UPDATE 3-Millicom Q3 core profit tops forecast, shares jump

(Adds chief executive comments)

By Jerker Hellstrom and Adam Cox

STOCKHOLM, Oct 23 (Reuters) - Emerging markets telecoms operator Millicom (MICC.O) reported a better-than-expected 60 percent rise in third-quarter core earnings on Tuesday, sending its share price up 18 percent. The firm, which is based in Sweden but focuses on high-growth emerging markets, said earnings before interest, tax, depreciation and amortisation (EBITDA) rose to $296 million from $186 million in the same period last year.

Millicom shares, which are traded on both the Stockholm bourse and Nasdaq, rose 18 percent to 647 Swedish crowns, outperforming a 2.3 percent gain in the Swedish market index .

The company said it increased its subscriber base by 2 million during the quarter to 20 million, up 77 percent from a year earlier.

"Really most parameters are better than expected, subscriber growth in particular," said Swedbank analyst Sven Skold.

"The subscriber growth in the second half will be very strong and one can assume that the fourth quarter will also be really good, as it's seasonally stronger than the third."

Pretax profit from continuing operations rose to $169 million from $102 million, while revenue climbed 77 percent to $686 million.

Analysts had on average forecast $285 million for EBITDA and $153 million for pretax profit, according to a Reuters poll.

Millicom's chief executive, Marc Beuls, said the company was boosting investment as revenues were rising.

"Millicom is today increasing its capex forecast for the full year 2007 from $800 million to over $1 billion as we continue to invest in future growth," Beuls said in a statement. "We are expecting a similar level of capex for 2008."

Beuls said the most encouraging aspect of the report was Africa, where Millicom acquired 17 percent more subscribers since the second quarter and 44 percent more than a year ago.

In Central America, where Millicom last quarter flagged growing competitive pressures, the firm said average revenue per unit was stable at $20. This, it said, was above the market average.

"Overall, we see opportunities in all our markets to continue investing aggressively in order to increase our market share and to exploit the general growth in the market as penetration rates continue to rise across our markets," the executive said in the statement.

Alexander Vassiouk, analyst at Morgan Stanley, said investors will take heart from the report.

"Investors will regain confidence that the stock may be back on track for growth," Vassiouk said. "Now there's a feeling that the momentum is continuing."

The capital spending plans also showed the company faced more growth than it had expected, he added.

"The return on investment in this market is excellent and, if anything, we would prefer this company to invest more early rather than later, as this will determine the longer-term competitive position in the markets," he said.

Beuls, in a conference call after the report, said a large part of the new investment would be in Africa and Central America. He said Africa had the lowest penetration rate and needed more investment.

The chief executive also said an "important" part of capital spending would be on third-generation mobile technology as the company was rolling out 3G services in Central America in 2008.

Beuls told the conference call the company was not looking at any new assets in Asia at the moment.