Millicom International Cellular Annual Report 2016

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FY2016 Annual Report · Millicom International Cellular

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Creating digital
communities

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Creating digital
communities

We are a leading telecommunication and media company
focused on emerging markets. We operate in 13 countries
across Latin America and Africa. A young population and
a growing middle class provide huge opportunities for us
to deliver The Digital LifestyleTM.

We are building world-class mobile, mobile data and cable
technology for our customers. We build responsibly and
profitably for investors and we are creating the digital
innovation to support the communities where we operate.

Integrated reporting
This year we are publishing our first integrated Annual Report that brings together our
corporate responsibility and annual reports. It is a natural evolution for us that reflects
both the strong social and economic impact of our products and services on our
markets and how we continue to embed responsible business practice within our
business processes. Our reporting is also in line with our commitment to transparency
and is a key element of building trust with our shareholders and wider stakeholders.

Overview
page 1

Strategy
page 13

Performance
page 25

Millicom at a glance

Chief Executive Officer’s review

Chief Financial Officer’s review

Market overview

Executing our strategy

Risk management

Chairman’s statement

Measuring progress
against strategy

Latin America performance review

Our business model

How we manage our
corporate responsibility

Governance

Chairman’s Report

Directors’ Financial
and Operating Report

Shareholder and
Board governance

123 Management governance

127 Management responsibility

statement

Africa performance review

Corporate responsibility
performance review

Financials

129 Independent auditor’s report

130 Introduction

135 Consolidated statement of income

136 Consolidated statement of comprehensive income

137 Consolidated statement of financial position

139 Consolidated statement of cash flows

140 Consolidated statement of changes in equity

141 Notes to the consolidated financial statements

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Millicom at a glance

We provide fixed and mobile communications services,
cable and satellite TV, Mobile Financial Services (MFS)
and local content, such as music and sports, to more than
57 million customers via our main consumer brand TIGO®.

At TIGO BUSINESS™, we deliver digital solutions
for governments, multinationals, large corporations
and small and medium sized businesses.

Our mission is to lead the adoption of The Digital Lifestyle™
in our markets and, by doing this, we will empower
customers, employees, partners, communities and
societies to advance in life and find joy.

Mobile
Mobile data
Voice
SMS
Mobile Financial Services

Countries
Corporate Offices

Revenue split by region:

86% Latin America
14% Africa

What we do in Latin America

Home
PayTV
Broadband internet
Direct-To-Home (DTH) TV

Bolivia, El Salvador,
Guatemala, Honduras,
Paraguay
Colombia

Costa Rica
Nicaragua

Mobile, B2B,
Home, MFS

Mobile, B2B,
Home
Home, B2B
B2B

What we do in Africa

Chad, Ghana, Rwanda,
Senegal, Tanzania

Mobile, B2B,
MFS

Millicom Annual Report 2016

Business
(B2B)
Fixed & mobile solutions
Data centers
Cloud services
M2M
Other services

Overview

Strategy

Performance

Governance

Financials

Millicom at a glance – continued

Our year in numbers1
The following dashboards highlight the year’s key figures across financial,
operational and corporate responsibility.

Revenue US$m

Adjusted EBITDA margin2 US$m

Revenue US$m

-0.4% organic growth2 35.6%

2015 US$6,572m

2016 US$2,225m

2016 US$6,249m

Home as a % of LatAm revenue

Mobile data users3

18.7% all technologies

2016 US$1,002m

2015 US$983m

36.0% penetration rate

2015 18.0m

2016 21.0m

OCF growth (EBITDA – Capex)2 US$m

ROIC2 % excluding corporate

22.7%

2016 US$1,141m

2015 US$930m

16.0%

2016 16.0%

2015 15.5%

Employees4

17,985 Read more on

our people
see pages 21-22

Women in senior management

29% Read more on

diversity
see pages 74-75

Senior managers recruited locally

86% Read more on

our people
see pages 21-22

Absolute reduction in carbon emissions

Read more on
reducing our
environmental
footprint
see pages 70-73

Employees who have acknowledged
the Code of Conduct

81% Read more on

compliance
see pages 67-69

Strategic suppliers who signed the
Supplier Code of Conduct

79% Read more on

responsible
supply chain
management
see pages 78-79

Footnotes:
1

GuatemalaandHondurasbusinessesfullyconsolidated.See‘Additionalinformation’onpages197to200for
reconciliationwithIFRSnumbers.Thecomparative2015financialinformationhasbeenre-presentedasaresultofthe
classificationofouroperationsinDRCasdiscontinuedoperations(inaccordancewithIFRS5).
AlternativeperformancemeasuresusedinthisAnnualreportarenon-GAAPmeasuresthatarepresentedtoprovide
readers withadditionalfinancialinformationthatisregularlyreviewedbymanagementandusedtomakedecisionsabout
operatingmatters.ItshouldnotbeviewedinisolationorasanalternativetotheequivalentGAAPmeasure.See“Additional
information”onpages197to200fordefinitionsandreconciliationstotheclosestrespectiveequivalentIFRSmeasures.
PenetrationratecalculatedasMobileDatasubscribersdividedbyTotalMobileSubscribers
IncludingTigoNicaragua.Emtelcoheadcountareexcludedfromthisreportandanyinternalreportingbecausetheir
costsareclassifiedasdirectcostsandnotemployeerelatedcosts.

3
4

LatAm
Africa

5,352
896

LatAm business unit revenue split
%

Mobile
Cable
MFS
Other

61
29
1
9

Africa business unit revenue split
%

Mobile
Cable
MFS
Other

83
2
11
4

Employees by region

LatAm4
Africa
Corporate
offices

15,964
1,674

347

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Market overview

We are dedicated to emerging markets and committed
to building on our success in bringing The Digital Lifestyle™
to our customers in these markets. We see exciting
opportunities to continue growing together with the
economies and markets that we operate in.

Underpinning our strategy is the
knowledge that we operate in a fast-
moving, continuously changing industry.

Millicom plays a leading role in connecting
people who previously have had no access to
the internet, either fixed or mobile. We are
enabling them to move swiftly from mainly
voice-call and text messaging based services
towards new communications primarily
based on data, so they can use the internet
and access social media while on the move,
download and upload photos and videos
from their mobile devices, download and play
games, and utilize the enormous range of
specialist consumer and business
applications that can now be accessed at any
time and from anywhere.

In the residential market, the range of
fixed-line services that customers demand is
expanding rapidly beyond telephony and the
traditional linear TV viewing model, into a
world of high-speed broadband, with all of
the two-way capabilities and vast array of
information and services on offer.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Market overview – continued

For businesses, both large and small,
commercial success increasingly depends on
being connected – offering online
distribution and sales channels, enabling
web-based customer communications and
service, and operating business-critical
functions in the cloud.

New research by Oxford Economics forecasts
that the middle class in our markets will grow
by around 5% per annum over the next ten
years. This will drive a major increase in
demand for digital products and services.

For example, Cisco’s latest index forecasts
predict internet traffic growth of more than
5% year-on-year in Latin America between
now and 2020, with customers expected to
triple the time they spend on mobile devices.

As well as wanting more data, consumers
and businesses will increasingly expect the
same services to be delivered through all of
their terminals and devices, blurring the
distinction between fixed-line and mobile
data services.

To enable this convergence of fixed and
mobile products, we are rapidly expanding
our state-of-the-art fixed networks in Latin
America, and increasing our broadband
and PayTV footprint. We have also created
strategic partnerships with a number of
global and local digital players to provide
relevant content for our customers, including
sports, movies and music.

Our work to expand our 4G mobile network,
increase smartphone penetration and grow
new mobile data and digital revenue streams,
is also capitalizing on the rapid adoption of
data services.

We have seen a decline in Voice and SMS
services, which had an impact on revenues in
our Latin American markets. However, our
strategy is built around this evolution of data
and is fully focused on exploiting the new
opportunities presented by the rapid growth
of data services.

Moving data customers up to 4G
Increasing value

4G LTE subscribers

Faster and better
Customers with high demand for data,
leading to high level of consumptions
with enhanced customer experience
at cheaper production cost
++++ ARPU

45%

2016 coverage

32% – 2015 coverage

Mobile data users

Develop data appetite
Develop and grow the need
for data through innovative
products and services
++ ARPU

21m

FY 2016

18m – 2015

Total mobile base

Our market forces

Government policy

Population age

GDP growth

Competition

Average income
levels

Customer
segmentation

Regulation

Taxation

Currency volatility

Read more about
our strategy
see pages 13-24

Population growth

Corruption index

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Market overview – continued

Understanding the
macro-economic drivers
in Latin America
In 2016, Millicom commissioned Oxford
Economics, a leading macro-economic
forecaster, to provide a long range review
of the growth prospects and economic
environments in each of our markets.

Read more here

GDP

CAGR %

4.95

4.97

4.44

3.79

3.56 3.46

4.01

3.75

3.40

Latin America 2016 – 2026

2.04 2.12 2.07

3.61 3.50 3.36

3.42

4.57

4.01

4.44

3.78

3.19

Bolivia

Colombia

Costa Rica

El Salvador

Guatemala

Honduras

Paraguay

2011–2016

2016–2021

2021–2026

Source: Oxford Economics

Average household disposable income

US$k 2012 prices

26.65

24.30

22.18

32.12

29.09

25.66

7.79 8.75

9.91

16.95 17.82 18.66

16.84 17.25

18.42

10.34 11.33

12.63

17.10 17.99

15.41

Bolivia

Colombia

Costa Rica

El Salvador

Guatemala

Honduras

Paraguay

2016

2021

2026

Source: Oxford Economics

Households with income >$20k

% of total

57.41

52.60

45.52

46.47

40.95

36.62

5.65 6.72 8.36

34.49

31.18

28.15

26.19 27.26

30.06

29.69

27.33

23.20

16.86

14.06

12.00

Bolivia

Colombia

Costa Rica

El Salvador

Guatemala

Honduras

Paraguay

2016

2021

2026

Source: Oxford Economics/Control Risk

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Market overview – continued

Commodity prices and foreign exchange
rates have continued to influence our
markets. Other challenges have included
managing development in areas of poor
security, weak infrastructure, and evolving
regulatory requirements. For more detail,
see page 45 Regional Review.

The need for differentiation
Competition has become tougher in some
of our markets. Here, we have sought to
maintain our competitive position by
focusing on providing innovative offers
across fast, reliable networks, and by leading
on significant positive initiatives that reflect
our commitment to sustainability and to
acting ethically at all times.

Our customer is front and center of
everything we do. Our aim is to provide an
efficient, first-time-right service that delivers
real value.

By building partnerships with major global
content developers, we are able to connect
our customers to a near-limitless world of
audio, video and other online media. By
continuing to innovate with our platforms,
developing our services and expanding our
infrastructure, we can offer better ways to
work, shop and play.

This connectivity and the surge in the use of
smart devices will continue to open up access
to services.

Focused on convergence
Where the convergence of mobile and fixed
networks was once largely focused on Voice,
over the past few years it has rapidly
expanded to include the internet and
entertainment. All now must be seamlessly
connected at work and at home.

Millicom is building this convergence, often
leading the way in terms of access and
technology.

As well as improving and expanding our fixed
network, we have also invested in building a
number of data centers to consolidate and
grow our B2B sector. Our cloud technology is
already helping to support a diverse range of
small and medium-sized businesses, large
national corporations, governments and
multinationals in our markets.

And through our partnerships with other
global businesses, such as Microsoft, we are
able to offer best-in-class solutions.

Engaging with regulatory authorities
In much of our footprint, regulation around
telecom and digital services – as well as the
legal and tax environment – is continuously
evolving, creating a level of uncertainty.
Issues such as cybersecurity, data privacy,
and spectrum allocation are the subject of
increasing regulations by policy makers.

Because we believe regulation must strike a
balance between investment stimulation and
consumer benefit, we take an active role in
working closely with governments and
policy-making bodies to drive best practice.

Acting responsibly
Our markets and customers are increasingly
interested in how we do business and deliver
wider value to our communities.

It is Millicom’s objective to be a responsible
agent for positive change wherever we
operate. Being a responsible business is not
only the right thing to do, it is central to
managing risks in our operating environment
and to strengthening trust with customers,
investors, employees and other stakeholders.

Our partnership with UNICEF on child online
protection and our work on privacy and
freedom of expression are fundamental to
our corporate responsibility aims, as is our
investment in the communities in which
we work.

You can read more about our approach and
the eight key corporate responsibility issues
in Corporate Responsibility Performance
Review starting on page 60.

Our customers: moving up the value
ladder

Total data subscribers ’000

4
9
7
1
1

7
3
0
2
1

8
1
3
2
1

9
1
7
3
1

Total 4G subscribers growth ’000

3,432

845

2,587

679

1,908

566

1,342

486

Net additional subscribers

Market trends in Latin America and Africa
Latin America
The markets where we operate have higher
medium-term growth outlooks than the
LatAm average.

Costa Rica, Colombia, El Salvador, Guatemala
and Paraguay are all expected to have
average household incomes approaching or
above US$20,000 within the next ten years,
helping to fuel the growth of the middle class
and greater purchasing power.

However, overall GDP growth has slowed in
most Latin American countries as the region
has been buffeted by weak commodity
prices, with many countries having limited
scope for policy response.

In the short term, we expect to see continued
strengthening of the US dollar against many
of the local currencies where we operate,
especially those countries with high exposure
to commodity prices.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Market overview – continued

Most of our markets offer strong growth
potential. Indeed, in B2B specifically, half of
our revenues came from Colombia, where we
anticipate growth in B2B to continue to
exceed average market growth.

We have seen our Voice services decline
faster than expected over 2016, but this has
been offset by a faster take-up of our digital
services.

Our focus on providing accessible, secure
digital platforms, channels and ongoing
innovation has been key and will continue as
a priority in 2017.

In Latin America, we have put great focus on
enhancing our network capacity and
improving our customer experience. Better
customer experience helps boost data
consumption and brand perception and
hence, our data traffic has increased.
Additionally, we have achieved and
surpassed our 2016 aim to build and
monetize fixed networks, passing over
eight million homes.

Africa
In Africa, we operate in five diverse markets,
where smartphone and data penetration
vary widely. Greater market maturity and
more intense competition mean that we
have concentrated our focus on attracting
high-value customers and on providing better
coverage and a reliable network.

Revenue from Voice is still growing in our
markets here and so we will continue to
capture Voice value as well as driving a trend
away from multi-SIMs. At the same time we
will monetize data growth and develop our
B2B opportunities.

Over the past year, we have invested in
network modernization and upgrades across
our African footprint. This acceleration
program has achieved its aim of simplifying
and speeding up the pace of our African
operations, creating efficiencies and centers
of excellence to drive revenue growth.

On a country-specific level, Ghana showed
very positive momentum with a more stable
currency and Rwanda and Senegal also
delivered strong performances. Chad
suffered macro-economic and security issues,
and growth was flat. In April 2016, our
Democratic Republic of Congo operation was
sold to Orange.

Our acceleration program
in Africa has achieved its
aim of improving revenue
growth.”

Our biggest African country by revenue,
Tanzania, has also been the one facing the
biggest challenges. Growth remains good,
but we faced a number of headwinds:
aggressive competition from a new mobile
operator, as well as changing government
policies. However, our strong Tigo brand
perception helped us move ahead to become
the largest operator by market share.

A key focus in 2017 is to grow market share
in B2B and to comply with government
regulations to list the business on the local
stock exchange. We believe we can play a
significant part in the growth of this market
in the region.

Connected women
Worldwide, the GSMA estimates that
200 million fewer women than men own a
mobile phone in low and middle income
countries. Closing this gender gap could
unlock up to US$170 billion globally for the
mobile industry before 2020. This is also a
great opportunity for Millicom in our markets.

GSMA’s Connected Women Initiative is
working to help the industry to address the
barriers in connecting women and reducing
the gender gap in the use of mobile
internet and mobile money services.

In July 2016, Millicom became the first
operator to commit all its Africa operations
to the initiative. Later in the year, Tigo
Paraguay became the first operator in Latin
America to sign a commitment to reduce the
gender gap in its mobile data customer base.

Read more here

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Chairman’s statement

Dear Shareholder,
Millicom is driving transformational change for people
in Latin America and Africa who want to be connected
on the go, at home, or at work. In this, my first statement
as Chairman of the Board of Millicom, I am inspired by
Millicom’s ability to bring about digital inclusion, as well
as its past performance, and its strong growth potential.

Read more on how
we measure progress
see page 24

We have delivered strong results, despite
weaker than expected revenues during
the year, brought about by challenging
macro-economics in some of our largest
markets. We remain focused on driving
efficiencies and on growth in margins.

Executing our strategy
Millicom’s strength lies in its strategic focus
and execution capability, so it was with
unanimous agreement that the Board was
able to approve the detailed strategy that
was presented to us in June.

Millicom Annual Report 2016

The ultimate
transformational goal
is customer centricity.”

Overview

Strategy

Performance

Governance

Financials

Chairman’s statement – continued

Millicom’s strategy is thorough yet simple.
It retains absolute focus on four pillars:
providing leading digital services; monetizing
mobile data and building fixed networks;
delivering operational efficiencies and acting
responsibly in the communities where we
operate. Over-arching our strategy is the
ultimate transformational goal – to become
a customer-centric organization, delivering
on the fast-paced expectations of
increasingly digitally-sophisticated
consumers.

With disciplined capital allocation, a
strengthened balance sheet, and focus on
the right fixed and mobile targets, the
execution of our strategy is now in full force.

Board committees
During 2016, the activities of the former
Government Relations and Corporate
Responsibility Committee were
incorporated into the scope of the
full Board.

The Compliance and Business Conduct
Committee (established in November
2015) commenced its activities in 2016,
meeting seven times during the year, and
providing the Board with oversight and
recommendations regarding the Group’s
compliance program and standards of
business conduct.

These changes were initiated as part of
the Board’s commitment to strengthen
its oversight over business.

Read more in the governance
section of our Annual Report
see pages 88-130

Dividend
The Board remains committed to creating
value for shareholders and we are confident
that by executing our strategy, delivering
efficiencies, and investing carefully, we will
achieve this. We are pleased to recommend
a final dividend of US$2.64 per share this year.

Board, management and colleagues
We thank our Board members who have
stepped down this year, Anders Borg, Paul
Donovan and Dame Amelia Fawcett, for their
dedicated service. I would like to express
particular recognition to Cristina Stenbeck,
who stepped down as Chairman of the Board
in May 2016. It was Cristina who initiated the
significant transformations that have taken
place in the Company over the past two
years. This year’s appointments to the
Millicom Board support the profound
transformations taking place and we
welcomed Ms. Janet Davidson, Mr. José
Miguel Garcia Fernández and Mr. Simon
Duffy as new Non-Executive Directors.

Mauricio Ramos, our Chief Executive Officer,
and his leadership team are highly experienced,
talented and entirely dedicated to inspiring
every colleague to achieve our vision and
deliver on the potential of the business.

Outlook
We expect that external conditions in some
of our larger markets will remain challenging
during 2017. However, the fundamental
demand within our markets, driven by
demographics and the increasing appetite
for fixed and mobile connectivity continues
to grow. With the ongoing re-orientation of
our business towards our customers and
convergence, we are well placed to navigate
this tough trading climate and we will take
every opportunity to deliver successfully
upon our strategy.

Tom Boardman
Chairman of the Board of Directors

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Read more about
how we execute
our strategy
see pages 18-23

Our business model

Millicom connects people to the internet and delivers the
vital services that are enabled by this connection, to the
home, at work and on the move. By investing in the best
available technology and the best talent, we are able
to create a compelling digital lifestyle for our customers.

The rapid transition towards this digital
lifestyle delivers economic growth, and in
particular growth of the knowledge-
based economy; this brings with it a wide
range of potential social benefits – in
education, in health, in community
cohesion, in financial inclusion – in short,
it can deliver a better quality of life.

Our business is therefore to build state-of-the
art fixed and mobile networks as well as on our
use of this infrastructure to deliver build
services for consumers and businesses.

We are rapidly increasing the digital
capabilities of our mobile networks, extending
our 4G network coverage – a technology that
enables a step change in the size and speed
of data services that can be delivered to the
mobile customer.

We are rapidly expanding our footprint of
state-of-the-art Hybrid Fiber Coaxial (HFC)
fixed networks, passing homes and business
premises and connecting them to our
infrastructure.

We are monetizing the substantial investment
we make in fixed and mobile networks by
providing high quality, secure connectivity as
well as innovative, compelling value-for-money
services that consumers and businesses
demand, placing a targeted multi-channel
distribution network at their service.

This build-out of our fixed and mobile
networks is underpinned by substantial
further investment in converged IT systems,
that are engineered to manage all of
our business operations and enable our
services to be developed, delivered and
monetized efficiently.

As we usually have substance (people,
networks, assets) in each of the markets
where we operate, it is important we are a
responsible member of the community where
we work and set a good example with our
corporate behavior. We are an integral part
of the communities that we serve, so it is
important that our business creates
sustainable long-term social and
economic value.

This is reflected in our partnerships with
organizations such as UNICEF and GSMA,
in social investment programs for education,
child protection and community development.
Our corporate citizenship is also reflected in
our objectives to reduce energy consumption
and recycle electronic waste responsibly.

To lead all the changes that our business
model demands, we have developed a vibrant
working culture that is focused on
performance and delivery. Our training,
personal development and career progression
management is enabling people to achieve
their own career aspirations within a
framework of inclusion and diversity at all
levels within the Company.

How we create value

Value created
For our customers: all of the opportunities and benefits of The Digital Lifestyle™.
For our communities: digital inclusion, economic growth
For our shareholders: cash flow growth, total shareholder return (TSR) growth

Core services
Mobile: Voice, SMS and data services; MFS; pre and post-paid contracts.
Home: fixed-line telephony, high-speed broadband, PayTV including
premium content, DTH (Direct to Home)
B2B: Voice, SMS and data services, fixed-line telephony, high-speed broadband,
managed services including Cloud

Value created

C o r e s e r vices

Resources and expertise
Mobile networks: state-of-the-art 4G plus 3G and 2G
Fixed networks: state-of-the-art HFC (“Hybrid Fiber Coaxial”)
IT infrastructure: converging “back office” systems
Distribution: multiple targeted channels to market
Suppliers and partners: high quality, competitive technology, win-win relationships
People: customer-focused, deep market knowledge, expertise, performance orientated

R e s o

c e s a nd expertise

H o w we create value

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

How we manage our
corporate responsibility

Our business strategy and how we deliver it has social
and environmental implications. By focusing on key topics
we can make a positive difference in the communities
where we work.

We continually work to understand and
monitor the social and environmental
topics that rise from our business
operations or that pose concern to our
different stakeholder groups – from
investors to customers and the wider
communities where we operate.

We identify our most material social and
environmental impacts through internal
risk and impact assessments and external
stakeholder engagement.

In 2016, we carried out a formal survey and
interviews with key stakeholders and identified
eight topics with significant importance both
to our stakeholders and to the successful
execution of our business strategy.

Each issue has dedicated resources, policies,
action programs and targets in place to
achieve improvement over time, to mitigate
associated risks and increase positive impacts.

Ongoing stakeholder dialog
As well as monitoring each topic internally,
we maintain regular dialog with stakeholders
at both global and country level – including
responsible investors, industry peers, NGOs
and governments.

This dynamic engagement enables us to put
our priorities and initiatives to the test on a
regular basis. We have established long-term
partnerships with a number of organizations.
At country level, we have various platforms
such as Voice of Customer committees, social
media, and Brand Tracker surveys to engage
with our customers, and we also engage
with local governments and NGOs.

Read more about our corporate
responsibility program starting
on page 60

Our social and
environmental priorities

H
g
h

m
p
o
r
t
a
n
c
e
f
o
r

s
t
a
k
e
h
o
d
e
r
s

Disaster preparedness and response

Privacy and

Land acquisition and management
for our network: community engagement,
fair pricing and anti-corruption measures

Tax transparency

Right to join trade unions and
freedom of association

Living wage

Conflict minerals

Raising awareness on health impacts
of electromagnetic frequency

Employee training

Talent attraction and development

Local recruitment and ethnic diversity

Responsible marketing

LGBT rights

Safe use of mobile phones while driving

freedom of expression

Child

protection

Anti-corruption

compliance

Health and safety

of employees

Responsible supply
chain management

Social innovation through
our products and services

Clarity of pricing and billing

environmental footprint

Reducing our
Promoting

diversity

Social

investment

Employment of disabled persons

Stability and reliability of the network

Digital inclusion of blind and deaf people

Executive and Board remuneration

High importance for our business strategy

Millicom Annual Report 2016

Strategy

This section contains a comprehensive look at
our business. Introduced by our Chief Executive
Officer, it is a forward looking evaluation that
includes a review of how we deliver, how we
create and sustain value, and our selection
of performance metrics.

14 Chief Executive Officer’s review
18 Executing our strategy
24 Measuring progress against strategy

Overview

Strategy

Performance

Governance

Financials

Chief Executive
Officer’s review

After almost two years into my appointment as CEO,
I am energized by the work we have been able to
accomplish and the focus with which we continue
to deliver our strategy.

Read our operational review
see pages 45-59

Our goal is to become a high-performing,
high-growth, fixed mobile convergent
(FMC) operator focused on equity value
creation.

For this we have defined a clear, and clearly
articulated, operational strategy; an
ambitious set of operational priorities;
setting and keeping the bar high on ethical
and responsible ways of doing business;
robust financial targets over the next three to
five years that are fully aligned with the
operational strategy; and a cash flow model
to underpin our equity value creation model.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Chief Executive Officer’s review – continued

I am pleased to say we have made great
progress in 2016. We continued to monetize
data and significantly expanded our cable
network. We also continued to drive
reconfiguration of our revenue mix to
mitigate the faster than expected decline in
our voice and SMS business which made our
revenue growth weaker as the year
progressed.

In the second half of the year, we focused on
creating a high-performance culture, turning
up the heat on transformation, efficiency
and cost control through an important
project we launched during the year, namely
our HEAT project. With this project we aim to
capture the next era of efficiencies that the
digital transformation can offer.

Leading Digital
We are developing partnerships with key
digital players such as Netflix and Microsoft
and using technology as an enabler to
increase our operational efficiency, agility
and brand strength.

Millicom can offer its partners the
opportunity to acquire new customers in a
new region, adding our deep understanding
of the markets we operate in. In Latin
America for instance, we offer our digital
partners more than 700 thousand
distribution points. These are unrivalled
touchpoints into our markets and a key
competitive advantage.

We will also look at every opportunity to
automate more processes across our business
so that we can continue to improve our
reliable, efficient services for our customers.

Our strategy is clear and simple. We will:

• Lead digital: internally, we will leverage
our digital transformation to become a
much leaner operation. For our customers,
we will continue to innovate and partner
with other digital players to offer our
customers the best services and local
content.

• Monetize data and build cable: we build
cable; home residential and B2B and we
are focused on reconfiguring our revenue,
creating a lighter, more digital organization
which will deliver increased cash flows and
in turn Total Shareholder Returns (TSR).

• Deliver value: as we embrace our digital
transformation, we are reconfiguring our
business to create a long term efficient and
sustainable cost structure. Reconfigured
revenue, lighter and digital organization
will deliver increased cash flows and in
turn TSR.

• Act responsibly: do business the right way
and drive positive change in the societies
where we operate.

Our strategy

Monetize data,
build cable

Mobile data:
monetize data

Cable/fiber footprint:
expand our high-speed
broadband footprint and
leverage the quality of our
network for both our consumers
and B2B clients

Convergence:
prepare for convergence
between networks, IT systems
and channels

Capture synergies from
convergence

Deliver value

Act responsibly

Understanding our customers:
reorientation towards total
customer satisfaction, enabling
Millicom to fulfil its vision and
mission

Operational efficiency:
executing our strategy

Equity value creation model:
cash flow growth and
operational efficiency

People:
attract, retain and develop
talent, stand for diversity,
encourage the Millicom culture

Corporate responsibility:
driving change by delivering
results in key projects from waste
programs to freedom of
expression to child online
protection

A role model:
positive change in society,
compliance with laws and
standards

Lead digital

Digital innovation and
digital services:
innovate and partner with other
digital leaders to create win-win
benefits and offer the best
services and local content to our
customers

MFS:
consolidate our position of
leadership, drive customer
loyalty, stickiness and reduce
churn

Customer touchpoints:
increase customer engagement
via more convenient digital
touchpoints

Process automation:
introduce smarter more efficient
operations which are fit for the
future

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Chief Executive Officer’s review – continued

Monetizing mobile data and building cable
This year we have accelerated progress in
monetizing data and building a greater cable
network. Mobile data and cable segments
now represent almost half of our revenue mix
in Latin America.

Mobile data revenue across the Group has
grown by more than 24% in the year and
we now have 26 million smartphone users
and almost 3.4 million 4G subscribers.
Data consumption per subscriber has also
increased by 26% to 1.4 GB per user per
month. We expect this will continue to grow
very fast in the future. We continue to
innovate in this space using our customer
insights, for example to roll out our successful
pilot of the All You Can App initiative to help
our customers purchase their data packages
in an easy and relevant way.

Strong smartphone and 4G penetration are
the key building blocks for further mobile
data growth. We will continue to expand our
4G networks, facilitate smartphone adoption
and bring The Digital Lifestyle™ to more
people in our markets. We will also shift our
balance from volume to attracting higher
value customers.

In cable we have now built more than eight
million homes passed in Latin America. Of
these, almost 7.2 million are HFC homes with
3.7 million subscribers, driving organic
revenue growth of more than 9.7%.

We have also leveraged our cable footprint
to benefit our B2B customers, who require
a fast, reliable network on which to grow.

Deliver value
We deliver value for both shareholders and
stakeholders. In early 2016, we began a
two-fold reconfiguration of the business
looking at our revenue mix and our cost
structure. Through the HEAT program we are
already transitioning our business towards a
leaner model. As a result, we have significantly
enhanced our Operating Cash Flow (OCF).

Act responsibly
Corporate responsibility and compliance have
great prominence in our business, reflected in
this first integrated financial and corporate
responsibility report. This year we became
members of the United Nations Global
Compact to make a public commitment to its
principles on human rights, labor standards,
environmental protection and anti-corruption
compliance.

We make profits for our shareholders, but we
also recognize the inherent social value our
core businesses and connectivity creates. The
transforming power of the technology we
provide was celebrated at the 71st United
Nations General Assembly that showcased
our mobile birth registration programs in
Ghana and Tanzania.

We have identified women customers as a
great opportunity for us, and have made
industry-leading commitments and created
programs to address access barriers and
increase the proportion of women in our
customer base.

I am delighted to have joined the GSMA Board
and to be able to work with the organization
to ensure that the right strategic, regulatory
and policy frameworks are in place to support
the direction of the industry as we all focus
on connecting the world.

Driving efficiency
A multi-year transformation program
expected to generate more than
US$200m in savings has been launched
named Project HEAT.

The program is widespread and includes
projects ranging from transforming our IT
back office systems towards an OTT-like
infrastructure, to turning our business into
a “Capex light” model with more managed
services agreements and network sharing,
to implementing shared service centers
and to changing our device supply chain to
reduce working capital.

The result will be a more efficient and
effective operating model and thus a
stronger cash flow.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Chief Executive Officer’s review – continued

Compliance remains a priority. This year we
have welcomed our new Chief Ethics and
Compliance Officer and worked to further
improve our already robust compliance
program. We have a zero-tolerance stance
to all forms of bribery and corruption. Our
prevention mechanisms include supplier
assessments and third party due diligence,
as well as with improved training for all
employees. These initiatives continue to
ensure ethical and responsible behavior and
promote respect for our strict codes of
conduct among our employees and suppliers.

Enabling new, easier and safer access online
helps to bring about The Digital Lifestyle™.
As we bring more people online, we also have
a responsibility to protect those who are
more vulnerable. I am proud of the way
we have taken leadership on child online
protection in our regions.

Our performance
To summarize our performance in 2016,
we delivered strong underlying operational
performance. We achieved this in the context
of a difficult macro environment, especially
in Latin America, and increased top-line
pressure due to the accelerated decline of
SMS and Voice revenues in the region. With
laser-like focus on operating leverage we
managed to significantly grow our OCF, and
deliver stronger cash flows. Organic service
revenue growth for the full year increased by
1.2% to US$5.9bn, adjusted EBITDA grew
4.3% to US$2.2bn and our focus on
profitable growth at all levels in the Group
improved the adjusted EBITDA margin in
2015 by 1.7% to 35.6%.

We continue to see selected opportunities for
M&A within the boundaries of our existing
footprint in order to expand our services and
strengthen our overall position.

Our people
At the executive leadership level, I am
pleased to report that we are now at full
strength, enabling consistency and stability
for the business. In 2016, we filled several
important positions within the Executive
Committee, welcoming Daniel Loria as Chief
Human Resources Officer, Esteban Iriarte as
Chief Operating Officer for Latin America,
HL Rogers as Chief Ethics and Compliance
Officer, and Rodrigo Diehl as Chief Strategy
Officer.

Together we have created a simpler, more
effective structure, which is functionally and
operationally driven.

It is important to me that during 2017 we
continue to develop a high performance,
operationally excellent and customer-focused
culture across the business and that we
ensure best-in-class talent throughout the
organization.

In summary, our strategy is in full motion and
delivering results: we are monetizing data
and building cable, fast. Placing customer
experience at the heart of our decision-
making will remain a core focus for us, as
will continuing to innovate across all our
operations. While reconfiguring the revenue
mix, we are also undertaking significant
transformations that I have no doubt will
result in many further tangible successes
in 2017.

Mauricio Ramos
Chief Executive Officer

We are monetizing data and
building cable, fast.”

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Executing our strategy

Our strategy is to build and monetize The Digital Lifestyle™.
Execution is focused on a number of clearly defined priorities,
articulated across markets but tailored to the specific competitive
dynamics and customer needs of each individual market.

During 2016, we continued with the
twofold reconfiguration of our business.

On the revenue side, we accelerated the
migration from mobile legacy voice and SMS to
data, as well as continued expanding our cable
footprint as an enabler for our fast-growing
Home and B2B businesses. On the operational
side, we continued the reconfiguration of our
cost base, with Digital as a key enabler to
capture efficiencies and increase operational
leverage to drive cash flow growth. We also
increased our focus and efforts to delight our
customers with a superior customer experience.
Finally, we reaffirmed our commitment to
invest in our people and act responsibly and
in compliance.

We are focused on growing
our high-value, digitally
active customers.”

Mobile
Mobile services remain the largest part of our
business, accounting for 64% of our total
revenues, and by the end of 2016 we had
more than 57 million mobile customers across
eleven markets in Latin America and Africa.

In Latin America, the mobile market has
continued its rapid transformation from
being mainly a voice and SMS market to
being data-driven, and as a result the share
of our revenues that comes from Latin
American legacy voice and SMS has
continued to decrease: in 2016 it represented
28% of our total revenues, down from 32%
in 2015. Our strategy to monetize the rapidly
growing demand for mobile data is built
around a number of key drivers:

• 4G networks: we are expanding our 4G

coverage, a technology that enables us to
deliver high volumes of data at high speeds
to our customers. In 2016, we announced
our first 4G services for Honduras, Paraguay
and El Salvador. By the end of the year, we
tripled the number of 4G subscribers, to
reach 3.4 million 4G subscribers.

• Smartphone adoption: we are driving the
adoption of data-capable smartphone
devices that enable customers to use data
services on the move. By the end of 2016,
our smartphone user base in Latin America
reached 20 million subscribers, or 63% of
our total Latin American customer base.

• Data usage: we are creating compelling
data-centric products and services to
encourage our consumers to consume
more data, while maintaining price
discipline. In Africa, where our mobile
revenues grew by 11% in 2016, the mobile
market remains primarily a voice and SMS
market, and therefore our strategy is driven
by further high-value customer acquisition
and growing the usage of both voice and
mobile data. By the end of 2016 we had
almost 15 million data users in Latin
America and Africa, representing more
than a quarter of our total customer base.

Mobile data revenue %

Raising our ambition

Revenue reconfiguration %

As percentage of LatAm service revenue

Number of homes passed

12m

0
2
0
7

4
7
3
6

7.6m >8.1m

LatAm Voice & SMS
Africa and other
LatAm mobile data
Cable

2015

Q4
33.37
21.89
18.30
26.44

2016

Q1
31.65
22.58
19.46
26.31

Q2
29.69
22.21
20.45
27.64

Q3
28.55
22.09
21.65
27.71

Q4
28.12
21.76
21.78
28.33

8
9
1

6
4
2

2015 2016

Mobile data revenue
LatAm service revenue

2015

2016

Ambition

Strategic focus

44.74

45.77

48.09

49.36

50.12

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Executing our strategy – continued

Mobile Financial Services
With more than two billion unbanked people
world-wide, Mobile Financial Services (MFS)
innovations have the power to reduce
poverty and boost prosperity in the markets
where Millicom operates. We have a solid
track record of innovation in MFS, providing
a broad range of services such as payments,
money transfers, international remittances,
savings, real-time loans and micro-insurance
for critical needs such as health. It makes
sending and receiving money easier and less
expensive, giving users the freedom to use
their money how and when they want. It is
also a significant driver of customer
satisfaction and loyalty as well as churn
reduction. Today we provide MFS to more
than 11.8 million customers, representing
21% of our customer base.

Creating an effortless
customer experience.”

Mobile Financial Services
With more than two billion people
unbanked worldwide, fintech innovations
like Mobile Money have the power to
reduce poverty and boost prosperity in
the markets where Millicom operates.

We provide Mobile Financial Services such
as money transfers, savings, loans and
merchant payments. It makes sending and
receiving money easier and less expensive,
giving users the freedom to use their
money how and when they want.

Read more here

Home
Demand for PayTV and fixed broadband
access continues to grow rapidly across our
markets in Latin America, as coverage, usage
and affordability increase. Our strategy to
address this attractive digital growth
opportunity is built around four priorities:

• Build fast: we are accelerating the roll-out
of our high-speed HFC fixed network and
are complementing it through targeted
acquisitions that complement our
footprint. In 2016 we passed 486.5
thousand households, reaching a total of
8.1 million homes passed by the end of the
year – on our way to achieve our ambition
of 12 million homes passed by 2021.

• Fill faster: we fill the network as fast as
possible, converting homes passed into
homes connected. Our current penetration
is 38.2%.

• Monetize faster: we upsell through

bundling of services to ensure we maximize
the number of revenue-generating units
per household. In 2016 we continued to
improve our bundling ratio, reaching 1.8
revenue generating units per household.

• Product innovation: we drive customer

connections onto our network by
expanding our range of digital services and
aggregating content, including exclusive
local content, enabling us to differentiate
our offerings from others in the market.

Tigo Business Forum
Tigo Business Forums took place in seven
LatAm countries this year. These events
have grown to become among the largest
and most important technology and
innovation conventions in the region with
more than 5,000 attending the series.

At these networking conferences, we offer
insight into the latest technology trends
directly from renowned international
speakers such as Jared Cohen, President
of JIGSAW (Google Ideas), Susana Voces,
President of eBay Spain, Marc Randolph,
co-founder of Netflix and Steve Wozniak,
co-founder of Apple.

Read more here

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Executing our strategy – continued

Digital
To deliver the promise of a Digital Lifestyle
and as key enabler for delighting our
customers with a simple and positive
experience, we continue to implement our
digital transformation with speed and
priority, focusing on four dimensions:

• New digital services: throughout 2016

we have been building as well as rolling out
our digital innovation pipeline, launching
innovative services and content for our
customers. As an example, we launched
“All you can App”, which allows our prepaid
customers to enjoy unrestricted time-based
access to their favorite mobile applications.
We have also partnered with digital leaders
to establish win-win cooperation models
and bring the best content to our
customers.

• Enhanced digital channels: we are
driving adoption and usage of more
convenient digital channels. In 2016 we
reached 2.2 million active users of Millicom
digital channels for sales and care, with
very positive results in terms of customer
engagement and satisfaction and a direct
correlation to churn reduction.

• Digitized operations: we have continued
to automate customer-facing as well as
internal processes to drive efficiencies and
become a leaner operation.

• IT transformation: we are transforming
our backend IT systems and infrastructure
to enable The Digital Lifestyle™ now and
in the future. We are simplifying and
converging our IT, migrating to an OTT-like
architecture and low-cost operating model.

B2B
B2B represents a significant growth
opportunity, with several of our operations in
Latin America and Africa where B2B is
under-represented and provides an
opportunity to grow to its ‘fair share’ of total
revenues. Our strategy is to grow by leveraging
the capillarity of our fixed network, as well as
our strong mobile market position. We are also
expanding our product portfolio to deliver
more value added services and business
solutions such as cloud services and ICT
managed services. Our data center business is
growing at double digits in Colombia. In 2016
we inaugurated two new state-of-the-art Tier
III data centers in Paraguay and Bolivia. We
have established partnerships that are
opening up new possibilities in M2M and IoT,
such as smart cities, telematics, smart
metering, and smart vending machines
among others. Our strong Central American
B2B footprint and fiber backbone also means
that we can service the needs of businesses
with a regional footprint as well as
multinationals that operate in the region.

Convergence
In all of our Latin American markets we are
one of the two existing mobile players who
has the lead and focus to build a modern
high-speed broadband network. We continue
to converge our organizations, channels,
backend and fixed and mobile networks
to drive efficiencies and capture synergies.
It also enables us to offer innovative convergent
services to governments, businesses and
consumers, increasing loyalty and reducing
churn and customer acquisition costs.

Customer centricity
The needs and desires of our customers are
paramount and we will continue to place our
customers and their experience at the heart
of all our decision-making. To achieve our
ambition of delighting our customers
throughout their journeys, we are investing to
strengthen our customer centric culture, as
well as deploying a net promoter scorecard
(“NPS”). As some of our markets in Latin
America reach more maturity, we are also
upgrading and focusing our retention efforts.
In 2016 we created a Customer Experience
team at Corporate level, to help us accelerate
the deployment and sharing of best practices
across markets.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Executing our strategy – continued

People and partnerships

As we execute our strategy, we rely on
a wide range of resources and expertise
from our people, partners and suppliers.

Our people
Our employees are the lynchpin to the
successful delivery of our business strategy. By
enabling and motivating our people across all
our markets, we help to make Millicom flourish.

We have strengthened the capabilities
of our human resources function to better
support continued development and high
performance of our employees. We created
a global center of expertise, and a more
streamlined, efficient and proactive talent
management team with clear roles and
responsibilities. Our new set up has further
strengthened our offering and helped to
focus on talent development, retention and
succession planning.

At the same time, we have improved our
leadership development program and begun
delivering on our diversity and inclusion
training, including a focus on unconscious
bias, to our top Executive Team. We are now
in the process of developing the content and
preparing to roll out the training to all our
staff since the end of 2016.

Diversity and inclusion are particularly
important for us as they lead to new ways
of working, different thought models and
innovation to set us ahead of our competitors.
Encouraging awareness, personal ownership
and accountability takes our work culture to
the next level.

Just as Millicom has a strategic focus on
developing our digital services externally, we
are also driving this goal internally. We are
digitalising some of our key HR processes,
including our performance management
system which has now been rolled out online
– giving managers and their staff easy digital
access to this extremely important process.

Next year, we will build on this by digitizing
further HR processes for our workforce.

Our employee profile
Millicom has 17,985 employees, more than
15,900 of whom work in Latin America.
95%1 of our employees are of local
nationality to the country they are employed
in. We are proud of our highly ethnically
diverse workforce which comprises 82
nationalities. Our employee base is young,
with 39% of our employees under 30.

We have continued our work in building the
most effective team structures to future-
proof our business, which has resulted in
some significant changes to our business, as
outlined in on the next page, in line with
industry trends.

Developing our staff
As our company grows and we develop
new products and services, it becomes even
more important to understand the skill
sets we already have in place and map the
new skills we will need to build and monetize
The Digital Lifestyle™.

1 As of end of Q3 2016.
2

Calculated excluding training hours delivered in Chad,
as we continue improving systematic tracking of
training hours provided.

Average number of hours of training provided1,2

Women employees
Men employees
Senior managers
Employees excluding senior managers

2014
24
23
19
32

2015
27
23
19
24

2016
16
18
34
17

17,985

employees

86%1

of our senior managers
are recruited locally

95%1

of our employees are native to the
country they are employed in

Trend of total workforce

8
8
0
7
2

3
3
1
4
1

5
3
2
6
2

5
8
9
7
1

8
8
5
8

6
0
2
2
1

2014

2015

2016

Employees
Outsourced workforce

Our people by age and gender

%
7
3

%
9
1

%
1
2

%
8
1

%
4

%
1

<30
years

30–50
years

>50
years

Women
Men

Turnover rate of all employees (Group)

New hires vs. turnover

Latin America
Africa
Millicom Group

Turnover %

Women
19
31
20

Men
27
32
28

Number of leavers
Men
2,604
386
3,067

Women
1,229
151
1,411

Number of new hires
Men
Women
2,965
2,390
114
28
3,137
2,455

%
5
2

%
7
3

%
8
1

%
0
2

2014

2015

2016

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Executing our strategy – continued

Significant changes
to our business
In Africa, the outsourcing of our network
maintenance was finalized in May 2015.
In 2016, we adopted a similar model in
three of our LatAm markets. This
transition into managed services mirrors
one that is taking place across our
industry. The main driver for us was to
focus our resources and efforts on
delivering our core services and increase
the quality of service by leveraging the
expertise of a global supplier.

In these countries, the managed services
provider was contractually tied to take over
all our staff with equal or better conditions
and with a 12-month job guarantee.

Across our Latin American operations and
corporate offices in Miami and Luxembourg,
we conducted a talent mapping process for
around 900 managers and developed
personal development and succession plans.
In collaboration with INCAE, the leading
business school in Latin America, we
continued to deliver a one week Digital
Leadership and Lifestyle program for 23
senior managers, and a two week Future
Leaders program for 62 people which is
targeted at our top talent in middle
management across the region. As a result,
participants from our Bolivia, Costa Rica,
Honduras and Paraguay operations are now
activating and transferring their knowledge
gained during the program into their local
businesses.

Our regional leadership training offer is
composed of three programs: Leading for
Entrepreneurship (61 participants in 2016),
Change Management (88 participants), and
Tigo Leadership Essentials (211 participants).
Our Colombia, Bolivia, Guatemala and Costa
Rica operations also implemented further
local programs for 805 leaders.

In our African operations we have trained all
our country leadership teams on Tigo
Leadership Essentials. In our Tanzania
operation we have conducted a talent
mapping process pilot for around 55
managers. Across all our African operations
we have conducted a succession mapping
process, with robust plans now place.

Performance management
We have a robust performance management
system where our employees can contribute
to the business success and feel rewarded for
their hard work. All employees have annual
objectives, which are reviewed together by
employee and manager mid-year and at the
end of the year. Employees receive bonuses
based on both their individual performance
grading and company performance criteria.

Taking care of our people:
health and safety
Most of our operations have specific Health
and Safety Committees with employee
representation. For more information on our
work, see pages 76-77.

Listening to our people
We continue to conduct the Great Place to
Work© survey in our LatAm operations, with
our overall Trust Index© score increasing by
almost 10% to 80. The surveys help us to
assess our internal climate as well as to
benchmark ourselves across our operations
and also against other companies in our
markets. All of the six Latin American
operations surveyed this year scored over
75 in the Great Place to Work© Trust Index©,
with Tigo Guatemala leading for the second
year running, Tigo Paraguay in second place
and Tigo Bolivia in third place on Great Place
to Work© “Empresas con mejor clima laboral”
(“best working environment”).

The survey tells us that our strengths lie
in how employees value the special and
unique contribution that they can bring, the
important role that our organization plays
in the community and our commitment to
diversity. The survey has also helped identify
areas of improvement such as decision
making, creating more opportunity for
collaboration, reward and recognition.

Each operation has prepared a country and
business area plan, linked to their culture
change plans, to improve employee
satisfaction scores.

Contributing to local employment
We continue to focus on retaining and
promoting local talent to senior
management roles, with 86% of our senior
managers locally employed. We have also
proactively engaged with leading universities
to attract top local talent in both regions, for
example through our partnership with INCAE
in Latin America.

We provide an eight-week sales and business
training program for our indirect sales force.
This year we have continued to evolve the
initiative to become the Tigo Experience
School. We are providing sales and services
training programs in all our Latin American
operations. In 2016, we offered comprehensive
training journeys for Mobile, Tigo Star,
Tigo Money, Dealers, DMS and advanced
customer-oriented workshops in the areas
of consultative selling and negotiation.
In total, some 17,200 participants completed
our Tigo Experience School programs across
the region.

Additionally, we have incorporated and
successfully implemented focused leadership
training for commercial leaders and during
2016 delivered programs such as Coaching,
Team Building, Team Leader Journeys and in
total trained about 728 people in LatAm.

In Africa we trained just under 30,000
freelancers and point of sale distributors.
Our freelancers who complete this training
often out-perform in terms of new customer
acquisition.

Respecting our employees’
right to collective bargaining
Collective bargaining agreements (CBA) are
in place in our operations in Colombia, Chad
and Senegal, accounting for 22% of our total
employee base. We have successfully
reached an agreement in Senegal in 2016
and the CBA was established. In Colombia,
there are twelve unions established which all
employees of TigoUne and its subsidiaries
are free to join.

We also engage with trade unions in some
of our countries, where formal CBAs do not
exist, as they do not yet meet the legally
required number of members to establish
CBAs, such as in Tanzania.

Our Luxembourg office also has a formal
Staff Delegation in place, who is appointed
through an employee vote.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Executing our strategy – continued

Our External Partners
In an increasingly interconnected and
interdependent world we strongly believe in
partnering with third parties to establish
win-win relationships.

Our long-term, strategic partnerships both at
global and operational level have helped us
become a leading telecommunications
operator in managing material corporate
responsibility topics, such as child online
protection and privacy and freedom of
expression. Through partnerships, for example
with UNICEF, Civil Rights Defenders and
Global Network Initiative, Millicom continues
to acquire a better understanding of human
rights issues in our operating markets and how
to tackle them. We not only rely on the
expertise of our partners, but also share our
Corporate income tax paid by region
in-depth knowledge about our industry to
jointly develop innovative solutions and tools.

Latin America

Year
Working with small local vendors as well as
large multinationals, Millicom has a diverse
2016 (US$m)
(234)
range of strategic business partners: for
(230)
2015 (US$m)
network and IT equipment and operations,
(295)
2014 (US$m)
digital and traditional content, high-end and
* Total tax paid by the Group in 2016.
entry-level phones, and sales and marketing
among others. We are continuously looking for
innovative ways of partnering and cooperating
with third parties.

Tax contributions
Digital workforce
In addition to our investments to
telecommunication infrastructure, another
In 2016, work began on an Employee
direct way we contribute to local economies is
Portal to help us collaborate, communicate
through taxes. Our biggest tax contribution is
and share relevant information more
through corporate income tax, reported in the
efficiently across the business. We are
table below per region where the taxes are
walking the talk by making our back office
paid. In addition, there are other taxes we
processes and procedures more digital,
contribute, which are not based on earnings,
interactive and mobile-friendly. The portal
including telecom tax, indirect tax, VAT and
is under development with colleagues in
excise duties, withholding tax, payroll tax,
HQ and El Salvador. In early 2017, we plan
asset tax and wealth tax. And of course, the
to roll out this new business tool to a wider
people we employ also pay income tax on
group of colleagues.
their earnings.

Africa

(17)
(16)
(25)

Unallocated
items

Total continuing
operations*

(9)
(6)
(60)

(259)
(252)
(380)

We regularly meet our strategic partners to
discuss project execution, quality of products
and services, and to foster innovation and
develop effective relationships. Such
alignment is crucial as our suppliers are critical
to ensure we have satisfied customers. We
formalize our efforts in a supplier scorecard
and track progress on agreed action points on
a monthly basis. Compliance and corporate
social responsibility are an integral part of this
scorecard. Our Supplier Code of Conduct has
been a mandatory annex to all contracts since
2014 and this year we have strengthened our
overall governance framework for suppliers.
Industry leading partnership with UNICEF
Two years into our partnership with UNICEF,
our collaboration continues to lead the way
on child rights in our sector.

To date, the collaboration has focused on
jointly identifying key child rights issues in
the digital world and creating tools for
telecom companies to manage the impacts
their business operations may have on the
rights of children. Together with UNICEF,

To find out more about our work
on responsible supply chain
management, see pages 78-79

we have brought together a diverse array
of stakeholders to raise awareness of child
online protection, developing support
materials for our customers to protect their
children online and most recently pledging
support for further developing child helplines
in three of our Central American operations.

Read more here

El Salvador

El Salvador has delivered solid results.
The operation has been challenged by
weak economic conditions and a
regulatory and political landscape that
included mandatory signal blocking since
April 2016 around prisons and some
urban areas.

Alongside the introduction of a number of
additional security taxes, we have seen
encouraging growth in the number of
smartphones and mobile data users,
delivering 12.6% on data revenues.

We now have 3.2 million mobile subscribers
in the country, 8.6% up compared to 2015.

In our Home business, we have connected
9.3% more homes than we did in 2015.
Cable & Digital revenue is up 6.7%
compared to 2015. Home revenue
is up 7.7% compared to 2015.

We also continue to improve operating
efficiency alongside investing in improving
the network infrastructure and we
announced that 4G will be rolled out to
customers in El Salvador during 2017.

Building a better future for home and at school
Tigo El Salvador has taken a lead in
developing two ground-breaking employee
volunteering programs.

Karla Rivas, Tigo El Salvador Corporate
Responsibility Director, says: “The
volunteering program has improved the
workplace environment, with better
integrated, more motivated and happier
employees”.

Throughout the three months that we ran
the program in 2016, 2,075 volunteering
hours have been recorded, seven schools
were helped and four houses built.

Our “Adopt a School” project consists of
rebuilding or refurbishing a school, with
Tigo employees undertaking volunteering
activities to make the schools operational.

We also signed a new memorandum of
understanding with TECHO and SolucionES
to benefit the Tiguapa Norte community,
by building eight houses and the
refurbishing of a digital center. The digital
center will serve children and offer them
ICT programs and courses. Tigo will
contribute to the project both financially
and with volunteering activities.

El Salvador has the
opportunity to be a strong
digital force in Latin America
and we want to progress
connectivity and enable
greater access to the
internet.”

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Latin America performance review – continued

Bolivia

Our operation delivered a strong 2016,
with overall service revenues 3% ahead of
the previous year.

Mobile Data revenue increased 32.9% on the
previous year, driven mainly by the roll-out of
our 4G network, with around 43% of
smartphone data users already using our 4G
services. Mobile Data ARPU increased 19%.

The Home business maintains double digit
growth of 31% and has positioned itself as
the main cable provider in Bolivia. The B2B
Fixed business tripled its customer base,
reaching more than 900 customers, delivering
revenue growth of 25.6%. Cable & Digital
revenue growth was 29%. Tigo Money is
proving a huge success and this year we have
opened the ecosystem to enable customers
to use the service across providers.

EBITDA increased by 9% on an organic basis,
reflecting a significant reduction in operating
costs as well as strong service revenue growth
in our key revenue streams: Data, Fixed and
MFS.

Mobile money and
banks in partnership
Bolivia has launched new online banking
services enabling customers to transfer
and receive money from a wider banking
community via Tigo Money, simplifying
their transactions and saving time.

Read more here

FY 2016

FY 2015 YOY change %1

3,076
542
525
214
39.5

3,121
531
511
197
37.0

(1.4)
2.1
2.7
9.0
2.5pt

The roll-out of 4G in Bolivia
is generating significantly
increasing data traffic.”

Digital classrooms
to enable children
with disabilities to
communicate
In Bolivia, as part of our wider program
to work with people with disabilities, we
have developed a “Digital Classrooms”
project. We have opened 20 classrooms
specifically designed for children with
disabilities to communicate and learn
through digital tools.

The room will allow them to accelerate
their social integration by having equal
access to and benefits of digital
technology. Today we have over 2,000
beneficiaries of the Digital Classroom
program.

Tigo Bolivia is also leading the way in
building inclusive operations, with its
customer service employees undertaking
training in sign language.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Latin America performance review – continued

Costa Rica

Helping our customers
interact easily with the brand
and driving efficiencies were
key goals in 2016.”

Tigo maintains a solid position as Costa
Rica’s leading PayTV operator where our
DTH product grew by 40% to more than
50,000 subscribers.

Revenue in the business segment grew by
5.4% with EBITDA margins remaining strong
at 43%.

We connected 250,000 homes, with 610,000
passed.

This year the focus has been on accelerating
digital TV and DTH and continuing to grow
broadband penetration, with more customers
buying home bundles.

Helping our customers interact easily with
the brand and driving efficiencies were key
goals in 2016 and new services such as a
self-service app and paperless sales processes
are continuing to orientate the business in
this direction.

Tigo Costa Rica is pioneering an internal
poverty assistance program which
identifies employees with socio-economic
vulnerabilities and creates strategies to assist
them. To date 175 people were engaged, and
37 were supported in gaining a formal high
school qualification.

FY 2016

FY 2015 YOY change %1

N/A
153
151
58
37.7

N/A
151
150
58
38.3

3.1
2.8
1.5
(0.6pt)

Promoting diversity
In 2016, Tigo Costa Rica joined a number
of leading companies in the country to
sign the Declaration of San Jose, in which
we commit to ensuring that we have a
workspace free of discrimination towards
the LBGTI community.

Our human resources department was
given a training session by the NGO AED
with support from the Canadian Embassy
on best practices. A toolkit to help the
recruitment process of LGBTI individuals
has also been produced and is in use.

Read more about our work on
diversity see pages 74-75

Creador del Cambio Digital
In Costa Rica, Tigo launched the program
“Creador del Cambio Digital” (Tigo Digital
Changemaker). A program developed
jointly with a local financial institution
(Coopeservidores) that invites people to
present ideas on how digital tools can solve
social and environmental challenges.

The winning entrepreneurs have support
from the University of Costa Rica to
implement their projects.

Read more about our work on social
investment see pages 80-83

Millicom Annual Report 2016

Africa
performance
review

56 Regional overview
56 Africa in figures
58 Tanzania
58 Chad
59 Other markets

Overview

Strategy

Performance

Governance

Financials

Africa performance review

Regional overview

In Africa, we operate in five countries where we capture
almost 14% of Millicom’s annual revenue. Following the
disposal of our Democratic Republic of Congo market in
early 2016, these countries are Tanzania, Chad, Ghana,
Rwanda and Senegal. We see our role as delivering
connectivity and access. Mobile operators are even more
important here than in other parts of the world because
fixed line penetration is very low.

We serve some 25.4 million customers
and our core strategy revolves around
the principles of accelerating and
growing mobile data, B2B and fintech.

Africa in figures

KPI (’000)

Mobile customers
Of which:
Chad
DRC
Ghana

Rwanda
Senegal
Tanzania
Zantel (Tanzania)
MFS customers

Financial

During the course of 2016, Africa has
delivered on its strategy to accelerate growth.
We remain focused on improving the
all-round performance of our African
operations, growing service revenue,
expanding EBITDA margins, controlling
capital expenditure and delivering positive
operating cash flow (EBITDA less capital
expenditure). African EBITDA of
US$258 million increased by 47%, on
revenue of US$896 million, up 14%.

FY 2016

25,407

3,132
-–
3,933

2,966
3,646
10,743
988
8,078

FY 2015 YOY change %1

30,002

2,981
5,321
4,086

2,775
3,039
10,430
1,371
7,560

(15.3)

5.1
(100.0)
(3.8)

6.9
20.0
3.0
(28.0)
6.9

FY 2016

FY 2015 YOY change %1

Mobile ARPU (US$)
MFS ARPU (US$)
Total revenue (US$m)
Service revenue (US$m)
EBITDA (US$m)
EBITDA margin (%)
Capex2 (US$m)
1 YOY change % represents organic growth. See Alternative Performance Measures (“APMs”) page 197.
2 Capex excludes spectrum and license costs.

2.5
1.1
896
889
258
28.7
160

2.7
1.2
829
816
184
22.1
218

(0.5)
3.4
14.3
15.2
47.2
6.6pt
(27.2)

This strong performance was fueled by an
increase in mobile data revenues and usage.
We added 1.4m mobile data users in the
year, bringing the total to 6.9m.

Our burgeoning B2B service, has also driven
growth. We have signed some significant
contracts with clients including large
corporations, embassies and governments
seeking to digitize their services. We have
reinvigorated our dedicated B2B routes to
market, and expanded our channel capacity
in account management and sales agents
to talk to B2B customers. We have seen
excellent results and a 40% growth year on
year. During the year we have also invested
in data centers in Senegal and Chad to
service Tigo’s internal needs and those of
external business clients seeking secure
robust data services.

MFS was also a major contributor to growth,
with the number of subscribers at eight million
– up 18.4% on last year.

During the first half of 2016, we focused on
transforming the cost base of all the African
operations, ensuring that we have an
efficient, sustainable operational platform
with the right people, the right products
and the right channels working effectively
to drive revenue.

In previous years, we have made significant
investments in the network to grow coverage
and improve quality and speed, with a clear
focus on the data business. This year, we
aimed to capitalize on our investments and
focus on maximizing utilization of the
network and growing our customer base.
Therefore our capital investment was lower in
2016 than in previous years.

Our work empowering people and promoting
social and financial inclusion is particularly
relevant in Africa. For example, all of
Millicom’s operations in Africa led the way in
committing to the GSMA’s Connected
Women Commitment Initiative. As part of
the commitment, the Africa operations are
working to increase the proportion of their
female customers using services such as
Mobile Money. Tigo Chad has also
committed to increase the proportion of
female customers using mobile internet.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Africa performance review – continued

Child birth registration:
Tigo Ghana featured at UN General Assembly
UNICEF estimate that more than 50 million
children are born into invisibility each year
and that 230 million children under the age
of five have not been officially registered.
This is despite numerous international
treaties calling for the rights of such children
to be recognized.

In Tanzania only 13% of children under
five years own a birth certificate. That is why
in Tanzania, Tigo partnered with
The Registration Insolvency and Trusteeship
Agency (RITA) and UNICEF to create and
develop a mobile birth registration system
which aims to scale up birth registration for
young children. The application that Tigo
developed and deployed is designed to work
with even the most basic feature phones.

In addition to establishing a child’s identity,
birth registration acts as an enabler for a
multitude of development outcomes
including access to healthcare, education
and social protection. Mobile technology
has an increasingly important role to play
in speeding up progress with birth
registration and the provision of unique
identities to the most underserved,
especially in sub-Saharan Africa.

Since the first launch in the Mbeya region,
the program has been extended to four
other regions, designed further new android
App functionality and has issued birth
certificates to over 780,000 children under
five years. Plans are underway to reach ten
regions in Tanzania.

Following this success, the program has
been replicated in other countries and this
year Tigo, UNICEF, Ghana and the Births
and Deaths Registry were recognized at the
United Nations General Assembly. The app
was featured in a video and presentation
to the audience, which included Ghana’s
former president, John Dramani Mahama.

Read more about our work on child
protection on pages 64-66

Watch our work on child birth
registration here

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Africa performance review – continued

Tanzania

Tanzania is our biggest market where
Tigo is the market leader in terms of
subscribers. Millicom-owned Zantel is also
the leading brand in Zanzibar. Our main
focus this year has been to improve the
data experience for our customers and
to enhance our network, providing faster
and better ways of connecting and
accessing mobile data.

Tigo has a total of 11.7 million customers.
Tigo now has a 4G network in every region of
the country, the first operator to do so, giving
customers greater speed and online access.

Tigo continued to encourage smartphone
penetration, offering attractive promotions
for data users such as WhatsApp and
YouTube bundles.

Tigo Tanzania is a leader in MFS and in 2016
became the first operator in the world to offer
interoperability with all other major operators.
Indeed, a recent report by the World Bank
named Tanzania as a world leader in Mobile
Financial Services and Tigo Tanzania’s mobile
transfer service was accredited for being a
large part of this accomplishment.

Following the acquisition of an 85% stake in
Zantel in 2015, our market share has grown
strongly in Zanzibar. Our customers have
benefited from the roll-out of high-speed 4G
services and brand strength has improved
along with greater cost efficiencies. It has
also delivered a new income stream from
wholesale data delivery.

Tigo now has a 4G network in
every region of Tanzania.”

Connecting education
As part of our commitment to digital
inclusion and enabling a more connected
world, Tigo Tanzania donated computers to
secondary schools in Masasi, Tandahimba
and Sino. These computers will provide
students with online access, enabling
them to learn more about search tools,
technology, and online security.

In addition we supplied vital laboratory
equipment to Chato Secondary School in
Geita region.

In support of the government’s effort to
offset the existing countrywide shortage
of desks in primary schools, we also
donated 1,250 desks countrywide.

Read more about our
social investment projects
on pages 80-83

Chad

Chad had a good performance this year.
Revenue grew by 10.1% year on year.
The subscriber base increased slightly
on last year by 5% to reach over 3 million
subscribers and mobile data continued
to experience strong momentum through
the extension of 4G to the whole of
N’Djamena. EBITDA also grew by 71%.

In 2016, we delivered on our objective of
tapping into opportunities in the B2B sector
and launched new B2B services. We also
opened Chad’s first state-of-the-art data
center, part of our strategy of continued
investment and expansion of infrastructure
in the region. To ensure a high quality, safe
environment for our people we also moved
to a new HQ building in N’Djamena.

This year we also continued to ensure a
quality, robust network for all our customers.

in 2016, we opened
Chad’s first state-of-the-art
data center.”

MFS boosts digital trade
In Chad, most people contribute to at least
one “Paare” or savings group. To meet the
needs of savings groups across the country
and especially those living in rural areas, we
have designed Tigo Paare.

Tigo Paare helps groups send cash to family
members, purchase products and trade
digitally. It has quickly become a useful
platform for connecting large groups with
distant or roaming members.

Tigo Paare has been highly successful and
is now supporting over 53,000 groups
including farmers, such as Chad’s cotton
cooperatives, and healthcare mutual funds.

In particular, the solution is supporting
women entrepreneurs such as the Women’s
Association of Fish Sellers through secure
membership payment to the association.
More than 600 members have benefited
from advice and financial training.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Africa performance review – continued

Other markets

Revenue grew 12% in our other markets,
Ghana, Rwanda and Senegal, where we
continued to focus on growing our
customer base, especially data customers
to ensure we fully utilize our networks.

We registered more than 645,000 new
mobile customers in these markets. We have
focused on attracting higher value customers
with dedicated services and this has delivered
good growth in mobile data users, up 24%.

In Rwanda, we are democratizing access
to data and services by cutting data fees
to allow roaming for internet users and
introducing the option to pay for smartphones
in installments.

In Ghana, we pioneered the industry’s
first product and services in international
Buy-Airtime.

Across all the markets our strategy to tap
into the high potential B2B market is also
delivering good results. In Ghana, for
example, we launched roadshows to assist
small and medium-sized businesses with
their development.

In Senegal, we are supporting the
government in its plan to transform the
country into a hub of information and
communication technologies with another
state-of-the-art data center.

Payment solution for
agriculture to improve
tea farmers’ lives
Tigo Rwanda launched the “Tigo payment
solution for agriculture” platform increasing
the financial and digital inclusion of over
10,000 tea farmers in two tea plantations
located in Mulindin and Rusizi district.

The platform simplifies and improves the
communication and banking arrangements
of the local farmers. Tigo is also supporting
the farmers to discover further benefits of
internet-enabled devices.

Watch more on the project here

Tigo digital literacy bus
Tigo Senegal organized a “digital bus”
which traveled through the country to give
people the opportunity to learn how to
use the internet. Access to the bus is free
and a qualified team advises visitors on
how to use the internet and discover the
opportunities of the digital world.

A fruit trader in Mbour in the east of the
country said: “I thank Tigo for allowing me
to open my first Facebook account. The
Tigo agent showed me how it worked and
helped me to post my first picture. I have
used this opportunity to buy a smartphone.”
More than 25,000 people visited the bus
and got connected for free to the internet
via Tigo network.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Corporate responsibility
performance review

This section sets out our performance
against our 2016 targets, key initiatives
of 2016 in greater detail and long-term
objectives for our most important eight
corporate responsibility topics.

61 Growing responsibly and with purpose
62 Privacy and freedom of expression
64 Child rights and online protection
67 Acting responsibly: anti-corruption compliance
70 Reducing our environmental footprint
74 Diversity
76 Taking care of our people: health and safety
78 Responsible supply chain management
80 Social investment
84 Awards and performance in 2016
85 About the CR performance section
86 Independent limited assurance report

Overview

Strategy

Performance

Governance

Financials

Growing responsibly
and with purpose

Our mission at Millicom is not just to lead the adoption
of The Digital Lifestyle™ in our markets. It is also essential
that we grow responsibly and with purpose. Our corporate
responsibility (CR) strategy and work are central to
delivering our vision of empowering our customers
and employees to advance in life and find joy.

Five year objectives

What we did in 2016

Measure the success and
health of our company
beyond financials

• Published our first integrated report to further clarify how CR strategy is

embedded in our daily decision making

• Expanded the scope of our data collection in environmental management
and diversity and across our subsidiaries in Colombia and Zantel in Tanzania

Promote, protect and
strengthen our reputation

• Finalized materiality assessments with local country stakeholders, and

published country fact sheets in each market

• Continued engagement with our investors, partners, governments and

other key stakeholders on specific topics; including becoming observers of
the Global Network Initiative and ESG visit in Colombia

See key performance
indicators as outlined
under each topic, from
page 62 onwards.

Find out more about our
materiality process on how
we manage our CR on page
12.

Our progress explained
throughout this section

Demonstrate thought
leadership in areas that
link to business success

• Leadership in child online protection, with multi-stakeholder workshops,

awareness and training programs to children, parents and teachers

• Collaborated with UNICEF to create “mobile operators child rights impact

See child rights and online
protection section on page
64 .

assessment tool” to be used across the industry

• First operator in Africa and LatAm to set targets to increase women in our

customer base within the GSMA’s Connected Women initiative

See the diversity section
on page 74.

Our eight most important CR topics

1. Privacy and
freedom of
expression

2. Child rights
and online
protection

3. Acting
responsibly:
anti-corruption
compliance

4. Reducing our
environmental
footprint

5. Diversity

6. Taking care
of our people:
health and safety

7. Responsible
supply chain
management

8. Social
investment

CASH
ACCEPTED
HERE

TV’S
AND
PHONES

CASH
ACCEPTED
HERE

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued

1. Privacy and freedom of expression

Progress in 2016

This year our focus has been on:

• Improving stakeholder engagement,
especially supporting the merger of
Telecommunications Industry Dialogue
on Freedom of Expression and Privacy
(TID) and Global Network Initiative (GNI)
and building relationships with local
human rights organizations

• Continuing to improve internal processes
relating to law enforcement assistance
and ‘major events’ escalation

As our customer base and services we provide
to them increase, so does the focus on and
reputational risk associated with requests from
law enforcement to communications
companies for surveillance and customer data.
Our priority is to ensure we achieve the right
balance between our obligation to respect local
laws and supporting governments in the
legitimate aims to protect their citizens, and our
responsibility to respect the privacy of our
customers.

Millicom is committed to being transparent
about how we deal with requests from
governments and law enforcement agencies.

In 2016, we continued to advocate for clear
and transparent legal frameworks around
surveillance, aligned to the principles of
proportionality and necessity. We contributed
to furthering the understanding around the
issues telecommunication companies face
and the context in which decisions are made
through our first Law Enforcement Disclosure
report, published in April 2016. We also made
further improvements to our internal
operating procedures and controls relating to
law enforcement assistance, and ensuring
that any ‘major events’ were escalated to
regional and global management for
attention and support.

Ongoing industry dialogue
Millicom is one of the founding members of
Telecommunications Industry Dialogue
(TID), an industry group jointly addressing
issues of privacy and freedom of expression
as they relate to the telecommunication
sector. In 2016, TID met face-to-face once a
quarter as well as weekly by phone. Our
detailed progress in implementing the
Principles of the TID can be found in our Law
Enforcement Disclosure report 2016.

In March, we became observers of the Global
Network Initiative (GNI), a multi-stakeholder
initiative focusing on internet freedom,
with the aim of joining as full members in
March 2017. The drivers of our membership
of GNI were to build joint leverage with
companies across the ICT ecosystem, shared
learning and best practices, strengthened
policy advocacy and benefit from a multi-
stakeholder approach – and to put our
processes to test through the GNI
independent assessment. Membership will
allow us to fully participate in what we
consider to be a critical debate with more
than 50 organizations, human rights experts,
investors, academics and internet companies.

The first year of our three-year donations
agreement with international human rights
organization Civil Rights Defenders focused
on sharing information of developments in
our two regions and connecting with local
human rights organizations in some of our
key markets, such as Tanzania and Colombia.

Improving our internal processes
All of our operations conducted self-
assessments on their alignment with the
Group Law Enforcement Assistance
Guidelines and controls, as outlined in our
internal control manual. We commissioned
reports on the legal frameworks and
government powers on surveillance from all
our markets not covered by previous reports
by TID or its members. These reports will be
published under the Creative Commons
license in 2017.

In 2016, we also established an internal
working group on data privacy and
protection, with the aim to create one
comprehensive data privacy framework for
the Group and to set global policies and
training for data privacy.

A global policy aligned to international best
practice will mean going beyond the
requirement of the law in a great majority of
our operating markets.

Our aim is to be able to significantly increase
transparency in 2017 on our policies and
approach to data privacy and protection and
on what data we collect and why.

Read more about our progress in
implementing the Principles of the TID
and our work on privacy and freedom
of expression in our Law Enforcement
Disclosure report 2016 here

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
1. Privacy and freedom of expression

Key

Completed/achieved
In progress

Our performance
Five-year plan objectives (by 2018):
• Complete an external assessment of Millicom’s policies and processes relating to privacy and freedom of expression

Topic

2016 target

Status Our progress in 2016

KPIs

2014

2015

2016

2017 target

Policy
implemen-
tation

Continue to support
specific operations
to implement Group
guidelines to
manage law
enforcement
requests

Law
enforcement
requests

Publish Law
Enforcement
Disclosure (LED)
report

We supported all
operations in clarifying
requirements of the
Group guidelines, and
implementing these;
resulting in all assessed
operations rising to a
mature level of controls.

% of operations
with controls
systematically
applied in line with
the Group
guideline1

Our first stand-alone LED
report was published in
April 2016.

Total number of
law enforcement
requests (Group)

N/A

45% 92%

All operations to
have controls
assessed and
systematically
applied in line with
the Group guideline

N/A

39,418 47,632 Conduct human

rights impact
assessment focused
on privacy and
freedom of
expression in all our
LatAm operations

Number of major
events3

182

2015 data disclosed this year based on 11 operations who completed the self-assessment, excluding Tigo DRC which was sold at the beginning of 2016, and Colombia and Zantel as
integration continued in 2015. 2016 data is based on 12 operations, excluding Zantel, as integration continued in 2016.
This number does not include requests to block access to child sexual abuse content (applicable only to Colombia in 2016).

Number of law enforcement requests

Region

LatAm

Africa

Interception

Customer metadata

927

39,279

6,827

MFS

267

326

Content takedown

Overview of major events3 by type

Type of event

Shutdown of services

Proposals for significant changes in local laws

Proposals for significant changes in technical or operational procedures

Disproportionate interception or customer data requests

Politically motivated messages

Other

Occurrences in 2016

Data reported for financial year, including 2016 data. This also applies to the “Overview of major events by type” table data below. “Major events” can include requests for shutdown of
specific base station sites, geographical areas or entire network, service denial or restriction (SMS, mobile/fixed internet, social media channels), interception requests outside of due
process, targeted take-down or blocking of specific content, denial of access for specific individuals, significant changes relating to surveillance techniques or operational processes
(direct access or how local surveillance laws are implemented in practice), significant changes to local laws relating to government powers of surveillance or data retention, or requests to
send politically motivated messages to customers on behalf of the government.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued

2. Child rights and online protection

Progress in 2016

This year our focus has been on:

• Finalizing the child rights tools for our
sector with UNICEF, and conducting
further assessments in LatAm

• Creating a holistic approach to child
online protection (COP) in LatAm

Promoting child rights
In 2014 we partnered with UNICEF to gain and
promote greater awareness of the issue of child
rights for our business. So far this collaboration
has focused on jointly identifying key child
rights issues in the digital sector and on
creating tools for companies to identify and
address their gaps and opportunities in
managing their child rights impacts.

The Mobile Operator Child Rights Impact
Assessment (MO CRIA) tool UNICEF and
Millicom jointly developed, was launched in
July 2016 and is available from UNICEF
website for all telecom companies to use. To
date, we conducted have five assessments
using this tool, two in Africa and three in
LatAm; Colombia, El Salvador and Bolivia.

Following the success of our mBirth
project in Tanzania, mobile birth
registration is now live in a number
of our markets, including Ghana
and Bolivia. See page 57 for our
case study.

Our work over the past years has positioned
us as a strong leader on child protection within
our industry, re-affirmed in our materiality
assessment with our key stakeholders in 2015.
Building on our understanding of how our daily
work may impact children’s lives, our initiatives

focus on managing operational risks around
child rights and actions to build safer
environments online for children.

Strengthening child online protection
We want children to be able to harness the
great benefits online access can bring them
in education, social interaction, inclusion and
self-expression while at the same time
ensuring their interaction is safe.

We work with UNICEF and other expert
partners to empower children to navigate
the digital world more safely. To date, our
workshops in seven countries in LatAm and
Africa have brought together key decision-
makers and influencers to promote consistent
legal frameworks to protect children online
– in particular to be able to jointly fight cyber-
bullying and child sexual abuse content and
its distribution. Some of our workshops have
acted as catalysts to form multi-stakeholder
national committees and have brought
together all major telecommunication and
internet service providers to promote
collaboration for safe online experiences and
fight child exploitation on the internet.

These workshops form a strong basis for our
integrated approach to child online
protection (COP).

To further raise awareness on this issue, we
provide training and support materials to our
customers, to children and teachers at
schools and train our sales and customer
service staff to be able to address any
customer concerns.

We have also taken steps internally to make a
bigger impact in the fight against child
sexual abuse content online, explained in the
following page.

• 1,826 child online protection (COP)

training sessions conducted, reaching
122,000 children, 14,800 teachers and
13,000 parents

• Over 1,230 digital literacy training

sessions for children and over 1,570 for
adults

• 1,061 schools, universities and public
institutions connected to the internet
as part of our digital connectivity
program

• Equipment of in-kind value around

US$474,000 donated to enable digital
connectivity

• Over 1,870 pieces of equipment such as
tablets, smartphones and computers
donated to 226 schools

• Over 900 members of our sales force
have been trained on COP to date

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
2. Child rights and online protection

Supporting multi-stakeholder collaboration
We ignite dialog and collaboration on COP
to ensure key stakeholders who are needed
to protect children online – legislators, law
enforcement, child rights experts and the tech
industry – all understand the different issues of
COP and their role in solving them. Two years
ago, Tigo Paraguay hosted Latin America’s
first ever COP workshop and since then we
have held similar events in Colombia, Bolivia,
El Salvador and Costa Rica, as well as the
first ever African-based workshop in Rwanda.

Building on the success of our previous
workshops, in October 2016, we hosted
306 participants, including the First Lady
of Honduras, the Lady Lee Foundation,
the Minister of Education, CONATEL – the
telecommunication regulator, UNICEF, GSMA,
International Centre for Missing and Exploited
Children, INHOPE, Plan International and
industry peers for a COP summit in Honduras.
A working group was created to discuss the
Legal Framework for the planned Law on
Cybercrime with the full support of the National
Congress and the National Directorate on
Children, Adolescence and Family.

These workshops are followed up with a
number of different work streams. For
example, in Rwanda and Costa Rica, national
committees on COP were established by the
government, which continue to meet
regularly. In El Salvador – through our Digital
Ambassador’s program – we have trained
more than 10,000 people, including parents
and teachers, on how to use the internet
responsibly. We also delivered this training to
our employees and their children. In Bolivia,
Tigo took part in a nationwide campaign on
COP, through which we reached thousands of
customers to highlight the importance of
responsible use of technology by children.

Fighting child sexual abuse content
As part of Millicom’s commitment to fighting
online child sexual abuse content (CSAC), we
are taking action to prevent access to this
content in our networks.

In 2016, we signed an agreement with
Interpol to begin blocking access on our
network to child sexual abuse content
included on their “Worst Of” list. These CSAC
sites are the only content we proactively
block access to in our services.

We expect our LatAm operations to have
blocking in place by the end of 2017.

Customer communication and training
Together with our partners, we provide
training on COP to parents, teachers and to
children as part of our volunteering activities
across our operations in LatAm. These
training workshops, supported by a wealth
of materials tailored to the local context,
emphasize the great potential the internet
has for children’s development when used
responsibly and aware of related risks.

All 12 operations1

assessed against minimum age of hiring
controls requirements of our internal
control manual reported highest level
of maturity for this control.

Through our partnership with UNICEF,
we launched our “Safe Internet Manual”
in several of our countries in LatAm. The
materials contain important information
on online safety and where to receive
assistance for children or adults in risk
situations. In El Salvador and Paraguay, we
have distributed over 30,000 brochures to
customers and, beginning next year, we will
distribute another 30,000 printed and digital
versions between Honduras and Bolivia to
our clients who have children in their homes.

In partnership with the Costa Rican NGO
Paniamor, we are providing a dedicated web
portal on Tigo websites in operations,
allowing our customers to learn how to be
more content-aware parents, as their children
access today’s digital world. The portal will
go live in 2017.

Training for our customer service
and sales staff
Continuing our effort to reach out to our
customers, we are training our sales force on
the COP. We want our sales force to be aware
of the importance of this to our customers
and their children, and to be able to guide
our customers to the best and safest ways
to use our products and services.

All operations excluding Zantel. As we continue to align
internal processes and systems for Zantel following our
acquisition in late 2015, self-assessment campaigns
start in 2017.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
2. Child rights and online protection

Key

Completed/achieved
In progress

Our performance
Five-year plan objectives (by 2018):
• The mobile operator child rights impact assessment (MO CRIA) tool we jointly developed with UNICEF is used across the mobile operator community.
• Conduct the MO CRIA in all operations in Africa and 50% of operations in Latin America
• Integrate promotion of parental controls and distribution of safe internet into mobile, fixed and cable TV customer processes in Latin America
• Publish child online protection (COP) policy and accompanying guidelines, and roll out across all operations

Topic

2016 target

Status Our progress

KPIs

2014

2015

2016

2017 target

N/A

58% 100%2 All operations to

Child labor
policy
compliance1

Child rights
impact
assessments

Child online
protection

All operations to
have controls in
place and
systematically
applied in line with
the minimum age
policy

Conduct MO CRIA
in three additional
operations,
including one in
Colombia

Organize COP
workshops with
stakeholders in
three operations

Roll out customer
materials and
training on COP
across Latin
America

All 12 operations
assessed report reached
highest level of maturity
against the controls.

% of operations
with controls
systematically
applied in line with
the minimum age
policy

In addition to Colombia,
we conducted
assessments in
El Salvador and Bolivia
in 2016.

% of operations
with child risk
impact
assessments
conducted to date

We hosted one workshop
in Honduras. Two
planned workshops were
postponed to 2017.

COP portal has been
designed and will be
rolled out to Tigo
websites in 2017.

% of operations
that have hosted a
multi-stakeholder
COP workshop to
date

% of operations
with a child online
protection portal

17% 38%3

15% 46% 54%4

New KPI
for 2016

We rolled out customer
leaflets jointly developed
with UNICEF in El
Salvador and Paraguay.

% of operations in
LatAm with
customer leaflets
on COP

New KPI
for 2016

We have conducted COP
trainings across LatAm
and in Ghana.

Number of children
reached by COP
training (’000)

New KPI
for 2016

29%

122

Block child sexual
abuse content
(CSAC)

We signed an agreement
with Interpol and
defined legal and
technical approach for
each operation.

% of operations
in LatAm blocking
child sexual abuse
content

N/A

14%5

14%

continue to maintain
systematic controls
in line with the
minimum age policy

Action plans in place
in all operations
where MO CRIA has
been completed

Organize COP
workshops in
Guatemala and
Ghana

All operations in
LatAm to integrate a
COP portal on Tigo
websites

At least three
additional
operations in LatAm
to roll out customer
leaflets

Increase number of
children trained by
20%

Implement CSAC
blocking in at least
50% of our
operations across
LatAm

When we published our minimum age policy in 2015, we reported two KPIs against targets around child labor policy compliance: number of operations completing self-assessment
against controls in place, and those who report systematic controls as being in place. From 2016 onwards, the controls are self-assessed for each operation on annual basis and we will
continue to report the maturity level only.
All operations excluding Zantel. As we continue to align internal processes and systems for Zantel following our acquisition in late 2015, self-assessment campaigns start in 2017.

2
3 Including assessments conducted in Tanzania and Rwanda in 2015; and Colombia, El Salvador and Bolivia in 2016.
4 Including the workshops hosted in Paraguay and Colombia in 2014; Bolivia, El Salvador, Costa Rica and Rwanda in 2015; and Honduras in 2016.
5 We restate 2015 number as our operations in Colombia already had CSAC blocking in place, in line with the country’s legislative requirements.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued

3. Acting responsibly:

anti-corruption compliance

Progress in 2016

This year our focus has been on:

• Appointing a new, dedicated Chief Ethics

and Compliance Officer role

• Simplifying our compliance framework by
adopting a three pillar approach: prevent,
detect and respond

• Rolling out standardized compliance

training across all operations

Millicom has a zero-tolerance policy towards
any and all forms of bribery, corruption,
extortion and fraud. We are committed to
doing business the right way in every
environment in which we operate.

We continued to further strengthen our
compliance framework, including getting better
understanding of compliance risks and
increased engagement within the business.

We rolled out Group-wide, standardized training
on our Code of Conduct (“the Code”),

anti-bribery and anti-corruption (ABAC), and
anti-money laundering (AML). We also
strengthened our capabilities and internal
controls around AML, with standardized
training framework launched for all our
Mobile Financial Services (MFS) staff.

Our new Chief Ethics and Compliance Officer,
reports directly to our Board, with a dotted
line to our CEO. Our governance structure can
be found in the Governance section of this
report, on pages 124-125.

Embedding a robust Code of Conduct
Our communication campaigns for current
staff, as well as new starters, aim to have all
employees acknowledge the Code formally
and declare any potential conflicts of
interest.

The mandatory Code training launched
across all our operations with an easy-to-
access online learning course and face-to-
face sessions. By the end of 2016, 92%1
of our employees completed the training
on our Code, its application and how to raise
any concerns around unethical behavior.

Building on the ABAC training delivered to
senior management and high risk groups in
2015, we are further rolling out the ABAC
training to staff at all levels.

Moving forward, the mandatory training
will have to be completed by all employees
annually. In 2017, we will be expanding our
90% completion target for Code training
to ABAC training as well.

We also continued to promote our
independently-run Millicom Ethics Line, which
allows employees and third parties to raise
concerns anonymously. As per our Code, we
reiterate the protection of whistleblowers
and our non-retaliation policy for all good
faith reports of wrongdoing.

Excluding Comcel. Compliance is working closely with
local management to roll out a tailored solution.

Strengthening our AML and
anti-fraud capabilities
With the growth of our MFS business
regulations are increasing in our markets
around the monitoring and registration of
MFS providers. We have further strengthened
our internal capabilities and provided
extensive support to our operations as part
of our registration process and we are
reinforcing our AML controls. We hired
centralized resources for both of our regions
to act as regional AML program managers.

We have a three-staged approach in ensuring
we have a robust AML framework: our AML
team continues to work closely with our
internal control functions in conducting
self-assessment campaigns against AML-
related controls. Our regional AML program
managers then conduct regular reviews of
AML measures. Finally, our internal audit
team conduct audits into the AML practices
currently in place.

In 2016, we conducted internal audits in
three of our largest MFS markets; El Salvador,
Paraguay and Tanzania. Remediation plans
were put in place and executed following
the audits.

We also revised our AML training program,
and delivered a standardized training
program to all our local AML officers. In 2017,
we will roll out this training program to all our
MFS staff.

We have renewed our corporate membership
of the Association of Certified Fraud
Examiners with a higher tier, which means we
have more ACFE members across our
operations compared to our previous
membership year.

We have a number of colleagues currently
progressing towards the certified fraud
examiner qualification and will increase this
further in 2017 as we continue to
professionalize our network.

In 2016, we achieved greater visibility on
fraud through quarterly trend analyses.
These fraud reports are then submitted
to the Audit Committee of the Board.

81%of our employees
acknowledged our
Code of Conduct.”

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
3. Acting responsibly: anti-corruption compliance

Key

Completed/achieved
In progress

Our performance
Five-year plan objectives (by 2018):
• Continue external and internal monitoring of the anti-bribery and anti-corruption (ABAC) program enhancements with a view to measure

the maturity level of the compliance framework over time

• Embed compliance risk management into business risk management at global, regional and local level
• Third party due diligence for end-to-end process, from landowners to suppliers, IT software providers etc. based on risk level

Topic

2016 target

Status Our progress in 2016

KPIs

2014

2015

2016

2017 target

Code of
Conduct

All employees have
acknowledged the
Code

Training

85% employees to
complete the Code
training2

ABAC training
completed by all
senior staff and
high risk groups

Conflict
of interest
declaration

All employees have
filled and signed
the conflict
of interest
declaration form

Through the global Code
training and awareness
campaigns, the number
of employees who
acknowledged the Code
more than doubled.
Despite this significant
increase, we are still in
the process of achieving
100% completion.

The Code training has
been rolled out to all
employees, where we
exceed the completion
target.

ABAC training was rolled
out beyond senior staff
and high risk groups,
with 45% of all our
employees completing
the training this year.

In all operations, we ran
a communication
campaign on disclosure
requirements around any
perceived, actual and
potential conflicts of
interest. All cases
reported were reviewed
and closed.

% of employees
who acknowledged
the Code

70% 52% 81%1

All employees
to acknowledge
the Code

% of employees
who have
completed the Code
training

New KPI
for 2016

92%3

N/A

32%

44%

N/A

63%

65%

67% 57% 74%1

% of procurement
staff trained on
ABAC

% of senior
managers trained
on ABAC

% of employees
who filled
and signed the
conflict of interest
declaration form

90% of employees
to complete the
Code and ABAC
training

Incorporate
elements of the
Code and ABAC
training into
onboarding training

All employees
to complete and
sign the conflict
of interest
declaration form

1
2

As the signings data is in line with CR performance data reporting period of Q4 2015 to Q3 2016, percentage is calculated based on headcount as of end of Q3 2016.
To ensure all our employees can access the training, we launched the Code training in both elearning and face-to-face formats, and therefore have slightly reworded this KPI for the
2016 report to reflect all training delivered. Employees will be required to complete a training session on both Code of Conduct and anti-bribery and anti-corruption at least once a year.

3 Excluding Comcel. Compliance is working closely with local management to roll out a tailored solution.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
3. Acting responsibly: anti-corruption compliance

Key

Completed/achieved
In progress

Topic

2016 target

Status Our progress in 2016

KPIs

2014

2015

2016

2017 target

Whistle-
blowing

Continue to align
management of
cases reported to
joint tools and
guidelines; promote
our Millicom Ethics
Line and encourage
employees to raise
potential concerns

We established a
Group-level committee
with compliance, HR,
fraud management and
corporate security
functions to streamline
the investigations
process.

We promoted the
Millicom Ethics Line as
part of the CoC and
ABAC training sessions,
with posters and
communication
campaigns.

110

156

Number of cases of
unethical behavior
reported and
investigated

Investigations
resulting in written
warning

Investigations
resulting in
termination of
employee contract

Anti-money
laundering

Strengthen internal
AML controls and
conduct AML audits

Each operation
conducted a self-
assessment against
AML-related controls.

% of operations
offering MFS with
AML controls
systematically
applied

New KPI for 2017

Continue
strengthening the
global investigations
process

Run a communication
campaign around
Millicom Ethics Line

90% completion rate
on CoC and ABAC
trainings, which
feature guidelines on
how to raise concerns
and non-retaliation
policies for all
good-faith reports
of wrong-doing

All operations
offering MFS to have
AML controls
systematically
applied

Third-party
risk
management
and anti-
corruption
measures

Map our land rights
management process
with a pilot operation
to understand
environmental and
social impacts
(including
corruption risk)

Monitor turnover of
procurement staff
as a high risk
employee group1

We conducted audits
in three of our largest
Mobile Financial Services
(MFS) markets.

% revenue from
MFS represented by
operations audited
for AML controls

New KPI
for 2016

83%

Conduct audits in
each market in a
three year cycle

We conducted audits on
our compliance
framework, including
transactions for network
deployment and land
permits practices and
ABAC-related risks.

New KPI for 2017

% of operations we
conducted a
compliance risk
assessment or audit

We continue monitoring
turnover rate.

Turnover of
procurement staff

N/A

14% 14%

Include land rights
management and
related transactional
elements in the
quarterly compliance
monitor plan.

Monitor turnover
of procurement
staff as a high risk
employee group

1 Low turnover could indicate heightened ABAC or fraud-related risks.

Overview of cases reported to Millicom Ethics Line2

Topic

Bribery and corruption

Discrimination and harassment

Human rights and labor

Conflict of interest

Fraud

Other

Total

Number of cases reported
and investigated

Cases ending in
written warning

Cases resulting
in termination

This table covers only cases reported to Millicom Ethics Line and excludes cases reported to TigoUne’s Línea Ética, as we further align case category descriptions.
Total cases reported in the KPIs table prior to this table include cases reported to both Millicom Ethics Line and TigoUne Línea Ética.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued

4. Reducing our

environmental footprint

Progress in 2016

This year our focus has been on:

• Aligning our environmental efforts with
our corporate efficiency program, HEAT,
to deliver cost and carbon savings by
reducing network energy consumption
and integrating fleet and facilities
management

• Modernizing and improving the energy

efficiency of data centers

• Rolling out of our responsible electronic
waste (e-waste) management program
in more countries

• Achieving ISO 14001 certifications

We have updated our Group Environment
Policy, which now establishes clear governance
structure to manage our environmental impacts
and outline the roles and responsibilities of
each function in protecting the environment.

We continue to focus our efforts on activities
that have the highest environmental impact, in
particular, reducing energy consumption and
rolling out our global e-waste management
program.

Progress has been good in implementing our
global responsible e-waste recycling program
across all operations by 2018, with eight
operations running the program by the end
of the year.

As we reached our long-term goals to reduce
our energy consumption by 50% by 2020
compared to 2008 baseline, we are now
exploring opportunities to further align our
environmental work with business priorities.
This year there is an 8% year-on-year
absolute reduction in our CO2e emissions.

We are pleased to have achieved certification
against the world’s leading environmental
management standard ISO 14001 for our
corporate offices and data centers and critical
sites in Honduras, the second operation after
Colombia to achieve this certification. Our aim
is to certify all other operations in 2017.

Energy efficiency
Last year electricity and fuel costs accounted
for one quarter of our site management and
maintenance costs. This, combined with our
commitment to better environmental
stewardship, makes reducing our energy
consumption a priority.

As we continue to upgrade our network, we
will roll out single-RAN technology across our
sites – this technology allows mobile
operators to reduce energy consumption by
an estimated 30% by hosting different
nodes such as 2G and 3G in one box. We are
including environmental impact and energy
reduction measurements to the Group-wide
operational efficiency program HEAT to help
us quantify savings.

Over
US$678,800

raised from sale of e-waste through
responsible recycling program in 20161

To reduce our energy consumption of our
networks sites, we continued to modernize
our network with more energy-efficient
equipment, increased network sharing and
reduced the use of cooling solutions. We also
invested in alternative energies, such as solar
power and hybrid battery solutions, for
powering sites in remote “off-grid” areas.

With The Digital LifestyleTM strategy, larger
data centers are needed. We have taken a
proactive approach to energy management
when building new state-of-the-art facilities
and modernizing those already operating.
The new and improved data centers we have
introduced in 2016 offer increased safety
and security and have significantly improved
power usage effectiveness (PUE).

Following a US$20m initial investment in
data centers in Chad, Tanzania, Ghana and
Paraguay, we are now investing a further
US$27m in those in Colombia, Senegal,
Bolivia and Guatemala in 2017. Work for
modernized data centers in Senegal and
Bolivia, and a new Tier 3 center in Colombia
are well advanced.

Excluding the monetary value of the e-waste sales from
our operations in Senegal in 2016, as we finalize the
clear out.

We are also working towards achieving a
Silver certification for “Certified Energy
Efficient Datacenter Award (CEEDA)” for Tigo
Paraguay and Tigo Tanzania data centers.
We expect to deliver this in early 2017 for our
first site.

Electronic waste management
Electronic waste (e-waste) continues to be a
key focus of our environmental management
work due to potentially high environmental
and reputational risks – and the need to take
a proactive approach in markets where
infrastructure for responsible e-waste
treatment may be missing.

In 2016, we performed a thorough review
of the implementation, gaps and impact
of our e-waste management practices in
all our operations. This has helped us create
roadmaps for countries who do not yet
apply the program. This year we were also
able to map for the first time the savings
the program is delivering in warehouse costs
due to reducing storage needs. Out of 13
operations, eight are now running on the
Group program.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
4. Reducing our environmental footprint

E-waste recycled through our responsible waste management program

Country

Chad

Colombia
Costa Rica
El Salvador
Paraguay
Rwanda

Senegal
Tanzania

Energy use

Sources of energy by asset type

Base station and fixed network sites
Our fleet
Data centers and offices1, 2
Shops

Sources of energy for our assets, excluding fleet

Latin America
Africa

* As a percentage of total energy consumption.

As the majority of our data centers are co-located with our
offices, they often do not have separate meters to enable
us report on data center consumption separately. With our
data center program roll-out, we will be able to measure
data center energy consumption individually.
For two of our operations, we account for some data center
electricity consumption under network sites. As we further
roll out our data center improvement program, we aim to
be able to report data center consumption separately
Including 377 Mwh electricity generated from solar panels
at our sites. Electricity consumption from solar panels have
been estimated based on average consumption per site or
solar panel, and differences in solar radiation in our
geographies. We are working towards improving the
accuracy of our renewable energy consumption.
Emissions from fuel are calculated using Defra’s 2016
Greenhouse Gas Reporting Conversion Factors.
Emissions from electricity are calculated using World
Resources Institute (2015) GHG Protocol tool for stationary
combustion, version 4.7.

Quantity of e-waste recycled (t)

Country set up on the program,
recycling in progress
206
89
101
267
Country set up on the program,
recycling in progress
84
75

3.5 times as much
e-waste recycled
through responsible
e-waste management
program in 2016”

Total weight of e-waste recycled
through our responsible e-waste
management program (tonnes)

Fuel (L ’000)

16,474
9,713
4,218
268

Energy from
fuel (MWh)

164,469
93,202
42,084
2,678

Electricity
(MWh)3

464,483
N/A
50,235
17,254

2
2
8

9
7
1

2015

2016

Total energy
consumption
(MWh)

Energy from
diesel
(%)*

Energy from
electricity
(%)*

562,346
178,163

15
69

85
31

Scope 3 emissions account for emissions from our base
station sites power managed by a supplier (accounting for
93% of total scope 3 emissions, same as 2015) and air
travel (7%).
Carbon emissions from sites power managed by a third
party in one operation are estimated based on 2015
figures, taking into account the change in total number of
sites managed by the third party.
Air travel data for Bolivia is extrapolated for the 12 month
period based on the data available for nine months.

Our carbon footprint4,5 tonnes CO2e

2
7
3
2
7

4
8
3
5
2
1

0
8
6
4
7

1
4
5
4
5

0
0
0
8
1
1

9
9
7
8
7

1
1
4
3
6

1
9
4
5
1
1

4
0
7
8
6

2014

2015

2016

Scope 1
Scope 2
Scope 36,7,8

Sources of energy for our assets

5
8

1
3

9
6

5
1

LatAm Africa

Diesel
Electricity

Total energy consumption MWh

1
7
9
1
3
5

2
3
4
2
0
3

1
3
5
4
2
5

4
6
6
9
7
2

6
9
5
0
7
4

3
9
5
6
5
2

2014

2015

2016

Fuel
Electricity

All countries ISO 14001
certified by end of 2017”

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
4. Reducing our environmental footprint

Promoting circular
economy
Building on our focus on e-waste, our
operations in LatAm have worked on
innovative solutions promoting circular
economy with other types of waste our
operations generate. Our team in Bolivia
has developed an upcycling project where
45 students, from underprivileged
backgrounds within Bolivia’s three main
cities, participate in building furniture
made from warehouse pallets that
would otherwise have been disposed of.
The finished furniture is being used in
our Tigocitos (crèches) and shelters.
As the project evolves, we aim to create
a business model to sell the furniture.
We completed the first phase of this
upcycling project and expect to apply
the project nationwide during next year.

In El Salvador, we work with a supplier
who makes bags and backpacks from
old banners and promotional material.
We distribute these, equipped with other
school material, to children as part of
our educational program.

Environmental impact
project continues in
Paraguay
In the second year of its environmental
impact assessment project, Tigo Paraguay
launched a waste management campaign
to reduce, reuse and recycle waste. The
Green Committee oversees the program
to promote recycling habits and establish
a comprehensive waste management
system that colleagues will use. Once we
have measured the amount of basic waste
disposed of from our main offices, the
plan is to expand this campaign to all
offices in Asuncion and progressively to
the whole country. Our focus is on
achieving a cost-benefit model through
programs of recycling paper for our
offices, generating jobs for local recyclers
and selling reusable products, thus
promoting a culture of reduction, reuse
and recycling and environmental
awareness.

Using mobile technology
to reduce our employees’
commuting footprint
TigoUne signed a commercial agreement
with Wheels, a company providing
sustainable mobility solutions. The app is
a social network allowing employees to
share their private car or taxi with other
employees. It is now used in seven
locations between Bogota and Medellin
and more than 460 employees have
subscribed to it. With traffic congestion
regulations limiting use of cars, this
initiative also helps our employees to
commute more easily.

Our new built, energy efficient
data center in Paraguay

Tigo Costa Rica goes
carbon neutral
With the Costa Rican government’s
ambitious target for the country to be
carbon neutral by 2021, Tigo Costa Rica
is leading the way with its own carbon
emissions mapping project. Since 2015,
we have been following the international
ISO 14064 standard and built a GHG
emissions inventory for our facilities in
San José and our entire fleet. This year we
delivered training on carbon neutrality for
all our fleet, facilities and CR teams; and
are implementing an energy reduction
plan. We aim to achieve carbon neutrality
certification over the next year.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
4. Reducing our environmental footprint

Key

Completed/achieved
In progress

Our performance
Five-year plan objectives (by 2018):
• Establish a cross-functional steering committee and global energy reduction and green energy strategy
• Global e-waste process implemented in all operations to manage e-waste through responsible vendors
• Extend environmental reporting to consider emissions relating to logistics and supply chain

Topic

2016 target

Status Our progress in 2016

KPIs

2014

2015

2016

2017 target

E-waste

Identify high-risk
operations where
e-waste is not
managed in line
with Millicom’s
global policy, and
set up programs
at these operations
as priority

Update Millicom’s
environment
and e-waste
management
policies

Reduce energy
consumption

Energy
consumption
and carbon
emissions

Target
setting

Review
environmental
target setting
process and
approach to science-
based targets for
carbon reduction
and set new
long-term targets

We conducted a review
of all operations to
identify current e-waste
management approach,
and alignment with
Group e-waste policy.
We are developing
roadmaps for operations
that are not set on the
Group program.

Millicom’s revised Group
environment policy was
updated and signed off
by senior management.

While we have several
energy saving initiatives
across our operations
and our normalized
energy consumption is
decreasing, we are still
working on gaining
better visibility on
quantifying energy
reductions achieved via
individual initiatives.
There is an 8% year-on-
year absolute reduction
in CO2e emissions.

This year we are
changing the way we
normalize our CO2e to
report “tonnes of CO2e
emissions per US$1,000
revenue”. This is more
representative of our
business activities and
covers emissions from
both mobile and cable
services.

We have not yet replaced
our 2020 target which we
achieved in 2015.

15% 38% 62%

% of operations
set up on our
global responsible
e-waste recycling
program

Roll out the
program in at least
10 operations,
accounting for
over 75%

% of operations
with controls
systematically
applied in line with
the environment
policy

Tonnes of CO2e
emissions per
US$1,000 revenue

% of base stations
using green power
or site sharing

% of base stations
on single RAN
technology

Energy
consumption by
technical and
administrative
sites and fleet

New KPI
for 2017

Develop and roll out
an implementation
manual for the
environment policy
and update the
internal control
manual accordingly

0.039

0.043

0.040 Quantify emissions

savings achieved
through key HEAT
initiatives, including
network energy
consumption and
logistics

Set new long-term
carbon reduction
targets

Expanded KPI
scope for 2016

25%

N/A

58% 55%

See
2014
CR
report
page
43.

See
2015
CR
report
page
28.

See
page
71
for
break-
down.

As we achieved our 2020
“CO2e per base station”
target last year, we now
monitor tonnes of CO2e
emissions per US$1,000
revenue and subsequent
reductions.

Carry out
environmental
impact assessments
to identify areas of
highest impact and
control over the
reduction of the
impact

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued

5. Diversity

Progress in 2016

This year our focus has been on:

• Delivering diversity and inclusion training

and awareness for executives

• Supporting female entrepreneurship and

building our female customer base

A diverse workplace
We are proud that our workforce is culturally
diverse with 82 nationalities. When we first
started our diversity program in 2014, the
gender balance at senior management level
was very low compared to the gender
balance across our overall employee base.

We continue to work to increase the number
of women in senior management. The trends
have been positive in our two regions, with
the number of women in senior positions
rising from 7% in 2013 to 26% in Africa, and
from 27% in 2015 to 31% in LatAm in 2016.
In our corporate offices 20% of senior roles
are held by women.

In 2016 the proportion of women in our
employee base is 39%. With the percentage
of women in top 680 management roles
increasing from 25% in 2015 to 29% in 2016.
We are committed to continuing this steady
progress.

In our 2015 report, we outlined our ambition
to establish a Company-wide diversity
steering group comprising members of the
Executive Committee and senior
management. We are preparing to start
diversity and inclusion committees for our
corporate offices and operations. The goal of
the committees will be to promote the
creation of an inclusive workplace, where our
employees’ different strengths are
celebrated, valued and utilized.

Steady progress increasing
women in senior roles”

New business models, innovation, better
creativity and ability to respond to more
fragmented customer segments make diversity
a crucial business issue. In our markets, female
customers in particular represent an enormous
opportunity. There is a clear gender gap in
adoption of the services we sell and women
have felt underserved by the digital industry.
Improved diversity will enable us to

tap into this market by providing relevant
and useful content and services.

This year we continued to highlight the
business case of diversity by demonstrating
its power to help us grow. We have also
promoted inclusion and trained management
on unconscious bias in the workplace.

Supporting employees
with children
Turnover of younger women has been
high in Millicom. To offer concrete support
to employees returning to work after
maternity leave, we have promoted a
shortened working week for breastfeeding
mothers and established dedicated
nursing rooms in most of our LatAm
operations: Bolivia, El Salvador, Paraguay,
Honduras and Guatemala, with our
offices in Colombia and Costa Rica to
follow shortly.

In Bolivia, we also offer childcare services
in the workplace. 190 of our female
employees and 80 of our male employees
use one of the eight nurseries we have
across our operations in the country.
We are also encouraging our employees –
both men and women – to take their full
parental leave.

We did not meet our 2016 target to conduct
an equal pay audit. The audit was postponed
pending further alignment of job grading
and responsibilities, a prerequisite for a
successful audit.

Training and awareness
In 2016, we carried out training on gender
diversity, inclusion and unconscious bias to
senior executives in two separate workshops.
This training – focused on understanding the
value of diversity, recognizing unconscious
bias, and building an inclusive workplace –
has been adapted to be rolled out to our
staff across corporate offices and markets.
The first of such one-day workshops took
place in Guatemala in December 2016.

Closing the digital gap for women
The mobile operator association GSMA
estimates that 200 million fewer women own
a mobile phone than men in low and middle
income countries. Bringing balance could
unlock up to US$170 billion globally for the
mobile industry before 2020.

Gaining more women customers represents
a great business opportunity for Millicom.
We are also working to better support
women entrepreneurs in the communities
in which we work.

Millicom is particularly proud of our
involvement with the GSMA’s Connected
Women Initiative that is helping our industry
focus on reducing the gender gap in the
adoption of mobile internet and mobile
money service.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
5. Diversity

Key

Completed/achieved
In progress

In 2016, Millicom became the first operator
to commit all of its African operations to the
initiative. The first African operator to sign up,
Tigo Rwanda, committed to increase the
percentage of women accessing its mobile
financial platform “Tigo Cash” from 39%
of total users to 45% by 2020.

Tigo Paraguay in turn became the first
operator in Latin America to sign the
Connected Women Commitment.

During National Women’s Week in Chad, Tigo
Chad hosted a “Women entrepreneurship
and ICT” event to highlight the significance
of digital tools for women and in particular
the benefits of Mobile Financial Services
(MFS) solutions. The event showcased Tigo
Paaré, an innovative group loan service that
has already benefited hundreds of women
entrepreneurs in getting crowdfunding to
start or expand their own businesses.

Additionally, this program reached out to the
Ministry of the Woman, where 13 female
employees received a certificate for completing
a six-week digital training on Microsoft Office,
mobile internet and Mobile Financial Services.
Training on digital tools for women are also
held in cooperation with Technidev, winner of
the 2015 Tigo Digital Changemakers Award
and the Association for the Education Action
and Advancement of Women (AEPF).

Our performance
Five-year plan objectives (by 2018):
• Increase the number of women among senior managers each year
• Establish a Group-wide maternity and paternity leave policy, to also include a shortened working week for breastfeeding mothers

Topic

2016 target

Status Our progress in 2016

KPIs

2014

2015

2016

2017 target

Family-
friendly
policies

Establish
breastfeeding
rooms in 50% of
operations

Female
represen-
tation in the
workforce

Increase % of
women in senior
management
positions

At the end of 2016, we
had nursing rooms in five
operations across
LatAm, representing
38% of our operations.
We also introduced these
facilities in Miami and
Luxembourg corporate
offices.

For our work in 2016, see
page 74.

% of operations
with breastfeeding
rooms

New KPI
for 2016

38%

% of women
in senior
management
positions

% of women
across our
employee base

22% 25%1

29%1

33% 34% 39%

Establish nursing
rooms in all
remaining LatAm
operations and our
London corporate
office

Increase % of
women in senior
management
positions to align
with % of women
across our employee
base

Reduce turnover
rate for women
under 30

For initiatives we
delivered, see case
study on “supporting
employees with children”
on page 74.

Turnover rate for
women under 30

28% 18% 21% Reduce turnover rate
for women under 30

In 2016, we clarified and updated the definition of senior management to represent key decision making roles across our business, such as our CEO or General Managers, their direct
reports and heads of departments. This represents top 680 senior manager roles, whereas in the previous years, our report was based on a grading structure which was similarly
representative at over 600 senior managers.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued

6. Taking care of our people:

health and safety

Progress in 2016

This year our focus has been on:

• Committing to zero-fatality business

• Introducing a risk-based approach
to health and safety by country

In our previous reports, we covered a number
of topics relating to health, safety, wellbeing,
development and career progression of our
employees under “Taking care of our people”
section. This year, as we integrate our reporting,
employment and career-development related
topics are now reported under “Our people
and partnerships” section, from pages 21-22.

For more information on governance of
health and safety, see pages 125-126.

A zero-fatality commitment
Our goal is to have zero avoidable incidents
and accidents and we have engendered this
culture from the bottom up by empowering
local health and safety officers. This has
been done through a global policy endorsed

We work in countries where health and safety
(H&S) practices are evolving and where
related regulation may not exist or is not
consistently enforced. Some of our countries
also experience high rates of violent crime,
extreme weather events or threat of terrorism,
so we need to be particularly vigilant to
mitigate risks to our employees.

Due to the lack of uniform H&S regulation in
our countries, it is essential that we remain

diligent and ensure compliance with all local
legislation, but also go beyond legal
compliance by aligning to global standards.

In 2016, our focus was on adopting a risk
based approach, carrying out risk assessments
in each operation and implementing
mitigation plans. We ensure a consistent
approach by rolling out an H&S management
system aligned to international H&S standard
OHSAS 18001.

personally by our CEO and delivered to all
CEOs of our subsidiaries. Our zero fatalities
approach applies not only to employees
directly employed by us but also to
contractors on whom we depend on for
many high risk areas, such as network
maintenance. In 2016, we had zero fatalities
amongst employees and contractor fatalities
fell to five from 16 the previous year.

Our Colombia, Honduras, Bolivia and
corporate offices are already certified against
the international health and safety standard
OHSAS 18001 and we are well on track to
achieve certification for all operations by the
end of 2017.

Risk-based approach
We achieved our target to conduct risk
assessments in each of our operations in 2016
to identify highest health and safety risk areas
and develop mitigation plans for top five risks.
Most common risks identified and subsequent
mitigation plans we worked on were:

• Working at heights: we require all

engineers working on our towers to wear
suitable personal protective equipment
(PPE). We conduct random site inspections
to ensure all engineers follow this. We also
continue to require all engineers to
demonstrate their level of safety
competency via a Safety Passport.

• Electrical safety: same requirements

apply as per working at heights. We also
continuously review alternative means of
installing cables to minimize the risks of
working with overhead cables.

• Management of road risk: with vehicle

tracking and speed monitoring equipment
installed in our fleet in almost all our
operations, we are focusing our efforts on
monitoring driver patterns and promoting
safe driving.

• Personal safety and security: we continue

providing travel safety information,
security bulletins and briefings. We are
conducting two pilots in Bolivia and
Honduras to develop and implement a
personal alarm and security app.

• Control of our contractors: we request all
suppliers to sign our Supplier Code of
Conduct and align with our requirements
on incident reporting, health and safety
management and use of personal
protective requirements. We also conduct
unannounced site inspections and request
mitigation plans.

We are committed to having a health and
safety committee that meets quarterly in
each of our markets. The vast majority of
our workforce is already represented by an
H&S committee, at 76%.

In 2017, we will continue reviewing risk
assessments for each country on a quarterly
basis. Senior management and the Board
receive reports on progress and incidents
on a monthly basis.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
6. Taking care of our people: health and safety

Key

Completed/achieved
In progress

Our performance
Five-year plan objectives (by 2018):
• Continue our zero-fatality commitment
• Review risk assessments for each country on a quarterly basis and update and manage as required
• Continue reporting to senior management and the Board on progress and incidents on a monthly basis

Topic

2016 target

Status Our progress in 2016

KPIs

2014

2015

2016

2017 target

Conduct internal
audits to assess
compliance with
the new H&S policy
and Millicom
Safety Rules

Alignment
with
international
H&S
standards
and
Millicom’s
own policies

Achieve
OHSAS 18001
certification for our
corporate offices

We audited each
operation in 2016 at
least once a year; with
audit control documents
and mitigation plans in
line with our internal
controls. Additional
OHSAS 18001
certification audits in
Bolivia, Colombia,
Honduras and our
corporate offices.

Our corporate offices
and operations in Bolivia
and Honduras have
achieved OHSAS 18001
certification; with our
Colombia operation
renewing their
certificate.

New KPI
for 2016

% of operations
with controls
systematically
applied in line
with our Group
H&S policy

100% Continue conducting

internal audits to
assess compliance
with our H&S policy
and internal controls

14% 100% 100% Achieve OHSAS

% of operations
in line with
OHSAS 18001

% of operations
certified against
OHSAS 180011

% of workforce
represented in
H&S committees

N/A

8% 23%

70% 91% 76%

Incident
reporting

Continue improving
our incident
reporting and
reinforcing
zero-fatality
commitment

For our work on
identifying and
mitigating H&S risks, and
reducing incident rates,
see “Risk-based
approach” on page 76.

Number of
employee
fatalities2

Number of
contractor
fatalities2

Number of H&S
incidents reported

Lost-time injury
rate per 1,000
workers3

N/A

305

155

N/A

1.26

1.47

Absentee rate

0.62% 0.71% 0.68%

1 We introduce this KPI in our 2016 report to align with our target of achieving OHSAS 18001 certification across all operations. In 2015, out of 12 of our operations – excluding Tigo DRC
which was sold in early 2016 and Zantel as we worked on integration, our Colombia operation was certified. In 2016, our Bolivia, Colombia and Honduras operations were certified.
2 Numbers of employee and contractor fatalities reported for 2016 are aligned with the financial year, same as 2014 and 2015 numbers reported.
3

Our incident management tool is available for all employees and outsourced workers to report incidents. Although 2015 numbers were calculated based on all incidents reported by
both worker categories, they were incorrectly reported as 1,000 employees in the 2015 CR report. In this report, we have reinstated the KPI as per 1,000 workers.

Millicom Annual Report 2016

18001 certification
for all remaining
operations

All operations
to have a H&S
committee in place
with employee
representation, that
meets on a regular
basis

Continue zero-
fatality commitment
for our employees
and all contractors

Improve incident
reporting across all
operations

All significant events
to be reported within
24 hours

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued

7. Responsible supply chain

management

Progress in 2016

This year our focus has been on:

• Identifying material risks by supplier

category

• Delivering training for our procurement
teams and suppliers on responsible
supply chain management

We rely on thousands of suppliers around the
world, from small local vendors to multinational
corporations to deliver our services. How they
behave and the job they do reflects on our
reputation, so it is essential we work in tandem
to ensure we share the same expectations and
practices in acting responsibly

Improving supplier performance and
managing risk
With 221 assessments requested from
suppliers on EcoVadis since 20151, we now
have a better view of the main risks our
suppliers represent and can mitigate these
through corrective action plans.

This year we invited an additional 124
suppliers to complete assessments. The
group of suppliers invited for assessments
represented the highest risk category
identified in the BSR review, such as suppliers
of contingent labor, security services, call
centers and car fleet providers. Going
forward, our focus will be to get all of our
high spend suppliers in risk categories to
complete EcoVadis assessments, and to
engage with low performers for improvement
plans, as well as re-invite those suppliers who

scored below 35/100 to re-assess their
progress. Low scoring suppliers will also be
the target of our training efforts in 2017.

The 100 suppliers who responded to one
of our three campaigns represent 48%2
of our supplier spend. Their average score
was 43/100, which is slightly above EcoVadis
average of 42/100.

From the respondents, 38 fell below our
threshold assessment score of 35/100.
We created corrective action plans for each
of these suppliers. We engage with these
suppliers to follow the implementation of
these action plans and have already seen
improvements to supplier performance, for
example with our suppliers in Colombia.
See below for more detail.

Supplier assessments on EcoVadis3

Since launch in 2015,
until the end of 2016

Total number of suppliers invited to complete an EcoVadis
assessment
Total number of suppliers who completed the assessment
Total number of suppliers that do not fulfill our requirements
Number of suppliers with improved scores following
implementing corrective action plans (CAPs)

221

100
38
2

Number of corrective action plans (CAPs) requested by category

Number of CAPs requested from
suppliers by EcoVadis categories

Environmental

Labor
rights

Fair business
practices

Sustainable
procurement

108

Following the EcoVadis assessments we
conducted in 2015 with strategic suppliers in
high risk categories, this year we commissioned
Business for Social Responsibility (BSR) to
conduct a supply chain risk materiality
analysis. The results have helped us
understand key risks in each supplier spend
category and are used to identify priority
areas for corrective actions.

Supplier training
All of our procurement team members,
regardless of the supply categories they
manage, were invited to a training on
the EcoVadis tool and assessment process
in 2015. 79%4 of all global and local
procurement teams have participated
in training on responsible supply chain
management and how to communicate
with suppliers on sustainability since 2015.

In 2016, the same buyers have received
further training on the EcoVadis tool,
specifically on how to analyze supplier
assessment results and create and follow up
corrective action plans. Over 50% of all
procurement team members participated to
these trainings. In addition, CR teams in all
markets participated in the same training
and received further in-depth training to be
able to work with procurement in follow up
actions and engagement.

Suppliers still active on the EcoVadis platform at the
end of 2016.
Based on 2015 spend. Additionally, three suppliers
assessed were part of a tender, so do not account for
overall spend data.

3 Since launch in 2015, until the end of 2016.
4

As a percentage of those who were invited to training.
In 2016, we focused our training efforts around
implementing corrective action plans.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
7. Responsible supply chain management

When our high-risk, high-spend suppliers have
scored poorly in EcoVadis assessments, we have
accelerated training in CR in selected countries:

• In Colombia we have established a

TigoUne has engaged with specific
suppliers and provided hands-on support
focusing on key gap areas identified in
their EcoVadis assessment.

stakeholder engagement strategy to share
corporate responsibility information
among our suppliers. In April and
December 2016, respectively 50 and over
300 suppliers attended training
focusing on compliance. Additionally,

• In Paraguay, we introduced a capacity
building program with eight key SME
suppliers, each receiving in-depth training
on ethical business conduct, labor
conditions, environmental management
and customer management.

Our performance
Five-year plan objectives (by 2018):
• Full supplier monitoring program in place, including self-assessments and on-site audits
• Support capacity building of local suppliers to manage CR-related risks

Key

Completed/achieved
In progress

• In El Salvador we partnered with a local

CR organization, FUNDEMAS, on supplier
training.

In 2017, we will partner with an organization
that specializes in delivering CR-related
training, and roll out this training to suppliers
across Latin America.

Topic

2016 target

Status Our progress in 2016

KPIs

2014

2015

2016

2017 target

% of strategic2
suppliers who
signed the Supplier
Code

% of all suppliers
who have signed
the Supplier Code

61% 79% 79%

27% 36%

Expand reporting to
% of suppliers who
refuse to sign the
Code and how we
manage those cases,
in line with our
Supplier Code
Guidelines

N/A

53% 48%

Increase response
rate to EcoVadis
assessment requests

% of spend
represented by
suppliers who
completed
assessments on
EcoVadis to date3

Supplier
monitoring

Ensure all suppliers
sign the Supplier
Code of Conduct
(“Supplier Code”)1

Conduct at least
two EcoVadis
assessment
campaigns, based
on materiality
assessment

Training to
staff on
responsible
supply chain
management

Provide training to
procurement staff
on implementing
and following
corrective action
plans on EcoVadis

Supplier
capacity
building

Provide training to
suppliers in
responsible
business practices

We developed a
template for tracking
Supplier Code signings,
and rolled this out across
operations; and shared
guidelines on how to
manage cases where a
supplier refuses to sign
the Supplier Code and
escalation of such cases
to the Group.

Although we only
conducted one
campaign, the number
of suppliers invited was
significantly higher than
the previous campaigns.

See “Improving supplier
performance and
managing risk” section
for more KPIs on
EcoVadis assessments.

We delivered training to
procurement and CR
teams on EcoVadis and
how to implement
corrective action plans
with suppliers.

N/A

65% 79%

% of procurement
teams trained
on responsible
supply chain
management4

We already provide
training to suppliers on
our CR strategy and
requirements in a
number of our
operations.

Number of
suppliers trained
on Millicom’s CR
strategy and
requirements

New KPI for 2017

Continue to provide
training to
procurement staff
on implementing
and following
corrective action
plans on EcoVadis

Identify a training
partner that
specializes in CR
and jointly roll out
training to suppliers
across LatAm

1 Although we have required our suppliers to sign the Supplier Code of Conduct since 2014, this was not expressed as a formal target in the 2015 CR report.
2

In 2017, we will work towards aligning our reporting definition of “strategic suppliers” with the results of supplier risk materiality analysis and report on percentage of high risk suppliers
who signed the supplier Code.
Number of suppliers who have been invited to complete self-assessments since beginning of 2015 until end of year 2016.

3
4 As a percentage of those who were invited to training. In 2016, we focused our training efforts around implementing corrective action plans.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued

8. Social investment

Progress in 2016

This year our focus has been on:

• Review of our social investment strategy
in Africa to increase digital initiatives

• Multi-country commitments and
programs in both Latin America
and Africa

Our priority is to align our social investment
activities with our core business mission and
expertise. To that end, our activities are
focusing on supporting digital and financial
inclusion, education and entrepreneurship –
as well as aligning to our material corporate
responsibility issues, such as child online
protection and supporting diversity.

Social investment that draws from our
services and expertise
In Africa, we have refined our social
investment strategy to have a strong focus
on investment themes that will support
the growth and success of our business.
We also supported our operations in
integrating social investment (SI) into
external communication and marketing
roadmaps, to better connect with our
customers and promote the value Tigo
brings back to our communities.

In Latin America, we signed a commitment
with the Organization of American States
and their Americas ICT 2030 Alliance. We
pledged to bring internet connection to 2,100
schools and public institutions across our
LatAm footprint and implement training
programs in child online protection (COP) for
parents and teachers by 2030. So far we
have connected 1,024 schools and public
institutions, giving internet access to 325,000
students in the region. See page 64 on
statistics on our COP training programs.

Social impact investments in 2016
US$’000

Monetary value
of employee
volunteering
Total cash
contributions
In-kind giving
(at cost)
Related
management
overhead costs

237

4,921

2,420

2,405

In 2016, we also introduced our global
volunteering policy that gives employees
the possibility to volunteer for two working
days a year.

Our overall monetary donations have
decreased as more social investment
resources are linked to our core business,
such as reducing the gender gap among
our customer base and protecting children
online. This means our social investments
are focused more on developing digital
solutions, and providing connectivity,
devices and digital literacy training for
underprivileged groups.

Going forward, we look to create more
multi-country collaborations to increase the
impact of our social investments. In line with
this aim, in December we pledged to extend
our support to UNICEF by collaborating on
violence prevention and child protection in
Guatemala, Honduras and El Salvador
through a donation and collaboration
agreement.

This commitment builds on our ongoing
collaboration on child rights and will serve to
expand existing UNICEF-supported initiatives
to improve helplines that ensure children and
young people receive support and advice
when they experience violence or abuse.
With Millicom’s support, the helplines will be
able to expand their capacity and will build
capability to address online crimes such as
sexting, grooming and cyber-bullying.
Millicom will also share its expertise by
providing guidance and technical assistance
in deploying and promoting the child
helplines.

Supporting customers
with disabilities
Supporting diversity and inclusion has
been in focus in many of our activities
in 2016.

A visit from 30 students from the Provolo
Institute to the Tigo Paraguay offices
provided staff with a valuable insight into
the lives of those who are hearing-
impaired and the daily challenges they
face, helping our staff understand diverse
requirements of our customers.

Following the visit, we donated a
“telecentro” to the institute. These are
shipping containers transformed into a
classroom fully equipped with IT services
and internet. In Paraguay, Tigo has
donated around 170 telecentros across
the country to date.

Meanwhile, in Tigo Bolivia, we delivered
sign language training to 84 customer
service staff this year. With 0.5% of the
country’s population hearing-impaired,
this training will help our customer service
staff provide support to a wider group of
customers. In addition, the program helps
raise general awareness on the
importance of sign language.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
8. Social investment

LatAm

Bolivia
In Bolivia we have played an important
role in having 28,280 children registered
between January 2014 and September
2016, in partnership with the National
Electoral Tribunal (Sereci) and UNICEF.
This program allows low-income families
and those living in remote areas to access
a universal, free of charge and timely birth
registration. Beyond supporting
economically the implementation of this
project, Tigo also provides free internet
connection to the Sereci’s child
registration booths.

Honduras
Tigo Honduras, in alliance with the
Ministry of Environment and Amitigra
Foundation, will take part in a
reforestation program of 300 hectares
of pine trees over the next three years
in two areas: Parque Nacional la Tigra and
San Jose watershed. The project started in
September with 10 hectares,
approximately 5,000 pine trees, with 400
Tigo volunteers taking part. This project
will be used to offset Tigo Honduras
carbon emissions.

El Salvador
As part of the Adopt a School project,
in cooperation with USAID and FEDAPE,
Tigo El Salvador inaugurated five digital
centers in 2016. Each digital center will
have 30 computers and free internet
access for a year. We estimate they
will benefit more than 2,260 students,
90 teachers and 1,420 families.

Costa Rica
Tigo Costa Rica in partnership with
Fundación Paniamor and Ideas en Acción
implemented the “Apps for Good”
program that teaches high school
children to program apps with social
impact. 26 students participating in the
pilot learned about responsible and
positive uses of technology, social
entrepreneurship and programming
language, and created six app prototypes.

Paraguay
Tigo Paraguay continues to support the
Ministry of Health in connecting medical
staff with their patients across the country
online. The aim is to facilitate live medical
consultations and remote analysis of
medical exams for patients, many of
whom would not have had access to such
services due to geographic distance and/
or other demands on their own resources.
Within 18 months of launch, more than
135,000 direct users benefited at no cost
to the patients.

This year almost 100 hospitals were
connected online to the Telemedicina
initiative. The Minister of Health,
Dr. Antonio Barrios, said that the program
“responds to a big need from many citizens
in remote areas”, a valuable reason for it to
be extended to 176 hospitals.

Guatemala
Through our digital inclusivity and
volunteering programs, we built three new
schools and refurbished 53 schools in
Guatemala, constructing and furnishing
digital classrooms – equipped them with
1,200 computers and internet enabled
phones, donated 15 water eco-filters and
school kits, with over 1,000 children and
40 teachers benefiting.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
8. Social investment

Africa

Rwanda
Launched in June 2016, Ruhunda
Ekocenter is a partnership between Tigo
Rwanda, Coca Cola, Pentair and Ericsson
that provides 25,000 local residents with
a hub where they can enjoy wi-fi enabled
internet access, mobile charging units
and access to clean drinking water.

Through this partnership, we also improved
the residents’ access to high-speed
internet, where we upgraded our services
from 2G to 3G. Tigo is also providing free
wi-fi access to medical staff the
neighboring Ruhunda Health Clinic.

Chad
Tigo Chad, in partnership with The Digital
Changemakers 2015 winner Technidev –
a project that provides online quality
educational content – launched an online
campaign to teach IT skills to 900 young
people. In September, all students
participated in a ceremony with the
Minister of Education and the Minister of
Youth to receive a certificate of successful
completion. As part of our commitment to
promote diversity at our workplace, we are
offering internships to ten young women
who participated in the training.

Ghana
The “Literacy 4 Life” reading camps
is a project implemented by the 2014
co-winner of Tigo Digital Changemakers
Award, Sheila Osei-Boakye. The traveling
reading camps are geared towards
complementing teachers’ efforts by helping
to train children to develop the vital literacy
skills to become proficient readers. By the
end of August 2016, the reading camps
had succeeded in visiting all the five rural
communities: Afienya, Apollonia, Ashaiman,
Otchebleku and Mobole. So far, this project
has improved 3,000 children’s literacy skills.
Literacy 4 Life hopes to eradicate illiteracy
among children in Ghana by 2030, and it
strives to reach 10,000 children by 2021.

Senegal
In partnership with Reach for Change,
Tigo Senegal laid the first cornerstone of
the Aiwa CyberCase building in Diakhao,
Fatick region in April. The CyberCase will
provide a multi-functional room of 50
machines, a video-conference room, a
cinema club and an internet cafe.
Furthermore, it will also enable women to
run their own businesses. Finally, the
project aims to establish digital platforms
in rural areas and remote locations
allowing students to have access to
powerful IT tools.

Volunteering program
launches in our
corporate offices
To mark the launch of our volunteering
program, employees in Luxembourg and
London organized fundraising activities
to support building of a sewing and
embroidery training center at the SOS
Village d’Enfants in N’Djamena – an
orphanage Tigo Chad has been working
with since 2010. Overall, both offices
raised over US$24,300 and organized
a total of 13 activities to raise funds.

Tanzania
Zantel has donated Tshs 10 million to
the Association of Seaweed Farmers
in Zanzibar. Going forward, Zantel will
conduct training for 2,000 women in the
year 2016–2017 in entrepreneurship and
finance management both online and
offline, in collaboration with the
University of Zanzibar in areas of
management. Seaweed farming is an
important economic activity in the
communities of the islands of Unguja and
Pemba. This type of farming is mostly
dominated by women, with 80% of the
over 20,000 farmers being women.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Growing responsibly and with purpose – continued
8. Social investment

Key

Completed/achieved
In progress

Our performance
Long-term objectives
• Connect 2,100 schools and public institutions to the internet by 2030 in Latin America
• Implement a volunteering program with digital education initiatives in all our markets by 2020

Topic

2016 target

Status Our progress in 2016

KPIs

2014

2015

2016

2017 target

Investing
for impact

Roll out social
impact
measurement and
report first results
in 2016 CR Report

We have defined KPIs for
our digital inclusion
programs. These align
with commitments
signed and our COP
program.

Continue
identifying
innovative and
digitally driven
ideas and solutions

We have continued Tigo
Digital Changemakers
Award in all Africa
countries, and four
LatAm countries.

Volunteering
and
donations

Roll out
volunteering policy
and align
documentation of
volunteering hours

We rolled out our
volunteering policy
across all operations and
corporate offices.

Continue social
investment through
cash and in-kind
contributions

Social investments have
reduced in line with our
operational efficiency
initiatives and as we
focus our resources more
on supporting
communities with our
products and services.

Schools and public
institutions
connected to
internet

New KPI
for 2016

1,061

Additional 100
schools connected
in LatAm

New KPI
for 2016

375

Additional 50,000
students connected

20%

Increase to 25%

3221

Focus on increasing
the social impact
of entrepreneurs
winning the award
to date

N/A

20,335 21,915 Increase

volunteering hours
by 15%

445

247

237

7,582

5,814

4,921

4,160

3,993

2,420

Continue social
investment through
cash and in-kind
contributions

1,303

2,357

2,405

Number of
students
connected (’000)

% of in-kind
contributions
directed at digital
inclusion initiatives

Number of social
entrepreneurs
supported in
operations with
Tigo Digital
Changemakers
Award or similar
activities per year

Number of
volunteering hours

Monetary value
of employee
volunteering
(US$’000)

Total cash
contributions
(US$’000)

Total in-kind
contributions
(US$’000)

Total management
overhead
contributions
(US$’000)

1 As of 2016, we will report on the total number of social entrepreneurs who receive either financial or mentorship support.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Awards and
performance
in 2016

Latin America:

Colombia

Bolivia

El Salvador World

Economic
Forum

Honduras

Africa:

Ghana

Held our top place as the most transparent
telecommunication company in Colombia
on Transparencia por Colombia’s
transparency index.

Ranked fourth most sustainable business
out of 100 top companies of Bolivia in
MERCO’s corporate reputation rankings.

Pablo Guardia, Tigo Bolivia General Manager
was recognized as a CSR hero for children by
UNICEF Bolivia under “Héroes de la RSE por
la niñez”.

Tigo El Salvador was recognized as
one of the 30 most responsible companies
in Central America, in a recent publication
by the World Economic Forum.

For the seventh year in a row, Tigo Honduras
was recognized as a socially responsible
company by Fundahrse.

Tigo Ghana, UNICEF and Births and Deaths
Registry’s Automated Birth Registration:
Changing Lives Award – Africacom awards

Tigo Shelter for Education:
CSR initiative of the year –
Ghana CSR Excellence Awards

Outstanding Woman in Technology –
Roshi Motman, Tigo Ghana CEO –
Ghana Information Technology and
Telecom Awards

Inclusion in Ethibel Excellence
Investment Register
For the second consecutive year, Millicom
International Cellular S.A. has been selected
for inclusion in the Ethibel EXCELLENCE
Investment Register. This selection by
Forum ETHIBEL indicates that the Company
performs better than average in its sector
in terms of corporate responsibility.

CDP Climate Change Survey
This is the seventh year we have reported
our greenhouse gas emissions to the CDP
Climate Change Survey. We continue to
improve our environmental performance, with
our B-level rating is well-above the industry
average on CDP’s climate change survey.

Shortlisted for Best Sustainability Report
Millicom’s 2015 Corporate Responsibility
Report was shortlisted for the “Best
Sustainability Report” award at EthicalCorp’s
seventh Annual Responsible Business Awards
2016 – one of the world’s leading corporate
responsibility and reporting awards.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

About the CR
performance section

Introductory statement
This is our fifth annual corporate responsibility (CR) report. In line with
our mission to lead the adoption of The Digital Lifestyle™ in our
markets, and our belief that our corporate reporting should reflect the
way we work, this year we have taken a leap forward in integrating
our financial and corporate responsibility reporting.

This report has been produced following the Global Reporting
Initiative (GRI) G4 Guidelines and its reporting principles.

The report continues to be externally assured. For the scope of
external assurance we commissioned and the assurance standards
our auditors follow, please see EY’s Independent Limited Assurance
Report on the next page.

Our materiality process
In 2014, we set a clear CR strategy and roadmap for the next five
years. In this report, we demonstrate the strong progress we made in
2016 against our strategy in implementing key initiatives. We outline
our focus, highlights from our work, and any challenges we faced in
2016 and our plans to continue improving our performance.

Geographical scope of the CR performance data
This year, we are aligning our CR management and reporting for our
newly merged or acquired businesses in Colombia and Tanzania. In
2015, we had expanded the scope of our reporting to include data
from our fixed services business in Colombia, following our merger
with UNE in 2014. This year, our reporting expands to all other
subsidiaries in Colombia (with the exception of headcount related
data from EMTELCO) and Zantel in Tanzania.

The report covers our operations in 12 markets and our corporate
offices in Luxembourg, the US and the UK. Our African markets
covered are Chad, Ghana, Rwanda, Senegal and Tanzania; while in
Latin America we cover our operations in Bolivia, Colombia, Costa
Rica, El Salvador, Guatemala, Honduras and Paraguay. As per our
previous reports, this report does not include data from our
operations in Nicaragua, as our business in that country focuses solely
on fixed services for the corporate sector. Comparative data from
2015 covers operations as described above and in addition,
operations from the Democratic Republic of Congo which we sold in
April 2016.

The report covers our eight most material CR topics, which were
confirmed through a comprehensive process of interviews and surveys
with our key stakeholders during 2015. Our materiality methodology
can be found in more detail on page 12 of this report.

Time boundaries for the CR performance data
Quantitative data in this report covers our progress and performance
from Q4 2015 to Q3 2016, with these exceptions:

• Any headcount related data is reported against the financial year.

Building on the methodology for engaging with our stakeholders and
conducting the Group CR materiality assessment, in 2016 we finalized
a country-level CR materiality assessment with our most important
stakeholders across all operations. The results of these can be found
on our country fact sheets, available on our website.

In this report we outline our approach, ambition, performance
against key indicators, and our future priorities for each of the
material topics.

• Numbers of employee and contractor fatalities are reported

against the financial year.

• In line with our business definitions, supplier Code of Conduct

signings related data reflects 18 months of data; from Q2 2015 to
Q3 2016.

• Number of whistleblowing cases; Code of Conduct and anti-bribery

and anti-corruption (ABAC) training data are reported against
financial year.

• Any other data point that may not be in line with the boundaries as

described above are footnoted.

Millicom Annual Report 2016

Independent limited assurance report

Millicom Annual Report 2016

OverviewStrategyPerformanceGovernanceFinancialsIndependent limited assurance report – continued

Millicom Annual Report 2016

OverviewStrategyPerformanceGovernanceFinancialsGovernance

For the year ended 31 December 2016.

89 Chairman’s Report

90 Directors’ Financial and Operating Report

92 Shareholder and Board governance
Corporate Governance Framework
92
Shareholders and shareholders’ meeting
94
95
Board of Directors and Board committees
103 Board committees
103 Audit Committee
109 Compliance and Business Conduct Committee
111 Compensation Committee:
Remuneration Report

119 Millicom CEO and Executive Team

123 Management governance

127 Management responsibility statement

Overview

Strategy

Performance

Governance

Financials

Chairman’s Report

The Governance section of Millicom’s 2016 Annual Report
sets out Millicom’s commitment to good corporate
governance and describes what has been achieved during
the year. I was appointed as Chairman in May 2016,
together with three other new Board members, and I
strongly believe that we have the right mix of skills and
experience in place.

In addition, Millicom’s executive
management team, led by Mauricio
Ramos, is now complete following the
appointment of new members to the
Executive Management team.

Millicom’s Board of Directors “the Board”
and its committees have dealt with a number
of significant matters during the year,
including the setting up of the Compliance
and Business Conduct Committee and a
strengthening of our compliance program.
Governance and compliance remain at the
forefront of decision making and strategic
direction. During the year, the activities of
the former Government Relations and
Corporate Responsibility Committee were
assumed by the full Board. This area now
benefits from a more diverse experience
that can be brought to bear on the broad
range of topics and geographical spread
of these issues.

Role of the Board
The Board is responsible for deciding
Millicom’s strategy, financial objectives and
operating plans. The Board also plans for
CEO succession and reviews and approves
plans for other senior management positions.

Board changes
During 2016, we welcomed four new
Board members, all of whom joined us in
May 2016. Ms. Janet Davidson brings to
the Board significant experience in the
telecommunications and IT sectors in a
variety of strategy, operations and
compliance areas. Ms. Davidson is a member
of the Compliance and Business Conduct
Committee.

Mr. Simon Duffy also brings us extensive
knowledge in telecommunications and media
businesses and in emerging markets, and his
experience from many board roles. Mr. Duffy
is a member of the Audit Committee.

Mr. José Miguel García Ferrández joins us
having previously been the CEO of Jazztel in
Spain and formerly various positions within
Cable & Wireless. Mr. García brings to the
group his broad experience in leading
transformational telecommunications
businesses in international markets.
Mr. García is Deputy Chairman of the Board
and serves as a member of the Audit
Committee and the Compensation
Committee.

In addition, I joined the Board as Chairman.
I am also the Chairman of Kinnevik AB,
Millicom’s largest shareholder and have
various other non-executive director roles
across a range of industries.

I would like to thank Ms. Cristina Stenbeck,
Mr. Anders Borg, Dame Amelia Fawcett and
Mr. Paul Donovan, the departing members of
the Board, for their service to the Board and
its committees.

Strength through diversity
Building strong governance functions and
acting with integrity remain at the forefront
of our commitment to good corporate
governance, a commitment that will continue
in the decisions we make.

Millicom’s strength is partly attributable to
the diversity of people in our operating
countries, regional offices and headquarters.
We value different perspectives and
encourage sharing of viewpoints, benefiting
from the wide range of experience and
backgrounds across the Group. These are
important elements that we will continue to
foster as part of Millicom’s corporate culture.

Compliance
During 2016, we continued a thorough
review of our compliance programs,
supported by the Executive Management
and our Compliance and Business Ethics
team, to further strengthen the practices
we already have in place. Executive
Management fully dedicated itself to this
process through several initiatives and
enhancements this year, as discussed herein.
In its first full year of operation the
Compliance and Business Conduct
Committee led this transformational process.

On behalf of the Board, I would like to
confirm our commitment to strong corporate
governance. We are committed to
contributing to build a first class Millicom
culture of compliance and we reassert our
belief that Millicom can be a force for good
through our dedication to ethics and
compliance in all of our markets. We look
forward to engaging with you and thank you
for being part of our journey.

Tom Boardman
Chairman of the Board of Directors

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Directors’ Financial
and Operating Report1

Profit before taxes at US$71 million included
the effects of the increase in interest
expenses described above as well as the
impairment of the value of our interest in
LIH, an equity investment.

The Group net tax charge in 2016 was
US$180 million leaving a net loss for the
year from continuing operations at
US$(109) million. The profit of US$19 million
from discontinued operations reflected the
profit on the sale of our business in DRC.
As a result, the net loss for the year was
US$(90) million. The share of losses of
non-controlling interests was US$58 million.

The net loss for the year attributable to
Millicom owners was US$(32) million.
Earnings per share was (0.32) cents.

Share Capital
At 31 December 2016, Millicom had
101.7 million issued and paid up common
shares of par value US$1.50 each, of which
1.4 million were held by the Company as
treasury shares (2015: 1.6 million). During the
year the Company acquired approximately
37,000 shares and issued around 208,000
shares to management and employees
under the LTIP remuneration plans and
approximately 8,000 shares to Directors as
part of their annual remuneration.

Distribution to shareholders and
proposed distributions
On 17 May 2016, at the Annual General
Meeting of shareholders, a dividend
distribution of US$2.64 per share was
approved, and subsequently paid to
shareholders.

This year’s proposed dividend is consistent
with distributions in 2015 and 2016.

Group performance
In 2016, we made substantial progress
towards our strategic goal of a two-fold
reconfiguration of our business, rapidly
growing mobile data and building cable
while pushing ahead with major initiatives
to enhance our operational efficiency.

The scope changes that occurred on
31 December 2015 (see “scope changes”
section on page 28) make the performance
and results of the Group not directly
comparable between 2015 and 2016 –
results for the year ended 31 December 2015
included Guatemala and Honduras fully
consolidated while those for 2016 do not.

In 2016, total revenue for the Group was
US$4,374 million. In Colombia, our largest
market, we saw competitive pressures
throughout 2016, although easing
somewhat at the end of the year.

Gross profit was US$3,096 million, or a
margin of 70.8%.

Operating expenses represented only 40.7%
of revenue. Operational efficiencies achieved
during the first year of our Project HEAT
initiatives underpinned our margins and cash
flow, delivering a lower operating cost run
rate as well as Capex and working capital
savings during 2016.

Our operating profit amounted to
US$482 million, an 11% margin.

Net financial expenses were US$372 million,
including one-off costs in respect of our
tender offers in December 2016 for
US$300 million of outstanding bonds, and
for the early redemption of our Swedish
Krona bond due in 2017.

Alternative performance measures presented in this
report are non-GAAP measures that are presented to
provide readers with additional financial information
that is regularly reviewed by management and used to
make decisions about operating matters. It should not
be viewed in isolation or as an alternative to the
equivalent GAAP measure. See “Additional information”
on pages 197 to 200 for definitions and reconciliations
to the closest respective equivalent IFRS measure.

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Directors’ Financial and Operating Report – continued

Risks and uncertainty factors
The Group operates in an industry and in
markets which are characterized by rapid
change and subject to macro-economic,
competitive and political uncertainty. This
change creates opportunities and at the
same time a degree of risk. Many of the
inherent underlying risks in these markets,
including regulatory change (including tariff
controls and taxation), currency fluctuations
and underlying macro-economic conditions,
impact on customers’ disposable income
and demand for our products and services.
The telecommunications, cable and content
industries continue to evolve at an
unprecedented pace, with access to the
internet and streaming services gathering
pace and spreading to all parts of the world.
Staying competitive in this increasingly
diverse business requires constant innovation,
a strong focus on customer experience, offer
of relevant products and services, strategic
partnerships, quality of content, service and
speed of delivery.

Access to, and investing capital in the right
place at the right time, directly impacts on
competitive advantage, and decision making
in this regard remains key to ensuring a
balance of risk and return in the Group.

Further information on these and other key
risks faced by the Group are set out in section
Risk Management from pages 31 to 44.

Financial risk management objectives
and policies
Millicom’s financial risk management policies
and objectives, together with a description
of the various risks and hedging activities
undertaken by the Group, are set out in
Section D. Financial Risk Management of
the Consolidated Financial Statements.

Controls and risk management in
preparation of the consolidated
financial statements
Internal controls and additional information
on the preparation of the Consolidated
Financial Statements are set out in section
Risk Management from pages 31 to 44.

Non-financial information
Non-financial information such as
environmental, social, human rights and fight
against corruption are set out in section
Corporate Responsibility Performance Review
from pages 60 to 87 of this Annual Report.

Management and employees
Over recent years, the Group has developed
many key functions and improved support
to local operations, including in the areas
of procurement, network development,
marketing, IT, governance, compliance and
finance. During 2016 the remaining Executive
Management team positions of Chief Human
Resources Officer, Chief Strategy Officer and
Chief Compliance Officer were filled.

At 31 December 2016, the Group’s headcount
reached approximately 18,000 up from almost
16,000 at 31 December 2015.

Outlook for the Group
Based on constant currency, at a constant
perimeter with Guatemala and Honduras
fully consolidated, and on our current
assessment of the macroeconomic outlook,
we currently expect for 2017 organic service
revenue growth to be in the low single-digit
range, and ahead of the growth we achieved
in 2016. Whilst we expect robust competition
in Colombia to continue, and voice and SMS
revenues across LatAm to decline further
through 2017, the lower weighting of these
within our overall mix, combined with further
strong growth in our mobile data, home and
B2B revenues, allows us to be more confident
about our revenue growth outlook in 2017.

We expect to make further progress in
configuring our cost base in 2017, driven by
both operational leverage and our Project
Heat initiatives. We therefore expect to
deliver organic growth in EBITDA in the
mid-to-high single-digit range, and again
higher than the growth seen in 2016.

By growing EBITDA and targeting our
investment program on our areas of core
revenue growth – fiber and 4G network
roll-out with converged IT infrastructure –
we expect to deliver operating cash flow
growth in 2017 of around 10%.

Subsequent events
Dividend
On 7 February 2017, Millicom’s Board decided
to propose to the Annual General Meeting of
the shareholders a dividend distribution of
US$2.64 per share to be paid out of Millicom
retained profits subject to the shareholders’
approval of the 2016 Consolidated Financial
Statements of the Group.

TV Cable Parana
On 6 January 2017, after obtaining the
necessary regulatory approvals, Tigo
Paraguay completed the acquisition of TV
Cable Parana for a total consideration of
approximately US$19 million.

Tigo Senegal and HTA
We have agreed to sell our business in
Senegal to Wari Group, subject to regulatory
approvals. The transaction represents an
enterprise value for Tigo Senegal of
US$129 million. We have also initiated a
process to sell our 22% stake in Helios
Towers Africa.

Tom Boardman
Chairman of the Board of Directors

Millicom Annual Report 2016

Overview

Strategy

Performance

Governance

Financials

Shareholder and
Board governance

Compliance with applicable stock
exchange rules
There has been no infringement of
applicable stock exchange rules and no
breach of good practice on the securities
market reported by the stock exchange’s
disciplinary committee or the Swedish
Securities Council in 2016.

Corporate Governance Framework

Background
Millicom International Cellular S.A.
(“Millicom” or the “Company”) is a public
liability company (société anonyme)
governed by the Luxembourg law of
10 August 1915 on Commercial Companies
(as amended), incorporated on 16 June 1992,
and registered with the Luxembourg Trade
and Companies’ Register (Registre du
Commerce et des Sociétés de Luxembourg)
under number B 40 630. The Millicom Group
comprises Millicom and its subsidiaries, joint
ventures and associates.

Millicom’s shares are listed on Nasdaq
Stockholm in the form of Swedish Depository
Receipts.

Millicom’s Corporate Governance Framework
is primarily based on the following legislation,
principles and regulations:

Within these frameworks, the Board has
developed and continuously evaluates
internal guidelines and procedures, as further
described below, to ensure quality and
transparency of corporate governance
practices within Millicom.

Swedish Corporate Governance Code
The Swedish Corporate Governance Code (the
“Swedish Code”) promotes positive
development of corporate governance. The
Code complements laws and regulations and
sets its good practice level above regulatory
requirements. The Swedish Corporate
Governance Board states that self-regulation is
often preferable to mandatory legislation and
therefore allows companies to deviate from its
rules, following a “comply or explain”
philosophy.

Publication

Authority

Philosophy

Swedish Code of Corporate Governance
Luxembourg Law
EU Directives and Regulations
Nasdaq Stockholm Issuer Rule Book
Good Stock Market Practice

Guiding Principles
Legislation
Legislation
Regulation
Principles

Comply or Explain
Comply
Comply
Comply
Corporate Citizenship

Millicom governance deviated in 2016 in relation to the Swedish Code in the following areas:

Code requirement

Millicom practice

Explanation

1.5 – A shareholder, or a proxy
representative of a shareholder,
who is neither a member of the
board nor an employee of the
company is to be appointed to
verify and sign the minutes of
the shareholders’ meeting.
9.7 – Vesting of share-related
incentive programs to be no
less than three years.

Minutes are signed by the
chairman of the shareholders’
meeting (who is not a member
of the Board or the Company),
the meeting Secretary and an
appointed Scrutineer.

Deferred share incentive plans
contain vesting of 16.5% of
granted shares after one year,
16.5% after two years, and
67% after three years.

While this represents a
deviation from the Swedish
Code, Millicom follows
Luxembourg Law in
connection with procedures
and rules for its shareholders’
meetings.
The Company believes that
this vesting schedule ensures
alignment between the
interests of the Company’s
shareholders and its
employees.

Millicom Annual Report 2016

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Performance

Governance

Financials

Shareholder and Board governance – continued

Corporate Governance structure
Millicom’s Corporate Governance structure comprises the following three levels:

1.
Shareholders and representatives
of shareholders.

2.
Board of Directors and
Committees appointed by the
Board from among its members.

3.
CEO and Executive Management,
and its main functions managing
governance, risk, compliance and
ethics, corporate responsibility,
controls and security.

Shareholders’ meeting

Nomination
Committee

Board of Directors

Compliance and
Business Conduct
Committee

Special
Committee(i)

Compensation
Committee

Audit
Committee

Chief Executive Ofﬁcer

Internal Audit

Executive Management Team

Compliance and
Business Ethics

Business
Control

Risk
Management

Corporate
Responsibility

Security

(i) The special committee was established in 2015 to manage the Board’s response to the potential improper payments on

behalf of its Guatemala joint venture.

Millicom Annual Report 2016

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Performance

Governance

Financials

Shareholder and Board governance – continued

1. Shareholders and shareholders’ meeting

The shareholders’ meeting is the highest
decision-making body of Millicom and a
forum for shareholders to exercise influence.
Each shareholder has the right to participate
in the shareholders’ meeting and to vote
according to the number of shares owned.
Shareholders who are not able to attend in
person may exercise their rights by proxy.

Millicom’s Articles of Association (as
amended on 17 May 2016) set the Annual
General Meeting of Shareholders (AGM) to
be held on the first Thursday of May at 10am
CET each year. If such day is a public holiday,
the meeting will be held during the following
business day. Millicom’s Articles of Association
are available in the “Our Governance” section
of Millicom’s website. Unless otherwise required
under Luxembourg law, an extraordinary
general meeting must be convened to amend
any provisions of the Articles of Association.

The 2016 AGM was held on 17 May 2016,
within six months of the end of the financial
year (as required by the Swedish Code). At
the 2016 AGM, the following key items were
decided:

• Approval of the 2015 Consolidated

Financial Statements and distribution of
a dividend of $2.64 per share;

• Election and re-election of the Directors

until the date of the 2017 AGM;

• Reappointment of Ernst & Young (“EY”)

as the external auditor;

• Approval of remuneration to the Board
and auditor and procedures for the
Nomination Committee;

• Approval of guidelines for the

remuneration of senior management;
• Approval of a Share Repurchase Plan; and
• On the same date an Extraordinary

General Meeting was held during which
several amendments were made to the
Articles of Association of the Company,
including amendment of the date in which
the AGM will be held in 2017.

Nomination Committee
Nomination Committee
Ms. Cristina Stenbeck
Mr. Tom Boardman
Mr. John Hernander
Mr. Ossian Ekdahl

On behalf of:
Kinnevik AB
Kinnevik AB
Nordea Investment Funds
Första AP-fonden

Position
Chairman
Member
Member
Member

Promoting Board diversity
Millicom’s Nomination Committee recognizes
the importance of diversity in its Board of
Directors for promoting strong corporate
governance, competitive advantage and
effective decision-making.

The Nomination Committee is responsible
for periodically determining the appropriate
skills, perspectives, experiences and
characteristics required of Board candidates,
taking into account the Company’s needs
and current Board composition.

This determination will include knowledge,
experience and skills in areas that are critical
to understanding the Company and its
business; richness of views brought by
different personal attributes such as gender,
race, age and nationality; and other personal
characteristics, such as integrity and
judgment; and candidates’ commitment to
the boards of other publicly-held companies.
The ambition to further improve gender
diversity on the Board has been added to the
Nomination Committee charter.

The Nomination Committee is appointed by
the major shareholders of Millicom. It is not
a committee of the Millicom Board. The
Nomination Committee’s role is to propose
decisions to the shareholders’ meeting in a
manner which promotes the common
interests of all shareholders. The Nomination
Committee has a term of office commencing
at the time of the announcement of the
interim report for the period January to
September each year and ending when a new
Nomination Committee is formed. Decisions
proposed at the AGM are as follows:

• Election and remuneration of Directors
of the Board, Chairman of the Board;
• Appointment and remuneration of the

external auditor; and

• Proposal of the Chairman of the AGM.

Under the terms of a Nomination Committee
charter, the Nomination Committee consists
of at least three members, with a majority
representing the larger shareholders of the
Company.

The current Nomination Committee was
formed during October 2016, in consultation
with larger shareholders of the Company at
31 August 2016 and in accordance with the
resolution of the 2016 AGM.

The table below sets out beneficial ownership
of Millicom common shares, par value $1.50
each, by each person who beneficially owns
more than 5% of Millicom common stock at
31 January 2017.

Shareholder
Kinnevik AB
Dodge & Cox
Nordea Investment Management AB
Except as otherwise indicated, the holders listed above (“holders”) have sole voting and investment power with respect to all
shares beneficially owned by them. The holders have the same voting rights as all other holders of Millicom common stock.
For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of a given
date which such person or group of persons has the right to acquire within 60 days after such date. For purposes of
computing the percentage of outstanding shares held by the holders on a given date, any security which such holder has
the right to acquire within 60 days after such date (including shares which may be acquired upon exercise of vested portions
of share options) is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.

Number of shares % Shareholding
37.9
10.9
5.9

38,559,080
11,133,236
5,979,886

Millicom Annual Report 2016

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Shareholder and Board governance – continued

Independence of the Board:

Board of Directors

Non-Executive Directors

Independent from the Company
and its Executive Management

Chairman, Deputy Chairman
and six members

100%
Tom Boardman, Odilon Almeida,
Simon Duffy, Tomas Eliasson,
Alejandro Santo Domingo;
Janet Davidson, José Miguel García
Fernández, Lorenzo Grabau

Not independent of the major shareholders

25%
Tom Boardman, Lorenzo Grabau

2. Board of Directors and Board committees

Role of the Board
Millicom’s Board of Directors (the “Board”) is
responsible for deciding Millicom’s strategy,
financial objectives and operating plans. The
Board also plans for management succession
of the CEO and reviews and approves plans
for other senior management positions.

As set forth in the Company’s Articles of
Association, the Board must comprise at
least six members. The 2016 AGM set the
number of Directors at eight, comprising a
Chairman, a Deputy Chairman and six
members (all of whom are Non-Executive
Directors).

The Board selects the CEO, who is charged
with the daily management of the Company
and its business. The CEO is responsible for
recruiting, and the Chairman of the Board is
responsible for approving, the senior
management of the company. The Board
reviews and approves plans for key senior
management positions, and the Board
supervises, supports and empowers the
senior management team, and monitors
their performance. In accordance with the
Swedish Code, the division of work between
the Board and the CEO are set out in “The
Rules of Procedure, Instruction to the CEO,
and Reporting Instruction”.

Powers and limitations of the Board
Borrowing powers – The Board has
unrestricted borrowing powers on behalf of
and for the benefit of Millicom.

Time and age limit – no age limit exists for
being a Director of Millicom. Directors can be
elected for a maximum period of six years
before either re-election, or ending service.
Directors are generally elected annually.
There are no restrictions on the maximum
continuous period that a Director can serve.
Directors hold office until their successors are
elected.

Restrictions on voting – no contract or
other transaction between the Company
and any other person shall be affected or
invalidated by the fact that any Director,
officer or employee of the Company has a
personal interest in, or is a director, officer or
employee of such other person, except that:

such contract or transaction shall be
negotiated on an arm’s-length basis on
terms no less favorable to the Company
than could have been obtained from an
unrelated third party and, in the case of a
Director, the Director shall abstain from
voting on any matters that pertain to such
contract or transaction at any meeting of
the Board of the Company, and

Further details on the roles and activities of
the various committees, their responsibilities
and activities are set out later in this section.

ii) any such personal interest shall be fully

disclosed to the Company by the relevant
Director, officer or employee.

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

Share ownership requirements – the
Directors are not required to be shareholders
of the Company. Share ownership of
Directors is included in the Director
biographies set out on the following pages.

Chairman of the Board
The Chairman convenes the Board and leads
its work. The Chairman is accountable to the
Board and acts as a direct liaison between
the Board and the management of the
Company, through the CEO. Meeting
agendas are set together with the CEO, and
the Chairman acts as the communicator for
Board decisions where appropriate.

The Chairman is elected by the AGM. If the
Chairman relinquishes the position during
the mandate period, the Board is to elect a
Chairman from among its members to serve
until the end of the next AGM.

Deputy Chairman of the Board
The Deputy Chairman of the Board acts as a
sounding board and provides support for the
Chairman. The Deputy Chairman convenes
Board meetings and leads its work in the
event the Chairman is unavailable or excused
from Board meetings. The Deputy Chairman
may act as an intermediary for other
Directors if there are conflicts among Board
members or between the Chairman and the
CEO, as and when necessary.

The Deputy Chairman is elected by the
Board, if appropriate. The position of Deputy
Chairman is not mandatory and varies
according to the particular circumstances.

Millicom Annual Report 2016

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Shareholder and Board governance – continued

Corporate Secretary
The Corporate Secretary is appointed by the
Board. The role of the Corporate Secretary is
to ensure that Board members have the
proper advice and resources for performing
their duties to shareholders under the
relevant legal frameworks. The Corporate
Secretary is also responsible for organization
and coordination of Board and Committee
meetings, and ensuring that the records, or
minutes those meetings, reflect the proper
exercise of those duties.

The Corporate Secretary is also a confidante
and resource to the Board and senior
management, providing advice and counsel
on Board responsibilities and logistics, and
plays a leading role in the Company’s
corporate governance.

Chief Executive Officer
The CEO is responsible for leading the
development and execution of the
Company’s strategy with a view to creating
shareholder value, together with the
management team. The CEO is responsible
for day-to-day activities of the Company and
management decisions, both operating and
financial. The CEO acts as a direct liaison
between the Board and management of the
Company and communicates to the Board
on behalf of management.

The CEO also leads communication on behalf
of the Company to shareholders, employees,
Government authorities, other stakeholders
and the public.

Board membership, balance and
independence
The Board periodically reviews the size and
balance of the Board to determine whether
any changes are appropriate.

At the AGM, held in May each year,
shareholders may vote for or against the
Directors proposed by the Nomination
Committee or may elect different Directors.

The Board has adopted the qualification
guidelines of an “independent director” as
defined by the Swedish Code. A director’s
independence is determined by a general
assessment of all factors that may give cause
to question the individual’s independence of
the Company or its Executive Management.
Factors that are considered include whether
the individual:

• is the chief executive officer or has been

the chief executive officer of the Company
or a closely related company within the
last five years,

• is employed or has been employed by the
Company or a closely related company
within the last three years,

• receives a not insignificant remuneration
for advice or other services beyond the
remit of the Board position from the
Company, a closely related company or a
person in the executive management of
the Company;

• has or has within the last year had a

significant business relationship or other
significant financial dealings with the
Company or a closely related company as a
client, supplier or partner, either individually
or as a member of the Executive
Management, a member of the Board or a
major shareholder in a company with such a
business relationship with the Company,
• is or has within the last three years been a

partner at, or has as an employee
participated in an audit of the Company
conducted by, the Company’s or a closely
related company’s current or then auditor,
• is a member of the executive management
of another company if a member of the
board of that company is a member of
the Executive Management of the
Company, or

• has a close family relationship with a

person in the executive management or
with another person named in the points
above if that person’s direct or indirect
business with the Company is of such
magnitude or significance as to justify the
opinion that the Board member is not to
be regarded as independent.

In accordance with the Swedish Code:

• the majority of Millicom’s Board must be
independent from the Company and its
Executive Management (all Millicom
Directors meet this criteria), and
• at least two of those independent

Directors must also be independent from
the Company’s major shareholders (six of
Millicom’s Directors meet this criteria); and

• not more than one member of the Board

may be part of the executive management
team of the Company or any of its
subsidiaries (no members of the executive
team sit on the Board).

Gender of the Board %

Female
Male

12
88

Tenure of Directors

Nationalities

1st year
2nd year
3rd year
4th year

4
1
1
2

1
Swedish
1
Spanish
1
British
1
Italian
American
1
Colombian 1
1
Brazilian
South African 1

Millicom Annual Report 2016

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Shareholder and Board governance – continued

Board profile – skills and experience

Mr. Tom Boardman (South African)
Chairman, Non-Executive Director
(First appointed: May 2016)

Mr. José Miguel García Fernández
(Spanish)
Deputy Chairman, Non-Executive Director
(First appointed: May 2016)

Mr. Boardman held various managerial
positions within the South African mining
and retailing industries during 1973 to 1986
and was founder and Managing Director of
the Boardmans chain of retail houseware
stores in South Africa. Between 1986 and
2002 he held managerial positions within the
BoE Bank and during 2003 to 2010 he was
Chief Executive of Nedbank Group.

Mr. Boardman holds a Bachelor of Commerce
degree and CTA from the University of
Witwatersrand in South Africa and is a
chartered accountant having served his
articles with Deloitte.

Mr. Boardman brings to the Millicom Board
in-depth experience in corporate governance
and oversight of both technology driven
entrepreneurial businesses as well as financial
groups and retail businesses.

Independent from the Company and its
Executive Management but Non-
Independent due to his significant affiliation
to the major shareholder Kinnevik AB.

Millicom shareholding at 31 January 2017:
3,000 shares.

His international background will also further
broaden the Board’s global perspective and
understanding of the dynamics of the
markets in which Millicom operates.

Independent from the Company, its
Executive Management, and its major
shareholders.

Millicom shareholding at 31 January 2017:
6,553 shares.

Mr. Tom Boardman was elected as a new
Director and Chairman of the Board of
Millicom in May 2016. He is a member of
the Compensation Committee, the Audit
Committee, and the Compliance and
Business Conduct Committee.

Mr. Boardman (1949) is Chairman of the
Board of Kinnevik AB (“Kinnevik”), a leading
Swedish entrepreneurial investment group
with investments across mobile
telecommunications, e-commerce,
entertainment and financial services.

He was elected to the Kinnevik Board in 2011
and elected Chairman in May 2016.

Mr. Boardman is also a Non-Executive
Director of Nedbank Group, Woolworths
Holdings and African Rainbow Minerals, and
was a Non-Executive Director of Vodacom
Group between 2009 and 2011.

Mr. García was elected a new member
and Deputy Chairman of the Board of
Millicom in May 2016. He is a member of
the Audit Committee and the
Compensation Committee.

Mr. García (1962) was previously Co-Chief
Executive Officer of Orange España. Between
2006 and 2015 he was CEO of the Spanish
telecommunications operator Jazztel, and he
held various managerial positions within
Cable & Wireless from 2000 to 2006,
including Managing Director of UK & Ireland
as well as CEO of Panama.

Mr. García holds a BSc in Electrical &
Electronic Engineering and Postgraduate in
Digital Telecommunications from Monash
University in Australia.

Mr. García contributes to Millicom’s Board his
relevant experience as an entrepreneurial
Chief Executive Officer within the
telecommunications and cable sectors.

Millicom Annual Report 2016

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Mr. Odilon Almeida (Brazilian)
Non-Executive Director
(First appointed: May 2015)

Ms. Janet Davidson (American)
Non-Executive Director
(First appointed: May 2016)

technology platforms, regulatory and
compliance, as well as consumer insights of
developed and emerging nations.

Mr. Almeida has a bachelor’s degree in Civil
Engineering from Maua Engineering School
in São Paulo, Brazil, and in Business
Administration from the University of São
Paulo, and also holds an MBA with
specialization in Marketing from the Getulio
Vargas Foundation, São Paulo. He advanced
his education at IMD Lausanne, The
Wharton School, and Harvard Business
School.

Mr. Almeida strengthens the Millicom Board
with decades of experience from the
financial services and Fintech sectors.

Independent from the Company, its
Executive Management, and its major
shareholders.

Millicom shareholding at 31 January 2017:
1,553 shares.

She brings to Millicom’s Board her long
experience in the telecommunications and
IT sectors.

Ms. Davidson received a Bachelor of Arts degree
in physics from Lehigh University, a Master of
Science degree in Electrical Engineering from
Georgia Tech, and a Master of Science in
Computer Science through Bell Laboratories.

Independent from the Company, its
Executive Management, and its major
shareholders.

Millicom shareholding at 31 January 2017:
895 shares.

Mr. Odilon Almeida was elected as a
member of the Board of Millicom in May
2015 and re-elected in May 2016. He is
Chairman of the Compliance and
Business Conduct Committee.

Mr. Almeida (1961) is the President for the
Americas and European Union Region at the
Western Union Corporation. With a 14-year
tenure, Mr. Almeida is spearheading the
digital transformation and growth of the
company. He leads 98 countries across North
America, Latin America, the Caribbean and
Europe.

With a 30-year career in global financial,
telecom and fast moving consumer goods
sectors, Mr. Almeida brings a leadership style
anchored in growth acceleration and
business turnarounds involving digital
transformation, organic growth and
successful M&A.

His board experience, along with business
leadership at Western Union, Millicom,
BankBoston (now Bank of America), The
Coca-Cola Company and Colgate-Palmolive,
has given him deep knowledge of corporate
governance, general management,

Ms. Janet Davidson was elected as a new
member of the Board of Millicom in May
2016. She is a member of the Compliance
and Business Conduct Committee.

Ms. Davidson (1958) is currently a Supervisory
Board member of STMicroelectronics.

Ms. Davidson held various managerial
positions in Alcatel Lucent from 1979 to 2011
including the role as Chief Strategy Officer,
Chief Compliance Officer and Executive Vice
President, Quality & Customer Care.

She has been a Member of Supervisory
Board of STMicroelectronics since June, 2013.
She serves as a Member of the Advisory
Board. She has also been recognized by
Working Woman Foundation with one of its
first Women Enabling Science and
Technology awards in 2001.

In 1999, she was inducted into the Academy
of Women Achievers of the YWCA of the City
of New York, which honors women of high
achievement.

Millicom Annual Report 2016

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Shareholder and Board governance – continued

Mr. Simon Duffy (British)
Non-Executive Director
(First appointed: May 2016)

Mr. Tomas Eliasson (Swedish)
Non-Executive Director
(First appointed: May 2014)

Mr. Simon Duffy was elected as a new
member of the Board of Millicom in May
2016. He is a member of the Audit
Committee.

He brings to Millicom’s Board his extensive
experience in telecommunications and
media businesses as well as emerging
markets.

Mr. Duffy (1949) is Non-Executive Chairman
of YouView TV and a Non-Executive director
of Modern Times Group, Oger Telecom
and Wizz Air.

Mr. Duffy was Executive Chairman of Tradus
until the company’s sale in March 2008. He
was also Executive Vice Chairman of
ntl:Telewest until 2007, having joined ntl in
2003 as CEO. He has also served as CFO of
Orange, CEO of wireless data specialist
End2End, CEO and Deputy Chairman of
WorldOnline International, and held senior
positions at EMI Group and Guinness.

Mr. Duffy holds a BA from Oxford University
and an MBA from Harvard University.

Mr. Tomas Eliasson was elected as a
member of the Board of Millicom in May
2014 and has been re-elected each year
since. He chairs the Audit Committee.

Mr. Eliasson (1962) is Executive Vice
President, Chief Financial Officer of Sandvik.

Previously Mr. Eliasson was the Chief
Financial Officer and Senior Vice-President of
Electrolux, the Swedish household and
professional appliances manufacturer.

Mr. Eliasson has also held various
management positions in Sweden and
abroad, at the leading power and
automation technologies company ABB
Group, from 1987 to 2002.

Mr. Eliasson was Chief Financial Officer of the
tools manufacturer Seco Tools AB from 2002
to 2006 and Chief Financial Officer of the
intelligent lock and security solutions
company Assa Abloy AB from 2006 to 2012.

Mr. Eliasson holds a Bachelor of Science
Degree in Business Administration and
Economics from the University of Uppsala.

Independent from the Company, its
Executive Management, and its major
shareholders.

Millicom shareholding at 31 January 2017:
895 shares.

Mr. Eliasson brings to the Millicom Board his
significant experience as a CFO for
multinational and global Swedish companies,
roles in which he has driven a number of
important and effective processes and
procedures within global finance functions.

Independent from the Company, its
Executive Management, and its major
shareholders.

Millicom shareholding at 31 January 2017:
2,140 shares.

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Mr. Lorenzo Grabau (Italian)
Non-Executive Director
(First appointed: May 2013)

Mr. Alejandro Santo Domingo
(Colombian)
Non-Executive Director
(First appointed: May 2013)

Mr. Grabau brings to the Millicom Board his
experience from leadership positions within
the Consumer/Retail and Media/Online
industry practices of Goldman Sachs, and his
experience on Boards of entertainment and
technology companies, as well as his former
role as CEO of Kinnevik.

Independent from the Company, its
Executive Management, but Non-
Independent due to his former role as
CEO of the major shareholder Kinnevik AB.

Millicom shareholding at 31 January 2017:
5,140 shares.

Mr. Lorenzo Grabau was elected to the
Board of Millicom in May 2013 and has
been re-elected each year since. He is the
Chairman of the Compensation
Committee.

Mr. Grabau (1965) is the former Chief
Executive Officer of Kinnevik.

Mr. Grabau began his career as an analyst for
the investment bank Merrill Lynch, in the
mergers and acquisitions department, before
joining Goldman Sachs International, where
he later became Partner and Managing
Director (1999).

Mr. Grabau is a member of the Board of
Directors of the leading European fashion
e-commerce company Zalando SE, of the
telecommunications operator Tele 2 AB, and
of the Nordic e-commerce and financial
services provider Qliro Group AB.

Mr. Grabau holds a degree in Economics and
Business from La Sapienza University, Italy.

Mr. Alejandro Santo Domingo was first
elected to the Board of Millicom in May
2013 and has been reappointed each year
since. He is a member of the Compliance
and Business Conduct Committee.

Mr. Santo Domingo (1977) is a Senior
Managing Director at Quadrant Capital
Advisors, Inc. in New York City.

He is a member of the Board of Directors
of Anheuser-Busch Inbev (ABI) having
previously been a board member at
SABMiller Plc and Vice-Chairman of
SABMiller Plc for Latin America.

Mr. Santo Domingo is Chairman of the Board
of Bavaria S.A. in Colombia, and Chairman of
Backus & Johnston, in Peru. He is Chairman
of the Board of Valorem, a company which
manages a diverse portfolio industrial &
media assets in Latin America.

Mr. Santo Domingo is also a director of JDE
(Jacobs Douwe Egberts) Keurig Green
Mountain; Florida Crystals, the world’s largest
sugar refiner; Caracol TV, Colombia’s leading
broadcaster; El Espectador, a leading
Colombian Daily; and Cine Colombia,
Colombia’s leading film distribution and
movie theater company.

In the non-profit sector, he is Vice Chairman
of the Wildlife Conservation Society, a
Member of the Board of Trustees of the
Metropolitan Museum of Art, and the
Educational Broadcasting Corporation
(WNET Channel Thirteen).

Mr. Santo Domingo is a Member of the Board
and Treasurer of Aid for AIDS, a foundation
dedicated to helping HIV and AIDS patients;
and Chairman of Alas, a foundation focused
on early childhood development which was
founded by artists such as Shakira &
Alejandro Sanz.

Mr. Santo Domingo is a Member of the Board
of DKMS Americas; a foundation dedicated
to finding donors for leukemia patients.
He is a Member of the Board of Endeavor
Colombia and Fundacion Pies Descalzos.

Mr. Santo Domingo holds a Bachelor of Arts
Degree from Harvard University.

Independent from the Company, its
Executive Management, and its major
shareholders.

Millicom shareholding at 31 January 2017:
7,140 shares.

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Board program
The Board’s annual program includes

• Company strategy and strategic direction
• Operating and financial performance review
• Governance and compliance matters
• Corporate Responsibility

• Government relations
• Corporate culture
• External financial reporting
• Risk management
• Dividend policy

• Evaluation of CEO and self-evaluation
• Human Resource matters

including compensation, health,
safety and well-being

Summary of Board activities in 2016

The Board of Directors has an annual
program which consists of specific areas of
focus that the Board has a role to oversee
and advise the Company on.

Summary of areas of focus in 2016

Activity/issues covered

Board actions

There will be specific projects and topics that
will arise in the normal course of business which
will be added to the program of the Board.

Some of these topics are dealt with in the
specific Board committees.

Reports of committees

• The Board regularly reviewed reports from its Audit, Compliance and Business Conduct, Special, and

Incorporation of committee
activities
Operational Review

Compensation Committees on recent activities.

• Discussion of Nomination Committee Director appointment proposals.
• Incorporation of the activities previously delegated to the Government Relations and Corporate

Responsibility Committee into the agenda of the full Board.

• Priorities and challenges for each of the Latin American and African businesses were regularly presented

and discussed by the Board, including development of cable and mobile data businesses, efficiency
measures and capital expenditure allocation.

Strategic Review

• The Board discussed with the Executive Team industry and geographic trends and the operational and

Organizational structure
Budget
Review and approval of
capital structure and
dividend

Review and approval of
corporate governance
matters
Mergers, acquisitions
and disposals
Review and approval of
financial reports

The external affairs
organization
Political environment

Government relations,
engagement and
regulatory affairs
Millicom’s non-financial
performance
Update on privacy and
freedom of expression issue

financial strategy for each region of the Group, including the portfolio strategy.

• The Board approved new hires into the Executive Team and management organizational and reporting structures.
• The Board discussed and approved the 2017 budget.
• Refinancing of the Swedish Krona bond.
• Amendment of existing terms and conditions of certain bonds.
• Additional financing in several markets.
• Recommendation of a dividend of $2.64 per share to the 2016 AGM.
• Revisions to the Corporate Policy Manual (including Board and Committee charters).
• Updates to the Authority matrix.
• Election of Committee members.
• The Board discussed acquisition and disposal developments across the Group, including approval of

transactions such as the sale of the Group’s business in the Democratic Republic of Congo.

• 2015 Annual Report including the 2015 Consolidated Financial Statements of the Group, and interim

consolidated financial statements.

• Standalone financial statements of the parent company.
• Review of the the finalized external affairs strategic framework and functions for suitability for the

organization’s need.

• Periodical reviews of the political situation per market with a specific focus on election periods and advice on

risk management required in relation thereto.

• Review of the state of government relations in markets and internationally.
• Review of regulatory and engagement challenges with advice from the Board on best practice engagement

strategy.

• Review of main non-financial performance and trends.
• Recommendation for continued focus in line with existing non-financial focus areas.
• Updates provided to the Board on continued proactive approach being taken by Millicom in relation to
these issues, including specific country cases. The Board recognizes the significant importance of these
topics and is supportive of continued efforts to improve engagement and in-house expertise in this area.

Child Protection
Gender diversity program

• Briefing of the Board of Millicom’s efforts in child protection and risk areas relating to the same.
• Update to the Board on transfer of ownership of internal gender diversity program to the HR function.

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Induction and training
Incoming Board members are provided with
information on their roles and responsibilities,
operating procedures and information on
Millicom’s business and industry. Access to
governance documents, policies and
procedures, as well as meeting materials and
Company information is provided through a
secure online tool, in meetings set with the
Executive Management team, and in
ongoing dissemination of information.

Training programs covering key topics such as
anti-bribery and corruption, ethics,
independence and insider trading are
provided. On an ongoing basis the Board
receives detailed reports on specific areas
that support their understanding of
Millicom’s business and operating
environment.

Millicom Directors also attend an annual visit
to one of Millicom’s operations, during which
time they are informed of the specific
characteristics of the local market, conduct
field trips to see aspects of the business in
operation, and interact with local
management.

Board effectiveness
The Board conducts an annual performance
review process, wherein each Board
member’s personal performance is also
reviewed. The review process involves an
assessment of the Board’s and its
committees’ actions and activities during the
year against the Board’s mandate as
determined in the Board Charter (and those
of its various committees).

The evaluation of the Board’s performance
during 2016 was conducted by the Chairman
of the Board by way of a formal
questionnaire covering areas such as the
Board’s performance against its key duties,
the Board’s composition and processes, as
well as the performance of individual Board
members. The results of the evaluation were
presented to the Nomination Committee by
the Chairman of the Board, and were also
reported in full to the Nomination
Committee in writing.

Board meetings/attendance at scheduled meetings of the Board in the 2016 financial year
Attendance %
Director

Meeting

Mr. Tom Boardman (Chairman)
Mr. José Miguel García Fernández (Deputy Chairman)
Mr. Odilon Almeida
Ms. Janet Davidson
Mr. Simon Duffy
Mr. Tomas Eliasson
Mr. Lorenzo Grabau
Mr. Alejandro Santo Domingo
Attendance of current Directors
Former Directors (until May 2016):
Ms. Cristina Stenbeck
Mr. Paul Donovan
Mr. Anders Borg
Dame Amelia Fawcett
Overall attendance

4/4
4/4
6/6
4/4
4/4
5/6
6/6
3/6
36/40

2/2
2/2
2/2
2/2
44/48

100
100
100
100
100
83
100
50
90

100
100
100
100
92

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Board committees

The Board and each of its Committees have
written approved charters which set out the
objectives, limits of authority, organization
and roles and responsibilities of the Board
and its Committees. The Board and
Committee charters can be found on our
website www.millicom.com/governance.
Details of the roles and responsibilities,
activities in 2016 and Directors’ emoluments
are set out on the following pages.

In 2015, the Board established two new
committees. A Special Committee was
set up to oversee the investigation into
potential improper payments on behalf
of the Guatemalan joint venture. The work
of this committee continued in 2016.

In Q4 2015, the Board also established a
new permanent Compliance and Business
Conduct Committee to cover compliance
related activities. In 2016 this Committee
assumed oversight of non-financial
compliance related matters from the
Audit Committee.

In 2016, the Board incorporated activities
previously delegated to the Government
Relations and Responsibility Committee into
the full Board agenda. The Board believed
that the overarching reach of these activities
across the various geographical and
functional areas, warranted the breadth of
experience and knowledge of the full Board.

Audit Committee

2016 was a very active year for the Audit
Committee, with specific focus and attention
on control activities of the Group, as well as
oversight over regular reporting and internal
audit activities. The Committee convened six
scheduled meetings during the year and
covered internal audit and internal control
activities during all meetings.

The Committee also reviewed and discussed
actions and activities around the important
regulatory updates and upcoming changes in
financial reporting, treasury, risk, revenue
assurance and compliance. Further work
remains to be done as the Group continues
to standardize and implement best practices
both in controls and assurance.

I would like to thank my fellow Committee
members for their dedication and
commitment to the activities of the Audit
Committee and look forward to continuing
our mandate through to the 2017 AGM.

From Mr. Tomas Eliasson
Chairman of the Audit Committee

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Audit Committee membership and attendance in 2016

Position
Audit Committee
Chairman*
Mr. Tomas Eliasson
Member
Mr. Tom Boardman
Mr. Simon Duffy
Member
Mr. José Miguel García Fernández Member
Mr. Lorenzo Grabau
Mr. Odilon Almeida
Overall attendance
* Designated as having specific accounting competence per EU Directive.

Former member
Former member

First
appointment
May 2014
May 2016
May 2016
May 2016
May 2014
May 2015

Meetings/
Attendance %
100
75
100
100
50
100
91

6/6
3/4
4/4
4/4
1/2
2/2
20/22

Ultimate responsibility for reviewing and
approving Millicom’s Annual Report and
Accounts remains with the Board.

The Chief Executive Officer, Chief Financial
Officer, Group Financial Controller, Head of
Internal Audit, Head of Business Controls,
Group Risk Officer and representatives from
Ernst & Young (“EY”), the Company’s external
auditor, are invited to attend Committee
meetings.

The agenda for meetings is prepared by the
Audit Committee Chairman in conjunction
with the Chief Financial Officer. Each
meeting includes a private session, attended
only by Audit Committee members and the
external auditor, to provide an opportunity
for open dialogue without management
presence. At each meeting, the Audit
Committee receives reports from the Chief
Financial Officer, the external auditor, the
Head of Internal Audit, the Head of Business
Controls, together with reports from other
officers of the Company as required.

Appointment and role of the
Audit Committee
The Audit Committee is comprised solely of
non-executive Directors, the majority of
whom are independent Directors. Members
are appointed to ensure there is a mixture of
relevant experience of both finance and
broader commercial matters. The Board is
confident that the collective experience of
the members enables them to act as an
effective Audit Committee. The Committee is
also satisfied that it has the expertise and
resource available to it to fulfill its
responsibilities.

The Board has delegated to the Audit
Committee the responsibilities for oversight
of the financial reporting process, the
integrity of the annual and quarterly financial
reports and the involvement of external
auditors in that process to ensure the
balance, transparency and integrity of
published financial information. The Audit
Committee focuses particularly on
compliance with financial requirements,
accounting standards and judgments,
appointment and independence of the
external auditors, transactions with related
parties (including major shareholders), the
effectiveness of the internal audit function,
the Group’s approach to risk management
and ensuring that an efficient and effective
system of internal controls is in place.

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2016 meetings
During 2016, the Audit Committee met six times, coinciding with key dates in Millicom’s external reporting:

Activity/issues covered

How the Audit Committee addressed the issues

Governance

Financial reporting

• Reviewed and amended Audit Committee Charter.
• Reviewed and discussed activities around the implementation of the law of 23 July 2016 in relation to the

audit profession and implementing EU regulation 537/2014, as well as its implication for the Audit
Committee.

• Key accounting and reporting issues were reviewed at each meeting.
• Reviewed and approved each quarter’s earnings release, the 2015 annual earnings release and summary

financial statements, and the 2016 half year earnings release and interim financial statements.

• Reviewed and discussed activities around the implementation of IFRS 15 (“Revenue from Contracts with
Customers”) and IFRS 16 (“Leases”), as well as other changes in the financial reporting landscape and
accounting policy changes/updates.

External auditor

• Received reports from the external auditor at each meeting covering important financial reporting,

accounting and audit issues.

• Approved the 2016 external audit strategy.
• Considered the results of control testing performed by the external auditor.
• Considered the performance of the external auditor and independence, including monitoring of the nature

and value of non-audit services, as well as approving these fees.

Internal audit activities

• Appointed a new VP, internal audit.
• Approved the 2016 internal audit plan.
• Reviewed internal audit findings arising from the delivery of the 2016 audit plan.

Financing, treasury and tax

• The Group’s Tax Director presented the Group’s tax strategy.
• Treasury and financing risks were discussed and the Committee approved the updated Group treasury and

related policies, including a new policy on financial risk management.

• Review and preparation of the implications of Base Erosion Profit Schemes (BEPS) driven disclosures.

Risk management

• Provided guidance and oversight over risk management processes.
• Reviewed alignment of top risks with strategy.
• Reviewed regular risk reports and IT remediation plan.

Internal controls

• Reviewed the remit and proposed activities of the Business Controls team.
• Received the summary findings of internal control self-assessments performed in the year against the 2016

internal targets.

• Approved 2017 targets for internal control maturity.
• Requested and received a report on the Group’s approach to information security.

Fraud management

• Reviewed fraud policies and quarterly fraud reports, as well as proposed actions to remediate identified cases.

Revenue assurance

• The Group head of revenue assurance presented on revenue assurance trends and actions taken to minimize loss.

Related party transactions

• A review of related party transactions was performed at each meeting.

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Main activities of the Audit Committee
during the year
Financial reporting
The Audit Committee reviewed earnings
releases for each quarter and financial
statements, having received reports from
management and the external auditor.
Attention was focused on:

• Significant accounting issues where

judgment has been applied;

• The appropriateness of and application of

the Group’s accounting policies and
practices;

• Compliance with financial reporting

standards and other financial reporting
requirements;

• The application of new accounting

standards, in particular the future adoption
of the new revenue recognition and lease
standards, IFRS 15 and IFRS 16,
respectively;

• The completeness and compliance of all
structural disclosures made in the IAS 34;
• The financial reporting implication of BEPS

legislation for future reporting.

A summary of all related party transactions
was presented quarterly. The significant
issues considered by the Audit Committee in
relation to the financial statements for the
year ended 31 December 2016 were:

1) Disposal of the Group’s operations in
DRC – also refer to note A.1.4. of the
consolidated financial statements
During 2016, Millicom completed the
disposal of its businesses in the Democratic
Republic of Congo (DRC). The transaction
included certain indemnity and warranty
clauses which required management’s
judgment. The effect of disposal and
assessment of provisions for indemnity and
warranty clauses have been presented and
discussed with the Committee.

2) Acquisition accounting in respect of
Zantel Telecom Limited – also refer to note
A.1.2. of the consolidated financial
statements
During the year, the Group completed the
purchase accounting of Zantel.
Management’s assessment of the acquisition
final fair values based on external valuation
advice were presented to the Committee for
discussion.

3) Measurement of the Group’s interests in
Guatemala and Honduras – also refer to
note A.2.3 of the consolidated financial
statements
As required by IFRS, the Group has
completed the measurement at fair value of
the assets and liabilities for Guatemala and
Honduras operations as of 31 December
2015, date of recognition of the Group’s
investment in both operations as joint
ventures. For the purchase accounting,
Millicom determined the fair values of these
operations based on a discounted cash flow
model. Similarly to Zantel, final fair values
based on external valuation advice were
presented to the Committee for discussion.

4) Guatemala security contracts – also
refer to notes F.1. of the consolidated
financial statements
In 2014, our joint venture in Guatemala
(55% shareholding) entered into a contract
with the Guatemala Government to provide
video surveillance to the Civil National Police.
Since inception, no payment had been
received under this contract. Management
has closely monitored the situation and
assessed that the amounts owed under these
contracts since inception were not
collectable. Additionally, Management
considered that, since 1 July 2016, the
accounting criteria regarding probability of
cash flowing to the Group were no longer
met. Finally, as a result of the above,
Management performed an impairment test
on the fixed assets acquired for the purpose
of rendering these services and concluded
that an impairment should be recorded.

The above accounting treatments and
decisions required Management judgment
and estimates which were extensively
discussed with the Committee.

5) Millicom investments in African Internet
Holding GmbH (AIH) and Helios Towers
Africa (HTA) – also refer to note A.3.2. of
the consolidated financial statements
Millicom’s shareholding in AIH and HTA
diluted during 2016 as a result of previous
committed cash calls and new investors’
funding. As a result, Millicom’s shareholding
in both companies reduced to 10% and 23%,
respectively. This has triggered the
recognition of a total net dilution gain of
US$59 million in the Group income
statement.

The accounting treatment of the latter was
presented and discussed with the
Committee.

6) Impairment testing – also refer to note
E.1.6. of the consolidated financial
statements
Under accounting standards, the Group is
required to test goodwill and indefinite life
intangible assets annually and, where there
are indicators of potential impairment, also
test the carrying value of other non-current
assets. Assessment of the recoverable
amount, be it under the “value in use” or the
“fair value less cost of disposal” model, is
subjective and requires significant judgment.
In addition, the Group also tests its
investments in joint ventures and associates
in case of an impairment indicator. The Audit
Committee received analysis from
Management as to their assessment of the
recoverable amounts of the Group’s
non-current assets, as well as the results of
the sensitivity analysis. The Audit Committee
also received analysis from the external
auditor, including their view of significant
assumptions such as discount rates.

Following consideration, the Audit
Committee agreed with Management’s
proposal that an impairment loss of
US$40 million had to be recognized on our
investment in MKC Brilliant Holding GmbH
(‘LiH’).

Except for the above, the results of the
annual impairment testing showed that
sufficient headroom exists for the Group’s
other operations.

7) Tax provisions and contingencies – also
refer to note G.3.2. of the consolidated
financial statements
The Group operates in many countries where
the tax and legal system is less mature and
may be less predictable. There are a number
of matters therefore relating to tax
contingencies which require judgment as to
the likely probability of cash outflow or the
potential amount of any outflow. The Audit
Committee therefore received regular reports
from the Group Tax Director as to the status
of each of these matters, the likely outcome,
the provision required, if any, and proposed
disclosure in the financial statements.
Analysis of judgmental tax matters was also
presented by the external auditor.

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Shareholder and Board governance – continued

Internal Audit
The execution of the 2016 Internal Audit
Plan provided Executive Management and
the Audit Committee visibility on the
effectiveness of Millicom’s risk management,
internal control and governance processes. It
was developed to ensure alignment with the
strategic risks of the Millicom Group, along
with consideration of the overall Group
strategy, input from senior management
across multiple geographies and functions,
external audit findings and Internal Audit’s
knowledge of the business.

In January 2016, the Audit Committee
ratified the Internal Audit Plan for the year,
which included reviews focusing on revenue
assurance and billing, information security, IT
and network resilience, financial control,
regulatory compliance, supplier contract
governance – particularly over large
infrastructure support contracts – and the
successful implementation of large IT change
programs. Follow-up audits were also built
into the plan, to provide independent assurance
that management actions from previous
audits had been addressed effectively.

The plan was primarily executed by the
in-house Internal Audit team based in
London, Luxembourg and Miami, with
specialist support provided by one of the “Big
4” accounting firms. At each meeting, the
Audit Committee received an update on
Internal Audit activities, progress against the
plan and results of the audits completed in
the period, including associated
recommendations and management action
plans where issues had been identified.

In December 2016, a new Group Head of
Internal Audit was appointed, having
performed the role on an interim basis for the
previous 18 months.

Disclosure Committee
To assist with all matters relating to earnings
releases and financial statement disclosures,
the Group has a Disclosure Committee
comprised of senior management from
finance, legal, communications, investor
relations and other functions as and when
required. The Disclosure Committee identifies
and considers disclosure matters in market
releases which contain material financial and
other price sensitive information.

Risk management
The Audit Committee received regular
reports on the Group’s risk management
framework and process, changes to
significant risks at an operational and a
Group level and how these are managed.
Further information is set out in the risk
management section of this Annual Report.

In addition, the Audit Committee reviewed
financial risk, tax risk and strategy, treasury
policy and risks, and Group insurance cover.

Internal control
The Audit Committee reviewed the
Company’s internal control framework. The
Audit Committee was focused on the need to
promote the continued improvement of
internal controls, including controls around IT
given the Group is strongly dependent on its
information technology infrastructure for the
continuity of the business processes. In 2015,
a new Business Controls function was created
at a Group level in order to increase the level
of resource and priority given to this issue.
The Group function complements and
supports control teams in each of the Group’s
operating companies. Targets for internal
control improvement in 2016 were
established and the Audit Committee
reviewed the Business Controls strategy and
received progress reports from the Head of
Business Controls at each meeting. At the
December meeting, the Audit Committee
evaluated progress on a country and process
level against the targets established and
discussed the strategy for internal control
development for 2017.

8) Deferred tax assets on unused carried
forward tax losses – also refer to note B.6.3.
of the consolidated financial statements
During 2016, deferred tax assets on unused
carried forward tax losses have been
discussed in relation to our UNE operation in
Colombia. The recognition of such deferred
tax assets is judgmental and based on
significant assumptions such as the expected
timing and level of future taxable profits
together with future tax planning strategies.

Management has presented its assessment
and judgment to the Audit Committee.
Considering the evidence available as of
today, and based on historical losses, it was
decided not to recognize a deferred tax asset
on the carried forward tax losses of UNE in
accordance with IAS 12.

9) Revenue recognition – also refer to note
B.1. of the consolidated financial
statements
Judgment is required in assessing the
application of revenue recognition principles.
This includes the application of revenue
between multiple deliverables, such as the
sale of a set top box with service in a bundled
package or managed services contracts that
have complex contractual agreements. The
Group has developed revenue recognition
rules compliant with IFRS, tailored to the
services and products sold. In addition,
Management is currently implementing the
new revenue standard, IFRS 15. The Audit
Committee received reports and
presentations from both Management and
the external auditor covering matters relating
to revenue recognition in general and to the
implementation project.

10) Potential improper payments on behalf
of the Guatemala joint venture and
Tanzania share ownership issue – also refer
to note G.3.1. of the consolidated financial
statements
On 21 October 2015, Millicom reported to
law enforcement authorities in the United
States and Sweden potential improper
payments made on behalf of the Company’s
joint venture in Guatemala.

In June 2016, Millicom was served by a third
party seeking monetary damages and
seeking to exert rights as a shareholder of
Millicom Tanzania Ltd.

The Audit Committee has been updated at
least quarterly on the progress of these
cases.

Millicom Annual Report 2016

107

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Auditor independence
The Audit Committee has established
policies to maintain the independence of the
external auditor and to govern the provision
of audit and non-audit services. Permitted
and prohibited services are clearly identified
along with the processes to be followed for
the approval of non-audit and audit services,
in accordance with the latest EU and local
regulations. All engagements require Audit
Committee approval and additionally all
engagements with an expected fee in excess
of US$100,000 require the prior approval of
the Audit Committee Chairman. A schedule
of all non-audit engagements with the
external auditor is reviewed at each meeting.

For the year ended 31 December 2016, the
Audit Committee approved fees for audit
services of US$4.6 million, together with fees
for non-audit work of US$2.0 million.

Under European rules, the current audit
partner will have to rotate off for the audit of
the consolidated financial statements as of
31 December 2019.

Audit tendering
EY was first appointed auditor of the
Company for the year ended 31 December
2012 following a competitive tender.

Based on the new EU audit regulations
and applicable Luxembourg law, EY would
have to rotate off by 2032 (20 years) at
the latest, with mandatory tender in 2022
(after ten years).

Fraud risk and whistleblowing
The Audit Committee received and reviewed
quarterly fraud reports in accordance with
the Group’s Fraud policy. Individual events
greater than defined quantitative and
qualitative thresholds were discussed and
remediation activities assessed.

The Group provides an ethics helpline which
is administered by an independent third
party and is available to all employees and
contractors.

External Audit
Audit effectiveness
The quality and effectiveness of the external
audit is of great importance to the Audit
Committee. A detailed audit plan is prepared
and discussed with the Audit Committee at
the start of each annual audit cycle, outlining
the key risks and proposed geographic
coverage.

Audit quality is assessed by reference to the
standard of the reports received by the Audit
Committee, the caliber of senior members of
the audit team and the level of challenge
provided to Management. Also, feedback is
received by the Audit Committee from
Management.

In addition, on a regular basis the
performance of the external auditors is
reviewed by Management both centrally and
in each of Millicom’s operating countries
against a set of 17 criteria ranging from
knowledge of the business, to timeliness of
communication and quality of reporting.

This feedback allows the Audit Committee to
monitor and assess the performance of the
external auditor in making a
recommendation to the Board regarding the
reappointment of Ernst & Young.

Millicom Annual Report 2016

108

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Compliance and Business Conduct Committee

The focus of the Compliance and Business
Conduct Committee during 2016 was aimed
at enhancing the Compliance function
through the onboarding of a Chief Ethics &
Compliance Officer. The Committee also
spent dedicated time reviewing and
discussing external regulatory requirements
and internal control environment for
anti-money laundering activities. Continued
attention was given to the results of the
external risk assessment exercise performed
by Covington & Burling.

Other key areas of focus were to support the
recommended simplification of the
compliance framework through the adoption
of a three-pillar approach – Prevent, Detect

and Respond. Specific support was given to
strengthening the resources of the
Compliance function. In parallel, the
Committee reviewed the ongoing monitoring
of the maturity of the compliance framework
in each of its meetings and will continue to
do so over next year as the function and
framework continues to evolve.

I want to thank the Board and Management
Team members of the Committee for their
continued support and dedication to the
work performed in 2016 and look forward to
working together in the new year.

Compliance and Business Conduct Committee membership and attendance 2016

Committee
Mr. Odilon Almeida
Mr. Alejandro Santo Domingo
Ms. Janet Davidson
Mr. Tom Boardman
Dame Amelia Fawcett
Overall attendance

Position
Chairman
Member
Member
Member
Former member November 2015

First appointment
November 2015
November 2015
May 2016
May 2016

Meetings/
attendance %
100
71
80
100
100
88

7/7
5/7
4/5
5/5
2/2
23/26

Appointment and role of the Compliance
and Business Conduct Committee
Millicom’s Compliance and Business Conduct
Committee oversees and makes
recommendations to the Board regarding the
Group’s compliance programs and standards
of business conduct. More specifically, the
Compliance and Business Conduct
Committee:

• Monitors the results of investigations

resulting from cases brought through the
Group’s ethics line or otherwise;

• Oversees allocation of resources and
personnel to the Compliance area;

• Assesses the Group’s performance in the

Compliance area; and

• Ensures that the Group maintains proper

standards of business conduct.

• Monitors the Group’s Compliance program,
including the activities performed by the
Compliance Team and its interaction with
the rest of the organization;

Management representatives invited to
attend the Compliance and Business
Conduct Committee include the Group CEO,
the Chief Compliance Officer, General
Counsel and CFO.

From Mr. Odilon Almeida
Chairman of the Compliance and
Business Conduct Committee

Millicom Annual Report 2016

109

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Summary of Committee activities in 2016
The Committee convened, as planned, seven
times during the year. In terms of structure of
each meeting, the Chairman prepares the
agenda in conjunction with the Chief Ethics
and Compliance Officer. The Chief Ethics and
Compliance Officer, as directed by the
Chairman, reports on the status of the

Compliance Program and any compliance
related issues including anti-money
laundering. The CEO plays an active role in
the meetings. The CEO and Executive Team
have demonstrated their full commitment
to enhancing the Compliance function and
culture at Millicom as shown by their active
involvement with the Committee.

Summary of areas of focus in 2016

Activity/issues covered

How the Compliance and Business Conduct Committee
addressed the issues

Initiation of Committee

• The Compliance and Business Conduct Committee

Recruited Chief Ethics and
Compliance Officer
Anti-corruption risk
assessment

commenced its activities in January 2016 with the election
of Mr. Odilon Almeida as Chairman of the Committee.
• A Chief Ethics and Compliance Officer was recruited. He

reports to the Board with a dotted line to the Millicom CEO.

• Received a report on the independent Risk Assessment

performed by Covington & Burling LLP, assisted by Kirkland
& Ellis and by KPMG. The review has been concluded and it
has not identified any matters requiring further
investigation. The review has identified potential ways in
which to proactively strengthen the Compliance Program
going forward.

Program enhancements

• Simplified compliance framework implemented with

emphasis on Prevent, Detect and Respond.

• Restructuring the Compliance function to better align with

other assurance functions.

• Training on Code of Conduct and Anti-Bribery &

Anti-Corruption.

• Additional emphasis on third party management and

anti-money laundering.

• Corporate and Local Compliance Committees in place.

Millicom Annual Report 2016

110

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Compensation Committee: Remuneration Report

In 2016, the Compensation Committee has
continued to focus on the review of
Millicom’s reward strategy to ensure that
senior management compensation reflects
more closely company performance. The
Committee has also reviewed Millicom’s
renewed approach to benchmarking
compensation and talent, which has led to
important work in recalibrating job grades
and roles.

We are confident that these steps will ensure
that the Group Management is incentivized
to take a longer term view on positive
business performance in alignment with
company and shareholder interests.

I would like to thank my fellow Compensation
Committee members for their dedication and
commitment to the activities of the
Compensation Committee and look forward
to continuing our expanded mandate
through to the 2017 AGM.

From Lorenzo Grabau
Chairman of the Compensation
Committee

Compensation Committee membership and attendance 2016

Position
Committee
Chairman
Mr. Lorenzo Grabau
Mr. Tom Boardman
Member
Mr. José Miguel García Fernández Member
Dame Amelia Fawcett
Mr. Paul Donovan
Overall attendance

First appointment
May 2015
May 2016
May 2016
Former Chairman May 2014
Former member May 2014

Meetings/
attendance %
100
100
100
100
67
93

5/5
2/2
2/2
3/3
2/3
14/15

Appointment and role of the
Compensation Committee
The Compensation Committee reviews and
makes recommendations to the Board of
Directors regarding the compensation of the
CEO and the other senior managers as well
as management succession planning.

The Board, based on guidelines by the
Compensation Committee, propose the
remuneration of senior management. The
objective of the guidelines is to ensure that
Millicom can attract, motivate and retain
executives, within the context of Millicom’s
international talent pool, which primarily
consists of telecom, media and FMCG

companies. Remuneration of the CEO and
the long-term incentive plans are then
approved by the shareholders at the AGM.

The evaluation of the CEO is conducted by
the Compensation Committee. The
evaluation criteria and the results of the
evaluation are then discussed by the
Chairman with the entire Board. The Board
considered that the CEO provided strong
leadership for the Company during 2016. The
results of the review and evaluation were
communicated to the CEO by the
Chairman. The Compensation Committee
comprises three members.

Millicom Annual Report 2016

111

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Main activities of the Committee during 2016
The Compensation Committee met five times in 2016.

Activity/issues covered

How the Compensation Committee addressed the issues

Bonus and performance
reports

• Reviewed and approved the variable compensation targets
to further align remuneration with company performance.

• Received and reviewed senior executive performance
reports and rewards for exceptional performance.

Separation arrangements
at Executive level

• Discussed, modified and subsequently approved separation

arrangements with former members of the Executive
Team.

Share-based incentive
plans

Global reward strategy
and executive
remuneration review

Recruitment

• Reviewed the terms and conditions of the 2016 share-

based incentive plans, in particular changes recommended
that improve alignment to shareholder returns for the
future performance plans.

• Discussed feedback from the changes to the 2016

share-based incentive plan design.

• Review of the timeline and planned activities for the

reward strategy update.

• Gave input to a holistic review of reward principles,

emphasizing importance of a performance-based incentive
opportunity culture.

• Reviewed the performance of individual members of the

Executive Team and compensation packages.

• Reviewed progress and potential candidates for the
positions of Chief Compliance Officer, Chief Human
Resources Officer, and Chief Strategy Officer.

Compensation review

• Reviewed guidelines and methodology for setting 2017

compensation.

Remuneration guidelines
The Board proposes to the AGM guidelines
for remuneration and other employment
terms for the senior management. The
annual base salary and other benefits of the
CEO and the Executive Vice Presidents (the
“Executive Team”) is proposed by the
Compensation Committee and approved by
the Board.

Remuneration policy
Remuneration packages for members of the
Executive Team at Millicom comprises an
annual base salary, an annual bonus,
share-based compensation, social security
contributions, pension contributions and
other benefits. Bonus and share-based
compensation plans (see note B.4.1 to the
Consolidated Financial Statements) are
based on actual performance. Share-based
compensation is granted once a year by the
Compensation Committee of the Board.

Base salary – The Executives’ base salary
shall be competitive and based on the
individual Executive’s responsibilities and
performance.

Variable cash remuneration – The
Executives may receive variable
remuneration in addition to base salary. The
maximum target variable remuneration in
any Executive’s contract is 100% of the base
salary and in case of exceptional business
and personal performance the actual
amount can reach 200%. The variable
amounts or percentages are considered to be
competitive within market standards at total
compensation levels. The variable
remuneration shall be based on the
performance of the Executives in relation to
established goals and targets along with
Millicom’s financial performance.

Millicom Annual Report 2016

112

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Use and relative weighting of performance target measures under the variable compensation
rules are equal to all employees regardless of seniority.

Bonus measurements

Rationale

Service Revenue(i)

EBITDA

Operating Free Cash Flow

Personal performance

Total

Recurring revenue is a key growth measure
used by the Group as it seeks to monetize
opportunities in all countries and all
business units.

EBITDA is used as a measurement of ongoing
earning power/value creation in the Group and
is used as a measure of how well management
controls the operational cost of growing
revenue.

Operating Free Cash Flow is a measure aligned
to return on invested capital and is used to
measure how efficiently management are
generating cash flow.

The individual goals and objectives of Millicom
management and employees are critical in
achieving its financial objectives and in
long-term value creation.

Weighting

23.33%

30%

100%

(i) The use of Service Revenue as a performance measure replaced use of Total Revenue from January 2016.

Long-term share based incentive plans
(LTIPs) – The aim of the LTIPs is to
complement and support Millicom’s
long-term business view and strategy.
The plans and the amounts need to be
competitive in order to attract and retain
key executives.

Other benefits – Other benefits can include,
for example, a car allowance, medical
coverage and in some cases, housing
allowance, school fees, home leave and
other travel expenses.

Pension – The Executives are entitled to
participate in a global pension plan, in
accordance with European standards.
The global pension plan is secured
through premiums paid to reputable
insurance companies.

Deviations from the guidelines – In special
circumstances, the Board may deviate from
the above guidelines, for example additional
variable remuneration in the case of
exceptional performance. In such a case
the Board of Directors will explain the reason
for the deviation at the following AGM.

Payment for loss of office
If the employment of a Millicom Executive
is terminated, a notice period of up to
12 months potentially applies.

Millicom Annual Report 2016

113

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Executive Team remuneration 2016

Compensation of the Executive Team
(US$ ’000)
2016
Base salary
Bonus (for 2016 performance)
Pension
Other benefits
Termination benefits
Total salary and benefits

CEO

CFO

Other
Executives
(9 members)

1,000
660
150
48
—
1,858

599
450
82
18
—
1,149

3,797
1,411
513
720
—
6,441

—

Performance share plan(i)
Deferred share plan(ii) (for 2016
performance)
CEO Dividend Share Award
45,146
Total shares (number)
Value of shares(iii) (US$ ’000)
2,385
(i) Amounts relating to the 2014 performance share plan based on the actual performance over the three year period to

15,017
2,358
17,375
743

10,250
450

13,024

32,122

10,250

—

31 December 2016. The value of shares is based on the closing market value of Millicom shares in US$ at 31 December
2016 of US$42.76. These shares vested on 1 January 2017.

(ii) Amounts relating to the 2016 deferred share plan (awarded in 2017). The value of shares is based on the closing market
value of Millicom shares in US$ at 31 December 2016 of US$42.76. These shares will vest over three years from the
award date, dependent on continued service of the employee.

(iii) The value is calculated on the basis described above which differs from the value calculated for the IFRS financial statements.

Compensation of
the Executive Team
(US$ ’000)
2015
Base salary
Bonus (for 2015
performance)
Pension
Other benefits
Termination benefits
Total salary and benefits

CEO*

Former CEO

750

1,006
113
11
—
1,880

304

—
—
—
2,854
3,158

Other
Executives
(9 members)(iv)

3,721

1,870
671
1,085
682
8,029

CFO**

989

1,206
95
14
—
2,304

Compensation shares
Performance share plan(i)
Deferred share plan(ii)
Sign-on grant(iii)
Total shares (number)
Value of shares(v)
(US$ ’000)
*
**
(i) Amounts relating to the 2013 performance share plan based on the actual performance over the three year period to

The CEO started in April 2015.
Includes compensation for the interim CEO role to 31 March 2015.

11,300
14,916
—
26,216

—
—
77,344
77,344

—
4,394
—
4,394

—
—
—
—

4,457

1,511

253

—

31 December 2015. The value of shares is based on the closing market value of Millicom shares in US$ at 31 December
2015 of US$57.63. These shares vested on 1 January 2016.

(ii) Amounts relating to the 2015 deferred share plan. The value of shares is based on the closing market value of Millicom

shares in US$ at 31 December 2015 of US$57.63. These shares will vest over three years from the award date, dependent
on continued service of the employee.

(iii) Amounts relating to the CEO sign on bonus share grant. The value of shares is based on the closing market value of
Millicom shares in US$ at 31 December 2015 of US$57.63. One-third of the total share amount vests on each of
1 January 2016, 1 January 2017 and 1 January 2018.
(iv) Includes former Executives who left Millicom during 2015.
(v) The value is calculated on the basis described above which differs from the value calculated for the IFRS financial statements.

Millicom Annual Report 2016

114

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Share based incentive plans
The share-based incentive plans currently
consist of a Deferred Share Plan (DSP) and a
Performance Share Plan (PSP). Shares
granted under the DSP are based on personal
and corporate performance of the previous
year and the awards vest over three years,
16.5% after one year, 16.5% after two years
and 67% after three years. Shares granted
under the PSP vest at the end of a three-year
period, whereby vesting is subject to certain
company performance conditions.

The modification to the Performance Share
Plan for the CEO and CFO as applied in 2015
(the Executive Share Plan) has not been
repeated in 2016. Both the CEO and CFO are
instead participating in the Group’s PSP, with
target opportunities as per the table below.

In 2016, long-term share based incentive
plans were offered to Executives, other senior
management, as well as to high potential
employees and employees in key roles (by
nomination exception) under the plans set
out in the following table. In addition, the
rules of the plans set out certain criteria and
conditions in which new employees can be
awarded sign-on awards.

Comment

LTIP Plans
Deferred
Share Plan
(DSP)

Performance
Share Plan
(PSP)

Eligibility
CEO, CFO,
other
Executives
and other
(global) senior
management*
CEO, CFO,
other
Executives
and other
(global) senior
management

Maximum
shares awarded
in 2016
287,316

Participants
330

200,617

Basis for
calculating
award
20–50%
on base salary
as per 31.12.15

200%
160%
35%–160%
on base salary
as per 01.01.16

* A limited number of High-Potential employees and employees in key roles can be nominated by exception.

Specific rules of each plan are set out below. Vesting under all plans is conditional on the
participant remaining employed by the Group at each vesting date. Additional vesting criteria
are noted under each plan.

LTIP Plans
Deferred Share Plan –
Future Performance
Plan

Additional vesting criteria
(terms and conditions)

Achievement of absolute and relative
total shareholder return target measures
plus a Free Cash Flow target measure
over the three year vesting period.

Vesting period

1 year

2 years
16.5% 16.5%

3 years
67%
— 100%

—

CEO compensation
At the AGM on 15 May 2015, the Board of
Directors proposed and the meeting
approved a sign-on share grant to the CEO
of 77,344 Millicom shares, as part of the
CEO remuneration.

One-third of the total share amount vests
(and is deliverable to the CEO along with
accrued dividends) on each of 1 January
2016, 1 January 2017 and 1 January 2018.
The vesting of shares is conditional upon the
CEO not being dismissed for cause.

The share grant was proposed by the Board
following review by the Compensation
Committee of the entire compensation
package for the CEO. The 2016 components
of this package are:

• an annual base salary of US$1 million;
• variable remuneration with a target of

100% of base salary;

• participation in Millicom’s share-based

compensation plans;

• the continued vesting of the Sign-on Share

Grant; and

• other standard benefits, as described under
the senior management remuneration
principles earlier in this report.

Millicom Annual Report 2016

115

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

CEO earnings opportunity from
2016 award levels
The tables below provide estimates of the
potential future remuneration for the Chief
Executive Officer based on the remuneration
opportunity granted in the 2016 financial
year. Potential outcomes are based on
different performance scenarios.

Assumptions underlying each scenario are
described below.

Fixed

Fixed income consists of base salary, employment benefits and company
pension contributions.
Base salary is at 31 December 2016.
Benefits are valued using the figures in the total remuneration for the 2016
financial year table detailed above.
Pension contributions are made at 15% of base salary as at December of the
preceding year.

Variables on
target

Variables at
maximum

Base
(US$’000)
1,000

Benefits
(US$’000)
48

Pension
(US$’000)
150

Total Fixed
(US$’000)
1,198

Mauricio
Ramos
Values are based on what the Chief Executive Officer Mr. Ramos would receive
if performance was in line with Incentive Performance Targets.
The target award opportunity for the annual cash bonus is 100% of base salary.
The target award opportunity for the Deferred Share Plan (DSP) is 50% of base
salary for the Chief Executive Officer.
The target award opportunity for the Performance Share Plan (PSP) is 200% of
base salary for the Chief Executive Officer, assuming TSR performance being
positive and at peer group median.
Maximum award opportunity under the annual cash bonus is 120%.
The maximum award for performance under the DSP is 75% of base salary.
The maximum award for performance under the PSP is 200% of base salary,
where total shareholder return (‘TSR’) outperforms the peer group by at least
5 percentage points.

Details of share purchase and sale activity
During 2016 Millicom’s CEO, Mauricio Ramos
acquired 12,000 Millicom shares.

At target US$’000
50%

Cash
2,198
Shares 2,200

50%

At target US$’000
72.8%

1,198
Fixed
Variable 3,200

27.2%

At maximum US$’000
51%

2,398
Cash
Shares 2,500

49%

At maximum US$’000
75.5%

1,198
Fixed
Variable 3,700

24.5%

Millicom Annual Report 2016

116

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Shareholding requirements
Millicom’s share ownership policy sets out the
Compensation Committee’s requirements on
Global Senior Managers to retain and hold a
personal holding of common shares in the
Company in order to align their interests with
those of our shareholders.

Global Senior Management Level
CEO
CFO
EVPs
General managers and VPs

All Share Plan participants in the Global
Senior Management Team (including all
Executives) are required to own Millicom
shares to a value of a percentage of their
respective base salary as of January of the
calendar year. Unless this requirement is filled
each year no vested Millicom shares can be
sold by the individual.

2016

2017

2018 onwards

Transition requirements %

400
200
20–50
10

400
200
50–100
25

Full requirement %
400
200
100
50

Shares and unvested share awards beneficially owned

CEO Executive Team

Total

27,020
114,729

—
104,008

34,472
173,340

11,714
83,823

61,492
288,069

11,714
186,831

Shares and unvested share awards
beneficially owned by the Executive Team
(number of shares)
31 December 2016
Shares
Share awards not vested
31 December 2015
Shares
Share awards not vested

2016 Remuneration for the
Chairman, Deputy Chairman and
Non-Executive Directors
Decisions on annual remuneration of
Directors (“tantièmes”) are reserved by the
Articles of Association to the general
meeting of shareholders. Directors are
therefore prevented from voting on their own
compensation. However, Directors may vote
on the number of shares they may be
allotted under any share-based
compensation scheme. The Nomination
Committee reviews and recommends the
Directors’ fees which are approved by the
shareholders at the AGM. Fees are set based
on the role (Chairman, Deputy Chairman),
and for participation in and roles of
Chairman of the Audit Committee, the
Compliance and Business Conduct
Committee, and Compensation Committee.

Millicom Annual Report 2016

117

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

The remuneration of Directors comprises an annual fee and shares denominated in
Swedish Krona (SEK). Director remuneration for the period is as follows:

Board and committees
Directors:
Mr. Tom Boardman (Chairman)
Mr. José Miguel García Fernández (Deputy Chairman)
Mr. Odilon Almeida(i)
Ms. Janet Davidson
Mr. Simon Duffy
Mr. Tomas Eliasson(i)
Mr. Lorenzo Grabau
Mr. Alejandro Santo Domingo

Remuneration
2016
SEK 000’s

Remuneration
2015
SEK 000’s

2,025
1,300
1,050
950
1,050
1,250
950
950

—
—
1,050
—
—
1,250
1,150
850

Former Directors (until May 2016):
Ms. Cristina Stenbeck (former Chairman)
Mr. Anders Borg (former Deputy Chairman)
Mr. Paul Donovan(i)
Dame Amelia Fawcett
Total in SEK 000’s
Total (US$’000)(ii)
(i) In addition, in 2015: EUR 57,000 was paid to each for their work on the Special Committee.
(ii) Cash compensation converted from SEK to USD at exchange rates on payments dates each year. Share based
compensation based on the market value of Millicom shares on the 2016 AGM date (in total 8,002 shares).
Net remuneration comprised 50% in shares and 50% in cash (2015: 38% in shares and 62% in cash).

—
—
—
—
SEK 9,525
US$1,143

1,500
1,000
950
1,075
SEK 8,825
US$1,058

Millicom Annual Report 2016

118

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

3. Millicom CEO and Executive Team

CEO

Position

Role and responsibilities

Mr. Mauricio Ramos

CEO

Mr. Mauricio Ramos
Chief Executive Officer
Mauricio Ramos (1968) joined Millicom in April
2015 as Chief Executive Officer (CEO). Before
joining Millicom, he was President of Liberty
Global’s Latin American division, a position he
held from 2006 until February 2015.

During his career at Liberty Global, Mauricio
held several leadership roles, including
positions as Chairman and CEO of VTR in
Chile and President of Liberty Puerto Rico.
Throughout this period he successfully
developed both mobile and broadband
businesses in Latin America, delivering solid
operational improvement and
outstanding financial results.

Leading the development and execution of
the Company’s strategy. Day-to-day
activities and management decisions, both
operating and financial. Liaison between the
Board and Management of the Company.
Leading the Executive Team.

Mauricio is also Chairman of TEPAL, the Latin
American Association of Cable Broadband
Operators, Member of the Board of Directors of
Charter Communications (US), and a Member
of the Board of Directors of the GSMA.

He is a dual Colombian and US citizen who
received a degree in Economics, a degree in
Law, and a postgraduate degree in Financial
Law from Universidad de los Andes in Bogota.

Millicom shareholding at 31 January 2017:
27,020 shares

Millicom’s Executive Team supports the CEO in the day-to-day operation and management of
the Group, within their specific areas of expertise. Millicom’s Executive Team meets on at least
a monthly basis and more frequently when required. Millicom’s Executive Team is as follows:

Executive Team

Position

Role and responsibilities

Mr. Tim Pennington

Chief Financial
Officer

Finance and financial planning. Reporting
financial performance, including external
financial reporting. Budgeting and
forecasting, monitoring expenditures and
costs. Implementation and enhancement of
related controls. Risk management.

Mr. Esteban Iriarte

Chief Operating
Officer – LatAm

Operations and development of the Latin
American businesses.

Ms. Cynthia Gordon

CEO Africa Division

Operations and development of the African
businesses.

Mr. Xavier Rocoplan

Chief Technology
and Information
Officer

Networks, technology and information within
the Group. Also procurement, corporate
security and information security.

Ms. Rachel Samrén

Chief External
Affairs Officer

Government relations, regulatory affairs,
corporate communications and corporate
responsibility.

Millicom Annual Report 2016

119

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Executive Team

Position

Role and responsibilities

Mr. Salvador Escalón

General Counsel

Legal and corporate governance matters
including oversight, identification and
management of legal cases and issues
of the Group, as well as legal aspects
of mergers and acquisitions and other
corporate transactions.

Mr. Daniel Loria

Mr. HL Rogers

Chief Human
Resources Officer

Human Resource matters including talent
acquisition and management, compensation,
diversity and inclusion.

Chief Ethics and
Compliance Officer

Compliance matters including ethics,
anti-bribery, anti-corruption and related
compliance programs.

Mr. Rodrigo Diehl

Chief Strategy
Officer

Strategy development and direction setting.

The profiles of the CFO and Executive Team members are provided below:

Mr. Tim Pennington
Chief Financial Officer
Tim Pennington joined Millicom in June 2014
as Chief Financial Officer.

Previously, he was the Chief Financial Officer
at Cable and Wireless Communications plc,
Group Finance Director for Cable and Wireless
plc and, prior to that, CFO of Hutchison
Telecommunications International Ltd, listed
in Hong Kong and New York. Tim was also
Finance Director of Hutchison 3G (UK),
Hutchison Whampoa’s British mobile business.

He also has corporate finance experience,
firstly as a Director at Samuel Montagu & Co.
Limited, and then as Managing Director of
HSBC Investment Bank within its Corporate
Finance and Advisory Department.

He is a British national and has a BA
(Honours) degree in Economics and Social
Studies from the University of Manchester.

Millicom shareholding at 31 January 2017:
9,813 shares

Mr. Esteban Iriarte
Chief Operating Officer, Latin America
Esteban Iriarte was appointed as Chief
Operating Officer (COO), Latin America in
August 2016.

Ms. Cynthia Gordon
Executive Vice President, CEO Africa
Division
Cynthia Gordon joined Millicom in September
2015 as EVP, CEO Africa Division.

Previously, Esteban was General Manager of
Millicom’s Colombian businesses where, in
2014, he led the merger and integration of
Tigo and the fixed-line company UNE.

Prior to leading Tigo Colombia, Esteban was
head of Millicom’s regional Home and B2B
divisions.

From 2009 to 2011, he was CEO of Amnet, a
leading service provider in Central America
for broadband, cable TV, fixed line and data
services that was bought by Millicom in
2008.

In 2016 Esteban joined Sura Asset
Management board. Sura is one of Latin
America’s biggest financial groups.

Esteban is from Argentina and received a
degree in Business Administration from the
Pontificia Universidad Catolica Argentina
“Santa Maria de los Buenos Aires”, and an
MBA from the Universidad Austral in Buenos
Aires.

Millicom shareholding at 31 January 2017:
8,634 shares

Cynthia was previously Chief Commercial
Officer at Ooredoo, with oversight for
commercial strategies across Ooredoo
operations in the Middle East, North Africa
and South-East Asia. Cynthia was also a
Commissioner on the Board of Indosat-
Ooredoo, the largest operation of the
Ooredoo Group.

She joined Ooredoo from Orange where she
was Vice President of Partnerships and
Emerging Markets. Prior to that Cynthia was
Group Chief Commercial Officer at MTS in
Russia and led the commercial strategy and
direction for the company, which at the time
had 91 million customers in six countries.
Cynthia currently serves as Board member of
European telecom operator Tele 2 and BIMA,
the leading provider of mobile-delivered
insurance in emerging markets.

Cynthia is a British national and has a BA
(Honours) in Business Studies.

Millicom shareholding at 31 January 2017:
110 shares

Millicom Annual Report 2016

120

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Mr. Xavier Rocoplan
Executive Vice President, Chief
Technology and Information Officer
Xavier Rocoplan started working with
Millicom in 2000 and joined the Executive
Committee as Chief Technology and IT
Officer in December 2012.

Xavier is currently heading all mobile and
fixed network and IT activities across the
Group as well as all Procurement & Supply
Chain activities.

Xavier first joined Millicom in 2000 as CTO in
Vietnam and subsequently for South East
Asia. In 2004, he was appointed CEO of
Millicom’s subsidiary in Pakistan (Paktel), a
role he held until mid-2007. During this time,
he launched Paktel’s GSM operation and led
the process that was concluded with the
disposal of the business in 2007. Xavier was
then appointed as head of Corporate
Business Development, where he managed
the disposal of various Millicom operations
(e.g. Asia), the monetization of Millicom
infrastructure assets (towers) as well as
numerous spectrum acquisitions and license
renewal processes in Africa and in Latin
America.

Xavier is a French national and holds
Master’s degrees in engineering from Ecole
Nationale Supérieure des
Télécommunications de Paris and in
economics from Université Paris IX Dauphine.

Millicom shareholding at 31 January 2017:
11,604 shares

Ms. Rachel Samrén
Executive Vice President, Chief External
Affairs Officer
Rachel Samrén joined Millicom in July 2014
and manages the Group’s government
relations, corporate communications and
corporate responsibility functions.

Her focus is on driving Millicom’s global
engagement with particular responsibility for
special situation strategies.

Rachel’s background is in the risk
management consulting sector, most recently
as Head of Business Intelligence at The Risk
Advisory Group plc. Previously, she worked for
Citigroup as well as non-governmental and
governmental organizations.

Rachel currently serves as Chairman of the
Board of Directors of Reach for Change and
Zantel.

She is a Swedish national and holds a BSc in
International Relations from the London
School of Economics and a MLitt in
International Security Studies from the
University of St Andrews.

Millicom shareholding at 31 January 2017:
93 shares

Mr. Salvador Escalón
Executive Vice President, General Counsel
Salvador Escalón was appointed as Millicom’s
General Counsel in March 2013 and became
Executive Vice President in July 2015.

Salvador leads Millicom’s legal team and
advises the Board of Directors and senior
management on legal and governance
matters.

He first joined Millicom as Associate General
Counsel Latin America in April 2010. In this role
he successfully led legal negotiations for the
merger of Millicom’s Colombian operations
with UNE-EPM Telecomunicaciones S.A., as well
as the acquisition of Cablevision Paraguay.

From January 2006 to March 2010, Salvador
was Senior Counsel at Chevron Corporation,
with responsibility for legal matters relating
to Chevron’s downstream operations in Latin
America.

Previously, he was in private practice at the
law firms Skadden, Morgan Lewis and
Akerman Senterfitt.

Salvador is an American national and has a
J.D. from Columbia Law School and a B.B.A.
in Finance and International Business from
Florida International University.

Millicom shareholding at 31 January 2017:
4,222 shares

Millicom Annual Report 2016

121

Overview

Strategy

Performance

Governance

Financials

Shareholder and Board governance – continued

Mr. Daniel Loria
Executive Vice President, Chief Human
Resources Officer
Daniel Loria joined Millicom in April 2016 as
Chief Human Resources Officer.

Previous to his current role, Daniel was Head
of HR for North America at Syngenta, the
global agribusiness company headquartered
in Switzerland.

His international experience includes his role
as Regional Head of HR for Royal & Sun
Alliance Latin America (2007 to 2009);
Global Head of HR for Novartis’ Vaccines and
Diagnostics and HR Head of Novartis
Pharmaceuticals in Latin America (2003 to
2007).

Daniel’s career has provided him with
extensive and diverse international
experience in developing the human capital
in organizations.

He has a degree in Business Communications
from ITESM Queretaro where he graduated
with honors, and an MA from California State
University where he studied Communications
and Public Relations as a Fulbright Scholar.
He also has an Advanced Certification in
Organizational and Executive Coaching from
New York University.

Millicom shareholding at 31 January 2017:
no shares

Mr. HL Rogers
Executive Vice President, Chief Ethics and
Compliance Officer
HL Rogers joined Millicom in August 2016 as
Chief Ethics and Compliance Officer. As the
leader of Millicom’s Compliance function he
is committed to maintaining a world-class
compliance program.

Previously, he was partner in the Washington
DC office of international law firm Sidney
Austin LLP where he represented individual,
corporate and government clients in
compliance issues and complex litigation.

Throughout this period, HL Rogers developed
a wealth of experience in setting up and
managing compliance programs,
strengthening compliance policies and
procedures, as well as conducting training
and development. He has also assisted many
large corporations in negotiations with
authorities in multiple jurisdictions.

HL clerked for Judge Thomas Griffith of the
United States Court of Appeals for the
District of Columbia Circuit in 2005. He
received his Juris Doctorate from Harvard
Law School in 2004 and has published
several articles on compliance and ethics
matters within the corporate setting.

In 2001, HL received his BA degree in English
from Brigham Young University.

Millicom shareholding at 31 January 2017:
no shares

Mr. Rodrigo Diehl
Executive Vice President, Chief Strategy
Officer
Rodrigo Diehl was appointed as Millicom’s
Executive Vice President, Chief Strategy
Officer in September 2016.

Previously, Rodrigo was a partner at
McKinsey & Co. both in Germany and in
Brazil where, from 2003, he advised
telecommunications, technology and media
leaders throughout Europe, the USA, Middle
East and Latin America.

He also previously worked as a Senior Analyst
and Planning Manager at Techint Group.

At Millicom, Rodrigo is supporting the
company’s drive to constantly improve its
strategic rigor and maintain its competitive
advantage in a rapidly transforming industry.

He graduated with honors from the
University of Buenos Aires and holds an MBA
from Harvard Business School.

Millicom shareholding at 31 January 2017:
no shares

Millicom Annual Report 2016

122

Overview

Strategy

Performance

Governance

Financials

Management governance

The Group seeks to ensure that governance
activities are embedded in the daily operations
of all businesses and in the Group’s corporate
functions. The role of the Group’s governance
functions is to set policies and procedures in
accordance with our obligations and
international best practice. These functions
then ensure these are embedded in our
businesses and monitor compliance.

Each function has clear reporting lines
through to the Executive Management Team
and the CEO. Reporting is also to the Board
committees, as previously described, based
on the responsibilities of each committee.

For instance, the Chief Ethics and
Compliance Officer reports directly to the
relevant Board committee with a dotted line
report to the CEO.

In addition, the Group has a dedicated
Internal Audit function to provide
independent assurance over all businesses
and corporate functions through a program
of risk-based internal audits. Internal Audit
reports to the Audit Committee of the Board
and to Executive Management.
Improvements are identified, management
actions assigned and implementation
progress is monitored.

Chief Executive Officer

Executive Management Team

1.
Business
Control

2.
Risk
Management

3.
Compliance
and Business
Ethics

4.
Corporate
Responsibility

5.
Security

Within the Millicom control framework,
controls are performed by operational and
functional management teams. The Group’s
key controls are documented in the Millicom
internal control manual, and covers both
financial and non-financial controls across 15
core business processes. The control manual
was significantly upgraded at the start of the
year. Each country has its own dedicated,
local Business Control team responsible for
monitoring and development of the local
internal control environment.

1. Business Control
The Board has overall responsibility for the
Group’s system of internal control which is
designed to manage, rather than eliminate,
the risk of failure to achieve business
objectives and can only provide reasonable,
but not absolute, assurance against material
misstatement or loss. The concept of
reasonable assurance recognizes that the
cost of control procedures should not exceed
the expected benefits.

Responsibility for maintaining effective
internal controls is delegated to the CEO and
the Executive Team with oversight provided
by the Audit Committee. Millicom continued
to invest significantly during the year to
further strengthen its internal control
framework.

Millicom Annual Report 2016

123

Overview

Strategy

Performance

Governance

Financials

Management governance – continued

Monitoring systems
A process of internal control self-assessment
is operated and requires self-certification of
the operation of key controls. Where controls
are found not to be operating effectively,
action plans are designed with
responsibilities and timescales assigned for
remediation.

Self-assessment results are reported to the
Audit Committee and the Executive Team.
The results enable an assessment of the
relative maturity of our internal control
environment by both business process and by
country. In 2016, three self-assessment
exercises were performed compared to two in
2015. All in-scope countries and operations
met their internal targets for 2016.

Fraud management and reporting
Business Control has responsibility for fraud
risk management. A new Group fraud policy
and fraud response standard was developed
and launched in late 2015. During the year,
there has been significant work to roll out
requirements to each operation.

A quarterly fraud report is prepared by each
operation. A summary of this is presented to
the Audit Committee along with the key
actions taken. Quantitative and qualitative
thresholds have been agreed to govern the
reporting of individual fraud incidents to the
Group CFO, CEO and the Audit Committee.

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

Management has assessed the effectiveness
of internal control over financial reporting as
of 31 December 2016 and concluded that its
internal control over financial reporting was
effective.

2. Risk Management
Millicom has a risk management framework
which our business units and corporate
functions utilize. Millicom has a network of risk
officers at headquarters, regional and each
significant operating country level, led by the
Chief Risk Officer. The risk function is tasked
with identifying, analyzing, 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, is responsible for
reviewing the effectiveness of risk activities.

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 Executives and key
decision makers.

The principal risks identified by the Group are
set out on in the Risk Management section of
this report.

3. Ethics and Compliance
The Millicom Ethics and Compliance Team
has overall responsibility for the enterprise-
wide Millicom compliance framework and the
anti-bribery and anti-corruption program. It
also manages the anti-money laundering
program and has overall responsibility for
investigations and case management.

Management and governance of
compliance activities
The Management Team established
corporate and local compliance committees
during last year. These are managed by the
Ethics and Compliance Team and serve as
assurance bodies and oversight functions of
the compliance framework.

The Corporate Compliance Committee
consists of all members of the Millicom
Executive Team and the Chief Ethics &
Compliance Officer. The local committees are
managed by the relevant Ethics &
Compliance managers, together with the
general managers and their leadership teams
in the local operations. The local compliance
committees will report into the Corporate
Compliance Committee for transparency,
assurance and oversight.

The Chief Ethics & Compliance Officer
reports monthly to the Executive Team and
Corporate Compliance Committee. On a
regular basis reports are shared with the
Board and the newly established Compliance
and Business Conduct Committee of the
Board.

Whistleblowing, case management and
reporting
The Group operates an ethics helpline, which
is managed by the Ethics & Compliance
Team and administered by an independent
third party. The Millicom Ethics Line allows
for anonymous reporting, is available on the
Millicom website, and is available to all
employees as well as third parties.

A quarterly report on matters raised through
the Millicom Ethics Line is provided to the
Corporate Compliance Committee, the
Executive Team and on an annual basis to
the Audit Committee.

Key governance initiatives
The role of Chief Ethics & Compliance Officer
(CECO) was created and the role was filled
mid-year. The CECO reports directly to the
Board, with a dotted line to the CEO. A new
Compliance structure with an enhanced level
of resource was approved.

The Code of Conduct training completion is
now linked to bonus eligibility. The target
threshold is 90% of staff completion rate,
which was achieved enterprise wide.

Internal Audit initiated frequent reviews of
the Compliance framework and risks. These
audits will be performed on a rolling basis
year on year. A compliance auditor has been
approved for Internal Audit and will assist in
targeting compliance-related issues.

A cross-functional Investigations Review
Committee (IRC) was established to oversee
and manage all ethics and compliance
concerns raised in one central clearing house
with representatives from Compliance, HR,
Legal and Internal Control.

Added emphasis was placed on due diligence
for third parties, including suppliers, vendors,
agents, consultants and M&A targets. Third
parties due diligence is being enhanced and
third parties will be reviewed according to the
risk they present to Millicom and its
operations. A due diligence vendor is being
identified to assist in this initiative.

Millicom Annual Report 2016

124

Overview

Strategy

Performance

Governance

Financials

Management governance – continued

We frequently engage external auditors to
conduct independent reviews of our
Compliance Framework and Anti-Bribery &
Anti-Corruption (ABAC) Program. With the
support of the Chief Ethics & Compliance
Officer, and with continued sponsorship by
the Board, a review of the compliance
framework was performed across a selection
of markets. The Washington based law firm
Covington & Burling was commissioned to
perform the review.

support successful delivery of our business
strategy. Millicom’s VP Corporate
Responsibility (CR) leads the team that
manages the Group’s “growing responsibly”
reporting process and publishes CR-related
strategy, management and performance
information in the annual integrated report.
Our integrated report will continue to be a
key vehicle in promoting transparency
towards investors and other key stakeholders
on CR risks and opportunities.

A focus was working with Guatemala to
strengthen governance. In 2016, we
emphasized the role of the local board
utilizing several key executives including CEO,
CFO and General Counsel, added audit and
compensation committees to the local board,
strengthened audit function, and began
working on compliance initiatives.

The CR team has active interaction with
external stakeholders to ensure that Millicom
understands and addresses CR issues that
are important and relevant to its
stakeholders. This is done in a formal way in
a bi-annual materiality analysis, and for the
most part via ongoing interaction with our
key partners and stakeholders.

4. Corporate responsibility
This year, for the first time, Millicom
integrates corporate responsibility-related
performance data and information to our
annual financial and operational report to
demonstrate how managing key “growing
responsibly” topics and subsequent risks

In addition to anticipating and improving
preparedness on risks, the CR function also
adds value by seeking leadership
opportunities for the Group to improve
reputation and brand perception, and
monitoring cost savings from environmental
initiatives.

Governance of CR
In 2016, the Board decided to cease the
specialized Government Relations (GR) and
CR Committee, and assumed the overall
responsibility of overseeing GR, CR and social
investment (SI). The driver for this change
was the depth and materiality of these
topics, the current maturity level of the
programs, and that monitoring of
subsequent risks was considered by the Board
as of importance to its entirety. The change
has given CR and SI topics more visibility
across the Board, as our Executive Vice
President (EVP) Chief External Affairs Officer,
a direct report of our CEO, is now directly
accountable to the Board for delivering
updates on our CR and SI strategy.

VP of Corporate Responsibility reports
progress on CR and SI strategy
implementation and issues management to
the Millicom Executive Committee on a
monthly basis through the EVP Chief External
Affairs Officer, and in specific cases directly.

How CR is governed

Role:
Oversees, advises and makes recommendations
to Management regarding our strategy and
activities in the areas of external affairs, including
government relations, CR and social investment.

Board of Directors

Chief Executive Ofﬁcer

Executive Management Team
sponsors for managing CR

EVP
Chief Compliance and
Business Ethics Ofﬁcer

EVP
Chief External Affairs
Ofﬁcer

Direct reports
to the CEO

EVP
Chief Technology and
Information Ofﬁcer

Senior management

Director of Compliance
and Business Ethics

Vice President
Corporate Responsibility

Vice President
Corporate Security

Vice President
Supply Chain

Responsible for:
Anti-corruption
compliance

Responsible for:
Environment and
human rights issues

Responsible for:
Health and safety issues

Responsible for:
Responsible supply
chain management

Millicom Annual Report 2016

125

Overview

Strategy

Performance

Governance

Financials

Management governance – continued

5. Security
Millicom has a robust professional security
and safety model, managed by the VP
Corporate Security, reporting into the EVP
and CTIO. The Security team oversees the
implementation of policy and Group
standards in physical security, health and
safety, business continuity and information
security, by local operational teams.

The focus of the Corporate Security team is
to protect life, protect information, to
promote well-being and to build resilience
throughout the business, to unexpected
events or crises.

Currently, the Corporate Security team is
working with the respective operating
entities by implementing international
standards such as OHSAS 18001, ISO 27001,
ISO 22301 and 31000 in order to secure
additional services as well as mitigating risk
to the business.

Business Continuity and Crisis
Management
Our business continuity and crisis
management system is designed to address
significant disruption that might affect our
capabilities to perform critical day-to-day
activities related to the delivery of our
services. All critical services and business
processes are identified by a business impact
analysis, and are required to have a disaster
recovery and business continuity plan. All
critical assets identified in the impact
analysis have a risk assessment performed to
address all relevant operational threats. All
relevant risks are then subjected to a formal
risk mitigation plan.

Millicom crisis management defines the
proper response to, and management of, an
intense, unexpected and unstable situation
that disrupts normal operation and has
highly undesirable outcomes, which require
extraordinary measures to restore normal
operations. Crisis management aims to
protect the safety of our staff and our
reputation, together with continuous and
reliable delivery of service to customers, while
maintaining contractual, legal and regulatory
compliance.

In parallel, Millicom has in place physical
security and loss prevention standards which
set minimum acceptable levels of critical site
protection, as defined by industry best
practice.

All activities are subject to a program of
monitoring and compliance activities.

Information Security
Millicom’s information security management
system establishes security requirements,
aiming to make our network more resilient to
emerging threats, to ultimately support the
corporate strategic objectives. The
framework allows for a risk driven approach
to protect the confidentiality, integrity and
availability of Millicom’s information and
technology assets. It is based on the
international code of practice for information
security management ISO/IEC 27001.

A risk assessment process is in place to
identify new risks, and all relevant risks are
then subjected to a formal risk mitigation
plan. The Global Information Steering
Committee, comprising the CTIO, and the
information security and IT senior leadership,
meets quarterly to assess and prioritize
information security risks across the Group,
and to provide status updates to the Millicom
Audit Committee.

Particular focus in 2016 was given to three
key areas of information risk: logical access
control, network segmentation and log
management, in response to earlier audit
and internal control findings.

Health and Safety Management
Our health and safety management system
is designed to tackle the most significant risks
at both corporate and country level. The key
risks include the following: personal safety
and security during travel, working at height,
road risk, managed services, fire and health,
including blood borne viruses such as
malaria, Zika, Dengue fever and Ebola.

During the year, our control measures were
reviewed and revised to ensure a robust
approach is adopted across all countries.

Millicom Annual Report 2016

126

Overview

Strategy

Performance

Governance

Financials

Management
responsibility
statement

We, Mauricio Ramos, Chief Executive Officer and Tim Pennington,
Chief Financial Officer, confirm, to the best of our knowledge, that
these 2016 consolidated financial statements which have been
prepared in accordance with the International Financial Reporting
Standards as adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the
Millicom Group and the undertakings included in the consolidation
taken as a whole, and that the Directors’ report includes a fair review
of the development and performance of the business and the position
of the Millicom Group and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks
and uncertainties that they face.

Luxembourg, 7 February 2017

Mauricio Ramos
Chief Executive Officer

Tim Pennington
Chief Financial Officer

Millicom Annual Report 2016

127

Overview

Strategy

Performance

Governance

Financials

This section details our financial performance for 2016.

129 Independent auditor’s report
130 Introduction
135 Consolidated statement of income
136 Consolidated statement of comprehensive income
137 Consolidated statement of financial position
139 Consolidated statement of cash flows
140 Consolidated statement of changes in equity
141 Notes to the consolidated financial statements

Overview

Strategy

Performance

Governance

Financials

Independent
auditor’s report

To the shareholders of Millicom International Cellular S.A.

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

Opinion
In our opinion, the consolidated financial statements give a true and
fair view of the financial position of Millicom International Cellular
S.A., as of 31 December 2016, and of its financial performance and
its cash flows for the year then ended in accordance with
International Financial Reporting Standards as adopted by the
European Union.

Report on other legal and regulatory requirements
The consolidated management report on pages 90 to 91, which is the
responsibility of the Board of Directors is consistent with the
consolidated financial statements and has been prepared in
accordance with applicable legal requirements.

The accompanying corporate governance statement on pages 92 to
127, which is the responsibility of the Board of Directors, is consistent
with the consolidated financial statements and includes the
information required by the law with respect to the corporate
governance statement.

Ernst & Young
Société anonyme
Cabinet de révision agréé

Olivier Lemaire
Luxembourg, 7 February 2017

Report on the consolidated financial statements
Following our appointment by the General Meeting of the
Shareholders dated 17 May 2016, we have audited the
accompanying consolidated financial statements of Millicom
International Cellular S.A., which comprise the consolidated
statement of financial position as at 31 December 2016, the
consolidated statement of income, the consolidated statement of
comprehensive income, the consolidated statement of cash flows, the
consolidated statement of changes in equity for the year then ended,
and a summary of significant accounting policies and other
explanatory information.

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

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

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

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Introduction

Corporate information
Millicom International Cellular S.A. (the “Company”), a Luxembourg
Société Anonyme, and its subsidiaries, joint ventures and associates
(the “Group” or “Millicom”) is an international telecommunications
and media group providing digital lifestyle services in emerging
markets, through mobile and fixed telephony, cable, broadband, TV
and investments in online businesses in Latin America and Africa.

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

On 7 February 2017 the Board of Directors (the “Board”) authorized
these consolidated financial statements for issuance. The approval
will be submitted for ratification by the shareholders at the Annual
General Meeting to be held on 4 May 2017.

Business activities
Millicom operates its mobile businesses in Central America (El
Salvador, Guatemala and Honduras) in South America (Bolivia,
Colombia and Paraguay), and in Africa (Chad, Ghana, Rwanda,
Senegal and Tanzania).

Millicom operates various cable and fixed line businesses in Latin
America (Colombia, Costa Rica, El Salvador, Guatemala, Honduras,
Nicaragua, Bolivia and Paraguay). Millicom also provides direct to
home satellite service in many of its Latin American countries.

On 31 December 2015, Millicom deconsolidated its operations in
Guatemala and Honduras which are, since that date and for
accounting purposes, under joint control. Income statements of those
operations are still fully consolidated for the year ended 2015 (see
note A.2.2., for further details).

Millicom has investments in online/e-commerce businesses in several
countries in Latin America and Africa, investments in a tower holding
company in Africa and various investments in start-up businesses
providing e-payments and content to its mobile and cable customers.

IFRS consolidated financial statements
Basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union (“IFRS”). This is in accordance with Regulation (EC)
No 1606/2002 of the European Parliament and of the Council of
19 July 2002 on the application of international accounting standards
for listed companies domiciled in the European Union.

The financial statements have been prepared on an historical cost
basis, except for certain items including derivative financial
instruments and call options (measured at fair value), financial
instruments that contain obligations to purchase own equity
instruments (measured at the present value of the redemption price),
and property, plant and equipment under finance leases (initially
measured at the lower of fair value and present value of the future
minimum lease payments).

This section contains the Group’s significant accounting policies that
relate to the financial statements as a whole. Significant accounting
policies specific to one note are included within that note. Accounting
policies relating to non-material items are not included in these
financial statements.

Consolidation
The consolidated financial statements of the Group comprise the
financial statements of the Company and its subsidiaries as of
31 December of each year. The financial statements of the
subsidiaries are prepared for the same reporting year as the
Company, using consistent accounting policies.

All intra-group balances, transactions, income and expenses, and
profits and losses resulting from intra-group transactions are
eliminated.

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Introduction – continued

IFRS consolidated financial statements – continued
Foreign currency
Financial information in these financial statements are shown in the
US dollar presentation currency of the Group and rounded to the
nearest million (US$ million) except where otherwise indicated. The
financial statements of each of the Group’s entities are measured
using the currency of the primary economic environment in which
each entity operates (“the functional currency”). The functional
currency of each subsidiary, joint venture and associate reflects the
economic substance of the underlying events and circumstances of
these entities. Except for DRC and El Salvador where the functional
currency is US dollar, the functional currency in other countries is the
local currency.

The results and financial position of all Group entities (none of which
operate in an economy with a hyperinflationary environment) with
functional currency other than the US dollar presentation currency
are translated into the presentation currency as follows:

Assets and liabilities are translated at the closing rate on the date
of the statement of financial position;

ii) Income and expenses are translated at average exchange rates
(unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates,
in which case income and expenses are translated at the dates of
the transactions); and

iii) All resulting exchange differences are recognized as a separate
component of equity (“Currency translation reserve”), in the
caption “Other reserves”.

On consolidation, exchange differences arising from the translation
of net investments in foreign operations, and of borrowings and other
currency instruments designated as hedges of such investments, are
recorded in equity. When the Group disposes of or loses control over a
foreign operation, exchange differences that were recorded in equity
are recognized in the consolidated income statement as part of gain
or loss on sale or loss of control.

Goodwill and fair value adjustments arising on acquisition of a
foreign operation are treated as assets and liabilities of the foreign
operation and translated at the closing rate.

The following table presents functional currency translation rates for
the Group’s locations to the US dollar on 31 December 2016 and 2015.

Exchange rates to the US dollar
Bolivia
Chad and Senegal
Colombia
Costa Rica
DRC
El Salvador
Ghana
Guatemala
Honduras
Luxembourg
Nicaragua
Paraguay
Rwanda
Sweden
Tanzania
United Kingdom

Functional currency
Boliviano (BOB)
CFA Franc (XAF)
Peso (COP)
Costa Rican Colon (CRC)
US dollar
US dollar
Cedi (GHS)
Quetzal (GTQ)
Lempira (HNL)
Euro (EUR)
Cordoba (NIO)
Guarani (PYG)
Rwandan Franc (RWF)
Krona (SEK)
Shilling (TZS)
Pound (GBP)

2016
Average rate
6.91
600.08
3,048.51
551.47
n/a
n/a
3.92
7.61
22.92
0.91
28.62
5,685.89
786.82
8.58
2,183.35
0.74

2016
Year-end rate
6.91
626.14
3,000.71
561.10
n/a
n/a
4.20
7.52
23.59
0.95
29.32
5,766.93
819.79
9.11
2,181.00
0.81

2015
Year-end rate
6.91
609.96
3,149.47
544.87
n/a
n/a
3.80
7.63
22.43
0.92
27.93
5,806.91
747.41
8.44
2,159.00
0.68

Change
%
n/a
2.65
(4.72)
2.98
n/a
n/a
10.53
(1.44)
5.17
3.26
4.98
(0.69)
9.68
7.94
1.02
19.12

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Introduction – continued

New and amended IFRS accounting standards
Standards or
amendments
Adopted by Millicom on 1 January 2016 with no material impact to the consolidated financial statements
Amendment to IAS 1

Objective

Not yet effective and not early adopted by Millicom on 1 January 2016
IFRS 9, “Financial
Instruments”

Annual improvements
2014

Amendments to IAS
38 and IAS 16
Amendments to
IFRS 11

IAS 12, “Recognition
of deferred tax assets
for unrealized losses”

These amendments are part of the IASB initiative to improve presentation and disclosure in
financial report, and rather clarify than significantly change, the existing IAS 1 requirements.
The amendments clarify: the materiality requirements in IAS 1, that specific line items in the
statement(s) of profit or loss, and Other Comprehensive Income (‘OCI’) and the statement of
financial position may be disaggregated, that entities have flexibility as to the order in which
they present the notes to financial statements, that the share of OCI of associates and joint
ventures accounted for using the equity method must be presented in aggregate as a single line
item, and classified between those items that will or will not be subsequently reclassified to profit
or loss.
These set of amendments impact four standards: IFRS 5, “Non-current assets held for sale and
discontinued operations” regarding methods of disposal, IFRS 7, “Financial instruments:
Disclosures”, IAS 19, “Employee benefits” regarding discount rates, IAS 34, “Interim financial
reporting” regarding disclosure of information.
Clarification of acceptable methods of depreciation and amortization issued by the IASB in
July 2014.
Accounting for acquisitions of interests in joint operations issued by the IASB in May 2014.

IFRS 9 addresses the classification, measurement and recognition of financial assets and
financial liabilities. IFRS 9 was originally issued in November 2009 and October 2010 and
subsequently amended in July 2014. It replaces the parts of IAS 39 that relate to the
classification and measurement of financial instruments. IFRS 9 requires financial assets to be
classified into two measurement categories: those measured at fair value, and those measured
at amortized cost. The determination is made at initial recognition. The classification depends
on the entity’s business model for managing its financial instruments and the contractual cash
flow characteristics of the instrument. For financial liabilities, the standard retains most of the
IAS 39 requirements. The main change is that, in cases where the fair value option is taken for
financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in
other comprehensive income rather than the income statement, unless this creates an
accounting mismatch. A final standard on hedging (excluding macro-hedging) has been issued
in November 2013 which aligns hedge accounting more closely with risk management and
allows to continue hedge accounting under IAS 39.
The Group does not expect IFRS 9 to have a material impact on the consolidated financial
statements and intends to adopt IFRS 9 no later than the compulsory adoption date of
1 January 2018.
The IASB issued the amendments to IAS 12 Income taxes to clarify the accounting for deferred
tax assets for unrealized losses on debt instruments measured at fair value. The amendments
clarify that an entity needs to consider whether tax law restricts the sources of taxable profits
against which it may make deductions on the reversal of that deductible temporary difference.
Furthermore, the amendments provide guidance on how an entity should determine future
taxable profits and explains in which circumstances taxable profit may include the recovery of
some assets for more than their carrying amount.
The Group does not expect this amendment to have a material impact on the consolidated
financial statements and intends to adopt it no later than the compulsory adoption date
(subject to endorsement by the EU).

IASB
effective date

1 January 2016

1 January 2018

1 January 2017

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Introduction – continued

New and amended IFRS accounting standards – continued

Standards or
amendments
IFRS 15, “Revenue
from contracts with
customers”

IFRS 16, “Leases”

IAS 7, Disclosure
initiative –
Amendment to IAS 7

IFRIC 22, “Foreign
currency transactions
and advance
consideration”

Annual improvements
2014–2016

Objective
IFRS 15 establishes a five-step model related to revenue recognition from contracts with
customers. Under IFRS 15, revenue is recognized at amounts that reflect the consideration that
an entity expects to be entitled to in exchange for transferring goods or services to a customer.
The Group is currently conducting a Group-wide IFRS 15 assessment and implementation
project. Based on the analyses made to date, the Group estimates that IFRS 15 will have an
impact on the timing and amount of revenue recognition in connection with certain multiple-
element arrangements and more particularly on hardware subsidies (e.g. mobile handsets).
Under IFRS 15 a larger portion of the total consideration received in a bundled contract will be
attributable to the component delivered at contract inception (e.g. mobile handset), requiring
earlier revenue recognition. The delivery of subsidized handsets would likely lead to the
recognition of a contract asset. As a result, this would likely lead to higher revenue from the sale
of hardware and to lower revenue from the provision of telecommunications services.
The recognition of commission costs related to the acquisition of customers is also expected to
be affected as the Group will have to capitalize certain of these commissions. Moreover, the new
Standard could impact transactions wherein third parties are involved concerning the gross vs
net presentation of revenue. Consequently, IFRS 15 might have a material effect on the
statement of financial position and income statement at first-time adoption, however a
reasonable estimate of the quantitative impact is not possible to be derived at this stage.
The Group expects to adopt IFRS 15 using the cumulative catch-up transition method no later
than the compulsory adoption date of 1 January 2018. As the Group does not intend to early
adopt the Standard, no material impact on revenue recognition is expected at year-end 2017.
The application of the Standard will affect primarily the accounting for the Group’s operating
leases. As at the reporting date, the Group has non-cancellable operating lease commitments of
US$727 million, see note G.2. However, the Group has not yet determined to what extent these
commitments will result in the recognition of an asset and a liability for future payments and
how this will affect the Group’s results and classification of cash flows. This said, the application
of this Standard will affect net debt and leverage ratios of the Group.
Some of the commitments may be covered by the exemption for short-term and low-value leases
and some commitments may relate to arrangements that will not qualify as leases under IFRS 16.
The new Standard is effective 1 January 2019 (subject to endorsement by the EU). Early
application is permitted (as long as the recently issued revenue Standard, IFRS 15 “Revenue from
Contracts with Customers” is also applied). The Group intends to adopt it no later than the
compulsory adoption date (subject to endorsement by the EU).
The amendments to IAS 7 Statement of cash flows are part of the IASB’s Disclosure Initiative
and require an entity to provide disclosures that enable users of financial statements to evaluate
changes in liabilities arising from financing activities, including both changes arising from cash
flows and non-cash changes. The Group does not expect this amendment to have a material
impact on the consolidated financial statements and intends to adopt it no later than the
compulsory adoption date (subject to endorsement by the EU).
This IFRIC addresses foreign currency transactions or parts of transactions where there is
consideration that is denominated or priced in a foreign currency. The interpretation provides
guidance for when a single payment/receipt is made as well as for situations where multiple
payments/receipts are made. The guidance aims to reduce diversity in practice. The Group does
not expect this amendment to have a material impact on the consolidated financial statements
and intends to adopt it once it is endorsed by the EU.
These amendments impact three standards: IFRS 1, “First-time adoption of IFRS”, regarding the
deletion of short term exemptions for first-time adopters regarding IFRS 7, IAS 19, and IFRS 10
effective 1 January 2018. IFRS 12, “Disclosure of interests in other entities” regarding
clarification of the scope of the standard. These amendments should be applied retrospectively
for annual periods beginning on or after 1 January 2017. IAS 28, “Investments in associates and
joint ventures” regarding measuring an associate or joint venture at fair value effective
1 January 2018. The Group does not expect these improvements to have a material impact on
the consolidated financial statements.

IASB
effective date
1 January 2018

1 January 2019

1 January 2017

1 January 2018

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Introduction – continued

Estimates
Estimates are based on historical experience and other factors,
including reasonable expectations of future events. These factors are
reviewed in preparation of the financial statements, although due to
inherent uncertainties in the evaluation process, actual results may
differ from original estimates. Estimates are subject to change as new
information becomes available and may significantly affect future
operating results. Significant estimates have been applied in respect
of the following items:

• Accounting for property, plant and equipment, and intangible
assets in determining fair values at acquisition dates, particularly
for assets acquired in business combinations and sale and
leaseback transactions (see note E.2.1.).

• Useful lives of property, plant and equipment and intangible

assets (see notes E.1.1., E.2.1.).

• Provisions, in particular provisions for asset retirement

obligations, legal and tax risks (see note F.4.).

• Revenue recognition (see note B.1.1.).
• Impairment testing including WACC and long term growth rates

(see note E.1.6.).

• Estimates for defined benefit obligations (see note B.4.3.).
• Accounting for share-based compensation in particular

estimates of forfeitures and future performance criteria (see note
B.4.1., B.4.2.).

• Fair value of financial assets and liabilities in particular the put

and call options related to our businesses in Guatemala and
Honduras and the fair value of such investments on
deconsolidation (see note A.2.2., C.6.3.).

Judgments and critical estimates
The preparation of IFRS financial statements requires management
to use judgment in applying accounting policies. It also requires the
use of certain critical accounting estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses
during the reporting period. These estimates are based on
management’s best knowledge of current events and actions, and
actual results may ultimately differ from these estimates. Areas
involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the financial statements
are disclosed in each note and are summarized below:

Judgments
Management apply judgment in accounting treatment and
accounting policies in preparation of these financial statements. In
particular a significant level of judgment is applied regarding the
following items:

• Contingent liabilities – whether or not a provision should be

recorded for any potential liabilities (see note G.3.).

• Leases – whether the substance of leases meets the IFRS criteria

for recognition as finance or operating leases or services contracts,
or elements of each (see notes E.2. and G.2.).

• Control – whether Millicom, through voting rights and potential
voting rights attached to shares held, or by way of shareholders
agreements or other factors, has the ability to direct the relevant
activities of the subsidiaries it consolidates, or jointly direct the
relevant activities of its joint ventures (see notes A.1., A.2.).

• Discontinued operations and assets held for sale – definition,
classification and presentation (see notes A.4., E.3.1.) as well as
measurement of potential provisions related to indemnities.

• Deferred tax assets – recognition based on likely timing and level

of future taxable profits together with future tax planning
strategies (see notes B.6.3. and G.3.2.).

• Acquisitions – measurement at fair value of existing and newly

identified assets and goodwill, the measurement of property, plant
and equipment and intangible assets, and the assessment of useful
lives (see notes A.1.2., E.1.1., E.1.5., E.2.1.).

• Financial instruments that contain obligations to purchase
own equity instruments – determination of the likelihood of
change of control events occurring in assessing the fair value of the
Guatemala and Honduras put options in 2015 (see note C.6.3.).
• Defined benefit obligations – key assumptions related to life

expectancies, salary increases and leaving rates, mainly related to
UNE Colombia (see note B.4.3.).

• Impairment testing – Key assumptions related to future business

performance (see notes E.1.2., E.1.6., E.2.2.).

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Financials

Consolidated statement of income
for the year ended 31 December 2016

B.3.

2016(ii)

Notes
B.1.
B.2.

B.2.
E.2.2.
E.1.3.
A.2.

4,374
(1,279)
3,096
(1,781)
(744)
(184)
115
(20)
482
(394)
22
10
(49)
71
(180)
(109)
19
(90)

US$ millions
Revenue
Cost of sales
Gross profit
Operating expenses
Depreciation
Amortization
Income from joint ventures, net
Other operating expenses
Operating profit
Interest expense
Interest and other financial income
Other non-operating (expenses) income, net
Income (loss) from associates, net
Profit (loss) before taxes from continuing operations
Charge for taxes, net
Loss for the year from continuing operations
Profit (loss) for the year from discontinued operations, net of tax
Net loss for the year
Attributable to:
The owners of Millicom
Non-controlling interests
Earnings per common share for profit (loss) attributable to the owners of the Company:
Basic (US$ per common share):
— from continuing operations
— from discontinued operations
— total
Diluted (US$ per common share)
— from continuing operations
— from discontinued operations
— total
(i) Re-presented for discontinued operations (shown in note A.4.).
(ii) The impact of accounting for Honduras and Guatemala under the equity method on the presentation of the 2015 consolidated income statement is shown in note A.2.2.

(0.51)
0.19
(0.32)

(32)
(58)

B.5.
A.3.

A.4.

B.6.

B.7.

2015(i)
6,572
(1,793)
4,778
(2,590)
(1,035)
(246)
—
(64)
843
(425)
22
(624)
100
(83)
(278)
(361)
(83)
(444)

(559)
115

(4.76)
(0.83)
(5.59)

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

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Financials

Consolidated statement of comprehensive income
for the year ended 31 December 2016

US$ millions
Net loss for the year
Other comprehensive income (to be reclassified to the income statement in subsequent periods),
net of tax:
Exchange differences on translating foreign operations(i)
Change in value of cash flow hedges, net of tax effects
Other comprehensive income (not to be reclassified to the income statement in subsequent periods),
net of tax:
Remeasurements of post-employment benefit obligations, net of tax effects
Total comprehensive loss for the year
Attributable to:
(897)
Owners of the Company
12
Non-controlling interests
(i) Cumulative exchange differences of US$192 million has been reclassified in the income statement as of 31 December 2015 following the deconsolidation of Honduras and Guatemala

(2)
(109)

(438)
(3)

—
(885)

2016
(90)

(14)
(3)

(60)
(49)

2015
(444)

(see note A.2.2.).

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

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Financials

Consolidated statement of financial position
at 31 December 2016

US$ millions
ASSETS
NON-CURRENT ASSETS
Intangible assets, net
Property, plant and equipment, net
Investments in joint ventures
Investments in associates
Deferred tax assets
Derivative financial instruments
Other non-current assets
TOTAL NON-CURRENT ASSETS

Notes

E.1.
E.2.
A.2.
A.3.
B.6.
D.1.2.

31 December
2016

31 December
2015(i)

1,359
3,057
2,945
331
166
32
72
7,961

1,429
3,198
3,220
376
188
26
75
8,512

80
398
16
193
125
39
109
142
769
1,871
12
10,395

CURRENT ASSETS
Inventories, net
Trade receivables, net
Amounts due from non-controlling interests, associates and joint ventures
Prepayments and accrued income
Current income tax assets
Supplier advances for capital expenditure
Other current assets
Restricted cash
Cash and cash equivalents
TOTAL CURRENT ASSETS
Assets held for sale
TOTAL ASSETS
(i) The consolidated statement of financial position for the year ended 31 December 2015 has been restated after finalization of Zantel’s purchase accounting (note A.1.2.).

62
387
17
171
101
23
110
145
646
1,661
5
9,627

F.2.
F.1.
G.5.

C.4.
C.4.

E.3.2.

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

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Financials

Consolidated statement of financial position
at 31 December 2016 – continued

US$ millions
EQUITY AND LIABILITIES
EQUITY
Share capital and premium
Treasury shares
Other reserves
Retained profits
Loss for the year attributable to equity holders
Equity attributable to owners of the Company
Non-controlling interests
TOTAL EQUITY

LIABILITIES
Non-current liabilities
Debt and financing
Derivative financial instruments
Amounts due to associates and joint ventures
Provisions and other non-current liabilities
Deferred tax liabilities
Total non-current liabilities

Notes

C.1.

A.1.5.

C.3.
D.1.2.
G.5.
F.4.2.
B.6.

C.3.

Current liabilities
Debt and financing
Payables and accruals for capital expenditure
Other trade payables
Amounts due to non-controlling interests, associates and joint ventures
Accrued interest and other expenses
Current income tax liabilities
Provisions and other current liabilities
Total current liabilities
Liabilities directly associated with assets held for sale
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
(i) The consolidated statement of financial position for the year ended 31 December 2015 has been restated after finalization of Zantel’s purchase accounting (note A.1.2.).

80
326
297
273
376
68
477
1,898
—
6,258
9,627

E.3.2.

F.4.1.

G.5.

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

Millicom Annual Report 2016

138

31 December
2016

31 December
2015(i)

638
(123)
(562)
3,247
(32)
3,167
201
3,368

3,821
84
113
286
57
4,361

639
(143)
(531)
4,071
(559)
3,477
251
3,728

3,789
65
63
243
50
4,210

221
285
334
581
425
124
487
2,457
—
6,667
10,395

Overview

Strategy

Performance

Governance

Financials

Consolidated statement of cash flows
for the year ended 31 December 2016

US$ millions
Cash flows from operating activities

Profit (loss) before taxes from continuing operations
Profit (loss) before taxes from discontinued operations

Profit (loss) before taxes
Adjustments to reconcile to net cash:

Interest expense (income), net
Interest and other financial income

Adjustments for non-cash items:
Depreciation and amortization
Income from joint ventures, net
Loss on disposal and impairment of assets, net
Share based compensation
(Income) loss from associates, net
Other non-cash non-operating (income) expenses, net
Changes in working capital:
Decrease (increase) in trade receivables, prepayments and other current assets
(Increase) decrease in inventories
Increase (decrease) in trade and other payables
Changes in working capital:
Interest (paid)
Interest received
Taxes (paid)

Net cash provided by operating activities
Cash flows from investing activities:

Acquisition of subsidiaries, joint-ventures and associates, net of cash acquired
Dividend received from joint-ventures
Effect of deconsolidation of Guatemala and Honduras subsidiaries
Proceeds from disposal of subsidiaries, net of cash disposed
Purchase of intangible assets and licenses
Proceeds from sale of intangible assets
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Net (increase) decrease in restricted cash
Dividend received from associates
Cash (used in) provided by other investing activities, net

Net cash used in investing activities
Cash flows from financing activities:

Acquisition of non-controlling interests
Proceeds from debt and financing
Repayment of debt and financing
Advances for, and dividends to non-controlling interests
Payment of dividends to equity holders
Cash (used in) provided by other financing activities, net

Net cash from (used by) financing activities

Exchange impact on cash and cash equivalents, net
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year

Notes

A.4.

A.2.
E.1.6.
C.1.
A.3.
B.5.

A.1.
A.2.2.
A.2.2.
E.3.2.
E.1.4.
E.1.3.
E.2.3.
E.2.2.

A.3.

A.1.2.
C.3.
C.3.
A.1./A.2.
C.2.

2016

2015(i)

71
13
83

397
(22)

932
(115)
19
14
49
(22)

102
19
(109)
12
(357)
19
(130)
878

—
143
—
147
(143)
6
(719)
6
—
—
8
(552)

(83)
(70)
(153)

442
(22)

1,321
—
66
19
(100)
622

162
17
(117)
62
(377)
23
(252)
1,651

(54)
—
(168)
4
(186)
4
(1,019)
5
(17)
6
14
(1,411)

—
713
(821)
(68)
(265)
—
(441)
(8)
(123)
769
646

(39)
1,880
(1,392)
(269)
(264)
—
(84)
(81)
75
694
769

Cash and cash equivalents at the end of the year
(i) Honduras and Guatemala operations are fully consolidated for the year ended 31 December 2015. The impact of accounting for Honduras and Guatemala under the equity method on

the presentation of the 2015 consolidated statement of cash flows are shown in note A.2.2.

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

Millicom Annual Report 2016

139

Overview

Strategy

Performance

Governance

Financials

Consolidated statement of changes in equity
for the year ended 31 December 2016

Number
of shares
held by
the Group
(000’s)

Number
of shares
(000’s)

Non-
controlling
interests

Share
capital(i)

Share
premium

Treasury
shares

Retained

Put option
reserve

Other
reserves(iv)

Total

profits(ii)

—

(2)

(1)

—

209

487

153

(29)

(18)

(48)

(160)

(389)

—
—

2,339

4,761

1,391

(1,756)

(2,512)

101,739

12
(244)

(338)
—

(897)
(264)

(559)
(264)

US$ millions
Balance on
31 December 2014
Total comprehensive
income for the year
Dividends(v)
Purchase of treasury
shares
Share based
compensation(vi)
Issuance of shares
under share based
compensation schemes
Change in scope of
consolidation(vii)
Effect of
deconsolidation(ix)
Put option liability
reversal (iii)
Balance on
31 December 2015(viii) 101,739
Total comprehensive
income for the year
Dividends(v)
Purchase of treasury
shares
Share based
compensation(vi)
Issuance of shares
under share based
compensation schemes
Balance on
31 December 2016
(i) Share capital and share premium – see note C.1.
(ii) Retained profits – includes profit for the year attributable to equity holders, of which $321 million; (2015: $384 million) are not distributable to equity holders.
(iii) Put option reserve – see note C.1.
(iv) Other reserves – see note C.1.
(v) Dividends – see notes C.2.
(vi) Share-based compensation – see note C.1.
(vii) Change in scope of consolidation in 2015 – Zantel, Edatel and Tigo Rwanda see note A.1.2.
(viii) The consolidated statement of financial position for the year ended 31 December 2015 has been restated after finalization of Zantel’s purchase accounting (note A.1.2.).
(ix) Effect of deconsolidation of Honduras and Guatemala – see note A.2.2.

(32)
(265)

(60)
(265)

(49)
—

(28)
—

101,739

(1,574)

(1,395)

3,477

3,513

3,167

3,215

—
—

2,512

2,135

(143)

(531)

(562)

(123)

(918)

(377)

(45)

(17)

(37)

201

153

251

486

485

192

216

—

(3)

(1)

—

Total
equity

3,730

(885)
(508)

(2)

—

(35)

(726)

2,135

3,728

(109)
(265)

(3)

3,368

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

Millicom Annual Report 2016

140

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016

A. The Millicom Group
The Group comprises a number of holding companies and operating subsidiaries with various combinations of mobile, fixed line telephony,
cable and wireless PayTV, internet and Mobile Financial Services businesses. The Group also holds investments in a tower holding company
investing in Africa and in online businesses in Latin America and Africa.

A.1. Subsidiaries
Subsidiaries are all entities which Millicom controls. Millicom controls an entity when it is exposed to, or has rights to variable returns from its
investment in the entity, and has the ability to affect those returns through its power over the subsidiary. Millicom has power over an entity
when it has existing rights that give it the current ability to direct the relevant activities, i.e. the activities that significantly affect the entity’s
returns. Generally, control accompanies a shareholding of more than half of the voting rights although certain other factors (including
contractual arrangements with other shareholders, voting and potential voting rights) are considered when assessing whether Millicom
controls an entity. For example, although Millicom holds less than 50% of the shares in its Colombian businesses, it holds more than 50% of
shares with voting rights. The contrary may also be true (e.g. Guatemala and Honduras).

Our main subsidiaries are as follows:

Entity

Country

Activities

Mobile, DTH, MFS, Cable
Mobile, MFS, Cable, PayTV
Mobile
Fixed line, Internet, PayTV, Mobile
Fixed line, Internet, PayTV, Cable

El Salvador
El Salvador
El Salvador
Costa Rica

Mobile, MFS
Cable, DTH
Cable, DTH
Cable, DTH

Bolivia
Paraguay
Colombia
Colombia
Colombia

Central America
Telemovil El Salvador S.A.
Cable El Salvador S.A. de C.V.
Navega.com SA, Succursal El Salvador
Cable Costa Rica S.A.
South America
Telefonica Celular de Bolivia S.A.
Telefonica Celular del Paraguay S.A.
Colombia Móvil S.A. E.S.P.(i)
UNE EPM Telecomunicaciones S.A.(i)
Edatel S.A. E.S.P.(i)
Africa
Millicom Ghana Company Limited
Sentel GSM S.A.
MIC Tanzania Limited (iii)
Oasis S.A.(ii)
Millicom Tchad S.A.
Millicom Rwanda Limited
Zanzibar Telecom Limited
Unallocated
Millicom International Operations S.A.
Millicom International Operations B.V.
MIC Latin America B.V.
Millicom Africa B.V.
Millicom Holding B.V.
Millicom Spain S.L.
(i) Fully consolidated as Millicom has the majority of voting shares to direct the relevant activities.
(ii) Disposed of in April 2016 and classified as discontinued operations for the year then ended (see note A.1.4.).
(iii) See note H.

Mobile, MFS
Mobile, MFS
Mobile, MFS
Mobile, MFS
Mobile, MFS
Mobile, MFS
Mobile, MFS

Luxembourg
Netherlands
Netherlands
Netherlands
Netherlands
Spain

Ghana
Senegal
Tanzania
DRC
Chad
Rwanda
Tanzania

Holding Company
Holding Company
Holding Company
Holding Company
Holding Company
Holding Company

31 December
2016
% holding

31 December
2015
% holding

100.0
100.0
100.0
100.0

100.0
100.0
50.0-1 share
50.0-1 share
50.0-1 share

100.0
100.0
100.0
—
100.0
100.0
85.0

100.0
100.0
100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0
100.0
100.0
85.0

100.0
100.0
100.0
100.0
100.0
100.0

Millicom Annual Report 2016

141

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.1.1. Accounting for subsidiaries and non-controlling interests
Subsidiaries are fully consolidated from the date on which control is transferred to Millicom. If facts and circumstances indicate that there are
changes to one or more of the elements of control, a reassessment is performed to determine if control still exists. Subsidiaries are de-
consolidated from the date that control ceases. Transactions with non-controlling interests are accounted for as transactions with equity
owners of the Group. Gains or losses on disposals to non-controlling interests are recorded in equity. For purchases from non-controlling
interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is
also recorded in equity.

A.1.2. Acquisition of subsidiaries and increases in non-controlling interests in subsidiaries
During the year ended 31 December 2016, Millicom did not make any significant acquisition.

During 2015 Millicom acquired 85% of the shares and control of Zanzibar Telecom Limited, raised its stake in its Rwandan subsidiary from
87.5% to 100% and in one of the UNE subsidiaries (Edatel S.A. E.S.P.) from 80% to 100%. The Group also made other smaller acquisitions for
a total consideration of US$20 million.

Acquisition of Zanzibar Telecom Limited on 22 October 2015
On 4 June 2015 Millicom’s fully owned Swedish subsidiary Millicom International Ventures AB entered into an agreement to purchase 85% of
Zanzibar Telecom Limited (“Zantel”). The agreed purchase consideration was US$1 subject to final price adjustment and included a
shareholder loan. In addition Millicom assumed Zantel’s debt obligations. The transaction completed on 22 October 2015 after receipt of
regulatory approvals. A final price adjustment, if any, may still occur in the coming months after the appointment of an independent expert.
The deal also includes a reverse earn-out mechanism based on Zantel’s achievement of EBITDA targets for the period from 2017 to 2019. No
amounts have been recognized under this mechanism.

For the purchase accounting, Millicom determined the fair value of Zantel based on transaction and relative values. The non-controlling
interest was measured based on the proportionate share of the fair value of the net assets of Zantel. The purchase accounting was updated
and finalized in 2016 when additional information became available regarding fair values of acquired assets and liabilities.

22 October 2015
(US$ millions)
Intangible assets (excluding goodwill), net.(i)
Property, plant and equipment, net(ii)
Other non-current assets(iii)
Current assets (excluding cash)(iv)(v)
Cash and cash equivalents
Total assets acquired
Non-current liabilities
Current liabilities
Total liabilities assumed
Fair value of assets acquired and liabilities assumed, net
Fair value of non-controlling interest in Zantel
Millicom’s interest in the fair value of Zantel
Acquisition price (US$1 dollar)
Goodwill
(i) Intangible assets not previously recognized are a trademark for an amount of US$10 million, with indefinite useful life, a customer list for an amount of US$13 million, with estimated
useful life of four years, telecommunication spectrum licenses for an amount of US$23 million, with estimated useful life of ten years and favorable contracts for US$2 million. Certain
IRUs were also written down to their fair values for an amount of US$9 million.

Final fair values
100%
75
32
14
41
5
167
77
103
180
(13)
(2)
(11)
—
11

Initial fair values
100%
36
40
1
30
5
112
81
104
185
(73)
(39)
(34)
—
34

Change
39
(8)
13
11
—
55
(4)
(1)
(5)
60
37
23
—
(23)

(ii) Certain network and civil works assets were adjusted down to their fair value for an amount of US$10 million. Certain land values were also stepped up to their fair value for an amount

of US$2 million.

(iii) The change in other non-current assets mainly corresponds to the step up at fair value of Zantel’s 9% investment in the West Indian Ocean Cable Company Limited (“WIOCC”), a

telecommunications carriers’ carrier.

(iv) Current assets includes indemnification assets at fair value for an amount of US$11 million.
(v) The fair value of trade receivables acquired was US$19 million.

The update of the purchase price allocation resulted in an impact on net income of less than US$(1) million for the year ended 31 December
2015, which has been considered as immaterial and has not triggered a restatement of the prior year income statement. The goodwill, which
comprises the fair value of the assembled work force and expected synergies from the acquisition, is not tax deductible.

Millicom Annual Report 2016

142

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

Control over UNE and subsidiaries obtained on 14 August 2014
On 1 October 2013 Millicom signed an agreement with Empresas Públicas de Medellín E.S.P. (“EPM”), to combine and merge their mutual
interests in Millicom’s Colombian operations (“Colombia Móvil”), with UNE EPM Telecomunicaciones S.A. (“UNE”). The merger created a
business offering a comprehensive range of bundled digital services including mobile and fixed telephony, mobile and fixed broadband and
PayTV products and services in complementary geographic areas. The transaction was completed on 14 August 2014.

In August 2015, the purchase accounting for the acquisition of UNE was finalized. The completion of the purchase price allocation resulted in
an impact on net profit of US$(2) million for the year ended 31 December 2015.

A.1.3. Cash flows from acquisition of subsidiaries, joint ventures and associates

Cash inflows and outflows
(US$ millions)
Net cash acquired from acquisition of Zantel
Increase in shareholdings (investments) in Online businesses
Other acquisitions (net of cash acquired)
Total

2016
—
—
—
—

2015
5
(29)
(30)
(54)

A.1.4. Disposal of subsidiaries and decreases in non-controlling interests of subsidiaries
DRC
On 8 February 2016, Millicom announced that it had signed an agreement for the sale of its businesses in the Democratic Republic of Congo
(DRC) to Orange S.A. (see note E.3.).

Other disposals
For the year ended 31 December 2016, Millicom did not dispose of any investments. For the year ended 31 December 2015, Millicom disposed
of minor subsidiries for a cash consideration of US$4 million.

A.1.5. Summarized financial information relating to significant subsidiaries with non-controlling interests
At 31 December 2016, Millicom’s subsidiaries with material non-controlling interests were the Group’s operations in Colombia (UNE and
Colombia Móvil).

Balance sheet – non-controlling interests
31 December (US$ millions)
Colombia (including UNE and Colombia Móvil)
Others
Total

Profit (loss) attributable to non-controlling interests
(US$ millions)
Guatemala operations (until 31 December 2015 – see note A.2.2.)
Honduras operations (until 31 December 2015 – see note A.2.2.)
Colombia (including UNE and Colombia Móvil)
Others
Total

2016
207
(6)
201

2016
—
—
(55)
(3)
(58)

2015
254
(3)
251

2015
148
20
(50)
(3)
115

The summarized financial information for the year ended 31 December 2015 in respect of material non-controlling interests in the Guatemala
and Honduras operations are presented in note A.2.2.

Millicom Annual Report 2016

143

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.1.5. Summarized financial information relating to significant subsidiaries with non-controlling interests – continued
The summarized financial information for material non-controlling interests in our operation in Colombia (including UNE and Colombia Móvil)
is provided below. This information is based on amounts before inter-company eliminations.

UNE and subsidiaries (including Colombia Móvil)
(US$ millions)
Revenue
Total operating expenses
Operating profit
Net (loss) for the year
50% non-controlling interest in net (loss)

Total assets (excluding goodwill)
Total liabilities
Net assets
50% non-controlling interest in net assets
Consolidation adjustments
Total non-controlling interest
Dividends and advances paid to non-controlling interest

2016
1,717
(660)
40
(110)
(55)

2,221
1,776
445
223
(16)
207
67

366
(340)
(24)
1
3

2015
1,982
(751)
94
(100)
(50)

2,278
1,745
533
266
(12)
254
11

423
(435)
(25)
(38)
(75)

Millicom Annual Report 2016

144

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.2. Joint ventures
Joint ventures are businesses over which Millicom exercises joint control as decisions over the relevant activities of each require unanimous
consent of shareholders. Millicom determines the existence of joint control by reference to joint venture agreements, articles of association,
structures and voting protocols of the Board of Directors of those ventures.

Our main joint ventures are as follows:

Entity
Latin America
Comunicaciones Celulares S.A.
Navega.com S.A.
Telefonica Celular S.A.
Navega S.A. de CV

Country

Activity(ies)

Guatemala
Guatemala
Honduras
Honduras

Mobile, MFS
Cable, DTH
Mobile, MFS
Cable, MFS

The carrying values of Millicom’s investments in joint ventures was as follows:

Carrying value of investments in joint ventures at 31 December (US$ millions)
Honduras operations(i)
Guatemala operations(i)
Total
(i) Includes all the companies under the Honduras and Guatemala groups.

%
66.7
55

The table below summarizes the movements for the year in respect of the Group’s joint ventures carrying values:

US$ millions
Opening balance at 1 January 2016
Results for the year
Dividends declared during the year
Currency exchange differences
Closing balance at 31 December 2016

31 December
2016
% holding

31 December
2015
% holding

55
55
66.7
66.7

2016
766
2,179
2,945

55
55
66.7
66.7

2015
983
2,237
3,220

2016

Guatemala
2,237
106
(166)
2
2,179

Honduras
983
9
(178)
(48)
766

At 31 December 2016 and 2015 the Group had not incurred obligations, nor made payments on behalf of Guatemala or Honduras operations.

A.2.1. Accounting for joint ventures
Joint ventures are accounted for using the equity method of accounting and are initially recognized at cost (i.e. fair value at the time of
deconsolidation for investments in Honduras and Guatemala). The Group’s investments in joint ventures include goodwill (net of any
accumulated impairment loss) on acquisition.

The Group’s share of post-acquisition profits or losses of joint ventures is recognized in the consolidated income statement under “Income from
joint ventures, net” and its share of post-acquisition movements in reserves is recognized in reserves. Cumulative post-acquisition movements
are adjusted against the carrying amount of the investments. When the Group’s share of losses in a joint venture equals or exceeds its interest
in the joint venture, including any other unsecured receivables, the Group does not recognize further losses, unless the Group has incurred
obligations or made payments on behalf of the joint ventures.

Gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Losses
are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of joint ventures
have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in
investments in joint ventures are recognized in the income statement.

After application of the equity method, including recognizing the joint venture’s losses, the Group applies IAS 39 to determine whether it is
necessary to recognize any additional impairment loss with respect to its net investment in the joint venture.

Millicom Annual Report 2016

145

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.2.2. Honduras and Guatemala operations deconsolidation
Effective 1 July 2010 (Honduras) and 1 January 2014 (Guatemala), Millicom reached agreements with its respective local partners whereby the
local partners granted Millicom an unconditional call option for a duration of five years (Honduras) and two years (Guatemala) for their
respective stakes in its Honduras and Guatemala operations. At the same time, and as a consideration for the call options, Millicom granted
put options for the same duration to its local partners. The put options were exercisable on a change of control of
Millicom International Cellular S.A., or Millicom’s subsidiaries that hold the shares in the Honduras and Guatemala operations.

On 19 June 2015 Millicom reached an agreement with its local partner to extend Millicom’s five year unconditional call option to acquire the
remaining 33.3% of the Honduran business until 31 December 2015 and in return extended the local partners conditional put option over the
33.3% stake. All other terms and conditions of the put and call options remained unchanged.

Millicom’s five year unconditional call option to acquire the remaining 33.3% of the Honduran business, as extended by six months from 1 July
2015 expired unexercised on 31 December 2015, and accordingly the Honduran business was deconsolidated from 31 December 2015.

Similarly, Millicom’s two year unconditional call option to acquire the remaining 45% of the Guatemalan business expired unexercised on
31 December 2015 and, accordingly, the Guatemala business was deconsolidated from 31 December 2015.

At the same time, the conditional put options Millicom provided to the other shareholders also lapsed.

As a consequence, on 31 December 2015, Millicom deconsolidated its investments in Honduras and Guatemala operations and accounted for
them under the equity method, initially at fair value of respectively US$2.2 billion for Guatemala and US$1.0 billion for Honduras, resulting in a
loss on the deconsolidation of these businesses amounting to US$391 million, including recycling of foreign currency exchange losses
accumulated in equity of US$192 million, which was recorded under “Other non-operating income (expenses), net”. The fair values of Honduras
and Guatemala operations were determined based on a discounted cash flow calculation.

As from 31 December 2015 onwards, Millicom therefore jointly controls the Honduras and Guatemala operations and accounts for its
investments in these operations under the equity method and reports its share of the net income of each of these businesses in the income
statement in the caption “Income (loss) from joint ventures, net” since 1 January 2016.

Lapse of the put options for both operations resulted in the extinguishment of both put option liabilities amounting to US$2,135 million on
31 December 2015. The carrying values of both liabilities have been settled against the put option reserve within equity for US$2,512 million
(amount recognized at inception) and against retained profits for the residual difference of US$(377) million as of 31 December 2015.

Millicom Annual Report 2016

146

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.2.2. Honduras and Guatemala operations deconsolidation – continued
Summarized financial information for the years ended 31 December 2016 and 2015 of the Guatemala and Honduras operations is as follows.
This information is based on amounts before inter-company eliminations.

Guatemala(i)
(US$ millions)
Revenue
Cost of sales (ii)
Gross profit
Operating expenses
Depreciation and amortization
Other operating income (expenses), net (iii)
Operating profit
Financial income (expenses), net
Other non-operating income (expenses), net
Profit before taxes
Charge for taxes, net
Profit for the year
Net profit for the year attributable to Millicom
45% non-controlling interest in net profit
Consolidation adjustments
Non-controlling interest in net profit for Guatemala
Dividends and advances paid to Millicom

Total assets (excluding goodwill)
Total liabilities
Net assets

2016
1,284
(252)
1,033
(401)
(281)
(21)
330
(73)
4
261
(67)
194
106
—
—
—
77

3,077
1,251
1,826

2015
1,306
(258)
1,048
(396)
(232)
(1)
419
(64)
—
355
(77)
278
130
(125)
(23)
(148)
216

2,937
1,289
1,648

Net cash from operating activities
Net cash from (used in) investing activities
Net cash from (used in) financing activities
Exchange impact on cash and cash equivalents, net
Net increase in cash and cash equivalents
(i) Includes all operations under the combined Guatemala group.
(ii) Include a provision for impairment of $24 million (2015: $18 million) related to the video surveillance contracts with the Civil National Police. No revenue has been recognised from the
contracts from 1 July 2016.
(iii) Include an impairment of $18 million on the fixed assets bought in the context of the video surveillance contracts.

438
(236)
(65)
(3)
134

525
(658)
195
1
63

Millicom Annual Report 2016

147

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.2.2. Honduras and Guatemala operations deconsolidation – continued

Honduras(i)
(US$ millions)
Revenue
Cost of sales
Gross profit
Operating expenses
Depreciation and amortization
Other operating income (expenses), net
Operating profit
Financial income (expenses), net
Other non-operating income (expenses), net
Profit before taxes
Charge for taxes, net
Profit for the year
Net profit for the year attributable to Millicom
33.33% non-controlling interest in net profit
Consolidation adjustments
Non-controlling interest in net profit for Honduras
Dividends and advances paid to Millicom

Total assets (excluding goodwill)
Total liabilities
Net assets

Net cash from operating activities
Net cash from (used in) investing activities
Net cash from (used in) financing activities
Net (decrease) increase in cash and cash equivalents
(i) Includes all operations under the combined Honduras group.

2016
609
(142)
467
(249)
(160)
(3)
54
(27)
(14)
13
—
13
9
—
—
—
66

902
691
210

85
(17)
(69)
(1)

2015
649
(159)
490
(207)
(124)
—
159
(22)
(45)
92
(51)
41
21
(14)
(6)
(20)
42

950
625
325

175
(180)
6
1

Millicom Annual Report 2016

148

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.2.2. Honduras and Guatemala operations deconsolidation – continued
The Group’s key results and cash flows, excluding Guatemala and Honduras entities, would have been as follows for the year ended
31 December 2015:

Summary Group income statement, financial position and cash flows with Guatemala and Honduras operations as joint ventures
(US$ millions)
Revenue
Cost of sales
Gross profit
Operating expenses
Depreciation and amortization
Other operating expenses
Share of net profit in Guatemala and Honduras operations
Operating profit
Net financial expense
Other non-operating income (expenses), net
(Loss) income from joint ventures and associates, net
Profit (loss) before taxes
Charge for taxes, net
Loss for the year
Profit (loss) for the year from discontinued operations, net of tax
Non-controlling interests
Net profit (loss) for the year attributable to Millicom

Total assets
Total liabilities
Net assets

2016
4,374
(1,279)
3,096
(1,781)
(928)
(20)
115
482
(372)
10
(49)
71
(180)
(109)
19
58
(32)

9,627
6,258
3,368

878
(552)
(441)
(8)
(123)

2015
4,616
(1,376)
3,241
(1,987)
(926)
(63)
151
416
(318)
(578)
100
(379)
(150)
(529)
(83)
53
(559)

10,395
6,667
3,728

951
(406)
(285)
(82)
178

Millicom Annual Report 2016

149

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.2.2. Honduras and Guatemala operations deconsolidation – continued
The assets and liabilities of the Guatemala and Honduras operations on 31 December 2016 and 2015 are as follows:

Summary statements of financial position of Guatemala and Honduras operations
(US$ millions)

2016

2015

Guatemala

Honduras

Guatemala

Honduras

Assets
Intangible assets, net (excluding goodwill)
Property, plant and equipment, net
Other non-current assets
Deferred taxes
Inventories
Trade receivables
Prepayments
Amounts due from related parties
Supplier advances
Other current assets
Restricted cash
Cash and cash equivalents
Total assets

Liabilities
Debt and financing
Deferred tax liabilities
Other non-current liabilities
Payables and accruals for capital expenditure
Other trade payables
Amounts due to related parties
Other current provisions and liabilities
Total liabilities
Net assets

1,440
717
2
8
14
56
32
466
24
24
4
289
3,077

988
4
48
55
12
12
132
1,251
1,826

213
429
1
—
6
37
6
184
—
4
7
13
902

402
98
18
35
12
7
120
691
210

1,253
710
2
4
22
58
37
639
31
22
4
155
2,937

984
2
26
66
40
20
150
1,289
1,648

204
320
1
—
10
35
7
351
1
8
—
13
950

391
60
11
23
10
11
119
625
325

Millicom Annual Report 2016

150

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.2.3. Purchase price allocation for Honduras and Guatemala
In 2016, the Group had completed the purchase price allocations for both the Guatemala and Honduras operations as of 31 December 2015,
the date of recognition of the Group’s investment in both operations as joint ventures. For the purchase accounting, Millicom determined the
fair values of these operations based on discounted cash flows.

Guatemala – 31 December 2015
(US$ millions)
Intangible assets (excluding goodwill), net(i)
Property, plant and equipment, net(ii)
Other non-current assets
Current assets (excluding cash)
Cash and cash equivalents
Total assets
Non-current financial liabilities
Current liabilities
Total liabilities
Carrying value/fair value of assets and liabilities, net
Fair value of the Group’s investment in joint venture
Goodwill
(i) Intangible assets increase mainly consists of step-up recognized on the trademark for an amount of US$71 million, with indefinite useful life and the customer lists for an amount of

Carrying values
55%
689
390
3
446
87
1,615
557
152
709
906
—
—

Fair Values
55%
905
409
3
446
87
1,850
560
152
712
1,137
2,237
1,100

Change
216
19
—
—
—
235
3
—
3
231
—
—

US$148 million, with estimated remaining useful life of seven years.

(ii) Certain network and civil works assets were adjusted to their fair value for an amount of US$19 million.

Honduras – 31 December 2015
Change
(US$ millions)
Intangible assets (excluding goodwill), net(i)
64
Property, plant and equipment, net(ii)
94
—
Other non-current assets
—
Current assets (excluding cash)
—
Cash and cash equivalents
158
Total assets
51
Non-current financial liabilities
—
Current liabilities
51
Total liabilities
107
Carrying value/fair value of assets and liabilities, net
—
Fair value of the Group’s investment in joint venture
—
Goodwill
(i) Intangible assets increase mainly consists of step-up recognized on the customer lists for an amount of US$64 million, with estimated remaining useful life between two and ten years.
(ii) Certain property, plant and equipment assets were adjusted to their fair value for an amount of US$94 million.

Carrying values
66.7%
136
213
1
274
9
633
308
109
417
216
—
—

Fair Values
66.7%
200
307
1
274
9
791
358
109
467
324
983
660

For the year ended 31 December 2016, the additional amortization related to the assets recognized as part of the purchase price allocation
exercise (net of tax) amounted to US$22 million for Guatemala and US$19 million for Honduras, at Millicom’s equity stake of which is recorded
under the caption “Income from joint ventures, net”.

Millicom Annual Report 2016

151

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.2.4. Impairment of investment in joint ventures
While no impairment indicators were identified for the Group’s investments in joint ventures in 2016, according to its policy, Management have
completed an impairment test for its joint ventures in Guatemala and Honduras.

The impairment test in respect of the Group’s investments in joint ventures (both equity and loans) is conducted on the same basis as for
goodwill impairment test (see note E.1.6.). Group’s investments in Guatemala and Honduras operations were tested for impairment by
assessing their recoverable amount (using a value in use model based on discounted cash flows) against their carrying amounts. The cash flow
projections used were extracted from financial budgets approved by Management and the Board covering a period of five years or more. Cash
flows beyond this period have been extrapolated using a perpetual growth rate of 1.0%–2.0%. Discount rates used in determining recoverable
amounts were 8.3% and 9.9%, respectively.

For the year ended 31 December 2016, and as a result of the impairment testing described above, Management concluded that none of the
Group’s investments in joint ventures should be impaired.

Sensitivity analysis was performed on key assumptions within the impairment tests. The sensitivity analysis determined that sufficient margin
exists from realistic changes to the assumptions that would not impact the overall results of the testing.

A.3. Investments in associates
Millicom’s investments in associates mainly represent its shareholding in Helios Towers Africa Ltd (HTA) and its investments in the African and
Latin American online businesses (AIH and LIH). Millicom has significant influence over these companies but not control or joint control.

Our main associates are as follows:

Country

Activity(ies)

Entity
Africa
Helios Towers Africa Ltd (HTA)(i)
Africa Internet Holding GmbH (AIH)(ii)
West Indian Ocean Cable Company Limited
(“WIOCC”)(iii)
Latin America
MKC Brilliant Holding GmbH (LIH)
Unallocated
26.75
Milvik AB
(i) On 7 October 2015, Millicom and HTA signed an agreement whereby Millicom owns 28.25% of shares in HTA (24.4% on a fully diluted basis) following a shareholding exchange. As a

Mauritius
Germany
Republic of Mauritius Telecommunication carriers’ carrier

Holding of Tower infrastructure company
Online marketplace, retail and services

Online marketplace, retail and services

22.83
10.15
9.1

28.25
33.33
9.1

Germany

Sweden

26.75

Other

35.0

31 December
2016
% holding

31 December
2015
% holding

result, shares held by Millicom in HTA’s tower companies in Ghana, DRC and Tanzania have been exchanged for shares in HTA (see note A.3.2.).

(ii) During 2015, Millicom ceased to jointly control AIH following changes in AIH shareholder rights. Hence AIH has been considered as an investment in associate as from 31 December 2015.
(iii) WIOCC was acquired as part of Zantel acquisition (see section A.1.2).

At 31 December 2016 the carrying value of Millicom’s main associates was as follows:

Carrying value of investments in associates at 31 December
(US$ millions)
MKC Brilliant Holding GmbH (LIH)
African Internet Holding GmbH (AIH)
Helios Tower Africa Ltd (HTA)
Milvik AB
West Indian Ocean Cable Company Limited (WIOCC)
Total

2016
55
64
189
9
14
331

2015
99
36
215
12
13
376

Millicom Annual Report 2016

152

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.3. Investments in associates – continued
The summarized financial information for the Group’s main material associates is provided below.

Summary of statement of financial position of associates at 31 December
(US$ millions)
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Total net assets
Millicom’s carrying value of its investment in associates

Share of net profit (loss) from associates
(US$ millions)
Revenue
Operating expenses
Operating profit (loss)
Net profit (loss) for the year/investment period
Millicom’s share of results from associates

2016
458
938
1,395
585
335
920
475
331

2016
463
(329)
(172)
(257)
(49)

2015
400
1,427
1,827
252
530
782
1,045
376

2015
237
(420)
(183)
(143)
(47)

A.3.1. Accounting for investments in associates
The Group accounts for associates in the same way as it accounts for joint ventures.

A.3.2. Acquisitions and disposals of interests in associates
Africa Internet Holding GmbH (AIH)
AIH indirectly owns a number of companies that provide online services and online marketplaces in certain countries in Africa mainly under the
brand name of Jumia.

Changes in ownership and accounting for AIH
Various shareholder funding rounds were signed in late 2015 and in 2016. Millicom did not participate and therefore maintained its initial
investment at EUR70 million. In addition, during June 2016, there was a capital restructuring whereby all investors rolled up into AIH. During
2016, these transactions have all been duly executed and as a result Millicom’s shareholding in AIH has been reduced to 10%. This has
triggered the recognition of a net dilution gain of US$43 million in the Group income statement under “Income (loss) from associates, net”.

Additionally, following the changes in AIH governance which took place in 2015 and as foreseen in the shareholders’ agreement, Millicom lost
its joint control but retains a significant influence over AIH – Millicom keeps one Board representative who will continue to participate in the
decision making process of AIH. Therefore, at 31 December 2015 and 2016, the investment in AIH is accounted for as an associate using the
equity method of accounting.

Millicom investment in African towers company, Helios Towers Africa
On 7 October 2015, Millicom and Helios Towers Africa (“HTA”) signed an agreement whereby Millicom owns 28.2% 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.

This transaction simplified the share ownership structure of HTA, aligned interest among shareholders and moved Millicom’s shareholding to
the parent company of HTA. The exchange of shares, which has commercial substance in accordance with IAS 28 and IAS 16, has resulted in
the Group recognizing its investment in HTA at fair value and hence a gain on disposal of its investments in the different tower companies of
US$147 million under “Income (loss) from joint ventures and associates, net”.

During 2016, Millicom’s shareholding has been diluted from 28.2% to 22.8% as a result of previous committed cash calls and new investors’
funding. This has resulted in Millicom recognizing a gain on dilution of US$16 million. The gain has been recorded in the Group income
statement under “Income (loss) from associates, net”.

Millicom Annual Report 2016

153

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

A.3.2. Acquisitions and disposals of interests in associates – continued
Latin America Internet Holding GmbH (LIH)
During 2015, LIH contributed its investments in its operating subsidiaries Kanui and Tricae to Global Fashion Group in a share for share
transaction, recognizing a net gain of US$11 million (Millicom’s share). Global Fashion Group is partly owned by Rocket Internet and Kinnevik.
LIH’s shareholding in Global Fashion Group was determined from the relative value of Kanui and Tricae and the post-merger value of Global
Fashion Group.

During March 2015, LIH disposed of its interest in HelloFood and LIH declared a US$6 million dividend to Millicom, which had been received by
31 December 2015.

During 2016, Millicom’s 35% investment in LIH has been impaired by US$40 million mainly as a result of the drop in fair value of LIH’s
investment in the Global Fashion Group.

A.4. Discontinued operations
A.4.1. Classification of discontinued operations
Discontinued operations are those which have identifiable operations and cash flows (for both operating and management purposes) and
represent a major line of business or geographic area which has been disposed of, or are held for sale. Revenue and expenses associated with
discontinued operations are presented retrospectively in a separate line in the consolidated income statement. Millicom considers that the loss
of path to control of operations by the termination of a contractual arrangement (e.g. termination without exercise of an unconditional call
option agreement giving path to control) does not require presentation as a discontinued operation.

A.4.2. Millicom’s discontinued operations
In accordance with IFRS 5, the Group’s businesses in DRC have been classified as assets held for sale as from 8 February 2016 and their results
were classified as discontinued operations. For further details, refer to note E.3.

Millicom Annual Report 2016

154

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B. Performance
B.1. Revenue
Millicom’s revenue comprises sale of services from its mobile, cable & digital media, and Mobile Financial Services businesses, as well as related
devices and equipment. Recurring revenue consists of monthly subscription fees, airtime and data usage fees, interconnection fees, roaming
fees, TV services, B2B contracts, mobile finance service commissions and fees from other telecommunications services such as data services,
short message services and other value added services.

Revenue from continuing operations by business unit
(US$ millions)
Mobile
Cable & Digital Media
Mobile Financial Services
Telephone and equipment and other
Total

Revenue from continuing operations by country or operation
(US$ millions)
Colombia
Guatemala
Paraguay
Honduras
Bolivia
El Salvador
Tanzania
Chad
Costa Rica
Ghana
Other countries(i)
Total
(i) Including Zantel from 22 October 2015 to 31 December 2015 and DRC re-presented as discontinued operations.

2016
2,505
1,398
129
342
4,374

2016
1,717
—
623
—
542
425
347
166
152
142
260
4,374

2015
4,226
1,582
123
641
6,572

2015
1,982
1,306
673
649
531
448
358
152
151
135
187
6,572

B.1.1. Accounting for revenue
Revenue recognition
Revenue is measured at the fair value of consideration received or receivable for the sale of good and services, net of value added tax, rebates
and discounts and after eliminating intra-group sales. Generally, this is the value of the invoice to the customer.

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured. Generally, this occurs when the service has been provided to the customer, or when the related equipment is delivered or passed to
the customer.

Recurring revenue is recognized on an accrual basis, i.e. as the related services are rendered. Unbilled revenue for airtime and data usage and
subscription fees resulting from services provided from the billing cycle date to the end of each month are estimated and recorded.

Subscription product and service revenue is deferred and recognized over subscription period. Related costs are deferred and recognized over
the same period.

Where customers purchase a specified amount of airtime or other credit in advance, revenue is recognized as the credit is used. Unused credit
is carried in the statement of financial position as deferred revenue within “other current liabilities”.

Revenue from the sale of handsets and accessories are recognized when the significant risks and rewards of ownership of handsets and
accessories have been passed to the buyer.

Bundled offers such as various services sold together, are divided into separate units of accounting if the products and services in the bundle
meet certain criteria. The price paid by the customer is then allocated among the separate products and services based on their relative fair
values or using the residual method. Revenue is then recognized separately for each product and service.

Millicom Annual Report 2016

155

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B.1.1. Accounting for revenue – continued
Revenue from content services such as video messaging, ringtones, games, music, eBooks etc., are recognized net of payments to the content
providers under certain conditions. These include whether the providers are responsible for the content, determining the price paid by the
customer, and where the provider assumes the credit risk. For such services the Group is considered to be acting in substance as an agent.
Other revenue is recognized on a gross basis with any third party costs recognized as cost of sales and services.

Revenue from provision of Mobile Financial Services is recognized once the primary service has been provided to the customer.

Revenue from the sale of cables, fiber, wavelength or capacity contracts, when part of the ordinary activities of the operation, is recognized as
recurring revenue. Revenue is recognized when the capacity has been delivered to the customer, based on the amount expected to be received
from the customer.

Revenue from operating lease of tower space is recognized over the period of the underlying lease contracts. Finance leases revenue is
apportioned between lease of tower space and interest income.

B.2. Expenses
The cost of sales and operating expenses incurred by the Group can be summarized as follows:

Cost of sales
(US$ millions)
Direct costs of services sold
Cost of telephone, equipment and other accessories
Bad debt and obsolescence costs
Cost of sales

Operating expenses, net
(US$ millions)
Marketing expenses
Network maintenance costs
Employee related costs (B.4.)
External and other services
Rentals and operating leases
Other operating expenses
Other operating income
Operating expenses, net
(i) Included Zantel from 22 October 2015 to 31 December 2015 and DRC re-presented as discontinued operations.

B.2.1. Accounting for cost of sales and operating expenses
Cost of sales
Cost of sales is recorded on an accrual basis.

2016
(953)
(261)
(65)
(1,279)

2016
(528)
(231)
(483)
(232)
(135)
(217)
45
(1,781)

2015(i)
(1,153)
(501)
(139)
(1,793)

2015(i)
(802)
(334)
(634)
(335)
(191)
(299)
5
(2,590)

Customer acquisition costs
Specific customer acquisition costs, including dealer commissions and handset subsidies, are charged to marketing expenses when the
customer is activated.

Operating leases
Operating leases are all leases that do not qualify as finance leases. Operating lease payments are recognized as expenses in the consolidated
income statement on a straight-line basis over the lease term.

Millicom Annual Report 2016

156

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B.3. Segmental information
Management determines operating and reportable segments based on the reports that are used by the Chief Operating Decision Maker
(“CODM”) to make strategic and operational decisions from both a business and geographic perspective. The Group’s risks and rates of return
for its operations are predominantly affected by operating in different geographical regions. The Group has businesses in two main regions:
Latin America and Africa (2015: three regions: Central and South America and Africa). In 2015, the Group reviewed the presentation of the
segment information and introduced EBITDA as a key performance indicator reviewed by the CODM.

The deconsolidation of Honduras and Guatemala (note A.2.2.), did not impact our internal reporting for management purposes and therefore
Honduras and Guatemala are still shown as fully consolidated in the Group’s segmental reporting.

Year ended 31 December 2016
(US$ millions)
Revenue
Operating profit (loss)
Add back:
Depreciation and amortization
Income (loss) from
joint ventures, net
Other operating income
(expenses), net
EBITDA(i)
Capital expenditure(ii)
Changes in working capital
and others
Taxes paid
Operating Free Cash Flow(iii)

Total Assets(iv)
Total Liabilities

Year ended 31 December 2015
(US$ millions)
Revenue
Operating profit (loss)
Add back:
Depreciation and amortization
Other operating income
(expenses), net
EBITDA(i)
Capital expenditure(ii)
Changes in working capital
and others
Taxes paid
Operating Free Cash Flow(iii)

42
2,063
(886)

37
(233)
981

10,386
5,229

Latin
America
5,740
1,109

Latin
America
5,352
848

Africa
896
62

1,173

188

—

Unallo-
cated

Total (a)
— 6,249
761

(150)

Guatemala
and
Honduras(v) (b)
(1,875)
(394)

Eliminations
and
transfers (c)

Subtotal
(a)+(b)+(c)
— 4,374
482

115

—

(6)
(148)
(6)

(33)
(9)
(197)

1,368

(440)

—

928

—

(24)
(858)

(115)

—
20
— 1,314

—

43
2,172
(1,051)

(1)
(259)
861

Disc
ops(vi)
40
2

—

—
5

Total
4,414
484

931

(115)

20
1,319

7
258
(159)

(5)
(17)
77

1,406
1,852

1,357
1,997

11,883
7,812

(5,589)
(1,942)

3,332
388

9,627
6,258

Africa
829
(61)

Unallo-
cated
3
(205)

Total
6,572
843

Elimina-
tions
—
—

—

—
—

1,087

190

1,281

7
2,204
(950)

18
(230)
1,041

54
184
(181)

(16)
(16)
(30)

3
(199)
8

77
(6)
(119)

64
2,188
(1,123)

79
(252)
892

Disc
ops(vi)
158
(53)

Total
6,730
791

1,321

2
(10)

66
2,178

Total Assets(iv)
Total Liabilities
(i) EBITDA is used by the management to monitor the segmental performance and for capital management. EBITDA is defined in the front

— 10,398
6,670
—

(4,226)
(3,504)

14,589
10,176

10,566
5,128

2,044
2,769

1,979
2,279

section of the Annual Report.

(ii) Cash spent for capital expenditure excluding spectrum and licenses of US$39 million (2015: US$47 million).
(iii) Operating free cash flow by segment includes share-based compensation as a cash transaction.
(iv) Segment assets include goodwill and other intangible assets.
(v) I ncluding eliminations for Guatemala and Honduras as reported in the Latin America segment.
(vi) See note E.3.2. DRC operations were part of the Africa segment.

Millicom Annual Report 2016

157

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B.4. People

Number of permanent employees
Continuing operations(i)
Guatemala and Honduras
Discontinued operations
Total

2016
13,962
4,023
—
17,985

2015
12,698
3,093
165
15,956

(i) Including Tigo Nicaragua. Emtelco headcount are excluded from this report and any internal reporting because their costs are classified as direct costs and not employee related costs.

(US$ millions)
Wages and salaries
Social security
Share based compensation
Pension and other long-term benefit costs
Other employee related costs
Total

(i) Including costs for the year for Guatemala and Honduras

Note

B.4.1.
B.4.3.

2016
(314)
(70)
(14)
(6)
(79)
(483)

2015(i)
(461)
(66)
(19)
(20)
(67)
(634)

B.4.1. Share based compensation
Millicom shares granted to management and key employee compensation includes share based compensation in the form of long-term share
incentive plans. In 2015, Millicom issued four types of plans, a deferred share plan, a performance share plan, an executive share plan and the
sign-on CEO share plan (which is a one-off plan). Up until 2015, Millicom had two types of plan, a future performance plan and a deferred
share plan. Since 2016, Millicom has two types of plans, a performance share plan and a deferred share plan. The different plans are further
detailed below.

Cost of share based compensation
(US$ millions)
2013 incentive plans
2014 incentive plans
2015 incentive plans
2016 incentive plans
Total share based compensation

2016
—
(1)
(3)
(10)
(14)

2015
2
(6)
(15)
—
(19)

Deferred Share Plan (unchanged from 2014)
For the deferred awards plan, participants are granted shares based on past performance, with 16.5% of the shares vesting on 1 January of each
of year one and two, and the remaining 67% on 1 January of year three. Vesting is conditional upon the participant remaining employed with
Millicom at each vesting date. The cost of this long-term incentive plan, which is not conditional on performance conditions, is calculated as
follows:

Fair value (share price) of Millicom’s shares at grant date x number of shares expected to vest.

Future Performance Share plan (valid until 2014 and replaced by the Performance Share Plan as from 2015)
For the future performance plan, participants earn the right to receive shares on the third anniversary of the grant date. The right and the
number of shares that vest are conditional 50% based on Return on Capital Investment (ROIC) and 50% based on EPS and upon the
participant remaining employed with Millicom at the vesting date. The cost of this long-term incentive plan, which is not conditional on market
conditions, is calculated in the same way as the deferred share plan above. At 31 December 2016, the 2014 future performance plan is vested.

Sign-on CEO Share Plan (new in 2015 – one off)
As part of his employment contract Millicom CEO (from 1 April 2015) received a sign-on grant of 77,344 shares. Vesting is conditional, among
other conditions, on the CEO not being dismissed for cause. The cost of this long-term incentive plan, which is not conditional on market
conditions, is calculated in the same way as the deferred share plan above. The expense for this plan has been taken in full during 2015.

Millicom Annual Report 2016

158

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B.4.1. Share based compensation – continued
Performance Share Plan (issued in 2015)
Under this plan, shares granted will vest at the end of the three-year period, subject to performance conditions, 62.5% based on Absolute Total
Shareholder Return (“TSR”) and 37.5% based on actual vs budgeted EBITDA – CAPEX – Change in Working Capital (“Free Cash Flow”). As the TSR
measure is a market condition, the fair value of the shares in the performance share plan requires adjustment for future market based conditions
at grant date.

For this, a specific valuation has been performed at grant date based on the probability of the TSR conditions being met (and to which extent)
and the expected payout based upon leaving conditions.

The free cash flows (“FCF”) condition is a non-market measure which has been considered together with the leaving estimate and based
initially on a 100% fulfillment expectation. The reference share price for 2015 Performance Share Plan is the same share price as the share
price as the Deferred Share Plan.

Executive Share Plan (new 2015)
Under this plan, shares were granted to the CEO and CFO based on an allocated holding of 3,333 (CEO) and 2,000 (CFO) shares for which
vesting occurs based on three components at multipliers based on market conditions (a TSR for Component A and B) and performance
conditions (on actual vs budgeted Free Cash Flow for Component C). The maximum number of shares that might vest under the plan is 26,664
(CEO) and 14,000 (CFO). Subject to the vesting criteria, shares under this plan will vest at the end of a three-year period.

Similarly to the Performance Share Plan, a specific valuation has been performed based on the probability of the TSR conditions being met
(and to which extent) and the expected payout based upon leaving conditions. The FCF condition being a non-market measure, it has been
considered together with the leaving estimate and based initially on a 100% fulfillment expectation. Therefore, the reference share price is the
share price on the date that the CEO and the CFO agreed to the Executive Share Plan.

Performance Share Plan (issued in 2016)
Shares granted under this Performance Share Plan vest at the end of the three-year period, subject to performance conditions, 25% based on
Positive Absolute Total Shareholder Return (“Absolute TSR”), 25% based on Relative Total Shareholder Return (“Relative TSR”) and 50% based
on budgeted Earnings Before Interest Tax Depreciation and Amortization (“EBITDA”) minus Capital Expenditure (Capex) minus Change in
Working Capital (CWC) (“Free Cash Flow”).

This Performance Share Plan is measured similarly to the Performance Share Plan issued in 2015, see above.

For the Performance Share Plans and the Executive Share Plan, and in order to calculate the fair value of the TSR portion of those plans, it is
necessary to make a number of assumptions which are set out below. The assumptions have been set based on an analysis of historical data
as at grant date.

Assumptions and fair value of the shares under the TSR portion
Performance Share Plan 2016 (Relative TSR)
Performance Share Plan 2016 (Absolute TSR)
Performance Share Plan 2015
Executive Share Plan 2015 – Component A
Executive Share Plan 2015 – Component B
(i) Historical volatility retained was determined on the basis of a three-year historic average.

Risk-free rate
%
(0.65)
(0.65)
(0.32)
(0.32)
(0.32)

Dividend yield
%
3.49
3.49
2.78
N/A
N/A

Share price
volatility(i)
%
30
30
23
23
23

Award term
(years)
2.61
2.61
2.57
2.57
2.57

Share fair value
(in US$)
43.35
45.94
32.87
53.74
29.53

Millicom Annual Report 2016

159

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B.4.1. Share based compensation – continued
The cost of the long-term incentive plans which are conditional on market conditions is calculated as follows:

Fair value (market value) of shares at grant date (as calculated above) x number of shares expected to vest.

The cost of these plans is recognized, together with a corresponding increase in equity (share compensation reserve), over the period in which
the performance and/or employment conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the
award. Adjustments are made to the expense recorded for forfeitures, mainly due to management and employees leaving Millicom. Non-
market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the
conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest.

No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. These
are treated as vested regardless of whether or not the market conditions are satisfied, provided that all other performance conditions are
satisfied. Where the terms of an equity-settled award are modified, as a minimum an expense is recognized as if the terms had not been
modified. In addition, an expense is recognized for any modification that increases the total fair value of the share based payment
arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

Plan awards and shares
expected to vest
(number of shares)
Initial shares granted
Additional shares granted(i)

2016 Plans

2015 Plans

2014 Plans

2013 Plans

Perform-
Deferred
ance plan
plan
200,617 285,978
— 1,338

Perform-
ance plan
98,137
—

Execu-
tive plan
40,664
—

CEO
plan

Deferred
plan

Deferred
plan
77,344 237,620 164,015 219,767 173,586 208,979
4,165

Deferred
plan

Future
plan

13,453

1,306

—

40,664

Total shares granted
Revision for forfeitures
Total before issuances
Shares issued in 2014
Shares issued in 2015
Shares issued in 2016
Performance conditions
Shares still expected to vest
Estimated cost over the vesting
period (US$ millions)
(i) Additional shares granted include new joiners and/or consideration for the impact of special dividends paid in 2012.

200,617 287,316
(10,331)
(26,222)
190,286 261,094
—
—
(1,733)
—
189,072 259,361

98,137
(26,826)
71,311
—
—
(771)
—
70,540

—
—
(25,781)
—

—
—
(1,214)
—

40,664
—
—

—
40,664

(79,702) (151,967)

(51,129) (124,603)

77,344 237,620 164,015 221,073 187,039 213,144
(76,184)
35,072 136,690
— (31,977)
— (25,889)
(79,094)
—
n/a

39,412 141,371
—
—
— (32,555)
— (25,508)
—
—
83,308
39,412

77,344 186,491
—
—
(38,745)
—
51,563 147,746

(35,072)
—
n/a

n/a

B.4.2. Share options
Prior to 2006, Millicom granted options to directors, senior executives, officers and selected employees. The exercise price of the granted
options was equal to or higher than the market price of the shares on the date of grant. The options were conditional on the employee or
director completing one to five years of service (the vesting period) and were exercisable starting from one year to five years from the grant
date. Shares issued from exercise of share options have the same rights as common shares.

By 31 December 2015 all share options had been exercised. The cost of share options was recorded in the exercise periods (until and prior to 2011).

Movements in share options
Outstanding at beginning of the year
Expired or forfeited
Exercised
Outstanding and exercisable at end of year

2016

2015

Average exercise
price in US$
per share
—
—
—
—

Number of
options
—
—
—
—

Average exercise
price in US$
per share
22.55
—

—

Number of
options
45,000
—
(45,000)
—

Millicom Annual Report 2016

160

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B.4.3. Pension and other long term employee benefit plans
Pension Plans
The pension plans apply to employees who meet certain criteria (including years of service, age and participation in collective agreements).

Pension and other similar employee related obligations can result from either defined contribution plans or defined benefit plans.

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. No further payment
obligations exist once the contributions have been paid. The contributions are recognized as employee benefit expenses when they are due.
Prepaid contributions are recognized as assets to the extent that a cash refund or a reduction in future payments is available.

Defined benefit pension plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or
more factors such as age, years of service and compensation. The liability recognized in the statement of financial position in respect of the
defined benefit pension plan is the present value of the defined benefit obligation at the statement of financial position date less the fair value
of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is
calculated annually by independent actuaries. The present value of the defined benefit obligation is determined by discounting the estimated
future cash outflows, using an appropriate discount rate based on maturities of the related pension liability.

Re-measurement of net defined benefit liabilities are recognized in other comprehensive income and not reclassified to the income statement
in subsequent years.

Past service costs are recognized in the income statement on the earlier of the date of the plan amendment or curtailment, and the date that
the Group recognizes related restructuring costs.

Net interest is calculated by applying the discount rate to the net defined benefit asset/liability.

Long-Service Plans
Long-service plans apply to employees with more than five years of service whereby additional bonuses are paid to employees that reach each
incremental length of service milestone (from five to 40 years).

Termination Plans
The Group’s Colombian subsidiary UNE has a number of employee defined benefit plans. The level of benefits provided under the plans
depends on collective employment agreements and Colombian labor regulations. There are no defined assets related to the plans, and UNE
make payments to settle obligations under the plans out of available cash balances.

At 31 December 2016, the defined benefit obligation liability amounted to US$37 million (2015: US$37 million) and payments expected in the
plans in future years totals US$86 million (2015: US$92 million). The average duration of the defined benefit obligation at 31 December 2016
is seven years (2015: eight years). The termination plans apply to employees that joined UNE prior to 30 December 1996. The level of
payments depends on the number of years in which the employee has worked before retirement or termination of their contract with UNE.

Except for the UNE pension plan described above, there are no other significant defined benefits plans in the Group.

B.4.4. Directors’ and Executive Management
The remuneration of the members of the Board of Directors comprises an annual fee and shares. Director remuneration is proposed by the
Nomination Committee and approved by the shareholders at the Annual General Meeting of Shareholders (the “AGM”).

Remuneration charge for the Board (gross of withholding tax)
(US$ ’000)
Chairperson
Other members of the Board(i)
Total(ii)
(i) In addition, in 2015, US$62,700 (EUR 57,000) was paid to three directors for their work on the special committee.
(ii) Cash compensation converted from SEK to USD at exchange rates on payments dates each year. Share based compensation based on the market value of Millicom shares on the 2016

2016
243
900
1,143

2015
180
878
1,058

AGM date (in total 8,002 shares). Net remuneration comprised 50% in shares and 50% in cash (SEK) (2015: 38% in shares and 62% in cash).

Shares beneficially owned by the Directors
(number of shares)
Chairperson
Other members of the Board
Total

2016
3,000
24,316
27,316

2015
80,645
17,013
97,658

The remuneration of executive management of Millicom comprises an annual base salary, an annual bonus, share based compensation, social
security contributions, pension contributions and other benefits. Bonus and share based compensation plans (see note B.4.1.) are based on
actual and future performance. Share based compensation is granted once a year by the Compensation Committee of the Board.

If the employment of Millicom’s senior executives is terminated, severance of up to 12 months’ salary is potentially payable.

Millicom Annual Report 2016

161

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B.4.4. Directors’ and Executive Management – continued
The annual base salary and other benefits of the Chief Executive Officer (“CEO”) and the Executive Vice Presidents (“Executive Team”) is
proposed by the Compensation Committee and approved by the Board.

Remuneration charge for the Executive Team
(US$ ’000)
2016
Base salary
Bonus
Pension
Other benefits
Termination benefits
Total before share based compensation
Share based compensation(i)(ii) in respect of 2016 LTIP
Total

CEO

1,000
660
150
48
—
1,858
2,660
4,518

Executive Team
(9 members)

CFO

599
450
82
18
—
1,149
1,481
2,630

3,797
1,411
513
720
—
6,441
4,031
10,472

CEO

Former CEO

Remuneration charge for the Executive Team
(US$ ’000)
2015
Base salary
Bonus
Pension
Other benefits
Termination benefits
Total before share based compensation
Share based compensation(i)(ii) in respect of 2015 LTIP
Total
(i) See note B.4.1.
(ii) Share awards of 49,171 and 104,573 were granted in 2016 under the 2016 LTIPs to the CEO, and Executive Team (2015: 104,800 and 64,930, respectively).

304
—
—
—
2,854
3,158
—
3,158

750
1,006
113
11
—
1,880
7,501
9,381

989
1,206
95
14
—
2,304
1,051
3,355

Executive Team
(10 members)

CFO

3,721
1,870
671
1,085
682
8,029
3,823
11,852

Shares and unvested share awards beneficially owned by the Executive Team
(number of shares)
2016
Shares
Share awards not vested
2015
Shares
Share awards not vested

CEO Executive Team

Total

27,020
114,739

—
104,008

34,472
173,399

11,714
82,823

61,492
288,138

11,714
186,831

B.5. Other non-operating (expenses) income, net
Non-operating items mainly comprise changes in values of options, derivatives and the impact of foreign exchange fluctuations on results of
the Group.

US$ millions
Change in carrying value / lapse of put options (see note C.6.3.)
Change in carrying value / lapse of call options (see note C.6.3.)
Change in fair value of derivatives (see note D.1.2.)
Exchange gain (loss), net
Loss on deconsolidation of Honduras and Guatemala, including recycling of foreign currency exchange losses
accumulated in equity (see note A.2.2.)
Other non-operating income (expenses), net
Total

Year ended
31 December
2016
—
—
3
16

Year ended
31 December
2015
125
(71)
32
(304)

—
(8)
10

(391)
(15)
(624)

Millicom Annual Report 2016

162

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B.5. Other non-operating (expenses) income, net – continued
Foreign exchange gains and losses
Transactions denominated in a currency other than the functional currency are translated into the functional currency using exchange rates
prevailing on transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions, and on translation of
monetary assets and liabilities denominated in currencies other than the functional currency at year-end exchange rates, are recognized in the
consolidated income statement, except when deferred in equity as qualifying cash flow hedges.

B.6. Taxation
B.6.1. Income tax expense
Tax mainly comprises income taxes of subsidiaries and withholding taxes on intragroup dividends and royalties for use of Millicom trademarks
and brands. Millicom operations are in jurisdictions with income tax rates of 10% to 40% levied on either revenue or profit before income tax
(2015: 10% to 40%). Income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated income statement.

2016

2015

Income tax charge
(US$ millions)
Income tax (charge) credit
Withholding tax
Other income tax relating to the current year

Adjustments in respect of prior years

Deferred tax (charge) credit
Origination and reversal of temporary differences
Effect of change in tax rates

(Increase) decrease in unrecognized deferred tax assets

Adjustments in respect of prior years

Tax (charge) credit on continuing operations
Tax (charge) credit on discontinuing operations
Total tax (charge) credit

Reconciliation between the tax expense and tax at the weighted average statutory tax rate is as follows:

Income tax calculation
(US$ millions)
Profit before tax
Tax at the weighted average statutory rate
Effect of:
Items taxed at a different rate
Change in tax rates on deferred tax balances
Expenditure not deductible and income not
taxable
Unrelieved withholding tax
Accounting for associates and joint ventures
Movement in deferred tax on unremitted
earnings
Unrecognized deferred tax assets
Recognition of previously unrecognized
deferred tax assets
Adjustments in respect of prior years
Total tax (charge) credit
Weighted average statutory tax rate
Effective tax rate

Continuing
operations
71
19

2016

Discont’d
operations
13
(4)

14
1

(66)
(44)
29

(16)
(115)

18
(20)
(180)
26.8%
253.5%

—
—

9
—
—

—
(5)

—
6
6

Total
84
15

14
1

(57)
(44)
29

(16)
(120)

21
(15)

(234)
(76)
23

7
(127)

18
(14)
(174)
17.9%
207.1%

64
(3)
(278)
74.7%
334.9%

(44)
(73)
(117)
(27)
(144)

53
1
54
(97)
(43)
7
(36)
(180)
6
(174)

—
—

(7)
—
—

—
(30)

—
—
(13)

(76)
(201)
(277)
6
(271)

142
(14)
128
(126)
2
(9)
(7)
(278)
(13)
(291)

Total
(153)
86

21
(15)

(241)
(76)
23

7
(157)

64
(3)
(291)
56.2%
190.2%

Continuing
operations
(83)
62

2015

Discont’d
operations
(70)
24

Millicom Annual Report 2016

163

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B.6.2. Current tax assets and liabilities
Current tax assets and liabilities for current and prior periods are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rate and tax laws used to compute the amount are those enacted or substantively enacted by the statement of
financial position date.

B.6.3. Deferred tax
Deferred tax is calculated using the liability method on temporary differences at the statement of financial position date between the tax base
of assets and liabilities and their carrying amount for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred tax liability arises from the initial
recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither accounting, nor taxable profit or loss.

Deferred tax assets are recognized for all temporary differences including unused tax credits and tax losses, to the extent that it is probable
that taxable profit will be available against which the deductible temporary differences can be utilized, except where the deferred tax assets
relate to deductible temporary differences from initial recognition of an asset or liability in a transaction that is not a business combination,
and, at the time of the transaction, affects neither accounting, nor taxable profit or loss.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to utilize them. Unrecognized deferred tax assets are reassessed at each statement of
financial position date and are recognized to the extent it is probable that future taxable profit will enable the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rate expected to apply in the year when the assets are realized or liabilities settled,
based on tax rates and tax laws that have been enacted or substantively enacted at the statement of financial position date. Deferred tax
assets and deferred tax liabilities are offset where legally enforceable set off rights exist and the deferred taxes relate to the same taxable
entity and the same taxation authority.

Deferred tax
(US$ millions)(i)
Balance at 1 January 2015
Acquisitions
Effect of deconsolidation
Adjustments to goodwill
(Charge)/credit to income statement
(Charge)/credit to other comprehensive income
Exchange differences

Deferred tax assets
Deferred tax liabilities
Balance at 31 December 2015
Acquisitions
Transfers to Assets Held for Sale
(Charge)/credit to income statement
(Charge)/credit to other comprehensive income
Exchange differences

Fixed
assets
(140)
—
55
(22)
38
—
22
(47)
81
(128)
(47)
—
(1)
24
—
1
(23)
84
(107)
(23)

Unused tax
losses
153
—
—
22
(45)
—
(21)
109
109
—
109
—
—
3
—
1
113
113
—
113

Unremitted
earnings
(23)
—
—
—
6
—
1
(16)
—
(16)
(16)
—
—
(16)
—
—
(32)
—
(32)
(32)

Deferred tax assets
Deferred tax liabilities
Balance at 31 December 2016
(i) Comparative information has been restated after finalization of Zantel’s purchase accounting (note A.1.2.).

Other
120
—
2
—
(6)
—
(24)
92
108
(16)
92
—
—
(47)
1
5
51
65
(14)
51

Offset

(110)
110
—

(96)
96
—

Total
110
—
57
—
(7)
—
(22)
138
188
(50)
138
—
(1)
(36)
1
7
109
166
(57)
109

Millicom Annual Report 2016

164

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

B.6.3. Deferred tax – continued
The Group historically recognized a deferred tax asset of US$70 million on the tax losses of the Company. Based on re-assessment made
during 2015, management concluded that the deferred tax asset can no longer be supported and it has been reversed late 2015. There is no
cash tax impact and this treatment does not impact the availability of the tax losses in the future.

Deferred tax assets have not been recognized in respect of the following deductible temporary differences:

Deductible temporary differences
(US$ millions)
At 31 December 2016
At 31 December 2015

Unrecognized loss carryforwards expire as follows:

Unrecognized tax losses related to continuing operations
(US$ millions)
Expiry:
Within one year
Within one to five years
No expiry
Total

Fixed assets
68
77

Unused tax
losses
4,501
2,636

Other
190
60

2016

27
493
3,981
4,501

Total
4,759
2,773

2015

152
282
2,202
2,636

At 31 December 2016, Millicom had US$1,696 million of unremitted earnings of Millicom operating subsidiaries for which no deferred tax
liabilities were recognized (2015: US$921 million). Except for intragroup dividends to be paid out of 2016 profits in 2017 for which deferred tax
of US$32m has been provided, it is anticipated that intragroup dividends paid in future periods will be made out of profits of future periods.

B.7. Earnings per share
Basic earnings per share are calculated by dividing net profit for the year attributable to equity holders of the Company by the weighted
average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated by dividing the net profit for the year attributable to equity holders of the Company by the weighted
average number of ordinary shares outstanding during the year, plus the weighted average number of dilutive potential shares.

Net profit/(loss) used in the earnings per share computation
(US$ millions)
Basic and diluted:
Net profit/(loss) attributable to equity holders from continuing operations
Net profit/(loss) attributable to equity holders from discontinued operations
Net profit/(loss) attributable to all equity holders to determine the basic earnings per share

2016

(51)
19
(32)

2015

(476)
(83)
(559)

Weighted average number of shares in the earnings per share computation
(thousands of shares)
Weighted average number of ordinary shares (excluding treasury shares) for basic earnings per share
Potential incremental shares as a result of share options
Weighted average number of ordinary shares (excluding treasury shares) adjusted for the effect of dilution

2016
100,337
—
100,337

2015
100,144
10
100,154

Millicom Annual Report 2016

165

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C. Capital structure and financing
C.1. Share capital, share premium and reserves
Common shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction
from the proceeds.

Where any Group company purchases the Company’s share capital, the consideration paid including any directly attributable incremental
costs is shown under “Treasury shares” and deducted from equity attributable to the Company’s equity holders until the shares are canceled,
reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable
incremental costs and the related income tax effects is included in equity attributable to the Company’s equity holders.

Share capital, share premium
Authorized and registered share capital (number of shares)
Subscribed and fully paid up share capital (number of shares)
Par value per share

2016
133,333,200
101,739,217
US$1.50

2015
133,333,200
101,739,217
US$1.50

Share capital (US$ millions)
Share premium (US$ millions)
Total (US$ millions)

Other equity reserves
(US$ millions)
As of 31 December 2014
Share based compensation
Issuance of shares – 2012, 2013, 2014 LTIPs
Remeasurements of post-employment
benefit obligations
Cash flow hedge reserve movement
Effect of deconsolidation (see note A.2.2.)
Currency translation movement
As of 31 December 2015
Share based compensation
Issuance of shares – 2013, 2014, 2015 LTIPs
Remeasurements of post-employment
benefit obligations
Cash flow hedge reserve movement
Currency translation movement
As of 31 December 2016

Legal reserve
16
—
—

Equity settled
transaction
reserve
44
19
(18)

Hedge
reserve
2
—
—

Currency
translation
reserve
(453)
—
—

—
—
—
—
16
—
—

—
—
—
16

—
—
—
—
46
14
(17)

—
—
—
43

—
(3)
—
—
(1)
—
—

—
(3)
—
(4)

—
—
192
(332)
(593)
—
—

—
—
(23)
(616)

153
485
638

Pension
obligation
reserve
1
—
—

—
—
—
—
1
—
—

(2)
—
—
(1)

153
486
639

Total
(389)
19
(18)

—
(3)
192
(332)
(531)
14
(17)

(2)
(3)
(23)
(562)

C.1.1. Legal reserve
If Millicom International Cellular S.A. reports an annual net profit on a non-consolidated basis, Luxembourg law requires appropriation of an
amount equal to at least 5% of the annual net profit to a legal reserve until such reserve equals 10% of the issued share capital. This reserve is
not available for dividend distribution. No appropriation was required in 2015 or 2016 as the 10% minimum level was reached in 2011 and
maintained each subsequent year.

C.1.2. Equity settled transaction reserve
The cost of share options and LTIPs is recognized as an increase in the equity-settled transaction reserve over the period in which the performance
and/or service conditions are rendered. When the options are exercised their cost is transferred from the equity-settled transaction reserve to share
capital and share premium. When shares under the LTIPs vest and are issued the corresponding reserve is transferred to share premium.

C.1.3. Hedge reserve
The effective portions of changes in value of cash flow hedges are recorded in the hedge reserve (see note C.1.).

C.1.4. Currency translation reserve
In the financial statements, the relevant captions in the statements of financial position of subsidiaries without US dollar functional currencies
are translated to US dollars using the closing exchange rate. Income statements or income statement captions (included those of joint
ventures and associates) are translated to US dollars at monthly average exchange rates during the year. The currency translation reserve
includes foreign exchange gains and losses arising from these translations.

Millicom Annual Report 2016

166

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.2. Dividend distributions
On 17 May 2016 a dividend distribution of US$2.64 per share from Millicom’s retained profits at 31 December 2015 was approved by the
shareholders at the Annual General Meeting and distributed in May 2016.

On 15 May 2015 a dividend distribution of US$2.64 per share from Millicom’s retained profits at 31 December 2014 was approved by the
shareholders at the Annual General Meeting and distributed in June 2015.

The ability of the Company to make dividend payments is subject to, among other things, the terms of indebtedness, legal restrictions and the
ability to repatriate funds from Millicom’s various operations. At 31 December 2016, US$321 million (31 December 2015: US$384 million) of
Millicom’s retained profits represent statutory reserves that are unavailable to be distributed to owners of the Company.

C.3. Debt and financing

Debt and financing by type
(US$ millions)
Debt and financing due after more than one year
Bonds
Banks
Finance leases
Other financing
Total non-current financing
Less: portion payable within one year
Total non-current financing due after more than one year

Debt and financing due within one year
Bonds
Banks
Finance leases
Other financing
Total current debt and financing
Add: portion of non-current debt payable within one year
Total

Note

C.3.1.
C.3.2.
C.3.3.

2016

2015

2,561
940
290
95
3,886
(65)
3,821

—
—
5
10
15
65
80

2,630
877
327
32
3,866
(77)
3,789

46
89
9
—
144
77
221

Total debt and financing

3,901

4,010

Debt and financing by location (i)
(US$ millions)
Millicom International Cellular S.A. (Luxembourg)
Colombia
Paraguay
Bolivia
Tanzania
Rwanda
Chad
Ghana
DRC
Senegal
Cable Central America
El Salvador
Total debt and financing
(i) No amounts appear in 2015 and 2016 for Guatemala and Honduras because of their deconsolidation.

2016
1,747
841
408
306
192
80
76
54
—
14
92
89
3,901

2015
2,003
660
412
253
214
131
109
61
40
17
104
6
4,010

Millicom Annual Report 2016

167

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.3. Debt and financing – continued
Debt and financings are initially recognized at fair value, net of directly attributable transaction costs. They are subsequently measured at
amortized cost using the effective interest rate method or at fair value. Amortized cost is calculated by taking into account any discount or
premium on acquisition and any fees or costs that are an integral part of the effective interest rate. Any difference between the initial amount
and the maturity amount is recognized in the consolidated income statement over the period of the borrowing. Borrowings are classified as
current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at least 12 months from the statement of
financial position date.

C.3.1. Bond financing

Interest rate
%

STIBOR +3.5(i)

Note

Bond financing
(US$ millions)
SEK Senior Unsecured Variable Rate Notes (1)
(1)
SEK Senior Unsecured Fixed Rate Notes
(2)
USD 4.75% Senior Notes
(3)
USD 6% Senior Notes
(4)
USD 6.625% Senior Notes
SEK Senior Unsecured Variable Rate Notes (5)
(6)
USD 6.75% Senior Notes
USD 6.875% Senior Notes(ii)
(7)
(8)
BOB 4.75% Notes
(8)
BOB 4.05% Notes
(8)
BOB 4.85% Notes
(8)
BOB 3.95% Notes
(8)
BOB 4.30% Notes
(9)
UNE Bond 1 (tranches A and B)
(9)
UNE Bond 2 (tranches A and B)
(9)
UNE Bond 3 (tranche A)
(9)
UNE Bond 3 (tranche B)
UNE Bond 3 (tranche C)
(9)
Total bond financing
(i) STIBOR – Swedish Interbank Offered Rate.
(ii) No amounts appear in 2015 and 2016 for Guatemala because of their deconsolidation and classification as joint ventures.

Country
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Paraguay
Guatemala
Bolivia
Bolivia
Bolivia
Bolivia
Bolivia
Colombia
Colombia
Colombia
Colombia
Colombia

Maturity
2017
2017
2020
2025
2021
2019
2022
2024
2020
2020
2023
2024
2029
2020
2016/2023
2024
2026
2036

5.125
4.75
6
6.625
STIBOR +3.3
6.75
6.875
4.75
4.05
4.85
3.95
4.30
CPI + 5.10
CPI + 3.70 / 4.80
9.35
CPI+4.15
CPI+4.89

2016
—
—
333
495
652
217
296
—
112
15
85
50
25
50
50
53
85
43
2,561

2015
207
27
486
494
791
—
295
—
135
15
85
—
—
47
94
—
—
—
2,676

(1) SEK Senior Unsecured Notes
On 30 October 2012 Millicom issued Senior Unsecured Floating Rate Notes of Swedish Krona (“SEK”) 1.75 billion and Senior Unsecured Fixed
Rate Notes of SEK 0.25 billion both repayable in five years. At the same time, Millicom entered into various cross currency interest rate swap
contracts whereby Millicom will receive SEK and sell USD to hedge against exchange and interest rate fluctuations.

On 12 April 2016, Millicom offered to purchase for cash any and all of its SEK 250 million (approximately US$31 million) 5.125% Senior
Unsecured Fixed Rate Notes due 2017 (the “Fixed Rate Notes”) and its SEK 1.75 billion (approximately US$219 million) STIBOR +3.500% Senior
Unsecured Floating Rate Notes due 2017 (the “Floating Rate Notes”, and together with the Fixed Rate Notes, the “Notes”).

Following the early and regular tender offers, SEK 186 million (approximately US$23 million) and SEK 1.498 billion (approximately
US$187 million) in aggregate principal amount of the Fixed Rate Notes and the Floating Rate Notes, respectively, have been repaid. Millicom
has paid to such noteholders 105.8% and 102.8% of the nominal amount of the Fixed Rate Notes and the Floating Rate Notes, respectively,
together with any accrued interest.

After settlement, SEK 64 million (approximately US$8 million) in aggregate principal amount of the Fixed Rate Notes (25.6%) and
SEK252 million (approximately US$32 million) in aggregate principal amount of the Floating Rate Notes (14.4%) remained outstanding.

On 19 September 2016, the Group has notified holders of both Bonds of the early voluntary redemption of the notes in full. The outstanding
notes totaling SEK 316 million (approximately US$40 million) of principal were redeemed in October 2016.

The total early redemption fees amounting to US$8 million have been recorded under interest expenses. The remaining US$1 million of related
unamortized costs were also expensed during 2016.

Millicom Annual Report 2016

168

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.3.1. Bond financing – continued
(2) USD 4.75% Senior Notes
On 22 May 2013, Millicom issued a US$500 million fixed interest rate bond to refinance most of the external debt outstanding at the time in its
African operations. Withheld costs of issuance of US$10 million and paid costs of US$9 million are amortized over the seven-year life of the
notes (effective interest rate of 5.29%).

In August 2015, Millicom obtained consent from its noteholders to amend certain covenant terms and conditions to align to its other credit
facilities. The covenant was increased to 3.0x Net Debt/EBITDA.

In November 2016, MIC S.A. announced an offer to purchase for cash up to US$300 million of its 4.750% Senior Notes due 2020 and its
6.625% Senior Notes due 2021 (the “Notes”). In December 2016, the Company confirmed that it had accepted to purchase US$300 million in
aggregate principal amount of the Notes of which US$158 million of its 4.750% Senior Notes due 2020. The early redemption fees amounting
to US$3 million and US$3 million of related unamortized costs have been expensed in December 2016 under interest expenses.

(3) USD 6% Senior Notes
On 11 March 2015, Millicom issued a US$500 million 6% fixed interest rate bond repayable in ten years, to repay the El Salvador 8% Senior
Notes and for general corporate purposes. The bond was issued at 100% of the principal and has an effective interest rate of 6.132%.
US$7.2 million of withheld and upfront costs are being amortized over the ten-year life of the bond.

(4) USD 6.625% Senior Notes
On 16 October 2013, Millicom issued a US$800 million bond. The funds were used to finance the Colombian Merger (see note A.1.2.), and
released from the escrow account prior to completion of the merger on 14 August 2014 (effective interest rate of 7.17%).

As part of the offer for early redemption described in (2) above, the Company confirmed that it had accepted for purchase US$142 million of
principal of its 6.625% Senior Notes due 2021. The early redemption fees amounting to US$8 million and US$2 million of related unamortized
costs have been expensed in December 2016 under interest expenses.

(5) SEK Senior Unsecured Notes
On 21 April 2016, Millicom also completed the placing of a new SEK 2 billion (approximately US$250 million) 3-year floating rate bond in the
Swedish market. The new bond has a floating rate coupon of three months STIBOR +3.3% and will mature on 17 April 2019, with a first call
option on 17 April 2018. The bond was issued at 100% of the principal. US$2.5 million of withheld and upfront costs are being amortized over
the three year life of the bond. The covenant is set at 3.0x Net Debt/EBITDA.

(6) USD 6.75% Senior Notes
On 7 December 2012, Telefónica Cellular del Paraguay S.A., Millicom’s fully owned subsidiary in Paraguay issued US$300 million of notes at
100% of the aggregate principal amount. Distribution and other transaction fees of US$7 million reduced the total proceeds from issuance to
US$293 million. The 6.75% Senior Notes have a 6.75% per annum coupon with interest payable semi-annually in arrears on 13 June and
13 December. The effective interest rate is 7.12%.

The 6.75% Senior Notes are general unsecured obligations of Telefónica Celular del Paraguay S.A. and rank equal in right of payment with all
future unsecured and unsubordinated obligations of Telefónica Celular del Paraguay S.A. The 6.75% Senior Notes are unguaranteed.

(7) USD 6.875% Senior Notes
In January 2014, Intertrust SPV (Cayman) Limited, acting as trustee of the Comcel Trust, a trust established and consolidated by Comcel for
the purposes of the transaction, issued a bond to refinance existing local and MIC S.A. corporate debt. The bond was issued at 98.233% of the
principal and has an effective interest rate of 7.168%. The bond is guaranteed by Comcel and listed on the Luxembourg Stock Exchange.
Simultaneously with, and using the proceeds from, the bond, Comcel entered into an US$800 million senior unsecured loan with a bank. The
proceeds of the bond were used by Intertrust SPV to purchase a 100% participation interest in the loan pursuant to a credit and guarantee.

The loan agreements between Intertrust, the bank and Comcel remove any risk to the bank connected to the loans, and as such the Group has
offset its asset against its liability towards the bank from the date of the agreement. Following the deconsolidation of Guatemala as of
31 December 2015, the asset and liability have both been deconsolidated at that date.

Millicom Annual Report 2016

169

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.3.1. Bond financing – continued
(8) BOB Notes
In May 2012, Telecel Bolivia issued Boliviano (BOB) 1.36 billion of notes repayable in installments until 2 April 2020. Distribution and other
transaction fees of BOB 5 million reduced the total proceeds from issuance to BOB 1.32 billion (US$191 million). The bond has a 4.75% per
annum coupon with interest payable semi-annually in arrears in May and November each year. The effective interest rate is 4.79%.

In November 2015, Telecel Bolivia issued BOB696 million (approximately US$100 million) of notes in two series, A for BOB104.4 million
(approximately US$15 million), with a fixed annual interest rate of 4.05%, maturing in August 2020 and serie B for BOB591.6 million
(approximately US$85 million) with a fixed annual interest rate of 4.85%, maturing in August 2023. The bond has coupon with interest
payable semi-annually in arrears in March and September during the first two years, thereafter each February and August. The effective
interest rate is 4.84%. In the placement, the final interest rate was reduced as Telecel Bolivia took advantage of strong demand for the bonds
resulting in a reduction of the average interest rate to 4.55%. Telecel Bolivia received BOB4.59 million in excess of the BOB696 million issued
(upfront premium).

On 11 August 2016, our operation in Bolivia issued a new bond for a total amount of BOB522 million consisting of two tranches (approximately
US$50 million and US$25 million, respectively). Tranche A and B bear fixed interest at 3.95% and 4.30%, and will mature in June 2024 and
June 2029, respectively.

(9) UNE Bonds
In March 2010, UNE issued a COP 300 billion (approximately US$126 million) five and ten-year bond consisting of two tranches. Interest rates
are either fixed or variable depending on the tranche. Tranche A bears variable interest, based on CPI, in Colombian peso and paid in
Colombian peso. Tranche B bears variable interest, based on Fixed Term Deposits, in Colombian peso and paid in Colombian peso. UNE
applied the proceeds to finance its investment plan. Tranche A matured in March 2015 and Tranche B will mature in March 2020.

In May 2011, UNE issued a COP 300 billion (approximately US$126 million) five and 12-year bond consisting of two equal tranches. Interest
rates are variable and depend on the tranche. Tranche A bears variable interest, based on CPI, in Colombian peso and paid in Colombian peso.
Tranche B bears variable interest, based on Fixed Term Deposits, in Colombian peso and paid in Colombian peso. UNE applied the proceeds to
finance its investment plan. Tranche A matured in October 2016 and Tranche B will mature in October 2023.

In May 2016, UNE issued a COP 540 billion bond (approximately US$176 million) consisting of three tranches (approximately US$52 million,
US$83 million and US$41 million respectively). Interest rates are either fixed or variable depending on the tranche. Tranche A bears fixed
interest at 9.35%, while Tranche B and C bear variable interest, based on CPI, (respective margins of CPI+4.15% and CPI+4.89%), in Colombian
peso.

UNE applied the proceeds to finance its investment plan and repay one bond (COP150 billion tranche). Tranches A, B and C will mature in May
2024, May 2026 and May 2036, respectively.

USD 8% Senior Notes
On 23 September 2010, Telemóvil Finance Co. Ltd., issued US$450 million aggregate principal amount 8% Senior Notes due on 1 October
2017. The 8% Senior Notes have an 8% per annum coupon with an 8.25% yield and were payable semi-annually in arrears on 1 April and
1 October.

On 18 March 2015 Millicom tendered an offer to early redeem the remaining US$311 million of the US$450 million bond issued by Telemovil
Finance Co. Ltd in 2010 for US$323 million including an early redemption premium of US$12 million over the face value of the bonds. The
repurchase was completed on 20 April 2015. The early redemption premium of US$12 million premium and US$4 million of related
unamortized costs were expensed in 2015.

Millicom Annual Report 2016

170

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.3.2. Bank financing

Bank financing
(US$ millions)
Fixed rate loans
Long-term loans
Variable rate loans
USD Long-term loans
USD Long-term loans
USD Long-term loans
USD Long-term loans
BOB Long-term loans
USD Short-term loans
COP Long-term loans
USD Senior Unsecured Term Loan Facility
USD Credit Facility
Other Long-term loans
Total Bank financing
(i) IBR – Colombia Interbank Rate.

Country

Maturity

Interest rate
%

2016

2015

Paraguay

2020/2023

Costa Rica
Chad
Rwanda
Tanzania (Zantel)
Bolivia
Ghana
Colombia (UNE)
El Salvador
El Salvador
Various

2021
2019
2019
2020
2019
2018
2023/2025
2021
2021

4 variable
4 variable
2.9 variable
4.1 variable
6 variable
3.5 variable
10.4 variable(i)
LIBOR + 3.0
LIBOR + 2.25
Various

103

92
7
69
99
1
40
400
50
33
46
940

104
11
119
100
1
40
381
—
—
118
966

MIC S.A. revolving credit facility
In June 2014, MIC S.A. entered into a $500 million revolving credit facility with a consortium of banks (the “2014 RCF”) of which $200 million
(Facility A) is for a 2-year term and $300 million (Facility B) is for a 3-year term. In May 2015 both facilities were extended for one year. As of
31 December 2016, the facility was committed and fully undrawn.

In the fourth quarter of 2016, Millicom initiated the renegotiation of its Revolving Credit Facility which was partially maturing in June 2017. By
year end 2016, having secured over $500 million of commitments from relationship banks through a refinancing process, the Group
accelerated the amortization of the upfront costs incurred in relation with the 2014 RCF and totalling then $2 million.

On 30 January 2017, the Company announced the closing of a new $ 600 million, 5 years Revolving Credit Facility and notified the lenders in
the 2014 RCF of the formal cancellation of the commitments outstanding under the 2014 RCF (none of which were drawn at such date).

Subject to the terms of the revolving credit facility, the maturity date of all or a portion of the amounts outstanding under the 2017 facility will
be due in full in January 2022. Amounts drawn under the revolving credit facility may be used for general corporate and working capital
purposes of the Millicom Group, including financing acquisitions, licenses, capital expenditure, and payment of dividends to the extent
permitted under the revolving credit facility agreement. Interest on amounts drawn under the revolving credit facility is payable at LIBOR or
EURIBOR, as applicable, plus an initial margin of 1.5%, provided that the margin may be reduced or increased if the net leverage ratio of MIC
S.A. in respect of the last twelve month (as measured on a quarterly basis) is within a specified range.

MIC S.A. term loan facility
In July 2016, MIC S.A. entered into a US$50 million term loan facility agreement, for which half will be repaid in 2018 and half in 2019. The
facility bears variable interest rate at six-month LIBOR + 2.25% per annum.

El Salvador
On 15 April 2016, Telemovil El Salvador, S.A. de C.V. entered into a Senior Unsecured Term Loan Facility of US$50 million maturing in April 2021
and bearing variable interest at LIBOR + 3.0% per annum. This Facility is guaranteed by the Company.

On 6 June 2016, Telemovil El Salvador, S.A. de C.V. entered into a US$30 million Credit Facility for general corporate purposes maturing in June
2021 and bearing variable interest rate at LIBOR + 2.25% per annum. The Facility is repayable over different yearly installments until maturity
and is guaranteed by the Company.

Millicom Annual Report 2016

171

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.3.2. Bank financing – continued
Right of set-off and derecognition
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is
a currently enforceable legal right to offset the recognized amounts and an intention to settle on a net basis, or to realize the assets and settle
the liabilities simultaneously.

A financial asset (or a part of a financial asset or part of a group of similar financial assets) is derecognized when:

• Rights to receive cash flows from the asset have expired; or

• Rights to receive cash flows from the asset or obligations to pay the received cash flows in full without material delay have been transferred
to a third party under a “pass-through” arrangement; and the Group has either transferred substantially all the risks and rewards of the asset
or the control of the asset.

When rights to receive cash flows from an asset have been transferred or a pass-through arrangement concluded, an evaluation is made if and
to what extent the risks and rewards of ownership have been retained. When the Group has neither transferred nor retained substantially all of
the risks and rewards of the asset, nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing
involvement in the asset. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay (see USD 6.875% Senior Notes in note C.3.1.).

A financial liability is derecognized when the obligation under the liability is discharged or canceled, or expires. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The
difference in the respective carrying amounts is recognized in the income statement.

In addition to the bank financing arrangements described above, as of 31 December 2016, a Millicom subsidiary has an agreement with a
bank whereby the bank provided loans amounting to EUR134 million (2015: EUR134 million) to the Millicom subsidiary with a maturity date in
2020. Simultaneously Millicom deposited the same amount with the bank and entered into total return swaps. The total return swaps remove
any risk of the banks connected to the loans, and as such Millicom has derecognized both its deposit asset and the loan liabilities from the date
of the total return swap (see D.1.2.).

C.3.3. Finance leases
Millicom’s finance leases mainly consist of long-term lease of tower space from tower companies or competitors on which Millicom locates its
network equipment.

Finance lease liabilities
Leases which transfer substantially all risks and benefits incidental to ownership of the leased item to the lessee are capitalized at the inception
of the lease. The amount capitalized is the lower of the fair value of the asset or the present value of the minimum lease payments.

Lease payments are allocated between finance charges (interest) and reduction of the lease liability so as to achieve a constant rate of interest
on the remaining balance of the liability. Finance charges are recorded as interest expenses in the income statement.

Finance lease liabilities
(US$ millions)
Lease of tower space
Lease of tower space
Lease of tower space
Lease of tower space
Lease of poles
Other finance lease liabilities
Total finance lease liabilities

Country
Tanzania
Colombia Movil
DRC
Ghana
Colombia (UNE)
various

Maturity
2023
2023
2017/2023
2023/2025
2029
various

2016
78
77
—
14
83
43
295

2015
90
66
40
21
67
52
336

Millicom Annual Report 2016

172

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.3.4. Guarantees and pledged assets
Guarantees
Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it
incurs because the specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee
contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the
guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present
obligation at the reporting date and the amount recognized, less cumulative amortization.

Liabilities to which guarantees are related are recorded in the consolidated statement of financial position under the caption “Debt and
financing” and liabilities covered by supplier guarantees are recorded under the caption “Trade payables” or “Debt and financing”, depending
on the underlying terms and conditions.

Maturity of guarantees
(US$ millions)
Term
0–1 year
1–3 years
3–5 years
More than 5 years
Total guarantees
(i) The outstanding exposure represents the carrying amount of the related liability at 31 December.
(ii) The maximum exposure represents the total amount of the Guarantee at 31 December.

At 31 December 2016

At 31 December 2015

Outstanding
exposure(i)
38
348
250
4
640

Maximum
exposure(ii)

38
348
250
4
640

Outstanding
exposure(i)
100
143
393
7
643

Maximum
exposure(ii)
100
143
393
7
643

Pledged assets
The Group’s share of total debt and financing secured by either pledged assets, pledged deposits issued to cover letters of credit, or guarantees
issued by the Company at 31 December 2016 was US$643 million (2015: US$646 million), out of this, assets pledged by the Group over this
debt and financing at the same date amounted to US$3 million (2015: US$3 million). The remainder represented primarily guarantees issued
by Millicom S.A. to guarantee financings raised by other Group operating entities.

C.3.5. Covenants

Millicom’s financing facilities are subject to a number of covenants including net leverage ratio, debt service coverage ratios, debt to earnings
ratios, and cash levels. In addition, certain of its financings contain restrictions on sale of businesses or significant assets within the businesses.
At 31 December 2016 there were no breaches in financial covenants.

C.4. Cash and deposits
C.4.1. Cash and cash equivalents

(US$ millions)
Cash and cash equivalents in USD
Cash and cash equivalents in other currencies
Total cash and cash equivalents

2016
411
235
646

2015
467
302
769

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original
maturities of three months or less.

Cash deposits with bank with maturities of more than three months that generally earn interest at market rates are classified as time deposits.

C.4.2. Restricted cash

(US$ millions)
Mobile Financial Services
Others
Restricted cash

2016
136
9
145

2015
134
8
142

Cash held with banks related to Mobile Financial Services which is restricted in use due to local regulations is denoted as restricted cash.

Millicom Annual Report 2016

173

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.4.3. Pledged deposits
Pledged deposits represent contracted cash deposits with banks that are held as security for debts at corporate or operational entity level.
Millicom is unable to access these funds until either the relevant debt is repaid or alternative security is arranged with the lender.

At 31 December 2016, there were no non-current pledged deposits (2015: US$nil).

At 31 December 2016, current pledged deposits amounted to US$3 million (2015: US$3 million).

C.5. Net debt

Net debt
(US$ millions)
Total debt and financing

Less:
Cash and cash equivalents
Restricted cash
Pledged deposits
Time deposits related to bank borrowings
Net debt at the end of the year
Add (less) derivatives related to debt (SEK currency swap)
Net debt including derivatives related to debt

2016
3,901

(646)
(145)
(3)
(2)
3,105
84
3,189

2015
4,010

(769)
(142)
(3)
(2)
3,094
65
3,159

C.6. Financial instruments
Financial instruments at fair value through profit or loss
Financial instruments at fair value through profit or loss are financial instruments held for trading. Their fair value is determined by reference to
quoted market prices on the statement of financial position date. Where there is no active market, fair value is determined using valuation
techniques. Such techniques include using recent arm’s-length market transactions, reference to the current market value of a substantially
similar instrument, discounted cash flow analysis and option pricing models. A financial instrument is classified in this category if acquired
principally for the purpose of selling in the short term. Derivatives are also categorized as held for trading unless they are designated as
hedges. Assets in this category are classified as current assets.

Financial instruments that contain obligations to purchase own equity instruments
Contracts that contain obligations for the Company to purchase its own equity instruments for cash or other financial assets are initially
recorded as financial liabilities, based on the present value of the redemption amounts with a corresponding reserve in equity. Subsequently,
the carrying value of the liability is remeasured at the present value of the redemption amount with changes in carrying value recorded in
other non-operating (expenses) income, net. If the contracts expire without delivery, the carrying amounts of the financial liabilities are
reclassified to equity.

The put options that Millicom granted to its local shareholders in Honduras and Guatemala represented obligations to purchase the shares
held by the local partners (see note C.6.3.).

Financial instruments that contain call options over non-controlling interests
Contracts over non-controlling interests that require gross cash settlement are also classified as equity instruments. Such call options are
initially recognized at fair value and not subsequently remeasured. If a call option is exercised, this initial fair value is included as part of the
cost of the acquisition of the non-controlling interest. If an unexercised call option expires or otherwise lapses, the fair value of the call option
remains within equity.

Call option contracts over non-controlling interests that require net cash settlement or provide a choice of settlement are classified as financial
assets. Contracts over non-controlling interests that require physical settlement of a variable number of own shares for a variable price are
classified as financial assets and changes in the fair value are reported in the income statement. If such a call option is exercised, the fair value
of the option at that date is included as part of the cost of the acquisition of the non-controlling interest. If an unexercised call option expires
or otherwise lapses, its carrying amount is expensed in the income statement.

The call options that Millicom obtained from its local shareholders in Honduras and Guatemala provided Millicom with control over the
operations in those countries until 31 December 2015 and were classified as financial assets. Changes in the fair value of the call options were
recorded in other non-operating (expenses) income, net.

Millicom Annual Report 2016

174

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.6. Financial instruments – continued
Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at fair value
at each subsequent closing date. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a
hedging instrument and, if so, the nature of the item being hedged. The Group designates certain derivatives as either:

a) Hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedge); or
b) Hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge).

For transactions designated and qualifying for hedge accounting, at the inception of the transaction, the Group documents the relationship
between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging
transactions. This is done in reference to the Group Financial Risk Management Policy as last updated and approved by the Audit Committee
of October 2016. The Group also documents its assessment, both at hedge inception and on an ongoing basis (quarterly), of whether the
derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The full fair value of a hedging instrument is classified as a non-current asset or liability when the period to maturity of the hedged item is
more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading
derivatives are classified as a current asset or liability when the remaining period to maturity of the hedged item is less than 12 months.

The change in fair value of hedging instruments that are designed and qualify as fair value hedges is recognized in the income statement as
finance costs or income. The change in fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of
the hedged item and is also recognized in the income statement as finance costs or income.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other
comprehensive income. Gains or loss relating to any ineffective portion is recognized immediately in the income statement within “Other
non-operating (expenses) income, net”. Amounts accumulated in equity are reclassified to the income statement in the periods when the
hedged item affects profit or loss.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time is recycled to the income statement within “Other non-operating (expenses) income, net”.

When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred
to the income statement within “Other non-operating (expenses) income, net”.

C.6.1. Fair Value Measurement Hierarchy
Millicom uses the following fair value measurement hierarchy:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices).

Level 3 – Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade
ratings. Interest rate swaps, foreign exchange forward contracts are valued using valuation techniques, which employ the use of markets
observable data. The most frequently applied valuation techniques include forward pricing and swap models using present value calculations.
The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of
the respective currencies, interest rate curves and forward curves.

Derivative financial instruments are measured with reference to Level 2, except for the call option in Honduras and in Guatemala (see note
C.6.3.), which were measured with reference to Level 3. The fair value of the call option was determined by using an option pricing model
(Monte Carlo simulation using the Longstaff Schwartz algorithm). The Honduras and Guatemala put option liabilities were carried at the
present value of the redemption amount and were therefore excluded from the fair value hierarchy. No other financial instruments are
measured at fair value.

Millicom Annual Report 2016

175

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.6.2. Fair value of financial instruments
The fair value of Millicom’s financial instruments are shown at amounts at which the instruments could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. The fair value of all financial assets and all financial liabilities except debt and
financing approximate their carrying value largely due to the short-term maturities of these instruments. The fair values of all debt and
financing have been estimated by the Group, based on discounted future cash flows at market interest rates.

Carrying value

Fair value(i)

Note

2015

2016

C.4.3.

—
26
75
398

—
32
72
387

Fair values of financial instruments at 31 December
(US$ millions)(ii)
Financial Assets
Pledged deposits
Derivative financial instruments
Other non-current assets
Trade receivables, net
Amounts due from non-controlling interests, associates
and joint venture partners
Prepayments and accrued income
Supplier advances for capital expenditures
Other current assets
Restricted cash
Cash and cash equivalents
Total financial assets
Current
Non-current
Financial Liabilities
Debt and financing(ii)
Trade payables
Payables and accruals for capital expenditure
Derivative financial instruments
Amounts due to non-controlling interests, associates
and joint venture partners
Accrued interest and other expenses
Other liabilities
Total financial liabilities
Current
Non-current
(i) Fair values are measured with reference to Level 1 (for listed bonds) or 2, except for call option asset which was measured during the year 2015 with reference to Level 3.
(ii) Comparative information has been restated after finalization of Zantel’s purchase accounting (note A.1.2.).

17
171
23
110
145
646
1,603
1,499
104

16
193
39
109
142
769
1,765
1,665
101

644
425
352
6,115
2,125
3,990

386
376
400
6,103
1,531
4,572

386
376
400
5,770
1,531
4,239

4,234
297
326
84

3,901
297
326
84

4,010
334
285
65

C.3.

2015

—
26
75
398

16
193
39
109
142
769
1,765
1,665
101

3,872
334
285
65

644
425
352
5,977
2,125
3,852

C.6.3. Call and put options
Honduras Call Option
For Celtel, the call option price was a fixed multiple of the EBITDA of Celtel. On 31 December 2015, Celtel’s call option to acquire the remaining
33% of the Honduras business has expired unexercised and Celtel has been deconsolidated as a result. The fair value of the call option was
immaterial. For further details, see note A.2.2.

Honduras Put Option
For Celtel the liability was measured at the present value of the redemption price of the put option.

The redemption price of the put option was based on a multiple of the EBITDA of Celtel. The multiple is based on a change of control
transaction multiple of Millicom. Management estimated the change of control transaction multiple of Millicom from a trading multiple of
Millicom adding a control premium (based upon comparable transactions from the industry).

During the year 2015, Millicom recorded an income of US$117 million under “other non-operating (expenses) income, net” due to the decrease
in value of the put option liability. At the same time as the unconditional call option, the conditional put option Millicom provided to the other
shareholders also lapsed. This resulted in the carrying value of the put option liability being reclassified within equity for a total amount of
US$456 million on 31 December 2015.

Millicom Annual Report 2016

176

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

C.6.3. Call and put options – continued
Guatemala call option
For Comcel, the call option price was a fixed multiple of the EBITDA of Comcel, with a gold price index in the event that the gold price increased
by more than 40%. Millicom’s two year unconditional call option to acquire the remaining 45% of the Guatemalan business expired on
31 December 2015. Millicom’s call option has therefore been derecognized at 31 December 2015. As a result, a total loss of US$71 million was
recorded in 2015 under “other non-operating (expenses) income, net”. For further details, see note A.2.2.

Guatemala put option
For Comcel the liability was measured at the present value of the redemption price of the put option.

The redemption price of the put option was based on a multiple of the EBITDA of Comcel. The multiple was based on a change of control
transaction multiple of Millicom. Management estimate the change of control transaction multiple of Millicom from a trading multiple of
Millicom and add a control premium (based upon comparable transactions).

During the year 2015, Millicom recorded an income of US$8 million under “other non-operating (expenses) income, net” due to the decrease in
value of the put option liability.

At the same time as the unconditional call option, the conditional put option Millicom provided to the other shareholders also lapsed. This resulted
in the carrying value of the put option liability being reclassified within equity for a total amount of US$1,679 million on 31 December 2015.

D. Financial risk management
Exposure to interest rate, foreign currency, non-repatriation, liquidity, capital management and credit risks arise in the normal course of
Millicom’s business. Each year Group Treasury revisits and presents to the Audit committee updated Treasury and Financial Risks Management
policies. The Group analyzes each of these financial risks individually as well as on an interconnected basis and defines and implements
strategies to manage the economic impact on the Group’s performance in line with its Financial Risk Management policy. These policies were
last reviewed in September and October 2016. As part of the annual review of the above mentioned risks, the Group agrees to a strategy over
the use of derivatives and natural hedging instruments ranging from raising debt in local currency (where the Company targets to reach 40%
of debt in local currency over the medium term) to maintain a 70/30% mix between fix and floating rate debt or agreeing to cover up to six
months forward of operating costs and capex denominated in non-functional currencies through a rolling and layering strategy. Millicom’s risk
management strategies may include the use of derivatives to the extent a market would exist in the jurisdictions where the Group operates.
Millicom’s policy prohibits the use of such derivatives in the context of speculative trading.

Accounting policies for derivatives is further detailed in note C.6.

On 31 December 2016, fair value of derivatives held by the Group can be summarized as follows:.

Derivatives
(US$ millions)
Cash flow hedge derivatives
Derivatives held for trading (on swaps on Euro denominated debt)
Net derivative asset (liability)

2016
(84)
32
(52)

2015
(65)
26
(39)

D.1. Interest rate risk
Debt and financing issued at floating interest rates expose the Group to cash flow interest rate risk. Debt and financing issued at fixed rates
expose the Group to fair value interest rate risk. The Group’s exposure to risk of changes in market interest rates relate to both of the above.
To manage this risk, the Group’s policy is to maintain a combination of fixed and floating rate debt with target for the debt to be distributed
between fixed (up to 70%) and variable (up to 30%) rates. The Group actively monitors borrowings against this target. The target mix between
fixed and floating rate debt is reviewed periodically. The purpose of Millicom’s policy is to achieve an optimal balance between cost of funding
and volatility of financial results, while taking into account market conditions as well as our overall business strategy. At 31 December 2016,
approximately 70% of the Group’s borrowings are at a fixed rate of interest or for which variable rates have been swapped for fixed rates with
interest rate swaps (2015: 68%).

Millicom Annual Report 2016

177

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

D.1.1. Fixed and floating rate debt

Financing at 31 December 2016
(US$ millions)
Fixed rate financing
Weighted average nominal
interest rate
Floating rate financing
Weighted average nominal
interest rate
Total
Weighted average nominal
interest rate

Financing at 31 December 2015
(US$ millions)
Fixed rate financing
Weighted average nominal
interest rate
Floating rate financing
Weighted average nominal
interest rate
Total
Weighted average nominal
interest rate

1 year
41

7.52%
39

4.20%
80

5.90%

1 year
48

9.17%
173

4.97%
221

Amounts due within:

1–2 years
85

2–3 years
314

3–4 years
435

4–5 years
720

>5 years
1,141

7.54%
168

9.46%
252

8.81%

5.41%
204

3.63%
518

4.71%

5.62%
213

2.89%
649

4.72%

7.11%
130

1.21%
850

6.20%

Amounts due within:

1–2 years
75

2–3 years
65

3–4 years
92

4–5 years
581

8.36%
245

3.33%
320

9.56%
99

4.16%
164

8.78%
170

3.95%
262

5.44%
229

5.66%
810

8.51%
411

3.86%
1,552

7.28%

>5 years
1,876

7.58%
357

12.06%
2,233

Total
2,736

7.28%
1,165

3.16%
3,901

6.05%

Total
2,737

7.26%
1,273

5.08%
4,010

5.87%

4.51%

6.30%

5.64%

5.50%

7.93%

7.01%

A 100 basis point fall or rise in market interest rates for all currencies in which the Group had borrowings at 31 December 2016 would increase
or reduce profit before tax from continuing operations for the year by approximately US$12 million (2015: US$13 million).

D.1.2. Interest rate swap contracts
From time to time, Millicom enters into currency and interest rate swap contracts to manage its exposure to fluctuations in interest rates and
currency fluctuations in accordance with its risk management policies. Details of these arrangements are provided below.

Interest rate and currency swaps on SEK denominated debt
As described in note C.3.1., the SEK Bonds have been fully redeemed during 2016. As a consequence, the Group has modified and extended the
related interest rate and currency swaps until at least April 2018 and attached them to the new SEK Bond. The swaps are accounted for as a
cash flow hedge as the timing and amounts of the cash flows under the swap agreements match the cash flows under the new SEK bond. The
hedging relationship is highly effective and related fluctuations are recorded through other comprehensive income. At 31 December 2016, the
fair values of the swaps amount to a liability of US$84 million (31 December 2015: a liability of US$65 million). These instruments are
measured with reference to Level 2.

Interest rate and currency swaps on Euro denominated debt
In June 2013, Millicom entered into interest rate and currency swaps whereby Millicom will sell Euro’s and receive USD to hedge against
exchange rate fluctuations on a seven-year Euro (EUR) 134 million principal and related interest financing of its operation in Senegal. At
31 December 2016, the fair value of the swap amounts to an asset of US$32 million (2015: an asset of US$26 million). This instrument is
measured with reference to Level 2.

In July 2013, Millicom entered into interest rate and currency swaps whereby Millicom will sell Euro’s and receive USD to hedge against
exchange rate fluctuations on a seven-year EUR41.5 million principal and related interest financing of its operation in Chad. In March 2015,
the financing facility was repaid and the swap contracts terminated. A gain on the swap including termination of US$4 million was recorded
in other non-operating income (expenses), net.

These financings are connected to the downstreaming of a portion of Millicom’s 4.75% bond (see note C.3.1.). These hedges do not qualify for
hedge accounting. Fluctuations in the value of those instruments are recorded through profit and loss. US$6 million of income was recorded
from the fluctuations in fair value in 2016 (2015: US$32 million) in “other non-operating income (expenses), net”.

Millicom Annual Report 2016

178

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

D.2. Foreign currency risks
The Group is exposed to foreign exchange risk arising from various currency exposures in the countries in which it operates. Foreign exchange
risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

Millicom seeks to reduce its foreign currency exposure through a policy of matching, as far as possible, assets and liabilities denominated in
foreign currencies, or entering into agreements that limit the risk of exposure to currency fluctuations against the US dollar reporting currency.
In some cases, Millicom may also borrow in US dollars where it is either commercially more advantageous for joint ventures and subsidiaries to
incur debt obligations in US dollars or where US dollar denominated borrowing is the only funding source available to a joint venture or
subsidiary. In these circumstances, Millicom accepts the remaining currency risk associated with financing its joint ventures and subsidiaries,
principally because of the relatively high cost of forward cover, when available, in the currencies in which the Group operates.

D.2.1. Debt denominated in US$ and other currencies
Debt denomination at 31 December
(US$ millions)
Debt denominated in US$
Debt denominated in currencies of the following countries:
Colombia
Chad
Tanzania
Bolivia
Ghana
Paraguay
Luxembourg (SEK denominated)
Other
Total debt denominated in other currencies
Total debt

2016
2,266

841
69
93
288
13
103
217
11
1,635
3,901

2015
2,564

660
94
94
236
21
92
234
15
1,446
4,010

At 31 December 2016, if the US dollar had weakened/strengthened by 10% against the other functional currencies of our operations and all
other variables held constant, then profit before tax from continuing operations would have increased/decreased by US$51 million and
US$(63) million respectively (2015: US$29 million and US$35 million respectively). This increase/decrease in profit before tax would have
mainly been as a result of the conversion of the US$-denominated debts in our operations with functional currencies other than the US dollar.

D.2.2. Foreign currency swaps
See note D.1.2. Interest rate swaps.

D.3. Non-repatriation risk
Most of Millicom’s operating subsidiaries generate most of the revenue of the Group and in the currency of the countries in which they operate.
Millicom is therefore dependent on the ability of its subsidiaries and joint venture operations to transfer funds to the Company.

Although foreign exchange controls exist in some of the countries in which Millicom Group companies operate, none of these controls currently
significantly restrict the ability of these operations to pay interest, dividends, technical service fees, royalties or repay loans by exporting cash,
instruments of credit or securities in foreign currencies. However, existing foreign exchange controls may be strengthened in countries where the
Group operates, or foreign exchange controls may be introduced in countries where the Group operates that do not currently impose such
restrictions. If such events were to occur, the Company’s ability to receive funds from the operations could be subsequently restricted, which
would impact the Company’s ability to make payments on its interest and loans and, or pay dividends to its shareholders. As a policy, all
operations which do not face restrictions to deposit funds offshore and in hard currencies should do so for the surplus cash generated on a weekly
basis. The Company and its subsidiaries make use of notional and physical cash pooling arrangements in hard currencies to the extent permitted.

In addition, in some countries it may be difficult to convert large amounts of local currency into foreign currency because of limited foreign
exchange markets. The practical effects of this may be time delays in accumulating significant amounts of foreign currency and exchange risk,
which could have an adverse effect on the Group. This is a relatively rare case for the countries in which the Group operates.

Lastly, repatriation most often gives raise to taxation, which is evidenced in the amount of taxes paid by the Group relative to the Corporate
Income Tax reported in its statement of income.

D.4. Credit and counterparty risk
Financial instruments that subject the Group to credit risk include cash and cash equivalents, pledged deposits, letters of credit, trade receivables,
amounts due from joint venture partners and associates, supplier advances and other current assets and derivatives. Counterparties to
agreements relating to the Group’s cash and cash equivalents, pledged deposits and letters of credit are significant financial institutions with
investment grade ratings. Management does not believe there are significant risks of non-performance by these counterparties and maintain
a diversified portfolio of banking partners. Allocation of deposits across banks are managed such that the Group’s counterparty risk with a
given bank stays within limits which have been set, based on each bank’s credit rating.

Millicom Annual Report 2016

179

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

D.4. Credit and counterparty risk – continued
A large portion of revenue of the Group comprises prepaid products and services. For postpaid customers, the Group follows risk control
procedures to assess the credit quality of the customer, taking into account its financial position, past experience and other factors. Accounts
receivable also comprise balances due from other telecom operators. Credit risk of other telecom operators is limited due to the regulatory
nature of the telecom industry, in which licenses are normally only issued to credit worthy companies. The Group maintains a provision for
impairment of trade receivables based upon expected collectability.

As the Group has a large number of internationally dispersed customers, there is generally no significant concentration of credit risk with
respect to trade receivables, except for certain B2B customers (mainly governments). See Note F.1.

D.5. Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group has
significant indebtedness but also has significant cash balances. Millicom evaluates its ability to meet its obligations on an ongoing basis using
a recurring liquidity planning tool. This tool considers the operating net cash flows generated from its operations and the future cash needs for
borrowing, interest payments, dividend payments and capital and operating expenditures required in maintaining and developing its
operating businesses.

The Group manages its liquidity risk through use of bank overdrafts, bank loans, bonds, vendor financing, Export Credit Agencies and
Development Finance Institutions (“DFI”) loans, and finance leases. Millicom believes that there is sufficient liquidity available in the markets
to meet ongoing liquidity needs. Additionally, Millicom is able to arrange offshore funding through the use of Export Credit Agency guarantees
and DFIs (IFC and FMO), which have been established specifically to finance development in the Group’s markets. Millicom has a diversified
financing portfolio with commercial banks representing about 24% of its gross financing (2015: 24%), bonds 66% (2015: 64%), Development
Finance Institutions 2% (2015: 3%), finance leases 8% (2015: 8%), and no vendor financing (2015 1%).

Maturity profile of net financial liabilities at 31 December 2016
(US$ millions)
Total debt and financing
Cash and cash equivalents
Restricted cash
Pledged deposits (related to bank borrowings)
Time deposits
Derivative financial instruments (SEK currency swap)
Net cash (debt) including derivatives related to debt
Future interest commitments
Trade payables (excluding accruals)
Other financial liabilities (including accruals)
Trade receivables
Other financial assets
Net financial liabilities

Maturity profile of net financial liabilities at 31 December 2015
(US$ millions)
Total debt and financing
Cash and cash equivalents
Restricted cash
Pledged deposits (related to bank borrowings)
Time deposits
Derivative financial instruments (SEK currency swap)
Net cash (debt) including derivatives related to debt
Future interest commitments
Trade payables (excluding accruals)
Other financial liabilities (including accruals)
Trade receivables
Other financial assets
Net financial liabilities

Less than 1 year
(80)
646
145
3
2
—
716
(283)
(443)
(1,174)
387
131
(666)

Less than 1 year
(221)
769
142
3
2
—
695
(257)
(420)
(1,693)
398
130
(1,147)

1 to 5 years
(2,269)
—
—
—
—
(84)
(2,353)
(916)
—
—
—
71
(3,199)

1 to 5 years
(1,555)
—
—
—
—
(65)
(1,620)
(881)
—
—
—
75
(2,426)

> 5 years
(1,552)
—
—
—
—
—
(1,552)
(71)
—
—
—
—
(1,622)

> 5 years
(2,233)
—
—
—
—
—
(2,233)
(83)
—
—
—
—
(2,316)

Total
(3,901)
646
145
3
2
(84)
(3,189)
(1,270)
(443)
(1,174)
387
202
(5,487)

Total
(4,010)
769
142
3
2
(65)
(3,159)
(1,221)
(420)
(1,693)
398
205
(5,889)

Millicom Annual Report 2016

180

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

D.6. Capital management
The primary objective of the Group’s capital management is to ensure a strong credit rating and solid capital ratios in order to support its
business and maximize shareholder value.

The Group manages its capital structure with reference to economic conditions and imposed restrictions such as debt covenants and local
regulations. To maintain or adjust its capital structure, the Group may make dividend payments to shareholders, return capital to shareholders
through share repurchases or issue new shares. At 31 December 2016, Millicom is rated at one notch below investment grade by the
independent rating agencies Moody’s (Ba1 negative) and Fitch (BB+ stable). The Group primarily monitors capital using net debt to EBITDA.

The Group reviews its gearing ratio (net debt divided by total capital plus net debt) periodically. Net debt includes interest bearing loans and
borrowings, less cash and cash equivalents (included restricted cash) and pledged and time deposits related to bank borrowings. Capital
represents equity attributable to the equity holders of the parent.

Net debt to EBITDA
(US$ millions)
Net debt(i)
EBITDA (i)
Net debt to EBITDA

Note
C.5.
B.3.

2016
4,181
2,172
1.93

Gearing ratio
(US$ millions)
Net debt(i)
Equity
Net debt and equity
Gearing ratio
(i) Including net debt and EBITDA of Guatemala and Honduras operations for US$1,076 million (2015: US$1,201 million) and US$858 million (2015: US$934 million), respectively.

2016
4,181
3,167
7,348
57%

Note
C.5.
C.1.

2015
4,295
2,188
1.96

2015
4,295
3,477
7,772
55%

E. Long-term assets
E.1. Intangible sssets
Millicom’s intangible assets mainly consist of goodwill arising from acquisitions, customer lists acquired through acquisitions, licenses and
rights to operate and use spectrum.

E.1.1. Accounting for intangible assets
Intangible assets acquired in business acquisitions are initially measured at fair value at the date of acquisition, and those which are acquired
separately are measured at cost. Internally generated intangible assets, excluding capitalized development costs, are not capitalized but
expensed to the income statement in the expense category consistent with the function of the intangible assets. Subsequently intangible
assets are carried at cost, less any accumulated amortization and any accumulated impairment losses.

Intangible assets with finite useful lives are amortized over their estimated useful economic lives using the straight-line method and assessed
for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization
method for intangible assets with finite useful lives are reviewed at least at each financial year-end. Changes in expected useful lives or the
expected beneficial use of the assets are accounted for by changing the amortization period or method, as appropriate, and treated as
changes in accounting estimates.

Amortization expense on intangible assets with finite lives is recognized in the consolidated income statement in the expense category
consistent with the function of the intangible assets.

Goodwill
Goodwill represents the excess of cost of an acquisition over the Group’s share in the fair value of identifiable assets less liabilities and
contingent liabilities of the acquired subsidiary, at the date of the acquisition. If the fair value or the cost of the acquisition can only be
determined provisionally, then goodwill is initially accounted for using provisional values. Within 12 months of the acquisition date any
adjustments to the provisional values are recognized. This is done when the fair values and the cost of the acquisition have been finally
determined. Adjustments to provisional fair values are made as if the adjusted fair values had been recognized from the acquisition date.
Goodwill on acquisition of subsidiaries is included in “intangible assets, net”. Goodwill on acquisition of joint ventures or associates is included
in “investments in joint ventures and associates”. Following initial recognition, goodwill is measured at cost, less any accumulated impairment
losses. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed
of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or
loss on disposal. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed and the portion of the
cash-generating unit retained.

Millicom Annual Report 2016

181

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

E.1.1. Accounting for intangible assets – continued
Licenses
Licenses are recorded at either historical cost or, if acquired in a business combination, at fair value at the date of acquisition. Cost includes cost
of acquisition and other costs directly related to acquisition and retention of licenses over the license period. These costs may include
estimates related to fulfillment of terms and conditions related to the licenses such as service or coverage obligations, and may include
up-front and deferred payments.

Licenses have a finite useful life and are carried at cost less accumulated amortization and any accumulated impairment losses. Amortization is
calculated using the straight-line method to allocate the cost of the licenses over their estimated useful lives.

The terms of licenses, which have been awarded for various periods, are subject to periodic review for, amongst other things, rate setting,
frequency allocation and technical standards. Licenses are initially measured at cost and are amortized from the date the network is available
for use on a straight-line basis over the license period. Licenses held, subject to certain conditions, are usually renewable and generally
non-exclusive. When estimating useful lives of licenses, renewal periods are included only if there is evidence to support renewal by the Group
without significant cost.

Trademarks and customer lists
Trademarks and customer bases are recognized as intangible assets only when acquired or gained in a business combination. Their cost
represents fair value at the date of acquisition. Trademarks and customer bases have indefinite or finite useful lives. Indefinite useful life
trademarks are tested for impairment annually. Finite useful life trademarks are carried at cost, less accumulated amortization. Amortization is
calculated using the straight-line method to allocate the cost of the trademarks and customer bases over their estimated useful lives. The
estimated useful lives for trademarks and customer bases are based on specific characteristics of the market in which they exist. Trademarks
and customer bases are included in “Intangible assets, net”.

Estimated useful lives are:

Estimated useful lives
Trademarks
Customer lists

Years
1 to 15
4 to 9

Programming and content rights
Programming and content master rights which are purchased or acquired in business combinations which meet certain criteria are recorded at
cost as intangible assets. The rights must be exclusive, related to specific assets which are sufficiently developed, and probable to bring future
economic benefits and have validity for more than one year. Cost includes consideration paid or payable and other costs directly related to the
acquisition of the rights, and are recognized at the earlier of payment or commencement of the broadcasting period to which the rights relate.

Programming and content rights capitalized as intangible assets have a finite useful life and are carried at cost, less accumulated amortization
and any accumulated impairment losses. Amortization is calculated using the straight-line method to allocate the cost of the rights over their
estimated useful lives.

Non-exclusive and programming and content rights for periods less than one year are expensed over the period of the rights.

Indefeasible rights of use
There is no universally-accepted definition of an indefeasible rights of use (“IRU”). These agreements come in many forms. However, the key
characteristics of a typical arrangement include:

• The right to use specified network infrastructure or capacity;

• For a specified term (often the majority of the useful life of the relevant assets);

• Legal title is not transferred;

• A number of associated service agreements including Operations and Maintenance (“O&M”) and co-location agreements. These are

typically for the same term as the IRU; and

• Any payments are usually made in advance.

IRUs are accounted for either as a lease, or service contract based on the substance of the underlying agreement.

Millicom Annual Report 2016

182

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

E.1.1. Accounting for intangible assets – continued
IRU arrangements will qualify as a lease if, and when:

• The purchaser has an exclusive right for a specified period and has the ability to resell (or sub-let) the capacity; and

• The capacity is physically limited and defined; and

• The purchaser bears all costs related to the capacity (directly or not) including costs of operation, administration and maintenance; and

• The purchaser bears the risk of obsolescence during the contract term.

If all of these criteria are not met, the IRU is treated as a service contract.

If an IRU is determined to be a lease, the following indicators need to be present in order for the capitalization of an IRU as a finance lease to
be considered:

• The Group will be consuming the major part of the useful economic life of the asset (generally considered to be 75% of the total remaining

useful economic life of the asset). The Group assumes that the useful economic life of a new fiber cable is 15 years;

• Substantially all of the risks and rewards of ownership are transferred to the Group (e.g. Millicom can sublease excess capacity on the cables

to other operators; Millicom is responsible for maintaining the cables during the contract period);

• Neither party has the right to terminate the contract early (other than for “force majeure”);

• The contract price is not subject to renegotiation or change (other than for inflationary increases);

• The minimum contractual payments are for substantially all of the fair value of the asset (generally considered to be greater or equal to

90% of the fair value of the leased asset);

• The Group can determine the fair value of the leased asset;

• The Group has physical access rights to the cable.

Otherwise the IRU will be considered as an operating lease.

A finance lease of an IRU of network infrastructure (cables or fiber) is accounted for as a tangible asset.

A finance lease of a capacity IRU (wavelength) is accounted for as an intangible asset.

Estimated useful lives of finance leases of IRU’s of capacity are between 12 and 15 years, or shorter if the estimated useful life of the
underlying cable is shorter.

The costs of an IRU recognized as operating lease is recognized as prepayment and amortized in the income statement on a straight-line basis
over the lease term.

The costs of an IRU recognized as service contract is recognized as prepayment and amortized in the income statement as incurred over the
duration of the contract.

E.1.2. Impairment of non-financial assets
At each reporting date Millicom assesses whether there is an indication that a non-financial asset may be impaired. If any such indication
exists, or when annual impairment testing for a non-financial asset is required, an estimate of the asset’s recoverable amount is made. The
recoverable amount is determined based on the higher of its fair value less cost to sell, and its value in use, for individual assets, unless the
asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable
amount. Where no comparable market information is available, the fair value, less cost to sell, is determined based on the estimated future
cash flows discounted to their present value using a discount rate that reflects current market conditions for the time value of money and risks
specific to the asset. The foregoing analysis also evaluates the appropriateness of the expected useful lives of the assets. Impairment losses of
continuing operations are recognized in the consolidated income statement in expense categories consistent with the function of the impaired
asset.

At each reporting date an assessment is made as to whether there is any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. Other than for goodwill, a previously
recognized impairment loss is reversed if there has been a change in the estimate used to determine the asset’s recoverable amount since the
last impairment loss was recognized. If so, the carrying amount of the asset is increased to its recoverable amount. The increased amount
cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the
asset in prior years. Such reversal is recognized in profit or loss.

After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual
value, on a systematic basis over its remaining useful life.

Millicom Annual Report 2016

183

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

E.1.3. Movements in intangible assets

Movements in intangible assets
in 2016
(US$ millions)
Opening balance, net
Additions
Amortization charge
Impairment
Disposals, net
Transfers
Transfers to/from assets held
for sale (see note E.3.)
Exchange rate movements
Closing balance, net
At 31 December 2016
Cost or valuation
Accumulated amortization
and impairment
Net

Goodwill
621
—
—
—
—
—

(11)
5

615
615

—
615

Licenses
387
89
(64)
—
—
(6)

Customer lists
57
—
(26)
—
—
—

(23)
(3)

380
702

(321)
380

—
1

32
210

(178)
32

IRUs
119
4
(13)
(2)
—
1

—
4

114
177

(64)
114

Broadcast and
other rights
32
—
(3)
—
—
(29)

—
—

—
11

(11)
—

Other(i)
213
98
(80)
(1)
(6)
(4)

(7)
5

219
579

(360)
219

IRUs
167

Other(i)
982

Licenses
774

Goodwill
3,076

Customer lists
486

Broadcast and
other rights
30

Movements in intangible assets
in 2015
(US$ millions)
Opening balance, net
Change in the Group
(see note A.1.2.)(ii)
Additions
Effect of deconsolidation (iii)
Amortization charge
Impairment
Disposals, net
Transfers
Exchange rate movement
Closing balance, net
At 31 December 2015
Cost or valuation
Accumulated amortization
and impairment
Net
(i) The caption “Other” includes intangible assets identified in business combinations (including trademarks – see note E.1.1.).
(ii) Comparative information has been restated compared to the information presented in the 2015 consolidated financial statement due to the finalization of Zantel’s purchase

17
—
(2,358)
—
—
—
—
(114)
621

22
—
(343)
(99)
—
—
2
(11)
57

12
116
(754)
(72)
(1)
—
—
(70)
213

40
47
(345)
(53)
(18)
—
(3)
(55)
387

9
31
(13)
(17)
—
(2)
(6)
(50)
119

—
—
—
(5)
—
—
7
—
32

(153)
57

(252)
387

(282)
213

(63)
119

(19)
32

—
621

210

182

495

621

639

Total
1,429
192
(186)
(3)
(6)
(38)

(42)
13

1,359
2,293

(934)
1,359

Total
5,515

100
194
(3,813)
(246)
(19)
(2)
—
(300)
1,429

2,198

(769)
1,429

accounting (note A.1.2.).

(iii) See note A.2.2.

Millicom Annual Report 2016

184

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

E.1.4. Cash used for the purchase of intangible assets

Cash used for intangible asset additions
(US$ millions)
Additions
Change in accruals and payables for intangibles
Cash used from continuing operations for additions

E.1.5. Goodwill

Allocation of Goodwill to CGUs, net of exchange rate movements and after impairment
(US$ millions)
El Salvador
Costa Rica
Paraguay
Colombia
DRC
Tanzania (Zantel)
Other
Total

Note

2016
192
(49)
143

2016
194
126
53
198
—
11
33
615

2015
194
(8)
186

2015
194
129
53
189
11
11
34
621

E.1.6. Impairment testing of goodwill
Goodwill from CGUs is tested for impairment at least each year and more frequently if events or changes in circumstances indicate that the
carrying value may be impaired. Impairment losses on goodwill are not reversed.

Goodwill arising on business combinations is allocated to each of the Group’s cash generating units (CGU’s) or groups of cash-generating units
that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned
to those units or groups of units. Each unit or group of units to which the goodwill is allocated:

• Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and

• Is not larger than an operating segment.

Impairment is determined by assessing the recoverable amount (value in use) and, if appropriate, the fair value less costs to sell of the CGU (or
group of CGUs), to which the goodwill relates. Where the recoverable amount and fair value less costs to sell of the CGU (or group of CGUs) is
less than the carrying amount, an impairment loss is recognized for the lower amount.

Impairment testing at 31 December 2016
Goodwill was tested for impairment by assessing the recoverable amount (first using a value in use model) against the carrying amount for
CGU based on discounted cash flows. The cash flow projections used (adjusted operating profit margins, income tax, working capital, capital
expenditure and license renewal cost) are extracted from financial budgets approved by management and the Board covering a period of five
years or more. This planning horizon reflects industry practice in the countries where the Group operates and stage of development or
redevelopment of the business in those countries. Cash flows beyond this period are extrapolated using a perpetual growth rate of 2.0%–2.5%
(2015: 2.0%–2.5%). When value in use model resulted in the carrying values of the CGUs being higher than their recoverable amount,
management has determined the fair value less cost of disposal (“FVLCD”) of the CGUs. Fair value less cost of disposal has been determined
either by using recent offers received from third parties (Level 1) or by using discounted cash flow projections (still based on the five-year plans)
and applying a multiple of EBITDA on the terminal year of the five-year plan to derive the terminal value for the CGU (ranging between
3.0x to 4.0x) (Level 3).

For the year ended 31 December 2016, and as a result of the annual impairment testing on goodwill, management concluded that none of the
Group CGUs should be impaired, but the impairment test performed for the Group CGU in Senegal shows limited headroom. As a matter of
fact, a decrease in the EBITDA multiple used by 1.0pt would make the carrying value of the Group CGU equal its recoverable amount
(determined by using FVLCD).

For the year ended 31 December 2015, the Senegal cash generating unit (CGU), part of Africa segment, had been impaired. Hence, in
accordance with IAS 36, an impairment loss of US$54 million had been allocated to reduce the carrying amount of the other assets of our
operations in Senegal (the goodwill allocated to Senegal was already fully impaired in 2013) pro rata on the basis of the carrying amount of
each asset to the extent the carrying amount of each asset was not below the highest of its fair value less costs to sell, its value in use and zero.
Management had determined that the impairment loss be allocated to property, plant and equipment and intangible assets for US$36 million
and US$18 million, respectively. The impairment had been classified within the caption “other operating expenses, net”. At 31 December 2015,
the carrying value of the CGU corresponded to its fair value less costs of disposal (Level 3).

Millicom Annual Report 2016

185

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

E.1.6. Impairment testing of goodwill – continued
Sensitivity analysis was performed on key assumptions within the impairment tests. The sensitivity analysis determined that sufficient margin
exists from realistic changes to the assumptions that would not impact the overall results of the testing - except for Senegal (see above).

Discount rates used in determining recoverable amount
(US$ millions)
Bolivia
Chad
Colombia
Costa Rica
DRC (See note E.3.)
El Salvador
Ghana
Guatemala (See note A.2.2.)
Honduras (See note A.2.2.)
Paraguay
Rwanda
Senegal
Tanzania

Discount rate after tax (%)

2016
9.4
16.5
8.6
10.9
na
11.9
17.7
na
na
9.3
14.6
14.0
14.3

2015
10.8
17.3
9.5
11.1
17.6
11.4
16.9
10.2
11.0
10.1
13.1
13.9
13.8

E.2. Property, plant and equipment
E.2.1. Accounting for property, plant and equipment
Items of property, plant and equipment are stated at either historical cost, or the lower of fair value and present value of the future minimum
lease payments for assets under finance leases, less accumulated depreciation and accumulated impairment. Historical cost includes
expenditure that is directly attributable to acquisition of items. The carrying amount of replaced parts is derecognized.

Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset and the remaining life of the
license associated with the assets, unless the renewal of the license is contractually possible.

Estimated useful lives
Buildings
Networks (including civil works)
Other

Years
40 years or lease period, if shorter
5 to 15 years or lease period, if shorter
2 to 7

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the
carrying value may not be recoverable. The assets’ residual value and useful life is reviewed, and adjusted if appropriate, at each statement of
financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than
its estimated recoverable amount.

Construction in progress consists of the cost of assets, labor and other direct costs associated with property, plant and equipment being
constructed by the Group, or purchased assets which have yet to be deployed. When the assets become operational, the related costs are
transferred from construction in progress to the appropriate asset category and depreciation commences.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, when it is probable that future
economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Ongoing routine repairs
and maintenance are charged to the income statement in the financial period in which they are incurred.

Costs of major inspections and overhauls are added to the carrying value of property, plant and equipment and the carrying amount of
previous major inspections and overhauls is derecognized.

Equipment installed on customer premises which is not sold to customers is capitalized and amortized over the customer contract period.

A liability for the present value of the cost to remove an asset on both owned and leased sites (for example cell towers) and for assets installed
on customer premises (for example set-top boxes), is recognized when a present obligation for the removal exists. The corresponding cost of
the obligation is included in the cost of the asset and depreciated over the useful life of the asset, or lease period if shorter.

Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that
asset when it is probable that such costs will contribute to future economic benefits for the Group and the costs can be measured reliably.

Millicom Annual Report 2016

186

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

E.2.2. Movements in tangible assets

Movements in tangible assets in 2016
(US$ millions)
Opening balance, net
Additions
Impairments
Disposals, net
Depreciation charge
Asset retirement obligations
Transfers
Transfers from/(to) assets held for sale (see note E.3.)
Exchange rate movements
Closing balance, net
Cost or valuation
Accumulated amortization and impairment
Net at 31 December 2016

Network
equipment(iii)
2,476
45
(2)
(11)
(677)
15
775
(123)
27
2,525
6,138
(3,613)
2,525

Land and
buildings
149
—
—
—
(12)
2
9
(5)
3
147
185
(38)
147

Construction
in progress
431
632
(2)
(3)
—
—
(814)
(2)
9
250
250
—
250

Other(i)
142
5
(4)
—
(58)
—
62
(9)
(4)
135
474
(339)
135

Total
3,198
683
(7)
(14)
(747)
17
31
(139)
36
3,057
7,047
(3,990)
3,057

Movements in tangible assets in 2015
(US$ millions)
Opening balance, net
Change in the Group (see note A.1.2.)(ii)
Additions
Effect of deconsolidation (iv)
Impairments
Disposals, net
Depreciation charge
Asset retirement obligations
Transfers
Transfers from/(to) assets held for sale
Exchange rate movements
Closing balance, net
Cost or valuation
Accumulated amortization and impairment
Net at 31 December 2015
(i) “Other” mainly includes office equipment and motor vehicles.
(ii) Comparative information has been restated compared to the information presented in the 2015 consolidated financial statement due to the finalization of Zantel’s purchase

Construction
in progress
490
4
962
(122)
(5)
—
—
—
(956)
—
58
431
431
—
431

Network
equipment(iii)
3,749
22
103
(850)
(33)
(9)
(952)
6
916
9
(485)
2,476
5,692
(3,216)
2,476

Land and
buildings
193
6
4
(18)
—
(2)
(15)
3
12
—
(34)
149
182
(33)
149

Other(i)
319
—
34
(40)
(1)
(4)
(108)
—
28
—
(86)
142
448
(306)
142

Total
4,751
32
1,103
(1,030)
(39)
(15)
(1,075)
9
—
9
(547)
3,198
6,753
(3,555)
3,198

accounting (note A.1.2.).

(iii) The net carrying amount of network equipment under finance leases at 31 December 2016 was US$245 million (2015: US$258 million).
(iv) See note A.2.2.

Borrowing costs capitalized for the years ended December 31, 2016 and 2015 were not significant.

Millicom Annual Report 2016

187

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

E.2.3. Cash used for the purchase of tangible assets

Cash used for property, plant and equipment additions
(US$ millions)
Additions
Change in advances to suppliers
Change in accruals and payables for property, plant and equipment
Vendor financing and finance leases
Cash used from continuing operations for additions

2016
683
(16)
51
1
719

2015
1,103
8
(62)
(30)
1,019

E.3. Assets held for sale
If Millicom decides to sell subsidiaries, investments in joint ventures or associates, or specific non-current assets in its businesses, these items
qualify as assets held for sale if certain conditions are met.

E.3.1. Classification of assets held for sale
Non-current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs
to sell if their carrying amount is expected to be recovered principally through sale, not through continuing use. Liabilities of disposal groups are
classified as “Liabilities directly associated with assets held for sale”.

E.3.2. Millicom’s assets held for sale
(US$ millions)
Tower assets held for sale
4G Spectrum (UNE) held for sale
Liabilities directly associated with assets held for sale
Net assets held for sale

2016
5
—
—
5

2015
—
12
—
12

Oasis S.A.
On 8 February 2016, Millicom announced that it had signed an agreement for the sale of its businesses in the Democratic Republic of Congo
(DRC) to Orange S.A. for a total cash consideration of US$160 million adjusted for working capital movements and including US$10 million of
cash hold-back subject to the completion of the disposal of the Mobile Financial Services business (DRC Mobile Cash). The transaction was
completed in respect of the mobile business (Oasis S.A.) on 20 April 2016 and includes certain indemnity and warranty clauses as well as other
expenses directly linked with the disposal, which have been provided for as of 31 December 2016. See note A 4.1. The separate disposal of DRC
Mobile Cash was completed in September 2016. As a result, US$10 million of the cash hold-back was received in October 2016.

In accordance with IFRS 5, the Group’s businesses in DRC have been classified as assets held for sale as from 8 February 2016 and their results
were classified as discontinued operations. The following assets and liabilities were held for sale in relation to Oasis S.A. as at the date of
disposal:

Assets and liabilities reclassified as held for sale – Oasis S.A.
(US$ millions)
Intangible assets, net.
Property, plant and equipment, net
Other non-current assets
Current assets
Cash and cash equivalents
Total assets of disposal group held for sale
Non-current financial liabilities
Current liabilities
Total liabilities of disposal group held for sale
Net assets

20 April 2016
58
133
11
42
33
277
44
84
128
149

Millicom Annual Report 2016

188

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

E.3.2. Millicom’s assets held for sale – continued
Comparative figures of the income statement have been represented accordingly. Financial information relating to the discontinued
operations for the year ended 31 December 2016 and 2015 is set out below.

The sale of Oasis S.A. generated a cash inflow of US$147 million, net of US$33 million of cash disposed.

Results from discontinued operations
(US$ millions)
Revenue
Cost of sales
Operating expenses
Depreciation and amortization
Other operating profit income expense, net
Operating profit (loss)
Interest income (expense), net
Profit (loss) before taxes
Credit (charge) for taxes, net
Results from discontinued operations
Gross gain on disposal of discontinued operations
Other expenses linked to the disposal of discontinued operations
Net gain (loss) on disposal of discontinued operations
Net profit (loss) from discontinued operations

Cash flows from discontinued operations
(US$ millions)
Cash used in operating activities, net
Cash used in investing activities, net
Cash provided by financing activities, net
Net cash inflows/(outflows)

31 December
2016
40
(15)
(20)
(3)
—
2
(2)
1
6
6
32
(19)
13
19

31 December
2016
(3)
(1)
—
(4)

31 December
2015
158
(60)
(108)
(40)
(2)
(53)
(17)
(70)
(13)
(83)
—
—
—
(83)

31 December
2015
(20)
(26)
49
3

Mobile Cash DRC
The sales agreement also included the separate disposal of Mobile Cash DRC, which was completed late 2016. The cash inflow and the loss
from the disposal of this operation was not material for the Group.

4G Spectrum (UNE)
During 2016, the 4G spectrum in Colombia has been reclassified from “Assets held for sale” to intangible assets as the value of the spectrum
will not be recovered through sale, but through use. A depreciation catch-up has been recorded for US$11 million. In October 2016, the date on
which UNE stopped rendering 4G services, the 4G spectrum was fully depreciated.

Millicom Annual Report 2016

189

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

F. Other assets and liabilities
F.1. Trade receivables
Millicom’s trade receivables mainly comprise interconnect receivables from other operators, postpaid mobile and residential cable subscribers
as well as B2B customers. The nominal value of receivables adjusted for impairment approximates the fair value of trade receivables.

(US$ millions)
Gross trade receivables
Less: provisions for impairment of receivables
Trade receivables, net

Ageing of trade receivables
(US$ millions)
2016:
Telecom operators
Own customers
Others
Total
2015:
Telecom operators
Own customers
Others
Total

2016
593
(206)
387

2015
599
(201)
398

Neither past
due nor
impaired

Past due (net of impairments)

< 30 days

30–90 days

>90 days

Total

26
121
57
204

32
153
52
237

14
48
19
81

20
54
14
88

11
77
5
93

14
48
6
68

1
6
2
9

1
—
4
5

52
252
83
387

67
255
76
398

Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less
provision for impairment. A provision for impairment is recorded when there is objective evidence that the Group will not be able to collect
amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganization, and default or delinquency in payments are indicators of impairment. The amount of the provision is
the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest
rate. The provision is recognized in the consolidated income statement within “Cost of sales”.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They
are included in current assets, except for those maturing more than 12 months after the end of the reporting period. These are classified within
non-current assets. Loans and receivables are carried at amortized cost using the effective interest method. Gains and losses are recognized in
the income statement when the loans and receivables are derecognized or impaired, as well as through the amortization process.

F.2. Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out (FIFO) method. Net realizable
value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Inventories
(US$ millions)
Telephone and equipment
SIM cards
IRUs
Other
Inventory at 31 December 2016

2016
32
7
6
17
62

2015
59
7
—
14
80

Millicom Annual Report 2016

190

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

F.3. Trade payables
Trade payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method where
the effect of the passage of time is material.

From time to time, the Group enters into agreements to extend payment terms with various suppliers, and with factoring companies when
such payments are discounted. The corresponding amount pending payment as of 31 December 2016, is recognized in “Trade payables” for an
amount of US$20 million.

F.4. Current and non-current provisions and other liabilities
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, if it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount
of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain.

The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money
is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, risks specific to the liability. Where
discounting is used, increases in the provision due to the passage of time are recognized as interest expenses.

F.4.1. Current provisions and other liabilities

Current
(US$ millions)
Deferred revenue
Customer deposits
Current legal provisions
Tax payables
Customer and MFS distributor cash balances
Witholding tax on payments to third parties
Other provisions
Other current liabilities
Total

F.4.2. Non-current provisions and other liabilities

Non-current
(US$ millions)
Non-current legal provisions
Long-term portion of asset retirement obligations
Long-term portion of deferred income on tower sale and leasebacks
Long-term employment obligations
Other non-current liabilities
Total

2016
112
9
12
44
139
17
10
134
477

2016
28
78
18
76
85
285

2015
121
8
20
60
130
—
18
130
487

2015
24
66
24
56
73
243

Millicom Annual Report 2016

191

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

G. Additional disclosure items
G.1 Fees to auditors

(US$ millions)
Audit fees
Audit related fees
Tax fees
Other fees
Total

2016
4.3
0.3
0.2
1.8
6.6

2015
4.7
0.3
0.3
0.9
6.2

G.2. Capital and operational commitments
Millicom has a number of capital and operational commitments to suppliers and service providers in the normal course of its business. These
commitments are mainly contracts for acquiring network and other equipment, and leases for towers and other operational equipment.

G.2.1. Capital commitments
At 31 December 2016 the Company and its subsidiaries and joint ventures had fixed commitments to purchase network equipment, land and
buildings, other fixed assets and intangible assets of US$179 million of which US$162 million are due within one year (December 31, 2015:
US$216 million of which US$203 million are due within one year). Out of these commitments, respectively US$17 million and US$14 million
related to Millicom’s share in joint ventures. (December 31, 2015: US$33 million of which US$27 million are due within one year).

G.2.2 Lease commitments
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and involves an
assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and whether or not the
arrangement conveys a right to use the asset. The sale and leaseback of towers and related site operating leases and service contracts are
accounted for in accordance with the underlying characteristics of the assets, and the terms and conditions of the lease agreements. On
transfer to the tower companies, the portion of the towers leased back are accounted for as operating leases or finance leases according to the
criteria set out above. The portion of towers being leased back represents the dedicated part of each tower on which Millicom’s equipment is
located and was derived from the average technical capacity of the towers. Rights to use the land on which the towers are located are
accounted for as operating leases, and costs of services for the towers are recorded as operating expenses.

Operating leases
Operating leases are all other leases that are not finance leases. Operating lease payments are recognized as expenses in the consolidated
income statement on a straight-line basis over the lease term.

Operating leases mainly comprise land in which cell towers are located (including those related to towers sold and leased back) and buildings.
Total operating lease expense from continuing operations for the year ended 31 December 2016 was US$135 million (2015: US$191 million –
see note B.2.).

Annual operating lease commitments
(US$ millions) from continuing operations
Within one year
Between one and five years
After five years
Total
(i) Joint ventures operating lease commitments amount to US$210 million (2015: US$219 million) and are excluded from the table above.

2016(i)
131
371
225
727

2015
111
310
214
635

Finance leases
Finance leases, which transfer substantially all risks and benefits incidental to ownership of the leased item to the lessee, are capitalized at the
inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments
are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged directly against income. Where a finance lease results from a sale and leaseback
transaction, any excess of sales proceeds over the carrying amount of the assets is deferred and amortized over the lease term. Capitalized
leased assets are depreciated over the shorter of the estimated useful lives of the assets, or the lease term if there is no reasonable certainty
that the Group will obtain ownership by the end of the lease term.

Millicom Annual Report 2016

192

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

G.2.2 Lease commitments – continued
Finance leases mainly comprise lease of tower space in Ghana, Tanzania and Colombia (see note C.3.3.), lease of poles in Colombia and tower
sharing in other countries. Other financial leases mainly consist of lease agreements relating to vehicles and IRUs.

Annual minimum finance lease commitments
(US$ millions)
Within one year
Between one and five years
After five years
Total
(i) Joint ventures finance lease commitments amount to US$nil (2015: nil) and are excluded from the table above.

2016(i)
81
330
353
764

2015
82
346
416
844

The corresponding finance lease liabilities at 31 December 2016 were US$295 million (2015: US$336 million). Interest expense on finance
lease liabilities amounts to US$66 million for the year 2016 (2015: US$63 million).

G.3. Contingent liabilities
G.3.1. Litigation and legal risks
The Company and its operations are contingently liable with respect to lawsuits and other legal risks that arise in the normal course of
business. As of 31 December 2016, the total amount of claims and litigation risks against Millicom and its operations was US$406 million, of
which US$3 million related to its share in joint ventures (31 December 2015: US$492 million, of which none related to its share in joint
ventures).

As at 31 December 2016, US$43 million, of which US$1 million related to its share in joint ventures (31 December 2015: US$42 million, of
which none related to its share in joint ventures), has been provided for litigation and legal risks in the consolidated statement of financial
position. While it is not possible to ascertain the ultimate legal and financial liability with respect to these claims and risks, the ultimate
outcome is not anticipated to have a material effect on the Group’s financial position and operations.

In June 2016, Millicom was served with claims by a third party seeking monetary damages in the amount of US$4.6 million and seeking to
exert rights as a shareholder of Millicom Tanzania Ltd (Tigo Tanzania). In June 2015, Millicom identified that an incorrect filing related to Tigo
Tanzania had been made in the commercial register, causing the register to incorrectly indicate that shares in the local subsidiary were owned
by this third party. Millicom remains engaged in legal proceedings regarding this issue. Millicom believes that these claims are entirely without
merit and, moreover, maintains that there is no valid basis whatsoever for any third party to claim any interest in Tigo Tanzania or be registered
as one of its shareholders. Accordingly Millicom continues to fully consolidate Tigo Tanzania at 100%.

The following specific risks are excluded from the US$406 million above:

Colombia
A claim filed with the Civil Chamber of Bogota in Colombia against all mobile operators in Colombia in 2013, including our subsidiary in
Colombia, by a group of approximately 20 individuals of approximately US$794 million. The claimants allege damages and losses suffered
from third parties through illegal use of cellular phones in extortion attempts against the claimants.

The case has been inactive, with the exception of a mandatory settlement conference held among the parties under the court’s supervision,
which did not result in a settlement agreement. This claim is considered by management to be entirely spurious and without foundation or
substance. As a result, no provision has been made for this claim.

Other
At 31 December 2016 Millicom has various other less significant claims which are not disclosed separately in these consolidated financial
statements.

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 Company’s joint venture in Guatemala. On 4 May 2016, Millicom received notification from the Swedish Public Prosecutor that
its preliminary investigation has been discontinued on jurisdictional grounds. Millicom continues to cooperate with law enforcement
authorities in the United States. As at 31 December 2016, the matter is still under investigation and Management has not been able to assess
the potential impact on these consolidated financial statements of any remedial actions that may need to be taken as a result of the
investigations, or penalties that may be imposed by law enforcement authorities. Accordingly, no provision has been recorded as of
31 December 2016.

Millicom Annual Report 2016

193

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

G.3.2. Tax related risks and uncertain tax position
The Group operates in developing countries where the tax systems, regulations and enforcement processes have varying stages of
development creating uncertainty regarding application of tax law and interpretation of tax treatments. The Group is also subject to regular
tax audits in the countries where it operates. When there is uncertainty over whether the taxation authority will accept a specific tax treatment
under the local tax law, that tax treatment is therefore uncertain. The resolution of tax positions taken by the Group, through negotiations with
relevant tax authorities or through litigation, can take several years to complete and, in some cases, it is difficult to predict the ultimate
outcome. Therefore, judgment is required to determine provisions for taxes.

In assessing whether and how an uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses,
unused tax credits and tax rates, the Group assumes that a taxation authority with the right to examine amounts reported to it will examine
those amounts and have full knowledge of all relevant information when making those examinations.

The Group has a process in place to identify its uncertain tax positions. Management then considers whether or not it is probable that a
taxation authority will accept an uncertain tax treatment. On that basis, the identified risks are split into three categories (i) remote risks (risk of
outflow of tax payments are 0–20%), (ii) possible risks (risk of outflow of tax payments are 21% to 49%) and probable risks (risk of outflow is
more than 50%). The process is repeated every quarter by the Group.

If the Group concludes that it is probable or certain that the taxation authority will accept the tax treatment, the risks are categorized either as
possible or remote, and it determines the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with
the tax treatment used or planned to be used in its income tax filings. The risks considered as possible are not provisioned but disclosed as tax
contingencies in the Group consolidated financial statements while remote risks are neither provisioned nor disclosed.

If the Group concludes that it is probable that the taxation authority will not accept the Group’s interpretation of the uncertain tax treatment,
the risks are categorized as probable, and it reflects the effect of uncertainty in determining the related taxable profit (tax loss), tax bases,
unused tax losses, unused tax credits or tax rates by generally using the most likely amount method – the single most likely amount in a range
of possible outcomes.

If an uncertain tax treatment affects both deferred tax and current tax, the Group makes consistent estimates and judgments for both. For
example, an uncertain tax treatment may affect both taxable profits used to determine the current tax and tax bases used to determine
deferred tax.

If facts and circumstances change, the Group reassesses the judgments and estimates regarding the uncertain tax position taken.

At 31 December 2016 potential tax risks estimated by the Group amount to US$311 million of which provisions of US$65 million have been
recorded representing the probable amount of eventual claims and required payments related to those risks (2015: US$369 million of which
provisions of US$86 million were recorded). Out of these potential claims and provisions, respectively US$96 million (2015: US$76 million) and
US$9 million (2015: US$9 million) related to Millicom’s share in joint ventures.

G.4. Non-cash investing and financing activities

Non-cash investing and financing activities from continuing operations
(US$ millions)
Investing activities
Acquisition of property, plant and equipment
Asset retirement obligations
Financing activities
Vendor financing and finance leases
Share based compensation

Note

E.2.2.
E.2.3.

G.2.2.
B.4.1.

2016

2015

35
(17)

—
14

(54)
(9)

30
19

G.5. Related party balances and transactions
The Company conducts transactions with certain related parties on normal commercial terms and conditions. The Group’s significant related
parties are:

Kinnevik AB (“Kinnevik”) and subsidiaries, Millicom’s principal shareholder.

Tower companies in Ghana, DRC, Tanzania (until October 2015), and in Helios Towers Africa Ltd (since October 2015), in which
Millicom holds a direct or indirect equity interest (see note A.3.2.).

EPM and subsidiaries, the non-controlling shareholder in our Colombian operations (see note A.1.2.).

Miffin Associates Corp and subsidiaries, our joint venture partner in Guatemala.

Millicom Annual Report 2016

194

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

G.5. Related party balances and transactions – continued
Kinnevik
Millicom’s principal shareholder is Kinnevik. Kinnevik is a Swedish holding company with interests in the telecommunications, media, publishing,
paper and financial services industries. At 31 December 2015, Kinnevik owned approximately 38% of Millicom (2015: 38%). During 2016 and
2015, Kinnevik did not purchase any Millicom shares. There are no significant loans made by Millicom to or for the benefit of Kinnevik or
Kinnevik controlled entities.

During 2015 and 2014 the Company purchased services from Kinnevik subsidiaries including fraud detection, procurement and professional
services.

Helios Towers
Millicom acquired 40% shareholdings in Helios Towers Ghana, Helios Towers Tanzania and Helios Towers DRC as part of the compensation
agreed for the sale and lease back of its towers in those countries. Millicom sold its tower assets and leased back a portion of space on the
towers in each of these countries and contracted for related operation and management services. As described in note A.3.2., as a result of a
reorganization, 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 a significant influence on HTA. The Group has future lease commitments in respect of the tower
companies (see note G.2.2.).

Miffin Associates Corp (“Miffin”)
The Group purchases and sells products and services from Miffin Group. Transactions with Miffin represent recurring commercial operations
such as purchase of handsets, and sale of airtime.

Expenses from transactions with related parties
(US$ millions)
Purchases of goods and services from Kinnevik
Purchases of goods and services from Miffin
Purchases of goods and services from EPM
Lease of towers and related services from Helios(i)
Other expenses
Total

Income and gains from transactions with related parties
(US$ millions)
Sale of goods and services to EPM
Sale of goods and services to Miffin
Other revenue
Total
(i) Until acquisition/disposal date.

As at 31 December the Company had the following balances with related parties:

US$ millions
Liabilities
Payables to Guatemala(i)
Payables to Honduras(ii)
Finance lease liabilities to tower companies(iii)
Payables to EPM
Other accounts payable
Total
(i) Shareholder loans
(ii) Amounts payable mainly consist in dividend advances. Dividend is expected to be declared in 2017.
(iii) Disclosed under “Debt and other financing” in the statement of financial position.

2016
7
167
22
35
2
233

2016
18
261
10
289

2015
3
148
17
36
2
206

2015
19
253
4
276

Year ended
31 December
2016

Year ended
31 December
2015

245
118
85
3
20
471

335
225
122
66
18
766

Millicom Annual Report 2016

195

Overview

Strategy

Performance

Governance

Financials

Notes to the consolidated financial statements
for the year ended 31 December 2016 – continued

G.5. Related party balances and transactions – continued

US$ millions
Assets
Receivables from EPM
Loan to Helios Towers Tanzania
Other accounts receivable
Total

Year ended
31 December
2016

Year ended
31 December
2015

4
10
3
17

5
7
4
16

H. IPO – Millicom’s operations in Tanzania
In June 2016, an amendment to the Electronic and Postal Communications Act (“EPOCA”) in the Finance Act 2016 requires all licensed telecom
operators to sell 25% of the authorized share capital in a public offering on the Dar Es Salaam Stock Exchange by 31 December 2016. As of
31 December 2016, no licensed operator had completed a public offering, including Millicom’s license holding subsidiaries, Millicom Tanzania,
Zantel and Telesis. On 13 January 2017, Millicom Tanzania, Zantel and Telesis each received from the Tanzanian Communications Regulatory
Authority (“TCRA”) a notice of material breach of the license giving 30 days to comply. Millicom has signaled its intention for its subsidiaries to
comply with the law and list its businesses but will not be in a position to complete public offerings by such time or in the near future.
Accordingly, Millicom’s businesses in Tanzania may face sanctions from the regulator or other government bodies, which could include financial
penalties, or even suspension or cancellation of its license. Management is currently not able to assess the financial impact on its consolidated
financial statements (although the Company deems the suspension or cancellation of the license is unlikely) and therefore no provision has
been recorded as of 31 December 2016.

I. Subsequent events
Dividend
On 7 February 2017 Millicom’s Board decided to propose to the Annual General Meeting of the Shareholders a dividend distribution of
US$2.64 per share to be paid out of Millicom profits for the year ended 31 December 2016 subject to the Board’s approval of the 2016
Consolidated Financial Statements of the Group.

TV Cable Parana
On 6 January 2017, after obtaining the necessary regulatory approvals, Tigo Paraguay completed the acquisition of TV Cable Parana for a
total consideration of US$19 million.

Tigo Senegal and HTA
We have agreed to sell our business in Senegal to Wari Group, subject to regulatory approvals. The transaction represents an enterprise value
for Tigo Senegal of US$129 million. We have also initiated a process to sell our 22% stake in Helios Towers Africa.

Millicom Annual Report 2016

196

Overview

Strategy

Performance

Governance

Financials

Additional information

Alternative Performance Measures (‘APMs’)
In the front section of the Group’s Annual Report, APMs are used to provide readers with additional financial information that is regularly
reviewed by management and used to make decisions about operating matters. These measures are usually used for internal performance
reporting and in defining director and management remuneration. They are useful in connection with discussion with the investment analyst
community. However, this additional information presented is not uniformly defined by all companies including those in the Group’s industry.
Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, certain information
presented is derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such measures
should not be viewed in isolation or as an alternative to the equivalent IFRS measure.

Definitions, use and reconciliations to the closest IFRS measures are presented in the table below and on the following pages.

APMs

Descriptions

Management reporting
numbers

The financial information presented in the front section of this Annual Report is with Guatemala (55% owned)
and Honduras (66.7% owned) as if fully consolidated, while the Group equity accounts those operations in the
IFRS consolidated financial statements. See next pages for reconciliation with IFRS numbers.

Service, mobile data and
cable revenue

Organic growth

Operating profit

EBITDA

Adjusted EBITDA

Adjusted net profit

• Service revenue is Group revenue related to the provision of ongoing services such as monthly subscription
fees, airtime and data usage fees, interconnection fees, roaming fees, mobile finance service commissions
and fees from other telecommunications services such as data services, short message services and other
value added services excluding telephone and equipment sales;

• Mobile data revenue is Group revenue related to the provision of data for smartphone users. Mobile data

revenue is included in Service revenue;

• Cable revenue is Group revenue related to the provision of cable services such as broadband internet and

TV. Cable revenue is included in Service revenue.

Organic growth represents year-on year-growth in local currency (includes regulatory changes) and constant
perimeter. See next pages for reconciliation with reported numbers.

Operating profit is profit before taxes before results from associates, other non-operating expenses (such as
foreign exchange losses and changes in fair value of derivatives) and net financial expenses.

EBITDA is operating profit excluding impairment losses, depreciation and amortization and gains/losses on
the disposal of fixed assets.

Adjusted EBITDA is EBITDA excluding one-off items such as restructuring charges, provisions for litigations,
tax provisions or settlements being made relating to prior periods and other exceptional items that have
materially impacted trading results that we do not expect to be recurring.

Adjusted net profit is net profit adjusted for non-operating items such as foreign exchange gains/losses,
changes in fair value of derivatives, early redemption premium for debts and other financing, dilution gains
and impairments on investments in associates and similar items classified under ‘other non-operating income
(expenses)’ as well as excluding results from discontinued operations.

Adjusted EPS

Adjusted EPS is computed based on adjusted net profit divided by the number of shares outstanding.

Return on Invested
Capital

Return on Invested Capital is used to assess the Group’s efficiency at allocating the capital under its control to
profitable investments.

Net debt

Net debt is Gross debt (including finance leases) less cash, restricted cash and pledged deposits.

Capex measures

• Capex is balance sheet capital expenditure excluding spectrum and license costs.
• Cash Capex represents the cash spent in relation to capital expenditure, excluding spectrum and licenses.

Cash flow measures

• Operating cash flow is EBITDA less capex (excluding spectrum and license costs);
• Operating Free Cash Flow is operating cash flow less change in working capital and other non-cash items

and taxes paid;

• Equity Free Cash Flow is operating cash flow less taxes paid, interest paid (net) and advances for dividends

to non-controlling interests.

These measures allow us and third parties to evaluate our liquidity and the cash generated by our operations.

Millicom Annual Report 2016

197

Overview

Strategy

Performance

Governance

Financials

Additional information – continued

Reconciliation with Guatemala and Honduras as if fully consolidated vs. IFRS (unaudited)
As previously noted, the table reconciles the Management reporting numbers which include Guatemala and Honduras on a 100%
consolidation basis with the IFRS numbers which account for these businesses as joint ventures using the equity method.

Consolidated statement of income

US$ millions
Revenue
Cost of sales
Gross profit
Operating expenses
EBITDA
EBITDA margin
Depreciation & amortization
Share of net profit in joint ventures
Other operating income (expenses), net
Operating profit
Net financial expenses
Other non-operating income (expenses), net
Gains (losses) from associates
Profit before tax
Net tax credit (charge)
Profit (loss) for the year
Profit (loss) from discontinued operations
Non-controlling interests
Net profit (loss) for the year

Year ended
31 December 2016
Management reporting
(Unaudited)
6,249
(1,655)
4,594
(2,422)
2,172
34.76%
(1,368)
—
(43)
761
(472)
(1)
(49)
239
(251)
(13)
19
(38)
(32)

Consolidated statement of financial position

US$ millions
Assets
Non-current assets
Intangible assets, net
Property, plant and equipment, net
Investments in joint ventures
Investments in associates
Deferred tax assets
Amount due from non-controlling interests, associates and joint ventures
Derivative financial instruments
Other non-current assets
Total non-current assets

Current assets
Inventories, net
Trade receivables, net
Amounts due from non-controlling interests, associates
and joint venture partners
Prepayments and accrued income
Current income tax assets
Supplier advances for capital expenditure
Other current assets
Restricted cash
Cash and cash equivalents
Total current assets
Assets held for sale
Total assets

Guatemala
and Honduras
(1,875)
376
(1,498)
641
(858)
45.75%
440
—
24
(394)
100
11
—
(283)
72
(212)
—
96
(115)

JV
adjustment

115

Year ended
31 December 2016
IFRS
(Audited)
4,374
(1,279)
3,096
(1,781)
1,314
30.04%
(928)
115
(20)
482
(372)
10
(49)
71
(180)
(109)
19
58
(32)

31 December 2016
Management reporting
(Unaudited)

IFRS
adjustments

31 December 2016
IFRS
(Audited)

4,618
4,205
—
331
175
1
32
74
9,434

82
481

269
209
111
48
142
156
947
2,445
5
11,884

(3,259)
(1,148)
2,945
—
(9)
(1)
—
(2)
(1,473)

(20)
(94)

(252)
(39)
(10)
(25)
(33)
(11)
(301)
(784)
—
(2,257)

1,359
3,057
2,945
331
166
—
32
72
7,961

62
387

17
171
101
23
110
145
646
1,661
5
9,627

Millicom Annual Report 2016

198

Overview

Strategy

Performance

Governance

Financials

Additional information – continued

Consolidated statement of financial position – continued

US$ millions
Equity and liabilities
Equity
Share capital and premium
Treasury shares
Option reserves
Retained profits
Profit (loss) for the year attributable to equity holders
Equity attributable to owners of the Company
Non-controlling interests
Total equity

Liabilities
Non-current liabilities
Debt and financing
Derivative financial instruments
Amounts due to associates and joint venture partners
Provisions and other non-current liabilities
Deferred tax liabilities
Total non-current liabilities

Consolidated statement of cash flows

US$ millions
Cash flows from operating activities (including discontinued operations)
Profit (loss) before taxes from continuing operations
Profit (loss) for the year from discontinued operations
Profit (loss) before taxes
Net cash provided by operating activities
Net cash used in investing activities
Net cash from (used by) financing activities
Exchange impact on cash and cash equivalents, net
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

31 December
2016
Management
reporting
(Unaudited)

31 December
2016
IFRS
(Audited)

IFRS
adjustments

638
(123)
(749)
3,243
(32)
2,976
1,095
4,071

5,147
84
1
352
159
5,742

143
416
322
2
532
79
577
2,070
—
7,812
11,884

—
—
188
4
—
191
(894)
(703)

(1,327)
—
112
(65)
(101)
(1,381)

(63)
(90)
(24)
271
(157)
(11)
(99)
(173)
—
(1,554)
(2,257)

638
(123)
(562)
3,247
(32)

3,167
201
3,368

3,821
84
113
286
57
4,361

80
326
297
273
376
68
477
1,898
—
6,258
9,627

Year ended
31 December
2016
(Unaudited)

Year ended
31 December
2016
IFRS (Audited)

IFRS
adjustments

239
13
251
1,476
(936)
(521)
(8)
10
937
947

(168)
—
(168)
(598)
385
80
—
(133)
(168)
(301)

71
13
83
878
(552)
(441)
(8)
(123)
769
646

Millicom Annual Report 2016

199

Overview

Strategy

Performance

Governance

Financials

Additional information – continued

Organic growth adjustments
Group revenue
Prior period
Current period
Reported growth
Local currency growth
Change in perimeter impact
FX impact

Group service revenue
Prior period
Current period
Reported growth
Local currency growth
Change in perimeter impact
FX impact

Group EBITDA
Prior period
Current period
Reported growth
Local currency growth
Change in perimeter impact
FX impact

Q4 2016
1,636
1,594
(2.6%)
(2.1%)
—
(0.4%)

Q4 2016
1,505
1,484
(1.4%)
(0.9%)
—
(0.5%)

Q4 2016
549
566
3.1%
1.4%
—
1.7%

Q4 2015
1,821
1,636
(10.2%)
4.4%
0.5%
(15.1%)

Q4 2015
1,647
1,505
(8.6%)
6.2%
0.5%
(15.3%)

Q4 2015
603
549
(9.0%)
3.0%
(0.5%)
(11.4%)

12M 2016
6,572
6,249
(4.9%)
(0.4%)
—
(4.5%)

12M 2016
6,056
5,855
(3.3%)
1.2%
—
(4.5%)

12M 2016
2,227
2,225
(0.1%)
4.3%
—
(4.4%)

12M 2015
6,251
6,572
5.1%
7.3%
8.3%
(10.5%)

12M 2015
5,775
6,056
4.9%
5.8%
9.0%
(10.0%)

12M 2015
2,109
2,227
5.6%
9.0%
9.6%
(13.1%)

Millicom Annual Report 2016

200

Millicom
For further information please contact:
investors@millicom.com

millicom.com

Cover and divider photography
Richard Davies