Thursday, February 09, 2006

Africa's Hot Cell Phone Growth Prospects Propel Millicom

Investor's Business Daily reports that service provider Millicom International Cellular (MICC), which operates in Africa, Southeast Asia and Latin America, is a takeover target, causing its stock price to surge. The wireless phone company had only 7.9 million customers as of Oct. 31 and operates in 15 countries, including Pakistan, Bolivia, Paraguay, Cambodia, Guatemala, Senegal and Ghana.

According to analysts, these countries have a lot of "headroom for subscriber and revenue growth," and "Africa's the fastest growing nation in terms of cell phone use."

Phil Kendall at Strategy Analytics said, "There have been some expressions of interest in their operations. I would expect to see them acquired — probably in parts." He predicted Millicom would not "be acquired whole because its assets are scattered around the globe," and that "bigger rivals that already operate in Southeast Asia, Africa or Latin America likely would buy Millicom's assets just in those regions."

Sundeep Bihani at Lehman Brothers noted that "more than half of Millicom's customers are in Africa and Asia, but its third-quarter sales growth was sparked by its Bolivia and Paraguay Latin American properties."

Matt Hatton at Yankee Group pointed out that "selling mobile services in developing countries is much different than in the U.S. and Europe. In emerging markets, most cell phone users buy prepaid plans and cheaper phones. So average revenue per user is much lower than in the U.S., Europe and Japan."

Hatton thought "Millicom has done a good job of adapting to distribution channels in developing countries."

Kendall added, "Millicom owns an impressive footprint in emerging markets, but they may not have enough scale to compete in low-cost markets."