins than the rest of the neighboring countries? Marc Beauls – President and Chief Executive Officer By terms of the margins on value added services there are a number of service you offer like SMS which typically is Sandra keeps it all. So it’s like a nomad call so you don’t have to share any of the revenue you generate your customer generates okay different from if you have a cross net call where you have to kind of share their revenue with another operator. Yes typically countries with a higher GDP per capita should be able to spend more money on value-added services because they had more disposal income and yes they might be doctors of new technology, new value added services however as I said before very much is in our own control in our own hands because we need to make sure that we inform, we train our customers, we develop the services so that you know they can use more and more of those but yes Colombia as the country with the highest GDP per capita should do that but it will also require a lot of effort form our side.

Okay thanks very much. I just want to make sure that those who should be able to go higher standards, should be able to go higher after that just given the per capita income, et cetera. Thank you. Marc Beauls – President and Chief Executive Officer Thanks Bill. Okay anymore questions?

No there are no further questions. Marc Beauls – President and Chief Executive Officer Okay so thank you everybody for being on today’s call for those who will join us on the capital markets day in Colombia Bogotב I hope to see you all on Monday morning 8:00 am for our presentation and to all the others, have a good day and we’ll speak I guess in February for our Q4 and 2007 results. Thank you. Good bye.