UPDATE 1-Millicom adds 2.8 mln subscribers in Q1, shares soar

(Adds background, share price, company comment)

STOCKHOLM, April 22 (Reuters) - Emerging markets telecom firm Millicom International (MICC.O) posted first-quarter core earnings in line with expectations on Tuesday and added 2.8 million new subscribers in the period, boosting its shares. The firm, controlled by Swedish investment company Kinnevik (KINVb.ST), said in a statement that earnings before interest, tax, depreciation and amortisation (EBITDA) totalled $336 million, up from $248 million a year earlier and in line with a mean forecast for $334 million in a Reuters survey.

"Millicom recorded the second best quarter in its history in terms of net subscriber additions, adding 2.8 million in the quarter, following the exceptional final quarter of 2007," its Chief Executive Marc Beuls said in a statement.

The company added 3.4 million subscribers in the fourth quarter of 2007 and the increase in the first three months of the year brought the total number of subscribers to 26.2 million at the end of March, up 59 percent from a year earlier.

"Subscriber growth is really impressive and sales in Africa have picked up speed," said Bengt Molleryd, analyst at Handelsbanken.

Shares in Millicom were up 9.6 percent at 608 crowns in Stockholm at 1158 GMT.

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The biggest growth in subscribers in the first quarter came in Honduras, Ghana and Tanzania, Millicom said.

Beuls said the first quarter was traditionally weak but that heavy investment in networks and marketing over recent years had brought benefits.

"It is encouraging to see the EBITDA margin improve to 42 percent from 40 percent in the previous quarter given this high level of investment," Beuls said.

The company, which operates in 16 countries in Latin America, Africa and Asia, plans to invest over $1a billion this year.

Millicom said, however, it would see a gradual decline in average revenues per user (ARPU) as it continues to target customers with lower disposable income.

ARPU was $12.7 in the first quarter against $13.9 in the preceeding three months.

"ARPU is a bit worrying, but it is a natural process that it will fall and I think that they can compensate for it as they continue to grow," said Urban Ekelund, analyst at Redeye.

Millicom said that although ARPU would fall, higher volumes will bring economies of scale, helping EBITDA margins.

The firm said its board was recommending a special dividend payment of $2.40 per share as outlined in its year-end report in February. (Reporting by Jerker Hellstrom and Simon Johnson; Editing by David Cowell)