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Executives

Mikael Grahne – President and CEO

François-Xavier Roger – CFO

Analysts

Bill Miller – JM Hartwell

Ric Prentiss – Raymond James

Sven Skold – Swedbank

Stefan Gauffin – Nordea

Lena Osterberg – Carnegie

Kevin Roe – Roe Equity Research

Andreas Joelsson – SEB Enskilda

Luigi Minerva – HSBC

Mark Walker – Goldman Sachs

David Kestenbaum – Morgan Joseph

Justine Dimovic – Exane BNP Paribas

Erik Pers – Danske Markets

Millicom International Cellular SA (OTCPK:MIICF) Q2 2011 Earnings Call July 19, 2011 8:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Millicom’s Q2 2011 conference call.

For your information, this conference is being recorded. May I also remind you that this call is being audio streamed over the web and is accessible at www.millicom.com together with a presentation summarizing the key features of the results.

I would now like to hand the call over to your host of today’s conference, Mr. Mikael Grahne, President and CEO; and Mr. François-Xavier Roger, CFO. Please go ahead, gentleman.

Mikael Grahne

Thank you operator and welcome to you all. As usual you can find the slides for this call on our website.

Please go to slide number three. In Q2 we recorded underlying local currency revenue growth of 11%. We are pleased to see the continued momentum in ARPU with positive growth once again in both Central and South America which is a testament to our focus on VAS and on attracting and retaining higher value customers. VAS revenues now account for almost one-third of total revenues in Latin America and half of the revenue growth for the region. Despite accelerated commercial investment in 3G, services and increased advertising and promotional activities we reported a strong underlying EBITDA margin of 46.2%.

Normalized EPS increased by 40% year-on-year due to the reduction of tax losses at operating and corporate level as well as our focus on tax planning and capital restructuring. We returned a total of 359,000,000 to shareholders in the second quarter through a combination of dividend payments and share buybacks.

Now let’s look at the financial highlights for the quarter in more detail as shown on slide for. Revenues for the quarter were 1.1 billion up 15% year-on-year or 11% on an underlying basis excluding exceptional items. The underlying EBITDA margin was 46.2%, 0.9 percentage points lower than for Q1 reflecting greater investment in 3G and services. We ended the quarter with 41.3 million customers, up 12% year-on-year.

CapEx for the quarter was 151 million or 13% of revenues. As we have stated previously CapEx should be significantly higher in H2 and we restate our full-year guidance of around 850 million for the full year. Offering free cash flow at 268 million or 24% of revenues was higher than last year.

On slide five you can see how our focus on higher value customers is being reflected in our subsidy costs which are almost 40% higher than in Q2 ‘10 in absolute terms as we aim to support data development. Sales and marketing costs excluding subsidies were 13% higher year-on-year. The strategy of accelerated investment in 3G and services aimed to address growing demand for the data and services and to sustain double-digit growth in the medium term.

On this slide six, we have set out our local currency mobile revenue growth over the last 10 quarters. Underlying local currency growth 11.5% for the first half, 4.2% points higher than the average for 2010, confirming our ability to produce double digit growth.

ARPU erosion continues to improve as you can see on slide seven. Primarily, as a result of data development, but also, due to our focus on higher quality customers and on other non-voice revenue streams.

Looking at the ARPU development by region on slide eight, you can see that in Central America, we have recorded a year-on-year increase of 1% and in South America local currency ARPU, which has developed positively for a year now was up by 3%. ARPU was 6% lower in Africa year-on-year and we continue to decline as we pursue penetration gains and greater traffic volumes.

On slide nine, you can see our distribution of our customers by ARPU level. We have used Latin America for this analysis as this is where our focus on higher value customer is most applicable, given that the 3G services in Africa are still very limited. At the end of the second quarter, 35.7% of our customers generated an ARPU of more than $10, up 1.6 points year-on-year. We expect a greater proportion of our customers in Latin America to fall into this category over time as we accelerate investment in data and other value-added services.

Slide 10. Voice revenues continue to grow and we are up by 4% in the quarter for the Group as a whole in a local currency thanks to our focus on branding and distribution and our product package is designed for specific customer segments.

VAS growth continued to be strong, up by 33.6%, and we are seeing increasing momentum in non-SMS VAS, which grew by 50% in local currency. SMS, which is a highly effective tool for introducing customers to a new range of new non-voice services, grew by 12%. Our suite of value-added services is on track to generate over 1 billion of revenues in 2011.

Slide 11. Having crossed the 25% landmark for VAS contribution to revenues last quarter, we were pleased to see an additional 1.5-percentage point increase this quarter. VAS now represents 27.1% of recurring revenues for the Group as a whole, up 4.9 percentage point year-on-year. VAS is delivering a robust revenue stream that generates greater customer interest and loyalty. Non-SMS services, our main area of focus, have increased from 12.7% to 17.3% over the last 12 months. In Latin America, almost one third of our revenues come from VAS today and we expect this figure to reach 50% by 2015.

In Africa, VAS now represents 10.5% of revenues and here too the non-SMS VAS segment is growing faster, up 0.7 percentage points quarter-on-quarter to 6.2% of revenues, and showing attractive potential when looking at the VAS performance in Latin America. Our aim is for VAS to account for 25% of revenues in Africa by 2015.

The split of revenue by four customers offering is set out on slide 12. The communication category grew by 8% year-on-year, information by 64%, entertainment by 14 and solution by 46%. As you can see, we are seeing the strongest growth in the information and solution categories, which combined are contributing more than 30% of revenues. We expect the strong growth to continue as we expand our 3G capacity and coverage this year and as we develop Tigo Cash and other mobile financial services. We will be providing a more detailed look at these two categories amongst other VAS at our Capital Market Day in London on 13 September.

On this slide 13, you can see the penetration levels or the main VAS products in each of our four categories. As you can see from looking at the belt, it will be the highest and lowest penetration figures. There is still room for further growth through the increase penetration of all these products and services.

Slide 14. Let’s look at the data bit more closely. Today, 2G and 3G data revenues combined represent 10.7% of all recurring revenues in Latin America. Data use has totaled 7.3 million at the end of the quarter up 4% quarter-on-quarter and 2 million of this were 3G data users. Of the 81 million of data revenues generate in Latin America in Q2, more than 50% come from handsets.

On slide 15, you can see how data revenues have grown over the past 10 quarters. There has been an acceleration over the past three quarters as we have increased our commercial investments and today half of the revenue growth enjoyed in Latin America comes from data. Given the sense of demand for affordable data services, we see this as the largest growth opportunity for Millicom in the medium term.

Our Tigo Cash services was first launched in Paraguay in Q3 ‘10, and we are steadily gaining traction as you can see on slide 16. By the end of June the service has reached the penetration level of 13% of our customer base. In Tanzania, where Tigo Cash was launched in Q4, 2010 penetration has reached 6% after eight months. The Tigo Cash service is now available in seven of our operation which collectively contributes over 60% of Group revenues.

Slide 17. Our market share increased by 0.6 percentage points quarter-on-quarter to 30.5% on a weighted basis, with seven markets gaining share and five markets loosing share. In Central America our market share was stable at 54.4. In South America, we gained 0.4-percentage point in share and in Africa we saw an increase of 0.9-percentage point. In the short-term, we expect continued volatility in market share in Africa driven by promotional activity.

Like customer intake, market share is becoming a less relevant indicator of performance as we have to be more emphasized on growing our share of higher-value customers. We can only mention customer market share today due to the lack of information on value share, which would be a more relevant indicator given our strategy.

On slide 18, you can see that on a Group basis, we have seen the slight quarter-on-quarter decline in churn to 4.6%, supported by the success of our products and services designed to increase customer loyalty. In Africa, mandatory registration is reducing the number of multiple SIMs.

Now I would like to handover to François-Xavier Roger, who will take you briefly through the results for each cluster and the financial.

François-Xavier Roger

Thank you, Mikael. We turn now to the original clusters starting with Central American on slide 20. Revenues from mobile and cable operations in Central America increased by 3.4% year-on-year on an underlying basis, the second quarter of resume growth in the region as we start to see the reserves of our investment in data. We have again seen an improvement in ARPU driven by our investments in value-added services and in particular in data.

Development of data growth which is mainly coming from postpaid customers has the effect of increasing ARPU and revenues but we saw a decreasing margin slightly since we recalled more T&E sales with negative or zero margin. The product mix adds to this negative effect as data with a lower margin is replacing international traffic with higher margin. Central America generated 120 million of operating free cash flow or 24.9% of revenues in the quarter.

Slide 21. In South America, revenues increased by 19.5% in local currency. All three markets reported a strong performance with ARPU up 3% year-on-year, demonstrating the success of customer segmentation and smart pricing of both data and voice services. EBITDA for Q2 was up 18.4% in local currency and the EBITDA margin was 42.8% essentially flat year-on-year. Operating free cash flow generation for South America was 92 million or 21.6% of revenues.

Slide 22. Revenues for Africa were 246 million, up 11.9% in local currency year-on-year. We have seen most stable pricing activity in the first half of 2011, compared with the second half of 2010. But, there has been little evidence of electricity following last year cross net service production. ARPU for the quarter was $5.1, a decline of 6% year on year. We expect ARPU to continue to decline. However, as we focus on maintaining the affordability of our product and services in order to drive further penetration growth on increase minutes of use.

EBITDA for Q2 was 100 million, up 22.1% on year-on-year in local currency and the EBITDA margin was 40.4%. CapEx in the Africa in the quarter amounted to 46 million or around 18% of revenues and the region generated 36 million of operating free cash flow or 14.7% of revenues.

Slide 24. Now, let’s look in more detail at the financials. Our effective tax rate for the quarter was low at 23% as we start to harvest the benefits of our tax planning initiatives including the push down of debt from the corporate to the operating level. The rate is also low due to the fact that two of our operation and the holding company are reducing their losses are now having a positive effective on rates. The effective tax rate is expected to decrease from the current level as more operations stop paying taxes and after we recognize, these aspects has set enough formula loss making operations.

Slide 25. We are pleased to see a 40% increase in the normalized EPS for Q2 to $1.73. Some months ago we highlighted our increased forecast on EPS now that we are paying dividends and we are starting to see the initial reserves off of capital restructuring and tax planning initiative.

Slide 26. Our operating free cash flow for the quarter was $268 million or 24% of revenues despite the hype experiment that typically occur in the second quarter.

Slide 27 shows our free cash flow for the quarter of $215 million or 19.2% of revenues.

Slide 28. We have continued to make progress in our asset productivity initiatives and we have now signed new tower deals in Guatemala and Colombia, which complete the bulk of our tower sharing plans. We now have over 7,000 towers committed to be shared. The five deals that we have done to-date, three in Africa and two in Latin America, generate a net present value in excess of $600 million estimated on a conservative this year basis. We will continue to pursue other opportunities to share passive infrastructure, which could include 3G and 4G network and spectrum enabling us to focus on our growing activities.

Slide 29. Last quarter we announced the total share buyback program for the full year of 800 million which demonstrates our commitment both to enhancing shareholder returns into improving efficiency of our capital structure. In the second quarter we bought back some 1.6 million shares at an average price slightly above $107 for a total consideration of one $170 million. Shares were bought back exclusively in the U.S. before the delisting and we commenced the program in Sweden before our blackout period. A total of 4.2 million shares both in 2010 and in 2011 before this year’s AGM were cancelled in May bringing the total number of shares outstanding 104.9 million at the end of June, out of which 453,000 were treasury shares. We will be in the position to resume the share buyback in Stockholm when this current blackout period ends on this 22nd of July and it is our intention to complete the full 800 million program by the end of the year.

Slide 30. At the end of Q2 our cash position was $1.60 billion and our leverage ratio stood at 0.6 times net debt to EBITDA. At the end of the year our net debt to EBITDA is expected to be around 0.75 times once we have completed our $800 million share buyback program.

Slide 31. Turning to our debt maturity, we see the average maturity of overall debt at three years and one month. 45% of the debt is at fixed-rate meaning that we are less exposed to interest rate volatility today without having increased our total cost of debt.

Slide 32. I would like to say a few words on the consolidation of our listing and how the second version is progressing. As of June 3rd our primary listing is on NASDAQ OMX in Stockholm following our delisting from the NASDAQ in the US at the end of May. The exited the NASDAQ 100 index upon delisting and we joined the OMX Stockholm benchmark index in June following the annual review. When we announce the consolidation of our listing be encouraged holders of the ordinary shares in the US to convert them into SDRs in order to benefit from trading on the liquid unregulated exchange.

We are pleased to report that the conversion has progressed well with about 80% of ordinary shares having been converted to SDRs today. We now have more than 90% of our total sales outstanding in the form of SDRs. Our total trading volumes in Stockholm is steadily increasing since the beginning of June and volumes in Sweden are now at around 80% of the total compared with 20% in May.

Slide 33. We reiterate our EBITDA margin guidance of above 44% for 2011 and our CapEx guidance of around 850 million which excludes any potential new spectrum, investments in greenfield cable assets, and the capitalization of leasing costs for towers which is a non-cash item. We now have greater visibility on a cash flow we are raising operating free cash flow margin guidance for 2011 to around 20%.

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

Mikael Grahne

Thank you, François-Xavier. I would just like to close with a quick summary. We made good progress in the second quarter with ARPU growth in Latin America. Given our focus on higher value customers and on developing VAS, ARPU development is a key KPI for Millicom. We believe that our performance in the first half of the year with underlying top-line growth of 11.5% is a good reflection of prevailing business conditions.

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

Question-and-Answer Session

Operator

(Operator Instructions) We will now move to our first question today which comes from Bill Miller from JM Hartwell. Please go ahead.

Bill Miller – JM Hartwell

Nice quarter gentleman, thank you very much.

Mikael Grahne

Thank you, Bill.

Bill Miller – JM Hartwell

The question I have is as we look out for the remainder of the year, how would you like to be judged, is it the ARPU increase, margin stabilization, what is –what are the two or three items that we should be looking at to consider over a time that you’re doing, the job you say you’re doing, which I agree you are doing which is value-added services, data et cetera. And when do we get a crossover in the margins between the seating of these services now and ultimately the higher margins that they represent?

Mikael Grahne

Okay, I think the core driver going forward is, you have to look at Millicom as a whole, is going to be data services in Latin America including other vast opportunities and voice – continued voice growth and penetration in Africa. I think data services have a good contribution to profitability both in terms of ROIC as well as EBITDA. The Tigo Cash services though are more of a longer term profit generator, so we believe that’s more on a three to five-year basis in the start to see real implemental EBITDA coming in from the services. So it’s really – on the Tigo Cash services penetration is the key driver for growth, we want to have as many our customers as possible try these services so that we can start generating the scale that in the long term will give us a needed profitability.

Bill Miller – JM Hartwell

So, Mikael, should we look at ARPU by market or what’s…

Mikael Grahne

Yeah. Well, we no longer report ARPU by my detail market but naturally as I said that in my closing remark, ARPU is a key KPI for us in Millicom. With the increasing higher penetration levels primarily in Latin America to drive revenue over the long term you need to grow ARPU and that’s the challenge and perhaps we put for ourselves and so for the strategy has worked well for us.

Bill Miller – JM Hartwell

Thanks very much.

Mikael Grahne

Thank you.

Operator

Thank you. We will now move to our next question which comes from Ric Prentiss from Raymond James. Please go ahead.

Ric Prentiss – Raymond James

Thanks, good day. Two questions if I may, first on the handset costs. Can you get us as far as what’s the cost you’re seeing in the marketplace where smartphones are today and how the trend has been continuing on the downward path? And the second question is, Colombia is one of those markets where did not have the number one or number two market share position. How are data offerings being seen in Colombia? What are you doing there as far as targeting segments and results?

Mikael Grahne

Okay. Handsets have continued to come down in price. I think we have – we’re starting to see good high end smartphones probably in the range of $140, $150 Android-based. In Latin America which is our focus for data, Android to-date is not a known concept but we expect customer adaptation is going to be quite rapid. So I think we’re seeing Android-based smartphone in and around hundred and $150, so there is a continued decline.

In terms of Colombia we are indeed more successful on data than we are on voice, so basically we have a higher share – market share on revenue share on data amongst our vis-à-vis the competitive benchmark than we have on voice. So the more data we sell the more we improve our competitive position. And as you have seen for the South America as a whole where Colombia is an important component we’re still growing at double digits in this market. We basically have a growth that is outpacing our competitors. A month after month we’re adding share.

Ric Prentiss – Raymond James

Why do you think you’re more successful at the data than the voice? What are you doing differently or what are you targeting differently?

Mikael Grahne

We – for a long time we basically positioned ourselves as a sort of or by the young and cool brand, we have superior vast offerings versus competition, and it’s just in the whole way we do business. The way we go to the market, the way we add new data customers, the way we sort of price, smart pricing or run the services, the way we do market segmentation. So it just a combination of all of that.

Ric Prentiss – Raymond James

Great. Thanks, Mikael.

Mikael Grahne

Welcome.

Operator

Thank you. We will now move to our next question from Sven Skold from Swedbank. Please go ahead.

Sven Skold – Swedbank

Yes. Hello, I have a question about slide number 10 in your presentation. It’s a very good description of voice and value-added services growth. I understand this is a group description and that voice is up 7%, but if you would split this up for Latin America versus Africa, is voice flat down in Latin America or is it down or is it…

Mikael Grahne

No, if you look – if you look at the local currency which is the more important, you can see that our voice is up 4% for the Group and in Latin America as a whole it’s 2% and in Africa it’s a 10%. So you can see that voice is still a key growth component in Africa, less of a growth component in Latin America.

Sven Skold – Swedbank

Do you have different segments of the market that now see or face lower voice volume or lower voice ARPU?

Mikael Grahne

Could you please clarify that question?

Sven Skold – Swedbank

I’m just wondering if you – if all markets see rising voice revenue, also in Latin America, is that 2% up on the on the average. But do you have different markets are different segments…

Mikael Grahne

There are some volatilities from markets to markets. I think Central America, we have some pressure on international incoming revenues which are sort of reducing the growth to get out from the voice.

Sven Skold – Swedbank

Yes. Okay, thank you.

Mikael Grahne

All right, welcome.

Operator

Thank you. We will now move to our next question from Stefan Gauffin from Nordea. Please go ahead.

Stefan Gauffin – Nordea

Yes, hello. I have a couple of questions. First of all you have earlier talked about below 30% tax rate for the year. With this low tax rate this quarter are we now talking closer to 25% for full year?

François-Xavier Roger

We don’t give any guidance for tax rate. But, we have flagged the fact that this quarter only it is essential that the tax rate is I would say artificially low due to the fact that we have a couple of operations and two operations plus the holding company in Luxemburg, which are either reducing their losses or moving from before tax situation that was loss to a profit now which is reducing artificially I would say the tax base. What happening is that going forward, there is certain likelihood that we may activate some these fixed assets in some countries which will have the impact of triggering one off gain. But, it will have the impact as well going down of time to increase our tax rate. We have always indicated it was an indicative number that we expect it to be below 30%, which we maintain without giving guidance.

Stefan Gauffin – Nordea

Okay.

François-Xavier Roger

23 or 24% number that you see today is on the lower side.

Stefan Gauffin – Nordea

Yes, okay. Then this statement that Bolivia may change to attend the process for license. This is happening in 2015, what’s the situation in Paraguay that’s due 2011 and Colombia 2013.

Mikael Grahne

In Paraguay there is a sort of older licenses we have. Our five years will automatic renewal across in there and so far we have repeated renewed these licenses. Basically, there is a simple formula where you calculate the – you give a forecast on your CapEx, forecast for the next five year and you pay a certain percentage of that as a license fee. So, we went through many renewals in Paraguay. In Bolivia, we are waiting for this new law. We don’t have visibility yet what’s in there and we will adopt and adjust depending what in there. But in general, we are engaging in a negotiation with whatever authorities well in advance before the expiry of our licenses so that we get that secured well ahead of any sort of last dates. And in Colombia, similar, there are quite clear license renewal processes for part of our spectrum and we expect that the ones which we both later on would have the same renewal process as we have on the majority of the spectrums we have.

Stefan Gauffin – Nordea

Hey, finally could you just state some more information regarding the impact from regulatory or governmental changes in South America. I guess the revenue tax in Bolivia should have an impact of 8 million. What about Paraguay?

Mikael Grahne

The Bolivia one is I think is a forward statement. We haven’t had any influx here today. I don’t think we are just able to breakout. Every year we have some movement in terms of either tax fees or fee changes and so far we have a strong history of finding options in cost item. So, we still can keep our business going forward and improve our profitability.

Stefan Gauffin – Nordea

Yes, okay. Thank you.

Mikael Grahne

Welcome.

Operator

Thank you. We now move to our next question from Lena Osterberg from Carnegie. Please go ahead.

Lena Osterberg – Carnegie

Yes, hello. I was wondering a little bit if you could say something maybe about the seasonality of your subscriber acquisition cost because it seems you had a lot of cost in Q4, quite low sacs in Q1 and now you have significantly higher sac levels again. Is there any seasonality or you just steering sort of opportunistically depending on what you competitors do? And also maybe if you could give us the actual dollar number in sacs because you very nicely outlined them last quarter and then out there this presentation this time around. And also I’m wondering on the operating say cash flow margin guidance, you had very nice margins so far. But, I was just wondering given that you only spend 240 million out of the 815 CapEx so far, do you then expect the positive working capital improvements in this so significant you can compensate.

Mikael Grahne

Okay. Let me start with this seasonality. It’s part promotional and it is even of seasonality given that Latin America is our biggest market area, you tend to have a little bit stronger Q4. In many other Latin American markets there is 14th salary paid in December and that has an impact on consumption. And then there is a number of holidays in January basically countries disappear. So, January starts very low. So, there is a built in seasonality and coupled with promotional activity.

François-Xavier Roger

I thought the operating free cash flow guidance. So, indeed we have increased the guidance to around 20%. There is a fairly strong disconnection between the actual amount of CapEx and operating free cash flow because there will be the timing impact. We have specific payment terms with suppliers, which make the for example one of the CapEx that we – probably higher CapEx that we expect to book in H2, 2011. We will pay out of it in 2012. So, we think the reason why at the beginning of the year we are always quite careful in giving the OCF guidance and now that we are moving forward into the year, we are in a better position to do so.

Mikael Grahne

And also on the page five in the investor presentation, you will see the cost of the subsidy and cost of say, it’s a marketing cost broken out Q2, ‘11 versus Q2, ‘10.

Lena Osterberg – Carnegie

Sorry, I missed that.

Mikael Grahne

Page five.

Lena Osterberg – Carnegie

Okay. Thank you.

Mikael Grahne

Thank you.

Operator

Thank you. We now move to our next question from Kevin Roe from Roe Equity Research. Please go ahead.

Kevin Roe – Roe Equity Research

Thank you. Hello gentlemen.

Mikael Grahne

Hi.

Kevin Roe – Roe Equity Research

Two questions, first on Africa Rwanda and Tanzania, you called in the releases is having pretty significant sequential increase in subscribers. Are those high quality ARPU ads in general or is this similar to Senegal last quarters. I’m trying to get sense if these additions will accelerate growth, revenue growth in those markets in Q3.

Mikael Grahne

In general we have significantly lower ARPUs in Rwanda than in Tanzania. So, a strong ARPU, strong subscriber growth in Rwanda will impact average ARPUs for Latin America and – sorry for Africa. In Latin America we are focused on the high-value customers. We have less – we basically have less service offerings to this customer today because we are not advanced data. But, the intent is again like in Latin America, we try to attract high-value customers. At this stage, we don’t have any new data on the sort of the quality of these net debts we have in Tanzania.

Kevin Roe – Roe Equity Research

Okay. But, I assume they are dilutive though to ARPU.

Mikael Grahne

Not necessarily.

Kevin Roe – Roe Equity Research

Okay. And secondly on Bolivia just to clarify Mikael, have talks begin on the license renewal in Bolivia and what are you expectations there in terms of timing and price. Do you expect that to write a large check to renew the license there or some sort of an annual fee just to trying to get a sense of how that will evolve.

Mikael Grahne

Yeah, I don’t think we want to comment publically on where we are on with any negotiation we would undertake with the government. So…

Kevin Roe – Roe Equity Research

Okay. Thank you.

Mikael Grahne

Thank you.

Operator

Thank you. We now move to our next question from Andreas Joelsson from SEB. Please go ahead.

Andreas Joelsson – SEB Enskilda

Hello, good afternoon. Just a few questions on the share buyback program, if you could tell us how much is left and sort of the rules for the buyback there. Are you in blackout so to say amongst before the reports and how much of daily volumes can you buy?

François-Xavier Roger

Okay. So, we did 171 million in Q2, we didn’t do any in Q1. So, we are confirmed the fact that we intent to reach the $800 million for the full year which mean that we have 630 million to go. The rules are quite similar to the U.S. except that the blackout is a little bit longer. We cannot buy the two weeks prior to the end of the quarter, which means that we could not buy from mid-June and we will not be able to buy from mid-September for example. And three days after we issue a quarterly report, we can start buying back again. But, we are confident that we have enough days in order to achieve the remaining 630 million if needed. The other thing is the fact that if you do the share buyback in Stockholm it provides more transparency as well to investor because you can look on the NASDAQ OMX stock whatever we buy on the derivatives.

Andreas Joelsson – SEB Enskilda

Perfect. Then a more operational question, it seems like that of performance is a little bit stronger in South America versus Central America. Can you elaborate a little bit about the difference between those regions when it comes to data?

Mikael Grahne

Well, we don’t really breakout the data between South and Central America, we show Latin America as a whole. But in general, I mean, the performance is quite similar given that we started in Paraguay first that tends to be a little bit with market. And then given that Colombia has the highest GDP per capita that’s another pillar in that growth.

Andreas Joelsson – SEB Enskilda

Okay, thanks.

Mikael Grahne

Welcome.

Operator

Thank you. We’ll move to our next question from Luigi Minerva from HSBC. Please go ahead.

Luigi Minerva – HSBC

Yes, good morning. I wanted to ask you about the pricing environment in Africa, clearly an improvement so far versus last year. I was wondering if you are concerned that Bharti may become more aggressive at some point later in the year given that they are making some good progress on the cost-cutting side. And the second question is on value-added services based on healthcare. It looks like indeed a great area of growth. I was wondering if you are testing some applications in the field or if you’re thinking of launching it in the short to medium term? Thanks.

Mikael Grahne

Okay. On the pricing as we said it will be more stable, there was a series of sharp reductions in Q3 but primarily in Q4, many of them are cost made [ph] that tended to have less velocity. The pricing environment will be more stabilizing. If you talk about Bharti, I think this sort of in their latest statement say that the key issue in Africa is high cost, we truly agree to that. And I don’t know where you picked the evidence that they have significantly reduced their cost base. So for the quarterly data we’ve seen from them hasn’t really indicated that.

Luigi Minerva – HSBC

Okay. And on the second one, on healthcare?

Mikael Grahne

Yes. Healthcare, that’s something that we’re going to look over in time and in fact we have some small experiments going on that. At this stage no materiality to discuss with the broader market.

Luigi Minerva – HSBC

Okay. Thank you.

Operator

Thank you. (Operator Instructions) We’ll move to our next question from Mark Walker from Goldman Sachs. Please go ahead.

Mark Walker – Goldman Sachs

Hi, there. My first question is on Central America. You mentioned that the reason for the year-on-year lower EBITDA was higher data in the mix which requires higher investment. I just wondered if that was essentially handset subsidy. And also the Central American ARPU growth fell from the Q1 level despite this higher contribution from data and higher levels of promotional spending on 3G, I was just wondering if you could give us a bit more color on the reasons for that please.

And then my second question is also on Central America, I just wondered what the current timeline for the AMX, Digicel asset swap is and how you see that affecting your ability to grow profitably in those markets going forward? Thanks very much.

Mikael Grahne

Okay. We have indeed very strong growth in Central America on value-added services including the ARPU components that they bring to. We have some reduction on international incoming calls which sort of normally 200% gross margin, so that had some impact on the EBITDA side. So we are growing very strongly on the key components – key drivers for the longer term which is the data. And having some losses – having some losses as expected on international business side.

In terms of Honduras and AMX and Digicel we really have no visibility into that process.

Mark Walker – Goldman Sachs

Okay. Thank you very much.

Mikael Grahne

Welcome.

Operator

Thank you. We will move to next question from David Kestenbaum from Morgan Joseph. Please go ahead.

David Kestenbaum – Morgan Joseph

Okay, thanks. I just want to follow up on the prior question, you had said that that there would be – you talked a lot about in the press release about affordability in Africa. I’m just wondering you don’t really see much promotional activity in the back half of the year, just want to confirm that. And then François you talked about the $7.5 million accounting adjustment in Guatemala?

Mikael Grahne

Yes. Let me comment about Africa, there are promotional activities going on in Africa on a daily basis. I think what we – there were some very steep price decreases in Q3 and primarily in Q4. We haven’t seen price decreases with a magnitude in the first half of 2011.

François-Xavier Roger

Okay. Regarding the adjustment in Guatemala what happened is that we – in Guatemala some other booking of revenues on a specific product which is a fairly sophisticated product, a mix between prepaid and posted services. This is an amount a little bit higher than $ 6 million committed over two years which is not material to Guatemala revenues in any of the quarter by the way. It is a non-cash item, the pure accounting adjustment, it’s a non-cash item that doesn’t – it is any of the invoicing to the customer. So it’s a pure accounting adjustment.

David Kestenbaum – Morgan Joseph

And that service was specific to Guatemala and not any other country?

François-Xavier Roger

Yes, we check that the issue that we had been facing in Guatemala did not happen in other markets and it did not so it’s a pure Guatemala issue.

François-Xavier Roger

Okay, thanks.

Operator

Thank you. We will move toward next question from Justine Dimovic from Exane BNP Paribas. Please go ahead.

Justine Dimovic – Exane BNP Paribas

Thank you very much. Just three quick questions please. The first one is related to the tower sharing deals that have been announced and most probably the one yesterday. The price per tower implied by the cash up-front to be received appears relatively low compared to other deals we’ve seen. Can you understand this as meaning that the value of the deal is more skewed to in your case lowering the OpEx base and maximizing the short-term cash up-front. And this is the case, we see that as enough to upset some of the pressures you mentioned related to new taxes being implemented in Central America in some markets? That’s going to be the first question please.

The second one is related to your M&A or external growth strategies, if you can provide an update if there is anything to update us on notably you talked in the past, if I recall correctly, about developing new services notably financial services are looking for partnership. I was wondering if you have anything to share on that front and as well on the ETB situation, if there is anything new.

And then, sorry it’s a bit long, lastly on spec promotions, is there anything coming soon on 3G or 4G in any of your markets that you could share with us, that would be great. Thank you very much.

Mikael Grahne

Yes, on the tower sharing, so indeed we are very happy to have signed this two deals in Latin America which are the first one that we have been in Latin America and which bring us close to the final stages of tower sharing initiative even that we have done most of the markets. In Colombia the reason why the price per tower is a little bit lower is due to the fact that we have a large number of awards which are actually rooftops which cannot be shared with other operators which limits the benefit of company managing the tower. And as well as we have a total number of towers which are already shared with one of our competitors, so which cannot be shared further with another one for wind load reasons, technical reasons.

In terms of M&A as we said many times don’t believe in global scale, don’t believe in regional scale only scale that counts is being number one or number two in the markets you operate. If there is an opportunity to find an asset that would sort of match the description and would generate a return that over time vote exceed country VAS, we would have an interest but because it’s not a strategic component in the way we think we tend to have an opportunistic approach to these opportunities.

In terms of ETB, there is really no news. There are some spectrum auctions taking place, there is one in Colombia on the 1900 spectrum, going to take place in a few weeks’ time. And there could be some other primarily existing not 3G or LTE spectrum opportunities. To buy more spectrum on the existing bands which is of interest to us, if you’ve got more money you are going to lose CapEx if you have spectrum.

Justine Dimovic – Exane BNP Paribas

Thank you very much.

Mikael Grahne

Welcome.

Operator

Thank you. (Operator Instructions) We now have a question from Erik Pers from Danske Markets. Please go ahead.

Erik Pers – Danske Markets

Thank you. I have a question on our couple of questions about tower sharing agreements just to get a better understanding. In Colombia will the new agreement eventually make it possible or more likely to share, to get access to competitors’ towers more than you already have, I understand you already shared some towers there. And in Africa have any other operators joined your tower sharing companies there. And if not when we expect that to eventually happened.

And also on the cash received up-front from the various tower sharing agreements, how much have been received so far and on which line is it occur in the cash flow statements? Thank you.

Mikael Grahne

Okay. In Colombia, yes we expect that we have the opportunity to get access to some of the towers of the competition, but anyway we have build-to-suit agreements with the tower operator according to which the tower operator has to build as such whenever we require one. So we gibe – we get access to either the towers that they have by the way American Tower with whom we partner in Colombia has already its own subsidiary with a couple of hundred of towers in Colombia. So we will get access these ones as well.

In Africa, the only project that we almost completed so far in Ghana, which is the first one that started more than a year ago. We started I think, we had a little bit more than one tenant tower on average. Today, we are close to 1.4 tenant of tower already in the partnership in the tower company that we have in partnership with Helios. So, it’s moving in the right direction and it is increasing months after months. The cash that we got up-front, we completed almost entirely the transaction in Ghana. So, we got most of the cash which appeared in the operating free cash flow line.

Operator

Thank you. As there are no further questions in queue, I’d like to turn the call back over to your gentlemen for any additional or closing remarks. Thank you.

Mikael Grahne

Before the end, I would just like to remind everyone that our Investor Day this year will be held in London on 13th September. The theme this year is beyond voice. So, for more information and to register, please contact Investor Relations. Thank you for joining the call today, and we look forward to seeing you soon. Thank you.

Operator

Thank you, sir. That will conclude today’s conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.

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