Annual report 2015
@Millicom
Driving #DigitalAccess
for 25 years
Overview
| Strategy
| Performance
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Millicom Annual Report 2015
2
Welcome to our reporting suite
Our new approach to reporting
In line with our mission to lead the adoption of
a Digital Lifestyle in our markets, our corporate
reporting should also reflect who we are. This year,
therefore, we are focusing our efforts on digital
reporting of what is material to our business.
Millicom’s Annual Report consists of two documents
designed for easy reading: our Strategic Report in
a new landscape format and the Governance and
Financial Report in portrait format.
Our corporate reporting suite also includes our
Corporate Responsibility Report. You can access all
the information we have produced previously, as
content in pdf format or in dynamic format, on our
website. This year will also be the final time we print
our Corporate Responsibility Report. We welcome
your feedback on our reporting – please contact
us at investors@millicom.com.
www.millicom.com
Contents
Overview
Welcome to our
reporting suite
User guide
About us
Highlights
Introducing Millicom
Chairman’s statement
Strategy
CEO Strategic and
operational review
Market overview
Our business model
Our strategy
Doing business the right way
Performance
Review of operations –
Latin America
Review of operations –
Africa
Risk management
Financial review
Further information
2
3
4
5
6
8
13
19
26
27
36
44
51
53
75
86
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Millicom Annual Report 2015
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User guide
In this interactive PDF there are a number of ways to help you easily access
the information that you want, whether that’s printing, searching for
a specific item or going directly to another page, section or website link.
More information
Governance and Financial Report
Our expanded Corporate Governance
Report, the Directors’ Report and audited
Consolidated Financial Statements of the
Group for the year ended 31 December
2015.
A copy of this report can be downloaded
from our website using the following link:
Corporate Responsibility Report
The Corporate Responsibility Report
outlines our approach to conducting
business ethically and how we manage
sustainability risks and opportunities.
A copy of the Corporate Responsibility
Report can be downloaded from the
following link:
Website
Our website features more information
about Millicom and how we lead the
Digital Lifestyle across our emerging
markets in Latin America and Africa.
More stories from Millicom can be found on
our website:
Millicom Reporting Centre
Our Responsibility
www.millicom.com
Navigating with tabs
Use the tabs at the top of this
report to quickly go to the start
of different sections.
Links within this document
In this report you will see a series
of icons that demonstrate how
we’ve integrated information
about our business model with
details of our strategy and risk.
The easy-to-identify icons also
tell you where to look for more
information.
Report links
Read more
Link to website
Go to page
Watch video
Overview | Strategy | Performance Welcome to our reporting suite User guide About us Highlights Introducing Millicom Chairman’s statement
Millicom Annual Report 2015
4
About us
We are Millicom.
We are the telecommunications
and media company focused on
emerging markets.
We operate across 14 frontier
and emerging Latin American and
African markets with high GDP
growth, a young population and
huge opportunities for the adoption
of the Digital Lifestyle.
We provide fixed and mobile telecommunications services, cable
and satellite TV, mobile financial services (MFS) and content such
as music and sports to more than 62 million customers via our main
consumer brand Tigo. At Tigo Business, we provide digital products
and services for governments, multinationals, large corporations
and small and medium businesses.
In 2015 we celebrated our 25th year and we will continue this
successful journey, growing our business profitably, responsibly and
with real social purpose. Our mission is to lead the adoption of a
Digital Lifestyle in our markets. Our vision is that, by doing this,
we will empower all, both customers and employees, to advance in
life and find joy.
Useful links within
this report
Millicom: Who we are
CASH
ACCEPTED
HERE
TV’S
AND
PHONES
CASH
ACCEPTED
HERE
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Millicom Annual Report 2015
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Highlights
A year of strong operational momentum
0
3
7
6
,
6
8
3
6
,
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2
,
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7.1
’14 ’15
’14 ’15
’14 ’15
’14 ’15
’14 ’15
’14 ’15
Revenue
(US$m)
Adjusted
EBITDA
(US$m)(ii)
Capex(iii)
(US$m)
Subscribers
(m)
Mobile
data users
(m)
Homes
passed
(m)
+7.4%
organic growth(i)
33.7%
Adjusted
EBITDA margin
81%
of expenditure
in Latin America
6.3m
net mobile
additions(iv)
30.1%
penetration
rate
17.2%
Home as a %
of LatAm revenue
Footnotes:
(i) Organic growth represents year-on year-growth in local currency (includes regulatory changes and UNE from Q4 15, excludes the impact of exchange rate changes). Service revenue is defined
as Group revenue excluding telephone & equipment sales.
(ii) Adjusted EBITDA is defined as reported EBITDA excluding restructuring and integration costs and other one-off items – See page 77 for reconciliation.
(iii) Excludes spectrum licence costs.
(iv) Includes Zantel.
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Introducing Millicom
The Digital Lifestyle company
Business
• Fixed & mobile
• Solutions
– Data centres
– Cloud services
– M2M
– Other services
Digital
• Music
• Sport
• Apps
• OTT aggregator
Mobile
• Voice
• SMS
• Mobile data
Telephony &
Equipment
• Tablet & PC
• Smartphones
• Feature phones
MFS
• Savings
• Loans
• Remittances
• Interoperability
Home
• Pay TV
• Broadband
• Direct-To-Home (DTH) TV
• Cable
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Introducing Millicom
Where we are
What we do
Latin America Mobile B2B Home MFS
Bolivia
Colombia
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Paraguay
Mobile B2B Home MFS
Africa
Chad
DR Congo
Ghana
Rwanda
Senegal
Tanzania
Revenue
split by
region
● LatAm
● Africa
%
85
15
LatAm
business unit
revenue split
● Mobile
● Cable
● MFS
● Other
%
61
28
1
10
Africa
business unit
revenue split
● Mobile
● MFS
● Other
%
87
9
4
Corporate Offices
Countries
Our business
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Millicom Annual Report 2015
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Chairman’s statement
We are proud to be
providing new products
and services to enable
more people to connect
to the internet.”
Cristina Stenbeck
Chairman
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Chairman’s statement
continued
A strong performance in our 25th year
Dear Shareholders
It was with great pride that we
celebrated our 25th anniversary in
2015. It’s hard to believe that the
small telecom company that started out
in 1990 is now the driving force behind
the adoption of the Digital Lifestyle
across 14 emerging markets in Latin
America and Africa, connecting those
who were previously without digital
access.
We achieved strong performance in our 25th year
with organic revenue growing across all our markets
and the recovery of the Adjusted EBITDA margin.
We have more than 62 million mobile subscribers and
our cable network now passes more than 7.6 million
homes. We continued our Digital Lifestyle journey as
we reached 29% data penetration. If you look at our
underlying performance, you will see that ours is
a company with strong growth potential. In 2015,
operational performance was marred by the impact
of adverse foreign exchange fluctuations in markets
such as Colombia, Paraguay and Tanzania. We have
done significant work on a profitable and responsible
growth strategy this year and that includes measures
to control both our internal costs and to manage our
exposure to foreign exchange fluctuations.
We are proud to be providing new products and
services to enable more people to connect to the
internet. Making digital inclusion a reality, especially
for often difficult-to-reach audiences, is what drives
us forward. Providing the means for an individual
continued
62.6m
mobile subscribers
Useful links within
this report
The Digital Torch
Our history
Overview | Strategy | Performance Welcome to our reporting suite User guide About us Highlights Introducing Millicom Chairman’s statement
Millicom Annual Report 2015
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Chairman’s statement
continued
shop keeper in Ghana to pay her suppliers using her
mobile phone, developing our own cable sports TV
content in Paraguay, or providing business solutions
to multinationals in Central America are all services
which make a real difference to people’s lives.
Technology and innovation is the backbone of our
growth and this year we have invested $1.3 billion in
our fixed and mobile networks. We are now more
focused than ever on delivering good returns from
our investments and we apply stronger criteria for
what we invest in day to day.
Corporate responsibility will always play an
important role in our development and our
relationships as we continue to contribute to the
communities in which we work. For instance, in
2015, we took an industry leadership role in
championing child online protection and delivered
workshops in collaboration with UNICEF,
governments, and other stakeholders in four of our
markets.
As part of Tigo Te Conecta in Honduras
we installed 178 broadband
connections in 150 schools, enabling
more than 80,000 students access to
the internet, and more than 1,600
teachers to use technology in managing
secondary education performance.
During the year we have also focused on building
the best team to deliver our strategy. In April 2015,
we were delighted to welcome Mauricio Ramos as
our new CEO and in September, Cynthia Gordon
joined as our CEO and EVP for Africa to ensure we
continue to deliver the growth and the potential of
our markets in this region.
It is testament to the efforts and enthusiasm of our
people that excellent customer service continues to
continued
US$2.64
Dividend per share
Useful links within
this report
Our strategy
p27
Our performance
p43
Our responsibility
p36
Ghana small trader
Blog: Child Online
Protection
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11
Chairman’s statement
continued
Useful links within
this report
Governance and
Financials
win us business and market share. Going forward
we will ensure that our customers remain at the
heart of everything we do. The Board is highly
appreciative of all our amazing colleagues who
make Millicom a rewarding and exciting place to
work. I would also like to thank our partners
worldwide who enable us to excel in what we do.
The Board has proposed a dividend for the full year
of $2.64 per share, the same as last year.
As I step down from my role as Chairman and
handover to Tom Boardman, I am confident that
Millicom is steadily progressing through its period of
transition. 2016 has seen an encouraging start to
the year and we are working hard to build continued
momentum in our markets.
On behalf of the Board, I would like to thank my
fellow directors who will not be seeking re-election
at the upcoming AGM, namely Anders Borg, Paul
Donavon, and Dame Amelia Fawcett. Their
commitment and leadership on the Millicom Board
over the last year has helped us to achieve many of
the important strategic, financial and operational
objectives that have secured a strong start to 2016.
We would also like to thank CFO Tim Pennington for
his important leadership role as interim CEO during
the first quarter of 2015. We also congratulate CEO
Mauricio Ramos on his first anniversary with the
Millicom family and look forward to continued
progress in leading Millicom through its current
period of transition. The Board remains focused on
helping to enable and support management’s
execution plans in order to create long term
shareholder value.
Cristina Stenbeck
Chairman of the Board of Directors
March 2016
Overview | Strategy | Performance Millicom Annual Report 2015
12
Strategy
We build the Digital Lifestyle for
our customers and monetise it
for our shareholders.
Contents
CEO Strategic and
13
operational review
19
Market overview
26
Our business model
Our strategy
27
Doing business the right way 36
Tigo is the main
sponsor of
Encarnacion’s famous
carnival, Paraguay
Overview | Strategy | PerformanceCEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
13
CEO’s strategic and
operational review
We will continue to focus
on accelerating data,
expanding our cable
footprint and growing
our B2B business.”
Mauricio Ramos
President and Chief Executive Officer
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
14
CEO’s strategic and operational review
continued
In this strategic and operational review
you will find details on our performance,
our business model, our strategy, how
we measure our performance, how we
manage risk and how we work to be an
innovative, profitable and responsible
business. To provide context, we start
with a look at the market environment
in which we operate.
Building the Digital Lifestyle for our consumers,
monetising it for our shareholders
We are a Digital Lifestyle company and our business
is bringing communication services to people,
including those previously left outside the digital
revolution, connecting the unconnected and often
leapfrogging technologies with the latest innovations.
I decided to join Millicom one year ago as I saw
a highly attractive business, delivering expertise in
its markets, offering strong new opportunities in
Latin America and in Africa to connect more people
to digital products and services.
A year later, we have clearly defined our strategic
roadmap and are laser-sharp in our focus on
operational leverage and the way in which we
allocate capital to accelerate cash flow generation.
continued
Useful links within
this report
Strategy
p27
Performance
p43
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
15
CEO’s strategic and operational review
continued
We have an excellent base on which to build and
monetise our business and the outlook is very
promising. We are a leader in Mobile and Cable in
most of our LatAm markets and there is scope to
increase penetration levels.
Our mobile business will continue to be fuelled by
smartphone adoption and data usage, with still two
thirds of our 62.6 million subscribers not yet owning
a smartphone. For us, it is all about monetising data.
In Home, namely our fixed-line and satellite services
in voice, broadband and Pay TV, our strategy is simply
to build, to fill and to monetise. We are positioning
ourselves to be able to deploy various layers of
services to new households. We will also be able to
leverage our fixed network to capture the business-to-
business (B2B) opportunity, especially the small and
medium size enterprises that we are passing.
Growing our Tigo Business (B2B) products and
services, which represent 14% of our income, will
continue to be a major focus for the team.
Concurrently Mobile Financial Services (MFS)
adoption is only just beginning to reach scale in
many of our countries and we are already
recognised as one of the leading global players in
this field.
We will continue to develop products and services
that enable us to secure a higher share of the
wallets of our customers, increase average revenue
per unit (ARPU) and provide excellent service and
experience levels so customers want to stay with us
(lowering churn).
Summarising our performance in 2015, we had
a strong year operationally, marred by the impact of
currency declines against the US dollar, particularly
towards the end of the year. Both in-country
management and the Board have had to accept
that excellent local performance has not translated
fully at Group level due to currency volatility.
However, our underlying performance is something
to be very proud of. Over the year, we improved our
cash flow generation and continued to increase our
operational efficiency and reduce corporate costs.
Organic revenue growth for the full year increased
by 7.4%* to US$6.73 billion, Adjusted EBITDA grew
9.2%* to US$2,266 million and our focus on
profitable growth at all levels in the Group,
operations and headquarters, improved the
Adjusted EBITDA margin in 2015 by 0.7% to 33.7%.
continued
* organic growth represents year-on-year growth in local currency (includes UNE from Q4 15.
Excludes the impact of exhange rate changes.
Robust growth trends in
service revenues
+21%
+52%
.
3
5
1
.
4
8
1
+39%
+34%
2
1
9
7
2
1
1
,
.
1
0
1
9
3
6
’13 ’14 ’15
’13 ’14 ’15
Mobile data
subscriber
growth (m)
Mobile data
revenues growth
at constant
FX (US$m)
Useful links within
this report
Our strategy
p27
Our performance
p43
CEO interview (Jan 2016)
Blog: MFS credit
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
16
CEO’s strategic and operational review
continued
Our principle consumer brand Tigo is going from
strength to strength, bringing the internet to new
customers, driving smartphone penetration and
increasing data consumption.
relevant local content for customers. In some of
our LatAm operations, for example, we now offer
football on our fixed network and exclusively on
mobile via the Tigo Sports app.
In Mobile, over the last year we added 6 million new
customers and we are making good progress and
are focused on delivering operational and capital
expenditure efficiencies. Smartphone users
increased by 56% last year and with our focus on
data pricing we grew our data revenue by 39%.
2015 was an important year for the integration of
our Colombian business after the merger of Tigo
and UNE in 2014. Colombia is now our biggest
market and accounted for 35% of our revenue in
Latin America in 2015. The merger has gone
incredibly well and we have increased the synergies
achieved through the integration.
I am particularly pleased with progress in our Home
business. We’ve passed 7.6 million homes and our
target for that business is to reach 10 million homes
in the medium term. We continued to add new
customers at a strong rate across our Direct-To-
Home (DTH) and cable footprint with pay-TV
contributing most towards this growth. One of our
core strengths continues to be our ability to provide
In 2015, as a management team, we developed
a clear operational strategy to convert growth
potential into increased cash flow by focusing on
growing our top line, driving operational efficiencies
and allocating capital to carefully targeted needs.
This has brought a step change for the business
with increased clarity and focus on executing
our plans.
In line with this strategy, looking ahead we will
continue to focus on accelerating data, expanding
our cable footprint and growing our B2B business.
We will also concentrate on investments that add
value to our core business and which demonstrate
operational leverage – such as fully utilising our
network, our customer base and our content.
continued
El Salvador
has the largest
mobile money
Tigo Star, San
penetration in LatAm
Salvador
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
17
CEO’s strategic and operational review
continued
We will prioritise opportunities based on whether
they can drive high demand, helping acquisition and
retention of customers, fuel high usage levels to
drive data traffic and ARPU, and whether they add
brand equity.
We expect uncertainty to prevail in emerging
market economies in 2016, which is why we will
continue to strengthen the fundamentals of our
business whilst continuing our focus on improving
cash flow further. Our capital structure is in good
shape with a long average maturity on our debt,
significant local currency borrowing, and we have a
line of sight to reduce leverage. Cash generation is
set to improve in 2016 aided by an improvement in
EBITDA and reduction in Capex plus disciplined
capital allocation to divest or improve
underperforming businesses.
In Latin America, we are preparing for convergence
of digital services, mobile, fixed, data, and content,
which will come at varying stages, but through
which we are already very well positioned to add
value. We have identified a major growth
opportunity in the B2B market by leveraging our
fixed networks, and we expect to capitalise on it.
In Africa, we are employing stringent capital
allocation disciplines and intend to deliver a
significantly improved cash profile in 2016 from this
region. In October 2015, we acquired Zantel in
Zanzibar, strengthening our position in Tanzania
and in the first quarter of 2016, we signed an
agreement to sell our Tigo business in the
Democratic Republic of Congo (DRC) to Orange
S.A., subject to regulatory approvals.
Underlining all our activity going forward is our
investment in our people. Last year, we clarified the
organisational structure by which we manage our
business.
We brought local management closer to the central
decision-making process and have integrated our
corporate office staff more into the day-to-day
operations. We are developing a coherent and fit-
for-purpose compensation and reward programme
to build on our performance-driven organisation,
fostering a culture of ethics and integrity and
enhancing our employer brand. This is core to
aligning our business, attracting and retaining talent
and successfully executing our strategy. We
continue to add value to our country operations
continued
Useful links within
this report
Our strategy
p27
Our performance – LatAm
p44
CEO interview (Feb 2016)
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
18
CEO’s strategic and operational review
continued
through compensation, responsibility, risk and
compliance, best practice sharing and culture and
values. We prioritise and promote diversity at every
level of our business.
Useful links within
this report
Our KPIs
p35
I have spent most of my time in our markets over
this past year, seeing for myself the progress we are
making, the challenges and particularly the
opportunities. I want to thank all our amazing
colleagues, across all the countries where we
operate, who have such passion for and
commitment to the Digital Lifestyle.
I am confident that we are well positioned for
a strong future, despite continued uncertainty in
the macro-economic environment. We will focus
much more closely on high performance delivery
of our strategy and pay close attention to our key
performance indicators as we continue to build and
monetise the Digital Lifestyle. We will stay equally
focused on improving our margins and delivering
profitable and responsible growth for our
shareholders.
Tigo launches
Rwanda’s first 4G
service – 2015
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
19
Market overview
We operate in Latin American and
African markets which are often
underdeveloped for the provision of core
communication as well as digital products
and services. GDP growth forecasts were
dampened across many of our countries
last year, but demand for digital services
is still growing, as consumers demand
what people in more developed markets
already take for granted.
Source: GSMA Vision 2020; MIC Strategy and Corporate Development team analysis
Business drivers
Customers
• Data usage continues to explode, driven by proliferation of devices
and more data intensive content (esp. video, enterprise)
• Ecosystem services in mobile and home becoming key customer
criterion, reducing ability to differentiate only via connectivity services
Competition / Value Chain
• Integrated and seamless access to content and services across
devices increases customer affinity and stickiness
• Ubiquitous connectivity and smart devices continuing to open up
new industries (e.g. health, financial services, education)
Technology
• Fixed-line network increasingly converging with mobile networks
• Increasing cost and complexity of adding network capacity in
highly dense areas
Government
• Security and privacy are becoming more relevant for regulators, policy
makers, and public discourse
• Regulation could strike a new balance between investment stimulation
and consumer benefit
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
20
Market overview
continued
High potential untapped markets
Each of our regions and countries has reached a
different level of economic development, personal
income and population growth and each therefore
has different characteristics in terms of what products
and services we can offer to the market. Cultural
differences also alter the level and speed of service
uptake and we localise our offers accordingly. All our
markets are growing and moving up the demand
curve. For example, increasing affluence in markets
like Colombia and Paraguay is driving strong demand
for our premium services such as cable TV and our
own proprietary content, Tigo Sports.
The digital boom and convergence
As the world moves increasingly towards
convergence of fixed, mobile and digital services,
we are evolving our strategy to capitalise on the
opportunities it will deliver. Our industry is moving
to an integrated digital ecosystem. Data usage
continues to explode, driven by the proliferation of
devices and more data-intensive content. The more
we can deliver integrated and seamless access to
content and services across devices, the more we
increase customer affinity and reduce churn. New
continued
Our market influences
GOVERNMENT SUPPORT
FOR CONVERGENCE
POPULATION
AGE
GDP
GROWTH
AVERAGE
INCOME LEVELS
CUSTOMER
SEGMENTATION
REGULATION
TAXATION
POPULATION
GROWTH
CURRENCY
VOLATILITY
CORRUPTION
INDEX
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
21
Market overview
continued
industries such as health, financial and educational
services are increasingly being accessed through
mobile devices and this allows us to add more value
for our customers.
We are also seeing greater and much needed
collaboration between governments, industry, the
private sector and society in general to tackle the
issues that greater connectivity raises. There are
strong examples where we have seen decreases in
mobile handset costs and huge increases in people
connecting to the internet, backed up by a strong
digital agenda supporting free competition and
encouraging infrastructure sharing.
Spectrum is another critical area where our industry
needs governments to demonstrate far-sightedness
and we are working together with relevant
governments to drive a greater understanding of this.
Consumer potential
Our markets are at different stages of digital
adoption and within each market consumers are
similarly at different stages in their personal data
consumption. Our most significant customer group is
generally young and literate adults, and starting to
experiment with the mobile internet and new digital
services. As smartphones become more easily
available and prices continue to decrease, this group
is quickly moving up the digital adoption curve.
Broadband penetration
Current penetration vs more advanced
LatAm average (opportunity) of 56%
These customers account for 51% of our subscriber
base in Latin America and 15% in Africa. We are
focused on expanding this group of consumers,
enabling their Digital Lifestyle.
Consumer profiles
Type of
consumer
Digital maestros
Social activists
% of
subscriber base
8%
47%
Profile
Already starting to live
the Digital Lifestyle:
literate, high income,
internet savvy
Starting to experiment
with the mobile internet:
young and literate,
device/budget
limitations, value-added
service users
Great
communicators
30%
No use of internet or
entertainment. MFS &
SMS users: wide range of
customers
Numerous,
modest
Only use mobile to make
calls
15%
continued
El Salvador
22%
Honduras
12%
Guatemala
7%
Costa Rica
Colombia
37%
37%
Bolivia
8%
Paraguay
12%
Pay TV penetration
Current penetration vs more advanced
LatAm average (opportunity) of 76%
El Salvador
Honduras*
Guatemala
Costa Rica
Colombia
34%
32%
30%
52%
40%
Bolivia
12%
Paraguay
31%
● Opportunity (average)
● Current penetration
* Excludes informal market
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
22
Market overview
continued
Business potential
Business customers are an important growth area
for us and we are expanding our B2B business
significantly. Businesses, as consumers, are also
adopting new technologies and ways of
communication, digitalising the economy.
We segment our business customers into small
and medium sized businesses, large national
corporations, governments and multinationals. We
provide a wide range of B2B digital products and
services, and tailor our approach to each type of
business customer. Our significant Latin American
footprint allows us to provide these services across
multiple territories for the major regional players
who often prefer to work with one provider.
Currency depreciation a continuing challenge
Our strategy to reduce our exposure to foreign
exchange fluctuation includes working with our
suppliers to increase the component of local currency
payments in the contracts or adding some indexation
to the currency parity, and on the debt side to favour
more local currency debt. We are confident that over
time we will be able to increase the proportion of
debt we hold in local currency. In 2015, foreign
exchange fluctuations challenged most multinational
businesses and we were no exception.
Regional trends – Latin America
Strong growth and a consolidating industry
In our Latin American markets, data usage continues
to increase driven by the proliferation of devices and
more data-intensive content such as video-streaming.
Consumer barriers are breaking down as digital
literacy and awareness improve. The main telecom
companies continue launching digital services to drive
data adoption and usage on both mobile and fixed
platforms. The first wave of digital services featured
music-streaming services such as Tigo Music, but
continued
37%
LatAm mobile
data penetration
Useful links within
this report
Digital inclusion overview
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
23
Market overview
continued
innovation is growing and expanding to other
services.
Mobile data penetration is currently 37%.
The shift to 3G and 4G is accelerating with analysts
expecting that 80% of all connections will be 3G
or 4G by 2020 compared to 40% in 2014.
Meanwhile, telecom infrastructure in general is
pushing towards fixed mobile convergence.
Our industry continues to consolidate, mainly in the
fixed space with mobile players leading the fixed
consolidation while expanding fixed footprint. As
the region continues to grow a middle class, the
ability to build more cable footprint will also grow.
B2B, as mentioned above, is a new and fast growing
business for us with both small and large companies
demanding a greater number and level of
sophistication of digital products and services across
Central and South America.
MFS is starting to show momentum in Latin
America. A recent report shows how the number of
mobile money users is growing rapidly year-on-year
and how critical mobile financial services are
to expanding digital inclusion (GSMA, 2016).
Evolving regulation
Because our markets are still relatively new from
a telecom and digital services perspective, the legal,
regulatory and taxation environment continues to
evolve and this can be challenging. We are seeing
increased regulatory intervention on topics like
mobile spectrum auctions, security and data
privacy. We continue to work closely to maintain
our business in line with these new dynamics.
A highly competitive market
A major source of competitive advantage is our
strategy to move from volume to value across our
businesses. We aim to be the operator of choice for
the modern Digital Lifestyle. Our biggest competitive
challenge is to ensure we remain ahead of the curve
when it comes to competing on excellent products
and services, customer experience and efficiency.
continued
80%
of all connections will be
3G and 4G by 2020
Useful links within
this report
Tigo Music
Mobile money report
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
24
Market overview
continued
Currency depreciation
LatAm currencies were very volatile last year. Across
our footprint, two currencies in particular, the
Colombian peso and the Paraguay guarani, have
experienced significant devaluation following oil
price declines and the macro economic slowdown in
Brazil. Fluctuations in exchange rates can damage
our revenue or cash flow generation depending
how our services and contracts are priced.
Regional trends – Africa
Exponential growth and innovation
The Sub-Saharan African mobile market is
poised for exponential growth in the number of
connections with penetration reaching 95% by
2020, up from 69% end of 2014, according to
analysts. With mobile broadband connection
penetration at 15% end of 2015, explosive growth
is expected, driven by broadband network rollouts
and cheaper smartphones, which are forecast to
reach 50% penetration of population by end of
2020 from 15% in 2015. Cellular data traffic in
the African region is forecast to grow at a 5-year
CAGR of 56%. Therefore, monetising this ongoing
data growth remains key. By 2020, smartphones are
expected to account for 50% of total mobile
connections. (Source: Ovum 2016).
We see digital inclusion as key to addressing some
of the major economic and social challenges that
many African countries still face. The shift to 3G and
4G is accelerating and we will innovate by bringing
4G to more of our countries and by creating
innovative partnerships and locally relevant
content and solutions for affordable access.
The barriers to traditional financial systems
continue to drive uptake of mobile money as a way
of leapfrogging infrastructure needs. Mobile money
is a clear success story and we continue to develop
the necessary ecosystem to innovate in this field.
We expect to see strong growth in MFS.
B2B is also growing massively in Africa and we are
well placed to capitalise on this opportunity. Africa
is still very early on the fixed mobile convergence
curve, although some mobile operators are
beginning to explore fixed networks in the
region especially in B2B.
continued
Useful links within
this report
Blog: Digital trends for
Africa
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
25
Currency depreciation
Similarly to LatAm, local currencies in Africa have
been very volatile in 2015 with reduced
commodities demand and lower oil prices. Across
our footprint only DRC, which has a dollar economy,
was immune from exchange rate volatility even if
lower demand from commodities impacted its GDP
growth. Currencies such as the Tanzanian shilling
and Ghanaian cedi experienced significant
devaluation over the year, mitigating strong
underlying growth.
Market overview
continued
Challenging earlier stage regulatory environment
Telecom and digital services regulation is also
evolving in Africa. 4G spectrum auctions are coming
up across the continent, with most of these taking
place in the next 3-5 years. We continue to be
challenged by political and regulatory changes
and in particular high telecom industry specific
taxes. We hope that in the long term regulators
will be able to strike a better balance between
investment stimulation and consumer benefit.
Competition remains strong
We are confident that our efforts to provide
the best customer experience, attractive value
propositions and superior distribution capabilities
will enable us to win. In Africa, the industry value
chain transformation is another potential challenge
and with producers of internet content from third
parties coming into the game, we need to be able
to adapt our business model and play in a new
ecosystem that is here to stay.
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
26
Our business model
Our business model
Our consumers
We generate
revenue through
What makes our business succeed
The value we add
Our core
services
Mobile
Consumers
Businesses
For more information
on how we categorise
our consumers,
see page 21
Home
Consumers
B2B
Large companies
Multinationals
(MNCs),
Governments
Mobile voice, data, SMS
and digital services,
including locally relevant,
eg. Tigo Sports
• We work in relatively untapped and still
significantly under-connected markets.
• We provide locally relevant services and
content.
In home services: fixed
-line, voice, broadband, Pay
TV services, and creating
and selling premium
proprietary cable TV
content. e.g. Tigo Sports
Mobile and Fixed
Connectivity as well as ICT
services e.g. security
products, M2M, cloud
services, data centres.
• We aspire to provide consistently excellent
customer experience.*
• Our trusted Tigo brand is deeply embedded in
our Latin American and African markets.*
• We have a world-class sales and marketing
network Group-wide.*
• We have a best in class infrastructure.*
• We are a highly efficient and cost conscious
Group.*
• We employ the best people both in-country
and at our head office.*
• We have a Group-wide commitment to doing
business the right way with the governance to
back this commitment up.
For customers
• Cash generated is reinvested in our network
and services to provide exemplary and ground-
breaking customer service and experience.
• Affordable, local-language access to life-
transforming Digital Lifestyle services provided
to millions of people worldwide who otherwise
would remain unconnected.
For shareholders
• Focused on generating profitable growth
and concrete sustainable returns for our
shareholders.
For our employees
• We offer great opportunities to innovate
digital lifestyles for emerging markets.
For countries and communities
• We are enabling change in communities
through the job opportunities we provide
and the access to digital services that were
previously out of reach.
Mobile
financial
services
(MFS)
Consumers
and Businesses
Small and Medium
sized businesses
Financial services delivered
by mobile technology:
money transfer, bill
payments, insurance, salary
payments, etc.
Our key resources and relationships – our brand, our people, our infrastructure and network, our suppliers, governments and partnerships.
For risks see page 53.
* Denotes what we designate a key ‘business enabler’. For more information on our enablers see page 32.
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
27
Our strategy
Building and monetising the Digital Lifestyle
Our strategy is based on building and
monetising the Digital Lifestyle. We have
built a detailed roadmap that will enable
the promise of a Digital Lifestyle for our
customers, and monetise it for our
shareholders. Our strategy is focused on
growth, efficiency, execution, credibility
and total shareholder returns.
Our business units
All four of our business streams had a strong year
in 2015, demonstrating the effectiveness of our
strategy.
Mobile
Mobile remains the largest of our four services and
accounted for 65% of our total revenue in 2015,
with growth being driven by Colombia and Africa.
In mobile, our value creation strategy moves
us from volume to value focusing on 4 key
elements:
1. Foster data adoption and deliver data
monetisation.
2. Value customer management.
3. Offer simplification and effortless service.
4. Efficiency discipline on margin, bad debt
and device subsidy.
continued
Tigo-sponsored Digital
Mobile Library – Ghana
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
28
Our strategy
continued
Our strategy in a nutshell
Strategic pillar
What we mean by this long term
Innovate further on digital services and products, partnering with Digital Leaders while adding local differentiation
Lead on digital
Execute our internal digital transformation while leveraging our Telco assets into the digital world
(digital distribution and customer engagement)
Foster data adoption while delivering on data monetisation through strong discipline
Build, fill and monetise cable through bundling, content aggregation and broadband speed
Capture growth
Become a B2B leader both in connectivity and ICT services
Capture the MFS opportunity while further enabling our business
Grow profitably
and responsibly
Increase customer centricity and satisfaction
Transform revenue growth into EBITDA growth
Target operating leverage and cash flow growth
Transform growth into operating cash flow growth
Be a good corporate role model, creating positive change. Respect local laws and international standards.
Strengthen talent, diversity, performance and reward programme
Invest in people
Take our unique culture to the next level – the Millicom DNA
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
29
Useful links within
this report
TV Cable Parana
Tigo Star
Our strategy
continued
Mobile (continued)
As consumers begin to use more mobile data and
explore the Digital Lifestyle, their need to become
constantly connected grows. The cost of smartphones
continues to decrease and we are focused on
educating our customers on the benefits of the Digital
Lifestyle to drive increased demand for data. We
continue to invest in the technical infrastructure to
build and maintain our brand and sales network and to
support the delivery of those services.
Our differentiated brand offer, distribution, customer
care and network will drive consumer satisfaction to
improve ARPU and also lower churn. In LatAm, our
voice ARPU declined but this was compensated by
the growth in data revenues as we are delivering
on data monetisation. In Africa, our voice and SMS
revenues are still growing and we see enormous
potential for these more traditional areas of
telecom services, as well as for mobile data.
Home
We are one of the largest Pay TV/fixed broadband
operators in Latin America with 7.6 million homes
passed. We are the second largest cable TV
operator in Colombia following our merger
with UNE in 2014. You can read more about
Colombia on page 45.
In Home, our value creation strategy focuses on
growing footprint and building convergence:
1. Grow coverage, expanding network and
DTH.
2. Push penetration with bundling, content
aggregation and digital services.
3. Differentiate with broadband speed and
Pay-TV exclusive local content.
Our home strategy is focused on building, bundling
and upselling. We are leading on data monetisation
and digital innovation across both our mobile and
home businesses and are focused on growth
through expanding our network, bundling our
services into the home and upselling to subscribers
using speed, content and digital services as strong
differentiators. Our target is to reach 10 million
homes passed and last year alone we built
out our network with over 500,000 homes.
continued
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
30
Useful links within
this report
Tigo Paraguay data
centre
Our strategy
continued
We fill the network as fast as possible, converting
homes passed into homes connected. Our current
penetration is 41.6%* and we upsell through
bundling of services to ensure we maximise the
number of revenue-generating units in the network.
These initiatives drive down churn and enable us to
provide a cross-selling opportunity to our subscriber
base, driving acquisition costs down and increasing
consumer loyalty. For example, we are integrating
international and local content such as soccer on
mobile and cable TV which drives consumer
adoption and also reduces churn.
B2B
We recognise B2B as a growth opportunity in the
form of specialist services to small, medium and
large businesses in LatAm and Africa.
Our 2015 revenue in B2B was US$928 million (of
which, US$334 million in mobile). We are well
positioned for the future development of the
business, with good international and national
connectivity, a strong consumer base, strong brand
and high quality data centres in Colombia and
Guatemala.
*Refers to HFC (includes copper lines of UNE)
In B2B, our value creation strategy focuses on
capturing the growing opportunity:
1. Grow into fast new growing segments as
SMBs and MNCs.
2. Expand the product portfolio into elements of
the ICT chain.
3. Develop a differentiated customer experience.
Our B2B strategy in Latin America is focused on four
geographical clusters which enable us to tailor our
service and strategy for clients across all markets.
We have in place fixed infrastructure, a fibre optic
ring which stretches from Guatemala to Colombia
providing a unique position in terms of footprint and
reflecting the way multinationals move around the
region.
In 2015, we set up a new data centre in Guatemala
to allow us to offer accessible cloud services to
businesses in Central America. In 2016 we will also
commission a new state-of-the-art Tier 3 data
centre for Paraguay and Bolivia.
continued
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
31
Our strategy
continued
We recently signed an agreement with a large M2M
platform, and will be expanding our solutions to
include more security products and vehicle and
asset tracking in 2016. We are cross-selling products
where we already have high market penetration in
mobile, building Tigo Business as the brand that
offers the best service and product portfolio.
In Africa, B2B represents approximately 2% of
revenue, presenting significant untapped opportunity.
To capture this opportunity, Millicom has made
significant investments in both fixed and mobile
infrastructure to provide a range of products and
services such as 4G services and data centres to all
business segments.
We have focused on delivering a superior customer
experience by providing easy access to our services
and by increasing our sales force. Tanzania has
led the way by expanding its sales force to more
than 200 agents.
As a result, we have a stronger customer base
including a high profile embassy, multi-national
banks, government institutions and network
operators making use of Tigo’s wholesale network
services.
Mobile Financial Services (MFS)
MFS (branded as Tigo Money, Tigo Cash or Tigo
Pesa depending on the market) has enormous
possibilities across all our markets. Our focus is on
maximising the potential of fintech as well as using
it to drive opportunities for our other business units.
We are building the MFS ecosystem in each of our
countries, with Tanzania, Paraguay and Rwanda
currently having the most developed ecosystems.
Our strongest market for MFS is Tanzania, with
penetration of MFS customers at 44%. In addition,
El Salvador and Honduras are both growing strongly.
Customers can store money in their mobile wallet
on their phones, make payments and transfers, save
money, borrow real-time micro and working capital
loans, and access micro-insurance for critical needs
such as health and agriculture. There are 20 MFS
operators globally with around one million active
users and Tigo has five of them – including two in
Africa, Tanzania and Rwanda, and three in LatAm
– Paraguay, Honduras and El Salvador. We now
provide MFS to more than 11.2 million customers,
representing 18% of our customer base.
continued
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
32
Our strategy
continued
Innovation is crucial in MFS. We were the first company
worldwide to offer customers interoperability, the
tools to send and receive international remittances,
cross-border mobile money transfer services with an
integrated currency conversion and an automatic
return each quarter on the balance held in their
account. We are accelerating our partnerships to
enable us to provide a greater and more advanced
range of financial services and building synergies
with other business units, such as smartphone
financing that has proved successful in Paraguay.
MFS is a major component of our digital inclusion
work and in Ghana and Chad for example, our
teams are pioneering projects that greatly improve
access to financial services for farmers,
entrepreneurs and women in business.
Our enablers
Also fundamental to our strategy are what we call
our enablers – the unique set of tools to build and
monetise the Digital Lifestyle. These are our people,
brand and marketing, customer experience, sales
and distribution, our infrastructure and IT, and our
efficient ways of working.
Our people
We did extensive work in 2015 to build the most
effective team structure to future-proof our business.
We have 15,956 employees, more than 13,000 of
whom work in Latin America. Some 97% of our
employees are of local nationality and we are proud
of our highly diverse workforce of 81 nationalities.
We reviewed our human resources policies last year
and identified a number of areas where we felt
improvements were key: namely how we work, our
culture, gender diversity, efficiency and processes.
Over the year we have strengthened leadership
capabilities and competencies to enable our people
to innovate, engage and transform the company
further. We are working to define and agree key
corporate culture parameters and targets at
Executive Committee level including:
• Creating a balance between developing internal
talent vs. bringing in external skills when required.
• Keeping decision-making as close as possible in
the business where it happens and aligning that
with people-deployment decisions.
continued
15,956
employees
2,245
in Africa
13,351
in Latin America
25%
women in the Senior
Management Team
85%
senior managers
recruited locally
97%
of local nationality
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
33
Our strategy
continued
• Formalising and encouraging our policy of
international mobility for our staff, clarifying the
business case requirements and the need for
mobility to develop our best talent.
• Building an inclusive workplace, starting with the
relaunch of our gender diversity programme.
We are also developing behaviours across every level
of the business connected to our core values of:
Passion, Trust, Integrity, Innovation and Simplicity.
We aim to achieve balance between investing in
critical process and technology improvements and
responding to cost saving pressures. For example,
the development of our existing employees needs
technology and policy frameworks to underpin it, in
order for it to work effectively.
We are building a more streamlined organisation to
minimise duplication of effort and are working to
clarify operating and supporting roles at the
corporate centre, with focus on creating strong,
standalone regional units with a lean central
function as our strategic architecture. We are
developing a coherent and fit-for-purpose
compensation and reward programme to build
a performance-driven organisation.
Our brand and marketing
Our Tigo brand is strong in Latin America and
growing in Africa. Through the launch of sub brands
and global campaigns in Latin America we have
seen a transformation since 2013, with improved
perception in our markets and a growth of nearly
10% in top-of-mind awareness in 2015 versus 2014
according to Millicom’s brand tracker survey. Our
business units are sub-branded under Tigo Smart
(digital services in Latin America), Tigo Star (cable/
broadband/DTH – only present in Latin America
currently), Tigo Business (for business customers in
Africa and Latin America), Tigo Money/Cash/Pesa
(mobile financial services in Africa and Latin
America), and value added services and content
under Tigo Music and Tigo Sports (only available to
Latin American subscribers currently). The Tigo
brand is growing twice as fast amongst digital
consumers compared to our competition and we
are very focused on improving our brand rating, its
quality and efficiency.
continued
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
34
US$650,000
achieved in sales of e-waste
Useful links within
this report
Blog: Skilled sales force
Blog: Tigo Paaré
Our strategy
continued
Customer experience
We are working hard to create an effortless
experience for all our customers by simplifying the
steps required across all business units and
tightening our monitoring of performance metrics.
We are moving from a product-centric to
a customer-centric approach. We continue to
improve our performance on key customer
experience metrics through consistent monitoring,
implementing new KPIs across services and touch
points, and rigorous collection of feedback from our
customers. As a Digital Lifestyle company, we are
driving more of our customer experience processes
and procedures into the digital arena.
Sales and distribution
Our sales and distribution network has been an
important competitive advantage for us and we are
growing our digital and cross-business unit sales
while driving increased efficiencies. We are working
to achieve cost savings across our network and to
optimise revenues, margins and product mix across
all channels. We are also working to drive efficiency
in mass digital distribution and to improve how we
monitor those efficiencies.
Infrastructure and IT
We are transforming our infrastructure and IT to
enable the Digital Lifestyle now and in the future.
We are moving to an OTT-like architecture,
operating and cost model, and improving our
business intelligence ability. We are also focused on
acquiring enough high and low band spectrum in
every market and securing long term spectrum and
services concessions. We are converging our core, IT
and transmission networks for all our business units
and are ensuring we roll out the right mix of future-
proof access technologies to optimise our
customers’ data experience.
Efficiency
We are improving efficiency and focusing on
operational excellence to continue to build a more
streamlined Millicom. We are also looking at
environmental efficiency opportunities through
energy reduction, use of alternative energy sources,
site sharing, and responsible electronic waste
management.
continued
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
35
Our strategy
continued
How we measure the effectiveness of our strategy
At Group level we measure the performance of the business using a number of Key Performance Indicators.
These help us track how well we are performing against our strategy.
Mobile
KPI
Home
2014
2015
KPI
Mobile data revenue (US$ millions)
912
1,127
Home revenue (US$ millions)
Mobile data users (millions)
15.3
18.4
HFC* homes connected (millions)
2014
2015
616
2.9
989
3.0
Data penetration rate
27.1% 30.1%
RGU’s per HFC* household
1.80x
1.88x
Smartphone penetration (%)
23.9% 34.2%
HFC* Homes Passed (millions)
7.1
7.6
MFS
KPI
B2B
2014
2015
KPI
2014
2015
MFS penetration including Zantel (%)
16.9% 17.9%
% of fixed B2B in total revenue
5.5%
9.0%
Active users (millions)
9.5
11.2
*HFC (includes copper lines of UNE)
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
36
Doing business the right way
At Millicom, we take our responsibilities
to the countries and communities
in which we work seriously and strive
to deliver positive social impact in
our communities.
We want to be a good corporate role model,
to create positive change. We respect local laws
and international standards. Our customers and
investors expect us to do the right thing and we
expect our business partners and suppliers to
act with integrity too. We have strengthened
our governance practices and procedures during
the year. Our corporate governance report is
significantly more detailed this year as we believe
it is important to provide greater transparency
to our approach in this area.
We have brought further focus to our corporate
responsibility, compliance, and health, safety and
security activities to ensure that they are aligned
with our business strategy and enhance our ability
to create value.
Our areas of focus
To promote responsible business practice, we focus
on eight key areas: anti-corruption compliance,
privacy and freedom of expression, child protection,
continued
Useful links within
this report
Our Responsibility
Blog: Social Investment
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
37
Useful links within
this report
Tigo Te Conecta
Compliance and
Business Ethics
Doing business the right way
continued
reducing our environmental impact, promoting
diversity, health, safety and security of our staff,
responsible supply chain management, and social
investment.
We carried out a materiality survey with our key
stakeholders to determine whether they agreed with
the current focus areas and to identify any new
concerns or opportunities. The results show our
focus areas continue to be well-aligned with what
stakeholders consider to be most important for
Millicom. The highest priority issues were identified
as privacy and freedom of expression, child
protection, and anti-corruption compliance.
As part of Tigo Honduras’s partnership
role in education, we sponsor the tech
competition “La Fabrica Smart”. We
encourage young digital entrepreneurs
to think up educational Apps and we
provide workshops on digital innovation.
In 2015, a winning entry went live with
Me Apunto, an App to support
volunteer networks across the country.
Anti-corruption compliance
Acting responsibly begins with compliance. We have
rigorous compliance processes and procedures
across the Group. The overall frameworks for this are
discussed in the Governance section of this report.
As part of our compliance and ethics work, in 2015
we updated our Code of Conduct and introduced
a renewed Anti-Bribery & Anti-Corruption Policy. All
employees must read and acknowledge the Code
and complete an e-learning course. All staff with
direct interaction with public officials and other third
parties are required to attend training on the Anti-
Bribery & Anti-Corruption Policy either face-to-face
or electronically. We also developed a standardised
compliance training programme for senior
managers and high-risk business functions, aimed
at raising awareness of corruption or bribery related
risks, how to report suspected incidents, and key
policies on managing risks.
We are aligned with all local anti-corruption
legislation of the countries where we operate, as
well as international standards such as the US
Foreign Corrupt Practices Act (FCPA) and the
UK Bribery Act (UKBA).
continued
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
38
Useful links within
this report
Shelter4Education
Blog: Child Online
Protection
Blog: Global Network
Initiative
Doing business the right way
continued
Privacy and freedom of expression
The issue of privacy and freedom of expression has
come under growing scrutiny in the public domain
in recent years, leading to an increased focus on our
preparedness in managing requests from law
enforcement, and related risks. Our priority is to
ensure we achieve the right balance between our
obligation to respect local laws and national security
interests, and our duty to protect our customers and
their access to information.
In 2015, we finalised mapping the legal frameworks
and government powers for surveillance, content
blocking and service shutdowns in each of the
countries we operate in. We also set a global
framework on how to assess and capture
information about the law enforcement requests
we receive.
We continue to work closely with other telecom
companies and wider stakeholders on this issue.
At the beginning of 2016, we became observer
members of the Global Network Initiative, which
will allow us to fully participate in what we consider
to be a critical debate with more than 50
organisations, human rights experts, investors,
academics and internet companies.
Over 10 million viewers watched Tigo
Ghana’s “Shelter for Education” TV
documentary which followed a social
investment project to renovate or build
schools in six underprivileged
communities in Ghana.
Child protection
The internet brings great opportunities to everyone
– including children – such as online education and
access to information. Empowering children to be safe
online is therefore crucial to our work and our reputation.
In 2015 we organised four industry-leading child
online protection conferences in Bolivia, Rwanda,
El Salvador and Costa Rica, in collaboration with
UNICEF, GSMA and others. These built on the
success of the pilot workshop we held in Paraguay
in 2014. Importantly all conferences had Ministerial
level attendance and brought together different
stakeholders whose collaboration is needed to
protect children online: law enforcement, regulators,
government, civil society and industry, and in our
continued
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
39
Useful links within
this report
Blog: Steps towards
Child Protection Online
Report: Walking the
Talk?
Doing business the right way
continued
El Salvador workshop also children themselves.
In a global first, all telecom operators in El Salvador
and Costa Rica united to sign a pledge to jointly
work on child online protection.
We also joined forces with UNICEF to develop
a Mobile Operator Child Rights Impact Self-
Assessment tool for mobile network operators,
covering all areas of Children’s Rights and Business
Principles and highlighting issues that are specific to
our industry. Following a consultation with peers and
other stakeholders by UNICEF, the final tool will be
available in 2016.
The Mistra Center for Sustainable
Markets at the Stockholm School of
Economics published their ‘Walk the Talk’
report in October 2015, exploring how
Sweden’s largest listed companies
communicate their sustainability work.
Amongst the 72 companies reviewed,
their research found Millicom was one of
the two companies walking the talk on
sustainability: doing as much as saying.
The environment
As we deliver our Digital Lifestyle strategy, we affect
the environment in a number of ways. Energy and
fuel consumption to run our network and operations
makes up the biggest part of our carbon footprint.
Reducing our energy consumption also provides
an opportunity to reduce our own costs.
To reduce our energy use we continue to modernise
our equipment, increase network sharing, and reduce
the use of cooling solutions, as well as investing in
alternative energies, such as solar power, for powering
sites in remote ‘off-grid’ areas. We piloted a new
energy efficiency strategy in El Salvador that involved
conducting a full review of energy management,
identifying savings opportunities and running an
employee-facing behaviour change campaign – and
are now identifying sites that would benefit from
efficiency projects.
At the end of 2015, our energy consumption per base
station was 51% lower than in 2008, which means
we have achieved our target of 50% reduction four
years early.
continued
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
40
Doing business the right way
continued
Managing e-waste as we upgrade our 2G networks
to data enabled 3G and 4G is another complex
challenge. Our global e-waste management
programme aims to support our operations in
managing and disposing of e-waste through selected
vendors, and continues to provide us with strong
financial incentives and opportunities to manage
environmental and reputational risks. By the end of
2015, most operations were systematically collecting
e-waste, separating it by equipment type and storing
it until they have enough to sell or recycle.
Promoting diversity
We have an incredibly diverse workforce in terms of
nationalities but recognised in 2015 that we needed
to relaunch our gender diversity programme,
particularly to improve gender balance at a senior
level, for us to stay relevant and innovative and be
better able to meet the needs of our globally diverse
customer base.
In 2015, we commissioned research into
best practices on gender diversity, carried out
mapping of family related policies and completed
a survey of women across our operating markets.
This information and feedback will be used to
design an upgraded programme in 2016, with
the oversight of the Executive Committee.
For the group as a whole, 34% of our workforce is
female and 25% of our top 600 managers are
women. We have two female Board members and
the Executive team also has two female members.
In Africa where 29% of the total workforce was
female, we have seen the biggest leap in women
in senior management from 7% in 2013 to 26% in
2015.
Health, safety and security of our staff
Our day-to-day priority is to ensure the health and
safety of our people, and during 2015 we focused
on improving our health and safety policy and
management system. Our most important long-
term goal is to achieve zero fatalities. Our CEO has
made health and safety a priority topic and the
revised Group Health and Safety Policy now includes
a personal statement of intent from the CEO.
We are adopting a systematic approach to security
issues with country reviews leading to better risk
mapping, closer cooperation with police and other
companies and more detailed information and
training for our staff. Starting in 2015, all operations
are conducting a review of engineers working at
heights to ensure they have the required
continued
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
41
Doing business the right way
continued
qualifications. We are also tightening road safety
measures.
As a result of the requirement to report all incidents
via our online incident management reporting tool,
there has been a substantial improvement in
reporting and record keeping of incidents.
Through its Telemedicina project,
Tigo Paraguay connects 200 regional
hospitals to the internet to send test
results from regional hospitals to the
capital Asunçion for analysis. The
results are returned in as little as 30
minutes, giving 4.5 million people
(65% of the total population) access to
medical testing they did not have
before. In the first 14 months 90,000
people used the service, which Tigo
provides at no cost to the patient.
Responsible supply chain management
We expect our suppliers and partners to work to the
same stringent ethical and corporate responsibility
standards as ourselves. In 2015 we started supplier
self-assessments on corporate responsibility and
compliance with the EcoVadis sustainability
monitoring platform. More than 100 of our suppliers
(covering more than 50% of our total supplier
spend) were invited to submit a self-assessment of
their corporate responsibility management. We are
also piloting a supplier capacity building programme
in Paraguay, for example, with eight key SME
suppliers, who will receive in-depth training on
ethical business conduct, labour conditions and
environmental management as well as quality and
customer management.
continued
Useful links within
this report
Tigo Paraguay:
Telemedicina
Tigo Paraguay:
Telemedicina
Overview | Strategy | Performance CEO’s strategic and operational review Market overview Our business model Our strategy Doing business the right way
Millicom Annual Report 2015
42
Useful links within
this report
Our strategy
p27
Our performance
p43
Reach4Change
Doing business the right way
continued
Social investment
Social investment, particularly digital and financial
inclusion, is at the very heart of our business mission
of promoting Digital Lifestyles. Investing in the
communities where we work enables us to
participate in addressing some of the key social
challenges our markets face. Our current priority is to
align our social investment strategy more closely
with our core business–by expanding the Digital
Lifestyle to our communities, to create an emotional
connection with our customers and stakeholders,
and to support our brand story. We are focused on
making technology more accessible for
unconnected and underprivileged groups, providing
better access to education, delivering access to
health awareness programmes and healthcare, and
empowering entrepreneurs through technology.
Overview | Strategy | Performance Millicom Annual Report 2015
43
Performance
Our performance across most
countries was strong in 2015
despite a generally more
challenging economic
environment.
Contents
Review of operations –
Latin America
Review of operations –
Africa
Risk management
Financial review
44
51
53
75
Overview | Strategy | PerformanceReview of operations – Latin America Review of operations – Africa Risk management Financial review Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
44
Review of operations – Latin America
In the past we have split out South and
Central America in our annual report
when reporting on Latin America.
Because of increased synergies and
similarities in our strategic approach
across the two regions, we will report
on Latin America as a whole.
Latin America makes up more than 85% of our
Group revenue and is where we provide the
broadest range of services across eight countries. All
our countries except Costa Rica and Nicaragua now
have both mobile and cable networks. Our Mobile
business continues to represent the major part of
our revenue at 61% (compared to 71% in 2014)
with our Home business making up 28% (compared
to 18% in 2014). Our performance across most
countries was strong in 2015 despite a generally
more challenging economic environment and
foreign exchange depreciation. Guatemala,
Honduras and Bolivia performed particularly well
and we saw growth in Paraguay despite the
economy there being badly affected by its close
correlation to the Brazilian economy. The worsening
gang violence in El Salvador created a very
challenging business environment in 2015.
continued
Revenues by Country
(%)
Colombia
Guatemala
Paraguay
Honduras
Bolivia
El Salvador
Costa Rica
and Nicaragua
35%
23%
12%
11%
9%
8%
3%
All our countries except Costa Rica
and Nicaragua now have both
mobile and cable networks.
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
45
Review of operations – Latin America
continued
Colombia
Our biggest market in Latin America is Colombia
which accounts for 35% of our total revenues in the
region.
Our business continued to perform very well, despite
a more challenging market environment. In 2015,
the economy was affected by the weaker oil price,
currency depreciation and a general slowdown.
Inflation reached 6.8%, above the Government’s
target of 3%. Foreign exchange was particularly
challenging with 32% depreciation of the peso
against the US dollar over the year.
Our main objective for 2015 was to implement fully
the merger of our mobile business with the UNE
cable business. We are now the second largest
telecom company in the country and are already
seeing the growth and increase in profitability
expected. The integration plan has gone
exceedingly well. As a result, in July last year, we
revised upwards our expected synergies target.
Revenue growth at UNE was strong at 7%, as a
result of a refocused product portfolio and
enhanced pricing since the merger. Mobile revenue
at Tigo increased by 3% driven by higher data
penetration and market share gains. Our Adjusted
EBITDA was US$578m (excluding US$33m of
integration costs) with a margin of 29.2%, up from
26.3% in 2014. We invested US$431m in improving
services and the network.
In mobile, we are a challenger and continue to grow
our market share. Our strategy is to move from low
prices and high volume to higher ARPU and a more
strategic, digital offer. The disaggregation of service
contracts from handsets drove customers towards
lower priced plans as they did not have the handset
incentive. This led to price erosion and a decline in
service revenue growth. Combined with the effect
of the peso depreciation against the US dollar,
handset sales grew at a slower pace as they became
more expensive. However, we still grew handset
sales at 40% in local currency which was a good
achievement. We also launched a free Facebook
campaign that, combined with our other data plan
Infinito, led to a strong increase in data revenue. In
September, we launched our Tigo Sports app which
proved very popular, and our smartphone campaign
“Desflechízate” which helps consumers transition to
smartphones continues to be successful, making
them more affordable in both pre and post-paid.
continued
Mobile data as a % of
mobile revenue in LatAm
Mobile Data
29%
Split of mobile customers (%)
Colombia
Guatemala
Honduras
Paraguay
Bolivia
El Salvador
27%
27%
15%
12%
10%
9%
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
46
Review of operations – Latin America
continued
The Home business generated excellent revenue
growth, with profit and customers growing well due
to higher broadband speeds and greater demand
for content, as we migrate customers from the pre-
existing copper network to hybrid fibre-coaxial cable
(HFC). We continued to expand our HFC network
and have worked to reposition the brand and
remodel our offer in Colombia. Penetration in the
new HFC network typically reached 18% in the first
12 months after activation. National football league
coverage is now included in all PayTV offers and our
HD channel demand continues to increase.
TigoUNE led the move to wider distribution of the
Colombian Soccer League by bringing together the
local soccer team federation and all major PayTV
operators and facilitating an agreement between
them. We have consolidated Tigo Music as a
platform for both consumers and artists, and are
offering exclusive content beyond the app to in-
home cable TV. We saw improved ARPU and lower
churn rates as a result of our strategy. In 2016, we
plan to launch our own DTH service leveraging our
experience in other Latin American markets.
B2B is a fast growing business in Colombia and
we have seen increasing demand for data center
services. We have worked on attracting new large
companies and gained 180 new customers in the
private sector to complement our existing business
with the government sector in Colombia. Cross-selling
of services into the B2B sector is an important part of
our strategy and we aim to deliver more competitive
and strategic products and services for existing
mobile clients, for example. We are assessing the
potential for MFS demand in Colombia.
continued
Business revenue mix (%)
● Mobile
● Cable
● MFS
61%
28%
11%
Useful links within
this report
Tigo Music
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
47
Useful links within
this report
Tigo Business Forum
Review of operations – Latin America
continued
Guatemala
Guatemala had a good year in 2015 with a relatively
stable macro-economic environment despite political
instability during the summer. We delivered solid
revenue and Adjusted EBITDA growth with Cable
offsetting mobile revenue decline.
More than 50% of our customer base has a
smartphone and our successful 4G LTE launch
confirmed our leadership position in mobile data.
We provided access to mobile broadband to more
than 32% of Tigo customers and connected close
to three million consumers to the internet.
To help build our profile in the
important new area of B2B, in
September 2015, we hosted the Tigo
Business Forum in Guatemala. The
event proved very popular, with 700
companies in attendance, 1,300
business leaders from Central America
and keynote speeches from Steve
Wozniak, Uri Levine and Jeff Wallace.
In 2015, we continued to expand our cable footprint
and are now the biggest HFC provider in Guatemala.
Growth in Cable was helped by very good trends in
both the Home and Business segments. B2B is an
important new business for us in the country. Our
new data centre provides cloud services for the
Central America region. Large companies are
becoming more aware of the benefits of cloud
services and have started to take them into account
in their tech planning. Small and medium sized
businesses are seeing smartphones as a working tool
and using applications for their daily operations. We
have invested in advanced mobile solutions, cloud
services and M2M services for our business
customers.
Paraguay
In Paraguay revenue growth was similar to 2014
in local currency, but suffered a severe currency
depreciation, affected by the economic slowdown
in Brazil, Paraguay’s most important commercial
partner. This unsupportive macro environment led
mobile revenue to decline. Our cable business
performed well, growing over the year as we
continued
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
48
Review of operations – Latin America
continued
continue to expand our network and achieved
penetration rates of 20% in less than a year after
each node activation. Paraguay continues to be our
most significant Latin American market for MFS.
Changes in the overall sales mix and regulation
affected our EBITDA margin which declined 2.4
points when compared to the previous year.
We start 2016 with good reasons to be optimistic.
Our customer satisfaction score has now recovered,
our service levels are back on track, our mobile
market share was stable and our recent acquisition
of 4G spectrum will enable us to capitalise on the
strong commercial efforts made over the last few
years around the Digital Lifestyle.
A 2015 highlight in Paraguay was our
digital inclusion work on “Telecentros”.
The project saw the deployment of
more than 100 shipping containers
(the Telecentros) fully equipped with IT
services and internet, to rural schools
across Paraguay. These have reached
thousands of teachers and pupils, who
will form a new generation of digitally
savvy users and can in turn share their
knowledge of the internet with
their communities.
Honduras
Revenue performance in Honduras showed good
momentum, whilst the EBITDA was stable due to
our commercial effort in mobile, off-set by one-off
charges linked to taxes. Mobile revenue grew 5%
with mobile data growth of 35%. We were focused
in 2015 on strengthening our digital ecosystem as
we launched Smart Apps, Mi Tigo App and Tigo
Shop App.
The Cable business grew by 18% mostly driven by
fixed broadband internet and DTH offers. We plan
to increase our cable footprint in 2016 and to push
our B2B offering with a new data centre, M2M
services and new post-paid plans for our business
customers.
continued
Cable revenue mix (%)
TV
Internet
Telephony
Other
27%
39%
24%
10%
Useful links within
this report
Telecentros
Tigo Shop app
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
49
Useful links within
this report
Tigo Fabrica Smart awards
Review of operations – Latin America
continued
For the second time we ran our
Changemaker Award workshop/
contest in Honduras, enabling young
people to learn about mobile apps and
then competing with an idea to be
developed. More than 150 15-20 year
olds took part in the 5 day workshop
learning from international and local
speakers sharing their knowledge of
innovation, social media,
programming, graphic design and
video games. We also provided digital
infrastructure and connectivity to
connect up 150 educational
institutions benefitting more than
80,000 school children.
El Salvador
Our business in El Salvador had a difficult year
because of an aggravated social context due to
a continued rise in violence and crime impacting
economic activity. Despite these challenging
conditions, we achieved growth in revenue driven by
mobile data, fixed broadband and Pay TV. EBITDA
improved thanks to good cost control.
We have close to one million active Tigo Money
users and were awarded ‘Best Mobile Service for
Financial Inclusion 2015’ as well as best MFS
deployment in LatAm at the M2Payment awards.
Tigo Money is the largest bill payment company in
El Salvador. El Salvador is the market leader with the
greatest MFS penetration in Latin America
according to Findex.
continued
We now have more than one million MFS users in
Honduras and we implemented a new wallet model
which will enable further development of new
products. We also integrated our service with a number
of major new merchants and partners, and launched
the distribution of financial aid via MFS to rural areas.
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
50
Useful links within
this report
Tigo Sports app
Tigo Music Fest
Tigo Star app
Review of operations – Latin America
continued
Bolivia
Our Bolivian business had an excellent year with
good revenue and EBITDA growth. We also
successfully renewed our mobile license for 15 years.
Mobile revenue grew based on mobile data growth
at 66%. In the Cable business we grew 68% driven
by increased penetration on our HFC footprint and
higher demand for our DTH product. We launched
Tigo Sport Cable TV with local and international
content and also made content available on
smartphones via Tigo Sports App downloaded
more than 250,000 times after only two months.
MFS also had an excellent year and we developed
Tigo Money as a payment option for online
purchases including event tickets and department
store sales. The Central Bank of Bolivia (BCB)
announced that the volume of mobile money
transactions rose more than 900% for the first
ten months of 2015 compared to the same period a
year earlier. We won ‘Best mobile initiative for
E-commerce’ at the Bolivian E-commerce Awards.
Due to low credit card penetration in Bolivia we see
a real opportunity for Tigo Money to become a key
payment method for e-commerce.
To increase public awareness of our
music offer, we promoted a music
festival, Tigo Music Fest with
international and local artists in Bolivia.
We marketed the event over digital
channels such as Facebook, the Tigo
Music website and other digital media,
and promoted an artist playlist inside
Tigo Music. 17,000 people attended
the festival and were introduced and
invited to find out more about
Tigo Music.
Costa Rica
In Costa Rica, where we operate a Cable only
business, revenue was up compared to 2014 with
stable EBITDA. In 2015, we launched ‘Mi Tigo Star’,
a customer service app that allows customers to
view their account status, contact us, locate stores
and collection points, and track orders with great
adoption from our customer base.
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Review of operations – Africa
Millicom Annual Report 2015
51
Africa continues to be a rapidly growing
region for Millicom. In 2015, our six Tigo
operations combined accounted for
15% of group revenues, with the biggest
contributor, Tanzania, accounting for
37% of Africa revenues. In 2015,
revenue growth in Africa was strong
although largely offset by foreign
exchange fluctuations. Most sectors
reported revenue growth in local
currency of 13% to 19%. Mobile
contributed 87% to the revenue of the
region, with MFS contributing 9%.
Focusing on improving the profitability of the
business, we are moving from a volume to a value
proposition for our customers through constant
innovation and better customer experience. In 2015,
we launched high speed 4G LTE services in three of
our markets, Tanzania, Rwanda and Chad. We also
accelerated our initiatives for business customers,
creating tailored Tigo Business propositions and
upgrading our billing systems and local teams. MFS
continues to be highly successful with savings
products such as Tigo Sugira in Rwanda, the group
savings product Tigo Paaré in Chad and our pay-out
product Wekeza in Tanzania. We also strengthened
the management team with the appointment of
Cynthia Gordon, as EVP and CEO for Africa.
Tanzania
Tanzania crossed the 10 million subscribers mark
during 2015. More than two million subscribers were
added over the course of the year, and Tanzania
now accounts for 35% of our African customer
base. We saw strong revenue and EBITDA growth
continued
Revenues by Country
(%)
● Tanzania
● Chad
● Ghana
● Others
36
15
14
35
Useful links within
this report
Tigo Music Africa
Tigo Sugira
Tanzania 4G
Zantel
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
52
Review of operations – Africa
continued
backed by a rapidly growing subscriber base, an
increase in data usage and strong MFS uptake.
We launched 4G LTE in Dar es Salaam, becoming
the first mobile operator to offer 4G services and
we will roll this out to other regions over the course
of 2016, reinforcing our leadership in data.
Millicom’s acquisition of Zantel is expected to
further boost our business by strengthening our
market position.
Tanzania is one of the most advanced MFS
markets in the world and the first to have full
interoperability. We recently developed a hub for
MFS innovation in the country by creating a centre
of excellence, and in July the Deputy Governor of
the Bank of Tanzania credited MFS with achieving
the country’s financial inclusion target of 50% one
year early by 2015 and recognised Tigo’s role in
supporting that.
Chad
Chad’s revenue grew modestly in 2015, impacted
by the worsening macro-environment and security
concerns. The subscriber base grew by 9% and
mobile data continued to experience strong
momentum. EBITDA declined significantly due
to lower levels of activity, a sharp increase in the
level of bad debt as well as some incremental tax
provisions.
Split of mobile subscribers
in Africa
We see interesting opportunities in the untapped B2B
market and have set up a specialist team focused on
delivering products and services to this market. We have
already seen an increase in revenues after partnering
with a number of key corporates. Regulation is also
challenging in Chad with increasing government
focus on international traffic and audit of tariffs.
Other African markets
We have accelerated the pace in our other African
markets. However, taxation, regulation, one-off
charges and currency volatility in 2015 have made
results challenging to achieve. Mobile revenue grew
by 16% in local currency with a similar performance
in our four markets. We registered more than
800,000 new mobile customers, with good
commercial performance in DRC, Ghana and
Rwanda and a stable situation in Senegal. Mobile
data saw an acceleration of its trend compared to
2014 with a 66% growth driven by Senegal and
Ghana. Finally, MFS continued to be increasingly
adopted as a substitute to cash and higher usage
contributed to 40% growth in 2015.
continued
● Tanzania
● DRC
● Ghana
● Chad
● Senegal
● Rwanda
39%
18%
14%
10%
10%
9%
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
53
Risk management
2015 was a year in which Millicom faced
the impact of two significant events:
Other key events during the year impacting
Millicom’s risk profile and strategy were:
(i) Currency value declined in many of
our key markets (including Colombia,
Paraguay and Tanzania). Currency
volatility is expected to be an
on-going risk.
(ii) In October 2015 Millicom voluntarily
reported potential improper payments
made on behalf of our Guatemalan
joint venture, highlighting the risk
of operating businesses in emerging
markets and our on-going
commitment to the highest ethical
business standards.
• Economic slowdown in certain Latin American
countries and general global economic
uncertainty.
• A marked worsening of the security situations
in El Salvador, Chad and DRC.
• Political uncertainty in countries that underwent
government elections.
Risk appetite
Millicom operates all of its business and generates
substantially all of its income in emerging markets.
Millicom does not have operations in any developed
market economies. Millicom’s business is therefore
exposed to a higher degree of risk, and potentially
different risks than telecommunications businesses
operating in larger, more established and mature
economies.
continued
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
54
Risk management
continued
Millicom’s speed of execution, innovation and
flexibility have contributed to its success. Millicom is
a significantly smaller group than many of its peers,
and operates within the constraints and limitations as
a result of our smaller scale. These include access to,
and cost of capital, financial resources in acquisitions
and in investing in innovation and growth.
As a consequence, Millicom’s risk appetite is higher
than many of its peers in the telecommunications
industry, and its risk profile wider than many
international businesses.
Risk Approach
Millicom recognises that there are risks in operating
our businesses, influenced by both internal and
external factors, some of which are outside our
control, and some which cannot be insured. 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 are operating effectively to manage risks
to an acceptable level (the ‘residual risk’).
Millicom has a risk management framework which
our business units and corporate functions utilise.
Key strategic and operating risks are assessed from
an overall Group perspective as well as individual
country and business units. Risk action plans 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 country
executives and key decision makers.
A network of risk officers is in place at headquarter,
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 Executive Team. The Audit
Committee, on behalf of the Board, reviews the
effectiveness of risk function activities on a regular
basis.
Risk Landscape
Millicom operates its businesses in emerging
markets in Central and South America and Africa.
The geographical diversification of these businesses
mitigates, to a certain extent, country specific
events or situations that impact the risks the Group
faces as a whole. However, our businesses remain
collectively exposed to the impact of regional and
global macro-economic conditions, as well as
continued
Risk summary
Political and regulatory
environment
Macro-economic conditions
Reputational risks and brand
protection
Technological change,
customer demands and new
business models
Robustness and reliability of
networks and IT systems
Third party risk
Control environment
Protecting customer data,
money, and respecting
data privacy
Talent management
Well-being and
safety of our people
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
55
Risk management
continued
industry developments. Certain inherent risks are
prevalent in many of these markets, over which
Millicom has no or limited control. The risks
described below are not the only risks to which
Millicom and the Group are exposed. Additional risks
that are not currently known to Millicom, or that
Millicom currently considers to be immaterial, could
have a material adverse effect on Millicom’s
business. The order in which the risks are presented
is not intended to provide an indication of the
likelihood of their occurrence or of their relative
significance.
Potential improper payments on behalf of the
Guatemala joint venture
On 21 October 2015, Millicom reported to law
enforcement authorities in the United States and
Sweden potential improper payments made on
behalf of the Group’s joint venture in Guatemala.
A special committee of the Company’s Board of
Directors made the decision to report in connection
with an independent investigation overseen by the
special committee and conducted by an
international law firm, with the support of the
Group’s management team. Any remedial actions
the Group may take as a result of its investigation,
or penalties imposed on the Group by law
enforcement authorities, could adversely affect
the Group’s business, financial condition or results
of operation.
As the investigation and its discussions with law
enforcement authorities are ongoing, we cannot
predict the ultimate outcome of the matter,
whether any remedial actions will be implemented
or the impact on the Group’s business, financial
condition or results of operations. Any
determination by law enforcement authorities that
the Group’s operations or activities are not, or were
not, in compliance with applicable laws could result
in the imposition of substantial fines, interruptions
of business, loss of partner relationships and other
legal or equitable sanctions, which could disrupt the
Group’s business and result in a material adverse
effect on the Group’s reputation, business, results of
operations or financial condition. Other internal or
government investigations or legal or regulatory
proceedings, including lawsuits brought by private
litigants, including Millicom’s shareholders, may also
follow as a consequence.
continued
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Risk management
continued
Political and regulatory environment (in particular licenses, tariff regulation, taxation and consumer protection laws)
Millicom’s revenue generating activities are all in emerging market economies. These markets are often subject to political and regulatory volatility, with policy making and
implementation, and enforcement of rules and law often lacking in transparency and predictability. Avenues for recourse are often limited or ineffective. The telecom sector, and
in particular high profile operators such as Millicom’s entities can be seen as an arbitrary source of income generation for governments, or a way in which indirect taxes can be
drawn from a wide section of the population. Millicom is exposed to changes in taxes (rates and applicability) in the countries in which it operates as well as those in its holding
company structure (in particular for dividends and other upstreaming).
Political and regulatory environment
Risk Evolution
Opportunities
Balancing risk with return
Positive political change can provide platforms
to improve the lives of our customers and
stimulate economic growth and support of the
telecommunications and cable industries.
Millicom has a politically neutral approach with no political
affiliations in any of the countries in which it operates. This
policy increases independence and reduces risks related to
change in political regimes.
Additional regulations often bring much needed
clarity and can enable operators to reset
product and service models to better suit
customer needs.
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 rate changes.
We actively engage with regulators and lawmakers directly or
through industry groups on legislative topics.
Political risks. Some of the countries we operate in
have volatile political environments. National
elections took place in two countries in 2015, and
will take place in three countries in 2016. In 2015,
both Guatemala and Tanzania elected new
presidents, both campaigns focused on anti-
corruption and social improvement.
Laws around business models (e.g. impacting
bundling handsets with services, expiry of minutes),
and regulations covering mobile financial services,
consumer protection, competition and data privacy
continue to evolve.
For example in 2014 Colombia introduced laws that
prohibit long-term mobile contracts, and in
Paraguay a law was passed that prohibited mobile
operators from setting expiry dates for usage of
phone credit.
continued
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Risk management
continued
Political and regulatory environment (continued)
Risk Evolution
Opportunities
Balancing risk with return
Licenses are becoming increasingly scarce and
expensive, although during 2015 we were able to
renew and/or obtain licenses and spectrum that we
were bidding for.
Diversification of our businesses (portfolio and
product mix) has reduced our dependence on one
or limited numbers of licenses and the geographical
spread of operations further reduces our exposure
to individual license renewal risk.
In established markets barriers for late entrants
limit competition to existing operators. As an
established operator in all of our markets we see
strong opportunities to acquire spectrum which
will enable us to follow our strategy of providing
consumers with more value added services.
Our preparation for license renewals and spectrum auctions or
allocations starts well in advance of expiry or availability. Our
approach focuses on legal requirements, our historic
compliance with license terms and conditions, as well as
amounts and sources of financing.
We have ongoing dialogue with governments and regulators
responsible for spectrum and licenses. We are regular
participants in industry groups and work with governments
in addressing mutual industry issues.
We actively support government programmes that link social
objectives with license acquisitions or renewals.
Proactive and early engagement with
appropriate governmental organisations can
result in positive contributions and
improvements in judicial and tax process,
reducing opacity and making for improved
business conditions.
We look to implement self-regulatory measures
in certain areas.
We have 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 guidelines
in setting transfer prices.
Our Legal and External Affairs teams regularly assess the
availability and strength of recourse measures both in-country
and through international methods as and when issues arise.
Tax and legal environments in many of our
countries remain underdeveloped. Transparency
in tax administration and judicial proceedings
continue to lag behind developed market
economies. There are some areas such as data
privacy or environmental protection where laws
do not currently exist.
For example, in June 2015, Millicom identified that
an incorrect filing related to one of its African
operations had been made in the commercial
register. As a result of that erroneous entry, the
register incorrectly indicates that shares in Millicom’s
operation were transferred to a third party.
continued
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Risk management
continued
Political and regulatory environment (continued)
Risk Evolution
Opportunities
Balancing risk with return
Indirect taxation and regulatory pressure
through tariffs, taxes and service penalties
continued to increase in 2015.
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 rate changes.
We constantly monitor and review potential changes in
regulations. Efficiency programme are sought in all aspects
of our business to offset the impact of newly introduced or
expected changes in taxes and regulations.
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 thereby react quickly to
changes.
We are operating businesses in 14 countries,
significantly spreading our 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
B2B services).
Anti-corruption compliance. All of our countries of
operation rank as high risk on the Transparency
International Corruption Perceptions Index (CPI).
Ensuring the ethical integrity of business
transactions, including compliance with laws and
regulations is at the heart of the principles and
values of Millicom. The inherent risk of corruption
coupled with a network of almost 16,000
employees, thousands of suppliers, business
partners and shareholders, means that the overall
risk to Millicom is high and must be managed
carefully in day-to-day business interactions.
Ethical and compliant business practice builds
stakeholder trust. A compliance based culture
adds reputational value, adds value and
confidence to stakeholders, and can be
a competitive advantage in many of our
markets.
Strong compliance programmes reduce
vulnerability and risk of bribery and
corruption related issues.
We take a clear stand against bribery and corruption in all of
our business dealings. We have a clear tone from the top with
zero tolerance on any and all matters of corruption. Through
clear polices, risk awareness training and monitoring activities
we ensure that all of our employees are aware of the risk to
them as individuals and to the Company and know how to act
if faced with the risk. Global Compliance and Global
Investigations work closely to follow up on all concerns raised.
We also work with our suppliers and other third parties to
ensure they have clarity on our principles and policies in this
area.
continued
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Risk management
continued
Macro-economic conditions (in particular currency fluctuations, GDP, inflation and consumer spending power)
The results of Millicom’s business activities are influenced by the macro-economic conditions in the emerging markets in which it operates. These conditions can be impacted
by both local and global economic conditions, and can directly and indirectly impact currency strength, customer demand, consumer spending power, taxation, regulation and
foreign currency control. Millicom is exposed to fluctuations in local currency exchange rates against its US$ reporting and dividend distribution currency in the countries in
which it operates as well as those in its holding company structure (in particular for dividend and other upstreaming). Millicom does not have operations in a ‘home’ market in
a developed stable economy.
Macro-economic conditions
Risk Evolution
Opportunities
Balancing risk with return
Currency valuation declines
against our US dollar reporting
currency were prevalent in many
of our countries during 2015.
We continue to see opportunities to refinance existing debt and
benefit from the relatively low cost of financing through global
debt markets.
Colombia has a relatively mature financial market with various
financing and hedging instruments available that could be used to
manage currency fluctuations in the income statement and cash
flow as our balance sheet is already fully hedged.
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.
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 or currencies.
We repatriate cash as early as possible and through different
means: royalties, dividends and management fees, supported
by appropriate agreements.
continued
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Risk management
continued
Macro-economic conditions (continued)
Risk Evolution
Opportunities
Balancing risk with return
Demand for the increasingly diversified range of our services from
higher value and target customers continues to increase, in
particular data and mobile financial services.
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.
We are continuously monitoring and refining affordability of
our services.
Operational efficiency management programmes 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 higher value customers and therefore should
enable us a higher resilience to economic conditions than the
telecom and cable industries on average.
We are developing opportunities in our B2B business reducing
dependence on individual consumers.
Macro-economic risks.
Fluctuating energy prices (in
particular oil), and currency
volatility continued to add to
economic uncertainty. In 2015
international remittance to many
of our markets increased, but
deteriorating security
environments continued to
impact GDP and economic
growth in many of our countries,
all factors contributing to
cautious consumer spending.
continued
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Risk management
continued
Reputational risks and brand protection
Millicom’s brand(s) including ‘Tigo’ are among its most significant and valued assets, and considered critical to market recognition in all of its operating markets. Failure to have
appropriate and effective protective and/or reactive measures to prevent, or limit exposure to brand and reputation damage could have a significant negative and long-lasting
impact on Millicom’s business, relationships with key stakeholders, and shareholder value. Failure to leverage Millicom’s brands to capitalise on new opportunities, to develop
consumer trust, and operate as a multi-service cross industry and continent provider may restrict growth of brand value.
Reputational risks and brand protection
Risk Evolution
Opportunities
Balancing risk with return
Brand equity. Millicom has a global brand
‘Tigo’ which it operates in all of its markets
for the majority of its products and services.
The strength of the Tigo brand is directly
correlated to its importance. As Millicom
expands the range of products and services it
delivers under the Tigo brand (including
mobile financial services) the severity of
impact of reputational and brand damage
increases.
Millicom’s brands have a high level of visibility and
strong reputation in all of our main markets.
Opportunities exist to leverage from local to regional
and/or global in many areas including cross and
intercontinental cooperation with content partners,
social media partners, suppliers and business
partners (including international money transfer
companies), as well as upsell new services.
We operate our businesses across multiple countries and
business units subject to various different regulations. This
diversification reduces our exposure to country specific issues.
Good 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 investors, customers, regulators and
non-governmental organisations in our markets as being closely
correlated. Our crisis management processes, and compliance
framework also take into account reputational issues.
continued
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Risk management
continued
Reputational risks and brand protection (continued)
Risk Evolution
Opportunities
Balancing risk with return
Reputation as a responsible company.
Multinational companies are under
increasing scrutiny over their business
practices. As a company listed in Sweden,
expectations are high on our ethical
standards and doing business the right way.
At the same time Millicom operates in
markets where legislation on social and
environmental issues may be lagging and
strong self-regulatory approaches are
needed.
continued
We have a big opportunity to be leaders in our
markets with a responsible business approach and
differentiate our brand in the eyes of consumers.
We operate a developed corporate responsibility
management system, with priorities defined based on
local needs and stakeholder concerns.
We also have an opportunity to attract socially
responsible investors with positive performance in
corporate responsibility.
Our approach is to be transparent about our corporate
responsibility performance and proactively engage with
external stakeholders.
For more information on our own environmental, social
and governance (ESG) related risks and initiatives, please
refer to the Corporate Responsibility section of this report
and the Millicom Corporate Responsibility Report 2015.
We regularly engage with key stakeholders to stay ahead
of issues that may concern them.
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Risk management
continued
Technological change, customer demands, and new business models
The mobile telephony industry has evolved significantly in the past few years. Emerging markets are undergoing fixed and mobile convergence, and the mobile space is rapidly
shifting from voice and SMS to data. Mobile financial services is emerging as a significant game changer in many markets. Innovation and differentiation is moving from
distribution channels to product and services, and few sizes fitting many is trending toward individual personalised services. Customers have an increasing range of alternatives
from which to communicate, access content and other services, in terms of how and from whom. This evolution has created a new playing field, one in which operators need to
rethink strategic positioning in the industry, and relationships with customers and competitors. Operators have an increasingly wide spectrum of business models and strategic
choices. Failure to effectively position or reposition strategic direction could have a significant impact on shareholder value and long-term viability.
Technological change, customer demands, and new business models
Risk Evolution
Opportunities
Balancing risk with return
Rapidly changing industry. Millicom
operates in an increasingly capital intensive
industry subject to rapid technological
change and competitive threats from
emerging technologies and business models.
The changes and customer needs are putting
additional pressure on operators, as payback periods
for new investments become shorter, increasing the
need to monetise data.
Capex is tightly controlled through a centralised spend
approval and monitoring system. Allocation of resources is
based on prioritisation across countries and service lines, and
directly linked to the overall strategic operation and financial
objectives of the Group.
Network capacity. Demand for improved
quality and the rapid uptake of mobile phone
services in recent years has put significant
pressure on mobile operators to expand
coverage, increase capacity, and provide faster
and more reliable services. Demand for mobile
based internet globally, and competitive
advantage has led to the need for rapid
deployment of 3G and 4G technology. Both
quantity and speed of data demand are
expected to continue to rise in future years,
with 5G networks and beyond.
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.
As customers evolve toward new lifestyle changing
solutions (above and beyond communication) we are
expanding our presence in cable and digital media
businesses and forging new partnerships
(e.g. Facebook and Deezer) to provide our customers
with new and improved experiences.
We actively engage our customers and potential customers
in consumer feedback experience programmes and look to
roll-out innovations between our markets.
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
launch of DTH in LatAm in 2014).
continued
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Risk management
continued
Technological change, customer demands, and new business models (continued)
Risk Evolution
Opportunities
Balancing risk with return
Content rights. Cable customers are
increasingly demanding access to controllable
content, such as video on demand, multiple
screen, and smart-TV. Rights to content, in
particular football, the predominant viewer
sport in many of our key markets, are
increasing in value.
Convergence of mobile with cable remains
a significant opportunity in most of our Latin
American footprint. Industry consolidation, network
expansion and demand for ‘to the home services’
including PayTV, broadband internet and M2M are
all factors that contribute to growth potential.
Our investments in content and service are based around
customer demand in each of our markets. We have a number
of operational models including partnering with content and
service providers such a TiVo or acquiring rights (e.g. football
rights in Bolivia and Paraguay).
Alternate technologies are changing the
way in which mobile customers consume
communication, information and
entertainment services. Traditional telecom
operators are experiencing a decline in voice
and SMS revenue.
A rapid increase in data consumption by
customers coupled with demand for
increased speed and cheaper smartphones
is characterising the industry.
Understanding the needs of customers and evolving
business models and offerings to suit is becoming
increasingly important to maintain revenue and
profitability.
We see significant potential in synergies from
combinations of cable, TV, and broadband services
with our mobile operations in many of our markets
(particularly LatAm and in Colombia).
Opportunities exist to partner with over-the-top
(OTT) content and service providers and use these
opportunities to strengthen our mobile customer
base and increase ARPU through providing the right
combination of data, voice and SMS, and other
content and solutions.
We take a customer centric approach to developing our
portfolio of products. We actively seek partnerships with
providers of content and services to further enable our
customer’s Digital Lifestyles. This allows rapid launch of
new features, minimises investment, and also sharing of
risk with our business partners.
continued
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Risk management
continued
Robustness and reliability of networks and IT systems
Millicom’s revenue generation is critically dependent on the quality, capacity, coverage, and operation of its fixed and wireless networks, and related information technology
systems and network operating centers. Any disruption in operation or quality, whether through technical issue, forced shutdown, interference (intentional or unintentional) or
any other reason, directly impacts Millicom’s ability to provide service and generate revenue from its customers and negatively impacts brand perception and value. Providing
quality service to existing and new customers is highly dependent on the robustness, reach and reliability of these systems, and therefore ensuring that suitable procedures and
controls are in place to maximise continuity of service is of critical importance.
Robustness and reliability of networks and IT systems
Risk Evolution
Opportunities
Balancing risk with return
Network availability. In most of our markets access
to communication, information and content has
shifted in recent years to be a critical part of
consumer lifestyles. These needs continue to grow,
and customers now expect continuous uninterrupted
service. Network availability and quality now more
than ever is a key factor in many customers choice of
mobile operator.
In addition, in many of Millicom’s countries, including
Colombia, consumer protection laws have been
introduced that penalise mobile operators for service
related issues such as call drops, customer service
delays, and customer complaints. Organisational
infrastructure is in place to monitor and levy penalties
against operators. Both service level requirements and
the level of monitoring of operators is expected to
increase.
continued
To develop and maintain quality networks
that help to obtain and retain customers,
and to build reputational strength in terms
of reliability and consistency within the
markets in which we operate.
We seek to balance our investment in maintaining and
upgrading our existing networks and expanding our
networks. We have rigorous processes and controls around
capital allocation that include assessment of relative
paybacks of specific investments across the Group.
A dedicated revenue assurance function detects and prevents
systems related issues that impact the bill to collect cycles
across all its businesses.
We have defined clear business continuity processes to apply
in situations where due to technical fault or weather
conditions our networks are affected. We regularly run tests
of this process.
We engage with the wider industry and other stakeholders on
freedom of expression to address forced shutdowns by
government demand. Millicom is a member of Telecom
Industry Dialogue and an observer of Global Network
Initiative.
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Risk management
continued
Robustness and reliability of networks and IT systems (continued)
Risk Evolution
Opportunities
Balancing risk with return
Quality of infrastructure. Many of the countries in
which we operate lack infrastructure or have
infrastructure in relatively poor condition.
We continue to look for partners to share
risks related to installation and operation of
our passive and active infrastructure.
Our network investment strategy is balanced between
capacity increase, geographical coverage, technology
advancement and security and stability.
Reliability of energy supply is a challenge as some
countries of operation lack any reliable electricity grid.
This also increases our CO2 emissions as we rely on
diesel generators.
In Africa we are seeking more reliable
sources of energy for tower sites including
hybrid battery solutions and solar energy.
Protecting infrastructure and services is a significant
risk area. Similar to protecting the life our people our
operations are subject many varying events including
natural environmental, theft & fraud, fire, terrorism as
well as hacking into our information.
Ensuring that we have contingency and
business continuity plans in place will assist
us in rapid response and remediation in the
event any risk materialise. Our customers
and other stakeholders are depending on
our services, particularly in times of need.
Vulnerability assessments are regularly performed and
a continuous improvement program in place.
We have in place business interruption and physical loss
insurance to reduce the financial impact of potential
disruptions.
Business continuity and crisis management is key to our
success. During 2015 this was tested by real crisis in several
markets (fuel starvation-Chad, Ebola across parts of Africa,
civil unrest-DRC).
Millicom has established robust business continuity and crisis
management processes and plans according to international
(ISO) standards. Every market has a professionally trained
and certified Business Continuity Management officer.
Millicom continues to improve its loss prevention record with
all operations showing significant improvement in their
insurance audit scores.
continued
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Risk management
continued
Robustness and reliability of networks and IT systems (continued)
Risk Evolution
Opportunities
Balancing risk with return
Climate change risk and natural disasters. Extreme
weather situations are becoming more common with
climate change and do affect some of our operations.
Some countries are located in areas prone to
earthquakes. These all may affect our ability to
provide our services.
Our services are essential in connecting our
customers to emergency services and each
other at times of natural disasters. Therefore
our ability to continue providing our services
can support communities in quickly
responding to emergency situations.
As part of our business continuity management (BCM)
strategy, we have conduct risk mapping, impact analysis and
crisis response assessments, and each operation has
a disaster recovery plan. Climate change resilience is one of
the risks in our risk map, and is fully integrated in our crisis
response and BCM approach.
continued
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Risk management
continued
Third party risk
Millicom’s third parties including suppliers, contractors, joint venture partners, investors in its associate entities, and revenue sharing partners may have different business
practices and values than Millicom.
Evolution of technology, customer demands and services has added significant value to customers in recent years. The emergence of mobile banking transactions and
usage of handsets and mobile devices in areas of greater data sensitivity has highlighted risks and requirements to safeguard customer data and protect customer money.
Third party risk
Risk Evolution
Opportunities
Balancing risk with return
Dependence on third parties. Millicom is increasingly
dependent on third parties in operation of its
businesses. These third parties include joint venture
partners, investors in Millicom’s associate entities,
suppliers, and partners in joint delivery of products
and services to customers (such as outsourced network
and infrastructure providers).
Millicom interacts on a regular basis with regulatory
authorities, central and local government authorities
including taxation and customs authorities.
Millicom has limited ability to directly control the
activities of these third parties, but by association
could be negatively impacted by their actions, should
those actions be contrary to the business integrity or
ethical standards that Millicom and its key
stakeholders require. Any such actions could hamper
or prevent Millicom from pursuing its business
objectives, or could significantly damage Millicom’s
brands and reputation.
continued
The extent and scale of Millicom’s operations
continues to increase through both organic and
acquisition growth. This provides Millicom with
further opportunities to partner with selected
suppliers on a regional or global level, increase
purchasing power and leveraging efficiency in the
roll-out of common systems, platforms, products and
services across its footprint.
In developing its business relationships Millicom
employs processes at selection, renewal and ongoing
monitoring of events and transactions that may
directly or indirectly impact Millicom, and Millicom
stakeholder value.
Reliance on individual or groups of suppliers is
monitored on a regular basis, including financial
health and reputation checks.
Millicom’s suppliers are obliged to conform to
Millicom’s Supplier Code of Conduct. In 2015, we have
begun assessments of our suppliers’ ethical
performance with the Ecovadis sustainability
monitoring platform. We communicate results of
these assessments in our Corporate Responsibility
report. Through our responsible supply chain work, we
oversee our third party interactions on an on-going
basis to ensure their activities do not negatively
impact Millicom or our employees.
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Risk management
continued
Third party risk (continued)
Risk Evolution
Opportunities
Balancing risk with return
Outsourcing of infrastructure and services. Millicom
has sold its tower network to third party tower
companies in many of its markets, and has outsourced
related services across the entire African footprint.
Risks associated with outsourcing are expected to
increase as further outsourcing initiatives are
undertaken.
Our tower sharing and network maintenance
outsourcing arrangements have reduced (shared)
many of the direct operational risks connected to
operation of cell sites.
These arrangements increase efficiencies and reduce
operating costs, as well as enabling Millicom to focus
on its customers and their needs.
Millicom manage related third party risks through
ongoing management and monitoring of contractual
obligations, assurances and commitments and in its
selection processes, including specific health and
safety training requirements and other ethical
guidelines.
continued
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Risk management
continued
Control environment
Millicom conducts its business in multiple countries with many employees, suppliers and other stakeholders undertaking many different activities and roles. A strong control
environment is an essential part of ensuring that these activities are performed efficiently, effectively, ethically and consistently with Millicom’s standards and objectives. Any of
the following items could negatively impact execution of these activities; insufficient or inadequate policies and procedures; lack of clarity or consistency in policy and
procedures; failure in application of policy and procedures; insufficient control and compliance processes; lack of structured governance and oversight.
Control environment
Risk Evolution
Opportunities
Balancing risk with return
A comprehensive and strong control environment is
an essential element of developing the business,
protecting and enhancing value.
Well positioned key controls can reduce cost,
inefficiency and waste, as well as maximise revenue
and cash generation opportunities.
Opportunities exist in Millicom to further develop and
enhance processes and increasingly sophisticated
and standardised controls.
Millicom follow a risk based approach toward
developing and implementing processes and control
activities. Developing and high risk businesses or parts
of the business are subject to a higher level of skill
support, and validation. Millicom use a Group-wide
maturity scale to benchmark and target control
improvements, and in the allocation of resources. This
approach is supported with a tone-at-the-top culture
focused on responsible and profitable growth.
Complexity and scale of businesses. Millicom’s
portfolio of businesses has undergone quite some
change in recent years, including the merger of UNE,
disposal of Mauritius, and acquisition of Zantel. At the
same time, the introduction of new products and
services, expansion and development of existing
businesses such as mobile financial services, B2B.
Home and machine-to-machine has widened the
number of activities and processes within the Group.
This expansion and broadening of business activities
has increased the need for comprehensive and robust
processes and procedures, with relevant control and
verification activities. This trend is likely to continue.
continued
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
71
Risk management
continued
Protecting customer data, money, and respecting data privacy
Networks and systems need to be sufficiently protected and controlled to ensure safety and security of information, including sensitive customer data and records. Controls need
to be in place to ensure that our infrastructure is not compromised/interfered with to prevent fraudulent or malicious activity and/or service interruption. Information security,
data protection and privacy issues are increasingly placing a burden of compliance and responsibility on companies (particularly those that handle potentially sensitive customer
data). Many governments in Millicom’s markets are seeking ways of monitoring the communication activities of its citizens and seeking to use the networks of mobile operators
to do so. Regulations are rapidly changing and the burden of compliance will continue to increase (in terms of protection reporting requirements).
Protecting customer data, money, and respecting data privacy
Risk Evolution
Opportunities
Balancing risk with return
Data Security. Risks and concerns over data privacy,
information security and access to networks and
devices by governments and regulators are increasing
globally. These risks are to a lesser extent in Millicom’s
markets, where legislation and consumer protection
laws are still developing.
Many governments in Millicom’s markets are seeking
ways of monitoring their populations with compulsory
SIM registrations, and controlling activities of its
citizens, particularly in times of political change, often
accompanied by social action or unrest. Increasingly
governments are seeking to use the networks of
mobile operators to do so.
The relationship telecommunications and
broadcasting companies have with customers is
evolving as the level of information exchanged and
retained increases.
Millicom is aware of the significant impact relating to
the intellectual theft may have on its business. As such
the Group has embarked on a robust programme in
order to defend against information security breaches.
Competitive advantage can be obtained and
maintained through reputation for secure
management of customer information and funds.
Opportunities exist to contribute to societal
development such as with SMS based birth
registrations in certain countries in Africa.
We operate a system of self-regulations through our
policy framework on information security.
In 2016 we have begun a Group-wide process to
harmonise our approach to customer data protection.
When handling requests from law enforcement
authorities for customer data and interception of
communications, Millicom applies a Group level
guideline to ensure the appropriate legal reviews and
protection of customer privacy throughout the
process. A public version of this guideline is available
on our website.
continued
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Millicom Annual Report 2015
72
Risk management
continued
Protecting customer data, money, and respecting data privacy (continued)
Risk Evolution
Opportunities
Balancing risk with return
As mobile financial services expand and become a
key element of that relationship, the need for trust in
systems and processes that Millicom deploy to
manage and protect customer’s money is essential.
Processes and controls in our mobile financial services
businesses are generally subject to a higher degree of
validation and verification than elsewhere in the
business.
Competitive advantage can be obtained and
maintained through reputation for secure
management of customer information and funds.
Significant investment of has been made into
improved controls through systems and tools to
monitor transactions and activities within the mobile
services business.
Protecting mobile money. Our mobile financial
services products are now well established in most of
our markets with over 17% of our mobile customers as
active users by the end of 2015. While providing an
excellent means of improving the lives of our
customers, the suite of services we offer comes with a
set of responsibilities. These responsibilities are toward
our customers, agents and dealers, in safeguarding
their funds, and the distribution channels for efficient
and accurate delivery, as well as to regulatory
authorities in ensuring appropriate and authorised use
of funds (anti-money laundering and counter terrorism
financing activities).
continued
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Millicom Annual Report 2015
73
Risk management
continued
Talent management
Execution of Millicom’s strategy requires talented, motivated and committed people. Qualified and experienced people are often in short supply in developing countries and
can be difficult to identify and retain. Lack of support and training of key people may lead to turnover, reduced morale or underperformance. Lack of succession planning can
lead to knowledge and relationship gaps which could negatively impact a number of key areas of the business, inhibit growth, morale, and operational performance. Failure
to adequately align compensation packages to performance and strategic objectives could result in lack of incentives or disincentives that encourage unwanted behaviour.
Talent management
Risk Evolution
Opportunities
Balancing risk with return
Significant opportunities exist to stabilise turnover
through a combination of improved talent
management programmes, including compensation
clearly aligned to strategic objectives, training, and
succession planning.
Millicom use a variety of internal and external
measures to align Group, operating business and
personal performance and achievement of objectives
in its reward based compensation strategy.
Millicom’s Board and its Committees take an active
role in the recruitment of Executive Management, and
oversee the performance of the CEO.
In recent years Millicom has experienced a high rate
of turnover of senior management and staff in both
central functions and in its countries.
This risk has declined over 2015 and is expected to
decline further as the foundations of the organisational
model set during 2015 continue in 2016 and we focus
on our corporate culture development.
In addition, a reset of many of the key human
resource related initiatives around development,
training and performance management are currently
being deployed.
continued
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Millicom Annual Report 2015
74
Risk management
continued
Well-being and safety of our people
The vast majority of Millicom employees live, work and travel to in emerging market economies. Many of these countries have security issues, including civil unrest, armed and
organized criminal activity, and to a lesser extent threat of terrorism. As a result, Millicom employees in carrying out their daily jobs are exposed to situations which may threaten
their personal security. In addition, the health and safety policies and procedures and legal environments in many of these countries are under underdeveloped, contributing to
a culture of lower concern or awareness regarding risk.
Well-being and safety of our people
Risk Evolution
Opportunities
Balancing risk with return
Millicom’s markets are often subject to issues of
personal security, including social and civil unrest,
threats from terrorism or organised crimes
organisations. In addition, as a result of sometimes
poor infrastructure or undeveloped health and safety
regulations and regimes, personal security can often
be a significant issue for our people and those of the
third parties that support our activities.
Millicom people are at the heart of its success story.
The contributions of many hard working people
following common goals and objectives are why
Millicom is where it is today. The health, safety and
security of our people is a foremost concern in the
strategies adopted and implementation methods.
Millicom manages the security, health, safety and
wellbeing of staff based on international (OHSAS)
standards, industry best practice as well as advice and
support from local authorities.
With a small central security and safety team, we have
empowered and trained operational teams to deliver
compliance with the Group standards. Every market
has a professionally trained and certified physical
security and health and safety officer.
All our third party partners are bound by contract to
abide by Millicom Group security and safety
standards.
2015 saw Colombia certified to OHSAS 18001 and
several other country operations on the verge of
achieving the same.
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
75
Financial review
2015 was a good year
operationally, as we
focused on profitable
and responsible growth
combined with efficiency
measures to enhance
margins and improve
cash flow.”
Tim Pennington
Chief Financial Officer
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
76
Financial review
continued
Key financial highlights of the year1
US$m
Revenue
2015
2014
% change
6,730
6,386
5.4%
Organic growth2
7.4%
9.4%
Adjusted EBITDA3
2,266
2,110
7.4%
Adjusted EBITDA margin
33.7% 33.0%
Capex4
1,273
1,206
5.5%
Capex % of revenue
18.9% 18.9%
Net debt
4,295
4,091
7.4%
Operating free cash flow5
Equity free cash flow6
Adjusted EPS ($)7
Dividend per share ($)
858
235
0.05
2.64
588
(43)
1.82
2.64
45.9%
N/M
N/M
–
1
2
3
4
5
6
7
Guatemala and Honduras businesses fully consolidated. 2014 restated for the effects of the
finalisation of UNE purchase accounting.
Organic growth represents year-on year-growth in local currency (includes regulatory
changes, excludes the impact of exchange rate changes and excludes UNE until Q4 15).
Service revenue is defined as group revenue excluding telephone & equipment sales
Adjusted EBITDA is defined as reported EBITDA excluding restructuring and integration
costs and other one-off items – See page 77 for reconciliation.
Capex excludes spectrum, license costs and capitalised content costs
EBITDA less net cash capex (excluding spectrum and licenses), plus change in working
capital and other non-cash items, less taxes paid.
Operating Free Cash Flow less interests paid (net), less advances for and dividends to non-
controlling interests.
Basic EPS adjusted for non-operating items.
Group revenue was $6.73 billion, up 5.4%.
The organic growth in constant currency was 7.4%
(with LatAm growing 6.0% and Africa by 14.1%)
whilst service revenue was up 5.8%.
In 2015 we experienced significant local currency
declines against the US dollar, particularly in
Colombia, Paraguay and Tanzania, which reduced
revenue by more than $900 million.
With the merger of UNE and significant adoption of
data, our revenue mix continues to move away from
pure mobile voice and SMS revenue. In 2015, Cable
and Digital Media revenue represented 23.6% of
Group revenue (2014: 15.2%) of which fixed B2B
represented 9.0% of total revenue (2014: 5.5%).
Growth in data revenue continues to be strong and
more than offset the decline in SMS as customers
adopt new forms of communication. The appetite
for smartphone adoption remains strong and a
significant contributor to the group revenue, driving
data growth up 39.0% year-on-year in local currency.
continued
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Millicom Annual Report 2015
77
Financial review
continued
Mobile data revenue contributed 16.7% of the total
revenue (2014: 14.3%). Additionally, the rapid
expansion of our cable footprint has seen the fixed
Home business increase strongly, growing 60% over
the year mostly due to UNE.
2015 was a good year operationally, as we focused
on profitable and responsible growth, combined
with efficiency measures to enhance margins and
improve cash flow. Full year EBITDA at
$2,178 million was 4.1% higher than last year
thanks to the full consolidation of UNE compared to
four and half months in 2014. At constant currency,
EBITDA grew by 17.1%.
There were $87 million of restructuring and
integration costs and other one-off charges.
Adjusting for these items EBITDA was
$2,266 million up 7.4% with a margin up 70 basis
points at 33.7%. The key driver of that improvement
is Colombia demonstrating the success of our
merger and continued efficiencies at the
headquarters. The one-off items include $33 million
of integration charges at UNE (compared to
$3 million in 2014), $18 million of provision for bad
debt in Guatemala, $15 million of restructuring of
our Africa businesses ($9 million in 2014) and
$17 million of tax adjustments.
Reconciliation from Operating Profit to
Adjusted EBITDA
US$m
Operating Profit
2015
2014
791
924
Depreciation and amortisation
1,321
1,158
Loss (gain) on disposal/write down
of assets, net
EBITDA
66
11
2,178
2,093
EBITDA as a % of revenue
32.4%
32.8%
Restructuring, integration costs
and other one-offs
87
16
Adjusted EBITDA
2,266
2,110
Adjusted EBITDA as a % of revenue
33.7%
33.0%
Balance sheet capital expenditure (excluding
spectrum and licence costs) for the year was
$1,273 million including $1,036 million in Latin
America (+16%) and $242 million in Africa (-23%).
We recorded $28 million ($14 million in Q4 2015) of
continued
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Millicom Annual Report 2015
78
Financial review
continued
integration Capex related to our merger in
Colombia. In addition, we spent $47 million in
spectrum and licence renewals (of which $31 million
in Bolivia in licence renewal and $15 million in
Paraguay on 4G spectrum with an additional
$30 million to be charged in Q1 2016).
The Group gross debt amounted to $5.38 billion
(including $335 million of finance leases), up from
$4.92 billion (as restated) as of end of 2014. Our total
net debt was $4.29 billion compared to $4.09 billion
(as restated) as of 31 December 2014. The
outstanding exposure of the Group’s debt guaranteed
by MIC S.A. was $643 million at the end of the year.
Overall net debt/EBITDA, based on the last
twelve months EBITDA, was 1.97x at 31 December
2015 (including Guatemala and Honduras).
Proportionate net debt to EBITDA was 2.32x.
The full year Operating free cash flow increased by
45.9% to $858 million thanks to a combination of a
higher EBITDA, a lower Capex paid and a decrease in
taxes paid. The Equity free cash flow significantly
improved to $235 million mainly because of the
reasons stated above and of less dividends paid out
to non-controlling interests in 2015. This represented
a dividend cover of 89%.
Free Cash Flow
US$m
Adjusted EBITDA
Restructuring, integration costs and
other one-offs
EBITDA
2015
2014
2,266
2,110
(87)
(16)
2,178
2,093
Net Cash Capex (excluding spectrum
and licenses)
(1,149)
(1,204)
Change in working capital and other
non-cash items
81
79
Operating cash flow
1,110
968
Taxes paid
(252)
(380)
Operating free cash flow
858
588
Interest paid, net
(354)
(331)
Free cash flow
504
257
Advances for and dividends to
non-controlling interests
(269)
(300)
Equity free cash flow
235
(43)
continued
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
79
From 31 December 2015 onwards, Millicom will
account for its investments in Comcel and Celtel
under the equity method and thus will report its
share of the net income of each of these businesses
in the income statement starting 1 January 2016.
For the purpose of comparison and to provide users
of this financial review a full understanding of the
financial condition of the Group, the financial
information presented in this section is on a pro
forma basis as if the Honduran and Guatemalan
businesses continue to be fully consolidated.
Further information on the accounting implications
of the deconsolidation are provided in notes to the
consolidated financial statements.
continued
Financial review
continued
The EPS was 5 cents for the full year 2015. As in
2014, we again returned $264 million to
shareholders through dividends. At the AGM to be
convened on 17 May 2016, the Board will again
propose an ordinary dividend payment of $2.64 per
share.
Scope changes in the Group
UNE has been consolidated for a full year in 2015
compared to 4.5 months in 2014.
In October 2015, Millicom completed the acquisition
of 85% of Zanzibar Telecom Limited (“Zantel”).
In October 2015, Millicom and Helios Towers Africa
(“HTA”) signed an agreement whereby Millicom
owns 28% of shares in HTA (24% on a fully diluted
basis) following a shareholding exchange. Millicom
has exchanged shares which were previously held in
HTA’s tower companies in Ghana, DRC and
Tanzania, into shares in HTA’s parent company and
retains significant influence over HTA.
On 31 December 2015, the existing call options with
local partners lapsed and under IFRS 10 and 11,
Millicom deconsolidated its investments in Comcel
(Guatemala) and Celtel (Honduras). This has
resulted in a non-cash negative value adjustment of
$391 million.
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
80
Financial review
continued
Performance
US$m
Revenue
2015
2014
% change
6,730
6,386
5.4%
Gross profit
4,876
4,692
3.9%
Gross profit margin
72.5% 73.5%
Operating profit
791
924
(14.4)%
Operating profit margin
11.8% 14.5%
Profit (loss) before taxes
(153)
3,036
N/M
Charge for taxes
(291)
(256)
(13.7)%
Net profit
attributable to owners
(559)
2,643
N/M
Gross profit
The gross margin declined by one percentage point
to 72.5% mostly due to an increase in the level of
bad debt arising on B2B (from UNE in particular),
postpaid clients and an $18 million provision for bad
debt from a large contract in Guatemala.
Operating profit
Operating expenses increased by $99 million or
3.8% compared to 2014 due to the first full year
consolidation of UNE (only four and half months in
2014) as well as $69 million of one-off items
($16 million last year) including $48 million of
restructuring and integration costs (UNE for
$33 million, the rest from Africa). Corporate costs
declined significantly to $210 million, $48 million
lower than last year, reflecting tighter cost control.
Depreciation and amortisation was $1.32 billion,
14.1% higher than 2014 primarily due to UNE’s full
year consolidation.
Other operating expenses of $66 million are
$55 million higher than 2014 after an impairment
of $53 million related to a write down of the
businesses in Senegal.
Operating profit was consequently down by 14.4%
to $791 million.
continued
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
81
Financial review
continued
Profit (loss) before tax
Net financial expenses at $420 million were
$16 million or 4.0% higher than 2014 mainly due to
$17 million of one-off expenses related to the early
redemption of the El Salvador bond in March 2015.
Other net non-operating expenses of $624 million
largely represent a non-cash loss on deconsolidation
of Guatemala and Honduras for $391 million (gain
on revaluation of $2,250 million in 2014) and
currency losses of $304 million partially offset by
positive changes in the fair value of put options of
$124 million.
The net gain from associates and joint ventures of
$100 million resulted from a $147 million book value
gain following the recent share exchange of our
shareholding in Helios Towers Africa, more than
offsetting the losses from our investments in AIH
and LIH (e-commerce ventures).
Tax
Tax charges at $291 million were up $35 million
compared to 2014 but excluding a non-cash charge
of $80 million (mainly from a write-down of
deferred tax assets at the Group level), tax charges
were down by $45 million reflecting lower tax
charges in Colombia and a change in the profit mix
of the operations.
Net profit
Net loss in 2015 attributable to equity holders of the
Millicom Group was $559 million compared to a net
profit of $2,643 million in 2014. The change is
largely due to the non-cash loss on deconsolidation
of Guatemala and Honduras, currency losses and
impairment of our operation in Senegal.
Non-controlling interests declined from $158 million
to $115 million mostly due to increased losses in
Colombia.
As a result of the above effects, loss before tax
amounted to $153 million.
continued
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
82
Financial review
continued
Currency movements vs. US$
l
a
a
m
e
t
a
u
G
s
a
r
u
d
n
o
H
a
u
g
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a
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i
N
a
c
i
R
a
t
s
o
C
a
i
v
i
l
o
B
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
continued
i
a
b
m
o
o
C
l
y
a
u
g
a
r
a
P
a
n
a
h
G
d
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/
l
a
g
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n
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S
a
d
n
a
w
R
i
a
n
a
z
n
a
T
● Closing 2015 Var %
● Average 2015 Var %
Overview | Strategy | Performance
Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
83
Financial review
continued
Cash flows
US$m
2015
2014 % change
Cash flow from operating
activities
1,651
1,458
+193
Cash flow from
investing activities
Cash flow from
financing activities
(1,244)
(276)
(968)
(84)
(1,368)
+1,284
Cash and cash equivalents
937
694
+243
Cash flow from operating activities
Net cash provided by operating activities was up by
$193 million at $1,651 million in 2015, compared to
$1,458 million in 2014. This is mainly due to an
improvement of $85 million in EBITDA and a
decrease in taxes paid of $128 million, partly offset
by an increase in interests paid of $27 million.
Cash flow from investing activities
Net cash used in investing activities was
$1,244 million, or $968 million higher than in 2014.
2014 was impacted by the release of a $800 million
pledged deposit related to UNE acquisition and a
$175 million proceeds from the disposal of Emtel
Mauritius and ATC Colombia. 2015 has been
affected by a decrease in property, plant and
equipment spend by $109 million and cash used for
the acquisition of subsidiaries, joint ventures and
associates.
Cash flow from financing activities
Net cash used by financing activities was $84 million
in 2015, compared to $1,368 million in 2014. In 2015,
we distributed $264 million to shareholders in
dividends ($2.64 per ordinary share), and repaid debt
of $1,392 million while raising funds of $1,880 million.
The remaining difference relates to the $860 million
deposit that was used to pay liabilities of the UNE
Companies as well as acquisitions of non-controlling
interests for $39 million. Advances and dividends to
non-controlling interests also decreased by
$31 million compared to 2014.
Cash position
As a result of the cash flow movements described
above, the net cash inflow in 2015 was $243 million,
compared to a spend of $215 million in 2014. The
Millicom Group had closing cash and cash
equivalents balances of $937 million at the end of
2015 compared to $694 million at the end of 2014.
continued
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Millicom Annual Report 2015
84
Financial review
continued
Assets, liabilities and equity
US$m
2015
2014 % change
Intangible assets, net
4,835
5,515
(680)
Tangible assets, net
4,236
4,751
(515)
Investments in joint
ventures and associates
Cash and cash equivalents
and restricted cash
363
274
+89
1,083
822
+261
Other (non-)current assets
1,888
2,056
(168)
Total assets
12,405
13,418
(1,013)
Equity attributable
to owners
3,285
2,339
+946
Non-controlling interests
1,128
1,391
(263)
Debt and financing
5,385
4,923
+462
Other (non-)
current liabilities
2,607
4,765
(2,158)
Total equity and liabilities
12,405
13,418
(1,013)
Intangible assets
Intangible assets decreased during the year as an
effect of the non-cash losses on the deconsolidation
of Guatemala and Honduras of $391 million,
currency losses of $300 million and amortisation
charge of $246 million, partly offset by the gross
additions of $194 million and the change in the
composition of the Group for $84 million.
Tangible assets
Tangible assets decreased during the year as an
effect of the depreciation charge of $1,075 million,
currency losses of $547 million, impairment charge
of $39 million (Senegal mainly), partly offset by the
gross additions of $1,103 million and the change in
the composition of the Group for $40 million.
Investment in joint ventures and associates
Investment in joint ventures and associates
increased by $89 million, mainly due to the
$147 million gain recognised on the reorganisation
of our investment in HTA, partly offset by the losses
from our investments in AIH and LIH (e-commerce
ventures).
continued
Overview | Strategy | Performance Review of operations – Latin America Review of operations – Africa Risk management Financial review
Millicom Annual Report 2015
85
Financial review
continued
Equity and non-controlling interests
Equity attributable to the owners of the Group has
increased by $946 million mainly because of the
derecognition (through equity) of the put option
liabilities related to Guatemala and Honduras for
$2,135 million, offset by the loss for the year of
$444 million, currency losses of $335 million and
$264 million of dividend declared in 2015. Non-
controlling interests have decreased by $263 million
mainly due to the effects of dividends declared in
2015 of $244 million and changes in the
composition of the Group of $27 million.
Debt and key financing activities
At 31 December 2015, the group gross debt
increased by $462 million, due to the effects of the
issuance of the $500 million 6% fixed interest rate
bond in March 2015, additional debt raised to fund
the Zantel transaction and its finance leases and
currency losses. In addition we issued debt
equivalent to $200 million in Bolivia and Paraguay
in local currency in 2015. This was partially offset by
the early redemption of the outstanding
$311 million of the $450 million bond issued by
Telemóvil Finance Co. Ltd in 2010.
As of end of December, 68% of group debt was at
fixed rate and 30% was in local currency (or pegged
to hard currency). Approximately 47% of the gross
debt in the operations was denominated in local
currency. The average maturity of our debt stood at
5.9 years and the Group has around $225 million of
debt maturing in the next 12 months. The average
cost of debt was 6.1% (excluding finance leases).
Other (non-)current assets and (non-)current
liabilities
Other (non-)current liabilities show a decrease of
$2,158 million that is mainly due to the
derecognition (through equity) of the put option
liabilities related to Guatemala and Honduras for
$2,135 million.
Overview | Strategy | Performance Overview
| Strategy
| Performance
Millicom Annual Report 2015
86
Further information
For further information about our corporate governance and detailed financial performance see our
expanded Corporate Governance Report, the Directors’ Report and audited Consolidated Financial
Statements of the Group for the year ended 31 December 2015.
A copy of this report can be downloaded from our website using the following link:
www.millicom.com/reporting2015
Selected awards and achievements throughout the year
Country
Awards and achievements
Colombia
• TigoUNE amongst the 10 most valuable brands in Colombia, by BRANDZTM Top 20 most
valuable Latin American Brands 2015.
• Tigo Music recognised as the no. 1 streaming music service in Colombia, BRANDZTM 2015.
Bolivia
• Second Place in Best Workplaces Bolivia, Great Place to Work 2015
• Tigo Sports – First Place Sports Channel, Maya Awards, 2015
• Tigo – Best Telecom Company, Maya Awards, 2015
El Salvador
• Tigo Money El Salvador, Award for best MFS deployment in LatAm in M2Payment awards in 2015
• Winner of best MFS deployment, Global Payment Awards in 2015
Tanzania
• Tigo Pesa won Most Innovative Service Award, AfricaCom 2015
Ghana
• CEO of the year ‘Roshi Motman’ – AfricaCom
• Best Customer Service – Mobile Telecommunications – Ghana Customer Service Awards
• Best Innovative Product ‘Tigo Music’ – Ghana Telecom Awards
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Keep in touch with Millicom’s progress
throughout the year on our website
and social media.
– Latest news
– Financial results, publications
and presentations
– Financial calendar
– Who we are
– What we do
– Where we operate
– Our responsibility
www.millicom.com
Corporate and registered office
Millicom
2, rue du Fort Bourbon
L-1249 Luxembourg
Grand Duchy of Luxembourg
Postal address:
Millicom
B.P.2312
L-1023 Luxembourg
Grand Duchy of Luxembourg
Tel: +352 27 759 101 Fax: +352 27 759 901
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