UPDATE 2-Millicom ups guidance and buyback after strong Q1

Tue Apr 19, 2011 8:14am EDT

* Q1 EBITDA $509 mln vs f'cast $486 mln

* Ups 2011 guidance

* Increases size of planned buyback, no big acquisitions

* Shares rise 6.1 percent

(Adds CEO, analyst comment)

By Simon Johnson

STOCKHOLM, April 19 (Reuters) - Record top line growth boosted first-quarter results at Millicom MICC.O (MICsdb.ST) and the emerging markets telecoms firm raised its guidance for the year, sending its shares higher.

The Latin America and Africa-focused operator also said it planned no big acquisitions but would expand a share buyback programme to around $800 million for this year up from the previously announced $300 million.

Millicom has traditionally relied on new subscribers to drive growth, but has shifted focus recently to higher paying customers.

It said the focus on value-added services -- like money transfer -- had helped drive first-quarter revenues up 13.4 percent to $1.1 billion, in line with forecasts. In local currencies, revenue growth was the highest since 2008.

"Given our strong performance in Q1 and our confidence in the business outlook for 2011, we are raising our EBITDA margin guidance to above 45 percent for the full year and our operating free cash flow margin guidance to the high teens," the company said.

It had previously forecast an EBITDA margin in the mid-forties and operating free cash flow in the mid-teens.

Millicom's core operating margin, at 47.1 percent in the first quarter, was higher than forecast although the firm said this could be a high water mark due to increased investment in value-added services this year.

CENTRAL AMERICA

Earnings before interest, tax, depreciation and amortisation (EBITDA) were $509 million versus a mean forecast in a Reuters poll of $486 million and $451 million in the year-ago quarter.

Shares were up 6.1 percent in Stockholm at 629.50 crowns by 1149 GMT, outperforming a broadly flat European telecoms market .SXKP.

"It was a good report, in particularly the EBITDA result was 5 percent higher than we had expected," Jan Dworsky, analyst at Handelsbanken, said.

"Central America has returned to good organic growth -- that's something that sticks out. In the light of the first quarter, there is room for upside in my own and consensus forecasts for 2011."

Average revenue per user (ARPU) turned positive in Central America -- Millicom's largest market area -- for the first time in several years and the decline in ARPU in Africa slowed.

The company said it saw ARPU stabilising in the coming quarters after a long decline.

"That's basically our ambition -- to hold or grow ARPU," Chief Executive Mikael Grahne said.

Millicom has said in recent quarters it would hold on to some cash as it eyed acquisitions. But the decision to increase the buyback is a sign that there are few opportunities at the right price and Grahne said that the company was better focused trying to grow its existing business.

"There is less likelihood of an acquisition," he said. "There could be something small, but nothing substantial."

Millicom also said it planned to delist in the United States with its shares traded in Stockholm. It said this would simplify its regulatory tasks. (Editing by Jon Loades-Carter)

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