Fair Trade for Millicom Shares

We maintain our Hold rating and the same valuation target for Millicom International Cellular (MICC), a leading wireless service provider in various emerging markets. Millicom's strategy, which entails substantial capital expenditures in order to upgrade networks and service untapped markets, has paid off with significant growth in its subscriber base.

In the fast-growing markets of Latin America and Central America, Millicom is in the process of phasing out older TDMA and CDMA firmware in order to add high-speed 3G data service capabilities. The company's offerings in African and Asian markets also witness significant subscriber additions. Millicom announced that the company will increase capital expenditures through fiscal 2008, highlighting its expectation of sustainable and profitable expansion over the long run.

We remain cautious, however, with respect to increased competition and tightened global economic conditions that may challenge future growth projections provided by the company. Millicom is trading at 20.9x our estimate for 2008 earnings, which is at a significant premium to both the S&P 500 and its peer group averages. With respect to other selected valuation metrics, the stock is also trading at a premium over its peers. We believe this valuation premium reflects the company's solid first quarter sales performance, significant retention of new subscribers, and an encouraging outlook for future expansion prospects.

However, increased competition and tightened credit market conditions may limit the extent of higher valuations over the near-term. We maintain our Hold recommendation for Millicom and the same six-month target price of $120, based on 21x estimated 2008 earnings.

Read the full analyst report on MICC.

Read the full analyst report on MICC