Global Insight Perspective | |
Significance | Millicom also reporteda 54% increase in worldwide revenue to US$403 million in the third quarter of 2006 as compared to the same period last year, and a 58% increase in EBITDA. |
Implications | Millicom also announced it was terminating its management contract with RIC and will exit Iran, because of difficulties in resolving interconnect problems. The company is now focussing attention on other emerging markets, in particular, in sub-Saharan Africa. |
Outlook | ‘We expect [Africa] to continue to be the fastest growing [of Millicom's worldwide regional operations] in 2006,’ said Millicom's chief executive officer in its year-end financial statement. As a result, Millicom said that it ‘has begun to spend significant capex across its African operations to grow its networks’ in both capacity and coverage. |
Millicom reported a 62% annual increase in subscribers to 12.8 million by 30 September 2006, and a 54% increase in worldwide revenue to US$402.5 million during the third quarter of 2006 (see table 1). Central America remains Millicom’s largest market, with its three operations in El Salvador, Guatemala and Honduras reporting a combined 84% increase in subscribers to 4.25 million, and a 72% increase in revenue to US$207.258 million.
Table 1: Millicom Worldwide Subscribers and Revenues, Q3 2005—2006 | ||||||
Total Subscribers | Revenues (US$ ‘000) | |||||
Q3 2006 | Q3 2005 | % Change | Q3 2006 | Q3 2005 | % Change | |
Central America | 4,247,941 | 2,314,053 | 84% | 207,258 | 120,370 | 72% |
South America | 1,966,614 | 1,152,309 | 71% | 62,808 | 36,716 | 70% |
Africa | 3,215,415 | 1,695,265 | 90% | 80,291 | 50,390 | 59% |
South Asia | 2,293,768 | 1,966,724 | 17% | 24,395 | 30,830 | -21% |
South East Asia | 1,072,064 | 784,188 | 37% | 28,251 | 22,323 | 27% |
Total | 12,795,802 | 7,912,539 | 62% | 402,503 | 260,629 | 54% |
Source: Millicom International Cellular | ||||||
The fastest growth in subscribers came from Millicom’s seven operations in Africa, which reported a 90% increase over the same period last year (see table 2). With a total of 3.2 million subscribers as of 30 September, this represented 25.1% of Millicom’s total worldwide subscriber base of 12.8 million. Ghana reported a 119% increase to 977,087 subscribers, with Tanzania a 116% increase to 881,714 subscribers. Meanwhile, new operations in Chad saw strong growth to 156,203 after launching last year. Millicom also purchased a 100% stake in mobile operator Oasis in the DRCongo during September 2005 (see DRCongo: 19 September 2005: Millicom Purchases Oasis Telecom for US$35 mil.); subscriber figures have dipped but the operator is investing in the roll-out of its network and plans to launch the Tigo brand either later this year or early next year. Millicom has launched the Tigo brand in five African countries: Senegal, Ghana, Tanzania, Sierra Leone, and Chad.
Table 2: Millicom Africa - Subscriber Base 2004-2006 | ||||||||
% Shareholding | Q3 2006 | Q2 2006 | Q4 2005 | Q3 2005 | Q2 2005 | Q4 2004 | % Annual Growth, Q3 2005—2006 | |
Chad | 87.5 | 156,203 | 134,282 | 91,159 | - | - | - | - |
DRCongo | 100.0 | 41,061 | 47,702 | 60,638 | - | - | - | - |
Ghana | 100.0 | 977,087 | 737,749 | 448,838 | 447,117 | 332,557 | 277,045 | 119% |
Mauritius | 50.0 | 246,565 | 236,764 | 221,100 | 194,851 | 175,124 | 167,565 | 27% |
Senegal | 100.0 | 883,824 | 751,906 | 679,914 | 617,761 | 531,568 | 339,884 | 43% |
Sierra Leone | 100.0 | 28,961 | 28,771 | 29,606 | 28,710 | 30,543 | 33,409 | 1% |
Tanzania | 100.0 | 881,714 | 752,339 | 475,379 | 406,826 | 355,499 | 302,712 | 116% |
Total Africa | - | 3,215,415 | 2,689,513 | 2,006,634 | 1,695,265 | 1,425,291 | 1,120,615 | 90% |
Source: Millicom International Cellular | ||||||||
Outlook and Implications
Millicom also announced it was exiting its investment in Iran. In its quarterly results, Marc Beuls, Millicom’s chief executive, said that, ‘Millicom and the Rafsanjan Industrial Complex (RIC) have mutually agreed to terminate their management contract in Iran, as the lack of progress made in resolving interconnect issues prevented Millicom from building a business delivering returns on investments comparable to those in its other countries.’ Millicom partnered with the Rafsanjan Industrial Complex (RIC)in 2004 in a build-operate-transfer (BOT) agreement, under which Millicom was to manage the network and had an option to acquire a 47% stake in any operator that happened to fully own the network. RIC announced the launch of its pre-paid GSM network in greater Tehran at the end of May last year (see Iran: 8 June 2005: RIC Announces Iranian GSM Network Launch in Millicom Team-Up). There are currently a total of some 10.6 million mobile subscribers in Iran, equivalent to a penetration rate of 15.4%. These are shared between the state-owned mobile operator MCI and three localised GSM operators RIC in Tehran, Mobile Telecommunications Company of Isfahan (MTCE) in Isfahan, and Telecommunications Kish Company (TKC) on the island of Kish.
In addition to operational difficulties, Millicom also faces the prospect of greater competition in the capital Tehran from at least one new entrant. The second national mobile operator Irancell launched nationwide services this month in Tehran and two other cities (see Iran: 23 October 2006: Irancell Launches GSM Services). Irancell, in which the South African operator MTN holds a 49% stake, has also experienced operational problems, saying its delayed launch was a result of ‘slow progress by contractors, a delay in operations to supply the required frequency as well as delays in issuing necessary permits,’ according to a company official as quoted by the news agency Agence France-Presse (AFP). Furthermore, the Information and Technology Ministry began the process of licensing a third nationwide GSM operator in April this year, and hopes that the third operator will be licensed and ready to launch services in November 2007 (see Iran: 24 April 2006: Iran to License Third Nationwide Cellular Operator).