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Contributors: Douglas McIntyre Jon C. Ogg

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Friday, August 18, 2006

Millicom's Mystery Rally

Millicom International Cellular SA (MICC) is having sme interesting trading activity today creating a mystery rally. The stock has already easily surpassed its average daily volume, and it is up 3.5% on no news. The company already got earnings behind it last month, so there is probably not much going on an earnings anticipation. Normally you could allocate this unusual move to an options expiration date, but options expiring today are tame and trading for September expiration isn't much more exciting. It is hard to find much real chatter in the name and not even message boards are active on it.

If you will recall, this was a company that was in talks to be acquired by China Mobile (CHL) back in June, but talks abruptly ended at the last minute. This is a Luxembourg-based cellular operator in many of the emerging markets.. MICC now has a market cap of $4.0 Billion, but the "old" proposed talks were supposed to generate an acquisition in the $5.0 to $5.3 Billion range. With this being a Friday, it is alsways possible the merger hopefuls are buying in hopes that a new bid would be coming.

The company is profitable, although its balance sheet is more leveraged as if it was an emerging cellular company back in the 1990's in the US before they were all rolled up. It is entirely in emerging markets, so perhaps that is why.

Here is the value of the company: Millicom International Cellular S.A. and its subsidiaries provide mobile telephone services worldwide. It offers prepaid cellular telephony services using mass market distribution methods. As of December 31, 2005, the company had approximately 8.9 million subscribers, as well as 17 mobile operations in 16 countries, including the following:

Central America: El Salvador, Guatemala, and Honduras;

South America: Bolivia and Paraguay;

Africa: Chad, Congo, Ghana, Mauritius, Senegal, Sierra Leone, and Tanzania;

South Asia: Pakistan and Sri Lanka;

Southeast Asia: Cambodia and Laos.

We have not heard any rumors or serious chatter out there. This is not really a BAIT SHOP member either, although if the balance sheet was different and if a little creativity came into play it is a name that could be on there. MICC has traded over 9750,000 shares and is up over 4% at $40.00. Its share price before the merger fell apart was about $45.00 and the shares have traded over $50 in May. The shares were under $30.00 in early 2006 before merger discussions surfaced. Its shares were also just under $36 on this Monday.

If we find anything out we'll follow up, but it looks like some old fashioned speculation may be today's reason for such a large advance on a quiet Friday in mid-August.

Jon C. Ogg
August 18, 2006
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