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UPDATE 1-Millicom Q2 margin squeezed by new services push
July 18, 2012 / 8:17 AM / 5 years ago

UPDATE 1-Millicom Q2 margin squeezed by new services push

* Q2 EBITDA $513 mln, vs consensus $527 mln

* EBITDA margin 43.4 pct, vs consensus 44.5 pct

* Sees full-year core margin around 43 pct

* Seeks pricier services as subscriber growth slows (Adds detail, background)

STOCKHOLM, July 18 (Reuters) - Emerging markets telecoms group Millicom will boost efforts to increase revenues from existing customers with new services after second-quarter core margins were dented by investments in such services, the company said on Wednesday.

After years of rapid expansion in Latin America, where Millicom generates 80 percent of revenues, and in Africa, subscriber growth has slowed as markets have matured.

The group, therefore, has begun to focus more on selling new and pricier services, such as mobile data, to its customers and boost investment in the services -- good news for telecoms equipment suppliers such as Ericsson and Nokia Siemens Networks.

Millicom posted a smaller core profit than expected for the quarter, sending its shares down, but roughly stood by its margin outlook for the full year.

“In a somewhat challenging environment, we continued to invest in improving our customer proposition,” Chief Executive Mikael Grahne said in a statement.

“In the coming quarters we will continue to invest to strengthen our innovation capabilities and to accelerate growth, through both our innovative categories and external opportunities should they arise.”

The group forecast a full-year margin of about 43 percent on earnings before interest, tax, depreciation and amortisation (EBITDA). The second-quarter margin shrank to 43.4 percent against 45.8 per cent last year, lagging behind a mean forecast of 44.5 percent in a Reuters poll.

Millicom said the margin fell because of increased investments and staffing in new growth categories, network building and handset subsidies.

The group had repeated as late as Monday -- as it announced the purchase of Cablevision Paraguay -- its earlier guidance for a margin in the mid-forties.

Quarterly EBITDA was unchanged on last year at $513 million, below analysts’ mean forecast for $527 million, on sales growth of 9 percent to $1.2 billion.

Sweden-based Millicom’s shares were down 4.4 percent at 0804 GMT at 623.5 Swedish crowns ($88.97). ($1 = 7.0081 Swedish crowns) (Reporting by Anna Ringstrom; Editing by David Goodman)

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