Fitch Affirms Telemovil's Ratings at 'BB'; Outlook Stable

  Fitch Affirms Telemovil's Ratings at 'BB'; Outlook Stable

Business Wire

MONTERREY, Mexico -- August 17, 2012

Fitch Ratings has affirmed the local and foreign currency Issuer Default
Ratings (IDRs) of Telemovil El Salvador, S.A. (Telemovil) and Telemovil
Finance Co. Ltd (TF), including the $450 million senior notes due 2017 issued
by TF and guaranteed by Telemovil at 'BB'. The Rating Outlook is Stable.

Telemovil's ratings reflect its diversified service offering and platforms,
leading positions in mobile and pay television services in El Salvador, strong
brand recognition, extensive network coverage, sound financial profile and
positive pre-dividend free cash flow. The company's credit quality is tempered
by a strong competitive environment in the mobile business, limited geographic
diversification and the dependence of the economy on remittances, which
affects demand for telecommunications services.

The ratings factor in the relationship with parent company Millicom
International Cellular S.A. (MIC), which fully owns Telemovil and TF. These
companies benefit from synergies related to the larger scale of the parent and
expertise of management but also consider the payment of dividends, royalties
and technical fees, loans to affiliates and Millicom's financial position. For
the 12 months ended June 30, 2012 MIC had a solid financial profile with
US$4.7 billion in revenues, US$2.0 billion in EBITDA, funds flow from
operations (FFO) of US$1.6 billion, on balance sheet indebtedness of US$2.7
billion and cash balances of US$900 million.

Price Declines Affecting Mobile Operations:

Telemovil strategy with regard to mobile service should center on increasing
value added services, such as mobile financial solutions, to compensate for
voice revenue declines. Strong competition has resulted in voice price
pressure that resulted in lower voice revenues that, in turn, have not been
fully compensated by increases in other services. Lower pace of mobile
subscriber additions than competitors has resulted in a 2% decline in market
share over the last year to 42%. A more balanced competitive environment is
expected once the transaction where America Movil will receive Digicel's
operations in El Salvador is approved.

The home and enterprise segments have had positive results. However, the
mobile operation has a larger size and is the largest contributor to revenues
and cash flow at nearly 70%. Telemovil offers bundled services with its pay-tv
subsidiary Millicom Cable, which include residential and enterprise customers.
In conjunction with Telemovil's strategy of focusing on differentiated mobile
service offerings, this should allow the company to maintain its leading
market position in the medium term. Millicom Cable's home segment continue to
increase RGUs, mainly driven by fixed broadband services, CATV and (to a
lesser extent) fixed lines, with stable ARPU and disconnections.

Fitch believes Telemovil's competitive position will improve due to the
offering of bundles with multiple services. However, Millicom Cable customers'
quadruple play bundles are currently very limited, and customers with double
and triple play bundles still offer penetration growth opportunities. Millicom
Cable is the leading CATV provider in El Salvador with approximately 316.6
thousand revenue generating units (RGUs) as of June 30, 2011. Millicom Cable
network has close to 80% of bidirectional capability and covers approximately
615,000 homes passed.

Higher Capex for 2013:

Pre-dividend free cash flow should decline in 2013 but still be positive due
to increased capital expenditures which are expected be slightly below 20% of
revenues. Investments follow the strategy towards data services by increasing
3G coverage and fixed broadband speeds. Pre-dividend free cash flow should
return to historical levels during the following years as capex normalizes.
Given the good financial position of the parent Fitch believes that payments
to MIC, in the form of dividends or royalties and technical fees, can be
reduced if needed providing flexibility to Telemovil.

Stable Gross Leverage:

Gross leverage has remained stable despite the operating pressures. For the 12
months ended March 31, 2012 total debt to EBITDA and net debt to EBITDA stood
at 2.5 times (x) and 2.1x, respectively. Going forward, Fitch expects that
mobile operations should continue stabilizing resulting in stable credit
metrics. Excess cash flow from operations after capital expenditures is
expected to be used for dividend payments.

Good Liquidity:

As of March 31, 2012 total debt was composed solely of the US$450 million
senior notes maturing in 2017 issued by TF and had cash balances of US$67
million. In addition, in 2006 the company lent funds to a holding company
owned by MIC sub that owns 50% plus one share of Colombia Movil. The amount
outstanding of this loan is US$171 million as of the end to the first quarter
of 2012. The ratings incorporate that when Telemovil receives the payment of
this loan, approximately US$100 million should remain in cash at Telemovil,
further supporting liquidity and reducing the net debt to EBITDA to
approximately 1.5x.

Key Rating Drivers:

Negative factors to credit quality include total debt to EBITDA remaining at
2.5x in conjunction with a poor liquidity position or higher leverage due to
competitive issues, cash flow deterioration, a change in financial targets of
management or a deteriorating financial profile of the parent (MIC). Positive
factors to credit quality include Telemovil making firm progress in reducing
and maintaining a leverage level of total debt to EBITDA in the range
1.0x-1.5x and/or increased geographical and/or service diversification.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology', dated Aug. 8, 2012;

--'Operating Leases: Updated Implications for Lessees' Credit, Aug. 5, 2011;

--'Rating Telecom Companies', Aug. 9, 2012.

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Operating Leases: Updated Implications for Lessees' Credit

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=462222

Rating Telecom Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682323

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Contact:

Fitch Ratings
Primary Analyst
Sergio Rodriguez, CFA
Senior Director
+52-81-8399-9100
Fitch Mexico, S.A. de C.V.
Prol. Alfonso Reyes 2612
Monterrey, Mexico
or
Secondary Analyst
Vanessa Villalobos
Associate Director
+506-2296-9182
or
Committee Chairperson
Alberto Moreno
Senior Director
+52-81-8399-9100
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com