Millicom International Cellular Annual Report 2013

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FY2013 Annual Report · Millicom International Cellular

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Annual Report 2013

Transforming
Lives
Economies
Events
Moments

Millicom Annual Report 2013

Financial highlights
Revenue (US$m)

EBITDA (US$m) (before
corporate cost)

4,814

4,530

5,159

3,920

3,373

2,087

2,065

1,881

1,841

1,545

Growth

7.3%

Margin

36.5%

Capex (US$m)

Net Debt (US$m)

1,226

1,120

737

731

848

2,316

1,991

1,507

1,276

732
09

Capex to revenue ratio

23.8%

Net Debt to EBITDA (US$m)
(after corporate cost)

1.4x

About us

Contents

Millicom is a leading international
telecommunications and media company
dedicated to emerging markets in Latin
America and Africa. We set the pace by
offering a range of digital lifestyle services
which connect people to their world.
Operating in 15 countries, with e-commerce
partnerships in 22, Millicom offers innovative
and customer-centric products. Millicom
employs over 11,500 people and provides
mobile, cable, broadband, TV and mobile
financial services to over 50 million customers.

Overview
02 Group at a glance
03

Our chosen markets and
strategic pillars

12 Chairman’s statement

Strategy
14 CEO statement
16 Market overview
20 Our business model
22
24 Risk management

Our strategy and KPIs

Performance
32 Review of operations
– Central America
36 Review of operations
– South America
40 Review of operations

– Africa

44 Corporate responsibility
46 Financial review

Governance
52 Corporate Governance
56 Board Committees
58 Board of Directors
60 Executive Committee
62 Directors’ report

Find out more
www.millicom.com

Financial Statements
65

Independent auditors’
report
Consolidated income
statement
Consolidated statement
of comprehensive income
Consolidated statement
of financial position
Consolidated statement
of cash flows
Consolidated statement
of changes in equity
Notes to the consolidated
financial statements

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

Millicom Annual Report 2013

Group at
a glance

Our products
and services

Founded in 1990 and headquartered in
Luxembourg with corporate offices in Stockholm,
London and Miami, Millicom’s subsidiaries
operate exclusively in emerging markets in Africa
and Latin America. Millicom’s shares are listed on
the Nasdaq OMX exchange in Stockholm and
Millicom’s market capitalisation was SEK64 billion
($9.9 billion) at the end of 2013.

Mobile Financial Services
We have six million mobile financial services
customers across our markets, including
money transfer, bill payments, merchant
payments and other services.

E-Commerce and Online services
We offer customers in 22 emerging markets
online shopping, market place, classifieds,
and other online services.

Mobile
We provide mobile communications and
Value Added Services to over 50 million
customers in Bolivia, Colombia, Paraguay,
El Salvador, Guatemala, Honduras, Chad,
DRC, Ghana, Mauritius, Senegal, Rwanda and
Tanzania essentially under the brand name
Tigo. In addition to mobile voice and SMS,
we offer mobile data and locally relevant
content through Value Added Services.

Cable & Digital Media
We offer fixed voice, broadband services
and Pay-TV, including premium content, in
cable and broadcast businesses in Bolivia,
Paraguay, Costa Rica, El Salvador, Guatemala,
Honduras and Nicaragua.

Our chosen
markets1

Region

Population (m)

Mobile customers (m)

Revenue ($m)

EBITDA ($m)

Employees

Central America

South America

15.8

1,884

858

4,030

13.8

2,192

805

4,410

Africa

186

21.0

1,000

279

2,915

1 All numbers are excluding the Online business.

Progressing on our strategic pillars

Strategic
pillars

2013
progress

Mobile

Cable &
Digital Media

Mobile Financial
Services

Online

Cost & Capex
optimisation

From volume
to value

Build a sizeable
business

Creating a
blockbuster

Investing
in Growth

Maximising
efficiency

$4.2bn

revenue

$446m

revenue

$79m

revenue

$83m

revenue

$49m

savings

Product
innovation

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12204

Millicom Annual Report 2013

Transforming
lives

Ghana
Value added services
continued to grow.
In Ghana, 10% of our
customers are using
our mHealth services
at the end of 2013.

In many of our markets, we are still connecting
people for the first time: to communications
and to the Internet. In four out of seven of our
African markets, penetration of mobile phones
in the population was still below 50% in 2013.
At the same time, the appetite for mobile data
is growing fast across our footprint.

Percentage of our customers using mobile
data at the end of 2013

In 2013, many more of our customers
upgraded to smartphones thanks to affordable
entry-level smartphones. Smartphones are
transforming the way people do business,
interact with each other and how they buy,
use and access content.

Percentage of entry-level smartphones of
all smartphones sold in Latin America in
December 2013

20.2%

62%

Delivered
During 2013, we provided data services
to 3.9 million new customers, bringing the
total to over 20% or one in five of our mobile
customers. Recurring revenue from mobile
data was 12.6% of Group revenue in the last
quarter of 2013 and grew by 31% from 2012.
We differentiated with exclusive partnerships
providing free Facebook access in Paraguay
and for streaming music across Latin America
further driving date adoption. We launched
LTE in Colombia at the end of 2013.

Planned
We will continue to help our customers build
their digital lifestyles by bringing down prices
of devices, increasing 3G coverage, and
providing high-speed internet through

fixed broadband. In countries and regions
where mobile access to the internet is not yet
possible, we will continue to innovate with
services such as access via SMS, access to
entertainment via voice services and social
networking via USSD.

Outlook
Prices of entry-level smartphones have reduced
to around the $60 mark in 2013 and are
expected to decline further. This is a very
encouraging trend as it means more of our
customers will be able to afford these devices.
Our predominantly pre-paid customer base will
likely continue to buy data in pre-paid bundles
and monthly subscriptions, but with premium
content becoming more common.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122
06

Millicom Annual Report 2013

Mobile Financial Services (MFS) are redirecting
cash-based economies to electronic
transactions that are safer, traceable and
instant. Traceability gives governments more
control and oversight over the flow of money
and helps reduce tax evasion and corruption.
For consumers, it provides the ability to
increase control over finances, to create credit
history, and a greater degree of security.

Providing both mobile and cable services we have
developed a communications infrastructure that
is essential for competitiveness and economic
development of the markets in which we operate.
In 2013 we continued to expand coverage in our
markets, including geographic expansion into
previously unconnected areas, as well as network
capacity expansion to meet rising demand for
data services.

Percentage of our customers using
MFS in Africa in countries served

Capex in 2013 excluding spectrum
and licences

23%

$1 billion

Transforming
economies

Delivered
One in six of our mobile customers
in our MFS footprint used MFS services in
2013. The service was launched in Chad and
Bolivia and continued to perform strongly,
particularly in East Africa and Paraguay.
In 2013 we launched 3G in Senegal,
expanded our footprint significantly in
Tanzania and DRC, and brought mobile
coverage to previously unconnected regions
of Bolivia and Guatemala.

Planned
We will continue to increase penetration
of MFS in our markets, and launch the service
in Senegal. We are launching new services,
such as cross-border MFS with integrated
currency conversion, and working with

other service suppliers to allow money
transfers to and from their customers.
New distribution and support points will
make it easier for our customers to adopt
the service. On network development, we will
continue to work on improving coverage and
capacity to improve the experience for new
data users.

Outlook
In MFS we see usage shifting increasingly
away from simple money transfers towards
transactions such as bill and transport
payments, and paying for goods and services.
We also see great potential for salary, subsidy
and aid payments being made through MFS.
Interoperability will be key in developing MFS
into a blockbuster.

Tanzania
In December, over $690 million
was transferred through our
Mobile Financial Services,
equivalent to 16% of
Tanzania’s GDP.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122
08

Millicom Annual Report 2013

Outlook
There are excellent opportunities in Pay-TV
in our markets due to the prevalence of
analogue services. Competition in cable is
highly fragmented. We see great potential
with strong brand positioning in our Latin
American markets to gain more share of
the wallets of our customers.

Delivered
At the end of 2013, our cable business
passed more than 2.5 million homes, with
the revenues growing 10% year-on-year to
$446 million. Our focus in the year was on
selling Double and Triple Play bundles to our
customers, combining Pay-TV with fixed
telephony and internet, and growing our
footprint. At the end of the year 42% of our
Pay-TV customers were also subscribing to
high-speed internet.

Planned
We will remain focused on increasing access to
homes over the next few years, either through
cable or satellite connections. This is to broaden
the potential market for our increasingly
diversified and unique content offering, which
will be provided to our customers under the
brand Tigo Star. We are working to obtain the
regulatory approvals necessary to complete our
merger with UNE in Colombia.

Transforming
events

We want our Pay-TV business to provide not
only the highest quality and widest offer, but
also ensure that our customers see the latest
entertainment and bring the most important
events to their living rooms. In 2013 we
announced our intention to create a leading
digital player in Colombia by merging our
mobile operations with UNE, a leading
cable provider.

Number of HD channels in our Pay-TV
portfolio in Costa Rica end of 2013

Football is always an event in our countries.
In 2013, we acquired multi-year, exclusive
football rights to the Bolivian and Paraguayan
national leagues. In 2014, we launch Tigo
Sports, a channel with exclusive rights to
international and local top events, from
football to cycling. This is a first, not only
for Millicom but also for our South American
countries, bringing sports entertainment
to a new level.

Homes passed in Latin America

2.5 million

Paraguay
In November 2013, we sponsored
large music events to mark our
partnership with Deezer. Red Hot
Chili Peppers played to 25,000
people in Asunción, their first
concert in Paraguay.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12210

Paraguay
In May we broadcast the UEFA
Champions League Final in
Paraguay in HD and in July
featured the Wimbledon Tennis
Final in the same format.

Delivered
In addition to our ground-breaking
agreements with Deezer and Facebook, we
introduced music to our customers in Africa
through Ringback tones, as well as music
services such as Tigo Muzika in Rwanda. We
are revolutionising shopping for many people
in our markets by introducing them to online
retail and classified advertising, as well as
services such as online hotel reservation
and taxi ordering.

Planned
We will continue to bring a wide range of
innovative digital services to our customers,
whether it is entertainment or online services.
We are looking to leverage our ability to be
present at every step of our customer value
chain from providing the connection to
providing the service, and both payment
and delivery methods.

Outlook
Demand for digital services in our markets
is still unmet, and we see great first
mover opportunities.

Transforming
moments

Social networks, particularly Facebook,
have gained relevance as communications
channels to many of our customers, whether
through smartphones, Internet or USSD on
feature phones. Given our popularity and
Facebook’s plan to connect the “next billion”
to the internet, in 2013 we signed an exclusive
deal to offer Facebook access for free to our
customers in Paraguay.

In 2013, we introduced consumers in Latin
America to streaming music before many had
ever bought an mp3 player. Our partnership with
the music streaming service Deezer across our
Latin American markets has been a strong driver
for adoption of mobile data as well as a great
way to connect to our customers through the
power of music. Launch concerts also served as
great occasions to showcase our smartphone
portfolio and let people try digital services.

Number of Tigo markets where we are
the most “liked” page on Facebook

Number of customers using Deezer

290,000

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12212

Chairman’s
statement

Delivering sustainable
stakeholder value

Leadership
The Board and Board Committees are
outlined in the governance section of
this report.

Kim Ignatius, Chair, Audit Committee
Allen Sangines-Krause, Chair, Compensation
Committee
Mia Brunell Livfors, Chair, Corporate
Responsibility Committee

Governance section
Page 52

2013 has been the start of an exciting
transformation for Millicom since the
announcement of the new strategy at the
Capital Markets Day in March. Millicom is
choosing a path that differs from most
telecommunications companies as
traditional revenue streams start to mature.
The new strategy is testament that the
strong entrepreneurial drive of the
Company’s founder is very much alive in
Millicom today. The Company is looking
ahead, beyond the mobile data revolution.
Its innovative force and commitment to
both short and long-term value creation
for shareholders is commendable.

Towards the end of the year, it has been
encouraging to see returns from the new
strategy, as top-line growth continued to
accelerate and Africa showed signs of recovery.
This is also a sign that Millicom management is
able to maintain operational focus while at the
same time preparing and transforming the
organisation to achieve targets. All strategic
pillars contributed to recurring revenue growth.
At the same time the historic mobile business
of Tigo has remained solid and grew in a
challenging environment. This is a strong base
from which to capture new opportunities and
keep the Company on a growth path.

Management team of Millicom now includes
experience in the strategic growth areas;
Cable, Pay-TV, e-commerce and media sectors.
It is also pleasing to see the focus on
promoting and growing local talent moving
beyond Latin America to Africa.

In 2013, and in line with the Company’s
evolving strategy, we welcomed new members
to the Board of Directors. Mr. Ariel Eckstein,
Mr. Lorenzo Grabau and Mr. Alejandro Santo
Domingo were appointed to the Board in the
Annual General Meeting in May 2013. They
each bring important skills in the strategic
growth areas of the Company; Cable, Media
and e-commerce and strong understanding of
selling mass market products and services in
emerging markets.

In a year of investment for future growth,
Millicom continued to reward its shareholders
in 2013, with $264 million returned through a
$2.64 per share ordinary dividend. The Board
will propose to the Annual General Meeting on
May 27, 2014, the payment of a stable
ordinary dividend.

On behalf of the Board, I would like to thank
shareholders for their continued support and
trust in Millicom and its ability to deliver. I also
want to congratulate the Millicom team for
stepping up to the challenge of transforming
the Company, one that will bring a lot of
delight to its customers.

Allen Sangines-Krause
Non-Executive Chairman

The year was one of investment for future
growth. Improved coverage and capacity of
mobile and cable networks, direction of
distribution channels to new products and
services and investment into Tigo brand
affinity are important foundations for organic
growth. Innovation in products that attract
people to new services requires resources, in
addition to creativity demonstrated by the
Millicom team in the year with landmark deals
with digital brands such as Deezer and
Facebook and services such as cross-border
mobile financial services.

At the same time as seeking and delivering
organic growth, the Company identified a
fantastic opportunity in Colombia with UNE.
This is a landmark agreement in Millicom’s
history, which will not only bring important
financial returns, but also introduce Colombian
consumers to an integrated digital player.

Millicom is bringing the digital lifestyle to the
fingertips of emerging market consumers. It is
important that Millicom maintains its agility
as it looks to capture first-mover advantage
in its markets in areas such as e-commerce,
classifieds and market places. As a Board, it is
exciting and rewarding to support Millicom’s
execution of its plan. The services the
Company is rolling out will enrich people’s lives
with first class entertainment and content, and
will help transform the way people interact
with each other, work, and pay for goods and
services. These services can make a huge
difference, such as aid disbursements through
mobile money in Guatemala and Chad.

A new strategy and diversifying business also
requires new leadership skills in both the Board
of Directors and the Executive Team. To
complement strong competencies in
telecommunications, the Executive

Dividend per share

Position in 85% of our mobile markets

$2.64

No.1 or 2

Non-financial
highlights are
published in our
2013 CR Report.

Go to Page 44 or download
at www.millicom.com

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12214

President and Chief Executive
Officer’s statement

A year of
good progress

The transformation we planned has well
and truly begun. We have exceeded 50
million customers for the first time and are
generating over $5 billion in annual revenue.

This highlights our focus on execution of our
strategy and preparing the Company for the
future based on our four strategic growth
pillars – Mobile, Cable & Digital Media, Mobile
Financial Services (MFS) and Online.

In 2013, our journey of offering the digital
lifestyle to our customers started. We have
been transforming our operations – recruiting

In this section

> President and Chief
Executive’s review

> Market overview
> Our business model
> Our strategy and KPIs
> Risk management

pg 14
pg 16
pg 20
pg 22
pg 24

That is why we invest in our people, why we
created the Millicom University, invested in
our Tigo Sales School and celebrate the
performance of our outstanding employees.
This is how we support and promote an
entrepreneurial and determined attitude
to stand out from the competition.

Many challenges and opportunities lie ahead.
I would like to thank all my colleagues, from
the Board and Executive Team to the newest
junior recruit, for their dedication in 2013.

My first full year in this role was one of
significant change. I look forward to continuing
this as a growing Millicom further delivers the
digital lifestyle.

Hans-Holger Albrecht
President and CEO

new talent and adding new expertise to
the organisation to develop a growing
product lineup.

Millicom has shown that by being agile,
in tune with its customers, and faster than its
competitors, it can rise to any challenge.

In Mobile, the shift to data has accelerated.
Now more than one in five of our customers
take data packages. This 50% annual
increase has been propelled by initiatives
such as unlimited music packages in Latin
America. It has been fuelled by the sale of
affordable $60 smartphones combined with
a sensible mix of subsidies.

In MFS, more than one in six of our customers
in the countries where we have the service now
use it, representing another 50% increase over
the year. Penetration remains solid in our
leading markets in Tanzania, Paraguay and
Rwanda – where in Kigali you can even pay
for bus tickets from your phone.

content across Latin America while we finalise
the merger with UNE in Colombia.

Our Online businesses grew and delivered new
products in e-commerce and services across
Latin America and Africa and in a diverse
range of categories. From Mexico’s Rio
Grande to South Africa’s Cape these ventures
enable economies to leapfrog directly to
online retail and offer goods and services
without the need for malls or offices.

We are confident about potential in our
markets as the combination of economic
and population growth create favourable
commercial conditions. We are investing
to benefit from the opportunities ahead.

Throughout 2013 we have been developing
a new culture to ensure we reach our true
potential. It is one where colleagues “Demand
More” of themselves so they can offer more
to our customers. This behaviour can be seen
and felt whenever visiting our markets.

Cable & Digital Media is growing at a rate
of 10% annually and we have been quick to
acquire new assets in Paraguay and Bolivia
on which we build our new “Tigo Star” and
“Tigo Sports” services. These will become key
features of the digital lifestyle as we look
to bundle cable, broadband, satellite and

Whether it is our employees returning to the
troubled Kivu region of DRC, launching MFS
in Chad, offering free Facebook access in
Paraguay or supporting humanitarian aid
projects in Guatemala, I have witnessed
extraordinary dedication and commitment
numerous times.

Our five pillars
We are transforming our business, crafting
virtuous circles of value between our
businesses and delivering the digital lifestyle
for millions. Our growth strategy is based on
five main pillars: Mobile, Cable and Digital,
Mobile Financial Services, Online, and Cost
and Capex optimisation.

Mobile: from Volume to Value
Focus on building a sophisticated, value-
oriented mobile business. Increase revenues,
loyalty and brand affinity with a focus on
driving data penetration and bundling services.

Online: investing in growth
Investing in high-growth internet business
models in the developing world. Accelerate
take-up of services by leveraging on our
existing infrastructure.

Cable & Digital Media:
build a sizeable business
Increase number of homes passed, and
further coverage via satellite, through organic
growth and strategic acquisitions to expand
our footprint where we offer our increasingly
attractive Pay-TV portfolio.

Cost and Capex optimisation:
maximising efficiency
Focus on Cost and Capex optimisation
with Capex / Revenue peaking in 2013 and
gradually decreasing even as we continue to
heavily invest on mobile and cable coverage
and TV services.

Mobile Financial Services:
creating a blockbuster
Increasing penetration of the service
to build the scale required to increase
transactions on services such as peer-to-peer
and merchant payments. Seek to further
develop the MFS sector in our markets by
pushing interoperability.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

Market
overview

Focusing on
consumer demand

In this section

> President and Chief
Executive’s review
> Market overview
> Our business model
> Our strategy and KPIs
> Risk management

pg 14
pg 16
pg 20
pg 22
pg 24

Tanzania and Rwanda
In February 2014, we launched
the world’s first cross-border
mobile money transfer service
with currency conversion between
Tanzania and Rwanda.

Market drivers

Expected trends

GDP/Capita1
GDP/capita is growing strongly and exceeding
developed market rates, for example in
Tanzania and Paraguay average growth of
7% and 4.6% per annum is expected in the
next four years

Population1
Populations continue to grow significantly,
for example in DRC and Guatemala expected
to grow by 13% and 10% to 20173

Customers
Our customers are becoming more
sophisticated and demanding better
and more ubiquitous services

Governments
Governments are increasing their investment
in infrastructure and innovation, namely on
mobile and digital services

Demand for data
Data in emerging markets will become an
ever more important part of revenue, and
drive operator investment in infrastructure

Handset manufacturers
More handset manufacturers will produce
cheaper smartphones closer to their
target markets

Mobile Financial Services
Mobile Financial Services will continue to
grow quickly, and convergence between
mobile and financial sectors will accelerate

Apps
From entertainment to shopping, social
media to news, users will want more apps and
will expect a high level of local adaptation

E-commerce
A spike in e-commerce across emerging
markets is expected, as it offers solutions
to many consumers in these markets

Opportunities for Millicom

Customer demand
Leverage on consumers increasing purchasing
power and data and Value Added Services
(VAS) demand to increase mobile revenue:

Infrastructure investment
Focus on the unique Latin American TV
and broadband opportunities

Further enable customers’ digital lifestyles
through increased smartphone penetration
and VAS

Become the main financial services provider
for the unbanked and a relevant provider for
the banked

Make e-commerce part of consumers’
everyday lives

Our targets versus 2013

Revenue ($m)

EBITDA margin after corporate cost

Capex/revenue ratio
(excluding spectrum and licences

2013 performance

2013 performance
in new consolidation
scope2

2014 targets

5,159

Growth 7.3%

5,557

Growth 5.5%

32.7%

19.9%

36.0%

19.9%

Mid to high single digit growth

Reported revenue growth over
15% vs. 20133

Stabilising at around mid-30s%

Decreasing to around 19%

1 IMF estimates.
2 New consolidation scope: Full consolidation of Guatemala and equity accounting for Mauritius and E-Commerce/Online.
3 Revenue growth at constant exchange rates.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

Millicom Annual Report 2013

Market overview
continued

Delivering the digital lifestyle
In 2013, we started our journey to offer
our customers the very best of the digital
world – what we call the “Digital Lifestyle”.
We are transforming our operations;
recruiting new talent and adding new skills
to offer an ever richer and entertaining
product suite to meet the current and
future needs of our customers.

Offering relevant products
and services
Mobile
Millicom’s mobile business had over 50 million
customers at the end of 2013. Our mobile
business unit continued to be the number
one contributor to revenue, with 47% of
recurring revenue growth coming from mobile
voice, data and SMS services. We offer a
full range of mobile internet services and
entertainment, from streaming music and video
to a wide range of value added services. At the
end of 2013, 20% of our customers in Latin
America were using smartphones. In countries
where data and smartphone penetration is
low, we also give our customers access to the
internet, social media and applications through
simple SMS-based menus and services.

Cable & Digital Media
Millicom offers first class entertainment by
cable to customers in seven markets in Latin
America: Paraguay, Bolivia, El Salvador,
Honduras, Guatemala, Nicaragua and Costa
Rica – with Colombia expected to come soon
when the merger with UNE closes. By the end of
2013, our network passed 2.5 million homes. We
are the leader in HD channels in all our markets
and combine HD with premium, digital and
basic TV channels for the greatest choice.

Our Cable & Digital Media business is growing
rapidly. In 2013 we acquired the broadcaster
Multivision in Bolivia, and announced the
agreement to merge with Colombia’s cable
provider UNE. In addition, we launched the
music channel HEi in Paraguay and acquired
exclusive sports television rights in Bolivia
and Paraguay.

Mobile Financial Services (MFS)
Millicom is one of the world’s leading MFS
providers. At the end of 2013, over 15.8% of
our mobile customers in countries where the
service is offered were already using MFS,
and this number keeps growing every day.

Financial services via mobile phones allow
millions of people without access to traditional
banking services to connect to the formal
economy, while bringing new services to the
banked population. With high demand for
the convenience and speed of cashless
transactions such as money transfer, bill
and merchant payments, our MFS brands
– Tigo Money, Tigo Cash and Tigo Pesa –
are at the very heart of our operations.

Online
E-commerce represents a huge opportunity in
emerging markets, where the growing middle
class looks for access to the latest goods and
services. Logistics, product availability and
internet connectivity pose new challenges
daily. Millicom is able and determined to
meet them and create first mover advantage.
Since 2012, when Millicom invested in two
start-ups – Africa Internet Holding (AIH) and
Latin America Internet Holding (LIH) – we have
moved swiftly. We have launched 11 new
online ventures in 22 territories, including
outside our mobile communications footprint.
Through organic growth and further
investment we plan to build on this
initial development.

Our leading brand in the market
Our brand, Tigo, retained a very strong market
position and high brand recognition. At the
end of 2013, Tigo was the number one or
two mobile operator in 85% of our markets.
As a brand, Tigo is innovative, youthful and
approachable – attributes that connect well
with our digital lifestyle strategy. With the
strong connection our consumers already
have with Tigo, we are able to up-sell and
cross-sell effectively, as well as introduce
entirely new services that require a strong
level of trust from consumers, such as Mobile
Financial Services. Moving forward, we will
make the Tigo offer and experience even
more consumer-centric, so we become closer
to the lives of consumers. In line with this
objective, we will extend the Tigo family by
introducing three new brand platforms:

– Tigo Smart, focused on the emerging

segment of smartphone users and their
specific needs to better navigate and
enjoy the mobile digital space.

– Tigo Star, focused on families and their

desire to enjoy the best content, in particular
movies, sports and high-speed internet via
reliable connections in their homes.
– Tigo Business, focused on the B2B

segment to provide tailored solutions
for each company’s digital lifestyle.

These brands will work together to serve their
specific consumer segments with digital
experiences that enhance lives, and at the
same time contribute to broaden Tigo’s appeal
beyond traditional telecommunications.

Contribution to recurring
revenue growth by category

13%

14%

47%

26%

Mobile
Online
MFS
Cable & Digital Media

In 2013 our focus has been to build the
foundations for future growth across all
strategic pillars.

In the year, 53% of recurring revenue growth
was coming from new strategic pillars of
Cable & Digital Media, Mobile Financial
Services and Online.

Nigeria
Online retailer Jumia became
the first African company to
be awarded the “Best Retailer
Launch of the Year” at the
Word Retail Awards in Paris in
October 2013.

Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122
20

Millicom Annual Report 2013

Our business
model

Creating value for
all our stakeholders

In this section

> President and Chief
Executive’s review

> Market overview
> Our business model
> Our strategy and KPIs
> Risk management

pg 14
pg 16
pg 20
pg 22
pg 24

Rwanda
Understanding our customers’
needs ensures relevant product
offering. Our lending products,
born from such insight, were used
by 40% of customers in 2013 and
by nearly 60% in Rwanda.

Creating Value for Customers

Creating Value for Shareholders

Our customers and the needs of our customers are at the centre of
our business, both the value proposition and the operating model.
On the value proposition, we seek to provide relevant digital products
with the best service and customer experience. With our strong trusted
consumer brand Tigo and innovative and accessible product offering,
Millicom helps emerging countries in Africa and Latin America and
their populations move into the digital lifestyle.

On the operating model side, we have long-term relationships with our
suppliers guaranteeing stability and quality throughout the value chain.
Our infrastructure has a wide coverage and high quality to support our
best in class service. Finally, we prime to have the right people with the
right skills with a customer-centric mindset.

By continuously striving for growth through our transformation from
a telecommunication operator to a digital lifestyle enabler, we create
value for shareholders. We invest early in new technologies and services
that we believe will become relevant to our customers. In 2013 we
started to see the benefits of our investments in mobile financial
services, cable, digital media and online bearing results as our growth
accelerated. This is the first building block for value creation. In 2014,
we will seek to stabilise margins and over time return to stronger cash
flow generation, the key measure of value creation.

V a l ue proposition

Brand
Trusted
Brand

Service
Provide excellent
service and customer
experience

Product offering
Locally relevant,
innovative and
useful products
and content

Sales
High availability
of sales channels

Customer at
the centre of our
Business Model

Value chain
Long-term supplier
relationships

Organisation
Right people with
right skills

Infrastructure
Wide coverage and
quality of networks

Operating mo d e l

Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

Millicom Annual Report 2013

Our strategy and
Key Performance Indicators

Delivering through
our five strategic pillars

In this section

> President and Chief
Executive’s review

> Market overview
> Our business model
> Our strategy and KPIs
> Risk management

pg 14
pg 16
pg 20
pg 22
pg 24

Paraguay
In February 2014, we launched
Tigo Sports, a channel dedicated
to professional football and sports
coverage worldwide. The channel
will be available in other Latin
American markets during 2014.

Traditional telecom business is under
pressure in our markets as it has been
around the world when voice and SMS
have become commoditised. Voice revenues
are slowing down, as less room remains
for growth through increasing penetration
of voice, except in Africa – one of the
reasons we are currently investing
strongly in the region. At the same time

competition on voice prices remains fierce in
highly competitive markets.

Consumers’ needs are changing and evolving
from simple connectivity to a diversified digital
lifestyle. Millicom wants to be ahead of the curve
to respond to this need and extend our offer and
relevance in the lives of our customers. We have a
great opportunity to be present at every step of

our customers’ digital lifestyle journey. We are
forging strategic partnerships with digital leaders
and building our own services.

In line with these developments, at our
March 2013 Capital Markets Day, we
announced our mid-term strategy based on
five pillars, setting the goal to increase revenue
from $4.8 billion in 2012 to $9 billion in 2017.

Strategic pillar

Mobile
Move from volume to value

Progress in 20134

Revenue in 2013

$4.2bn
Growing 3%
on a recurring basis

Comment on progress

Outlook

Driven by innovation, Data and
Value Added Services (VAS) are
increasing in mobile revenue
providing new sources of growth.
Our unlimited music offer has
been extremely successful in
many markets.

Many of our African countries
are gaining significant traction and
should continue to do so next year.

B2B market focus in Latin America
should create the next wave of
growth in the region.

Cable & Digital Media
Build a sizeable business

MFS
Creating a blockbuster

Online
Investing in growth

Revenue in 2013

$446m
10% organic
growth

Revenue in 2013

$79m
98% growth
6.3 million
customers

Revenue in 2013

$83m
554% growth

Data and VAS is expected to
continue to increase share as we
launch new products and features
increasing mobile revenue.

The merger with UNE in 2014
will be a major step in achieving
our goal.

The launch of Tigo Sport, initially
in Paraguay, and in the rest of
Latin America thereafter, is a
major development in our content
strategy, which we believe will lead
to additional opportunities.

Progress has been achieved both
through organic growth and
acquisitions. Our newest operations
in Paraguay (further rollout after
acquisition of Cablevision) and
Guatemala (greenfield roll-out with
some in-market consolidation) have
experienced double digit growth.
Costa Rica this year was negatively
impacted by competition from
low-end providers.

In 2013 we have seen Tanzania,
Rwanda, Paraguay and El Salvador
with some of the highest adoption
rates in the world grow even
further. New products have
been launched in every market
contributing to our current
and future growth.

Some of our operations are
introducing Mobile Financial
Services and growth in penetration
will drive revenue. Our product
pipeline is strong and we expect
new sources of revenue in MFS as
the numbers of transactions
increase, in particularly
peer-to-peer.

Online has been driven mainly
by e-commerce ventures with
companies like Kanui and Tricae in
Brazil, and Jumia in Africa with its
extremely high growth rates. In
parallel, many other ventures are
building the path for future growth.

Latin America has shown a strong
adoption of online services and
should continue in this path.
Our partnership with MTN in
Africa Internet Holdings at the
end of 2013 will push our Online
ventures further in Africa, which
should accelerate growth.

Cost & Capex Optimisation
Maximising efficiency

Savings

$49m

All savings in 2013 were
reinvested in growth.

Several initiatives are already in
place in 2014, with specific local
projects aiming to define and
achieve efficiency targets without
compromising growth.

4 Growth in local currency.
Mobile excludes revenues from T&E, MVNO/DVNO, visitor roaming.

Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

Millicom Annual Report 2013

Risk management

Centering on strong
risk management

In this section

> President and Chief
Executive’s review

> Market overview
> Our business model
> Our strategy and KPIs
> Risk management

pg 14
pg 16
pg 20
pg 22
pg 24

In Millicom we continuously look ahead and
demand more. Our strategy and direction is
significantly influenced by the expectations of
our stakeholders, the needs of our customers
and the opportunities that we see and those
we create. We aim to strike the right balance
between risk and return, both enhancing
and protecting our business.

Millicom operates in a dynamic industry
characterised by rapid evolution in
technology, consumer demand, and business
opportunities. Combined with a focus on
emerging markets in various geographic
locations, the Group has a proactive approach
to identifying, understanding, assessing,
monitoring and acting on balancing a myriad
of risks and opportunities. Millicom’s approach
to risk includes an enterprise-wide assessment
of key stakeholder objectives, careful
alignment of those objectives with strategy
and operations, and implementing actions
at corporate and operational levels.

Millicom empowers its strategic and operational
decision makers to strike the right balance of
risk and profitable top line growth, cash flow
generation and return on invested capital.

Millicom’s risk function
Millicom has a network of risk officers at
headquarter, regional and each significant
operating country level, led by the Chief
Risk Officer. The risk function is tasked with
identifying, analysing, monitoring and
coordinating Millicom’s approach to balancing
risk with return and reporting to the Audit
Committee. The Audit Committee is responsible
for reviewing the effectiveness of risk function
activities and oversight of risk related activities
of the Group, and reporting to the wider Board
of Directors. Key strategic and operating risks
are assessed from an overall group perspective
as well as individual country and business units.
Risk action plans comprising ongoing activities
that seek to balance risks with returns are
developed, implemented and modified over
time as the underlying risks evolve. Action steps
are implemented both globally and locally by
executives and key decision makers.

Risks are inherent in business, and Millicom
accepts these risks to the extent that
opportunities for sufficient returns exist and
that systems and controls are in place and
operating effectively to manage risks on an
acceptable level. Millicom’s control environment
includes consideration of the impact of its key
strategic and operating risks, and is designed
and modified accordingly.

Evolution of key risks in 2013
2013 has been the start of a transformation
for Millicom, characterised by the
increasing commoditisation of traditional
telecommunications revenue streams,
investment in organic growth and diversification
in cable, mobile data and mobile financial
services, and strengthening our footprint in
Colombia with the merger with UNE, and further
development of the e-commerce businesses.
These developments have provided a number
of opportunities and challenges, including an
increased need to diversify and innovate in
product and services, a greater reliance on the
ability of operating entities to upstream cash to
service group level debt, and a greater need for
experienced and talented people to implement
the new strategy of the Group.

The table below sets out a summary
of the risks and opportunities we face
operating in our various emerging
markets and business categories.

Shift in consumer demand
Potential risk
The manner in which customers are
communicating and their demand
for products and services is evolving
rapidly. Failure to adapt to changing
consumer demands or failure to innovate
and lead adaptation to new means of
connecting and improving lifestyles
through digital services may lead to
loss of competitive advantage.

Evolution of the risk
Shift in consumer demand in many
of our markets is rapidly reshaping
the competitive landscape. Innovative
product offerings, such as the availability
and cost of mobile financial services, are
becoming critical components of mobile
operators in certain markets (e.g.
Tanzania).

Access to the internet and availability of
affordable handsets remains a key driver
of customer uptake and retention in
LATAM, and a decline in voice revenue
as customers use other means of
communicating, adds pressure to
traditional business models.

Where we see opportunities
We continue to see opportunities
to migrate many of our customers
to bundles of data and traditional mobile
services, and experience rapid payback on
handset subsidies in the fastest developing
data markets.

How we balance risk
with return
We actively engage our customers and
potential customers in consumer feedback
experience programmes and look to
roll-out innovations between our markets.

As customers evolve towards new means
of communication we are expanding our
presence in cable and digital media
businesses and forging new partnerships
(e.g. Facebook) to provide our customers
with new and improved experiences.

We provide a mix of tariff and product
structures targeting specific customer
segments and promote the uptake of
data and other value added services
in our more developed markets.

We have accelerated our investment
in data uptake based on customer demand
and trend and seek to expand our portfolio
of offerings and services, by introducing
new possibilities for consumers to access
content related products (e.g. the recent
launch of Tigo Star and Tigo Sports),
across multiple devices.

Ghana
Tigo Cash in Ghana won an
award for the Best Mobile Money
Deployment at the Mobile Money
& Digital Payment conference
in Dubai.

We continue to see many
opportunities to migrate customers
to bundles of data as well as
traditional mobile services. Payback
on handset subsidies is rapid in the
fastest developing data markets.

Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

Risk management
continued

Financial risks
Potential risk
A significant portion of our group debt
is denominated in US dollars and held
at Group level. Our revenue generating
activities are predominantly in currencies
other than US dollars. This creates an
exposure to fluctuations in exchange rates
that may negatively impact our reported
results and US dollar cash flows.

We are increasingly dependent on
the ability of our operating entities
to upstream cash to service US dollar
borrowings, and exposed to potential risks
related to macroeconomic conditions,
policies and currency controls in
our operations.

Where we see opportunities
We continue to see opportunities
to refinance existing debt and
benefit from the relatively low
cost of financing through global
debt markets.

Evolution of the risk
The risks related to currency controls
and macroeconomic conditions have
remained relatively stable during the year.
However, the increased amount of Group
level debt during 2013 has increased
our exposure to potential risks.

None of the countries in which we operate
have hyperinflationary economies or
immediate threat of forced currency
devaluations. Nevertheless, in some of the
countries in which we operate, political and
economic stability may deteriorate rapidly,
and result in currency devaluation or
hyperinflation.

In El Salvador and DRC the currency
of operation is the USD. In Chad and
Senegal, the local currencies are pegged
to the Euro.

Sources of financing may not be available,
or may not be available at commercially
acceptable rates in the currencies in which
we generate cash flows.

Furthermore, financial instruments that
hedge against currency fluctuations may
not be available. This creates an exposure
to exchange rate fluctuations that may
impact our US dollar reported results and
the US dollar value of our reported
external debt.

We have been able to renew or
replace existing debt on commercially
acceptable terms.

We have successfully raised additional
financing through bond increasing our
liquidity and raising our average debt
maturity.

Our tower monetisation activities in
recent years have reduced our capital
investment while increasing our operating
efficiency and lowered our need for
capital in our markets.

Our new businesses and value added
services have lower capital outlay and
therefore reduced the amount of upfront
financing required for new ventures,
products and services.

Relatively low global interest rates
have provided us with the opportunity
to refinance or raise addition finance at
lower rates than in previous years and
extend our debt maturity.

Our established operation of successful
businesses in emerging markets and
strong historic cash flow have led to an
improvement in our investment grading
and we see an opportunity to further
leverage this as we continue to seek
opportunities to raise finance with
reducing recourse or guarantees from
the Millicom parent company. This in
turn improves our debt raising ability
and flexibility for pursuing our
strategic objectives.

Further opportunities exist in
refinancing debt in our local markets.

We follow a strategy involving a mix of
debt and equity financing that creates
a degree of dependence and therefore
exposure to continuing availability of
external financing. In the event of
economic conditions reducing liquidity in
the financial markets in which we have
historically raised debt financing we may
need to seek financing or refinancing in
different markets or at higher prices than
in the past.

We have been able to renew or
replace existing debt on commercially
acceptable terms.

In 2013 we have successfully refinanced
and raised additional financing through
bond offerings in Luxembourg at
substantially reduced rates compared
to existing facilities.

How we balance risk with return
We closely monitor economic and political
conditions in the markets in which we
operate. Our cash flow planning process
involves careful analysis of the timing and
amounts of cash flows required to service
Group level debt while balancing cash flow
needs of each of our operations.

Contingency plans have been developed
to ensure alternate sources of funds are
available if required.

In certain countries we obtain financing
through our local entities reducing our
exposure to risk factors.

The diverse geographical spread of the
countries and economies and currencies
in which we generate revenues and cash
flows reduces our exposure to fluctuations
in individual countries.

We maintain a policy of holding excess
cash generated in US dollars and
upstreaming cash to holding companies
or cash pooling in US dollars.

We repatriate cash as early as possible
and through different means: royalties,
dividends and management fees,
supported by appropriate agreements.

Non-US dollar denominated debt at holding
company level is hedged to US dollars.

We are constantly analysing and reviewing
our sources and currencies of financing
and our decision making is based on a
variety of risk and opportunity based
factors including; interest rates, currencies,
credit, counterparties and liquidity.

We seek to balance the various financing
risks that we face through a variety of
sources of financing and a target mix
of variable and fixed interest rates, local
currency versus US dollar debt and hedges
against fluctuations between financing
currencies and the US dollar and variability
of interest rates.

We have significantly diversified our
sources of financing and we are less
dependent on bank financing, which now
represent less than one third of our total
financing while public financing now
accounts for almost 60% of our total
financing with longer maturities.

We have significant amounts of cash
balances with financial institutions
exposing us to counterparty risk.

The risk is largely within our control
as we can choose which financial
institutions we use and specific
amounts in each institution.

Our financial position and policy of
holding cash with several banks provides
us with greater negotiating power giving
us access to a number of sources of
additional financing if and when required.

We diversify the location of cash among
a variety of banks so that our counterparty
risk with individual banks does not exceed
limits which we have set based on each
bank’s credit rating.

Influence of shareholders and insiders
Potential risk
Certain insiders represent entities that
have a significant number of Millicom
shares, giving them substantial influence
over management.

Evolution of the risk
The shareholdings in Millicom of these
entities have remained relatively constant
in recent years as has the proportion of
representation on the Board of Directors.

Where we see opportunities
These entities have similar business
interests as Millicom which can lead to
additional business opportunities and
sharing of knowledge and skills as well
as entering into new businesses.

How we balance risk with return
Our Board of Directors comprises eight
members of whom five are independent
Directors. The five-member Audit
Committee of Millicom comprises four
independent directors.

Opportunities for cost and process
efficiencies exist with fellow
subsidiaries including procurement
and supplier relationships.

Business dealings with related parties are
performed on an arm’s length basis.

Transactions and balances with related
parties (including entities controlled by the
largest shareholder) and non-controlling
shareholders in our local operations are
periodically review and approved by the
Audit Committee.

Directors refrain from participating in
decisions and votes where they have
conflicts of interest as was the case for
the decision related to the investments in
Rocket Internet subsidiaries LIH and AIH.

Our ability to exercise control over some
of our operations is dependent on the
consent of shareholders who are not
under our control.

Disagreements or unfavourable terms in
agreements governing our joint ventures
may adversely affect our operations.

We continue to maintain strong and
productive relationships with our
fellow shareholders.

In early 2014 we signed an agreement
with our local partner in Guatemala which
strengthens our relationship by providing
us with an option to acquire the remaining
45% of shares in our Guatemalan
operation at any time over the next
two-year period.

Local partners have local expertise
and know-how which can lead to
opportunities and efficiencies in
operating our businesses.

We are in constant dialogue with our
local partners in Honduras, Guatemala,
Colombia, Mauritius, Rwanda and the
Rocket Online businesses.

Skills, knowledge and experience from
our local partners reduce the risk of
entering new countries or new businesses
and provide us with opportunities to
apply this across our different countries
and operations.

The shareholders’ agreement in Colombia
that gives us management rights, and the
option agreements we have related to
Honduras (and since January 1, 2014 in
Guatemala), enable us to fully control
and consolidate those businesses.

Regulatory, tax and legal risks
Potential risk
The mobile telephony market is
heavily regulated and taxed.

Regulations in new areas of business
such as Mobile Finance Services are
often less developed and as a result
subject to rapid change.

Evolution of the risk
Rules and regulations in the markets in
which we operate continue to evolve with
increasing types and rates of regulation
but also increasing clarity on applicability
to mobile operators.

Where we see opportunities
Advanced planning enables us to predict
and plan for potential changes in tariffs
and regulations. Dynamic pricing enables
us to adjust rapidly to the impact of any
significant rate changes.

How we balance risk with return
We constantly monitor and review
potential changes in regulations and
taxes and have implemented a tax risk
management system to identify and
actively manage these risks.

Margins on traditional mobile telephony
services have continued to be pressured
during 2013 with rate cuts experienced
in many markets.

In addition, the experience we gain in
more regulated and taxed markets enables
us to transfer knowledge and best practice
to less developed markets and react
quickly to changes.

Cost cutting opportunities are sought
in all aspects of our business to offset the
impact of newly introduced or expected
changes in taxes and regulations.

Diversification of products and services
from the traditionally heavily regulated
communications business reduces
our exposure to fluctuations in rates
and regulations.

We are operating our telephony businesses
in 13 main countries, significantly spreading
our regulatory, tax and legal risks.
Additionally we have diversified our
products/services base with less exposure
now to pure telecom operations that are
heavily dependent on regulations (these
are generally less applicable to Cable and
Digital Media, and Value Added Services).

In 2013, we launched a new
global helpline for reporting
non-compliance to our Code of
Ethics and other concerns. The
new service is available 24/7 in
several languages via phone
and internet and allows
anonymous reports.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Where we see opportunities
Regulatory pressures might even open
up some opportunities for us to serve
our customers better through continuous
innovation, especially in our products
and pricing.

How we balance risk with return
Taxes and regulatory pressures are part of
the constraints we have to deal with in the
telecom industry and we constantly look
for cost cutting and other opportunities
to offset them.

Regulatory, tax and legal risks continued
Potential risk
Any failure to comply with local or
international laws and regulations could
result in liabilities, sanctions or restrictions
in activities. Any of these events could
have a material adverse impact on
our business.

Evolution of the risk
Internal compliance, corporate
responsibility and integrity activities
continued to strengthen during the
year. No significant changes noted in
the inherent aspects of this risk.

Where we see opportunities
Our presence and reach in many of our
markets provides us with significant
opportunities to demonstrate our role
as leading corporate citizens.

In offering affordable access to voice,
data, entertainment, mobile financial
services, and related solutions we are
also investing a meaningful share of
our local net profits in corporate social
responsibility activities.

Risk management
continued

Regulatory, tax and legal risks continued
Potential risk
The tax and regulatory environments in
many of the countries in which we operate
are evolving in such a way that rates and
types of tax (including withholding tax)
and related charges, and tariff limits are
increasing regularly. This may impact the
amount and cost of repatriation of cash
from our operations and may increase
operating costs and/or reduce
interconnection revenues.

The frequency and type of tax authority
and regulatory audits are increasing,
raising the risk of claims for payment
of additional taxes, or fines.

Evolution of the risk
Taxes and regulatory changes are increasingly
impacting the amount of cash available for
repatriation relative to cash generated.

The mobile telephony sector may be
forced to provide access to its spectrum
which may result in additional competition
or may be forced to pay high prices to get
access to spectrum.

Demand for high quality spectrum
continues to outweigh availability
and shortages are expected to continue
as demand for data and non-voice
services increases.

Our position as an established number
one or two operator with contractual
rights of renewal in many of our markets
positions us favourably for both renewal
and new spectrum.

Many of the telecommunications
regulatory regimes and legal systems in
the countries in which we operate are
underdeveloped compared to those in
developed markets. This can lead to
uncertainty and unpredictability in
application of rules and regulations and
reduced levels of transparency and/or
equitableness regarding claims or disputes.

Demand for LTE spectrum continues to
increase as broadcasters, media firms
and others seek to gain strongholds in
wireless markets.

Our diversifying product and service
portfolio enables us to provide services
that optimise usage of spectrum and
reduce reliance on certain types of
spectrum. We are developing opportunities
in partnering to deliver such services as
TV and Machine to Machine.

Our strong cellular tower footprint reduces
our reliance on specific spectrum.

As a global player operating across two
very different geographies; Latin America
and Africa, we believe it is part of our duty
to contribute positively to building an
improved regulatory framework in the
markets in which we operate.

We lead by example in the way we do
business and in positively impacting and
influencing the economic environments in
which we do business. In turn this raises
our local and global brand equity.

Our increasing engagement with key
stakeholders in our markets as a corporate
citizen promoting governance and ethics
strengthens the economic environment.

Most of the countries in which we operate
telecommunications businesses do not
have universal service obligations (USOs).
If such obligations were introduced the
profitability of our operations may be
negatively impacted.

There have been no recent trends towards
introducing USOs in the mobile sector
in the telecommunications markets in
which we operate, however spectrum
and licences in certain countries, notably
Colombia and Honduras, create certain
coverage and social obligations.

In certain markets regulators offer or
require investment in coverage expansion
as an alternative to cash payments. This
can create a cost effective opportunity to
increase our subscriber base with limited
additional capital expenditure.

Increasingly high penetration levels
in many of our markets reduce the
likelihood of introduction of USOs.

Introduction of USOs may present
opportunities to further fulfill our social
responsibility ambitions. By 2016 we
aim to move beyond compliance with
applicable laws and internal policy to
a model where we actively seek social
return as an additional output from
our investment.

We have a adopted a tax strategy
with a considered approach to risks and
uncertainties, particularly where legislation
is either underdeveloped or lacking in clarity.

We apply international practice including
OECD conventions in setting transfer prices.

We actively monitor and execute a
strategy to secure high quality spectrum
as and when it becomes available based
on knowledge of customer needs.

We believe that our present and future
success is very much correlated to our
understanding of our customers. We are
used to operating in highly competitive
environments and expect competition
to remain strong.

We are ready to share spectrum with other
operators or competitors if necessary to
get access to attractive spectrum and to
reduce costs.

We pro-actively engage with regulators,
governments and other key stakeholders
in our operations. We constantly monitor
legal and regulatory developments in our
markets and in many countries provide
input into developing or enhancing
existing rules and regulations.

We operate our businesses across
multiple countries and business units
subject to various different regulations.
This diversification reduces our exposure
to country specific issues.

Our policies and procedures are based
on a backbone of integrity and ethical
practices which include promotion of
transparency and equity among our
business partners and stakeholders
in each of our markets.

We proactively engage with regulators,
governments and other key stakeholders
in our operations. We constantly monitor
legal and regulatory developments in our
markets and in many countries provide
input into developing or enhancing
existing rules and regulations.

We are actively involved in the countries
and communities in which we do business
constantly seeking ways in which the
benefits of the services that we provide
can be cost effectively provided to a
larger base on consumers.

How we balance risk with return
Corporate governance and corporate
citizenship are embedded in the Millicom
culture. We directly associate brand
equity with our public profile and see
management of our image with
customers, regulators and lawmakers in
our markets as being closely correlated.

We adopt a proactive approach to
ensuring current compliance and monitor
developments. Scenario and impact
analysis is performed regularly on
potential developments, and preparatory
actions taken in advance of effective dates
of new or amended locals and regulations.

How we balance risk with return
We regularly engage key stakeholders in
and monitor political and economic
stability in all our markets.

We have contingency plans in place that
enable us to operate under challenging/
constrained business environments (such
as Senegal during the period in which the
validity of our licence was challenged).

Our corporate responsibility initiatives
include demonstration of the significant
role we play in contributing to economic
development in the countries in which
we operate.

Local debt which is non-recourse to
Millicom reduces exposure to political risk.

We are constantly monitoring and
managing our local profiles, and
engaging with key stakeholders,
including government ministries,
agencies and regulatory bodies.

We develop and implement strategies to
position our brand and corporate profile
highlighting our contributions back to the
economies, societies and communities in
which we operate. This includes our profile
as an employer of choice, charitable
actions and our fiscal contributions.

We have a balanced approach towards
leverage. We raise debt at the operating
local level and on a non-recourse basis,
wherever possible.

Emerging market risks
Potential risk
Many of the countries in which we operate
have a history of political instability. Any
current or future instability may negatively
affect our ability to conduct business,
revenue and profitability.

Evolution of the risk
While political change has occurred with
relatively little instability during 2013 in
several of our markets, the political
systems in some of our markets (mainly
in Africa) remain relatively fragile, and
potentially threatened by cross-border
conflicts or ongoing warring action from
rival groups (for example DRC).

The recognition of the validity of our
licence in Senegal in October 2012 has
significantly reduced uncertainty in
this market.

Where we see opportunities
Political uncertainty typically hinders
country growth. Improving stability drives
economic growth and provides more
opportunities for customers to improve
their lives through use to the services that
we provide.

As we contribute positively as an industry
to the societies in which we operate,
improving stability in our markets can
lead to an appreciation of the value of
our businesses.

Some of the countries in which we operate
have political regimes that may not view
foreign business interests favourably and
may attempt to expropriate all or part of
our local assets or impose controls.

Government expropriation of assets does
occur in some of our markets (most
recently in the energy sector in Bolivia),
and this threat remains. However, other
than Bolivia the overall threat has steadily
declined over recent years.

A marked increase in social responsibility
programs and stakeholder engagement
contributes to an improved profile as a
good corporate citizen. We strongly believe
that such actions and activities leads to
increased customer uptake and loyalty
(reduced churn). They also contribute to
raising our brand image and government
view of our profile.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122
30

Risk management
continued

Emerging market risks continued
Potential risk
Many of the countries in which we operate
lack infrastructure or have infrastructure in
relatively poor condition.

Evolution of the risk
Our tower monetisation activities and
tower sharing arrangements have reduced
(shared) many of the direct operational
risks connected to operation of cell sites.

Challenges remain in certain countries
where natural and manmade risks and
threats to sites threaten coverage and
quality of services. These include
natural disasters as well as reliability
of energy supply.

Macro-economic risks
Potential risk
An economic downturn, a substantial
slowdown in economic growth or
deterioration in consumer spending could
adversely affect Millicom’s operating
results and financial conditions.

Evolution of the risk
Some of the economies in which we
operate continue to be impacted by global
or local economic slowdown. The markets
in which we operate in Central America
which are to some degree dependent
on international remittances remain
particularly affected. This increases
consumer price sensitivity which
typically lowers margins and
increases potential churn.

Where we see opportunities
Further opportunities exist for sharing of
passive infrastructure or outsourcing to
specialised tower management companies.
Such deals generate value in operating
efficiency and shared risk generally
reduces risk.

Diversification into e-commerce and
expansion of cable and digital media
services reduces our reliance on
infrastructure connected to operation of
cell sites for revenue generating activities.

How we balance risk with return
Network optimisation and operating
efficiency projects are a regular and
ongoing part of our actions to minimise
tower site outages. We make use of
back-up generators at many of our sites
to ensure our services are constantly
available.

We are continuously looking for site
sharing opportunities with other operators
and tower management companies.

Our business continuity plans include
assessment of infrastructure related risks
to which we devise and implement back-up
and other contingency plans including
alternate sources of energy.

Where we see opportunities
Despite economic conditions, demand for
the increasingly diversified range of our
services from higher value and target
customers continues to increase, in
particular data, mobile financial services,
entertainment and solutions.

Many of the economies in our markets
continue to outgrow more developed
economies, leading to increased
disposable income and consumer
demand for our products and services.

How we balance risk with return
We are continuously monitoring and
refining affordability of our services.

Operational efficiency management
programs in place seek to reduce cost and
deploy Capex in business areas offering
higher return on investments.

Our business model is focused on cross
selling and upselling more services to
our high value customers and therefore
should enable us a higher resilience to
economic conditions than the telecom
industry on average.

Dependence on spectrum and licences
Potential risk
We face substantial competition in
obtaining and renewing licences, particular
in our mobile businesses.

Evolution of the risk
We have successfully renewed and
obtained new licences in our operations in
recent years. We see less threat from new
entrants in our markets.

We have successfully obtained licences
for operation of new businesses (such as
mobile financial services).

Diversification of our businesses reduces to
some extent, our dependence on one or
limited numbers of licences and our
geographical spread of operations further
reducing our exposure to individual licence
renewal risk.

Where we see opportunities
We expect a degree of consolidation will
occur in some of our markets and
especially in Africa. This will reduce
demand for existing and future spectrum.

Many of our markets are still to auction or
make available spectrum enabling 3G or
LTE service provision. As an established
operator in all of our markets we see
strong opportunities to acquire such
spectrum which will enable us to follow our
strategy of providing consumers with more
value added services.

How we balance risk with return
Our preparation for licence renewals and
spectrum auctions or allocations starts
well in advance of expiry or availability.
Our approach focuses on legal
requirements, our historic compliance, as
well as amounts and sources of financing.

We have ongoing dialogue with
governments and regulators responsible
for spectrum and licences. We are regular
participants in industry groups and work
with governments in addressing mutual
industry issues.

With penetration levels close to 100% and
our extensive distribution footprint in our
Latin American markets and in the urban
areas of our African markets, we believe
that potential new entrants in our markets
have limited opportunities to jeopardise
our established position.

We actively support government
programmes that link social objectives
with licence acquisitions or renewals.

Dependence on spectrum and licences continued
Potential risk
Availability or cost may limit our ability to
acquire required or preferred frequency
blocks of spectrum in some of our markets.

Evolution of the risk
Governments are opening up additional
blocks of spectrum as technologies
change.

Where we see opportunities
We consider spectrum an attractive and
scarce resource. It is a prerequisite to
operate as a mobile telecommunication
service provider.

The risk of parallel industries (e.g.
television) competing for the same
spectrum is increasing over time.

Diversification of our businesses reduces
to some extent, our dependence on one or
limited blocks of frequency and our
geographical spread of operations further
reduces exposure to individual frequency
related risk.

Consolidation and our active approach to
pursuing acquisition opportunities in some
of our markets creates opportunities to
obtain spectrum from other operators.
Such acquisitions may be less competitive
and less costly than direct purchase from
governments or regulators.

Spectrum sharing among competing
operators is increasingly common in the
industry and we see opportunities in this
area particularly in lower cost of
acquisition and efficiency in use.

How we balance risk with return
The timing and cost of our investments in
spectrum are evaluated carefully against
potential returns (ROIC). We consider
alternate frequency blocks and the
possibility for jointly bidding for spectrum
with other operators.

We evaluate ongoing spectrum needs
against current capacity and quality as
well as forecast growth or transition to
new technologies (from cost of capex
and equipment service and customer
demand perspectives).

Over the years, we have developed
extensive experience in negotiating
licence renewals and spectrum prices.

We actively support government programs
that link social objectives with spectrum
acquisitions and renewals.

Entering into new businesses
Potential risk
Our growth strategy is supported by
constant innovation and acquisition of
complementary businesses within the
Digital Lifestyle sphere.

As we enter into new business areas such
as Mobile Financial Services, e-commerce
services and entertainment, we face new
and differing risks including: regulatory
requirements, employee skills, reputation
risk, start-up operating losses and success
factors different from those we are
familiar with in the telecom business.

Evolution of the risk
While acquisition of new businesses
increases risk, we are acquiring knowledge,
skills and experience of executives and
management driving these businesses
(e.g. e-commerce) or leveraging from our
existing businesses (e.g. Cable).

We have invested considerably in
innovation and value added services in
people, process and technology to balance
risks connected new businesses.

In Africa in e-commerce our agreement
with MTN and Rocket (subject to
regulatory approval) signifies a strategy
of cooperation and joint development
of new businesses with another
telecommunications company.

Where we see opportunities
We see significant potential in synergies
from combinations of cable, TV, and
broadband services with our traditional
mobile operations in many of our markets
(particularly LATAM) and to a lesser extent
with e-commerce.

We believe that expanding our presence to
cover more of the spaces and places where
people “connect” in the future will enable
us to protect our market share and provide
our customers with higher quality and
more services in future. We also believe
that such positioning will enable us to
develop more partnerships with businesses
seeking channels to provide services to our
customer bases.

How we balance risk with return
In 2012 and 2013, we have and will
continue to invest in new business
categories, and seek to make additional
acquisitions if opportunities are available
at the right price.

When necessary, we partner with experts
in the business areas we are developing
and monitor risks and returns against
targets, refining timing and direction
as necessary.

We have a step by step approach to
entering into new business areas and
markets; we trial first and assess the risks
and potential rewards before taking any
decision to launch.

Acquisition and integration of UNE in Colombia
Potential risk
Our merger with UNE in Colombia provides
a number of challenges and opportunities.
Failure to adequately integrate UNE and
extract value from synergies and
efficiencies may impact shareholder
value and cash flow generation in our
Colombian operations.

Evolution of the risk
This risk has materialised in 2013 as a
result of the merger agreement, and the
transaction remains subject to regulatory
approval and closing conditions.

Where we see opportunities
We see significant potential in synergies
from combinations of cable, fixed line and
broadband services with our traditional
mobile operations in Colombia, and the
merger will significantly strengthen our
presence and reach into additional
geographic areas of Colombia.

$800 million of financing has been
obtained for the merger through issuance
of a bond at holding company level
which is restricted until completion
of the transaction.

How we balance risk with return
Our investment strategy is based on
careful analysis and diligence in the
pre-acquisition stages. Our existing
knowledge of the Colombian and LATAM
markets provide us with the ability to
identify value creating opportunities from
market to market and our experience in
integrating cable operations in other
LATAM markets enables us to apply
knowledge and skills obtained to the
Colombian market.

Key members of our management team
in Colombia have been deployed from
other group companies with cable and
fixed line operations.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

Review of operations

Central
America

Market leaders in our
Central American operations
(% of market share)

65.4

53.8

38.3

El Salvador
Guatemala
Honduras

In Costa Rica, customers
choosing HD TV grew by

34%
50%

and fixed telephony by

Macroeconomic and
regulatory environment
The macroeconomic and regulatory
environment was challenging in 2013 in
our Central American markets, despite the
improvements in remittance flows into
the region compared to 2012.

Mobile Termination Rates (MTRs) were cut
several times in Honduras. With over 65%
market share, the cuts had a significant impact
on our margins. At the end of the year, the
asymmetric MTRs were $0.015 and $0.025 in
Honduras. MTRs were also cut in El Salvador in
line with the glide path for cuts every year in.
At the end of 2013, the MTR was $0.05 in
El Salvador and $0.015 in Guatemala.

Remittance flows from the United States
increased in Honduras and El Salvador
compared to 2012. This increase did not
translate, however, into higher revenues or
customer in take, which we attribute to the
high government deficit and resulting reduced
purchasing power of consumers as taxes
increased. El Salvador GDP growth fell to the
lowest in the region, at 2.5%, and direct
foreign investment remained low.

Elections were held in Honduras with little
impact on our business. Elections will be held in
El Salvador and Costa Rica in early 2014.

In Guatemala the environment was more
positive with remittances from the US estimated
to be $5.4 billion in 2013, up from $4.8 billion in
2012. The government has improved business
competitiveness, increased foreign trade,
attracted foreign investment, promoted public
security and improved macroeconomic stability.
In September 2013, the government introduced
a requirement for mobile device registration, to
deter device theft.

Number portability has been discussed in all
of our mobile markets in Central America, and
implementation seems a strong possibility
during 2014 in Honduras and El Salvador.

In Costa Rica, inflation fell to its lowest rate
since 2009. In 2013 we were obliged to
introduce VAT on internet services, increasing
cost to consumers and leading to one-off costs
for the year as this implementation was
retroactive. Unemployment among young
adults (our core customer group for internet
services) exceeded 20%.

Overall the business environment remained
stable compared to 2012, with low inflation
rates and increasing trend in average
household income.

Competitive environment
Competition in Central America remained
strong, despite no new entrants, as
competitors have continued to push reload
multipliers, aggressively priced packages and
activation benefits. We believe that loss of
customer market share in Honduras of 4.4ppt
and El Salvador of 2.6ppt are attributable to
such offers by competitors.

Number portability plans will likely be seen by
competitors as an opportunity to make market
share gains, as we are clear market leaders in
our Central American operations. At the end
of the year, we had 65.4% market share in
Honduras, 38.3% in El Salvador and 53.8%
in Guatemala.

In Costa Rica, an existing low-cost competitor
invested in coverage within our footprint,
and we expect new entrants in the cable
space in 2014.

El Salvador postponed its planned 1900 MHz
auction and indicated that it would only be
available to new entrants, opening up the
possibility of new competitors in near future.

Business units
In the Mobile business in 2013, we continued
to see our revenue mix evolve from traditional
mobile voice and SMS revenue, with erosion in
voice being compensated by an increase in
data and Value-Added Service (VAS)
revenues. An increasingly segmented
approach with targeted personalised offers
has been used to promote cross-selling and
keep ARPU on an upward trend. Unique
offers, such as unlimited music with Deezer,
have helped push ARPU in the post-paid
segment upwards. At the end of 2013,
monthly mobile ARPU in Central America
stood at $10.1.

At the same time, an extreme focus on low
prices, a tactic of our competitors in the past
years, affected our revenue less towards the
end of the year. For example in El Salvador,
we have seen reload multiples coming down
to 3X or 4X from 6X.

Appetite for data has been high in
Central America in 2013. We have pushed
smartphone penetration with subsidies, and
reduced prices of entry-level handsets, mainly
targeted at the pre-paid customer segment.
To entice customers to upgrade, we have
offered the opportunity to “try & buy”
smartphones and given up to 1GB of free
data with the purchase of a device. In
El Salvador, Tigo had the lowest priced
smartphones in the market, selling at
$53.99 without subsidy.

Millicom Annual Report 2013

Demand for mobile data access in Central
America has been high in 2013. In the year,
we put effort in a wider device offering to our
customers in all price points with focus on
entry-level segments, and increased device
subsidies, as well as the availability of devices
in our distribution.

Smartphone availability in distribution in
Guatemala grew within 2013 from 10% to

90%

Central America
Our “Paquetigos”, prepaid bundles
including voice, SMS and data,
brought mobile internet to many
new customers in 2013.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 201335

Branding and distribution
In distribution, the focus has been on device
availability and promotion of the data
experience. In Guatemala, we significantly
increased smartphone availability in our
distribution channels from 10% to 90%,
a level unmatched in the market.

We have been promoting the visibility of Tigo
and the use of mobile data through outdoor
festivals, digital campaigns on social media,
flash mobs and competitions involving
smartphones. In large-scale events we are
able to engage with customers directly,
letting them try (and buy) services.

The “Go Blue” campaign to promote the
visibility of our Tigo brand has continued for
the third year running, focusing on high
visibility for our points of sale. In Honduras,
we have decentralised our direct sales to both
reduce cost and ensure brand presence in all
major cities in the country. In El Salvador, we
have increased the number of points of sale,
which in the region reached 144,000 by the
end of 2013.

To address the quality of new customer
acquisitions, we have been working on a new
model for our agent commission structure.
Tigo Sales School was rolled out in all
countries except Costa Rica, which is targeted
for 2014. The programme, which started in
Africa in 2012, has helped reduce turnover
of freelancers and increase revenue and
activations. In general, we have focused
on educating our points of sale on the new
digital lifestyle range of products to ensure
they are able to support customers in
choosing the right plans and enjoying
a positive first experience.

The most marketed and popular data plan
in Central America has been pre-paid data.
We have been very successful in introducing
customers to data through packages –
Paquetigos – that bundle voice, SMS and data.
Sales of such bundles doubled in Guatemala
in the year. We have also combined pre-paid
data with offers such as free social network
services over a certain period.

In our Cable business we focused on promoting
double and triple bundles – offers that combine
Pay-TV, fixed internet and telephony. We
focused on inviting our customers to upgrade to
the superior experience of High-Definition TV,
and high-speed internet. In 2013, we introduced
new HD channels and continued to differentiate
in our markets as leaders in HD TV content with
35 channels by the end of 2013.

In Costa Rica seasonal promotions of our
TriplePlay offer doubled our client base for
bundles. Our customers choosing HD TV grew
by 34% during the year, and our customers
choosing fixed telephony grew by 50%. We
launched Video on Demand in Costa Rica at
the end of 2013. El Salvador suffered from
strong competition in the home space, leading
to a significant reduction in broadband prices
during the year, and negatively impacting
our margins.

In Mobile Financial Services, we have been
encouraging customer uptake by promoting
self-top-up and bill payments, in addition to
the more common remittance and money
transfer usage.

The Central American region has remained
challenging for the service due to regulatory
pressure. This is particularly evident in
Honduras, where a new law regarding banking
distributors is under consideration. In total
5.8% of our customer base in Central America
was using the service by the end of 2013.

As in all markets, MFS requires a high initial
push to build awareness of the product and its
benefits. In Central America we are not
benefiting from joint promotion of the service
with our competitors. In El Salvador, where the
penetration of the service is the highest in the
region, passing the 10% mark at the end of
2013, we pushed visibility of the service at our
points of sale with a “Go Yellow” campaign.

On the cable network we have been digitalising
nodes allowing for higher quality content in
addition to traditional analog video. Homes
passed in the region grew to 1.9 million in 2013,
a 14% increase.

Outlook
In 2014, in Central America we will continue to
focus on operational efficiencies in distribution
and network deployment and management as
well as increasing customer focus through
segmented offers and a knowledgeable sales
force supporting adoption of new services.
We believe customer service will be a
significant differentiator going forward. We
have a great opportunity to bundle a unique
value proposition to our customers across our
business units, and at the same time create
commercial synergies. Data, whether mobile
or fixed, will be a key driver in the region.

We believe the biggest challenges and
uncertainties in the coming year will
again come from the regulatory side, the
macroeconomic and political climate, and
the manner in which our competitors will
seek to benefit from any changes.

El Salvador
In El Salvador, our “Go
Yellow” campaign in 2013
brought our Mobile Financial
Services in a big visible push
to our customers. The
campaign resulted in a
strong increase in the
penetration of the service,
with 11.4% of our customers
using the service at the end
of the year.

We ended the year with 91 stores in Central
America, 18 more than the previous year. The
most new stores were opened in Honduras.
The focus has been to upgrade existing stores
into experience centres, focusing on mobile
data and bundled offers.

Network development
We have increased capacity mostly in areas
of strength and major cities in order to assure
quality of service and experience to our mobile
customers, and in geographic coverage. We have
done this by increasing the number of sites,
upgrading equipment, deploying back-up power
sources to remove outages, and by roll-out of
fibre backbone. In Guatemala we have expanded
basic 2G coverage to new areas, previously
unserved by any operator.

To improve the capital efficiency of our networks,
we have expanded our site sharing activities,
modernised base station hardware (for single
RAN) and increased both on-site and remote
security measures to protect our assets. In
Guatemala, we have been replacing remote fuel
powered sites with hybrid battery and solar
panels. These will become more cost efficient
and address the challenges of fuel theft and cost
of transportation. We are planning to increase
our sharing of sites and fibre optic cable in
Honduras and El Salvador further during 2014,
in order to accelerate coverage and capacity
improvements. In terms of spectrum, we
managed to secure 4G spectrum for $12 million
in Q4 2013 in Honduras.

Regional statistics as of December 31, 2013

Population (m)
GDP per Capita ($)
Mobile penetration

El Salvador
6
7,500
108.6%

Guatemala
14
5,100
96.4%

Honduras
8
4,400
86.4%

Market position

1 of 5

1 of 3

Costa Rica
5
12,900
n/a
1 of 7
(Pay-TV)
2 of 6
(Broadband)

Revenue Generating Units
in Cable (RGUs 000’s)1

353

144

149

327

1 Total services (Pay-TV, broadband Internet and fixed telephony) in cable connected homes.

Review of operations
continued

Homes passed in the
region grew to

1.9m
14%

in 2013, an increase of

Food aid in Guatemala
In Guatemala, we partnered with Oxfam to
distribute more than 2.25 million Guatemalan
quetzals through Tigo Money, for food aid in
the region of Chiquimula, one of the worst
affected by drought and child malnutrition in
Guatemala. The aid reached 1,700 families.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 2013

Review of operations

South
America

Pay-TV subscribers receiving
digital TV in South America

85%

Market shares in our
South American operations

57.8

34.9

13.5

Colombia
Bolivia
Paraguay

Macroeconomic and
regulatory environment
The economic environment in Colombia
remained positive in 2013 with GDP growing
4.4% for the year. Both inflation and
unemployment were lower than in 2012. The
Colombian Central Bank maintained interest
rates at levels that have encouraged spending
in the economy. These measures have assisted
in our revenue growth, particularly in consumer
ability to upgrade to higher-end devices.
Equipment sales grew well over 45%
year-on-year in December.

New income taxes were introduced in
Colombia that will likely negatively impact
our profitability. Asymmetric interconnection
charges were put in place in February 2013, as
well as other regulatory restrictions affecting
our position favourably. Colombian regulators
have also emphasised monitoring quality
of service metrics, and compensation of
customers for dropped calls and service
failures were encouraged.

The GDP of Paraguay grew by 8.5% in 2013,
driven largely by strong performance in
agricultural exports of soybean and beef. The
growth followed a very difficult 2012, but did
not reach all levels of the population and
translated into a modest increase in consumer
purchasing power. Paraguay held elections in
2013. The new government appears strongly
supportive of development of the private sector.

No significant regulatory developments took
place in Paraguay in 2013. Given our strong
market position in the country, there have
been discussions about asymmetric regulation,
in particular regarding interconnection rates,
to be potentially introduced in 2014.

In Bolivia the overall economic environment
was stable in 2013. GDP growth at 4.8% was
supported by high international metal prices
that form part of the key economic drivers for
the country. Remittances, coming mostly from
Spain, were also up by 7%.

Several new laws were introduced
affecting private businesses in general and
telecommunications specifically. Mobile
Termination Rates were cut to $0.07 and
regulations with high penalties were introduced
regarding customer and quality of service, billing
and frequency use. Like Colombia, Bolivia will
hold Presidential elections in 2014.

The year has been volatile for South American
currencies. The Colombian Peso and the
Paraguayan Guarani experienced a significant
devaluation of 9% over the year.

Competitive environment
We gained 2% in market share in Colombia,
remaining the number three player, and
closing at 13.5% of the market at the end of
2013. Two new MVNOs entered the Colombian
market in 2013, which now has five MNVOs.
One, operating on a competitor’s network,
launched aggressively priced bundled data
offers that we were able to counter for the
most part by including differentiating content
in our bundles.

In Paraguay we remain a strong market leader,
with market share having remained fairly
stable throughout the year, peaking at a record
high of 59.4% mid-year. We closed the year
with 57.8% market share. There have been
no new entrants to the market in 2013.

In Bolivia, due to new customer service
regulations, we adjusted our market share
calculation. We managed to increase our
market share during the second half of the
year with an aggressive SIM card activation
campaign, closing the year at 34.9%. We
remain a strong number two operator in the
country. While no new competitors entered
Bolivia, a competitor launched an MVNO
service in a major city of the country.

Business units
In our Mobile business we have strongly
encouraged customers to adopt mobile
data and entertainment services by offering
new packages and innovative products.
Our revenue mix has evolved in this direction
in all markets in 2013, with data and value
added services gaining ground on voice
and SMS services.

In Paraguay we faced strong price
competition on voice, pushing down our
average price per minute by 22% during the
year. Mobile data tariffs also decreased due
to a change in our data offer, from more
expensive “data on demand” offers to either
bundled packages or monthly data plans.
Data and smartphone pricing in Bolivia were
affected by more stringent regulation after
mobile internet was declared a “basic service”.
In Bolivia we reduced our “data on demand”
tariffs by 70% in April and managed to
achieve the same revenue levels within
four months, demonstrating both the
elasticity of the market and high demand
for data services.

Millicom Annual Report 2013

In February 2013 we entered into discussions
in Colombia with UNE, the cable and fixed
telephony provider, regarding a potential
merger of UNE with Tigo Colombia.

The merged company will create a truly
integrated digital lifestyle player for
Colombian consumers, offering a
comprehensive range of bundled digital
services to millions of households, including
mobile and fixed telephony, mobile and
fixed broadband and Pay-TV.

Our revenue growth in Colombia
for FY2013

18.6%

Monthly increase in Easy Taxi rides
throughout Latin America

50%

Colombia
In Colombia taxi drivers are also
offered a specific Tigo data-plan to
facilitate the recruitment of new
Taxi drivers to Easy Taxi and new
mobile customers to Tigo.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 201338

Review of operations
continued

Customers who use Mobile
Financial Services in Paraguay

31.8%

Expanding 3G coverage
In South America, we focused in 2013 on
providing good quality and coverage of our 3G
services. In Paraguay, we increased 3G coverage
by 12.5% with 77.5% of the population having
access to 3G services at the end of 2013.

The most popular value added services in
South America in 2013 have been our
exclusive music service with Deezer, as well as
Facebook USSD. The unlimited music offer
with Deezer, for both pre-paid and post-paid
smartphone users, differentiates us from our
competition. We have included the service into
our data bundles and offered it free to
customers exceeding $20 monthly data
packages. Facebook USSD has served as a key
entrance for future smartphone users, allowing
them to enjoy social networking in text form as
a first step.

In Paraguay, we launched Facebook Zero, free
access to Facebook, and also available in
Guarani, the local language, in December
2013. The service has been very popular and
has had a positive effect on data usage
already in the short period of availability.

The number of post-paid users increased 16%
in South America compared to 2012.

In the Cable business, we have been focusing
on locally relevant content, bundling TV and
internet, and directing existing TV customers
towards high definition content. In Paraguay
and Bolivia, we have been promoting our
exclusive rights to local soccer, which has been
made available on our HD platform in 2013.
As a result of a very high visibility campaign in
Paraguay “Futbol HD”, our TV customer base
grew by 38%. We also focused on selling
packages bundling Pay-TV and internet
and HD plans.

In Bolivia we acquired the broadcaster
Multivision in November 2013. Our Paraguayan
TV content was awarded two awards and a
special mention in ATVC Awards, which
recognises the best TV productions in Latin
America.

In February 2013 we entered into discussions
in Colombia with UNE, the cable and fixed
telephony services arm of EPM, an industrial
and commercial conglomerate, regarding a
potential merger of UNE with Tigo Colombia.
The negotiations were successfully completed
and an agreement signed in October. Final
regulatory approvals are expected during the
first half of 2014. The merged company would
be able to offer a comprehensive range of
bundled digital services to millions of
households, including mobile and fixed
telephony, mobile and fixed broadband,
and Pay-TV.

In Mobile Financial Services, Paraguay
continues to be the leading market in South
America in terms of penetration of the service.
At the end of the year 31.8% of our mobile
customers were using the service. 80% of MFS
revenues came from remittance-type money
transfers. We promoted the use of peer-to-peer
transfers as well as bill payments in certain
regions where electronic payment can offer
convenient solutions to the challenge of
receiving bills on time. Out of our portfolio of
40 types of bill payments, those relating to
electricity payment were the most popular in
Paraguay.

We launched MFS in Bolivia in January 2013.
We are currently the only provider of such
services in the country. Focus in 2013 has been
on creating brand awareness and educating
our customers on the benefits of the service.
One method has been to introduce customers
to a self-top-up option.

Strict regulation exists in Bolivia regarding
electronic wallets. As a result, we launched
machines at all Tigo Money points of sale to
dispense receipts for transactions. This allows
us to comply with regulations and makes
transactions more tangible to customers who
are getting to know the service.

Colombia is the only market where we do not
offer any financial services, and we have no
plans to launch in the near term, as our priority
and focus in 2014 will be on the merger with
UNE and continuous growth of our mobile
market share. Our Online retail ventures in
South America have been developing strongly.
Brazil was our number one market in South
America, with e-commerce sites such as Kanui
and Tricae leading the way.

The mobile taxi booking service “Easy Taxi”
also continues to grow. The service is available
in eight countries and approximately 50 cities
in Latin America, with the number of rides
increasing by an average of over 50% per
month during 2013. To benefit from synergies
with our existing business, we pre-installed
apps on smartphones in Colombia, along with
cross-promotion in all markets and global
knowledge sharing within areas such as IT,
marketing and infrastructure. In Colombia,
taxi drivers are also offered a specific Tigo
data-plan in order to facilitate the recruitment
of new drivers to Easy Taxi and new mobile
customers to Tigo.

In 2013, we acquired additional spectrum in
Bolivia and Colombia to allow us to further
improve the quality of our data services.
We also renewed our licence and acquired
an additional 4G licence in Colombia.

Branding and distribution
Virtual interaction with customers has
increased this year, with Facebook becoming
one of our main communication channels.
Our Bolivian Facebook page is the most
“liked” in the country, and we also offer
customer service via Live Chat on our website.
We are also increasingly using internet and
social media for promotions and as a sales
and distribution channel.

The number of points-of-sale has increased in
Bolivia and Colombia this year to improve our
market presence, capillarity and efficiency of
our distribution. Some of these new sales
points focus exclusively on Tigo Cash. We
have been revisiting our customer acquisition
models as well as monitoring of our points of
sale. This year, our Bolivian go-to-market
team received the ISO 9001 certification, first
in the Group and in the country.

During 2013, we put increased emphasis on
the quality of our sales force, from
recruitment and selection to providing
increased support and oversight and training
opportunities and focusing the efforts of this
key group on our new product offering.

Our number of stores increased in South
America during 2013, particularly in Bolivia.
Many of these stores focus on showcasing
and promoting our data and other value
added services and smartphone sales. In
towns where we do not have stores, we
operate TigoMovil minivans, which are mobile
customer service kiosks. In Bolivia, these vans
reach over ten thousand customers each
month.

Network development
Network development in 2013 in South America
focused on providing a good 3G experience for
the growing data customer base through the
addition of capacity in high density areas. In
Paraguay we increased our 3G coverage by
12.5% in the year, with 77.5% of the population
now having access to 3G. We continued to
maintain and improve our performance in the
key network quality metrics as coverage and
traffic increased. We also continue to expand
basic coverage, with Bolivia adding 32 new base
stations in rural areas where no communications
networks previously existed. We also brought
internet connectivity to 20 new cities previously
unserved by fixed broadband.

In Colombia and Bolivia we acquired additional
spectrum during 2013. In Colombia we renewed
our licence and acquired a new 4G licence, for a
total of $126 million. We acquired several blocks
of spectrum in Bolivia for a total of $59 million,
notably 2x10 MHz in 1900MHz band and
2x15MHz of AWS spectrum in the
1700/2100MHz bands. In July, we obtained
2x12MHz of 700MHz band spectrum. The
additional capacity we have been able to
acquire with this new spectrum has both
increased our coverage and improved user
throughput. At the end of the year, our 3G
services reached 57% of the Bolivian
population. In Paraguay we also purchased
additional spectrum for $4 million.

In Paraguay and Colombia, significant
savings have been achieved in both Capex
and future Opex through equipment swaps,
re-negotiations with suppliers and conversions
to more energy efficient solutions. We have
increased site sharing in all countries in order to
reduce Capex and have made good progress in
Paraguay and Colombia. In Bolivia, where in
2013 the regulator released long expected
regulation regarding sharing initiatives, only ten
sites have been shared so far and further site
sharing appears challenging to achieve. We
continue to push for more such initiatives in the
future, with our competitors of the benefit of
both the industry and customers.

In Colombia, we acquired in June 2013
2x15MHz of spectrum in AWS. We deployed LTE
in the five main cities of Colombia: Bogotá,
Medellín, Cali, Bucaramanga and Barranquilla.
The LTE roll-out, to be performed together with
Telefonica on a 50/50 basis, will bring
considerable Capex savings. The plan is to
roll-out over 2,000 LTE nodes over the next
five years.

Outlook
The focus in the South American regions
continues to be: momentum on mobile data,
differentiating value added services, and
further roll-out of cable and satellite offerings.
We are looking forward to concluding the
regulatory requirements for the agreement
with UNE within the year to create a truly
integrated digital player in the Colombian
market.

The biggest challenges in the region relate
to renewal of the licence in Bolivia in 2015,
and potential unfavourable regulatory
developments.

Regional statistics as of December 31, 2013

Population (m)
GDP per capita ($)
Mobile penetration
Market position
Revenue Generating Units in Cable (RGUs ’000s)1

Bolivia
10
4,800
76.3%
2 of 3
48

Colombia
46
10,200
106.2%
3 of 3
n/a

Paraguay
7
6,200
97.4%
1 of 4
248

1 Total services (Pay-TV, broadband Internet and fixed telephony) in cable connected homes.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 2013Millicom Annual Report 2013

Review of operations

Africa

In Rwanda, we approached

customers and a market share of

2m
38%

Number of our customers
using Mobile Financial Services
in Tanzania

45.6%

In 2013, we focused a great deal of resource
and management’s attention to Africa, with
a new strategy to increase our coverage,
improve our service and revive the Tigo
brand with high visibility campaigns.

Macroeconomic and regulatory
environment
GDP growth remained above global average
in nearly all of our African markets. Weighted
average GDP growth in our African markets
was 5.8%, while average inflation was 8.8%.
However, many new regulatory proposals
made the operating environment challenging.

Many new proposals for taxation of the
telecommunications sector were introduced,
to add to the already heavy tax burden. The
year was particularly challenging in terms of
regulation in Tanzania where Finance Act
no.4 introduced by the government in July
increased excise duties, extending to cover
all telecom services, not only voice. The
government withdrew its proposal for a
SIM card tax in December 2013.

Tanzania also cut Mobile Termination
Rates (MTRs) by 70% in March and
introduced stringent new requirements
on SIM registration. Compliance to the
regulation led to a decline in new activations,
as registration is challenging due to lack
of formal identification documents.

In Ghana a fall in prices of the main exports
of gold and cocoa, as well as the new
government’s commitment to increase
civil servant pay by 10%, increased fiscal
pressure and led to a number of new proposals
for taxes on the sector. The main proposal was
for the extension of the Communications
Services Tax (CST) to interconnection charges
and “free airtime” promotions. The Ghanaian
regulator is expected to continue focusing on
Quality of Service metrics in the coming year,
and increasing potential sanctions and
penalties, making improvements a focus area
for us in 2014.

In Rwanda the conflict on the Congolese
border resulted in the freezing of foreign aid
on which the country is largely dependent,
causing the local currency to deteriorate
against the US Dollar. Apart from Rwanda and
Ghana, where the Ghanaian Cedi depreciated
significantly against the dollar, we saw little
effect on exchange rates in the year.

Labour relations were tense in Senegal in the
year, in the aftermath of the resolution of our
long-lasting licence dispute. Following a strike
in May, we started negotiating a collective
agreement with local unions, which we expect
to be finalised during the first half of 2014. In
June 2013, we signed a similar agreement in
the DRC, which had a positive impact on
employee satisfaction.

Competitive environment
Many of our markets saw new entrants in
the previous year, who introduced aggressive
tactics to gain position, putting pressure
on our market share. In DRC, where we
remain the number two operator in the two
regions we are present, (Kinshasa Bas-Congo
and Kivu), with 31% market share, we felt the
full impact of the rebranding of a competitor
that entered the market in 2012, and the
entrance of another player with a very
aggressive on-net offering. We were able
to counter most of the impact with our
expansion to new regions of the country
and through tactical promotions. A sixth
operator is expected to enter in 2014.

In Rwanda the third operator, who entered
the market in 2012, has accelerated growth.
Our customer numbers grew strongly and
we approached the milestone of two
million customers while our market share
grew to 38%.

In Tanzania we lost market share due to the
aggressive MTR cuts and more stringent SIM
registration requirements. Coverage
expansion in the country also meant we have
exposure to competitor numbers previously
not visible in our measurement of market
share. We ended the year with 29% market
share. In Senegal, our market share was 29%,
down slightly from 31% at the end of 2012.

In Chad we maintained the clear market
leader position, rising to a 53% market share.
There are discussions in the market regarding
potential increased competition.

In Ghana, despite strong and active
competition, we managed to end 2013 on a
positive trend, with market share at 18%, due
to compelling new products, brand focus and
focus on our distribution channels.

In 2013, one transforming moment in our
own operations stands out. In June 2013,
we were able to return to Kivu in the
north-eastern DRC after the easing of
hostilities in the region, allowing many
people to connect to their families and
friends via telephone for the first time.
With 11 million residents, our re-entry to
Kivu doubles our footprint in the country.

New customers in the first six
months of operation in Kivu

500,000

Chad
In Chad in our loyalty promotion
during the Muslim festival of
Tabaski we gave away 900
sheep to customers with
highest consumption over a
one-month period.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 201342

Review of operations
continued

Mobile penetration in
our African operations

100.7

80.7

69.0

44.9

45.0

47.0

36.2

Chad
Tanzania
DRC
Rwanda

Senegal
Ghana
Mauritius

Partnership on online services
In December 2013, we welcomed MTN as a
strategic partner to accelerate the growth of
our online alliance in Africa. Together with
MTN, we reach 220 million mobile customers
with very limited overlap. This is significant as
the synergies are numerous between mobile
business and online services, through the
opportunities to leverage the distribution
network, the customer base and the payment
infrastructure.

Business units
In our Mobile business, data penetration has
increased significantly in all of our markets
in Africa in 2013. This has been driven by our
offer of affordable voice/SMS/data bundles,
sales of feature phone with GPRS and entry
level smartphones approaching $50. We
continue to migrate customers towards
post-paid contracts, with post-paid
subscriptions increasing by 35% in 2013,
although the numbers still remain modest.

We have continued to add new locally
relevant Value-Added Services (VAS) in
particular in the entertainment, social media
and mHealth area. In Ghana, voice and
audiotainment products such as voice
operations (Tigo Kasade) and Religious Portal
have been very popular, as well as a Hospital
Insurance product.

In Senegal and Tanzania we focused on bundles
tailored to specific customer segments, helping
us introduce customers to data and relevant
services, while offering affordable rates for SMS
and voice calls. For a positive data experience,
we introduced notifications to avoid bill shock
for customers and allow free surfing after a
level of spend was reached. These initiatives are
important in educating our customers on the
benefits of data but also to help them
understand and control data consumption.

Mobile Financial Services were available in
all our African markets with the exception of
Senegal by the end of the year. Penetration
grew strongly and steadily in all markets, with
Chad becoming the fastest deployment to date,
reaching 9.6% penetration in only ten months.
Tanzania remains the most developed market
with 45.6% of our users using the service,
followed by Rwanda with 37.1%.

In 2013, we introduced our customers to
mobile financial services well beyond simple
person to person money transfers. Our
customers used their mobile wallets to receive
salaries, pay utility bills, buy airtime and for
merchant payments.

In DRC, we introduced civil servant payments
with Tigo Cash, which have increased efficiency
and transparency of money flows. In Rwanda
we also introduced the first Tigo Matic
machines, which allow customers to carry out
both “cash-in” and “cash-out” transactions as a
self-service. The first cross-border ‘Tigo to Tigo’
MFS transfers were made possible between
Tanzania and Rwanda in November. Rwanda is
also the first country where we expect mobile
money interoperability regulations to come into
effect in 2014.

Nigeria and South Africa are the leading
markets for our Online offer in Africa. In 2013,
we also launched e-commerce ventures in
Ivory Coast and Kenya in addition to the
established services in Egypt, Morocco,
Nigeria, South Africa and our existing Tigo
markets. The online retailer Jumia became
the first African company to win the
prestigious “Best New Retailer Launch of the
Year” award at the World Retail Awards in
2013. Jumia is now the number one online
retailer in five of six territories. In 2013 we
obtained the first synergies with our existing
businesses, integrating our MFS platform to
e-commerce services in Ghana, Tanzania
and Rwanda.

In December 2013, we announced that our
competitor MTN was joining us to invest in
our African online businesses. We see growth
accelerating as the business benefits from the
complementary footprint, over 220 million
customers, and local expertise of Millicom
and MTN.

Branding, distribution and
customer service
Reinvigoration of the Tigo brand in our
African markets has been at the heart of our
strategy for the region. We have put a lot of
effort on brand visibility of Tigo with a “Go
Blue” campaign: painting walls, billboards
and organising concerts with local celebrity
participation. Roadshows and caravans for
new product launches have brought the
brand closer to our customers.

We have also increased the brand presence in
our points of sale with ready-made Tigo kiosks,
umbrellas, and branded T-shirts for sales teams.
In 2013, we opened 17 new stores, bringing the
total in the African continent to over 120. These
stores focus on introducing customers to new
services and experiences with data and
smartphones.

The year in Africa has also been about
connecting to our customers in new ways by
increasing the channels for them to reach us,
giving them options to manage their offers
themselves, and supporting them in use of new
product and services.

We do this by going to our customers with
roadshows and mobile campaign trails, but
more importantly by putting more focus on the
skills of our indirect sales force, or freelancers.
One of the big success stories of the year was
the roll-out of our Tigo Sales School across
Africa. In the programme we train well-
performing freelancers in sales techniques,

Launching 3G in Senegal
At the end of 2013, we launched 3G
services in Senegal’s two biggest cities,
Dakar and Touba. The launch was
accompanied by a big campaign to educate
customers on the benefits of mobile data and
how to manage pre-paid data bundles. We also
introduced an experience center in Dakar to
showcase mobile data and devices, and another
“mobile experience center” to reach other
parts of the country.

In DRC, we have seen the gradual
establishment of a sea-link connection
(West-African Cable System) in 2013, and
expect to see material impacts during 2014.
The year also saw us reopening our
operations in the northeastern Kivu regions.

We have been able to achieve significant
reductions in energy consumption and
network management costs through
increased site sharing across our African
footprint. Site sharing has also allowed us to
accelerate expansion of coverage and
capacity, especially in large countries such as
Tanzania. In Africa 1,008 off-grid sites were
running on Deep Cycle Battery solutions,
which consume significantly less power
compared to traditional diesel generators.
In Rwanda, increased reliability of the
electricity grid allowed us to further reduce
reliance on generator powered sites, and
reduce energy cost.

Outlook
In 2014 we will continue to fix gaps in
coverage and capacity of our network.
We expect the competitive situation
to intensify again, with new entrants
expected in DRC and potentially Chad.

The key risk for the African region continues
to be the unpredictability of regulation in
general, in particular taxation. We actively
engage together with the industry with
governments to have visibility on new
proposals and constructive dialogue to
promote proposals to ensure healthy
competition and growth of the sector and
positive contribution to the local economy.
Another key challenge in our African markets
is our ability to attract talent and skills in
our new strategic areas.

Chad
11
1,900
36.2%
1 of 3

DRC
76
300
45%
2 of 61

Ghana
25
3,100
80.7%
3 of 6

Mauritius
1
15,000
100.7%
2 of 3

Rwanda
12
1,300
47%
2 of 4

Senegal
13
2,000
69%
2 of 4

Tanzania
48
1,600
44.9%
2 of 7

people skills and our latest product offering. The
new connection and loyalty towards Tigo has in
turn translated into a peak in performance:
doubling of customer intake and VAS
subscriptions.

Social networks have gained importance
as channels of customer service and
communication across our African markets in
2013. In DRC and Tanzania, the Tigo pages
had more ‘likes’ than any other local Facebook
page in 2013. Our Tanzanian operation was
ranked the eighth most social brand on
Facebook by Socialbakers; based on our
response rate. We also use Twitter to interact
with customers.

We regularly follow customer satisfaction of
our call centres and service centers. In 2013
we introduced further IVR based customer
services in Ghana and added new local
and tribal language selections in Senegal
and Chad in particular. IVR services allow
self-service for the most basic needs of our
customers, and are particularly needed in
regions with higher illiteracy rates.

Network development
In 2013, we put significant effort into
increasing network coverage and capacity.
This has allowed us to significantly increase
network traffic, while we have been able
to improve our performance in key network
performance indicators, such as Call Success
Rates and Drop Call Rates.

Our Tanzanian operation won an award
for “Best network improvement” at the
AfricaCom Awards after achieving a 70%
reduction in outages, 60% reduction in
dropped calls and 300% improvement
in data throughput. Capacity and quality
improvements have also been significant
in Senegal, where we have been investing
to the network following the finalisation
of the licence dispute.

Regional statistics as of December 31, 2013

Population (m)
GDP per Capita ($)
Mobile penetration
Market position

1 In Kinshasa Bas Congo and Kivu.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 201344

Corporate
responsibility

$7m

spent on community projects
in 2013

of employees are recruited locally

taxes paid

$322m
99%
33%
76
53

nationalities in our workforce

of our employees are women

hours of training per employee

Corporate responsibility (CR) activity at
Millicom is based on two pillars: promoting
good corporate behaviour and making a
positive social impact in our communities.
With this approach we help the business
deliver sustainable growth for shareholders,
provide an attractive workplace for our
employees and create a strong brand to
appeal to consumers.

In 2013, we reached out to our main
stakeholder groups to better understand
the CR issues that are most relevant and
important to them and adjusted our non-
financial reporting based on the results. A
full review of our non-financial performance
can be viewed in our 2013 Corporate
Responsibility report.

Customers: Responsible digital
lifestyle
Corporate Responsibility is integral to our core
business: providing accessible and affordable
digital access and thereby transforming lives,
is fundamental to our business purpose. As we
transform into a diversified digital player, we
are putting even more emphasis on listening
to our customers and ensuring we provide
them with relevant and reliable services.

We do this through making services
affordable and easy to understand, improving
our customer service availability and
performance, improving the quality of our
networks and expanding our presence in the
marketplace.

We also invest significantly in the local
communities we operate in through local
recruitment, use of local suppliers, tax
payments, community projects and
infrastructure investments.

People: A good place to work
Our people are the bedrock of our success.
We cannot achieve anything without their
commitment and we strive to attract and
retain the best talent. We actively promote
local talent. At the end of 2013 we had over
11,500 employees across our footprint. To
bring new skills into the company to execute
on our growth strategy, we recruited over
2,000 new employees and significantly
strengthened our training offer.

Business responsibility: Trusted to
act responsibly
We must act responsibly in our core business,
with high standards of governance and
anti-corruption measures in place. It is vital
that we are strict on compliance and that we
respect the local laws and customs in our
markets. In 2013 we continued to develop our
anti-corruption compliance programme,
improve data protection and reduce our
environmental footprint.

Millicom Foundation: Social impact
through digital tools
Participating in the local community is not just
about developing infrastructure and increasing
the reach of mobile. It is also about using the
power of our networks and technology to
overcome social challenges in the societies
we are working in.

The Millicom Foundation’s mission is to identify
best digital ideas that tackle social challenges,
turn them into working products and replicate
them in multiple countries to maximise positive
impact on societies. This simple three step
approach is the basis of the Digital
Changemaker Programme which is being
implemented over the course of 2014.

Millicom Annual Report 2013

Mobile birth registration
In six months Tigo Tanzania together
with UNICEF has registered over 100,000
children in a pilot birth registration project.

In the West, we do not even reflect upon
the consequences we would face if our
parents would not have registered our
name and date of birth. Indeed it is a right
enshrined in the UN Convention on the
Rights of a Child. As simple as it appears,
the vast majority of children in Sub-Sahara
have never been registered. In Tanzania, a
combination of a lack of local registration
offices in rural communities, and a tradition
to delay naming a new child for several
weeks after birth, has led to a situation
where less than 20% of children under
five have been registered, and less than
9% have a birth certificate.

For the child, a certificate is a proof of age,
protecting the child from early recruitment
into armed forces, early marriage and
child labour and allowing them access to
healthcare, schooling, food and eventually
a job. For the country, it means that the
Tanzanian government can properly
and efficiently plan its education and
healthcare systems.

Tigo in your community
In Paraguay, our community programme Tigo
Digital Citizen, has educated 11,000 students,
parents and other community members on safe
and responsible use of technology. In the
programme children, their educators and parents
learn about better protection of privacy online,
online bullying and predators, as well as good
etiquette for online communications.

Chad
In Chad we partnered with Action
Contre la Faim and World Food
Programme to distribute aid
donations through our Mobile
Financial Services platform.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 201346

Financial review

Delivering the
digital strategy

Revenue per business unit (US$m)

446

349

4,202

Mobile
Cable and Digital Media
MFS
Online
Others

Mobile customers

50.6m

Group
At the end of 2013 our mobile customer
base exceeded 50 million customers, up
7%, with 3.4 million new mobile customers
added in the year. Group revenues were
up 7.3% to $5,159 million. Group revenue
was up 7.3%, in line with our expectations.

In 2013 we experienced significant regulatory
pressure, particularly from reduction in
mobile termination rates (MTRs). Significant
MTR cuts were made in Honduras, Bolivia,
Colombia, Tanzania and DRC. Cuts
in MTR affect our revenues and margins
and have an impact also on monthly
Average Revenue per User (ARPU).

Growth in data revenues only partially offset
the regulatory pressure and impact of strong
price competition. Mobile ARPU declined by
4.0% in local currency in 2013, compared
with 3.8% decline in 2012, but by only 1.3%
in Q4. In the last quarter of the year ARPU
showed the first upward quarter-on-quarter
trend, driven by good performance in South
America. ARPU at the end of 2013 was $8.0.

At the end of 2013 over ten million customers,
20.2% of our customers, were using data
services. 8.5% of our customers were
upgraded to data services during 2013.

Our EBITDA margin before corporate cost for
the full year 2013 was 36.5%, 6.4ppt lower
than the prior year. Underlying EBITDA
margin before corporate cost, excluding
Online and one-offs was 39.2%, in line with
our guidance of around 40%. The margin is
evolving as a result of the investments to
build the foundations for future growth in our
strategic pillars, and regulatory and pricing
pressure in many markets. We expect the
EBITDA margin to stabilise in the mid-30s in
2014 after corporate costs, as we continue
investments for growth and grow further in
lower-EBITDA business areas, such as Cable
& Digital Media and Mobile Financial Services.

Net finance costs
Net finance costs, which include interest
expense, net of interest income, increased
by 23% for the year ended December 31,
2013 to $253 million from $206 million for
the year ended December 31, 2012. This
increase was mainly due to our higher level of
indebtedness for the year ended December
31, 2013 compared to the year ended
December 31, 2012.

Other non-operating
income/expenses, net
Other non-operating expenses/income,
net were expenses of $132 million for the
year ended December 31, 2013. Other
non-operating expenses/income, net were
income of $22 million for the year ended
December 31, 2012. This variation is mainly
due to a change in carrying value of the
Honduras put option for $62 million, a change
in fair value of derivatives of $19 million and
net exchange losses of $50 million.

Charge for taxes
The charge for taxes decreased by 54%
year-on-year to $182 million for the year
ended December 31, 2013, from $393 million
for the year ended December 31, 2012, due
primarily to a decrease in profit before tax.
The charge for tax includes deferred tax
which amounted to positive $92 million for
the year ended December 31, 2013, from
negative $67 million for the previous year and
impacted by the recognition of a deferred tax
asset of $79 million on losses brought forward
in Luxembourg. The current charge for tax
was $274 million for the year ended
December 31, 2013 from a charge of $326
million for the previous year, impacted by the
profit from tax decrease and the effective
tax rate, which increased to 47% for the year
ended December 31, 2013 from 44% for
the year ended December 31, 2012.

Net profit
As a result of the foregoing, net profit
for the year ended December 31, 2013
was $205 million compared to a net
profit of $504 million for the year ended
December 31, 2012.

Capex
In 2013 we invested 24% of our revenue, or
$1,226 million, in Capex (including spectrum
and licences). Most of the Capex was directed
at increasing coverage and capacity and to
upgrade our networks, as well as upgrading
our IT and billing platforms. In the year, we
spent $201 million on spectrum, in Bolivia,
Guatemala, and Paraguay and on new
licences and licence renewals in Colombia
and Honduras.

Cash flows
Our cash flow generation in 2013 was
reduced in an intense investment year
to $497 million. Operating free cash flow
represented 10% of our revenue in 2013.

Investment in Capex

$1.2bn

Return to shareholders
through dividends

$264m

For the year ended December 31, 2013 cash
provided by operating activities was $1,210
million compared to $1,585 million for the
year ended December 31, 2012. Lower profit
before tax in 2013 and a lower change in
working capital were the main factors.

Cash used in investing activities was $2,020
million for the year ended December 31, 2013
compared to $1,141 million for the year ended
December 31, 2012. The increase in cash used
in investing activities was mainly attributable
to higher investments in spectrum and
licences and from the bond proceeds to
finance the UNE transaction kept in interest
bearing short term deposits for $800 million.

Cash provided from financing activities was
$576 million for the year ended December 31,
2013 compared to cash used of $133 million
for the year ended December 31, 2012. The
increased cash used for financing activities
for the year ended December 31, 2013 was
mainly as a result of the bond proceeds to
finance the UNE transaction kept in interest
bearing short-term deposits for $800 million.

The net decrease in cash and cash equivalents
for the year ended December 31, 2013 was
$233 million compared to an increase of $313
million for the year ended December 31, 2012.
We had closing cash and cash equivalents of
$941 million as of December 31, 2013 compared
to $1,174 million as of December 31, 2012.

Debt
Millicom Group gross debt at the end of
2013 stood at $4.2 billion, up $0.9 billion
from year end 2012. Most of the debt
increase was incurred as we prepared for
the merger in Colombia with UNE. Debt
at the corporate level amounted to close to
$1.8 billion at YE2013, of which $0.8 billion
was in escrow pending closing of the UNE
transaction in Colombia. At the end of Q4
2013, 71% of gross debt was at fixed interest
rates, reducing our exposure to interest rate
volatility. At the end of Q4 2013, 60% of
Group gross debt was in bonds and 32% from
bank financing which allowed us to extend
average maturities to 4.8 years.

Millicom net debt reached $2.3 billion, versus
$2 billion at the end of 2012. Net debt to
EBITDA (after corporate costs) at the end of
2013 was 1.4x, up from 1.0x at December 31,
2012. We expect our Group leverage to rise as
we close the transaction in Colombia, and our
priority will be reducing this towards the lower
end of our target range of 1-2x Net Debt/
EBITDA (after corporate cost).

At December 31, 2013, Millicom had $1.8
billion of cash, of which $0.8 billion related
to the Millicom bond issuance held in escrow
pending closing of the transaction with UNE
in Colombia. Approximately $0.7 billion of
Millicom’s unrestricted cash of $0.9 billion
was denominated in either $US or Euro.

Dividends
In 2013, we returned $264 million to
shareholders through dividends. Our dividend
policy is to pay out no less than $2 per share
and at least 30% of normalised net income.
We aim as well for a progressive growth in
dividend. In 2014 and as our leverage will
increase as we complete the merger in
Colombia, the Board will propose to the
AGM the payment of a stable dividend.

Key financials by region1
Central America
Revenue in Central America totalled
$1,884 million in 2013. Our Central American
business continued to be very competitive
throughout the year, and we were hit both by
regulatory changes and overall challenging
macroeconomic climate.

EBITDA for the year was $858 million and
the EBITDA margin was 45.6%, down 4.8 ppt
year-on-year, partly due to regulatory impact
and increased subsidies to drive smartphone
intake. Capex in 2013 amounted to $284 million
or 15% of revenue, including $12 million
for spectrum in Honduras. Cash generation
continued to be strong, with OFCF of
$438 million or 23.2% of revenue.

1 All regional figures exclude Online.

Central America key financials

Mobile customers (m)
Mobile and MFS ARPU ($)
Revenue ($m)
EBITDA ($m)
EBITDA margin %
Capex ($m)
OFCF ($m)
OFCF margin %

2013
15.8
10.1
1,884
858
45.6%
(284)
438
23.3%

2012 % change
1.3%
15.6
(2.8%)
11.2
(0.9%)
1,901
(10.4%)
958
50.4% (4.8ppt)
(4%)
(17%)
27.8% (4.5ppt)

(296)
528

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 201348

Financial review
continued

South America
South America was again our strongest
performing region in 2013. Reported revenue
grew by 14% in 2013 to $2,192 million, with
Colombia in particular performing strongly.
EBITDA reached $805 million, up 6%, and the
EBITDA margin was 36.7%, declining 2.6ppt as
we continued to invest in handset subsidiaries
to drive higher mobile data penetration.

We invested $588 million, or 26.7% of revenue
in Capex in South America during the year, from
which $189 million in spectrum and licences in
Bolivia and Colombia. OFCF in South America
was $57 million, or 2.6% of revenue.

Revenue per region (US$m)

South America key financials

1,000

1,884

2,192

Central America
South America
Africa
Online

Mobile customers (m)
Mobile and MFS ARPU ($)
Revenue ($m)
EBITDA ($m)
EBITDA margin %
Capex ($m)
OFCF ($m)
OFCF margin %

2013
13.8
11.7
2,192
805
36.7%
(588)
57
2.6%

2012 % change
8.7%
12.7
(8.6%)
12.8
13.8%
1,926
6.3%
757
39.3% (2.6ppt)
57%
(85%)
20.4% (17.8ppt)

(373)
393

Africa
Revenue in Africa grew in 2013 by 2.7%
to $1,000 million. Increasing revenue is a
good first sign that our turnaround strategy
for the region is starting to have impact.
EBITDA reached $279 million, down 22%,
and the EBITDA margin was 27.9% down
9.0ppt year-on-year. We expect margins in
Africa to remain under pressure as we execute

on our turnaround strategy and focus
on increasing coverage, capacity and
brand visibility.

Capex in Africa amounted to $333 million in
2013 or 33% of revenue as we continued our
investments in network coverage, 3G and value
added services. Cash generation in Africa in
2013 was $76 million or 7.6% of revenue.

Mobile data penetration in Africa

Africa key financials

15.2%

at the end of 2013, compared
to 7.7% in 2012

Mobile customers (m)
Mobile and MFS ARPU ($)
Revenue ($m)
EBITDA ($m)
EBITDA margin %
Capex ($m)
OFCF ($m)
OFCF margin %

2013
21.0
4.0
1,000
279
27.9%
(333)
76
7.6%

2012 % change
10.8%
18.9
(9.1%)
4.4
2.7%
974
(22.3%)
359
36.9% (9.0ppt)
(22.5%)
(10.6%)
8.6% (1.0ppt)

(430)
85

Financial performance in
strategic pillars by region
In 2013 we focused on setting the
foundations for future growth in new areas,
while maintaining strong momentum in the
mobile business. Regulatory pressure on
our business was stronger than in past years,
but we more than offset its revenue impact
through innovative offerings in Mobile,
Cable & Digital Media, MFS and Online.

Mobile: return to mid-single digit growth
Overall, our Mobile business proved resilient in
the year with revenues of $4.2 billion despite
strong regulatory headwinds, returning to
5.5% local currency growth in Q4 from
virtually flat growth figures at the start of
the year. Removing the impact of regulatory
pressure, which was still significant in the last
quarter of the year, our mobile growth would
have reached 7.4%.

Significantly, our voice and SMS mobile
business grew 1.1% in the fourth quarter in
local currency (3.6% excluding regulatory
pressures), a marked improvement versus
previous quarters on the back of strong net
additions again in South America and Africa.

Our total mobile customer base grew 7% in
the year to 50.6 million. In 2013, we managed
to upgrade 3.9 million customers to mobile
data, 8.5% of our YE2012 mobile customer
base. Steady growth in data customers
enabled us to consistently grow 28-30% in
mobile data in local currency over the year.

We continued to innovate with new value-added
services in the entertainment and solutions
categories. Lend me balance and ring-back
tone products were again the most popular
across our footprint. ARPU in these categories
was negatively impacted in the year due to
transparency initiatives to stop automatic

renewals of subscriptions. We believe
these initiatives will increase brand trust
going forward.

Group mobile ARPU in Q4 2013 was $8.0.
The ARPU decline that we have seen in the
past two years was slowing down as the year
progressed and mobile data revenues offset
regulatory impact and dilution from new
customer net-adds. In Q4 2013, ARPU decline
slowed down to 1.3%, compared to 2.7%
decline in the previous quarter.

Central America
Central America was particularly affected by
interconnection rate cuts, as the biggest cuts
took place in Honduras, where our market share
is particularly high. Coupled with the general
macroeconomic environment, converting
customers to data was more challenging in the
region compared to others. Customer additions
were also impacted by reclassification of
customers between the mobile and fixed
telephony units, reducing customers by 284,000
in El Salvador in Q1 and Q2. We added 200,000
new customers in the year, bringing the total
at year end to 15.8 million.

Mobile data penetration in Central America
was 20.1% at the end of 2013, up from 15% in
2012. We expect data penetration to pick up as
smartphones move towards lower price
brackets. Mobile ARPU was 2.8% lower than
last year.

South America
In South America mobile customer numbers
grew steadily by 8.7% ending the year at
13.8 million. Similarly to El Salvador, clean-up
of the customer base in Bolivia reduced
customer additions in the first half of the
year. Mobile ARPU was down by 2% in
South America, in local currency mainly
due to regulatory pressures.

Mobile data users were growing strongly in
the region as smartphone prices came down
and we continued to offer relevant services,
such as Facebook in Guarani, the local
language in Paraguay. Data penetration in
South America grew to 27.8% by the end of
2013, up 7.8ppt from 2012. Smartphone
penetration grew strongly through handset
subsidies, reaching 27% in Colombia at the
end of the year, and 20% for the region. We
also invested strongly in the capacity of our
networks to respond to the spike in data users
in all of South America. Capex for the region
increased to $588 million.

Africa
Mobile customer numbers grew the most
strongly in Africa in 2013, by two million, or
11%, reaching nearly 21 million customers at
the end of the year. This is despite SIM card
registration requirements slowing down
additions in Tanzania, particularly in Q3 2013.
Ghana customer numbers returned to growth
last seen two years ago with net additions
exceeding 100,000 in Q2 alone.

Mobile ARPU in Africa declined slightly year on
year to $4 at the end of 2013, but remained
resilient towards the end of the year, likely due
to increase in VAS and data revenues. The
erosion in ARPU was expected for the year, as
we extended coverage of our services to new
lower ARPU regions. Price competition in Africa
stabilised somewhat in the year, which in turn
slowed down ARPU decline.

Residential cable ARPU at the
end of 2013

$34.7

per month

Like in other regions, mobile data penetration
in Africa grew strongly in the year and stood at
15.2% in Q4 2013 compared to 7.7% in 2012.
We invested significantly in 3G in Africa during
2013, which is testimony to our ambitions for
voice and data growth in the region. We also
continued to convert more people to use
different value-added services, with social
networking on USSD and different
audiotainment solutions being the
most popular.

Cable & Digital Media: focus on
homes passed and cross-selling
Our Cable & Digital Media business yielded
steady organic growth in the year, with
revenue totalling $446 million for 2013,
up 10% year-on-year. We increased homes
passed to 2.5 million by the end of the year
with 42% of our Pay-TV customers also
purchasing high speed broadband internet
services from us in Q4. Residential cable
ARPU was $34.7 at the end of 2013.

In the last quarter of the year, our Cable
business launched our first in-house channel,
Tigo Sports, in Paraguay. First of its kind in the
country to offer 24/7 live sports coverage, the
channel will bring exclusive sports events and
original programming to the country. We look
to launch the channel in other markets in
2014, initially in Costa Rica and El Salvador.
In 2014, our cable content offering will be
brought under an umbrella brand of “Tigo Star”
as we will seek to differentiate by bringing the
latest, unique content to our customers.

Central America
At the end of 2013, we had 1.9 million
homes passed in Central America. In Central
America, residential cable revenues were
under pressure as the overall macroeconomic
situation affected the purchasing power
of consumers, and due to increasing price
competition in our main markets of
Costa Rica and El Salvador.

Our channel offering in Central America
continues to be the widest in the region, with
35 channels at the end of the year. We have
been pushing customers to upgrade to High
Definition TV, with penetration doubling in
Costa Rica in the year. We also launched
“video on demand” in Costa Rica and El
Salvador at the end of 2013.

Business services, particularly for broadband
internet and fixed telephony, grew better
overall, with double digit growth in Costa Rica.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 201350

Financial review
continued

Penetration of our Mobile
Financial Services grew by

50%

in 2013 vs 2012

Cable RGUs in our
Latin American operations

623

425

174

127

Fixed broadband
RGUs

Pay-TV
RGUs

Homes
passed

2012
2013

Cable & Digital Media KPIs Central America

Homes passed
Pay-TV RGUs
Fixed broadband RGUs

2013
1,909
595
248

2012
1,682
558
219

South America
At the end of 2013, we had 623,000 homes
passed in South America, mostly in Paraguay
from our 2012 acquisition of Cablevision, which
brought us to a strong position in the Cable
segment in the country. In 2013, we purchased
exclusive rights to the Paraguayan football
league and in December launched our first
Tigo Sports operation in Paraguay.

In Bolivia we acquired the broadcaster
Multivision in November 2013. We also
applied for further DTH licences in Latin
America to broaden our reach and continue
to diversify our product offering.

In an important step toward expanding our
cable footprint in South America, in Q1 we
entered into Q1 negotiations with EPM
(Empresas Publicas de Medellin) to combine
EPM’s telecommunications and cable
business, UNE, with Tigo Colombia. With a
very complementary geographical
strongholds and product offerings, the
merged company is expected to bring a true
digital lifestyle player to Colombia. We signed
the final agreement with EPM on the
proposed merger in October 2013, and expect
the regulatory approvals for the merger
during the first half of 2014.

Millicom and EPM have identified cost and
Capex synergies equivalent to a net present
value of over $600 million (after integration
costs). The costs and Capex savings are
expected to be essentially derived from
network and IT integration and procurement
efficiencies.

On a pro forma basis, in 2012 the combined
company would have had revenues of $2,009
million and EBITDA of $531 million in 2012.
Free Cash flow generation in 2012 would
have been $185 million.

Cable & Digital Media KPIs South America

Homes passed
Pay-TV RGUs
Fixed broadband
RGUs

2013
623
174

2012
425
127

Mobile Financial Services:
increasing penetration
Penetration of our Mobile Financial Service
grew by 50% in 2013 versus 2014, exceeding
15% of our mobile customer base in the
markets where the service has been launched,
and 12.4% for the total Group. Revenue for
the MFS business totalled $79 million for
2013, up 98% over 2012. MFS contributed
14% to recurring revenue growth in 2013.

ARPU in MFS was $1.35 at the end of the year,
up 3.2% and was on a growing trend through
the year, well on the way to our target of $2 by
2017. It has been encouraging to see the ARPU
resilient and growing despite the strong new
customer adds. MFS customers totalled
6.3 million at the end of 2013.

Central America
In Central America, creating the market for
MFS has been more challenging due to lack
of competition, meaning we alone have been
educating consumers and marketing the
benefits of the product. However, towards
the end the year penetration significantly
accelerated in El Salvador where we passed
the important 10% penetration mark, ending
at 11.4% at end of the year. It is our most
successful market in Central America so far.

By the end of 2013, we had a total of 892,000
MFS customers, with an ARPU of $0.66. Most
of the transactions in Central America still
evolve around remittances and simple money
transfers. Going forward we are looking to
introduce customers to bill, peer-to-peer
and merchant payments.

South America
Penetration growth in MFS remained very solid
in Paraguay, our leading market in the region.
At the end of Q4, 31.8% of our customers were
using the service. We launched MFS in Bolivia
in 2013 and first signs are positive, although
as an only provider with a strict regulatory
framework, it is likely the ramp up period is
longer than in markets in Africa. We do not
provide MFS in Colombia.

MFS ARPU in South America was $1.90 at the
end of the year, up 3.2% from the previous
year and nearly 1.3 million customers were
using the service.

Africa
Africa has been the birthplace of MFS, and the
service continues to thrive there. Penetration in
our number one market of Tanzania reached
45.6% of our customer base by the end of
2013. Rwanda was our second most penetrated
MFS market by the end of December, with
37.1% of our mobile customers being active
users of MFS. Chad, which launched only in
2013, has reached 9.6% penetration at the
end of the year and in Ghana 8.4% of our
customers were using the service. In DRC
penetration in the customer base is lower,

Penetration of MFS in Chad,
10 months after the launch

9.6%

particularly due to the high customer intake
in the year as we re-entered the Kivu region.
We will launch MFS in Senegal in 2014.

MFS ARPU in Africa was $1.29 at the end
of 2013, up 11% compared to one year ago.
Most of our MFS customers are in Africa, with
well over four million people using the service
at the end of the year.

In Africa, we have expanded our portfolio of
services significantly by pushing for more
merchants to accept Tigo Cash as a mode of
payment to various bill payment options and
disbursement of civil servant salaries in DRC.
In Africa we also partnered with the World
Food Program and Action Contre la Faim
to distribute significant amounts of aid to
recipients via Tigo Cash.

Millicom piloted in November 2013,
and launched in 2014, the world’s first
international MFS service featuring integrated
currency conversion. This pioneering service
has been launched in Rwanda and Tanzania
and enables individuals and businesses to
make simple cross-border transactions from
their handsets without needing to go to a
bank or specialist provider.

MFS KPIs Q4 2013

MFS ARPU ($)
MFS RGUs (’000)

Central
America
0.66
892

South
America
1.90
1,292

Africa
1.29
4,093

MFS KPIs Q4 2012

MFS ARPU ($)
MFS RGUs (’000)

Central
America
0.91
303

South
America
1.84
902

Africa
1.16
2,731

Online: new launches, markets
and partnerships
In 2013, the Online division generated
revenue of $83 million and EBITDA losses of
$61 million, in line with previously revised
guidance. As anticipated, growth accelerated
in the fourth quarter, while losses remained
under control. By the end of the year, Online
ventures had been launched in 22 countries.

Changes in the agreements with AIH and LIH
mean that in 2014, the Online division will be
equity accounted for as Millicom’s share of
the results of the division, compared to full
consolidation previously.

Africa
We continued to see strong demand for Online
services in Africa, with particularly Jumia and
Zando improving their performance in the
year. We introduced payment with Tigo Cash
for the HelloFood ordering service in Senegal
and Rwanda, and Kaymu for Rwanda
and Tanzania.

In December we welcomed MTN to our
online ventures in Africa. We expect the new
partnership to strengthen the venture as a
result of the complementary footprint of
Millicom and MTN businesses in Africa. Upon
closing of the transaction each partner will
own one third of the business. The new set-up
is likely to accelerate the launches and
take-up of services, and will ensure that the
African ventures are now fully funded until
the expected break-even.

Latin America
Particularly on the e-commerce side of the
business, and flagship services such as Kanui
and Tricae, the focus is on the Brazilian
market. While growth was strong in the
year, we saw significant impact from the
currency movements of the Brazilian real.
We sought new synergies to push services
where we saw strong initial pick up, such as
pre-installing applications offering specific
Tigo data plans to recruit taxi drivers to take
on the Easy-Taxi app.

Our partnership with Rocket Internet in Latin
America was partially amended at the end of
the year. In the amended agreement a path
to control remains in place where the final call
option needs to be exercised by September
2016 but no earlier than one year after the
second option is exercised. As a consequence
the Online business in Latin America will be
equity accounted for as Millicom’s share of
the results of the division in the beginning
of 2014, compared to full consolidation
previously.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 201352

Corporate Governance

Chairman’s
introduction

Millicom Annual Report 2013

During the year, the Board and its various
committees convened on more than 20
occasions, and expanded our hands-on
knowledge of the business with a visit to
Rwanda and participating in the Capital
markets day investor event in London. During
these meetings, calls and visits we interact
with many members of the Millicom team.
We see this as a key way in which we can
provide effective oversight and enhance
our roles as governors of the business.

Allen Sangines-Krause
Chairman of the Board

Millicom continued to execute its strategy
through a commitment to customers and
quality of products, organic and acquisitive
growth, and focus on cost control. As a
Board, it is exciting and rewarding to
support Millicom execute on its plan.

It is pleasing to see the evolving role of the
Company and the many positive impacts this
has on our customers, the societies which we
are part of, and the many people who work
hard for Millicom to make this happen. As
Chairman of the Board it is a privilege to
preside over this organisation and together
with my fellow Directors provide guidance
and direction over these activities.

2013 has been another year of development
for Millicom, and I would like to thank the
members of the Board for their service until
May 2013, especially the outgoing members,
Ms. Donna Cordner, and Mr. Anders Kronborg,
and to those who have continued to serve the
Company since then.

In 2013, we also welcomed new members
to the Millicom Board. I believe the current
composition brings strong individual
credentials and experience complementing
well the skills of the Company’s management,
and importantly reflecting the current
strategic direction of the Company.

Board meetings

Board meetings in 2013
During the 2013 financial year, the Board
convened six times at different locations
in Europe and once in Millicom operations
in Rwanda. In addition, six telephone
conference meetings were held. The
average attendance rate at the meetings
was above 95%. The main topics handled
by the Board were:

– Review and approval of financial reports.
– Review and follow-up of corporate

governance.

– Treasury including financing and

cash management.

– Human resource matters, including talent
management, succession planning and
remuneration guidelines.

– Strategy review, including review
of growth opportunities, product
portfolio, business model challenges
and marketing strategies.

– Review and approval of the UNE

merger transaction.

– Several matters regarding acquisition
and divestment opportunities and
participation in licence auctions
or tenders.

– Review of 2014 budget.
– Self-evaluation of the Board
and evaluation of the CEO.
– Auditors’ report and corporate

sustainability matters.

The activities in 2013 of the
various committees are presented
on page 56.

Governance framework
Millicom International Cellular S.A. is a
public liability company (société anonyme)
governed by the Luxembourg law of August
10, 1915 on Commercial Companies (as
amended), incorporated on June 16, 1992,
and registered with the Luxembourg Trade
and Companies’ Register (Registre du
Commerce et des Sociétés de Luxembourg)
under number B 40 630.

The articles of incorporation of Millicom
define its purpose as follows: “to engage in all
transactions pertaining directly or indirectly
to the acquisition and holding of participating
interests, in any form whatsoever, in any
Luxembourg or foreign business enterprise,
including but not limited to, the
administration, management, control and
development of any such enterprise.”

Millicom’s shares are listed on the NASDAQ
OMX exchange in Stockholm in the form of
Swedish Depository Receipts. Accordingly,
Millicom’s Corporate Governance Framework
is primarily based on Luxembourg and other
EU legislation, the listing requirements of
NASDAQ OMX Stockholm, the Swedish Code
of Corporate Governance and good stock
market practice. Within these frameworks,
the Board of Directors has developed and
continuously evaluates internal guidelines
and procedures, as further described below, to
ensure quality and transparency of corporate
governance practices within Millicom.
The Company has applied the Swedish Code
of Corporate Governance (“the Swedish

Code”) from May 30, 2011, the date on which
it moved its primary listing to the NASDAQ
OMX exchange in Stockholm and delisted
from the NASDAQ exchange in the US (full
deregistration from NASDAQ in the US
occurred on October 12, 2012).

Compliance with the Swedish corporate
governance code
The Code has been applied by Millicom
since May 30, 2011. Millicom is committed
to complying with best-practice corporate
governance on a global level wherever possible.
Millicom applies home state rules or deviate in
relation to the Code in the following areas:
Shareholder meetings are held in Luxembourg
in accordance with Luxembourg law and the
Company’s Articles of Association. Shareholder
meetings are held in the English language and
meeting material is available in English only.
Shareholder meeting minutes are signed by
the meeting Chairman, Secretary and
Scrutineer in accordance with Luxembourg law.
Luxembourg law and the Company’s Articles
of Association do not specify the language
used at shareholder’s meetings. The
Company’s investor base is international and
the Company considers English to be the best
language in which to communicate with
its shareholders.

With regard to share-related incentive
programs, the Code (Article 9.8) states that
the vesting period or the period from the
commencement of an agreement to the date
for acquisition of shares is to be no less than
three years. The Company’s programme for

Annual General Meeting

Millicom held its 2013 Annual General
Meeting of Shareholders on May 28,
2013 in Luxembourg.

The AGM decided on the following
issues, among others:

– Re-election of Ms. Mia Brunell Livfors,
Mr. Allen Sangines-Krause, Mr. Paul
Donovan, Mr. Omari Issa and Mr. Kim
Ignatius as Non-executive Directors;

– Appointment of Mr. Ariel Eckstein,

Mr. Lorenzo Grabau and Mr. Alejandro
Santo Domingo as new Directors;

– Re-election of Mr. Allen Sangines-Krause
as Chairman of the Board of Directors;

– Approval of the consolidated financial

statements for the year ended
December 31, 2012, allocation of results
and distribution of a $2.64 dividend
per share;

– Approving of the Directors’ compensation,

amounting to SEK 7,726,000 for the
period from the AGM to the 2014 AGM.

– Re-election of Ernst & Young S.à.r.l.,
Luxembourg as the external auditor;
– Approving of the procedures for the

Nomination Committee;

– Approval of the proposal to set up

a Charity Trust.

The 2014 AGM will take place in Luxembourg
on May 27, 2014 at 10:00 a.m. (Central
European Time).

variable remuneration related to the deferred
restricted share plan vests with 16.5% after
1 year, 16.5% after 2 years, and 67% after
3 years. Most of the award vests at the end
of year 3, but some also vest at the end of
year 1 and 2. This plan applies to a wide
range of employees, including younger
executives and the Company believes that
this vesting schedule ensures alignment
between the interests of the Company’s
shareholders and its employees.

Corporate governance in practice
Allocation and delegation of
Board responsibilities
The Board has a protocol that divides work
between the Board and the President and
Chief Executive Officer (“the CEO”), and there
are also work procedures for each of the
Board committees. Further details on the
roles and activities of the various committees
are set out later in this section.

The main task of the Board committees (Audit,
Compensation and Corporate Responsibility)
is to work on behalf of the Board within their
respective areas of responsibility. From time
to time, the Board delegates authority to an
“ad hoc” committee so that it may resolve a
specific matter on its own without having to
go before the full Board for approval.

Evaluation of performance
The Board carries out a self-assessment of
its performance and the performance of
each individual Board member. The Board
also evaluates the performance of the
CEO each year.

Corporate policy manual
The Board has adopted several corporate
policies on governance including ethics and
conduct, corporate responsibility, human
resources, and accounting policies as well
as and other matters. These policies are
collected in a Corporate policy manual.
Regional policies that are more stringent or
detailed than those set out in the Corporate
policy manual are adopted as necessary.
The Company’s Code of Ethics is a part of
the corporate policy manual. All Directors,
senior executives, management and
employees must sign a statement
acknowledging that they have read,
understood and will comply with the
Code of Ethics.

Millicom’s governance position papers,
codes of conduct, code of ethics, annual
Corporate Governance report and terms
and conditions for the Swedish Depositary

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013
54

Corporate Governance
continued

Receipts are available on its corporate
website www.millicom.com.

Internal control environment
Following the voluntary deregistration from
NASDAQ in the United States, Millicom
implemented processes to migrate from the
requirements of the Sarbanes Oxley Act (SOX)
and further improve the effectiveness and
efficiency of its internal controls, aligned
with the COSO 2 internal control framework.
Within this framework, controls are performed
by operational and functional management,
and regularly reviewed in the framework of two
complementary Group processes: audit of
internal control practices in Millicom entities to
ensure consistency with the principles and rules
defined by the Group, and; global review of
internal control systems in the Group based on
materiality of related risks. This work is led by
the Internal Audit & Control department, with
reporting to and oversight by the Audit
Committee of the Board.

The management of Millicom is responsible
for establishing and maintaining adequate
internal control over financial reporting.
Internal control over financial reporting is
a process designed to provide reasonable
assurance regarding the reliability of financial
reporting and the preparation of financial
statements for external reporting purposes
in conformity with International Financial
Reporting Standards as issued by the
International Accounting Standards Board
and as adopted by the European Union.
Due to its inherent limitations, internal
controls over financial reporting may
not prevent or detect misstatements.

Management has assessed the effectiveness
of Millicom International Cellular S.A. internal
control over financial reporting as of December 31,
2013. In making its assessment, management
has utilised the criteria set forth by the
Committee of Sponsoring Organizations of
the Treadway Commission in Internal Control
– Integrated Framework. Management
concluded that based on its assessment, Millicom
International Cellular S.A. internal control
over financial reporting was effective as
of December 31, 2013.

Annual General Meeting
and other General Meetings
General meetings of shareholders are
convened after the publication of a convening
notice in the Luxembourg Official Gazette and
in a Luxembourg newspaper. The Board of
Directors sets the formalities to be observed by
each shareholder for admission to the general
meeting in the convening notice, as required
by article 18 of the Articles of Incorporation.

Annual General Meeting (AGM)
An AGM is convened every year on the
last Tuesday of May in the Grand-Duchy of
Luxembourg at the registered office of the
Company, or at another place as specified
in the notice convening the meeting. If that
day is a public holiday, the meeting is held
on the next business day. The Chairman of
the AGM is elected by the shareholders.

Other General Meetings
Other general meetings are convened by the
Board of Directors of the Company if requested
by shareholders representing at least ten per cent
(10%) of the Company’s issued share capital.

Director remuneration (i)

Mr. Allen Sangines-Krause
Mr. Kim Ignatius
Ms. Mia Brunell Livfors
Mr. Paul Donovan
Mr. Omari Issa
Mr. Lorenzo Grabau (since May 2013)
Mr. Alejandro Santo Domingo (since May 2013)
Mr. Ariel Eckstein (since May 2013)
Ms. Donna Cordner (until May 2013)
Mr. Dionisio Romero Paoletti (until May 2013)
Mr. Anders Kronborg (from December 2012 until May 2013)
Mr. Hans Holger Albrecht (until July 2012)
Total

2013
US$
‘000(ii)
190
130
96
110
110
110
90
96
–
–
–
–
932

2012
US$
‘000(iii)
210
144
103
121
125
–
–
–
121
98
58
17
997

(i)

Cash compensation converted from SEK to USD at exchange rates on payment dates for each year, net of 20%
witholding tax.

(ii) For the period from May 29, 2013 to May 27, 2014
(iii) For the period from May 29 , 2012 to May 28, 2013

There were no other general meetings
during 2013.

Directors
The Company is administered by a Board
of Directors composed of at least 6 (six)
members. Members of the Board of Directors
need not be shareholders of the Company.

The Directors and the Chairman of the Board
of Directors are elected by the shareholders’
meeting, which will determine the number, and
period of service (not exceeding six years).
Directors hold office until their successors
are elected.

Restrictions on voting – No contract or other
transaction between the Company and any
other person shall be affected or invalidated by
the fact that any Director, officer or employee of
the Company has a personal interest in, or is a
director, officer or employee of such other person,
except that (x) such contract or transaction shall
be negotiated on an arm’s length basis on terms
no less favourable to the Company than could
have been obtained from an unrelated third
party and, in the case of a Director, the Director
shall abstain from voting on any matters that
pertain to such contract or transaction at any
meeting of the Board of Directors of the
Company, and (y) any such personal interest
shall be fully disclosed to the Company by
the relevant Director, officer or employee.

In the event that any Director or officer of the
Company may have any personal interest in
any transaction of the Company, the Director
shall make known to the Board such personal
interest and shall not consider or vote on any such
transaction, and such transaction and such
director’s or officer’s interest therein shall be
reported to the next general meeting of
shareholders.

Compensation and nomination – decisions on
annual remuneration of Directors (“tantièmes”)
is reserved by the articles of incorporation to the
general meeting of shareholders. Directors are
therefore prevented from voting on their own
compensation. However, Directors may vote
on the number of shares they may be allotted
under any share based compensation scheme.

The Nomination Committee makes
recommendations for the election of Directors
to the AGM. At the AGM, shareholders
may vote for or against the Directors
proposed or may elect different Directors.
The Nomination Committee reviews and
recommends the Directors’ fees which are
approved by the shareholders at the AGM.

The remuneration of Directors comprises
an annual fee. Director remuneration is
proposed by the Nomination Committee and
approved by the shareholders at the Annual
General Meeting of Shareholders as follows
and as adjusted for length of service.
Borrowing powers – Directors generally have
unrestricted borrowing powers on behalf of
and for the benefit of Millicom.

Time and Age limit – no age limit exists for
being a Director of Millicom. Directors could
be elected for a maximum period of six years,
but are generally elected annually.

Share ownership requirements – Directors
need not be shareholders in Millicom.

Shareholders
Treasury (Own) Shares
At December 31, 2013 Millicom held
1.9 million treasury shares (2012: 2.2 million)
having acquired 44,000 shares during the
year and issued 315,000 shares.

Changes in shareholders’ rights
In order to change the rights attached to
the shares of Millicom, a general meeting
of shareholders must be duly convened and
held before a Luxembourg notary, as under
Luxembourg law such change requires an
amendment of the Articles of Incorporation.
A quorum of presence of at least 50% of the
shares present or represented is required at
a meeting held after the first convening
notice and any decision must be taken by a
majority of two thirds of the shares present
or represented at the general meeting.
Any change to the obligations attached
to shares may be adopted only with the
unanimous consent of all shareholders.

Limitation on securities ownership
There are no limitations imposed under
Luxembourg law or the articles of incorporation
on the rights of non-resident or foreign entities
to own shares of Millicom or to hold or exercise
voting rights on shares of Millicom.

Disclosure of shareholder ownership
As required by the Luxembourg law on
transparency obligations of January 11, 2008

(the “Transparency Law”), any person who
acquires or disposes of shares in Millicom’s
capital must notify Millicom’s Board of Directors
of the proportion of shares held by the relevant
person as a result of the acquisition or disposal,
where that proportion reaches, exceeds or
falls below the thresholds referred to in the
Transparency Law. As per the Transparency Law,
the above also applies to the mere entitlement
to acquire or to dispose of, or to exercise, voting
rights in any of the cases referred to in the
Transparency Law. As per the Articles of
Association, the requirements of the
Transparency Law also apply where the
mentioned proportion reaches, exceeds
or falls below a threshold of 3%.

Shares and dividends
Equity and dividends
Holders of Millicom common shares are
entitled to receive dividends proportionately
when and if declared by the Company’s
Board of Directors, subject to Luxembourg
legal reserve requirements and the approval
of its shareholders at general meetings.
Millicom paid its first cash dividend to its
shareholders in 2008. In the past, Millicom
retained any earnings for use in the operation
and expansion of its business.

On February 11, 2014, Millicom announced
that the Board would propose to the AGM
a dividend distribution of $2.64 per share to
be paid out of Millicom’s retained profits at
December 31, 2013.

Freely negotiable shares
Rights attached to the shares – Millicom
has only one class of shares, common shares,
and each share entitles its holder to:

– One vote at the general meeting

of shareholders,

– Dividends out of distributable profits

when such distributions are decided, and
– Share in any surplus left after the payment

of all the creditors in the event of
liquidation. There is a preferential
subscription right under any share or
rights issue for cash, unless the Board of
Directors restricts the exercise thereof.

Nomination Committee

The Nomination Committee is responsible
for preparing proposals for the election of
Directors of the Board, Chairman of the
Board and the external auditor, in the case
that an auditor should be elected, and their
remuneration, as well as a proposal for the
Chairman of the Annual General Meeting.
On May 28, 2013, the Shareholders
decided on the procedure to appoint the
members of the Nomination Committee,
in accordance with the Swedish Code of
Corporate Governance. As result during
October 2013 a Nomination Committee of

major shareholders was formed in
consultation with the larger shareholders
of the Company as at September 30, 2013.
The Nomination Committee consists of at
least three members, with a majority
representing the larger shareholders of the
Company. The Nomination Committee
met three times in 2013.

Members
Cristina Stenbeck (Chair) (on behalf of
Investment AB Kinnevik)
Annika Andersson (on behalf of Swedbank
Robur funds)
Mathias Leijon (on behalf of Nordea funds)

Redemption of shares – Millicom’s Articles
of Incorporation provide for the possibility
and set out the terms for the repurchase by
Millicom of its own shares. Any repurchase
is at Millicom’s discretion. The Company may
repurchase its shares of common stock using a
method approved by the Board of Directors of
the Company in accordance with Luxembourg
law and the rules of the stock exchange(s) on
which the Company’s common stock may be
listed from time to time.

Sinking funds – Millicom shares are not
subject to any sinking fund.

Liability for further capital calls – all of the
issued shares in Millicom’s capital are required
to be fully paid up. Accordingly, none of
Millicom’s shareholders are liable for further
capital calls.

Principal shareholder restrictions – there are
no provisions in the Articles of Incorporation
that discriminate against any existing or
prospective holder of Millicom’s shares
as a result of such shareholder owning
a substantial number of shares.

Treasury (own) shares
At December 31, 2013 Millicom held 1.9
million treasury shares (2012: 2.2 million)
having acquired 44,000 shares during the
year and issued 315,000 shares.

Changes in articles of incorporation
Unless otherwise required under Luxembourg
law, an extraordinary general meeting must
be convened to amend any provisions of the
Articles of Association.

Equal treatment of shareholders and
transactions with related parties
The table below sets out certain information
known to Millicom as at February 28, 2014,
unless indicated otherwise, with respect to
beneficial ownership of Millicom common
share, par value $1.50 each, by:

– Each person who beneficially owns more
than 5% of Millicom common stock, and

– Significant related parties to Millicom.

Shareholder
Investment
AB Kinnevik
Dodge & Cox
Stenbeck Family

Number
of shares Percentage

38,559,080
7,241,180
195,053

37.9%
7.1%
0.2%

Except as otherwise indicated, the holders
listed above (“holders”) have sole voting and
investment power with respect to all shares
beneficially owned by them. The holders have
the same voting rights as all other holders of
Millicom common stock. For purposes of this
table, a person or group of persons is deemed
to have “beneficial ownership” of any shares
as of a given date which such person or group
of persons has the right to acquire within

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 2013

Board Committees

Kim Ignatius
Non-Executive Director

Allen Sangines-Krause
Chairman

Mia Brunell Livfors
Non-Executive Director

Audit Committee

Members
Mr. Kim Ignatius (Chair)
Mr. Paul Donovan
Mr. Omari Issa
Mr. Lorenzo Grabau

Compensation Committee

Corporate Responsibility Committee

Attendance
100%
86%
100%
100%

Members
Mr. Sangines-Krause (Chair)
Ms. Brunell Livfors
Mr. Eckstein

Attendance
100%
100%
100%

Members
Ms. Brunell Livfors (Chair)
Mr. Omari Issa

Attendance
100%
100%

The Audit Committee met seven times during 2013 (including
two by phone) and Millicom’s external auditors participated in
each meeting.

What have we done during the year
– Review and approval of quarterly earnings releases
– Review and recommendation to the Board of approval of

2012 Annual Report

– Guidance, direction and assessment of significant financial
activities during the year – financial and tax structuring
and activities

– Review and recommendation of 2014 budget
– Guidance, direction and assessment of internal control,

internal audit and risk functions

– Review of revenue assurance strategy
– Review of internal control environment and risk matrix
– Review of tax strategy

In 2013 the Compensation Committee met three times.

The CR Committee met once in 2013.

What have we done during the year
– Recommendation of remuneration of Senior Executives,

including the CEO

– Review of succession planning
– Review of long-term incentive programmes
– Review of bonus and performance calculations
– Review of remuneration structures in the company

Outcome
– Report on executive compensation and guidelines

What have we done during the year
– Review of the Corporate Responsibility strategy
– Review of Millicom’s first Corporate Responsibility report
– Review of proposal to form Millicom Foundation

Outcome
– Millicom published a CR Report separate from the 2012

Annual Report in 2013.

Our plan for 2014/2015
– Implement new Corporate Responsibility structure, including

the Millicom Foundation

Millicom’s Audit Committee is responsible for planning and reviewing the
financial reporting process, the preparation of the annual and quarterly
financial reports and accounts and the involvement of external auditors
in that process. The Audit Committee focuses particularly on compliance
with legal requirements, accounting standards, independence of external
auditors, audit fees, the internal audit function, the fraud risk assessment,
risk management and ensuring that an effective system of internal
financial controls is in place. The ultimate responsibility for reviewing and
approving Millicom’s annual report and accounts remains with the Board.

The Committee comprises four Directors and convenes at least four times
a year.

The Compensation Committee reviews compensation of the
CEO and other Senior Executives and makes recommendations
to the Board of Directors and advises on management succession
planning. The Board of Directors then proposes guidelines for Senior
Management remuneration to shareholders for approval at the
Annual General Meeting. The guidelines aim to ensure that Millicom
can attract, motivate and retain executives, with the necessary skills,
experience and talent in the context of a multinational provider of
digital lifestyle services through mobile, cable and fixed line.

The Compensation Committee comprises three members.

Millicom’s Corporate Responsibility (CR) Committee has responsibility
for overseeing and making recommendations to the Board regarding
the management of corporate responsibility activities.

The CR committee convenes at least two times a year, and comprises
two members.

Corporate Governance
continued

60 days after such date. For purposes of
computing the percentage of outstanding
shares held by the holders on a given date,
any security which such holder has the right
to acquire within 60 days after such date
(including shares which may be acquired
upon exercise of vested portions of share
options) is deemed to be outstanding, but
is not deemed to be outstanding for the
purpose of computing the percentage
ownership of any other person.

The Company conducts transactions with
a number of related parties, including its
principal shareholder, Investment AB Kinnevik
(“Kinnevik”) and its subsidiaries, tower
companies in which it holds a direct or indirect
equity interest in Ghana, DRC, Tanzania and
Colombia, and with businesses owned or related
to the other shareholders of our operating
subsidiaries, notably in Guatemala, Honduras
and Colombia. Transactions (including loans)
with related parties are conducted on an arm’s
length basis.

Information and communications
The Company communicates with financial
markets based on principles of openness and
equal treatment of shareholders. All information
distributed to shareholders is published on the
Company’s website.

The Company promptly submits all material
press releases to the stock exchanges to
which it has reporting obligations.

Takeovers
With reference to Article 11 of the Luxembourg
Law on Takeover Bids there are no provisions in
the articles of incorporation of Millicom that
would have the effect of delaying, deferring
or preventing a change in control of Millicom
and that would operate only with respect to a
merger, acquisition or corporate restructuring
involving Millicom, or any of its subsidiaries.
Luxembourg laws impose the mandatory
disclosure of an important participation in
Millicom and any change in such participation.

Auditor
The external monitoring of the operations
of the Company is entrusted to one or more
auditors who need not be shareholders.

The auditors will be elected by the
shareholders’ meeting by a simple majority
of the votes present or represented at such
meeting, which will determine their number,
for a period not exceeding (6) six years.
They will hold office until their successors are
elected. They are re-eligible, but they may be
removed at any time, with or without cause,
by a resolution adopted by a simple majority
of the shareholders present or represented
at a meeting of shareholders.

Ernst & Young S.A., Luxembourg was elected
as the external auditor of Millicom in 2013 for
a term ending on the day of the 2014 AGM.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 201358
58

Millicom Annual Report 2013

Board of Directors

1. Kim Ignatius (1956)
Non-Executive Director
Mr. Kim Ignatius was elected to the Board of Millicom
in May 2011. He is Chairman of the Audit Committee.

Skills and experience
Mr. Ignatius has held leadership positions from
telecommunications and media to pharmaceutical and
energy sectors. He brings to Millicom his operational
experience at the executive level of listed companies
and best practice in auditing and risk management.

Relevant background
Mr. Ignatius, a Finnish national, is the CFO of Sanoma
Corporation, the European media group, which he joined
in 2008. Previously, Mr. Ignatius was EVP and CFO of
TeliaSonera AB until 2008 and EVP and CFO of Sonera
Oyj between 2000 and 2002. Before joining Sonera, Mr.
Ignatius was Group CFO and a member of the Executive
Board of Tamro Oyj and worked for the Amer Group in a
variety of finance and general management roles in both
North America and Europe. He is currently on the Board of
Fortum Corporation where he serves as Chairman of the
Audit and Risk Committee. Mr. Ignatius graduated with
a B.Sc. Economics from the Aalto University School of
Economics in Helsinki.

Mr. Ignatius qualifies as independent of major shareholders
as well as the Company and its management according to
the Swedish Code of Corporate Governance.

Mr. Ignatius holds 500 Millicom shares.

2. Lorenzo Grabau (1965)
Non-Executive Director
Mr. Lorenzo Grabau was elected to the Board of Millicom
in May 2013. He is a member of the Audit Committee.

Skills and experience
Mr. Grabau brings to the Millicom board his experience
from the media, digital and cable sectors as well as
expertise in financial services – key areas in Millicom’s
growth strategy.

Relevant background
Mr. Grabau, an Italian national, is a Member of the Board
of Directors of Investment AB Kinnevik, Modern Times
Group MTG AB, CTC Media, Inc. and SoftKinetic BV.
Previously, Mr. Grabau was a Partner and Managing

Director at Goldman Sachs International in London.
He holds a degree in Economics and Business from
La Sapienza University, Italy.

Mr. Grabau does not qualify as independent of major
shareholders, but is independent of the Company and
its management according to the Swedish Code of
Corporate Governance.

Mr. Grabau holds 3,000 Millicom shares.

3. Mia Brunell Livfors (1965)
Non-Executive Director
Mrs. Mia Brunell Livfors was elected to the Board of Millicom
in May 2007. She is a member of the Compensation
Committee and Chairman of the CR Committee.

Skills and experience
Mrs. Brunell Livfors brings to the Millicom board her
extensive experience at the helm and in boards of major
Swedish multinationals, as well as in-depth understanding
of the business models specifically in the media and
digital services industries.

Relevant background
Mrs. Brunell Livfors, a Swedish national, has been since
August 2006 the Chief Executive Officer of Investment AB
Kinnevik, a Swedish public company managing a portfolio
of long-term investments in a number of public companies
such as Millicom. Mrs. Brunell Livfors joined Modern Times
Group MTG AB in 1992, and was appointed CFO in 2001.
Currently, Mrs Brunell Livfors is a member of the Board of
Tele2 AB, Modern Times Group MTG AB, Billerud Korsnäs
AB, and CDON Group. She has studied Business
Administration at Stockholm University.

Mrs Brunell Livfors does not qualify as independent of
major shareholders, but is independent of the Company
and its management according to the Swedish Code of
Corporate Governance.

Mrs Brunell Livfors holds 2,359 Millicom shares.

4. Allen Sangines-Krause (1959)
Chairman and Non-Executive Director
Mr Allen Sangines-Krause was elected to the Board of
Millicom in May 2008 and appointed as Chairman in May
2010. He is Chairman of the Compensation Committee.

Skills and experience
Mr Sangines-Krause’s long experience within international
financial institutions and development of growth
companies in emerging markets bring invaluable support to
Millicom to successfully execute on its business strategy.

Relevant background
Mr. Sangines-Krause, a Mexican and British national,
worked for Goldman Sachs between 1993 and 2008,
working in a variety of senior positions in Latin America,
New York and most recently as Managing Director out of
London. Prior to joining Goldman Sachs, Mr. Sangines-
Krause was with Casa de Bolsa Inverlat, in Mexico, and
before that he was a Founding Partner of Fidem, S.C., a
Mexican investment bank. Mr. Sangines-Krause currently
sits on the Board of Investment AB Kinnevik and is the
Executive Chairman of G3 Good Governance Group
and BK Partners. He is a member of the Council of
the Graduate School of Arts and Sciences of Harvard
University. He holds a Ph.D. in Economics from Harvard
University in Massachusetts, USA.

Mr. Sangines-Krause does not qualify as independent of
major shareholders, but is independent of the Company
and its management according to the Swedish Code of
Corporate Governance.

Mr. Sangines-Krause holds 2,318 Millicom shares.

5. Ariel Eckstein (1967)
Non-Executive Director
Mr Ariel Eckstein was elected to the Board of Millicom in May
2013. He is a member of the Compensation Committee.

Skills and experience
Mr Ariel Ekstein has a strong background in online services,
customer experience and internet start-ups – activities in
which the Company is developing a growing interest.

Relevant background
Mr Eckstein, United States citizen, is Managing Director
for LinkedIn EMEA, the social networking website for
professional occupations, founded in 2002. Appointed in
March 2011, Mr. Eckstein is focused on developing, leading
and delivering the company’s strategy and growth
initiatives in Europe, the Middle East and Africa. Prior to
his current role, Mr. Eckstein was Managing Director for
LinkedIn’s Hiring Solutions business in EMEA. Prior, Mr.
Eckstein was Vice President of Business Expansion for AOL

Inc. Europe, a multinational mass media corporation that
develops, grows and invests in brands and websites. He
holds a bachelor’s degree in International Relations from
Tufts University and an MBA from University of Virginia.

7. Alejandro Santo Domingo (1977)
Non-Executive Director
Mr. Alejandro Santo Domingo was elected to the Board of
Millicom in May 2013.

Mr. Eckstein qualifies as independent of major shareholders
as well as of the Company and its management according
to the Swedish Code of Corporate Governance.

Mr. Eckstein holds no Millicom shares.

6. Paul Donovan (1958)
Non-Executive Director
Mr. Paul Donovan was elected to the Board of Millicom in
May 2009. He is a member of the Audit Committee.

Skills and experience
Mr. Donovan brings to Millicom his long operational and
management experience in technology industries,
particularly in telecommunications, as well as business
models relating to fast-moving consumer goods.

Relevant background
Mr Donovan, a British national, is the CEO of Odeon UCI
Group, Europe’s largest cinema operator. Prior to leading
Odeon, he was director and Chief Executive Officer of
Eircom, Ireland’s leading telecommunications company.
Previously Mr. Donovan was member of Vodafone’s
Executive Committee and Chief Executive for Eastern
Europe, Middle East and Asia Pacific regions. Africa, the
US, India and China were added to his remit in 2006. Prior
to Vodafone, Mr. Donovan held positions at Apple
computers, BT, and Cable and Wireless. He holds a
Bachelor of Arts in Scandinavian Studies from University
College London and a Master’s Degree in Business
Administration from the University of Bradford.

Mr. Donovan qualifies as independent of major
shareholders as well as the Company and its
management according to the Swedish Code of
Corporate Governance.

Mr. Donovan holds 1,356 Millicom shares.

Skills and experience
Mr. Santo Domingo has considerable experience in the
media and online sectors in Latin America as well as
extensive knowledge of commerce in Africa, giving the
board valuable insight into mass-market consumer
behaviour in the two continents Millicom operates in.

Relevant background
Mr. Santo Domingo, a Colombian national, is a Managing
Director at Quadrant Capital Advisors Inc., an investment
firm focused on Venture Capital and Private Equity. He is
also a member of the Board of Directors of SABMiller Plc,
the world’s second largest brewery, and serves as
Vice-Chairman of SABMiller Latin America. He sits on the
Boards of many of the companies controlled by his family
owned business; the Santo Domingo Group. He is Chairman
of the Board of Bavaria S.A. in Colombia, and Chairman
of Backus and Johnston in Peru. Additionally he serves as
Chairman of the Board of Valorem S.A., which manages
a diverse portfolio of industrial and media assets in Latin
America, and as a Director of the Board of Caracol
Television S.A., Colombia’s leading broadcaster. Mr Santo
Domingo is a member of the Board and Treasurer of Aid
for AIDS, a member of the board of DKMS, a foundation
focused on fighting blood cancer and is a Trustee of the
Metropolitan Museum of Art, the Wildlife Conservation
Society and WNET (Channel 13). He holds a Bachelor of
Arts degree from Harvard University. Mr. Santo Domingo
qualifies as independent of major shareholders as well as
the Company and its management according to the
Swedish Code of Corporate Governance.

Mr. Santo Domingo holds 5,000 Millicom shares.

8. Omari Issa (1947)
Non-Executive Director
Mr Omari Issa was elected to the Board of Millicom in
May 2010. He is a member of the Audit Committee and
the CR Committee.

Skills and experience
Mr. Issa brings to the Millicom board his important insight
and firsthand experience of doing business in Africa, and
deep understanding of the role of business in
international development.

Relevant background
Mr. Issa, a Tanzanian national, is since June 1st 2013, the
Chief Executive Officer of the Tanzania President’s Delivery
Bureau which oversees the general implementation of
government priorities. Previously he was CEO of Investment
Climate Facility for Africa and a Board member of the
Geita Gold Mining Company. Prior to that, Mr. Issa was the
Executive Director and Chief Operating Officer of Celtel
International, and spent 14 years with the IFC and six years
with the World Bank. In 2013, he was appointed to Chair
the Board of AMREF International and also became
member of the Board of Africare, the largest African-
American organisation in the development field. He has
a Bachelor of Science (Honours) from The Polytechnic of
Central London, and an MBA from Columbia University,
New York.

Mr. Issa qualifies as independent of major shareholders
as well as the Company and its management according
to the Swedish Code of Corporate Governance.

Mr. Issa holds 610 Millicom shares.

Our governance committees
Pages 56–57

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 201360

Executive Committee

Hans-Holger Albrecht
President and Chief Executive Officer
Hans-Holger Albrecht was appointed President and CEO of Millicom on
November 1st 2012. Previously he was President and CEO of Modern Times
Group MTG AB (MTG) for 12 years. Hans-Holger started his career at MTG
in 1997 as head of the pay-TV operations, before being appointed as
Business Area Manager in 1999 and thus assuming responsibility for the
free-TV division as well. In April 2000, he was appointed Chief Operating
Officer (COO) of MTG. Before joining MTG, Hans-Holger worked for
the Luxembourg-based media group CLT from 1991 to 1996 and for
Daimler-Benz in 1990. Hans-Holger Albrecht graduated in Law at the
University of Freiburg in Germany, studied at Yale University in the USA
and received a PhD at the University of Bochum, Germany. Hans-Holger
Albrecht holds 8,810 Millicom shares.

Marc Zagar
EVP and Deputy CFO
Marc Zagar was appointed Interim CFO in August 2013. He will become
Deputy CFO in June 2014. He joined Millicom as EVP of Controlling and
Analytics in February 2013. Prior to this and since October 2011, Marc
Zagar was EVP Finance at MTG. Marc joined MTG in 2001 as Business
Area Controller of Viasat broadcasting. In March 2006, he was appointed
Chief Operating Officer for MTG’s broadcasting businesses. Prior to
joining MTG, Marc worked for over ten years in various financial
management positions within Vivendi Universal, having started his career
with Steelcase Strafor. He graduated with a Bachelor’s degree from
CESEM Business School in Reims, France and has a Master’s degree from
Université Dauphine in Paris. Marc Zagar holds 502 Millicom shares.

Mario Zanotti
Senior EVP Operations
Mario Zanotti was appointed as Senior EVP Operations in December
2012. From late 2011, Mario was COO Categories & Global Sourcing.
He joined Millicom in 1992 as General Manager of Telecel in Paraguay.
Following this, he became Managing Director of Tele2 Italy and
CEO of YXK Systems. In 2002, he served as Head of Central America
for Millicom and became Chief Officer LATAM in 2008. Prior to joining
Millicom, he worked as an electrical engineer at Itaipu Hydroelectric
Power Plant and later as Chief Engineer of the biggest electrical
contractor company in Paraguay. He has a degree in Electrical
Engineering from the Pontifica Universidade Catolica in Porto Alegre,
Brazil and a MBA from INCAE and the Universidad Catolica de
Asunción, Paraguay. Mario Zanotti holds 8,120 Millicom shares.

Arthur Bastings
EVP Africa
Arthur Bastings was appointed EVP Africa in May 2013. Previously Arthur
was Chief Executive at online games developer Bigpoint. Prior to this
he was Managing Director of Discovery Communications Europe –
the largest pay-TV channels business in the region. Before that he
had senior roles at Time Warner and Viacom. His early career was in
strategy consulting and brand development. Arthur Bastings holds
no Millicom shares.

Jo Leclère
EVP Human Resources
Jo Leclère was appointed Chief HR Officer of Millicom in 2011. He joined
Millicom in February 2009 as Head of Reward & Performance, having
previously been VP Operations Europe at Northgate Arinso, a global
HR consulting and outsourcing provider. Prior to this position, he was
HR Services Director at PricewaterhouseCoopers. He holds a master’s
degree in Law, a postgraduate degree in Tax and a bachelor’s degree
in Economics. Jo Leclère holds 800 Millicom shares.

Martin Lewerth
EVP Home and Digital Media
Martin Lewerth was appointed as EVP of Home and Digital Media in
December 2012. Previously, Martin was Executive Vice President
Pay-TV and Technology at MTG. Martin joined MTG in 2001 where he
served in various management positions including CTO for MTG, CEO
for the IPTV distribution, Business area manager for the Pay-TV
business and manager responsible for the group’s online strategy and
operations. Before joining MTG, Martin worked for the management
consulting firm Applied Value and the Swedish company SKF Group.
Martin holds a M.Sc. from Chalmers University of Technology in
Sweden. Martin Lewerth holds 356 Millicom shares.

Anders Nilsson
EVP Commerce and Services
Anders Nilsson was appointed as EVP of Commerce and Services
with effect from January 2013. Anders oversees the Mobile Financial
Services business (previously headed by François-Xavier Roger) and the
newly created Online division. Prior to joining Millicom, Anders was EVP of
Central European Broadcasting at MTG, responsible for free and pay-TV
operations in the Baltics and free-TV operations in the Czech Republic,
Bulgaria and Hungary. Anders joined MTG in 1992 and he successfully
headed the group’s Radio and Publishing businesses before serving as
MTG’s COO and Head of MTG Sweden. Between 2008 and 2010, Anders
was also CEO of MTG’s Online business area which was spun off in 2010
into what is now CDON.

Anders Nilsson holds 803 Millicom shares.

In February 2014 Millicom announced that Mr. Nilsson will leave the
Company at the end of March 2014.

Xavier Rocoplan
EVP CTIO
Xavier Rocoplan was appointed as Executive Vice President and Chief
Technical & IT Officer in December 2012. He was previously Chief Global
Networks Officer, a position he held from April 2012. Xavier will continue
to report to Mario Zanotti, senior EVP Operations. Xavier joined Millicom
in 2000 as CTO in Vietnam and then became CTO for the South East
Asian cluster (Cambodia, Laos and Vietnam). In 2004, he was appointed
CEO of Paktel in Pakistan, a role he held until 2007. During this time,
he launched Paktel’s GSM operations and led the process that was
concluded with the disposal of the business in 2007. After Millicom’s
exit from Asia, Xavier was appointed to head the New Corporate Business
development unit where he managed the Tower Assets Monetisation
programme which led to the creation of tower companies in Ghana,
Tanzania, DRC and Colombia. Xavier holds Master’s degrees from
Ecole Nationale Supérieure des Télécommunications de Paris and
from Université Paris IX Dauphine. Xavier Rocoplan holds 9,000
Millicom shares.

Martin Weiss
EVP Strategy and Corporate Development
Martin Weiss joined Millicom on June 1, 2013 as EVP Strategy and
Corporate Development. Martin Weiss was previously founding
Partner at Solon Management Consulting where he developed
extensive experience advising telecommunications and media
companies internationally including consultancy to Millicom.
He began his business career at McKinsey & Company.
Martin Weiss holds 593 Millicom shares.

Remuneration of the Executive management
The remuneration of the Officers of the Company (“Officers”) comprises an annual base salary, an annual bonus, share based compensation, social
security contributions, pension contributions and other benefits. The bonus and share based compensation plans are based on actual performance
(including individual and Group performance). Share based compensation is granted once a year by the Compensation Committee of the Board.
The annual base salary and other benefits of the Chief Executive Officer (“CEO”) is proposed by the Compensation Committee and approved by the
Board. The annual base salary and other benefits of the Chief Executive Officer (“CEO”) is proposed by the Compensation Committee and approved
by the Board. The annual base salary and other benefits of the Chief Executive Officer (“CEO”) and the Executive Vice Presidents (“Executive Team”)
is proposed by the Compensation Committee and approved by the Board.

The remuneration charge for the Officers for the years ended December 31, 2013, and 2012 was as follows:

2013
Base salary
Bonus
Pension
Other benefits
Total
Share based compensation(i) (ii)

2012
Base salary
Bonus
Pension
Other benefits
Total
Share based compensation(i)

Current Chief
Executive Officer
US$ ‘000
2,252
2,269
723
1,282
6,526
1,705

Former Chief
Financial Officer
US$ ‘000
463
–
74
34
571
531

Executive Team
US$ ‘000
3,532
1,768
573
747
6,620
3,057

Current Chief
Executive Officer
633
–
134
44
811
–

Former Chief
Executive Officer
1,265
1,554
379
187
3,385
3,431

Former Chief
Financial Officer
662
719
108
59
1,548
1,533

(i)
(ii)

See note 23
Share awards of 65,178 and 71,899 were granted in 2013 under the 2013 LTIPs to the CEO, and Executive Team. Share awards of 33,209 and 13,962 were granted in 2012
under the 2012 LTIPs to the former CEO and former CFO. Share awards of 34,937 and 14,814 were granted in 2011 under the 2011 LTIPs to the former CEO and former CFO.

The number of shares and unvested share awards beneficially owned by senior management as at December 31, 2013 and 2012 was as follows:

2013
Shares
Share awards not vested
2012
Shares
Share awards not vested

Former Chief
Financial Officer

Chief Executive
Officer
8,810
65,178

Executive
Team
20,174
105,102

610
–

23,402
46,044

Total
28,984
170,280

24,012
46,044

Notice period
If employment of the executives is terminated by Millicom, a notice period of up to 12 months is applicable, and the CEO is entitled to receive
a termination payment equivalent to 24 months’ basic salary if he complies with certain conditions.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 201362

Directors’
report

Principal Activities
and Background

Millicom International Cellular S.A. (the
“Company”), a Luxembourg Société
Anonyme, and its subsidiaries, joint ventures
and associates (the “Group” or “Millicom”) is
an international telecommunications and
media company providing digital lifestyle
services in emerging markets, through
mobile and fixed telephony, cable,
broadband and online businesses in
Latin America and Africa. Millicom operates
its mobile businesses in El Salvador,
Guatemala and Honduras in Central
America; in Bolivia, Colombia and Paraguay
in South America; and in Chad, the
Democratic Republic of Congo, Ghana,
Mauritius, Rwanda, Senegal and Tanzania
in Africa. In addition, Millicom operates
cable businesses in El Salvador, Guatemala,
Honduras, Bolivia, Costa Rica and Paraguay
and has investments in online/e-commerce
businesses in several countries in Latin
America (including Brazil) and Africa
(including Nigeria and South Africa).

The Company’s shares are traded as Swedish
Depositary Receipts on the Stockholm stock
exchange under the symbol MIC SDB and over
the counter in the US under the symbol MIICF.
The Company has its registered office at 2, Rue
du Fort Bourbon, L-1249 Luxembourg, Grand
Duchy of Luxembourg and is registered with
the Luxembourg Register of Commerce under
the number RCS B 40 630.

Group Performance
The Group delivered accelerated revenue
growth in 2013 despite more challenging
economic conditions and strong investments
into future growth areas. The total mobile
customer base increased by 7% to 50.6 million
compared to 47.2 million at December 31,
2012. In 2013, our emphasis was building the
foundations for future growth across all
strategic pillars. In the year 53% of recurring
revenue growth was coming from new
strategic pillars of Cable, MFS and Online.
Revenue increased by 7.3% in local currency to
$5,159 million year-on-year.

Total operating profit for the year ended
December 31, 2013 was $781 million from
$1,104 million for the year ended December
31, 2012, reflecting an increased focus on
developing resources and infrastructure
around new growth areas, and in encouraging
customers to migrate towards data through
increased handset subsidies. This focus also
translated into a decline in the net profit
attributable to equity holders of the Company
(from $508 million in 2012 to $229 million).

The Group generated operating free cash flow
of $497 million in 2013, equivalent to 9.6%
of revenue, compared to $981 million in 2012.
Cash, cash equivalents and low-risk interest
bearing deposits increased to $1.8 billion
compared to $1.2 billion at December 31,
2012. As at December 31, 2013, the Group
had total equity of $2.1 billion compared
to $2.3 billion at December 31, 2012.

The Group’s performance throughout
2013 demonstrates our ability to maintain
top-line growth while refocusing on growth
opportunities and reacting to market conditions.

Developments in 2013
On January 11, 2013, the termination of our
reporting and disclosure obligations under
the US Exchange Act became fully effective.
Our shares will continue to trade in the USA
over the counter.

On February 5, 2013, Millicom announced that
it has entered into a non-binding exclusive
agreement to discuss with EPM, the largest
utility company of the Northwest region of
Colombia, the possible combination of their
respective telecom businesses.

On April 11, 2013, Millicom qualified along with
11 other participants to the last phase of the
process that should see Myanmar issuing two
new 15-year telecom licences. The process was
completed in June 2013 and Millicom’s bid was
unsuccessful.

On May 24, 2013, Millicom announced a
change in its Executive Committee with the
appointment of Arthur Bastings as EVP for
Africa. On August 27, 2013, we announced that
our CFO Francois-Xavier Roger was leaving the
Company and replaced on an interim basis by
Marc Zagar. In February 2014 Tim Pennington
was announced to take over the CFO role in
June 2014 and Mr. Zagar will assume the role
of Deputy CFO.

In Q2 2013, we applied for further DTH licences
in Latin America to broaden our reach and
continue diversifying our product offering.
We also entered into an agreement to share
spectrum and jointly roll out a 4G network
in Colombia, supporting our Capex
optimisation plan.

On October 1, 2013, we signed a final
agreement with EPM regarding the proposed
merger of EPM and Millicom’s telecom and
media businesses in Colombia to create
a leading integrated player. The merger,
awaiting regulatory approval, will enable
us to fast-track our Cable business plans.

On October 15, 2013, Millicom signed an
agreement to acquire a cable TV provider
in Bolivia. It enabled Millicom to complete
its Cable footprint in Latin America.

On October 16, 2013, Millicom issued an
eight year $800 million bond. Proceeds from
the issuance will be used for the merger with
UNE and have placed into escrow until closing.
The bond will carry a 6.625% coupon.

On December 13, 2013, Millicom signed
a partnership with Rocket Internet and MTN
to further accelerate the growth of the African
Online businesses. The agreement is subject to
regulatory approvals.

In January 2014, we also announced the
signing of a put and call option with our
partner in Guatemala. As a result of these
developments and the new IFRS rules, in 2014
Millicom will fully consolidate Tigo Guatemala,
while Mauritius and the Online businesses
(in Africa and Latin America) will be
equity accounted.

In 2013, we returned $264 million to
shareholders through dividends. Our dividend
policy is no less than $2 per share and at least
30% of normalised net income. We aim as
well for a progressive growth in dividend. In
2014 and as our leverage will increase as we
complete the merger in Colombia, the Board
will propose to the AGM the payment of
a stable dividend.

Risk management activities are presented on
pages 24 to 31 of this Annual Report.

Outlook for the Group
In 2014, we will continue to focus on rigorous
financial discipline, operating efficiency and
providing our customers with the Digital
Lifestyle. This means continuing the
investments needed for future growth which
focuses on five areas: 1) move from volume to
value in mobile by capturing the data
opportunity, 2) by building a $2 billion business
on Cable & Digital Media, 3) creating a
blockbuster with Mobile Financial Services, 4)
investing in Online ventures in Latin America
and Africa, and 5) maximising operational and
Capex efficiencies. Creation of a leading
integrated operator in Colombia with UNE,
expected to finalise during the first half of
2014, will enable us to accelerate our
development in cable, whilst offering
material opportunities to cross-sell and
up-sell innovative and best quality services
to customers.

Under the new consolidation scope and at
constant exchange rates, we expect revenue
growth to accelerate at a mid to high single
digit rate (versus comparable 5.5% in 2013).
On a reported basis and at constant exchange
rates, we expect revenue growth to exceed
15%. We expect EBITDA margin to stabilise at
around mid-30s% (after corporate costs). In
2014, we expect a Capex to revenue ratio of
around 19%, excluding spectrum and licence
acquisitions.

EBITDA margin improvements from full
consolidation of Guatemala will be offset by
accelerating growth opportunities in Africa
and South America.

Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Millicom Annual Report 2013Millicom Annual Report 2013
64

Millicom Annual Report 2013

Financial statements

Contents
65 Independent auditors’ report
66 Consolidated income statement
67

Consolidated statement
of comprehensive income
Consolidated statement
of financial position
Consolidated statement
of cash flows
Consolidated statement
of changes in equity
Notes to the consolidated
financial statements

Independent auditors’ report

To the Shareholders of
Millicom International Cellular S.A.

Following our appointment by the General Meeting of the Shareholders dated May 28, 2013, we have audited the accompanying consolidated
accounts of Millicom International Cellular S.A., which comprise the consolidated statement of financial position as at December 31, 2013, the
consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the
consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.
The consolidated accounts as of December 31, 2011 and for the years then ended were audited by another auditor which issued an unqualified
opinion on March 1, 2012.

Board of Directors’ responsibility for the consolidated accounts
The Board of Directors is responsible for the preparation and fair presentation of these consolidated accounts in accordance with International
Financial Reporting Standards as adopted by the European Union and for such internal control as the Board of Directors determines is
necessary to enable the preparation and presentation of consolidated accounts that are free from material misstatement, whether due to
fraud or error.

Responsibility of the “réviseur d’entreprises agréé”
Our responsibility is to express an opinion on these consolidated accounts based on our audit. We conducted our audit in accordance with
International Standards on Auditing as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier”. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts.
The procedures selected depend on the judgement of the “réviseur d’entreprises agréé”, including the assessment of the risks of material
misstatement of the consolidated accounts, whether due to fraud or error. In making those risk assessments, the “réviseur d’entreprises agréé”
considers internal control relevant to the entity’s preparation and fair presentation of the consolidated accounts in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated accounts.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the consolidated accounts give a true and fair view of the financial position of Millicom International Cellular S.A. as of
December 31, 2013, and of its financial performance and its cash flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union.

Report on other legal and regulatory requirements
The accompanying management report on page 62 and 63, which is the responsibility of the Board of Directors, is consistent with the
annual accounts.

The accompanying corporate governance statement on pages 52 to 61, which is the responsibility of the Board of Directors, is consistent
with the annual accounts and includes the information required by the law with respect to the corporate governance statement.

ERNST & YOUNG
Société Anonyme
Cabinet de révision agréé

Olivier LEMAIRE
Luxembourg, March 21, 2014

Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122Consolidated statement of comprehensive income
for the year ended December 31, 2013

Net profit for the year
Other comprehensive income (loss) (to be reclassified to profit and loss in
subsequent periods):
Exchange differences on translating foreign operations
Cash flow hedges
Total comprehensive income for the year
Attributable to:
Equity holders of the Company
Non-controlling interests

The accompanying notes are an integral part of these consolidated financial statements.

2013
US$ millions
205

2012
US$ millions
504

2011
US$ millions
1,129

(73)
7
139

182
(43)

(55)
(2)
447

469
(22)

(47)
(3)
1,079

882
197

Consolidated income statement
for the year ended December 31, 2013

Revenue
Cost of sales
Gross profit
Sales and marketing expenses
General and administrative expenses
Other operating expenses
Other operating income
Operating profit
Interest expense
Interest and other financial income
Other non-operating income (expenses), net
Income (loss) from associates, net
Profit before tax from continuing operations
(Charge) credit for taxes
Profit for the year from continuing operations
Profit for the year from discontinued operations, net of tax
Net profit for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Earnings per share for the year
(US$ per common share)
Basic earnings per share
– from continuing operations attributable to equity holders
– from discontinued operations attributable to equity holders
– for the year attributable to equity holders
Diluted earnings per share
– from continuing operations attributable to equity holders
– from discontinued operations attributable to equity holders
– for the year attributable to equity holders

Notes
10

10,11

12
17

2013
US$ millions
5,159
(2,041)
3,118
(1,076)
(1,099)
(179)
17
781
(276)
23
(132)
(9)
387
(182)
205
–
205

2012
US$ millions
4,814
(1,737)
3,077
(914)
(956)
(122)
19
1,104
(220)
14
22
(23)
897
(393)
504
–
504

2011
US$ millions
4,530
(1,565)
2,965
(817)
(839)
(96)
44
1,257
(187)
15
(4)
(10)
1,071
19
1,090
39
1,129

229
(24)

508
(4)

2.30
–
2.30

5.02
–
5.02

5.01
–
5.01

925
204

8.50
0.37
8.87

8.49
0.37
8.86

The accompanying notes are an integral part of these consolidated financial statements.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12268

Consolidated statement of financial position
as at December 31, 2013

ASSETS
Non-Current Assets
Intangible assets, net
Property, plant and equipment, net
Investments in associates
Pledged deposits
Deferred tax assets
Other non-current assets
Total Non-Current Assets
Current Assets
Inventories
Trade receivables, net
Amounts due from non-controlling interests and joint ventures
Prepayments and accrued income
Current income tax assets
Supplier advances for capital expenditure
Advances to non-controlling interest
Other current assets
Pledged deposits
Restricted cash
Cash and cash equivalents
Total Current Assets
Assets held for sale
TOTAL ASSETS

The accompanying notes are an integral part of these consolidated financial statements.

Notes

2013
US$ millions

2012
US$ millions

Notes

2013
US$ millions

2012
US$ millions

15
16
17
18,26
13

19
32

18,26
20
21

2,543
3,162
122
2
313
83
6,225

140
320
234
163
58
63
69
22
817
81
941
2,908
14
9,147

2,419
3,108
193
47
259
86
6,112

93
322
81
140
39
44
56
78
8
43
1,174
2,078
21
8,211

EQUITY AND LIABILITIES
EQUITY
Share capital and premium
Treasury shares
Put option reserve
Other reserves
Retained profits
Profit for the year attributable to equity holders
Equity attributable to owners of the Company
Non-controlling interests
TOTAL EQUITY
LIABILITIES
Non-current Liabilities
Debt and financing
Derivative financial instruments
Provisions and other non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Current Liabilities
Debt and financing
Put option liability
Payables and accruals for capital expenditure
Other trade payables
Amounts due to joint venture partners
Accrued interest and other expenses
Current income tax liabilities
Provisions and other current liabilities
Total current liabilities
Liabilities directly associated with assets held for sale
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES

The accompanying notes are an integral part of these consolidated financial statements.

22
22
24
25

26
34
27
13

26
27

640
(172)
(737)
(185)
2,154
229
1,929
152
2,081

3,687
23
162
188
4,060

471
792
453
277
87
393
153
378
3,004
2
7,066
9,147

642
(198)
(737)
(133)
1,942
508
2,024
312
2,336

2,566
4
127
180
2,877

693
730
411
259
19
341
161
379
2,993
5
5,875
8,211

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12270

Consolidated statement of cash flows
for the year ended December 31, 2013

Profit before tax from continuing operations
Adjustments to reconcile to net cash:
Interest expense
Interest and other financial income
(Income) loss from associates, net
Other non-operating (income) expenses, net
Adjustments for non-cash items:
Depreciation and amortisation
Loss (gain) on disposal and impairment of assets, net
Share-based compensation

Decrease (increase) in trade receivables, prepayments and other
current assets
(Increase) in inventories
Increase in trade and other payables
Changes in working capital
Interest paid
Interest received
Tax paid
Net cash provided by operating activities
Cash flows from (used in) investing activities:
Acquisition of subsidiaries, and non-controlling interests, net of cash acquired
Proceeds from disposal of subsidiaries and non-controlling interests
Purchase of intangible assets including licences
Proceeds from sale of intangible assets
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Disposal of pledged deposits, net
Investment of 6.625% bond proceeds
Disposal of time deposits, net
Net increase in restricted cash
Loans to associates
Cash (used in) provided by other investing activities, net
Net cash used in investing activities

Notes

2013
US$ millions
387

2012
US$ millions
897

2011
US$ millions
1,071

276
(23)
9
132

875
29
17
1,702

38
(55)
55
38
(227)
19
(322)
1,210

(4)
–
(402)
–
(758)
60
–
(800)
–
(39)
(20)
(57)
(2,020)

220
(14)
23
(22)

811
6
22
1,943

(103)
(14)
201
84
(169)
11
(284)
1,585

(172)
–
(159)
2
(842)
115
–
–
–
(23)
(31)
(31)
(1,141)

187
(15)
10
4

739
(22)
17
1,991

(57)
(13)
85
15
(141)
14
(268)
1,611

(20)
1
(57)
–
(700)
127
9
–
3
(20)
–
(35)
(692)

9,10,15,16
9,10
23

18,26

Cash flows from (used in) financing activities:
Short term loans to other non-controlling interests
Proceeds from issuance of shares
Purchase of treasury shares
Proceeds from debt and other financing
Proceeds from 6.625% bond
Repayment of debt and financing
Advance payments to non-controlling interests
Payment of dividends to equity holders
Cash (used in) provided by other financing activities, net
Net cash (used in) from financing activities
Cash provided by discontinued operations
Exchange gains (losses) on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

Notes

2013
US$ millions

2012
US$ millions

2011
US$ millions

26
18,26
26

–
–
–
1,179
800
(1,168)
–
(264)
29
576
–
1
(233)
1,174
941

(24)
–
(190)
1,545
–
(923)
–
(541)
–
(133)
–
2
313
861
1,174

–
1
(498)
703
–
(792)
(27)
(494)
–
(1,107)
53
(27)
(162)
1,023
861

The accompanying notes are an integral part of these consolidated financial statements.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12272

Consolidated statement of changes in equity
for the year ended December 31, 2013

Balance on January 1, 2011
For the year ended December 31, 2011
Profit for the year
Cash flow hedge reserve movement
Currency translation differences
Total comprehensive income for the year
Transfer to legal reserve
Dividends(v)
Purchase of treasury shares
Cancellation of treasury shares
Shares issued via the exercise of stock options
Share-based compensation(vi)
Issuance of shares under the LTIPs(vi)
Sale of Amnet Honduras to non-controlling interests
Disposal of Laos
Dividend to non-controlling shareholders
Balance on December 31, 2011
For the year ended December 31, 2012
Profit for the year
Cash flow hedge reserve movement
Currency translation differences
Total comprehensive income for the year
Dividends(v)
Purchase of treasury shares
Cancellation of treasury shares
Share-based compensation(vi)
Issuance of shares under the LTIPs(vi)
Non-controlling interests in Rocket Internet(vii)
Dividend to non-controlling shareholders
Change in scope of consolidation(viii)
Balance on December 31, 2012
For the year ended December 31, 2013
Profit for the year
Cash flow hedge reserve movement
Currency translation differences
Total comprehensive income for the year
Dividends(v)
Purchase of treasury shares
Shares issued via the exercise of stock options
Share-based compensation(vi)
Issuance of shares under the LTIPs(vi)
Change in scope of consolidation(vii)
Change in deferred tax liabilities(viii)
Dividend to non-controlling shareholders
Balance on December 31, 2013

Attributable to equity holders

Share
Capital(i)
US$ ’000
163,578

–
–
–
–
–
–
–
(6,300)
59
–
70
–
–
–
157,407

–
–
–
–
–
–
(4,800)
–
–
–
–
–
152,607

–
–
–
–
–
–
–
–
–
–
–
–
152,607

Share
Premium(i)
US$ ’000
517,981

–
–
–
–
–
–
–
(20,070)
1,184
–
6,025
–
–
–
505,120

–
–
–
–
–
–
(15,000)
–
(1,106)
–
–
–
489,014

–
–
–
–
–
–
(343)
–
(1,106)
–
–
–
487,565

Treasury
shares
US$ ’000
(300,000)

Retained
profits(ii)
US$ ’000
2,754,631

–
–
–
–
–
–
(498,274)
401,415
592
–
17,908
–
–
–
(378,359)

–
–
–
–
–
(189,619)
344,377
–
25,453
–
–
–
(198,148)

–
–
–
–
–
(3,702)
8,166
–
21,313
–
–
–
(172,371)

924,515
–
–
924,515
(61)
(493,909)
–
(375,045)
(435)
–
(773)
2,207
–
–
2,811,130

508,306
–
–
508,306
(541,133)
–
(324,577)
–
(11,926)
–
–
8,658
2,450,458

229,147
–
–
229,147
(263,627)
–
(4,796)
–
(1,104)
1,391
(28,000)
–
2,383,469

Put option
reserve(iii)
US$ ’000
(737,422)

–
–
–
–
–
–
–
–
–
–
–
–
–
–
(737,422)

–
–
–
–
–
–
–
–
–
–
–
–
(737,422)

Other
reserves(iv)
US$ ’000
(54,685)

–
(3,015)
(39,806)
(42,821)
61
–
–
–
(81)
17,264
(23,230)
–
–
–
(103,492)

–
(1,118)
(37,709)
(38,827)
–
–
–
21,929
(12,421)
–
–
–
(132,811)

–
6,857
(53,903)
(47,046)
–
–
(3,027)
16,871
(19,103)
–
–
–
(185,116)

Total Equity
Holders’
interests
US$ ’000
2,344,083

Non-
controlling
interests
US$ ’000
45,550

924,515
(3,015)
(39,806)
881,694
–

(493,909)
(498,274)

–
1,319
17,264
–
2,207
–
–
2,254,384

508,306
(1,118)
(37,709)
469,479
(541,133)
(189,619)
–
21,929
–
–
–
8,658
2,023,698

229,147
6,857
(53,903)
182,101
(263,627)
(3,702)
–
16,871
–
1,391
(28,000)
–
1,928,732

204,490
(247)
(6,892)
197,351
–
–
–
–
–
–
–
11,974
(6,493)
(57,212)
191,170

(4,718)
(85)
(17,530)
(22,333)
–
–
–
–
–
160,321
(16,969)
–
312,189

(24,547)
182
(19,068)
(43,433)
–
–
–
–
–
(91,834)
–
(24,872)
152,050

Total equity
US$ ’000
2,389,633

1,129,005
(3,262)
(46,698)
1,079,045
–

(493,909)
(498,274)

–
1,319
17,264
–
14,181
(6,493)
(57,212)
2,445,554

503,588
(1,203)
(55,239)
447,146
(541,133)
(189,619)
–
21,929
–
160,321
(16,969)
8,658
2,335,887

204,600
7,039
(72,971)
138,668
(263,627)
(3,702)
–
16,871
–
(90,443)
(28,000)
(24,872)
2,080,782

Number
of shares
’000
109,053

–
–
–
–
–
–
–
(4,200)
40
–
46
–
–
–
104,939

–
–
–
–
–
–
(3,200)
–
–
–
–
–
101,739

–
–
–
–
–
–
–
–
–
–
–
–
101,739

Number of
shares held
by the Group
’000
(3,254)

–
–
–
–
–
–
(4,646)
4,200
6
–
187
–
–
–
(3,507)

–
–
–
–
–
(2,106)
3,200
–
237
–
–
–
(2,176)

–
–
–
–
–
(44)
90
–
235
–
–
–
(1,895)

Share Capital and Share Premium – see note 22.

(i)
(ii) Retained Profits – includes profit for the year attributable to equity holders, of which $126 million; (2011: $94 million) are not distributable to equity holders.
(iii) Put option reserve – see note 24.
(iv) Other reserves – see note 25.
(v) Dividends – see note 28.
(vi) Share based compensation – see note 23.
(vii) Acquisition of Rocket Internet businesses – see note 4
(viii) Change in scope of consolidation – see note 4.

The accompanying notes are an integral part of these consolidated financial statements.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12274

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013

1. Corporate information
Millicom International Cellular S.A. (the “Company”), a Luxembourg Société Anonyme, and its subsidiaries, joint ventures and associates (the
“Group” or “Millicom”) is an international telecommunications and media company providing digital lifestyle services in emerging markets,
through mobile and fixed telephony, cable, broadband and e-commerce businesses in Latin America and Africa.

Millicom operates its mobile businesses in El Salvador, Guatemala and Honduras in Central America; in Bolivia, Colombia and Paraguay in
South America; and in Chad, the Democratic Republic of Congo (“DRC”), Ghana, Mauritius, Rwanda, Senegal and Tanzania in Africa. In
addition Millicom operates cable businesses in El Salvador, Guatemala, Honduras, Costa Rica, Nicaragua and Paraguay, and a television
business in Bolivia. Millicom also has investments in online/ e-commerce businesses in several countries in Latin America (including Brazil) and
Africa (including Nigeria, South Africa, Egypt and Morocco) (see note 4).

The Company’s shares are traded as Swedish Depositary Receipts on the Stockholm stock exchange under the symbol MIC SDB and over the
counter in the US under the symbol MIICF. The Company has its registered office at 2, Rue du Fort Bourbon, L-1249 Luxembourg, Grand Duchy
of Luxembourg and is registered with the Luxembourg Register of Commerce under the number RCS B 40 630.

On March 21, 2014 the Board of Directors (“Board”) authorised these consolidated financial statements for issuance. The approval will be
submitted for ratification by the shareholders at the Annual General Meeting on May 27, 2014.

2. Summary of consolidation and accounting policies
2.1 Basis of preparation
The consolidated financial statements of the Group are presented in US dollars and amounts are rounded to the nearest million (US$ million)
except where otherwise indicated. The consolidated financial statements have been prepared on a historical cost basis, except for certain items
including derivative financial instruments (measured at fair value), financial instruments that contain obligations to purchase own equity
instruments (measured at the present value of the redemption price), and property, plant and equipment under finance leases (initially
measured at the lower of fair value and present value of the future minimum lease payments).

In accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of
international accounting standards, the consolidated financial statements for the year ended December 31, 2013 have been prepared in
accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”).

As of December 31, 2013, International Financial Reporting Standards as adopted by the European Union are similar to those published by the
International Accounting Standards Board (“IASB”), except for IAS 39 – Financial Instruments that has been partially adopted by the European
Union and for the group of new standards on consolidation covering IFRS 10, ‘Consolidated Financial Statements’, IFRS 11, ‘Joint
Arrangements’, IFRS 12, ‘Disclosure of Interest in Other Entities’, and related amendments to the existing standards IAS 27, ‘Consolidated and
Separate Financial Statements’ and IAS 28, ‘Investments in Associates’, which have been adopted by the European Union to become effective
for periods commencing on January 1, 2014, rather than January 1, 2013 as pronounced by the IASB.

The preparation of financial statements in conformity with IFRS requires management to use judgment in applying the Group’s accounting
policies. It also requires the use of certain critical accounting estimates and assumptions that affect reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. These estimates are based on management’s best knowledge of current events and actions, and actual results
may ultimately differ from these estimates. Areas involving a higher degree of judgment or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements are disclosed in note 3.

2.2 Consolidation
The consolidated financial statements of the Group comprise the financial statements of the Company and its subsidiaries and joint ventures
as at December 31 of each year. The financial statements of the subsidiaries and joint ventures are prepared for the same reporting year as
the Company, using consistent accounting policies.

All intra-group balances, transactions, income and expenses, and profits and losses resulting from intra-group transactions are eliminated.

The acquisition method of accounting is used to account for acquisitions where there is a change in control. The cost of an acquisition is
measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair value on
acquisition date, irrespective of the extent of any non-controlling interest. The excess of cost of acquisition over the fair value of the Group’s
share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised directly in the income statement (see policy note 2.6 on Goodwill). All acquisition related costs
are expensed as incurred.

Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating
policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Non-controlling interests
Transactions with non-controlling interests as accounted for as transactions with equity owners of the Group. Gains or losses on disposals to
non-controlling interests are recorded in equity. For purchases from non-controlling interests, the difference between any consideration paid
and the relevant share acquired of the carrying value of net assets of the subsidiary is also recorded in equity. Non-controlling interest is
measured at the proportionate interest in the net assets of the subsidiary.

Joint ventures
Millicom determines the existence of joint control by reference to joint venture agreements, articles of association, structures and voting
protocols of the Boards of Directors of those ventures.

Entities that are jointly controlled are consolidated in the financial statements using the proportionate method which includes the Group’s
share of the assets, liabilities, income and expenses of the joint ventures (see policy note 2.29 Changes in Accounting Policies for a change in
accounting for joint ventures applicable from January 1, 2014).

The Group recognises the portion of gains or losses on the sale of assets to joint ventures that are attributable to other parties in the joint
venture. The Group does not recognise its share of profits or losses from purchase of assets by the Group from a joint venture until it resells the
assets to a third party. However, if a loss on a transaction provides evidence of a reduction in the net realisable value of current assets or an
impairment loss, the loss is recognised immediately.

Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between
20% and 50% of the voting rights.

Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s
investment in associates includes goodwill (net of any accumulated impairment loss) on acquisition.

The cost of shares acquired in associates from sale and lease back transactions with tower companies are initially measured based on the fair
values of the towers sold. The fair value of the towers sold is derived by using the estimated replacement cost of the towers adjusted by an
amount for wear and tear taking into consideration the average age of the towers.

The Group’s share of post-acquisition profits or losses of associates is recognised in the consolidated income statement, and its share of
post-acquisition movements in reserves is recognised in reserves. Cumulative post-acquisition movements are adjusted against the carrying
amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further losses, unless the Group has incurred obligations or made payments on behalf of
the associates.

Gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Losses are
also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have
been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments
in associates are recognised in the income statement.

2.3 Foreign currency translation
Functional and presentation currencies
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”). The functional currency of each subsidiary, joint venture and associate
reflects the economic substance of the underlying events and circumstances of these entities. The Company is located in Luxembourg and its
subsidiaries, joint ventures and associates are located in various countries and operate in different currencies. The Group’s consolidated
financial statements are presented in US dollars (the “presentation currency”). The functional currency of the Company is the US dollar
because of the significant influence of the US dollar on its operations.

Transactions and balances
Transactions denominated in a currency other than the functional currency are translated into the functional currency using exchange rates
prevailing on transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions, and on translation of
monetary assets and liabilities denominated in currencies other than the functional currency at year-end exchange rates, are recognised in the
consolidated income statement, except when deferred in equity as qualifying cash flow hedges.

Translation into presentation currency
The results and financial position of all Group entities (none of which operate in an economy with a hyperinflationary functional currency)
with functional currency other than the US dollar presentation currency are translated into the presentation currency as follows:

i) Assets and liabilities are translated at the closing rate at the date of the statement of financial position;

ii) Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the

cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates
of the transactions); and

iii) All resulting exchange differences are recognised as a separate component of equity (“Currency translation reserve”), in the caption “Other reserves”.

On consolidation, exchange differences arising from the translation of net investments in foreign operations, and of borrowing and other
currency instruments designated as hedges of such investments, are recorded in equity. When a foreign operation is sold, exchange differences
that were recorded in equity are recognised in the consolidated income statement as part of gain or loss on sale.

Goodwill and fair value adjustments arising on acquisition of a foreign operation are treated as assets and liabilities of the foreign operation
and translated at the closing rate.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12276

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

2. Summary of consolidation and accounting policies (continued)
The following table presents currency translation rates for the Group’s most significant operations to the US dollar on December 31, 2013
and 2012 and average rates for the year ended December 31, 2013.

Country
Bolivia
Brazil
Chad and Senegal
Colombia
Costa Rica
Ghana
Guatemala
Honduras
Luxembourg
Mauritius
Nicaragua
Nigeria
Paraguay
Rwanda
South Africa
Sweden
Tanzania
United Kingdom

Currency
Boliviano (BOB)
Real (BRL)
CFA Franc (XAF)
Peso (COP)
Costa Rican Colon (CRC)
Cedi (GHS)
Quetzal (GTQ)
Lempira (HNL)
Euro (EUR)
Rupee (MUR)
Cordoba (NIO)
Naira (NGN)
Guarani (PYG)
Rwandan Franc (RWF)
Rand (ZAR)
Krona (SEK)
Shilling (TZS)
Pound (GBP)

2013 Average rate
6.91
2.15
494.43
1,870.69
506.30
1.99
7.86
20.42
0.75
30.63
24.68
159.17
4,306.62
649.21
9.66
6.52
1,613.98
0.64

2013 Year-end rate
6.91
2.36
477.45
1,926.83
507.90
2.16
7.84
20.67
0.73
30.16
25.33
160.00
4,585.00
676.00
10.52
6.42
1,590.00
0.60

2012 Year-end rate
6.91
2.05
497.50
1,768.23
514.32
1.88
7.90
20.03
0.76
30.54
24.13
156.15
4,224.00
631.46
8.48
6.50
1,581.00
0.62

The effect of exchange rate changes on cash and cash equivalents held or due in foreign currency is reported in the cash flow statement in order to
reconcile cash and cash equivalents at the beginning and end of the year. Millicom’s functional currency in both El Salvador and DRC is the US dollar.

2.4 Segment reporting
Management determines operating and reportable segments based on the reports that are used by the Chief Operating Decision Maker
(“CODM”) to make strategic and operational decisions from both a business and a geographic perspective. The Group’s risks and rates of return
for its operations are predominantly affected by operating in different geographical regions. The businesses are predominantly organised and
managed according to the selected geographical regions. These regions (Central America, South America, and Africa), represent the basis for
evaluation of past performance and for future allocation of resources.

2.5 Property, plant and equipment
Items of property, plant and equipment are stated at either historical cost, or the lower of fair value and present value of the future minimum lease
payments for items under finance leases, less accumulated depreciation and accumulated impairment. Historical cost includes expenditure that is
directly attributable to acquisition of items. The carrying amount of replaced parts is derecognised.

Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset and the remaining life of the
licence associated with the assets, unless the renewal of the licence is contractually possible.

Estimated useful lives are:
Buildings
Networks (including civil works)
Other

40 years or lease period, if shorter
5 to 15 years or lease period, if shorter
2 to 7 years

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the
carrying value may not be recoverable. The assets’ residual value and useful life is reviewed, and adjusted if appropriate, at each statement of
financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than
its estimated recoverable amount.

Construction in progress consists of the cost of assets, labor and other direct costs associated with property, plant and equipment being
constructed by the Group, or purchased assets which have yet to be deployed. When the assets become operational, the related costs are
transferred from construction in progress to the appropriate asset category and depreciation commenced.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, when it is probable that future
economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance
are charged to the income statement in the financial period in which they are incurred. Costs of major inspections and overhauls are added to
the carrying value of property, plant and equipment and the carrying amount of previous major inspections and overhauls is derecognised.

Equipment installed on customer premises which is not sold to customers is capitalised and amortised over the customer contract period.

A liability for the present value of the cost to remove an asset (for example cell towers) on both owned and leased sites is recognised when a
present obligation for the removal exists. The corresponding cost of the obligation is included in the cost of the asset and depreciated over the
useful life of the asset, or lease period if shorter.

Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of that
asset when it is probable that such costs will contribute to future economic benefits for the Group and the costs can be measured reliably.

2.6 Intangible assets
Intangible assets acquired separately are initially recognised at cost. The cost of intangible assets acquired in a business combination is measured
at fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and
any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised but
expensed to the income statement in the year in which incurred.

Intangible assets with finite useful lives are amortised over their estimated useful economic lives using the straight-line method and assessed
for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation
method for intangible assets with finite useful lives are reviewed at least at each financial year-end. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the assets are accounted for by changing the amortisation period
or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is
recognised in the consolidated income statement in the expense category consistent with the function of the intangible assets.

Goodwill
Goodwill represents the excess of cost of an acquisition, over the Group’s share in the fair value of identifiable assets less liabilities and contingent
liabilities of the acquired subsidiary, joint venture or associate at the date of the acquisition. If the fair value of identifiable assets, liabilities or
contingent liabilities or the cost of the acquisition can only be determined provisionally, then goodwill is initially accounted for using provisional
values. Within twelve months of the acquisition date any adjustments to the provisional values are recognised. This is done when the fair value of
the identifiable assets, liabilities and contingent liabilities and the cost of the acquisition have been finally determined. Adjustments to provisional
fair values are made as if the adjusted fair values had been recognised from the acquisition date. Goodwill on acquisition of subsidiaries and joint
ventures is included in “intangible assets, net”. Goodwill on acquisition of associates is included in “investments in associates”. Following initial
recognition, goodwill is measured at cost less any accumulated impairment losses. Gains or losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.

Goodwill is tested for impairment at least each year and more frequently if events or changes in circumstances indicate that the carrying value
may be impaired. Impairment losses on goodwill are not reversed.

For the purpose of impairment testing, goodwill acquired in a business combination is, from acquisition date, allocated to each of the Group’s cash
generating units or groups of cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether
other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is allocated:
– Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and
– Is not larger than an operating segment.

Impairment is determined by assessing the recoverable amount (value in use) and, if appropriate, the fair value less costs to sell of the cash-generating
unit (or group of cash-generating units), to which the goodwill relates. Where the recoverable amount and fair value less costs to sell of the cash-
generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised for the lower amount.

Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed
of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or
loss on disposal. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed and the portion of the
cash-generating unit retained.

Licences
Licences are recorded at either historical cost or, if acquired in a business combination, at fair value at the date of acquisition. Cost includes cost
of acquisition and other costs directly related to acquisition of licences. These costs may include estimates related to fulfilment of terms and
conditions related to the licences such as service or coverage obligations.

Licences have a finite useful life and are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation
is calculated using the straight-line method to allocate the cost of the licences over their estimated useful lives.

The terms of licences, which have been awarded for various periods, are subject to periodic review for, amongst other things, rate setting, frequency
allocation and technical standards. Licences are initially measured at cost and are amortised from the date the network is available for use on a
straight-line basis over the licence period. Licences held, subject to certain conditions, are usually renewable and generally non-exclusive. When
estimating useful lives of licences, renewal periods are not usually included.

Trademarks and customer bases
Trademarks and customer bases are recognised as intangible assets only when acquired or gained in a business combination. Their cost
represents fair value at the date of acquisition. Trademarks and customer bases have finite useful lives and are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the trademarks and customer bases over their
estimated useful lives. The estimated useful lives for trademarks and customer bases are based on specific characteristics of the market in
which they exist. Trademarks and customer bases are included in “Intangible assets, net”.

Estimated useful lives are:
Trademarks
Customer bases

1 to 15 years
4 to 9 years

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

2. Summary of consolidation and accounting policies (continued)
Programming and content rights
Programming and content rights which are purchased or acquired in business combinations which have validity for more than one year are
recorded at cost as intangible assets. Cost includes consideration paid or payable and other costs directly related to the acquisition of the
rights, and are recognised at the earlier of payment or commencement of the broadcasting period to which the rights relate.

Programming and content rights have a finite useful life and are carried at cost less accumulated amortisation and any accumulated
impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of the rights over their estimated useful lives.

Indefeasible Rights of Use
Indefeasible rights of use (“IRU”) agreements are mainly composed of purchase and / or sale of specified infrastructure, purchase and/or sale
of lit fibre capacity and exchange of network infrastructure or lit fibre capacity. These arrangements are either accounted for as leases, service
contracts, or partly as leases and partly as service contracts. Determination of the appropriate classification depends on an assessment of the
characteristics of the arrangements.

A network capacity contract is accounted for as a lease if, and when:

– The purchaser has an exclusive right to the capacity for a specified period and has the ability to resell (or sub-let) the capacity; and
– The capacity is physically limited and defined; and
– The purchaser bears all costs related to the capacity (directly or not) including costs of operation, administration and maintenance; and
– The purchaser bears the risk of obsolescence during the contract term.

If all of these criteria are not met, the IRU is treated as a service contract.

If the arrangement is, or contains a lease, the lease is accounted for as either an operating lease or a financial lease (see policy note Leases
2.21). A financial lease of an IRU of network infrastructure is accounted for as a tangible asset. A financial lease of an IRU on capacity is
accounted for as an intangible asset.

Estimated useful lives of finance leases of IRU’s of capacity are between 12 and 15 years, or shorter if the estimated useful life of the
underlying cable is shorter.

2.7 Impairment of non-financial assets
At each reporting date the Group assesses whether there is an indication that a non-financial asset may be impaired. If any such indication
exists, or when annual impairment testing for a non-financial asset is required, the Group makes an estimate of the asset’s recoverable
amount. The Group determines the recoverable amount based on the higher of its fair value less cost to sell, and its value in use, for individual
assets, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable
amount. Where no comparable market information is available, the fair value less cost to sell is determined based on the estimated future cash
flows discounted to their present value using a discount rate that reflects current market conditions for the time value of money and risks specific
to the asset. The foregoing analysis also evaluates the appropriateness of the expected useful lives of the assets. Impairment losses of continuing
operations are recognised in the consolidated income statement in expense categories consistent with the function of the impaired asset.

At each reporting date an assessment is made as to whether there is any indication that previously recognised impairment losses may no
longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. Other than for goodwill, a previously
recognised impairment loss is reversed if there has been a change in the estimate used to determine the asset’s recoverable amount since the
last impairment loss was recognised. If so, the carrying amount of the asset is increased to its recoverable amount. The increased amount
cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in profit or loss. After such a reversal, the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

2.8 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They
are included in current assets, except for those maturing more than 12 months after the end of the reporting period. These are classified within
non-current assets. Loans and receivables are carried at amortised cost using the effective interest method. Gains and losses are recognised in
the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

2.9 Derecognition of Financial Assets and Liabilities
A financial asset (or a part of a financial asset or part of a group of similar financial assets) is derecognised when:

– Rights to receive cash flows from the asset have expired; or
– Rights to receive cash flows from the asset or obligations to pay the received cash flows in full without material delay have been transferred

to a third party under a ‘pass-through’ arrangement; and the Group has either transferred:

(a) Substantially all the risks and rewards of the asset; or
(b) Control of the asset.

When rights to receive cash flows from an asset have been transferred or a pass-through arrangement concluded, an evaluation is made if and
to what extent the risks and rewards of ownership have been retained. When the Group has neither transferred nor retained substantially all of
the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing
involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The
difference in the respective carrying amounts is recognised in the income statement.

2.10 Financial instruments
Financial instruments at fair value through profit or loss
Financial instruments at fair value through profit or loss are financial instruments held for trading. Their fair value is determined by reference to
quoted market prices on the statement of financial position date. Where there is no active market, fair value is determined using valuation
techniques. Such techniques include using recent arm’s length market transactions, reference to the current market value of a substantially
similar instrument, discounted cash flow analysis and option pricing models. A financial instrument is classified in this category if acquired
principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges.
Assets in this category are classified as current assets.

Financial instruments that contain obligations to purchase own equity instruments
Contracts that contain obligations for the Company to purchase its own equity instruments for cash or other financial assets are initially
recorded as financial liabilities based on the present value of the redemption amounts with a corresponding reserve in equity. Subsequently the
carrying value of the liability is remeasured at the present value of the redemption amount with changes in carrying value recorded in other
non-operating (expenses) income, net. If the contracts expire without delivery, the carrying amounts of the financial liabilities are reclassified
to equity.

Financial instruments that contain call options over non-controlling interests
Call option contracts over non-controlling interests that require physical settlement of a fixed number of own shares for a fixed consideration
are classified as equity.

Contracts over non-controlling interests that require gross cash settlement are also classified as equity instruments. Such call options are
initially recognised at fair value and not subsequently remeasured. If a call option is exercised, this initial fair value is included as part of the
cost of the acquisition of the non-controlling interest. If an unexercised call option expires or otherwise lapses, the fair value of the call option
remains within equity.

Call option contracts over non-controlling interests that require net cash settlement or provide a choice of settlement are classified as
financial assets.

Contracts over non-controlling interests that require physical settlement of a variable number of own shares for a variable price are classified
as financial assets and changes in the fair value are reported in the income statement. If such a call option is exercised, the fair value of the
option at that date is included as part of the cost of the acquisition of the non-controlling interest. If an unexercised call option expires or
otherwise lapses, its carrying amount is expensed in the income statement.

Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is
a currently enforceable legal right to offset the recognised amounts and an intention to settle on a net basis, or to realise the assets and settle
the liabilities simultaneously.

Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at fair value.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged. The Group designates certain derivatives as either:

(a)
(b)

Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or
Hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge).

For transactions designated and qualifying for hedge accounting, at the inception of the transaction, the Group documents the relationship
between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging
transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The full fair value of a hedging derivative is classified as a non-current asset or liability when the period to maturity of the hedged item is more than
12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are
classified as a current asset or liability when the remaining period to maturity of the hedged item is less than 12 months.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

2. Summary of consolidation and accounting policies (continued)
The change in fair value of hedging derivatives that are designed and qualify as fair value hedges is recognised in the income statement as
finance costs or income. The change in fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value
of the hedged item and is also recognised in the income statement as finance costs or income.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income. Gains or loss relating to any ineffective portion is recognised immediately in the income statement within ‘other
non-operating (expenses) income, net’. Amounts accumulated in equity are reclassified to the income statement in the periods when the
hedged item affects profit or loss.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or
loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income
statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately
transferred to the income statement within ‘other non-operating (expenses) income, net’.

2.11 Discontinued operations and non-current assets (or disposal groups) held for sale and related liabilities
Non-current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair value (less
costs to sell if their carrying amount is expected to be recovered principally through sale, not through continuing use). Liabilities of disposal
groups are classified as “Liabilities directly associated with assets held for sale”.

Discontinued operations are those with identifiable operations and cash flows (for both operating and management purposes) and represent a
major line of business or geographic unit which has been disposed of or is available for sale. Revenues and expenses associated with discontinued
operations are presented in a separate line in the consolidated income statement. Comparative figures in the consolidated income statement
representing the discontinued operations are reclassified to the separate line.

2.12 Inventories
Inventories (which mainly consist of mobile telephone handsets and related accessories) are stated at the lower of cost and net realisable
value. Cost is determined using the first-in, first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of
business, less applicable variable selling expenses.

2.13 Trade receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment. A provision for impairment is recorded when there is objective evidence that the Group will not be able to collect
amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default or delinquency in payments are indicators of impairment. The amount of the provision is
the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest
rate. The provision is recognised in the consolidated income statement within “Cost of sales”.

2.14 Deposits
Time deposits
Cash deposits with banks with maturities of more than three months that generally earn interest at market rates are classified as time deposits.

Pledged deposits
Pledged deposits represent contracted cash deposits with banks that are held as security for debts at corporate or operational entity level.
Millicom is unable to access these funds until either the relevant debt is repaid or alternative security is arranged with the lender.

2.15 Restricted cash
Cash held with banks related to mobile financial services which is restricted in use due to local regulations, but typically cycled out of the
banking system within three months, is denoted as restricted cash.

2.16 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original
maturities of three months or less.

2.19 Borrowings
Borrowings are initially recognised at fair value, net of directly attributable transaction costs. Borrowings are subsequently measured at
amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any discount or premium on
acquisition and any fees or costs that are an integral part of the effective interest rate. Any difference between the initial amount and the
maturity amount is recognised in the consolidated income statement over the period of the borrowing.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months from the statement of financial position date.

2.20 Financial Guarantee Contracts
Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it
incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee
contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the
guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present
obligation at the reporting date and the amount recognised less cumulative amortisation.

2.21 Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and involves an
assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and whether or not the
arrangement conveys a right to use the asset.

Finance leases
Finance leases, which transfer substantially all risks and benefits incidental to ownership of the leased item to the lessee, are capitalised at the
inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments
are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged directly against income. Where a finance lease results from a sale and leaseback
transaction, any excess of sales proceeds over the carrying amount of the assets is deferred and amortised over the lease term.

Capitalised leased assets are depreciated over the shorter of the estimated useful lives of the assets, or the lease term if there is no reasonable
certainty that the Group will obtain ownership by the end of the lease term.

Operating leases
Operating leases are all other leases that are not finance leases. Operating lease payments are recognised as expenses in the consolidated
income statement on a straight-line basis over the lease term.

Tower sale and leaseback transactions
The sale and leaseback of towers and related site operating leases and service contracts are accounted for in accordance with the underlying
characteristics of the assets, and the terms and conditions of the lease agreements.

When sale and lease back agreements are concluded, the portions of assets that will not be leased back by Millicom are classified as assets
held for sale as completion of their sale is highly probable. Asset retirement obligations related to the towers are classified as liabilities directly
associated with assets held for sale.

On transfer to the tower companies, the portion of the towers leased back are accounted for as operating leases or finance leases according to
the criteria set out above. The portion of towers being leased back represents the dedicated part of each tower on which Millicom’s equipment
is located and was derived from the average technical capacity of the towers. Rights to use the land on which the towers are located are
accounted for as operating leases, and costs of services for the towers are recorded as operating expenses.

2.22 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, if it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount
of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

2.17 Impairment of financial assets
The Group assesses at each statement of financial position date whether there is objective evidence that a financial asset or group of financial
assets is impaired. Impairment losses are recognised in the consolidated income statement.

The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money
is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, risks specific to the liability. Where
discounting is used, increases in the provision due to the passage of time are recognised as interest expenses.

2.18 Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction
from the proceeds.

2.23 Trade payables
Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method where
the effect of the passage of time is material.

Where any Group company purchases the Company’s share capital, the consideration paid including any directly attributable incremental
costs is shown under “Treasury shares” and deducted from equity attributable to the Company’s equity holders until the shares are cancelled,
reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable
incremental costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

2.24 Revenue recognition
Revenue comprises the fair value of consideration received or receivable for the sale of goods and services, net of value added tax, rebates and
discounts and after eliminating intra-group sales.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured. The following specific recognition criteria must also be met before revenue is recognised.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12282

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

2. Summary of consolidation and accounting policies (continued)
Recurring revenue consist of monthly subscription fees, airtime usage fees, interconnection fees, roaming fees, revenue from online product
and service sales, mobile finance service commissions and fees from other telecommunications services such as data services, short message
services and other value added services. Recurring revenues are recognised on an accrual basis, i.e. as the related services are rendered.
Unbilled revenue for airtime usage and subscription fees resulting from services provided from the billing cycle date to the end of each month
are estimated and recorded.

Subscription products and services are deferred and amortised over the estimated life of the customer relationship. Related costs are also
deferred, to the extent of the revenues deferred, and amortised over the estimated life of the customer relationship. The estimated life of the
customer relationship is calculated based on historical disconnection percentage for the same type of customer.

Where customers purchase a specified amount of airtime or other credit in advance, revenue is recognised as the credit is used. Unused credit
is carried in the statement of financial position as deferred revenue within “other current liabilities”.

Revenue from value added content services such as video messaging, ringtones, games etc., are recognised net of payments to the providers
under certain conditions including if the providers are responsible for the content and determining the price paid by the customer. For such
services the Group is considered to be acting in substance as an agent. Other revenue is recognised gross.

Revenue from the sale of handsets and accessories are recognised when the significant risks and rewards of ownership of handsets and
accessories have been passed to the buyer.

Revenue arrangements with multiple service deliverables (“Bundled Offers”) such as various services sold together, are divided into separate units
of accounting if the deliverables in the arrangement meet certain criteria. The arrangement consideration is then allocated among the separate
units of accounting based on their relative fair values or on the residual method. Revenue is then recognised separately for each unit of accounting.

Revenue from the sale of online and e-commerce services is recognised as and when the service is provided or on delivery of products to
customers, less provision for product returns, based on the amounts expected to be received from customers.

Revenue from sale of capacity is recognised when the capacity has been delivered to the customers, based on the amounts expected to be
received from customers.

Revenue from lease of tower space is recognised over the period of the underlying lease contracts. For finance leases revenue is apportioned
between the lease of the tower space and interest income (other operating income).

Revenue from provision of mobile financial services is recognised once the primary service has been provided to the customer.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are
treated as vested irrespective of whether or not the market conditions are satisfied, provided that all other performance conditions are satisfied.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In
addition, an expense is recognised for any modification that increases the total fair value of the share based payment arrangement, or is
otherwise beneficial to the employee as measured at the date of modification.

2.28 Taxation
Current tax
Current tax assets and liabilities for current and prior periods are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rate and tax laws used to compute the amount are those enacted or substantively enacted by the statement of
financial position date.

Deferred tax
Deferred income tax is provided using the liability method and calculated from temporary differences at the statement of financial position
date between the tax base of assets and liabilities and their carrying amount for financial reporting purposes. Deferred tax liabilities are
recognised for all taxable temporary differences, except where the deferred tax liability arises from the initial recognition of goodwill or of an
asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting, nor taxable,
profit or loss.

Deferred income tax assets are recognised for all deductible temporary differences and carry-forward of unused tax credits and unused tax
losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary difference and the carry-
forward of unused tax credits and unused tax losses can be utilised, except where the deferred tax assets relate to deductible temporary
differences from initial recognition of an asset or liability in a transaction that is not a business combination, and, at the time of the
transaction, affects neither accounting, nor taxable, profit or loss.

The carrying amount of deferred income tax assets is reviewed at each statement of financial position date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to utilise the deferred income tax asset. Unrecognised deferred income tax
assets are reassessed at each statement of financial position date and are recognised to the extent it is probable that future taxable profit will
enable the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rate expected to apply in the year when the assets are realised or liabilities
settled, based on tax rates and tax laws that have been enacted or substantively enacted at the statement of financial position date. Income
tax relating to items recognised directly in equity is recognised in equity and not in the consolidated income statement. Deferred tax assets
and deferred tax liabilities are offset where legally enforceable set off rights exist and the deferred taxes relate to the same taxable entity and
the same taxation authority.

2.25 Cost of sales
The primary cost of sales incurred by the Group in relation to the provision of services relate to interconnection costs, roaming costs, rental of
leased lines and tower infrastructure, costs of handsets and other accessories sold, royalties, commissions, and cost of goods sold. Cost of sales
is recorded on an accrual basis.

2.29 Changes in accounting policies
New and amended standards adopted by the Group
The following standards have been adopted by the Group for the first time for the financial year beginning on or after January 1, 2013 but
have not had a material impact on the Group:

Cost of sales also includes depreciation and any impairment of network equipment and trade receivables.

2.26 Customer acquisition costs
Specific customer acquisition costs, including dealer commissions and handset subsidies, are charged to sales and marketing when the
customer is activated.

2.27 Employee benefits
Pension obligations
Pension obligations can result from either a defined contribution plan or a defined benefit plan.

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity No further payment
obligations exist once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due.
Prepaid contributions are recognised as assets to the extent that a cash refund or a reduction in future payments is available.

A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit pension plans define an amount of
pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and
compensation. The liability recognised in the statement of financial position in respect of the defined benefit pension plan is the present value
of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, together with adjustments for
unrecognised actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by independent actuaries.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using an appropriate
discount rate based on maturities of the related pension liability.

Share based compensation
Share awards are granted to management and key employees.

The cost of equity-settled transactions is based on the fair value (market value) of the shares on grant date. The cost is recognised, together with a
corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the
relevant employee becomes fully entitled to the award (the vesting date). The cumulative expense recognised for equity-settled transactions at
each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number
of equity instruments that will ultimately vest.

– Amendment to IAS 1, ‘Financial statement presentation’ regarding other comprehensive income. The main change resulting from these

amendments is a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are
potentially reclassifiable to profit or loss subsequently (reclassification adjustments).

– IAS 19, ‘Employee benefits’ was revised in June 2011. The changes on the group’s accounting policies has been as follows: to immediately

recognise all past service costs; and to replace interest cost and expected return on plan assets with a net interest amount that is calculated
by applying the discount rate to the net defined benefit liability (asset).

– Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on asset and liability offsetting. This amendment includes new disclosures to

facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in
accordance with US GAAP.

– IFRS 13, ‘Fair value measurement’, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a
single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned
between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use
is already required or permitted by other standards within IFRS’s.

New standards and interpretations not yet adopted by the Group
The following standards, amendments and interpretations issued are not effective for the financial year beginning January 1, 2013 and have
not been early adopted.

– IFRS 9, ‘Financial Instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9

was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of
financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at fair value, and
those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity’s business
model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the
standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial
liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income
statement, unless this creates an accounting mismatch. A final standard on hedging (excluding macro-hedging) has been issued in
November 2013 which aligns hedge accounting more closely with risk management. The Group is yet to assess IFRS 9’s full impact and
intends to adopt IFRS 9 no later than the compulsory adoption date.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12284

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

2. Summary of consolidation and accounting policies (continued)
– IFRS 10, ‘Consolidated Financial Statements’ build on existing principles by identifying the concept of control as the determining factor in

whether an entity should be included within the financial statements of the parent company. The standard provides additional guidance to
assist in the determination of control where this is difficult to assess. The Group will adopt IFRS 10 on its January 1, 2014 effective date in
the European Union and does not expect it to have a significant impact.

– IFRS 11, ‘Joint Arrangements’, sets out the core principle that a party to a joint arrangement determines the type of joint arrangement in

which it is involved by assessing its rights and obligations and accounts for those rights and obligations in accordance with that type of joint
arrangement. The standard removes the option for an interest in a jointly controlled entity using proportionate consolidation, and requires
equity accounting to be applied to investments in a joint venture. The Group has assessed that at January 1, 2014 its joint venture operation
in Mauritius will no longer be proportionately consolidated and will be equity accounted for from that date. This change will result in our no
longer reporting line by line the costs and revenue, and reporting only our share of the results of Mauritius in one line in our consolidated
income statement, impacting revenue and operating profit, for example, but not impacting group net profit or cash generation. This change
will also impact the carrying value of assets and liabilities. Information on proportionately consolidated joint ventures is provided in note 8.
As a result of the put and call agreement with our partner in Guatemala (see subsequent events – note 35), the Guatemala operation will be
fully consolidated from January 1, 2014.

4. Acquisitions of subsidiaries, joint ventures and non-controlling interests
Agreement to Merge Colombia Móvil and UNE
On October 1, 2013 Millicom signed an agreement with Empresas Públicas de Medellín E.S.P. (“EPM”), the largest public service company in
Colombia, whereby, subject to regulatory approval and closing conditions, the parties will combine and merge their mutual interests in
Millicom’s Colombian operations (“Colombia Móvil”), with UNE EPM Telecomunicaciones S.A. (“UNE”).

Millicom will contribute its shares in its Colombian subsidiary (“Colombia Movil”) and $860 million in cash to the merged entity (largely
financed through a bond – see notes 18 and 26).

As a result of the merger agreement, and related shareholders’ agreement, and subject to regulatory approvals, Millicom will control the
merged entity by virtue of a one share majority in voting shares, and having the ability to direct the relevant activities of the business through
its rights to appoint four out of the seven Board members. Super majority clauses in the shareholders’ agreement provide Millicom with
blocking rights to maintain the existing board appointments/decision making power. Accordingly, it is expected that the combined business
will be fully consolidated after regulatory approval.

– IFRS 12, ‘Disclosure of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including

By December 31, 2013 regulatory approvals had not yet been obtained.

joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. IFRS 12 will increase the level of disclosures
regarding its control and influence over its joint venture in Mauritius and its investments in its tower company associates and investments in
e-commerce businesses in Africa. The Group will adopt IFRS 12 in the accounting period beginning on January 1, 2014, its effective date in
the European Union.

– IAS 27, Consolidated and Separate Financial Statements, reissued as IAS 27 Separate Financial Statements, as a result of issuance of IFRS

10, Consolidated Financial Statements. The standard is effective for annual periods beginning on or after January 1, 2014.

– IAS 28, Investments in Associates and, reissued as IAS 28 Investments in Associates, as a result of issuance of IFRS 11, Joint Arrangements.

The standard is effective for annual periods beginning on or after January 1, 2014.

There are no other IFRS’s or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

3. Significant accounting judgments and estimates
Judgments
Management judgment is applied in application of IFRS accounting policies and accounting treatment in preparation of these consolidated
financial statements. In particular a significant level of judgment is applied regarding the following items:

– Contingent liabilities – the determination of whether or not a provision should be recorded for any potential liabilities.
– Leases – determination of whether the substance of leases meets the IFRS criteria for recognition as finance or operating leases or services

contracts, or elements of each.

– Control – determination of whether Millicom, through voting rights attached to shares held, or by way of shareholders agreements or other

factors, has the ability to direct the relevant activities of the subsidiaries it consolidates.

– Discontinued operations and assets held for sale –classification and presentation.
– Deferred tax assets – likely timing and level of future taxable profits together with future tax planning strategies.
– Acquisitions – allocation of excess of purchase price between newly identified assets and goodwill, measurement of property, plant and

equipment and intangible assets and assessment of useful lives.

– Financial instruments that contain obligations to purchase own equity instruments – determination of the likelihood of change of control

events occurring in assessing the fair value of these instruments.

Estimates
Judgment is also required in estimation of certain values in the preparation of these consolidated financial statements. Estimates are
continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. Due to inherent uncertainties in this evaluation process, actual results may differ from original estimates.
Estimates are subject to change as new information becomes available and may significantly affect future operating results. Significant
estimates have been applied in respect of the following items:

– Accounting for property, plant and equipment, and intangible assets in determining fair values at acquisition dates, particularly in the case

of sales and leaseback transactions, and assets acquired in business combinations.

– Estimating useful lives of property, plant and equipment.
– Estimation of provisions, particularly related to legal and tax risks.
– Allocation of revenue between business units.
– Impairment testing.
– Accounting for share-based compensation.
– Fair value of financial assets and liabilities.

Acquisition of Rocket e-Commerce Businesses
On August 29, 2012 Millicom acquired, for Euro 85 million, and by way of issuance of new shares, 20% interests in two subsidiaries of Rocket
Internet GmbH, Latin America Internet Holding (“LIH”) and Africa Internet Holding (“AIH”) and unconditional options to acquire the remaining
shares in each of LIH and AIH (LIH and AIH own several operating entities in Latin America and Africa respectively). The First options enabled
Millicom to increase its stake from 20% to 35%, the Second from 35% to 50% and the Third to 100% and all could initially be exercised at any
time between the August 29, 2012 acquisition date and September 2016.

The acquired 20% interests, combined with unconditional rights to exercise the options, as well as a number of protective governance mechanisms in the
LIH and AIH shareholders agreements provided Millicom with the ability to govern the operating and financial policies of AIH, and LIH. While Millicom
controlled AIH, certain minority shareholder rights per shareholder agreements, including blocking rights, resulted in Millicom initially having significant
influence in, but not controlling Africa e-commerce Holding (“AEH”) the holding company of many of the operating entities in the AIH Group.

As a result of the acquisition and option agreements Millicom obtained the right to control LIH and AIH and fully consolidated these
subsidiaries from September 1, 2012. Millicom’s initial investment in AEH was included in investments in associates from September 1, 2012.
AEH was subsequently consolidated from April 1, 2013 as a result of an agreement with a minority shareholder (see later in this note for
details). The AIH Group (including AEH) was subsequently deconsolidated as a result of an agreement signed with MTN that ended Millicom’s
right to exercise its options to obtain control (see later in this note for details).

The LIH call options remained exercisable at December 31, 2013 (see note 35 for subsequent events) and were financial instruments which are
accounted for in accordance with IAS 32 and 39. The exercise prices of the First and Second Options of Euro 50 million and Euro 100 million
respectively were based on the original equity value of LIH. The cash invested by Millicom (capital increases) in LIH increases the equity value of
LIH such that the equity value exceeds the exercise prices. As these options are exercisable at fixed prices they are accounted for as equity
instruments in accordance with IAS 32. Accordingly, for LIH a value of $15 million has been assigned to the options against non-controlling
interests in the consolidated statement of financial position. The exercise price of the Third Option is based on the fair market value of the shares
at the time of exercise (subject to a minimum value of Euro 300 million), and as such the option itself does not have any standalone value.

LIH
Millicom allocated the LIH purchase price of Euro 50 million ($64 million) to the assets acquired, liabilities assumed and contingent liabilities
and recognised the following amounts:

Intangible assets, net
Property, plant and equipment, net
Current assets
Cash and cash equivalents

Current liabilities
Deferred tax liabilities

For critical accounting judgments and estimates reference is made to the relevant individual accounting policies and notes to these
consolidated financial statements, more specifically note 4 – Acquisition of subsidiaries, joint ventures and non-controlling interests; note 6
– Discontinued operations and assets held for sale; note 13 – Taxes; note 15 – Intangible assets, note 16 – Property, plant and equipment,
note 19 – Trade receivables, note 23 – Share-based compensation (relating to long-term incentive plans); note 27 – Other non-current and
current provisions and liabilities (relating to the put option); note 31 – Commitments and contingencies; and note 34 – Financial instruments.

Fair value of the net assets acquired and contingent liabilities
Non-controlling interests:
In net assets acquired and contingent liabilities
Less fair value of options (equity instruments)

Controlling interest
Cash consideration
Goodwill

LIH Group
Fair value 100%
US$ millions
14
1
9
65
89
8
5
13
76

64
(15)
49
27
64
37

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12286

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

4. Acquisitions of subsidiaries, joint ventures and non-controlling interests (continued)
The goodwill, which is not expected to be tax deductible, is attributable to future customers, know-how, potential synergies and the value of
development stage projects. The non-controlling interest was measured as a proportion of the net assets acquired. LIH contributed revenues of
$13 million and net loss of $9 million for the period from acquisition to December 31, 2012. Millicom finalised its purchase price allocation
in 2013 resulting in an increase in goodwill by $3 million to $37 million and a corresponding increase in non-controlling interests compared to
the provisional allocation.

AIH Shareholder’s Agreement
On December 13, 2013 Millicom, Rocket and Mobile Telephone Networks Holdings (Pty) Limited (“MTN”) signed an agreement whereby MTN
will invest in the AIH Group such that, following anti-trust and other requisite clearances and closing conditions, each of the three parties will
own a 33.33% interest in AIH. MTN’s 33.3% stake will be acquired by cash investment (increase in share capital) at a price equivalent to
20% more than the investment made by Millicom. Millicom has committed to invest an additional Euro 70 million with a guaranteed minimum
commitment of Euro 35 million.

On March 27, 2013 Millicom exercised its first call option increasing its ownership in LIH from 20% to 35%. In December 2013 consideration for
exercise of the first LIH option of EUR 50 million ($68.5 million) was agreed to be provided at the earlier of when the cash balances of LIH fall
below Euro 15 million or September 2014. As the consideration was not provided in 2013 Millicom was no longer entitled to participate in the
returns of LIH related to this incremental 15% in 2013. Accordingly Millicom’s ownership in LIH reverted to 20% and remained at 20%
at December 31, 2013.

As a result of this agreement Millicom no longer has the ability to exercise its options related to the remaining 65% in AIH, and has deconsolidated
the AIH Group on December 12, 2013. In addition, the agreement also reduced Millicom’s participation in AIH from 35% to 20% and its rights to
participate in the results of AIH from 35% to 20%. Accordingly, Millicom’s 20% equity stake at December 13, 2013 has been accounted for as an
investment in associates at December 12, 2013 at its fair value of $57 million, resulting in a gain on deconsolidation of $14 million recorded in
other operating income. The fair value was derived from the price agreed by MTN for its 33.3% stake.

AIH
Millicom allocated the AIH purchase price of Euro 35 million ($45 million) to the assets acquired, liabilities assumed and contingent liabilities
and recognised the following amounts:

Investment in associates
Cash and cash equivalents
Fair value of the net assets acquired and contingent liabilities
Non-controlling interests:
In net assets acquired and contingent liabilities
Less fair value of options (equity instruments)

Controlling interest
Cash consideration
Goodwill

AIH
Fair value 100%
US$ millions
100
45
145

117
(13)
104
41
45
4

The investment in associates represented the investments in the operating entities of AEH (see note 17). The fair value of these investments
was determined based on a discounted cash flow model. The goodwill, which is not expected to be tax deductible, is attributable to future
customers, know-how, potential synergies and the value of development stage projects. The non-controlling interest has been measured as a
proportion of the net assets acquired. Millicom finalised its purchase price allocation in 2013 resulting in a decrease in goodwill by $9 million to
$4 million and a corresponding decrease in non-controlling interests compared to the provisional allocation.

On March 27, 2013 Millicom exercised its first call option increasing its ownership in AIH from 20% to 35%. In October 2013 consideration for
exercise of the first AIH option of EUR 35 million ($48 million) was agreed to be provided when the cash balances of AIH fall below
Euro 10 million.

AEH
Effective April 1, 2013 Millicom entered into an agreement with a non-related minority investor in Africa e-Commerce Holding (AEH), a
51.47% subsidiary of AIH providing Millicom the ability to purchase a further 20% interest in AEH upon exercise of the option to reach 100%
ownership in AIH and the minority shareholder to sell its 20% stake in AEH upon the same conditions. This agreement provided Millicom with
the ability to control the AEH Group, which was therefore fully consolidated from April 1, 2013. The previous investment in AEH was originally
accounted for as an investment in associates (see note 17).

Millicom determined the fair value of the AEH Group and revalued its previously held interest as follows:

Fair value of net assets of AEH Group
Non-controlling interests
Fair value of the net assets acquired and contingent liabilities
Previously held interest in AEH
Revaluation of the previously held interests in AEH

100%
US$ millions
222
(125)
97
(100)
(3)

The fair value of AEH was based on a sum-of-parts valuation of its operating entities using a discounted cash flow approach. The change of
control contributed revenues of $27 million and net losses of $23 million (including the loss on revaluation of the previously held interest) for
the period from acquisition to December 13, 2013 (see AIH Shareholder’s Agreement below). Millicom revalued to fair value its previously held
interest in AEH recognising a loss of $3 million. The fair value of the previously held interest was determined based on discounted cash flows.
The cash flow projections used were estimated by management covering five years. Cash flows beyond this point were extrapolated using a
perpetual growth rate of 5%.

At December 31, 2013 the transaction had not yet closed as anti-trust and requisite clearances had yet to be obtained.

Cablevision Acquisition
On October 2, 2012 Millicom completed its acquisition of the debt and cash free operating businesses of Cable Vision Comunicaciones
S.A., Television Dirigida S.A., Consorcio Multipunto Multicanal S.A., Producciones Unicanal S.A. and 100% of the shares of Teledeportes
Paraguay S.A. (together “Cablevision”) for combined cash consideration of $172 million. The acquired interests provide Millicom with the ability
to govern the operating and financial policies of Cablevision which has been fully consolidated into the Millicom Group financial statements
from October 1, 2012.

Millicom allocated the purchase price of $172 million to the assets acquired, liabilities assumed and contingent liabilities and recognised the
following amounts:

Tangible and intangible assets, net
Fair value of the net assets acquired and contingent liabilities
Cash consideration
Goodwill

Cablevision
Fair value 100%
US$ millions
105
105
172
67

The goodwill, which is not expected to be tax deductible, is attributable to future customers, know-how, and potential synergies. Cablevision
contributed revenues of $15 million and net profit of $6 million for the period from acquisition to December 31, 2012. If the acquisition had
occurred on January 1, 2012, Group revenues from continuing operations for the year ended December 31, 2012 would have been $54 million
higher, and the net profit from continuing operations for the same period would have been $17 million higher. These amounts have been
calculated using the Group accounting policies. Millicom finalised its purchase price allocation in 2013 resulting in an increase in goodwill by
$2 million to $67 million and a corresponding decrease to the value assigned to customer relationships compared to the provisional allocation.

Other Minor Acquisitions
During 2013 Millicom also made other smaller acquisitions of cable and television businesses in Guatemala and Bolivia for total consideration
of $19 million.

During 2012 Millicom also completed the increase of ownership in Navega El Salvador from 55% to 100% and completed other minor
acquisitions for consideration of $16 million.

During 2011 Millicom did not acquire any subsidiaries, joint ventures or non-controlling interests. At December 31, 2011, the agreement entered
into on August 20, 2010 to increase Millicom’s ownership in Navega El Salvador from 55% to 100% remained subject to completion.

5. Disposals of subsidiaries and joint ventures and non-controlling interests
There were no disposals of subsidiaries, joint ventures or non-controlling interests during 2013 or 2012. As described in note 4, during 2013 as a
result of the investment agreement related to MTN Millicom deconsolidated AIH.

Millicom Lao Co Ltd
On September 16, 2009 Millicom signed an agreement for the sale of its 74.1% holding in Millicom Lao Co. Ltd., its Laos operation, to
VimpelCom for approximately $65 million in total cash proceeds, payable on completion. The transaction valued the Laos operation at an
enterprise value of approximately $102 million. On March 9, 2011 Millicom completed the transaction and received proceeds (net of
transaction costs and taxes) from the sale of $53 million, realising a gain on sale of $37 million. From that date the Laos operation was no
longer included in the consolidated financial statements of the Group.

Amnet Honduras
As part of a regional shareholding alignment agreement with its local partner in Honduras, on March 21, 2011, Millicom reduced its
shareholding in Amnet Honduras from 100% to 66.7%, realising a gain on sale of $2 million, which was recorded in equity as gain on sale to
non-controlling interests. The proceeds from the sale amount to $16.5 million, of which $5 million was received in 2011 and 2012, $2.3 million
in 2013 and $2.3 million will be received in March each year for the next four years (2014, 2015, 2016 and 2017).

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12288

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

6. Discontinued operations and assets held for sale
Discontinued operations
There were no discontinued operations in 2013 and in 2012. The results of discontinued operations for the year ended December 31, 2011 are
presented below:

7. Subsidiaries
At December 31, 2013 Millicom consolidated the following significant subsidiaries:

Revenues
Operating expenses
Profit before tax
Tax charge
Gain from disposal, net
Net profit for the year

The cash provided by discontinued operations for the year ended December 31, 2011 is presented below:

Net cash used by operating activities
Net cash used by investing activities
Net cash provided by financing activities
Transfer of cash to assets held for sale
Proceeds from the sale of discontinued operations
Cash provided by discontinued operations

2011
US$ millions
6
(3)
3
–
36
39

2011
US$ millions
–
–
–
–
53
53

There were no non-cash investing and financing activities of discontinued operations for the year ended December 31, 2011.

Assets held for sale
Between 2009 and 2011, Millicom signed various sale and leaseback agreements with tower companies in Africa and South America whereby
Millicom agreed the sale of tower assets and to lease back a dedicated portion of each tower to locate its network equipment in exchange for
cash and investments in the tower companies (see note 17). The portions of these assets that will not be leased back by Millicom are classified
as assets held for sale as completion of their sale is highly probable.

At December 31, 2013, towers sold but yet to be transferred to tower companies (assets held for sale) of $14 million related to operations in
DRC, Colombia, Ghana and Tanzania (December 31, 2012: $21 million related to operations in DRC, Colombia, Ghana and Tanzania).

Asset retirement obligations related to the towers of $2 million (December 31, 2012: $5 million) are classified as liabilities directly associated
with assets held for sale.

Assets held for sale
Property, plant and equipment, net
Liabilities directly associated with assets held for sale
Other non-current liabilities
Net assets directly associated with assets held for sale

2013
US$ millions

2012
US$ millions

(2)
12

(5)
16

Name of the company
Central America
Telemovil El Salvador S.A
Cable El Salvador S.A. de C.V.
Navega.com SA, Succursal El Salvador
Telefonica Celular S.A.
Navega S.A. de CV
Cable Costa Rica S.A.
South America
Telefonica Celular de Bolivia S.A.
Telefonica Celular del Paraguay S.A.
Colombia Movil S.A. E.S.P.
LATAM Internet Holding GmbH
Africa
Millicom Ghana Company Limited
Sentel GSM S.A.
MIC Tanzania Limited
Oasis S.P.R.L.
Millicom Tchad S.A.
Millicom Mauritius Limited
Millicom Rwanda Limited
Unallocated
Millicom International Operations S.A.
Millicom International Operations B.V.
MIC Latin America B.V.
Millicom Africa B.V.
Millicom Holding B.V.
Millicom Ireland Limited

Country

El Salvador
El Salvador
El Salvador
Honduras
Honduras
Costa Rica

Bolivia
Paraguay
Colombia
Germany

Ghana
Senegal
Tanzania
Democratic Republic of Congo
Chad
Mauritius
Rwanda

Luxembourg
Netherlands
Netherlands
Netherlands
Netherlands
Ireland

8. Interests in joint ventures
At December 31, 2013 Millicom proportionally consolidated the following significant joint ventures:

Name of the company
Central America
Comunicaciones Celulares S.A.
Navega.com S.A.
Africa
Emtel Limited

Country

Guatemala
Guatemala

Mauritius

Holding on
December 31,
2013
% of ownership
interest

Holding on
December 31,
2012
% of ownership
interest

100.0
100.0
100.0
66.7
66.7
100.0

100.0
100.0
50.0 + 1 share
20.0

100.0
100.0
100.0
100.0
100.0
100.0
87.5

100.0
100.0
100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0
100.0
100.0
87.5

100.0
100.0
100.0
100.0
100.0
100.0

Holding on
December 31,
2013
% of ownership
interest

Holding on
December 31,
2012
% of ownership
interest

55.0
55.0

50.0

55.0
55.0

50.0

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12290

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

8. Interests in joint ventures (continued)
The share of assets and liabilities of the jointly controlled entities at December 31, 2013 and 2012, which are included in the consolidated
financial statements, are as follows:

Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities

2013
US$ millions
169
480
649
172
200
372

2012
US$ millions
197
445
642
185
241
426

The share of revenue and operating expenses of the jointly controlled entities for the years ended December 31, 2013, 2012, and 2011, which
are included in the consolidated income statements from continuing operations, are as follows:

Revenue
Total operating expenses
Operating profit

2013
US$ millions
684
(423)
261

2012
US$ millions
663
(389)
274

2011
US$ millions
650
(365)
285

As described in accounting policy note 2.29 ‘Changes in Accounting Policies’, the IFRS standards and amendments that become effective on
January 1, 2014 result in the joint venture operation in Mauritius no longer being proportionately consolidated (equity accounting will apply
from that date), and that, as a result of the put and call agreement signed with our partner in Guatemala (see subsequent events note 35),
the Guatemala business will be fully consolidated from January 1, 2014.

December 31, 2012
Revenue
Operating profit (loss)
Add back:
Depreciation and amortisation
Loss (gain) of disposal and impairment
Corporate costs
Adjusted operating profit(i)
Additions to:
Property, plant and equipment
Intangible assets
Capital expenditure
Taxes paid
Changes in working capital
Other movements
Operating free cash flow(ii)
Less corporate costs (excl. non-cash)
Operating free cash flow after
corporate costs
Total Assets(iii)
Total Liabilities

Central
America
US$ millions
1,901
639

South
America
US$ millions
1,939
491

Africa
US$ millions
974
122

Unallocated
items
US$ millions
–
(148)

Total
continuing
operations
US$ millions
4,814
1,104

Inter-
company
elimination
US$ millions
–
–

Total
US$ millions
4,814
1,104

320
(1)
–
958

(290)
(6)
(296)
(131)
42
(45)
528
–

257
–
–
748

(303)
(70)
(373)
(76)
3
91
393
–

233
4
–
359

(272)
(158)
(430)
(32)
46
142
85
–

1
3
144
–

(5)
(16)
(21)
(45)
(7)
48
(25)
(122)

528
3,570
1,696

393
2,604
1,913

85
2,050
2,073

(147)
1,068
1,253

811
6
144
2,065

(870)
(250)
(1,120)
(284)
84
236
981
(122)

859
9,292
6,935

–
–
–
–

–
–
–

811
6
144
2,065

(870)
(250)
(1,120)

(1,081)
(1,060)

8,211
5,875

9. Segment information
The Group has businesses in three regions: Central America, South America and Africa. Revenue, operating profit (loss) and other segment
information for the years ended December 31, 2013, 2012 and 2011 is as follows:

(i) Adjusted operating profit is used by the management to monitor the segmental performance and for capital management (see note 33).
(ii) Operating free cash flow by segment includes vendor financing of capital equipment as a cash transaction.
(iii) Segment assets include goodwill and other intangible assets.

December 31, 2013
Revenue
Operating profit (loss)
Add back:
Depreciation and amortisation
Loss (gain) of disposal and impairment
Corporate costs
Adjusted operating profit(i)
Additions to:
Property, plant and equipment
Intangible assets
Capital expenditure
Taxes paid
Changes in working capital
Other movements
Operating free cash flow(ii)
Less corporate costs (excl. non-cash)
Operating free cash flow after corporate
costs
Total Assets(iii)
Total Liabilities

Central
America
US$ millions
1,884
548

South
America
US$ millions
2,248
470

Africa
US$ millions
1,027
(54)

Unallocated
items
US$ millions
–
(183)

Total
continuing
operations
US$ millions
5,159
781

Inter-
company
elimination
US$ millions
–
–

Total
US$ millions
5,159
781

309
1
–
858

(234)
(50)
(284)
(156)
24
(4)
438
–

302
(7)
–
765

(293)
(295)
(588)
(85)
(90)
55
57
–

261
51
–
258

(286)
(47)
(333)
(21)
101
71
76
–

3
(16)
196
–

(9)
(12)
(21)
(60)
3
4
(74)
(179)

438
3,442
1,640

57
2,669
2,071

76
1,959
2,257

(253)
3,044
2,932

875
29
196
1,881

(822)
(404)
(1,226)
(322)
38
126
497
(179)

318
11,114
8,900

–
–
–
–

–
–
–

875
29
196
1,881

(822)
(404)
(1,226)

(1,967)
(1,834)

9,147
7,066

December 31, 2011
Revenue
Operating profit (loss)
Add back:
Depreciation and amortisation
Loss (gain) of disposal and
impairment
Corporate costs
Adjusted operating profit(i)
Additions to:
Property, plant and equipment
Intangible assets
Capital expenditure
Taxes paid
Changes in working capital
Other movements
Operating free cash flow(ii)
Less corporate costs
(excl. non-cash)
Operating free cash flow
after corporate costs
Total Assets(iii)
Total Liabilities

Central
America
US$ millions
1,842
650

South
America
US$ millions
1,706
505

Africa
US$ millions
982
216

Unallocated
items
US$ millions
–
(114)

Total
continuing
operations
US$ millions
4,530
1,257

Discontinued
operations
(note 6)
US$ millions
6
3

Inter-
company
elimination
US$ millions
–
–

Total
US$ millions
4,536
1,260

303

5
–
958

(220)
(1)
(221)
(146)
(67)
17
541

–

231

(10)
–
726

(295)
(29)
(324)
(77)
15
85
425

–

204

(17)
–
403

(288)
(9)
(297)
(14)
92
79
263

–

541
4,074
1,673

425
2,008
1,388

263
1,630
1,705

–
113
–

–
(6)
(6)
(31)
(25)
37
(25)

(96)

(121)
830
927

739

(22)
113
2,087

(803)
(45)
(848)
(268)
15
218
1,204

(96)

1,108
8,542
5,693

–
–
5

–
–
–

–
–

–

–
–
–

741

(22)
113
2,092

(803)
(45)
(848)

(1,260)
(857)

7,282
4,836

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12292

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

9. Segment information (continued)
Revenue by business unit for the years ended December 31, 2013, 2012 and 2011:

Mobile
Cable & Digital Media
Mobile Financial Services
Online
Telephones and equipment and other
Total

2013
US$ millions
4,202
446
79
83
349
5,159

Revenue from continuing operations for the years ended December 31, 2013, 2012 and 2011 by country:

Colombia
Paraguay
Guatemala
Honduras
Bolivia
El Salvador
Tanzania
Ghana
Chad
Costa Rica
Other
Total

2013
US$ millions
969
784
641
656
438
443
351
169
149
139
420
5,159

2012
US$ millions
4,131
354
40
13
276
4,814

2012
US$ millions
849
649
621
705
429
443
345
162
121
126
364
4,814

Non-current assets (intangible assets and property, plant and equipment) as at December 31, 2013 and 2012 by country:

Colombia
Paraguay
Guatemala
Honduras
Bolivia
El Salvador
Tanzania
Ghana
Chad
Costa Rica
Other
Total

2013
US$ millions
812
497
433
1,473
376
417
419
145
163
250
720
5,705

10. Analysis of operating profit
The Group’s operating income and expenses from continuing operations by nature of expense is as follows:

Revenue
Cost of services rendered and goods sold
Depreciation and amortisation (notes 9, 15 and 16)
Dealer commissions
Employee related costs (note 11)
Sites and network maintenance
Advertising and promotion
Phone subsidies
External services
Operating lease expense (note 31)
Billing and payments
Gain (loss) on disposal and impairment of assets, net (note 9)
Other income
Other expenses
Operating profit

2013
US$ millions
5,159
(1,360)
(875)
(434)
(453)
(239)
(159)
(219)
(222)
(131)
(41)
(29)
17
(233)
781

2012
US$ millions
4,814
(1,134)
(811)
(417)
(345)
(220)
(130)
(179)
(190)
(108)
(36)
(6)
19
(153)
1,104

2011
US$ millions
4,530
(1,007)
(739)
(398)
(299)
(208)
(127)
(139)
(155)
(96)
(33)
22
44
(138)
1,257

The following table summarises the aggregate amounts paid to Millicom’s auditors for the years ended December 31, 2013, 2012 and 2011.

Audit fees
Audit related fees
Tax fees
Other fees
Total

11. Employee related costs

Wages and salaries
Social security
Share based compensation (see note 23)
Other employee related costs(i)
Total

(i)

Includes pension costs and other benefits.

2013
US$ millions
5.3
–
0.2
0.1
5.6

2012
US$ millions
4.8
–
0.2
0.8
5.8

2011
US$ millions
3.6
0.2
0.1
–
3.9

2013
US$ millions
(322)
(43)
(17)
(71)
(453)

2012
US$ millions
(238)
(29)
(22)
(56)
(345)

2011
US$ millions
(209)
(24)
(17)
(49)
(299)

The average number of permanent employees during the years ended December 31, 2013, 2012 and 2011 was as follows:

Continuing operations
Discontinued operations
Total average number of permanent employees

2013
10,951
–
10,951

2012
8,273
–
8,273

2011
6,526
128
6,654

2011
US$ millions
3,994
280
10
–
246
4,530

2011
US$ millions
756
593
604
673
357
460
280
205
128
104
370
4,530

2012
US$ millions
713
474
400
1,554
274
443
374
169
147
239
740
5,527

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12294

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

12. Other non-operating (expenses) income, net

Change in carrying value of put option (see note 27)
Change in fair value of derivatives
Revaluation of previously held interest (see note 4)
Other exchange (losses), net
Other non-operating expenses
Other non-operating (expenses) income, net

2013
US$ millions
(62)
(19)
–
(50)
(1)
(132)

2012
US$ millions
15
(6)
9
2
2
22

2011
US$ millions
24
(2)
–
(26)
–
(4)

13. Taxes
Taxes mainly comprise income taxes of subsidiaries and joint ventures. As a Luxembourg commercial company, the Company is subject to all
taxes applicable to a Luxembourg Société Anonyme. Due to losses incurred and brought forward, no taxes based on income in Luxembourg
have been computed for 2013, 2012 and 2011. The effective tax rate on continuing operations is 47% (2012: 44%, 2011: (2%)). Currently
Millicom operations are in jurisdictions with income tax rates of 6% to 40% levied on either revenue or profit before income tax (2012: 6% to
40% and 2011: 10% to 40%).

The reconciliation between the weighted average statutory tax rate and the effective average tax rate is as follows:

Weighted average statutory tax rate(i)
Recognition of previously unrecorded tax losses
Unrecognised current year tax losses(ii)
Non-taxable income and non-deductible expenses, net
Taxes based on revenue
Income taxes at other than statutory tax rates
Withholding taxes on transfers between operating and non-operating entities
Write-back of tax provision
Effect on change in tax rate
Effective tax rate

2013
%
11
(20)
11
6
5
7
24
3
–
47

2012
%
16
–
2
6
2
3
8
3
4
44

2011
%
24
(29)
1
1
(6)
4
3
–
–
(2)

(i)

(ii)

The weighted average statutory tax rate has been determined by dividing the aggregate statutory tax charge of each subsidiary and joint venture, which was obtained by
applying the statutory tax rate to the profit or loss before tax.
Unrecognised current year tax losses mainly consist of tax losses at the Company level and tax losses recorded in the Group’s operations in DRC and Rwanda (2012: DRC,
Rwanda and Tanzania; 2011: DRC and Rwanda).

The credit (charge) for income taxes from continuing operations is shown in the following table and recognises that revenue and expense items
may affect the financial statements and tax returns in different periods (temporary differences):

Current income tax credit (charge)
Net deferred income tax benefit (expense)
Credit/(charge) for taxes

2013
US$ millions
(274)
92
(182)

2012
US$ millions
(326)
(67)
(393)

2011
US$ millions
(278)
297
19

(A) Profit After Tax
(1) Current Income Tax
(2) Deferred Income Tax
(B) Total income tax (1) + (2)
(C) Profit Before Tax = (A)+(B)
(3) Effective tax rate (B)/(C)
(4) Weighted average tax rate
(D) Theoretical Income Tax (C)*(4)
Difference to explain =(B)-(D)
Non-taxable and deductible items
Items taxed with another tax rate
Withholding tax
Adjustments from prior years
Tax based on revenues and other taxes
Impact of changes in tax rates on deferred tax assets
Unrecognised tax losses
Recognition of previously unrecognised deferred tax assets
Total

2012
US$ millions
504
(326)
(67)
(393)
897
44%
16%
(142)
(251)
(52)
(24)
(72)
(24)
(24)
(39)
(16)
–
(251)

2013
US$ millions
205
(274)
92
(182)
387
47%
11%
(41)
(141)
(23)
(26)
(93)
(14)
(21)
–
(43)
79
(141)

The tax effects of significant items of the Group’s deferred income tax asset and liability as of December 31, 2013 and 2012 are as follows:

Loss carry-forwards
Provision for doubtful debtors
Temporary differences between book and tax basis of
intangible assets and property, plant and equipment
Deferred tax liabilities recognised as part of the
acquisition of Celtel
Deferred tax liabilities recognised as part of the
acquisition of Amnet
Deferred tax liabilities recognised as part of the
acquisition of Navega
Deferred tax liabilities recognised as part of the
acquisition of LIH Group (see note 4)
Other temporary and translation differences
Deferred tax benefit (expense)
Deferred tax assets (liabilities), net
Reflected in the statements of financial position as:
Deferred tax assets
Deferred tax liabilities

Consolidated balance sheets

2013
US$ millions
198
16

2012
US$ millions
134
14

(57)

(63)

(9)

(2)

(5)
47

125

313
(188)

(56)

(81)

(13)

(2)

(5)
88

259
(180)

Consolidated income statements
2013
US$ millions
64
2

2012
US$ millions
(48)
5

2011
US$ millions
182
5

(1)

–

–
(41)
46

(61)

–

(5)
51
(39)

–
41
296

Deferred income tax assets and liabilities reflect temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.

Total unrecognised tax loss carry-forwards relating to continuing operations amounted to $390 million as at December 31, 2013
(2012: $267 million, 2011: $169 million) of which $171 million expire within one to five years (2012: $236 million, 2011: $169 million and
$219 million which have no expiry (2012: $31 million, 2011: nil).

During 2013, a deferred tax asset of $79 million was recognised by the Company relating to expected utilisation of tax loss carry-forwards
in Luxembourg during the period from 2014 to 2018. The expected utilisation of tax loss carry-forwards was based on an assessment by
management that sufficient taxable profit will be available to allow the benefit of the deferred tax asset to be utilised. At the same time, a
deferred tax liability of $28 million was recognised representing withholding tax payable on undistributed retained earnings of Millicom’s
operating subsidiaries.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12296

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

14. Earnings per share
Basic earnings per share are calculated by dividing net profit for the year attributable to equity holders of the Company by the weighted
average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated by dividing the net profit for the year attributable to equity holders of the Company by the weighted
average number of ordinary shares outstanding during the year plus the weighted average number of dilutive potential shares.

Net profit and share data used in the basic and diluted earnings per share computations are as follows:

Basic
Net profit attributable to equity holders from continuing operations
Net profit attributable to equity holders from discontinued operations
Net profit attributable to equity holders to determine the basic earnings per share
Diluted
Net profit attributable to equity holders from continuing operations
Net profit attributable to equity holders from continuing operations used to determine the
diluted earnings per share
Net profit attributable to equity holders from discontinued operations
Net profit attributable to equity holders to determine the diluted earnings per share

2013
US$ millions

2012
US$ millions

2011
US$ millions

229
–
229

229

229
–
229

2013
’000

508
–
508

508

508
–
508

2012
’000

886
39
925

886

886
39
925

2011
’000

Weighted average number of ordinary shares (excluding treasury shares) for basic earnings
per share
Effect of dilution:
Potential incremental shares as a result of share options
Weighted average number of ordinary shares (excluding treasury shares) adjusted for the
effect of dilution

99,801

101,332

104,196

105

99,855

101,425

104,301

To calculate earnings per share amounts for discontinued operations, the weighted average number of shares for both basic and diluted
amounts is as per the table above.

15. Intangible assets
Movements in intangible assets in 2013 were as follows:

Opening balance, net
Change in the composition of the Group (see note 4)
Additions (see note 9)
Amortisation charge(i)
Impairment
Transfers
Other movements
Exchange rate movements
Closing balance, net
As at December 31, 2013
Cost or valuation
Accumulated amortisation and impairment
Net

Goodwill
US$ millions
1,508
(13)
–
–
(36)
–
–
(37)
1,422

Licences
US$ millions
327
–
102
(52)
–
131
(1)
(7)
500

Customer lists
US$ millions
335
15
–
(64)
–
(7)
–
(8)
271

Other(ii)
US$ millions
249
(17)
302
(45)
–
(124)
(1)
(14)
350

Total
US$ millions
2,419
(15)
404
(161)
(36)
–
(2)
(66)
2,543

1,422
–
1,422

780
(280)
500

528
(257)
271

654
(304)
350

3,384
(841)
2,543

(i) The amortisation charge for Licences and Other is recorded under the caption “General and administrative expenses”.
(ii) The caption “Other” includes intangible assets identified in business combinations (including trademarks – see note 4) as well as content and programming rights.

Movements in intangible assets in 2012 were as follows:

Opening balance, net
Change in the composition of the Group (see note 4)
Additions (see note 9)
Amortisation charge(i)
Transfers
Other movements
Exchange rate movements
Closing balance, net
As at December 31, 2012
Cost or valuation
Accumulated amortisation
Net

Goodwill
US$ millions
1,415
130
–
–
–
–
(37)
1,508

1,508
–
1,508

Licences
US$ millions
213
–
155
(41)
3
–
(3)
327

Customers’ lists
US$ millions
370
44
–
(69)
–
–
(10)
335

Other(ii)
US$ millions
172
21
95
(44)
(3)
3
5
249

Total
US$ millions
2,170
195
250
(154)
–
3
(45)
2,419

571
(244)
327

532
(197)
335

518
(269)
249

3,129
(710)
2,419

The following table provides details of cash used for intangible asset additions:

Additions
Change in suppliers advances
Change in capex accruals and payables
Cash used from continuing operations for intangible asset additions

2013
US$ millions
404
–
(2)
402

2012
US$ millions
250
1
(92)
159

2011
US$ millions
45
–
12
57

Impairment test of goodwill
As at December 31, 2013, management tested goodwill for impairment by assessing the recoverable amount (value in use) against the
carrying amount for each cash-generating unit (“CGU”).

The value in use of a CGU or group of CGUs is determined based on discounted cash flows. The cash flow projections used (adjusted operating
profit margins, income tax, working capital, capital expenditure and licence renewal cost) are extracted from financial budgets approved by
management and the Board covering a period of five years or more. The planning horizon reflects industry practice in the countries where the
Group operates and stage of development or redevelopment of the business in those countries. Cash flows beyond this period are extrapolated
using a perpetual growth rate of 2.5%-3.0% (2012: 2.0%).

An impairment of $36 million relating to goodwill for Senegal was recorded in 2013. No impairment losses were recorded on goodwill for the
years ended December 31, 2012 and 2011.

Sensitivity analysis was performed on key assumptions within the impairment tests. The sensitivity analysis determined that sufficient margin
exists from realistic changes to the assumptions that would not impact the overall results of the testing. For DRC the estimated recoverable
amount exceeded the carrying value by 15 per cent or less (2012: 10% or less). Indicators of sensitivity were identified in respect of the DRC
cash-generating unit and sensitivity testing was performed resulting in the following findings:

– A long-term growth rate decrease of 2.4 ppt (percentage points), from 2.5% to 0.1%, would result in a value in use equal to the carrying

amount. An additional 1.0 ppt decrease, from 0.1% to -0.9%, would lead to a value in use lower than the carrying amount by $8.1 million.
– A discount rate increase of 1.2 ppt, from 15.1% to 16.3%, would result in a value in use equal to the carrying amount. An additional 1.0ppt

increase, from 16.3% to 17.3%, would lead to a value in use lower than the carrying amount by $17.1 million.

– A 5% decrease of the operating profit before depreciation and amortisation would result in a value in use equal to the carrying amount. An

additional 1% decrease, would lead to a value in use lower than the carrying amount by $4.9 million.

The recoverable amounts have been determined for the cash generating units based on the following discount rates for the years ended
December 31, 2013 and 2012:

Central America
South America
Africa

Discount rate after tax

2013
10.5%–12.6%
9.4%–10.6%
12.0%–15.0%

2012
7.5%–11.4%
7.4%–10.8%
8.4%–15.2%

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-12298

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

15. Intangible assets (continued)
The allocation of goodwill to cash generating units, net of exchange rate movements and after impairment, is shown below:

16. Property, Plant and Equipment (continued)
Movements in tangible assets in 2012 were as follows:

Millicom’s operations in:
Honduras (see note 4)
El Salvador
Costa Rica
Paraguay
Colombia
Guatemala
Senegal
DRC
Other
Total Goodwill

2013
US$ millions
855
194
139
68
52
39
–
11
64
1,422

2012
US$ millions
883
194
137
76
57
40
35
11
75
1,508

16. Property, Plant and Equipment
Movements in tangible assets in 2013 were as follows:

Opening balance, net
Change in the composition of the Group (note 4)(ii)
Additions (including sale and leaseback)
Impairments and net disposals
Depreciation charge(iii)
Asset retirement obligations
Transfers
Transfer from assets held for sale (see note 6)
Exchange rate movements
Closing Balance at December 31, 2013
Cost or valuation
Accumulated depreciation
Net

Network
equipment
US$ millions
2,540
–
48
(30)
(642)
3
630
5
(75)
2,479
5,685
(3,206)
2,479

Land and
Buildings
US$ millions
77
–
3
(1)
(5)
–
15
–
(2)
87
114
(27)
87

Construction
in Progress
US$ millions
322
(3)
745
(7)
–
–
(645)
–
(9)
403
403
–
403

Other(i)
US$ millions
169
6
26
(2)
(67)
–
65
–
(4)
193
474
(281)
193

Total
US$ millions
3,108
3
822
(40)
(714)
3
65
5
(90)
3,162
6,676
(3,514)
3,162

“Other” mainly includes office equipment and motor vehicles.

(i)
(ii) The change in the composition of the Group corresponded to minor acquisitions (see note 4).
(iii)

The depreciation charge for network equipment is recorded under the caption “Cost of sales” and the depreciation charge for Land and Buildings and Other is recorded under
“General and administrative expenses”.

Network
equipment
US$ millions
2,428
20
52
(97)
(584)
6
659
44
12
2,540
5,213
(2,673)
2,540

Land and
Buildings
US$ millions
69
2
8
(1)
(8)
–
7
–
–
77
99
(22)
77

Construction
in Progress
US$ millions
240
1
793
(2)
–
–
(718)
–
8
322
322
–
322

Other(i)
US$ millions
128
8
49
(4)
(65)
–
52
–
1
169
422
(253)
169

Total
US$ millions
2,865
31
902
(104)
(657)
6
–
44
21
3,108
6,056
(2,948)
3,108

“Other” mainly includes office equipment and motor vehicles.

(i)
(ii) The change in the composition of the Group corresponded to the acquisition of Cablevision Paraguay and other minor investments.
(iii)

The net carrying amount of network equipment under finance leases at December 31, 2013, mainly comprising towers from sale and lease
back transactions with tower companies, was $231 million (2012: $195 million).

Borrowing costs capitalised for the years ended December 31, 2013 and 2012 were not significant.

The following table provides details of cash used for the purchase of property, plant and equipment:

Additions
Change in suppliers advances
Change in capex accruals and payables
Vendor financing and finance leases (see note 31)
Cash used from continuing operations for purchase of property, plant and equipment

2013
US$ millions
822
18
(39)
(43)
758

2012
US$ millions
870
3
(21)
(10)
842

2011
US$ millions
803
(2)
(63)
(38)
700

17. Investments in associates
The following table illustrates the summarised financial information of the Group’s investment in associates for the years ended December 31,
2013 and 2012:

2013
Helios Towers Tanzania
Helios Towers DRC
Helios Towers Ghana
ATC Colombia BV
Africa Internet Holding (from December 12 – see note 4)
Total

Ownership
interest
%
40%
40%
40%
40%
20%

Income (loss)

from associates
US$ millions
(4)
1
1
(4)
(3)
(9)

Carrying
amount of the
investment
US$ millions
17
32
13
3
57
122

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122
100

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

17. Investments in associates (continued)

19. Trade receivables, net

2012
Helios Towers Tanzania
Helios Towers DRC
Helios Towers Ghana
ATC Colombia BV
Africa e-Commerce Holding (see note 4)
Others
Total

Ownership
interest
%
40%
40%
40%
40%
10%

Income (loss)
from associates
US$ millions
(13)
(4)
(1)
(4)
(1)
–
(23)

Carrying
amount of the
investment
US$ millions
26
29
17
20
100
1
193

Helios Towers Tanzania, DRC and Ghana
The initial cost of the 40% investment stakes in Helios Tower companies in Tanzania, DRC and Ghana were measured at Millicom’s interest in the
fair value of the tower sites sold to the tower companies (see note 6), after elimination of intercompany gains on sale. The carrying values have
subsequently been changed to reflect Millicom’s share in the losses of the tower companies, amounting to $2 million in 2013 (2012: $18 million).

Revenue of the tower companies in 2013 amounted to $130 million (2012: $82 million). At December 31, 2013 total assets of the tower
companies amounted to $309 million (2012: $295 million) and total liabilities $258 million (2012: $124 million).

ATC Colombia BV
In December 2011, Millicom exercised an option to acquire 40% of the holding company (ATC Colombia BV), of ATC Infraco (to which
Colombia Móvil, Millicom’s subsidiary in Colombia sold its towers). By December 31, 2013 Millicom had invested cash of $62 million in ATC
Colombia BV comprising debt and shareholder loans (December 31, 2012: $35 million). The amount of the investment is derived from the value
of the tower assets sold and transferred from Colombia Móvil to ATC Infraco (see note 6).

Millicom’s unconditional option to acquire a minority equity interest of up to 40% in ATC Sitios de Colombia S.A.S. (ATC Sitios), another tower
subsidiary of American Tower in Colombia, expired on December 21, 2012. Unconditional options provided by Millicom to Colombia Móvil’s
other shareholders to acquire up to half of Millicom’s interest in ATC Colombia BV expired on July 18, 2013.

At December 31, 2013 total assets of ATC Colombia BV amounted to $162 million (2012: $91 million) and total liabilities $96 million
(2012: $51 million).

Africa Internet Holding (AIH)
As a result of the agreement signed with MTN, from December 12, 2013 Millicom no longer controlled AIH (see note 4) and has accounted for
its investment from that date as an investment in an associate.

Africa e-Commerce Holding (AEH)
Effective April 1, 2013 Millicom entered into an agreement with a non-related minority investor in Africa e-Commerce Holding (AEH), a 51.47%
subsidiary of AIH (Millicom’s investment in Rocket Africa) providing Millicom the ability to purchase a further 20% interest in AEH upon exercise
of the option to reach 100% ownership in AIH and the minority shareholder to sell its 20% stake in AEH upon the same conditions. This
agreement provided Millicom with the ability to control the AEH Group, which was fully consolidated from April 1, 2013 until December 12,
2013 (see note 6).

18. Pledged deposits
As at December 31, 2013, non-current pledged deposits amounted to $2 million mainly related to security over financing of Millicom’s
operation in Guatemala (2012: $47 million (see note 26)).

At December 31, 2013, short-term pledge deposits amounted to $817 million and mainly comprised the proceeds of Millicom’s $800 million
bond related to the planned Colombian merger described in note 4. The proceeds from the bond (see note 26) are held in low risk interest
bearing deposits until such time as approval for the merger between Colombia Movil and UNE has been received.

101

2013
US$ millions
438
(118)
320

2012
US$ millions
430
(108)
322

Gross trade receivables
Less: provisions for impairment of receivables
Trade receivables, net

Nominal value less impairment is assumed to approximate the fair value of trade receivables (see note 33).

As at December 31, 2013 and 2012, the ageing analysis of trade receivables is as follows:

2013
Telecom operators
Own customers
Others
Total
2012
Telecom operators
Own customers
Others
Total

20. Restricted cash

Mobile financial services
Others
Restricted cash

Neither past
due nor
impaired
US$ millions

67
79
69
215

72
94
40
206

Past due (net of impairments)

<30 days
US$ millions

30–90 days
US$ millions

>90 days
US$ millions

Total
US$ millions

20
23
17
60

21
19
23
63

24
10
10
44

23
21
9
53

–
–
1
1

–
–
–
–

111
112
97
320

116
134
72
322

2013
US$ millions
78
3
81

2012
US$ millions
43
–
43

Mobile financial services cash restricted based on local regulations in each country where mobile financial services are offered.

21. Cash and cash equivalents
Cash and cash equivalents are comprised as follows:

Cash and cash equivalents in US dollars
Cash and cash equivalents in other currencies
Total cash and cash equivalents

2013
US$ millions
449
492
941

2012
US$ millions
628
546
1,174

Cash balances are diversified among leading international banks and in domestic banks within the countries where we operate.

22. Share capital
Share capital and share premium
The authorised registered share capital of the Company is 133,333,200 shares (2012: 133,333,200). As at December 31, 2013, the total
subscribed and fully paid-in share capital and premium was $640 million (2012: $642 million) consisting of 101,739,217 (2012: 101,739,217)
registered common shares with par value of $1.50 (2012: $1.50) each.

The following table summarises movements in issued share capital for the years ended December 31, 2013 and 2012:

Issued share capital as of January 1
Cancellation of shares during the year
Issued share capital as of December 31

2013
Number of
shares
101,739,217
–
101,739,217

2012
Number of
shares
104,939,217
(3,200,000)
101,739,217

The Company reduced its issued share capital by $5 million in 2012 by way of cancellation of 3.2 million treasury shares having a par value of
$1.50 each.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122
102

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

23. Share based compensation
Share-based compensation comprises share options and long-term incentive plans.

Share options
Until May 30, 2006, share options were granted to Directors, senior executives, officers and selected employees. The exercise price of the granted
options was equal to or higher than the market price of the shares on the date of grant. The options were conditional on the employee or Director
completing one to five years of service (the vesting period) and were exercisable starting from one year to five years from the grant date.

103

Shares granted under the performance plan vested on January 1, 2013 and were 50% subject to a market condition that was based on the
Total Shareholder Return (TSR) of Millicom compared to the TSR of a peer group of companies during the three-year period of the plan, and
50% subject to a performance condition, based on EPS. A fair value per share subject to the market condition was determined and applied to
the total potential number of performance shares, and expensed over the vesting period.

In 2013, 66,542 treasury shares were issued under the 2010 performance shares plan and 89,650 treasury shares issued under the deferred
share plan.

Options granted prior to 2005 have an indefinite life and those granted in 2005 a 20-year life. Shares issued when share options are exercised
have the same rights as common shares.

The total charge for the 2010 LTIPs of $16 million was recorded over the service period (2010 to 2012).

The following table summarises information about share options outstanding and exercisable at December 31, 2013. The market price of the
Company’s shares as at December 31, 2013 was SEK 640.50 (2012: SEK 562.50), approximately $99.71 (2012: $86.48).

Exercise price US$
20.56
25.05
20.56–25.05

Options outstanding and exercisable
Number
outstanding at
December 31,
2013
25,000
20,000
45,000

Weighted
average
exercise price
20.56
25.05
22.55

Share options outstanding at the end of the year have the following expiry dates, exercise prices and terms:

Date issued

May 2004

May 2005

Number of options outstanding
as at December 31, 2013

Exercise
price US$

20,000

25,000

25.05

20.56

Terms
Exercisable immediately.
Options have an indefinite life.
Exercisable immediately.
Options have a 20-year life.

The following table summarises the Company’s share options as of December 31, 2013, 2012 and 2011, and changes during the years
then ended:

Outstanding at beginning of year
Expired/forfeited
Exercised
Outstanding at end of year
Exercisable at end of year

2013

2012

2011

Average
exercise price in
US$ per share
29.34
–
–
22.55
22.55

Number of
options
134,996
–
(89,996)
45,000
45,000

Average
exercise price
in US$ per share
29.34
–
–
29.34
29.34

Number of
options
134,996
–
–
134,996
134,996

Average
exercise price
in US$ per share
29.06
20.56
28.80
29.34
29.34

Number of
options
183,797
(3,000)
(45,801)
134,996
134,996

Long-term incentive plans
2010
Long-term incentive awards for 2010 (“2010 LTIPs”) were approved by the Board on November 27, 2009. The 2010 LTIPs consist of a deferred
share awards plan and a performance shares plan.

Shares granted under the deferred plan were based on past performance and vested 16.5% on each of January 1, 2011 and January 1, 2012
and 67% on January 1, 2013.

2011
Long-term incentive awards for 2011 (“2011 LTIPs”) were approved by the Board on February 1, 2011. The 2011 LTIPs consist of a deferred
share awards plan and a performance shares plan.

Shares granted under the deferred share awards plan are based on past performance and vest 16.5% on each of January 1, 2012 and
January 1, 2013 and 67% on January 1, 2014.

Shares granted under the performance plan vest at the end of the three year period ending January 1, 2014, subject to performance
conditions, 50% based on Return on Capital Investment (ROIC) and 50% based on EPS. Prior to September 2011, the vesting conditions were
50% based on EPS and 50% on a market condition that was based on the ranking of the TSR of Millicom compared to the FTSE Global
Telecoms Index adjusted to add three peer companies (“Adjusted Global Telecoms Index”). As this index was discontinued during 2011, the
Compensation Committee approved the replacement of this condition with the ROIC condition.

In 2013, 20,303 treasury shares were issued under the 2011 performance share plan and 46,061 treasury shares were issued under the deferred
share plan.

The total charge for the 2011 LTIPs of $18 million was recorded over the service period (2011 to 2013).

2012
Long-term incentive awards for 2012 (“2012 LTIPs”) were approved by the Board on January 27, 2012. The 2012 LTIPs consist of a deferred
share awards plan and a performance shares plan, the mechanisms of which are the same as the 2011 LTIPs.

Shares granted under the deferred share awards plan are based on past performance and vest 16.5% on each of January 1, 2013 and
January 1, 2014 and 67% on January 1, 2015. Shares under the performance plan vest at the end of the three year period ending
January 1, 2015.

In 2013, 7,453 shares were issued under the performance share plan and 26,669 shares were issued under the deferred share plan.

The total charge for the 2012 LTIPs, estimated at $19 million, is being recorded over the service period (2012 to 2014).

2013
Long-term incentive awards for 2013 (“2013 LTIPs”) were approved by the Board on February 1, 2013. The 2013 LTIP’s consist of deferred share
awards and performance share awards, the mechanisms of which are the same as the 2012 LTIPs.

Shares granted under the deferred share awards plan are based on past performance and vest 16.5% on each of January 1, 2014 and
January 1, 2015 and 67% on January 1, 2016. Shares under the performance plan vest at the end of the three year period ending
January 1, 2016.

In 2013, no shares were issued under either the performance share plan or the deferred share plan.

The total charge for the 2013 LTIPs, estimated at $25 million, is being recorded over the service period (2012 to 2014).

The number of share awards expected to vest under the long-term incentive plans is as follows:

Plan share awards
Share awards granted(i)
Revision for actual and expected forfeitures
Revision in respect of performance conditions
Shares issued
Share awards expected to vest

Performance
shares 2013
173,586
12,634
(24,112)
–
–
162,108

Deferred
share awards
2013
208,979
3,240
(23,695)
–
–
188,524

Performance
shares 2012
105,284
3,763
(49,409)
–
(7,453)
52,185

Deferred
share awards
2012
161,798
5,658
(37,766)
–
(26,669)
103,021

Performance
shares 2011
106,947
6,640
(32,873)
–
(20,303)
60,411

Deferred
share awards
2011
146,556
7,727
(40,390)
–
(46,061)
67,832

(i)

Additional shares granted including consideration for the impact of the special dividends paid in 2012 and 2011 (see note 28), and vest at the end of the performance and
deferred share plans

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122104

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

23. Share based compensation (continued)
Total share based compensation expense
Total share-based compensation for years ended December 31, 2013, 2012 and 2011 was as follows:

2009 LTIPs
2010 LTIPs
2011 LTIPs
2012 LTIPs
2013 LTIPs
Total share-based compensation expense

2013
US$ millions
–
–
2
5
10
17

2012
US$ millions
–
5
7
10
–
22

2011
US$ millions
3
5
9
–
–
17

24. Put option reserve
On July 1, 2010, in exchange for an unconditional 5 year call option, the Company granted to its non-controlling interest in our operation in
Honduras a 5 year conditional put option over his 33.3% shareholding (see note 27). A put option reserve in the amount of $737 million was
recognised representing the present value of the redemption price of the put option at that date.

25. Other reserves

As at January 1, 2011
Transfer from retained profits
Shares issued via the exercise of share options
Share based compensation
Issuance of shares – 2008, 2009, and 2010 and LTIPs
Cash flow hedge reserve movement
Currency translation movement
As at December 31, 2011
Share based compensation
Issuance of shares – 2009, 2010, and 2011 LTIPs
Cash flow hedge reserve movement
Currency translation movement
As at December 31, 2012
Share based compensation
Issuance of shares – 2010, 2011, and 2012 LTIPs
Shares issued via the exercise of share options
Cash flow hedge reserve movement
Currency translation movement
As at December 31, 2013

Legal
reserve
US$ ’000
16,298
61
–
–
–
–
–
16,359
–
–
–
–
16,359
–
–
–
–
–
16,359

Equity-settled
transaction
reserve
US$ ’000
38,736
–
(81)
17,264
(23,230)
–
–
32,689
21,929
(12,421)
–
–
42,197
16,871
(19,103)
(3,027)
–
–
36,938

Hedge
reserve
US$ ’000
(1,700)
–
–
–
–
(3,015)
–
(4,715)
–
–
(1,118)
–
(5,833)
–
–
–
6,857
–
1,024

Currency
translation
reserve
US$ ’000
(108,019)
–
–
–
–
–
(39,806)
(147,825)
–
–
–
(37,709)
(185,534)
–
–
–
–
(53,903)
(239,437)

Total
US$ ’000
(54,685)
61
(81)
17,264
(23,230)
(3,015)
(39,806)
(103,492)
21,929
(12,421)
(1,118)
(37,709)
(132,811)
16,871
(19,103)
(3,027)
6,857
(53,903)
(185,116)

Legal reserve
If the Company reports an annual net profit on a non-consolidated basis, Luxembourg law requires appropriation of an amount equal to at
least 5% of the annual net profit to a legal reserve until such reserve equals 10% of the issued share capital. This reserve is not available for
dividend distribution.

No appropriation was required in 2012 or 2013 as the 10% minimum level was reached in 2011 and maintained in 2012 and 2013. At the
Company’s Annual General Meeting in May 2011, the shareholders voted to transfer $61,000 from retained profits to the legal reserve.

Equity-settled transaction reserve
The cost of share options and LTIPs is recognised as an increase in the equity-settled transaction reserve over the period in which the
performance and/or service conditions are rendered. When the options are exercised their cost is transferred from the equity-settled
transaction reserve to share premium. When shares under the different LTIPs vest and are issued the corresponding reserve is transferred
to share capital and share premium.

Hedge reserve
The effective portion of changes in value of cash flow hedges of fluctuations in interest rates in Millicom’s operations in Costa Rica,
Honduras, and in the Company are recorded in the Hedge Reserve (see note 34).

105

Currency translation reserve
In the consolidated financial statements, the relevant captions in the statements of financial position of joint ventures, and subsidiaries with
functional currencies other than the U.S. dollar, are translated to U.S. dollars using the closing exchange rate. Income statements or income
statement captions (included those of associates) are translated to U.S. dollars at the average exchange rates during the year. The currency
translation reserve includes foreign exchange gains and losses arising from these translations.

26. Borrowings
Borrowings due after more than one year:

Debt and financing:
MIC SA 4.75% Senior Notes(viii)
MIC SA 6.625% Senior Notes(viii)
El Salvador 8% Senior Notes(ii)
SEK Senior Notes(viii)
Paraguay 6.75% Senior Notes(vi)
Bolivia 4.75% Senior Notes(vii)
Colombia syndicated loan(i)
Bank financing
Non-controlling shareholders
Finance leases
Vendor financing
Total non-current debt and financing
Less: portion payable within one year
Total debt and financing due after more than one year

Borrowings due within one year:

Bank financing
Vendor financing
Finance leases
Total current debt and financing
Portion of non-current debt payable within one year
Total debt and financing due within one year

Borrowings analysed by location:

Colombia(i)
El Salvador(ii)
Honduras(iii)
Tanzania(iv)
Guatemala(v)
Paraguay(vi)
Bolivia(vii)
Luxembourg(viii)
Other
Total debt and financing
Of which:
Due after more than 1 year
Due within 1 year

2013
US$ millions

2012
US$ millions

491
791
441
310
294
175
340
798
–
263
–
3,903
(216)
3,687

2013
US$ millions
239
–
16
255
216
471

2013
US$ millions
444
443
267
109
219
359
180
1,797
340
4,158

–
–
440
304
293
191
–
1,270
243
200
40
2,981
(415)
2,566

2012
US$ millions
236
10
32
278
415
693

2012
US$ millions
547
440
261
183
265
379
198
304
682
3,259

3,687
471

2,566
693

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122106

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

26. Borrowings (continued)
Significant individual financing facilities are described below:

(i) Colombia
At December 31, 2013, Colombia Móvil S.A. E.S.P. (“Colombia Móvil”), Millicom’s operation in Colombia had the following financing:

Description

Syndicated loan

IRU Promitel

Club Deal 5 year facility

Non-controlling shareholders (repaid in 2013)

Other COP short term loans (repaid in 2013)

Other USD short term loans (repaid in 2013)

Total loans

Finance lease of towers (see note 6)

Other finance leases

Total financing

(i)
IBR – Colombia Interbank Rate
(ii) DTF – Deposits to Fixed Terms

At December 31, 2013 the loans were unsecured.

Maturity

Currency

Interest rate

2013
US$ millions

2012
US$ millions

IBR +7.10%(i)

340

2020

2014

2013

2015

2013

2023

2014

2013

COP

6.65%

COP DTF +4.50%(ii)

DTF +4.15%

various

COP

USD

COP

–

343

–

444

–

243

130

447

–

547

(ii) El Salvador
At December 31, 2013, Telemóvil Finance Co. Ltd., a subsidiary of Millicom in the Cayman Islands had the following financing:

Description
8% Senior Notes
Total loans
Finance lease of towers
Total financing

Maturity
2017

Currency
USD

Interest rate
8.25%

2020

USD

2013
US$ millions
441
441
2
443

2012
US$ millions
440
440
–
440

8% Senior Notes
On September 23, 2010, Telemóvil Finance Co. Ltd., issued $450 million aggregate principal amount 8% Senior Notes due on October 1, 2017.
The 8% Senior Notes have an 8% per annum coupon with an 8.25% yield and are payable semi-annually in arrears on April 1 and October 1.
The effective interest rate is 8.76%.

The proceeds were loaned to a bank which has then financed Telemovil El Salvador. The bank has no obligation to pay amounts to Telemóvil
Finance Co. Ltd unless it collects the equivalent amounts from Telemovil El Salvador and therefore these transactions have been considered as
a net arrangement such that ultimately there is no balance outstanding between the Group and the bank as of December 31, 2013.

The 8% Senior Notes are general unsecured obligations of Telemóvil Finance Co. Ltd and rank equal in right of payment with all future
unsecured and unsubordinated obligations of Millicom. The 8% Senior Notes are guaranteed by Telemóvil El Salvador, S.A., Millicom’s
operating subsidiary in El Salvador.

Telemóvil Finance Co. Ltd has the following unexpired options to partially or fully redeem the 8% Senior Notes:

(i)

Full or partial redemption at any time prior to October 1, 2014 for 100% of the principal to be redeemed, or the present value of the
remaining scheduled payments of principal to be redeemed and interest, whichever is higher.

(ii) Full or partial redemption at any time on or after October 1, 2014 for the following percentage of principal to be redeemed, plus accrued

and unpaid interest and all other amounts dues, if any:

October 1, 2014
October 1, 2015
October 1, 2016

104%
102%
100%

These options represent embedded derivatives which have been valued and determined to be closely related to the underlying Notes.

107

If either Millicom, Telemóvil Finance Co. Ltd or Telemóvil El Salvador, S.A. experience a Change of Control Triggering Event, defined as a rating
decline resulting from a change in control, each holder will have the right to require repurchase of its Notes at 101% of their principal amount
plus accrued and unpaid interest and all other amounts due, if any.

(iii) Honduras
As at December 31, 2013, Telefonica Celular S.A., Millicom’s operation in Honduras, had the following financing:

Description
USD variable rate loans
USD fixed rate loans
HNL variable rate loans
Total financing

Maturity
2014/2021
2014/2021
2014/2021

Currency
USD
USD
HNL

Interest rate
4.50% – 6.00 variable
3.96% – 6.45%
9.00% – 15.50% variable

2013
US$ millions
37
109
121
267

2012
US$ millions
35
127
99
261

At December 31, 2013 the loans were unsecured.

(iv) Tanzania
As at December 31, 2013 Millicom Tanzania Limited (‘Millicom Tanzania’), Millicom’s operating subsidiary in Tanzania, had the
following financing:

Description

Maturity

Currency

TZS short term loans
USD variable rate loans (repaid in 2013)
USD fixed rate loans (repaid in 2013)
Total loans
Finance lease of towers (see note 6)
Total financing

2012
2014/2015
2015

2023

TZS
USD
USD

TZS

Interest rate
180 day Tanzanian
Treasury Bill rate +2.5%
LIBOR+2.50% – 3.00%
4.04%

2013
US$ millions

2012
US$ millions

–
–
–
–
109
109

17
55
31
103
80
183

(v) Guatemala
As at December 31, 2013 Millicom’s joint venture companies in Guatemala (‘Millicom Guatemala’), had the following unsecured financing
(Millicom’s proportionate share):

Description
USD variable rate loans
USD fixed rate loans
GTQ variable rate loans
GTQ fixed rate loan
Total financing

Maturity
2016/2018
2018
2016/2017
2019

Currency
USD
USD
GTQ
GTQ

Interest rate
LIBOR 3M +0.9-4%
5.35%
6.30 – 6.50%
6.00%

2013
US$ millions
159
14
39
7
219

2012
US$ millions
195
16
46
8
265

(vi) Paraguay
As at December 31, 2013 Millicom’s subsidiary in Paraguay had the following financing:

Description
6.75% Senior Notes
8 year loan with the
European Investment Bank
Other short term loans
Total financing

Maturity
2022

2017
2013

Currency
USD

USD
USD

Interest rate
6.75%

2013
US$ millions
294

2012
US$ millions
293

LIBOR+ 0.667% – 1.484%
3.90% – 9.70%

65
–
359

85
1
379

6.75% Senior Notes
On December 7, 2012, Telefónica Celular del Paraguay S.A., Millicom’s fully owned subsidiary in Paraguay issued $300 million aggregate
principal amount of 6.75% Senior Unsecured Notes (the “6.75% Senior Notes”) due on December 13, 2022. The 6.75% Senior Notes were
issued at 100% of the aggregate principal amount. Distribution and other transaction fees of $7 million reduced the total proceeds from
issuance to $293 million. The 6.75% Senior Notes have a 6.75% per annum coupon with interest payable semi-annually in arrears on June 13
and December 13. The effective interest rate is 7.12%.

The 6.75% Senior Notes are general unsecured obligations of Telefónica Celular del Paraguay S.A. and rank equal in right of payment with all
future unsecured and unsubordinated obligations of Telefónica Celular del Paraguay S.A. The 6.75% Senior Notes are unguaranteed.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

108

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

26. Borrowings (continued)
Telefónica Celular del Paraguay S.A. has options to partially or fully redeem the 6.75% Senior Notes as follows:

(i)

Full or partial redemption at any time prior to December 13, 2017, for the highest of, 100% of the principal to be redeemed or, the present
value of the remaining scheduled payments of principal to be redeemed and interest.

(ii) Full or partial redemption at any time on or after December 13, 2017 for the following percentage of principal to be redeemed, plus

accrued and unpaid interest and all other amounts dues, if any:

December 13, 2017
December 13, 2018
December 13, 2019
December 13, 2020 to maturity

103.375%
102.25%
101.125%
100.00%

These options represent embedded derivatives which, in accordance with IAS 39 have been valued and determined to be closely related to
the underlying bond.

(iii) Redemption of up to 35% of the original principal of the 6.75% Senior Notes if, prior to December 13, 2015, Telefónica Celular del

Paraguay S.A. receives proceeds from issuance of shares, at a redemption price of 106.75% of the principal amount to be redeemed plus
accrued and unpaid interest and all other amounts due, if any, on the redeemed notes.

If Telefónica Celular del Paraguay S.A. experiences a Change of Control Triggering Event, defined as a rating decline resulting from a change in
control, each holder will have the right to require repurchase of its notes at 101% of their principal amount plus accrued and unpaid interest
and all other amounts due, if any.

(vii) Bolivia
As at December 31, 2013 Millicom’s subsidiary in Bolivia had the following unsecured financing:

Description
BOB 1.36 billion Notes
Netherlands Development Finance Company (“A tranche”)
Other long term loans
Total financing

Maturity
2020
2014
2019

Interest rate
Currency
BOB
4.75%
USD LIBOR + 2.25%
BOB 7.94% variable

2013
US$ millions
175
3
2
180

2012
US$ millions
191
7
–
198

BOB 1.36 billion Notes
In May 2012, Telecel Bolivia issued BOB 1.36 billion of notes repayable in instalments until April 2, 2020. Distribution and other transaction fees
of BOB 5 million reduced the total proceeds from issuance to BOB 1.32 billion ($191 million). The bond has a 4.75% per annum coupon with
interest payable semi-annually in arrears in May and November. The effective interest rate is 4.79%.

(viii) Luxembourg
As at December 31, 2013 the Company had the following financing:

Description
SEK Senior unsecured floating rate notes
SEK Senior unsecured fixed rate notes
$300 million Nordea term loan facility
$500 million 4.75% Senior Notes
$800 million 6.625% Senior Notes
Total loans
Other financial leases
Total financing

(i)

STIBOR – Swedish Interbank Offered Rate

Maturity
2017
2017
2014
2020
2021

Currency

Interest rate
SEK STIBOR +3.5%
5.125%
SEK
USD LIBOR+1.30%
USD
4.75%
6.625%
USD

2014

USD

2013
US$ millions
273
37
199
491
791
1,791
6
1,797

2012
US$ millions
268
36
–
–
–
304
–
304

SEK Senior Unsecured Notes
On October 30, 2012 Millicom issued senior unsecured floating rate notes of Swedish Kronor (‘SEK’) 1.75 billion and senior unsecured fixed rate
notes of SEK 0.25 billion. The floating rate notes were issued for 100% of the principal amount and the fixed rate notes for 99.699% of the
principal amount and both are repayable in five years. The floating rate notes bear interest at the three month Swedish Interbank Offering rate
(‘STIBOR’) + 3.5% per annum and the fixed rate notes bear interest at 5.125% per annum. At the same time Millicom entered into various
cross currency interest swap contracts whereby Millicom will sell SEK and receive USD to hedge against exchange and interest rate fluctuations
(see note 33).

The notes can be early redeemed between October 2013 and October 2016 at 101% of the issuance price. These options represent embedded
derivatives which, in accordance with IAS 39 have been valued and determined to be closely related to the underlying notes.

109

$500 million 4.75% Senior Notes
On May 22, 2013 Millicom issued a $500 million 4.75% fixed interest rate bond repayable in seven years, with the purpose of refinancing
the African operations (excluding Rwanda and Mauritius). Withheld costs of issuance of $10 million and paid costs of $9 million are to be
amortised over the seven-year life of the notes using the amortised cost method (effective interest rate of 5.29%).

The bonds can be early redeemed between October 2013 and October 2016 at 101% of the issuance price. These options represent
embedded derivatives which, in accordance with IAS 39 have been valued and determined to be closely related to the underlying notes.

USD $800 million 6.625% Senior Notes
On October 16, 2013 Millicom issued an $800 million eight-year bond (Senior Notes) bearing interest fixed at 6.625% per annum and payable
semi-annually in arrears. The funds will be used to finance the Colombian Merger (see note 4) and released from an escrow account
(see note 18) six days prior to the completion of the merger.

If the Colombian Merger is not or cannot be completed by September 30, 2014, then all Notes will be subject to a special mandatory
redemption at a price equal to 100%, if redeemed on or before April 15, 2014, or 101%, if redeemed thereafter.

Right of set-off and de-recognition
In addition to the facilities described above, in 2013 two of Millicom’s subsidiaries had agreements with banks whereby the banks provided
loans amounting to Euro 176 million to Millicom’s subsidiaries with a maturity date in 2020. Simultaneously Millicom deposited the same
amount with the banks and entered into a total return swaps. The total return swaps remove any risk of the banks connected to the loans, and
as such Millicom have derecognised both its deposit asset and the loan liabilities from the date of the total return swap.

Guarantees
Millicom has issued guarantees to secure certain obligations of some of its operations under financing agreements. Outstanding amounts under
the guarantees and the guarantee periods as of December 31, 2013 and 2012 are shown below. Amounts covered by bank guarantees are
recorded in the consolidated statements of financial position under the caption “Other debt and financing” and amounts covered by supplier
guarantees are recorded under the caption “Trade payables” or “Other debt and financing” depending on the underlying terms and conditions.

Terms
0–1 year
1–3 years
3–5 years
Total

Bank and other financing guarantees(i)

As at December 31, 2013

As at December 31, 2012

Outstanding
exposure
US$ millions
34
50
186
270

Maximum
exposure
US$ millions
112
50
255
417

Outstanding
exposure
US$ millions
278
196
315
789

Maximum
exposure
US$ millions
470
305
355
1,130

(i) The guarantee ensures payment by the guarantor of outstanding amounts of the underlying loans in the case of non-payment by the obligor.

Pledged assets
The Group’s share of total debt and financing secured by either pledged assets, pledged deposits issued to cover letters of credit, or guarantees
issued by the Company as at December 31, 2013 is $764 million (2012: $1,391 million). Assets pledged by the Group over this debt and
financing at the same date amount to $819 million (2012: $131 million of which $87 million were pledged over property, plant and equipment).

Net debt
The following table provides details of net debt change for the years 2013, 2012 and 2011:

Total Debt and financing
Less: Derivative financial instruments related to debt(i)
Less: Cash and deposits(ii)
Net debt at the end of the year

2013
US$ millions
4,158
(10)
(1,841)
2,307

2012
US$ millions
3,259
(6)
(1,272)
1,981

2011
US$ millions
2,438
–
(931)
1,507

(i) Carrying value of foreign currency hedges on SEK denominated notes.
(ii) Cash and cash equivalents, restricted cash, current and long-term pledged, and time deposits related to bank borrowings.

Covenants
Millicom’s financing facilities are subject to a number of covenants including debt service coverage ratios, debt to earnings ratios, debt to
equity and cash levels. In addition, certain of its financings contain restrictions on sale of businesses or significant assets within the businesses.
At December 31, 2013 there were no breaches in covenants.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122

110

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

27. Other non-current and current provisions and liabilities
Provisions and other non-current liabilities are comprised as follows:

Non-current legal provisions (note 31)
Long-term portion of asset retirement obligations
Long-term portion of deferred income on tower deals
Other
Total

Provisions and other current liabilities are comprised as follows:

Put option
Deferred revenue
Customer deposits
Current legal provisions (note 31)
Other tax payables
Current provisions(i)
Derivative financial instruments
Customer and distributor cash balances (Tigo cash)
Other
Total

2013
US$ millions
14
63
41
44
162

2013
US$ millions
792
162
13
5
78
9
–
73
38
1,170

2012
US$ millions
6
62
51
8
127

2012
US$ millions
730
151
22
7
71
16
7
47
58
1,109

(i)

Includes tax and other contingencies for $3 million (2012: $4 million) that were assumed as part of the Amnet and Navega acquisitions. The former shareholders of Amnet and
Navega placed in escrow $35 million and $3 million respectively to cover these contingencies. Therefore a corresponding financial asset of $3 million (2012: $4 million) has been
recorded within “Other current assets”.

Put option
On July 1 2010, Millicom reached an agreement with its local partner in Honduras whereby Millicom’s local partner granted Millicom an
unconditional call option for duration of five years for his 33% stake in Celtel, the Honduran operation (see note 34). At the same time, and as
consideration for the call option, Millicom granted a put option for the same duration to its local partner. The put option becomes exercisable
on a change of control of Millicom International Cellular S.A., or Millicom’s subsidiary that holds the shares in Celtel (except if the change of
control is in favor of Investment AB Kinnevik, the current largest shareholder of Millicom, or management of Millicom).

A change of control event may occur at Millicom level which is beyond the control of Millicom. Such an event would trigger the ability of our
local partner to exercise his put option at his discretion. Therefore, the put option is a financial liability as defined in IAS 32 and is recorded as a
current liability. The liability is measured at the present value of the redemption price of the put option which amounted to $792 million at
December 31, 2013 (2012: $730 million).

The redemption price of the put option is based on a multiple of the EBITDA of Celtel. The multiple is based on a change of control transaction
multiple of Millicom. Management estimated the change of control transaction multiple of Millicom from a trading multiple of Millicom adding
a control premium (based upon comparable transactions from the industry).

28. Dividends
On May 28, 2013 a dividend distribution of $2.64 per share from Millicom’s retained profits as at December 31, 2012 was approved by the
shareholders at the Annual General Meeting and distributed in June 2013.

On December 5, 2012 an extraordinary dividend of $3.00 per share from Millicom’s retained profits as at December 31, 2011 was approved at
an Extraordinary General Meeting and distributed in December 2012. On May 29, 2012 a dividend distribution of $2.40 per share from
Millicom’s retained profits as at December 31, 2011 was approved by the shareholders at the Annual General Meeting and distributed in
June 2012.

111

29. Directors’ and officers’ remuneration
Directors
The remuneration of the members of the Board of Directors of the Company comprises an annual fee. Director remuneration is proposed by
the Nominations Committee and approved by the shareholders at the Annual General Meeting of Shareholders (the “AGM”).

The remuneration charge (net of 20% withholding tax) for the Board for the years ended December 31, 2013, 2012 and 2011 was as follows:

2013
2012
2011

Chairman
US$ ‘000
190
210
203

Other members
of the Board
US$ ‘000
742
787
697

Total
US$ ‘000
932
997
900

The number of shares and share options beneficially owned by the Directors as at December 31, 2013 and 2012 was as follows:

2013
Shares
2012
Shares
Share options

Chairman

Other members
of the Board

Total

2,318

12,825

15,143

2,318
–

18,950
10,000

21,268
10,000

Officers
The remuneration of senior management of the Company (“Officers”) comprises an annual base salary, an annual bonus, share based
compensation, social security contributions, pension contributions and other benefits. From 2013 the senior management of the Company is
considered to be the CEO and the Executive Vice Presidents (previously CEO and CFO). The bonus and share based compensation plans
(see note 23) are based on actual performance (including individual and Group performance). Share based compensation is granted once a
year by the Compensation Committee of the Board. The annual base salary and other benefits of the Chief Executive Officer (“CEO”) and the
Executive Vice Presidents (“Executive Team”) is proposed by the Compensation Committee and approved by the Board.

On August 31, 2013 Marc Zagar was appointed as Interim Chief Financial Officer following the departure of Francois-Xavier Roger.

On October 31, 2012 the Board appointed Hans-Holger Albrecht, who was a Director of Millicom since May 2010, to succeed Mikael Grahne as
President and CEO.

The remuneration charge for the Officers for the years ended December 31, 2013, 2012 and 2011 was as follows:

2013
Base salary
Bonus
Pension
Other benefits
Total
Share based compensation:(i) (ii)

(i)
(ii)

See note 23.
Share awards of 65,178 and 71,899 were granted in 2013 under the 2013 LTIPs to the CEO, and Executive Team.

Current Chief
Executive Officer
US$ ’000

Former Chief
Financial Officer
US$ ’000

Executive Team
US$ ’000

2,252
2,269
723
1,282
6,526
1,705

463
–
74
34
571
531

3,532
1,768
573
747
6,620
3,057

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122112

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

29. Directors’ and officers’ remuneration (continued)

2012
Base salary
Bonus
Pension
Other benefits
Total
Share based compensation:(i) (ii)
2011
Base salary
Bonus
Pension
Other benefits
Total
Share based compensation:(i) (ii)

Current Chief
Executive Officer

Former Chief
Executive Officer

Former Chief
Financial Officer

633
–
134
44
811
–

1,265
1,554
379
187
3,385
3,431

1,323
1,915
406
158
3,802
2,862

662
719
108
59
1,548
1,533

676
798
105
71
1,650
1,267

(i)
(ii)

See note 23.
Share awards of 33,209 and 13,962 were granted in 2012 under the 2012 LTIPs to the former CEO and former CFO. Share awards of 34,937 and 14,814 were granted in 2011
under the 2011 LTIPs to the former CEO and former CFO.

The number of shares and unvested share awards beneficially owned by senior management as at December 31, 2013 and 2012 was as follows:

2013
Shares
Share awards not vested
2012
Shares
Share awards not vested

Chief Executive
Officer

Former Chief
Financial Officer

8,810
65,178

610
–

23,402
46,044

Executive
Team

20,174
105,102

Total

28,984
170,280

24,012
46,044

Notice period
If the employment of Millicom’s senior executives is terminated, severance of up to 12 months salary is potentially payable, and the CEO is
entitled to receive a termination payment equivalent to 24 months’ basic salary if he complies with certain conditions.

30. Non-cash investing and financing activities
The following table gives details of non-cash investing and financing activities for continuing operations for the years ended
December 31, 2013, 2012 and 2011.

Investing activities
Acquisition of property, plant and equipment (see note 16)
Asset retirement obligations (see note 16)
Change in scope of consolidation (AIH – see note 4)
Financing activities
Vendor financing and finance leases (see note 16)
Share based compensation (see note 23)

2013
US$ millions

2012
US$ millions

2011
US$ millions

(43)
(3)
(92)

(43)
17

(10)
(6)
–

10
22

(38)
(5)
–

38
17

113

31. Commitments and contingencies
Operational environment
Millicom operates in Latin American and African markets characterised by evolving and at times fluctuating regulatory, political, technological
and economic environments. These characteristics result in uncertainties that may affect future operations, the ability to conduct business,
transact foreign exchange, repatriate funds and repay debt, all of which may impact agreements with third parties.

In the normal course of business, Millicom faces uncertainties regarding taxation, interconnect rates, licence renewal and tariff arrangements,
which can have a significant impact on the profitability and economic viability of its operations.

Litigation
The Company and its operations are contingently liable with respect to lawsuits and other matters that arise in the normal course of business.
As of December 31, 2013, the total amount of claims and litigation risks against Millicom and its operations was $668 million
(December 31, 2012: $955 million) of which $1 million (December 31, 2012: $1 million) relate to joint ventures.

As at December 31, 2013, $19 million (December 31, 2012: $13 million) has been provided for litigation risks in the consolidated statement
of financial position. While it is not possible to ascertain the ultimate legal and financial liability with respect to these claims, the ultimate
outcome of these contingencies is not anticipated to have a material effect on the Group’s financial position and operations.

Specific risks included in the amounts above:

Ghana
A lawsuit filed against our subsidiary in Ghana (Millicom Ghana) by E-Talk Limited (E-Talk) in November 2011, alleging that Millicom Ghana
terminated a July 2006 contract with insufficient notice. The total value of the claim is approximately $30 million, including various general
damages, loss of expected revenues and punitive damages. Management considers this claim as opportunistic and without foundation, in so
far as it was filed more than four years after the events on which the plaintiff bases its claim. A provision of less than $1 million has been made
for legal costs related to this claim.

Arbitration
At December 31, 2013 Millicom has various other claims, mainly related to licences subject to arbitration processes.

Specific risks excluded from the amounts above:

Colombia
A claim filed with the Civil Chamber of Bogota in Colombia against all mobile operators in Colombia, including our subsidiary in Colombia, by a
group of approximately twenty individuals of approximately $753 million. The claimants allege damages and losses suffered from third parties
through illegal use of cellular phones in extortion attempts against the claimants.

The case has been inactive, with the exception of a mandatory settlement conference held among the parties under the court’s supervision, which
did not result in a settlement agreement. It is expected that the litigation will move towards an evidence-presentation phase. This claim is
considered by management to be entirely spurious and without foundation or substance. As a result, no provision has been made for this claim.

Taxation
The Group faces regular tax investigations in the countries where it operates. As of December 31, 2013, the Group estimates potential tax claims
of $169 million of which a tax provision of $64 million has been recorded (2012: $85 million of which provisions of $11 million were recorded).

While it is impossible to quantify the ultimate financial liability with respect to these assessments, the ultimate outcome of these contingent
tax risks is not anticipated to have a material effect on the Group’s financial position and operations.

Lease commitments
Operating Leases:
The Group has the following annual commitments lease as of December 31, 2013 and 2012.

Operating lease commitments
Within: one year
Between: one to five years
After: five years
Total

2013
US$ millions

2012
US$ millions

96
317
166
579

82
187
130
399

Operating leases mainly comprise land and buildings (including those related to towers sold and leased back). The operating lease terms and
conditions reflect normal market conditions. Total operating lease expense from continuing operations was $131 million in 2013
(2012: $108 million, 2011: $96 million – see note 10).

Finance leases:
The Group’s future minimum payments on finance leases were $521 million at December 31, 2013 (2012: $512 million) and mainly comprised
lease of tower space in Ghana, Tanzania, DRC and Colombia under 12 year leases (see note 16) and tower sharing in other countries.
Other financial leases are not material and mainly consist of lease agreements relating to vehicles.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122114

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

31. Commitments and contingencies (continued)
The Group had the following finance lease commitments at December 31, 2013 and 2012.

Finance lease commitments
Within: one year
Between: one to five years
After: five years
Total

2013
US$ millions

2012
US$ millions

61
223
237
521

45
187
280
512

The corresponding finance lease liabilities at December 31, 2013 were $281 million (2012: $232 million).

Capital commitments
At December 31, 2013 the Company and its subsidiaries and joint ventures had fixed commitments to purchase network equipment, land and
buildings, other fixed assets and intangible assets of $324 million (2012: $367 million), of which $41 million (2012: $50 million) relate to joint
ventures, from a number of suppliers.

Following exercise of its option in LIH (see note 4); the Group has commitments to downstream Euro 50 million to LIH at the earlier of as and
when the level of cash in LIH falls lower than Euro 15 million, and September 14, 2014.

In addition, Millicom has committed as part of the shareholder investment agreement with Rocket and MTN a further Euro 35 million to
AIH (see note 4).

Currency and interest rate swap contracts
Millicom enters into currency and interest rate swap contracts to manage its exposure to fluctuations in interest rates and currency fluctuations
in accordance with its risk management policies. Details of these arrangements are provided below.

Currency swap contract (Colombian Pesos)
Colombia Móvil S.A.’s foreign currency swap contract to sell Colombian Pesos in exchange for US$ for a nominal amount of $43 million
matured in July 2013 (December 31, 2012: $43 million). Gains under the contract amounted to $2 million for the year until maturity
(December 31, 2012: loss of $6 million).

Interest rate swaps on US$ Floating Rate Debt
In October 2010, Millicom entered into separate interest rate swaps to hedge the interest rate risks on floating rate debt in Honduras and
Costa Rica. The interest rate swap in Honduras was issued for a nominal amount of $30 million, with maturity in 2015, and in Costa Rica for a
nominal amount of $105 million with maturity in 2017. The swaps were assessed as highly effective and cash flow hedge accounting is applied,
with changes in the fair value of the swaps recorded in other comprehensive income. At December 31, 2013 the negative cash flow hedge
reserve on these hedges amounted to $3 million (December 31, 2012: negative $4 million).

In January 2010, Millicom entered into a three-year $100 million interest rate swap to hedge interest rate risk of floating rate debt in DRC, Ghana
and Tanzania. The swaps were initially assessed as effective and cash flow hedge accounting applied. During the three month period ending
September 30, 2012 the Tanzania and Ghana hedges were assessed as ineffective, and as the value of these hedges were not expected to change
significantly between September 30, 2012 and their expiry in January 2013, the corresponding cash flow reserve was recycled to the income
statement. At December 31, 2012 the DRC hedge was assessed as ineffective and the corresponding cash flow reserve was recycled to the income
statement. The hedge contracts matured in January 2013.

Interest rate and currency swaps on SEK denominated debt
In October 2012, Millicom issued senior unsecured floating rate notes of Swedish Kronor (‘SEK’) 1.75 billion and senior unsecured fixed rate
notes of SEK 0.25 billion. At the same time Millicom entered into various cross currency interest swap contracts whereby Millicom sells SEK and
receives USD to hedge against exchange rate fluctuations for the notional amount of SEK 2 billion and interest payments on this principal.
Millicom also hedged against interest rate fluctuations on the floating rate notes of SEK 1.75 billion, receiving variable interest at STIBOR
+3.5% and paying a fixed rate of 5.125%.

The currency portion of the swap has been accounted for as a fair value hedge and related fluctuations have been recorded through profit and
loss. For the interest portion, as the timing and amounts of the cash flows under the swap agreements match the cash flows under the bonds
the swaps are highly effective. Cash flow hedge accounting has been applied and changes in the fair value of the swaps are recorded in other
comprehensive income. At December 31, 2013 the cash flow hedge reserve on these hedges amounted to $4 million.
(December 31, 2012: negative $2 million).

Interest rate and currency swaps on Euro denominated debt
In June 2013 Millicom entered into interest rate and currency swaps whereby Millicom will sell Euros and receive USD to hedge against
exchange rate fluctuations on a seven year Euro 134 million principal and related interest financing of its operation in Senegal.

In July 2013 Millicom entered into interest rate and currency swaps whereby Millicom will sell Euros and receive USD to hedge against exchange
rate fluctuations on a seven year Euro 41.5 million principal and related interest financing of its operation in Chad.

115

These financings are connected to the downstreaming of a portion of Millicom’s 4.75% bond (see note 26). These hedges are considered
ineffective, with fluctuations in the value of the hedges recorded through profit and loss.

Dividends
The ability of the Company to make dividend payments is subject to, among other things, the terms of indebtedness, legal restrictions and the
ability to repatriate funds from Millicom’s various operations. As at December 31, 2013, $140 million (December 31, 2012: $126 million) of
Millicom’s retained profits represent statutory reserves and are unable to be distributed to owners of the Company.

32. Related party transactions
The Company conducts transactions with certain related parties on normal commercial terms and conditions. Included are:

– Investment AB Kinnevik (“Kinnevik”) and subsidiaries, the Company’s principal shareholder,
– Tower companies in Ghana, DRC, Tanzania and Colombia in which the Company holds a direct or indirect equity interest (see note 6), and
– With a subsidiary of a non-controlling interest in Colombia (UNE EPM Telecomunicaciones S.A.)
– With controlled entities of our joint venture partner in Guatemala (Miffin Associates Corp).

Kinnevik
The Company’s principal shareholder is Kinnevik. Kinnevik is a Swedish holding company with interests in the telecommunications, media,
publishing, paper and financial services industries. As of December 31, 2013, Kinnevik owned approximately 38% of Millicom (2012: 38%).
During 2013 and 2012, Kinnevik did not purchase any Millicom shares. There are no significant loans made by Millicom to or for the benefit of
these related parties.

During 2013 and 2012 the Company purchased services from Kinnevik subsidiaries including fraud detection, procurement and
professional services.

Helios Towers and American Towers
Under the sale and leaseback agreements with Helios Tower Africa entities (see notes 6 and 17), the Group acquired a 40% equity investment
in the associate company Helios Towers Ghana in 2010, and in the associate companies Helios Towers DRC, Helios Towers Tanzania and ATC
Colombia B.V. in 2011 (“Tower companies”). Millicom sold its tower assets and leased back a portion of space on the towers in each of these
countries and contracted for related operation and management services. The Group has future lease commitments in respect of the Tower
Companies (see note 31).

In October 2011, Millicom’s operating subsidiary in DRC provided Helios Towers DRC with a financing facility for a maximum of $38 million
(principal of $30 million). Amounts under the facility are guaranteed by Helios Towers Africa, the parent company of Helios Towers DRC, as well
as by pledge of its shares in Helios Towers DRC. Outstanding amounts under the facility bear interest at LIBOR + 7.5% per annum until October
17, 2012 and thereafter increase by 100bps each year until the maturity date of October 17, 2015. Interest is either repayable on June 15 and
December 15 of each year or added to the principal.

In 2013 Millicom provided Helios Towers Tanzania with a $12 million unsecured loan bearing interest at 15% per annum and repayable by the
end of 2019.

During 2012 and 2013, the Group provided its associate company, ATC Colombia BV, with various US dollar denominated loans (in total
$35 million) bearing a fixed rate interest at 8.3% per annum. The loans are unsecured and have 10 year repayment terms.

UNE EPM Telecomunicaciones S.A.
The Group operation in Colombia leases portions of its tower assets (owned or leased) under finance leases to UNE EPM Telecomunicaciones
S.A. (‘UNE’), a minority shareholder in Millicom’s Colombian operation.

Miffin Associates Corp
The Group purchases and sells products and services from Miffin Associates Corp and its controlled entities (‘Miffin’). Transactions with Miffin
represent recurring commercial operations such as purchase of handsets, and sale of airtime. Transactions with such parties are made at arm’s
length principle.

The following transactions were conducted with related parties:

Expenses
Purchases of goods and services (Kinnevik)
Purchases of goods and services (Miffin)
Purchases of goods and services (non-controlling interest in Colombia)
Lease of towers and related services (Helios and ATC)
Lease of towers and related services (UNE)
Total

2013
US$ millions

2012
US$ millions

2011
US$ millions

10
134
13
78
17
252

8
95
–
107
11
221

6
82
–
22
–
110

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122116

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

117

32. Related party transactions (continued)

The table below summarises, as at December 31, 2013, the group’s fixed rate debt and floating rate debt (including hedging activities):

Income
Sale of goods and services (non-controlling interest in Colombia)
Sale of goods and services (Miffin)
Gain on sale of towers (Helios and ATC)
Lease of towers and related services (UNE)
Interest income (Helios Towers DRC and Tanzania loans, ATC Colombia loans)
Total

As at December 31, the Company had the following balances with related parties:

Liabilities
Finance lease payables to tower companies
Payables to Miffin
Other accounts payable
Total
Assets
Advances to non-controlling interests
Loan to Helios Towers DRC
Loan to Helios Towers Tanzania
Loan to ATC Colombia BV
Total

2013
US$ millions

2012
US$ millions

2011
US$ millions

8
206
10
31
7
262

–
220
16
10
2
248

–
187
54
–
–
241

2013
US$ millions

2012
US$ millions

224
13
1
238

69
35
13
38
155

188
8
12
208

54
32
–
20
106

33. Financial risk management
Terms, conditions and risk management policies
Exposure to interest rate, foreign currency, non-repatriation, liquidity, capital management and credit risks arise in the normal course of Millicom’s
business. The Group analyses each of these risks individually as well as on an interconnected basis and defines and implements strategies to
manage the economic impact on the Group’s performance in line with its financial risk management policy. Millicom’s risk management strategies
may include the use of derivatives. Millicom’s policy prohibits the use of such derivatives in the context of speculative trading.

Interest rate risk
Interest rate risk generally arises on borrowings. Borrowings issued at floating rates expose the Group to cash flow interest rate risk. Borrowings
issued at fixed rates expose the Group to fair value interest rate risk. The Group’s exposure to risk of changes in market interest rates relates to
both of the above. To manage the risk, the Group’s policy is to maintain a combination of fixed and floating rate debt with target for the debt
to be equally distributed between fixed and variable rates. The Group actively monitors borrowings against target and applies a dynamic
interest rate hedging approach. The target mix between fixed and floating rate debt is reviewed periodically. The purpose of Millicom’s policy is
to achieve an optimal balance between cost of funding and volatility of financial results, while taking into account market conditions as well as
our overall business strategy. At December 31, 2013, approximately 71% of the Group’s borrowings are at a fixed rate of interest or for which
variable rates have been swapped for fixed rates with interest rate swaps (2012: 52%).

Interest Rate Swaps
At December 31, 2013 the Group had the following floating to fixed interest rate swaps to hedge against floating rates of interest on debt
(see note 31):

– In Honduras for nominal amount of $30 million entered into in 2010 with maturity in 2015.·
– In Costa Rica for nominal amount of $105 million entered into in 2010 with maturity in 2017.
– In Luxembourg for nominal amount of Swedish Kronor 1.75 billion entered into in 2012 with maturity in 2017.

As the timing and amounts of the cash flows under these swap agreements match the cash flows of the underlying debt instruments, the
swaps were assessed as highly effective, thus qualifying for cash flow hedge accounting. Accordingly the effective portions of the changes of
the swap values are recorded in other comprehensive income.

Prior to December 31, 2013 a 3-year $100 million interest rate swap to hedge the interest rate risk of the floating rate debt in three countries
(Tanzania, DRC and Ghana) contracted in January 2010 matured. During the three month period ending September 30, 2012 the Tanzania
and Ghana hedges were assessed as ineffective and, as the value of these hedges were not expected to change significantly between
September 30, 2012 and their expiry in January 2013, the corresponding cash flow reserve was recycled to the income statement. At
December 31, 2012 the DRC hedge was assessed as ineffective and the corresponding cash flow reserve was recycled to the
income statement.

1 year

1–2 years

2–3 years

3–4 years

4–5 years

>5 years

Total

Amounts due within

Fixed rate
Weighted average nominal
interest rate
Floating rate
Weighted average nominal
interest rate
Total
Weighted average nominal
interest rate

137

7.91%
334

3.25%
471

4.61%

6.32%
117

5.74%
212

6.00%

(in millions of U.S. Dollars, except percentages)
42

832

6.33%
139

6.25%
227

6.28%

7.12%
179

5.61%
1,011

6.85%

7.95%
170

6.30%
212

6.63%

1,778

7.42%
247

8.35%
2,025

8.07%

The table below summarises, as at December 31, 2012, our fixed rate debt and floating rate debt:

1 year

1–2 years

2–3 years

3–4 years

4–5 years

>5 years

Amounts due within

305

140

102

109

(in millions of U.S. Dollars, except percentages)

Fixed rate
Weighted average nominal
interest rate
Floating rate
Weighted average nominal
interest rate
Total
Weighted average nominal
interest rate

4.34%
388

5.61%
693

7.34%
333

6.92%
473

5.05%

7.04%

7.35%
254

7.33%
348

7.33%

5.78%
187

5.22%
289

6.39%
347

5.30%
456

928

9.16%
72

12.43%
1,000

2,972

7.30%
1,186

5.70%
4,158

7.05%

Total

1,678

7.64%
1,581

6.36%
3,259

5.42%

5.56%

9.36%

7.45%

A one hundred basis point fall or rise in market interest rates for all currencies in which the Group had borrowings at December 31, 2013, would
increase or reduce profit before tax from continuing operations for the year by approximately $12 million (2012: $16 million).

Foreign currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures where the Group operates.
Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

Millicom seeks to reduce its foreign currency exposure through a policy of matching, as far as possible, assets and liabilities denominated in
foreign currencies, or entering into agreements that limit the risk of exposure to currency fluctuations against the US dollar. In some cases,
Millicom may also borrow in US dollars where it is either commercially more advantageous for joint ventures and subsidiaries to incur debt
obligations in US dollars or where US dollar denominated borrowing is the only funding source available to a joint venture or subsidiary. In
these circumstances, Millicom accepts the remaining currency risk associated with financing its joint ventures and subsidiaries, principally
because of the relatively high cost of forward cover, when available, in the currencies in which the Group operates.

Foreign Currency Swaps
At December 31, 2013 the Group had the following foreign currency swap contracts (see note 31):

– In Luxembourg for nominal amount of Swedish Kronor (‘SEK’) 2 billion from October 2012, receiving US dollars to hedge against exchange

rate fluctuations for the notional amount of SEK 2 billion and interest payments on this principal.

– In Luxembourg for nominal amount of Euro 134 million from June 2013, receiving US dollars to hedge against exchange rate fluctuations on

a seven year Euro 134 million principal and related interest financing of its operation in Senegal.

– In Luxembourg for nominal amount of Euro 41.5 million from July 2013, receiving US dollars to hedge against exchange rate fluctuations on

a seven year Euro 41.5 million principal and related interest financing of its operation in Chad.

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122118

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

119

33. Financial risk management (continued)
The following table summarises debt denominated in US$ and other currencies at December 31, 2013 and 2012 (excluding hedging activities).

The tables below summarise the maturity profile of the Group’s net financial liabilities at December 31, 2013 and 2012.

Total US$
Colombia
Chad
Tanzania
Honduras
Bolivia
Ghana
Guatemala
Other
Total non-US$ currencies
Total

2013
US$ millions
3,196
444
25
109
121
177
23
46
17
962
4,158

2012
US$ millions
2,191
507
84
97
96
191
19
53
21
1,068
3,259

At December 31, 2013, if the US dollar had weakened/strengthened by 10% against the other functional currencies of our operations and all
other variables held constant, then profit before tax from continuing operations would have increased/decreased by $73 million and $89 million
respectively (2012: $99 million and $121 million respectively). This increase/decrease in profit before tax would have mainly been as a result of
the conversion of the results of our operations with functional currencies other than the US dollar.

Non-repatriation risk
Most of the operating subsidiaries receive substantially all of their revenue in the currency of the countries in which they operate. The Group
derives substantially all its revenue through funds generated by local operations and, therefore, Millicom is dependent on the ability of its
subsidiaries and joint venture operations to transfer funds to the Company.

Although foreign exchange controls exist in some of the countries in which Millicom Group companies operate, none of these countries currently
significantly restrict the ability of these operations to pay interest, dividends, technical service fees, royalties or repay loans by exporting cash,
instruments of credit or securities in foreign currencies. However, existing foreign exchange controls may be strengthened in countries where
the Group operates, or foreign exchange controls may be introduced in countries where the Group operates that do not currently impose such
restrictions. If such events were to occur, the Company’s ability to receive funds from the operations could be subsequently restricted, which
would impact the Company’s ability to make payments on its interest and loans and, or pay dividends to its shareholders.

In addition, in some countries, it may be difficult to convert large amounts of local currency into foreign currency because of limited foreign
exchange markets. The practical effects of this are time delays in accumulating significant amounts of foreign currency and exchange risk,
which could have an adverse effect on the Group’s results of operations.

Credit and Counterparty risk
Financial instruments that potentially subject the Group to credit risk are primarily cash and cash equivalents, pledged deposits, letters of
credit, trade receivables, amounts due from joint venture partners, supplier advances and other current assets and derivatives. Counterparties
to agreements relating to the Group’s cash and cash equivalents, pledged deposits and letters of credit are significant financial institutions
with investment grade ratings. Management does not believe there are significant risks of non-performance by these counterparties and have
diversified its banking partners. Allocation of deposits across banks are managed such that the Group’s counterparty risk with a given bank
stays within limits which have been set based on each banks credit rating.

A large portion of turnover comprises prepaid airtime. For postpaid customers, the Group follows risk control procedures to assess the credit
quality of the customer, taking into account its financial position, past experience and other factors.

Accounts receivable also comprise balances due from other telecom operators. Credit risk of other telecom operators is limited due to the
regulatory nature of the telecom industry, in which licences are normally only issued to credit worthy companies. The Group maintains a
provision for impairment of trade receivables based upon expected collectability.

As the Group has a large number of internationally dispersed customers, there is no significant concentration of credit risk with respect to
trade receivables.

Liquidity risk
Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group has incurred
significant indebtedness but also has significant cash balances. Millicom evaluates its ability to meet its obligations on an ongoing basis using a recurring
liquidity planning tool. This tool considers the operating net cash flows generated from its operations and the future cash needs for borrowing, interest
payments, dividend payments and capital and operating expenditures required in maintaining and developing its operating businesses.

The Group manages its liquidity risk through use of bank overdrafts, bank loans, bonds, vendor financing, Export Credit Agencies and
Development Finance Institutions (“DFI”) loans, and finance leases. Millicom believes that there is sufficient liquidity available in the markets
to meet ongoing liquidity needs. Additionally, Millicom is able to arrange offshore funding through the use of Export Credit Agency guarantees
and DFIs (IFC and FMO), who have been established specifically to finance development in the Group’s markets. Millicom has diversified its
financing with commercial banks representing about 30% of its gross financing (2012: 38%), bonds 60% (2012:38%), Development Finance
Institutions 3% (2012:8%), and finance leases 7% (2012: 7%).

Year ended 31 December 2013
Total borrowings (see note 26)
Cash and cash equivalents
Restricted cash
Short-term escrow investments
Pledged deposit (relating to bank borrowings)
Derivative financial instruments (SEK currency swap)
Net cash (debt)
Other derivative financial instruments
Future interest commitments(i)
Trade payables (excluding accruals)
Put option
Other financial liabilities (including accruals)
Trade receivables
Other financial assets
Net financial liability

Year ended 31 December 2012

Total borrowings (see note 26)
Cash and cash equivalents
Restricted cash
Pledged deposit (relating to bank borrowings)
Derivative financial instruments (related to debt)
Net cash (debt)
Derivative financial instruments
Future interest commitments(i)
Trade payables (excluding accruals)
Put option
Other financial liabilities (including accruals)
Trade receivables
Other financial assets
Net financial liability

Less than
1 year
US$ millions
(471)
941
81
800
17
–
1,368
–
(274)
(387)
(792)
(1,201)
320
316
(650)

Less than
1 year
US$ millions

(693)
1,174
43
8
–
532
(7)
(211)
(404)
(730)
(996)
322
199
(1,295)

1 to 5 years
US$ millions
(1,662)
–
–
–
2
10
(1,650)
1
(860)
–
–
–
–
70
(2,439)

>5 years
US$ millions
(2,025)
–
–
–
–
–
(2,025)
(21)
(76)
–
–
–
–
–
(2,122)

Total
US$ millions
(4,158)
941
81
800
19
10
(2,307)
(20)
(1,210)
(387)
(792)
(1,201)
320
386
(5,211)

1 to 5 years
US$ millions

>5 years
US$ millions

Total
US$ millions

(1,566)
–
–
47
6
(1,513)
(6)
(558)
–
–
–
–
86
(1,991)

(1,000)
–
–
–
–
(1,000)
–
(47)
–
–
–
–
–
(1,047)

(3,259)
1,174
43
55
6
(1,981)
(13)
(816)
(404)
(730)
(996)
322
285
(4,333)

(i)

Includes unamortised difference between carrying amount and nominal amount of debts.

Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and solid capital ratios in order to
support its business and maximise shareholder value.

The Group manages its capital structure with reference to economic conditions and imposed restrictions such as debt covenants and local
regulations. To maintain or adjust its capital structure, the Group may make dividend payments to shareholders, return capital to shareholders
through share repurchases or issue new shares. At December 31, 2013 Millicom is rated at one notch below investment grade by the
independent rating agencies Moody’s (Ba1 negative outlook) and Fitch (BB+). The Group primarily monitors capital using net debt to adjusted
operating profit, as well as a set of other indicators.

Net debt (see note 26)
Adjusted operating profit (see note 9)

Net debt to adjusted operating profit ratio

2013
US$ millions
2,307
1,881

2012
US$ millions
1,981
2,065

Ratio
1.2

Ratio
1.0

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122120

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

33. Financial risk management (continued)
The Group reviews its gearing ratio (net debt divided by total capital plus net debt) periodically. Net debt includes interest bearing loans and
borrowings, derivative financial instruments related to borrowings, less cash and cash equivalents (included restricted cash) and pledged and
time deposits related to bank borrowings. Capital represents equity attributable to the equity holders of the parent.

Net debt (see note 26)
Equity
Net debt and equity
Gearing ratio

2013
US$ millions
2,307
2,081
4,388
53%

2012
US$ millions
1,981
2,336
4,317
46%

34. Financial Instruments
The fair value of Millicom’s financial instruments are shown at amounts at which the instruments could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. The fair value of all financial assets and all financial liabilities except debt
and financing approximate their carrying value largely due to the short-term maturities of these instruments. The fair values of all debt and
financing have been estimated by the Group based on discounted future cash flows at market interest rates.

The following table shows the carrying and fair values of financial instruments as at December 31, 2013 and 2012:

FINANCIAL ASSETS
Pledged deposits (see note 18)
Other non-current assets
Trade receivables, net
Amounts due from non-controlling interests and JV partners
Prepayments and accrued income
Advances to non-controlling interest
Other current assets
Restricted cash
Cash and cash equivalents
Total
Current
Non-current
FINANCIAL LIABILITIES
Debt and financing (see note 26)
Trade payables
Payables and accruals for capital expenditure
Derivative financial instruments
Put option
Amounts due to non-controlling interests and JV partners
Accrued interest and other expenses
Other liabilities
Total
Current
Non-current

Carrying value
2013
US$ millions

2012
US$ millions

Fair value

2013
US$ millions

2012
US$ millions

2
83
320
234
163
69
839
81
941
2,732
2,647
85

4,158
277
453
23
792
87
393
167
6,350
2,596
3,754

47
86
322
81
140
56
86
43
1,174
2,035
1,903
132

3,259
259
411
11
730
19
341
140
5,170
2,591
2,579

2
83
320
234
163
69
839
81
941
2,732
2,647
85

3,183
277
453
23
–
87
393
167
4,583
1,804
2,779

47
86
322
81
140
56
86
43
1,174
2,035
1,903
132

2,682
259
411
11
–
19
341
140
3,863
1,861
2,002

Call option and put option related to Telefonica Cellular S.A. DE CV (Celtel)
On July 1, 2010 Millicom reached agreement with its local partner in Honduras whereby Millicom’s local partner granted Millicom an
unconditional call option for the next five years for his 33% stake in Telefonica Celtel and as consideration, Millicom granted a conditional put
option for the same duration to the local partner.

The put option can only be exercised on a change of control of Millicom International Cellular S.A. or Millicom’s subsidiary that holds the shares
in Celtel (except if the change of control is in favour of Investment AB Kinnevik, the current largest shareholder of Millicom, or management of
Millicom). Millicom believe that a change of control transaction that triggers the local partner’s right to exercise his put is currently highly
unlikely to happen during the term of the put option.

The call option price is a fixed multiple of the EBITDA of Celtel in the year the option is exercised. As the fixed multiple exceeded the fair value
multiples (based on comparable transactions and including a control premium) at December 31, 2013 and 2012, and as there were no expectations
that the Honduran market characteristics would significantly change over the term of the call option, Millicom determined the fair value of the call
option to be immaterial at both December 31, 2013 and 2012.

121

LIH Call Options
As described in note 4, at December 31, 2013 Millicom had three call options to increase its stake in LIH from 20% to 100%.

Fair value measurement hierarchy
Effective January 1, 2009, Millicom adopted the amendment to IFRS 7 for financial instruments that are measured in the Statement of
Financial Position at fair value, which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

– Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
– Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices)

or indirectly (that is, derived from prices).

– Level 3 – Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

Derivative financial instruments are measured with reference to Level 2, except for the call option in Honduras (see note 27) and the call
options for LIH (see note 4) which are measured with reference to level 3. The Honduras put option liability is carried at the present value of the
redemption amount and is therefore excluded from the fair value hierarchy. No other financial instruments are measured at fair value.

35. Subsequent events
Put and Call Agreement related to Guatemalan Operations
On January 16, 2014 Millicom announced that it and its local partner in Guatemala, Miffin Associates Corp (“Miffin”) reached an agreement
that gives Millicom control of the Guatemalan operations (“Comcel”). Miffin has granted Millicom, for consideration of $15 million and a
minimum term of two years, an unconditional call option for its 45% stake in Comcel. In return, Millicom has granted Miffin a put option for
the same duration, exercisable in the event Millicom sells its 55% interest in Comcel or undergoes a change of control.

Prior to entering into the agreement, Millicom was dependent on the consent of its local partner for strategic decisions related to its
Guatemalan operation, as the shareholders agreement required a vote of 80% of the shares to authorize and approve significant financial and
operating policies of Comcel. The call option allows Millicom, unconditionally at any time during the two year period from January 1, 2014 to
exercise its right to acquire the 45% stake (and voting rights) of our local partner at a price which Millicom believes represents the strategic
value of the asset. The call option therefore conferred to Millicom control over Comcel through its ability to develop the relevant activities
(develop the future business in Guatemala).

As a consequence, and in accordance with IFRS 10 ‘Consolidated Financial Statements’ effective January 1, 2014, Millicom will fully
consolidate Comcel from January 1, 2014. Previously, the results of the Guatemalan operations were proportionately consolidated.

In 2014 Millicom provisionally revalued to fair value its previously held 55% interest in Comcel, and will recognise a provisional gain of
$2,246 million. The fair value of Comcel was determined based on a discounted cash flow calculation. The assets and liabilities that will be
provisionally recognised as a result of the revaluation were as follows:

Intangible assets, net
Property, plant and equipment, net
Other non-current assets
Inventory
Trade receivables
Current loans and other receivables
Other current assets
Cash and cash equivalents

Non-current financial liabilities
Other long-term liabilities
Trade accounts payable
Current financial liabilities
Other current liabilities

Non-controlling interests
Fair value of the net assets acquired and contingent liabilities
Goodwill arising on change of control
Previously held interest in Comcel
Revaluation of previously held interest

Previously
held (55%)
interest
US$ millions
84
349
4
17
35
101
31
30
651
187
2
59
46
55
349

Fair Value
(provisional)
100%
US$ millions
1,401
653
7
29
75
185
43
54
2,447
324
22
91
88
111
636
819
992
1,556
(302)
2,246

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122123

122

Notes to the consolidated financial statements
as at and for the year ended December 31, 2013 (Continued)

Allocation of the revalued interest to identifiable assets and liabilities has been performed on a provisional basis. The goodwill is not expected
to be deductible for tax purposes.

A change of control event may occur at Millicom level which is beyond the control of Millicom. Such an event would trigger the ability of our
local partner to exercise his put option at his discretion. Therefore, the put option is a financial liability as defined in IAS 32 and in 2014
Millicom will record a current liability for the present value of the redemption price of the put option of $1,918 million at January 1, 2014.

The redemption price of the put option is based on a multiple of the EBITDA of Comcel. The multiple is based on a change of control
transaction multiple of Millicom. Management estimated the change of control transaction multiple of Millicom from a trading multiple of
Millicom and adding a control premium (based upon comparable transactions from the industry).

Investment in LIH
On January 20, 2014 Millicom amended its investment agreement with Rocket regarding its share purchase options for LIH. As a result of the
amendment, Millicom can only exercise its Third option (as described in note 4) to acquire the final 50% of LIH after one year has passed from
exercising its Second option to raise its stake from the current 35% to 50%. Accordingly, as of January 20, 2014 Millicom no longer has the
ability to exercise its options to acquire a controlling stake in LIH, and will deconsolidate the LIH group and treat its 20% investment as an
investment in an associate.

In February 2014 Millicom acquired an additional 15% of LIH by implementing its first option and transferring to LIH an initial amount of Euro
10 million of the Euro 50 million option price.

$800 million 6.875% Bond
On January 30, 2014 Millicom’s operation in Guatemala issued an $800 million 6.875% fixed interest rate bond repayable in 10 years, to
refinance the Guatemalan operation and for general purposes. The bond was issued at 98.233% of the principal.

Dividend
On February 11, 2014 Millicom announced that the Board will propose to the Annual General Meeting of the Shareholders a dividend
distribution of $2.64 per share to be paid out of Millicom’s profits for the year ended December 31, 2013 subject to the Board’s approval of the
2013 Consolidated Financial Statements of the Group.

Appointment of CFO
On February 11, 2014 Millicom announced the appointment of Tim Pennington to the role of Chief Financial Officer from June 2014.

Contact details

Corporate and registered office
Millicom
2, rue du Fort Bourbon
L-1249 Luxembourg
Grand Duchy of Luxembourg

Postal address
Millicom
B.P. 2312
L-1249 Luxembourg
Grand Duchy of Luxembourg

Tel: +352 27 759 101
Fax: +352 27 759 359
RC: B 40 630 Luxembourg

Investor Relations
Nicolas Didio
Director, Head of Investor Relations
Tel: +44 (0)203 249 2220
investors@millicom.com

Financial calendar
First quarter results:
April 24, 2014
Second quarter results: July 16, 2014
Third quarter results: October 22, 2014
Fourth quarter results: February 2015

Millicom Annual Report 2013Millicom Annual Report 2013Overview 01-13Strategy 14-31Performance 32-51Governance 52-63Financials 64-122124

Millicom Annual Report 2013

Millicom on the web

www.millicom.com

twitter.com/Millicom

www.facebook.com/millicom

www.linkedin.com/company/8579

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The paper used in this Report is
derived from sustainable sources

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