Digital connectivity
for tomorrow’s world…
Millicom Annual Report 2017
Digital connectivity
for tomorrow’s world…
We are a leading provider of cable and mobile services
dedicated to emerging markets. We operate under the Tigo®
brand in eight countries across Latin America and three in Africa.
We set the pace when it comes to providing high-speed
broadband, innovative services and our trademark
The Digital Lifestyle® to more than 50 million customers.
Our purpose is to build the digital highways that connect
people, improve lives and develop our communities.
Our mission is to provide the best, most secure digital highways
to be the first choice for customers in all our markets.
For further information on Millicom’s
results, please refer to our Reporting
Center: www.millicom.com/investors/
Millicom Annual Report 2017
What’s inside
this report…
Integrated reporting
This is our second integrated Annual Report
that combines our corporate responsibility and
financial reports to provide all our stakeholders
with a clear and comprehensive overview of
our business. It reflects both the strong social
and economic impact of our products and
services on the communities we serve, and our
responsible business practices throughout our
operations. Our reporting is also in line with
our commitment to transparency, and is a key
element of building trust with all stakeholders.
Note: The financial information presented in
the front section of the Annual Report is with
Guatemala (55% owned) and Honduras
(66.7% owned) as if fully consolidated, while
the Group equity accounts for those
operations in the IFRS consolidated financial
statements. See Additional information on
pages 157 to 160.
Millicom Annual Report 2017
Overview
Millicom at a glance
Our year in numbers
Chairman’s statement
Market overview
Our business model
Strategy
Chief Executive Officer’s statement
Our strategy
Measuring progress against strategy
Performance
Chief Financial Officer’s review
Risk management
How we are doing in Latin America
How we are doing in Africa
Growing responsibly and with purpose
Governance
Chairman’s report
Shareholder and Board governance
Corporate Governance Framework
Shareholders and shareholders’ meeting
Board of Directors and Board committees
Board profile – skills and experience
Board program
Board committees
Audit Committee
Compliance and Business Conduct Committee
Compensation Committee: Remuneration Report
Millicom CEO and Executive Team
Management responsibility statement
Financials
Independent auditor’s report
Introduction
Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
CR performance
Independent limited assurance report
Corporate responsibility is crucial to our success
1. Privacy and freedom of expression
2. Child rights and online protection
3. Acting with integrity: 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
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1
Millicom at a glance
Our services…
Through our Tigo and Tigo Business™ brands, we provide
a wide range of digital services, including high-speed
data, cable TV, voice and SMS, Mobile Financial Services
(MFS), and business solutions.
In Latin America (Latam), we provide both
mobile and fixed services in six countries –
Bolivia, Colombia, El Salvador, Guatemala,
Honduras, and Paraguay. In addition, we
provide fixed services in Costa Rica and
Nicaragua. In Africa, we provide mobile
services in Tanzania and Chad, as well as
Ghana, where we operate as a joint venture
since the last quarter of 2017.
In 2017, we reached agreements to divest
our operations in Rwanda and Senegal,
with regulatory approval still pending in
the latter country.
We provide services to 50.8 million mobile
customers and 3.3 million cable and
broadband households. We have 21.2 million
mobile data subscribers, including more
than seven million on the 4G networks
available in eight of our nine mobile markets.
Tigo
2:29pm
100%
Tigo Sports
Tigo Music
Tigo Money
Tigo ONE tv
Mi Tigo
Tigo Shop
Tigo Business
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Millicom Annual Report 2017
B2C MobileB2C HomeB2B Our year in
numbers…
Comparative figures at Group level for:
Operating Cash Flow ($m)1
Year-over-year growth
4G smartphone data users (m)2
Year-over-year change
+6% 2x
2017
2016
2015
1,197
1,126
2017
2016
3.4
7.2
973
2015 0.9
HFC homes passed (m)3
Year-over-year change
Employees4
As of year end 2017
+18% 18,802
2017
2016
2015
8.4
7.2
6.4
Footnotes:
1 Operating Cash Flow (OCF) is EBITDA less capex (excluding spectrum, license and finance lease capitalization).
2 Total Group (Latam and Africa).
3
Hybrid fiber-coaxial (HFC) homes passed is the total number of premises that have capability to be connected to the network
without any significant investment in the network.
Excluding Senegal and Ghana. Emtelco (Colombia call center) headcount is excluded from this report and any internal reporting
because their costs are classified as direct costs and not employee related costs.
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Millicom Annual Report 2017
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Chairman’s
statement
The change we have driven in our business for the past
two years has not only increased our effectiveness but
also helped us transform the lives and businesses of
millions of customers in all our markets.”
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Millicom Annual Report 2017
Embracing change has
been absolutely central
to our success.”
Ours is a powerful story
of transformation and
growth, for Millicom and
for all our stakeholders.
Our strategy is clear and simple; we build
high-speed data networks, both mobile and
fixed. The simplicity of our strategy, which
you can read about on pages 14 to 15, helps
drive operational effectiveness, and our
business is leaner and more agile than ever.
We now have a solid foundation on which to
build – and I am pleased to see that revenue
growth is already beginning to reflect this.
Our strategy is transforming the external
landscape, too. By accelerating deployment
of our high-speed data networks, we have
substantially increased access to the digital
highways for millions of people across our
markets. Our new networks also benefit
thousands of businesses, from start-ups to
large multinationals, as you can discover in
our Performance review on pages 17 to 46.
By creating a more efficient organization
and keeping a sharp focus on costs, we have
continued to increase our free cash flow
generation and strengthen our financial
position. We are pleased to recommend a
final dividend of US$2.64 per share this year.
You can read more about this in our Financials
section on pages 88 to 160.
Corporate responsibility
We think of our core business as a social good.
Our corporate responsibility program,
pages 162 to 188, directly addresses the wider
impacts our business operations have in our
communities. We focus on applying our
technological expertise to address gaps in
development in the societies where we
operate. We believe that our commitment
to corporate responsibility differentiates us
in our markets, makes us more competitive,
and helps us strengthen our position as
an employer of choice in the region.
In May 2017, we were ranked among the top
20 multinational employers of choice in Latin
America in the Great Place to Work awards –
and we were the only telecommunications
company featured.
Board, management and colleagues
We would like to thank Mr. José Miguel García
Fernández and Mr. Lorenzo Grabau, our Board
members who have stepped down this year,
for their contribution.
We welcome Mr. Anders Jensen, Mr. José
Antonio Ríos García, and Mr. Roger Solé Rafols
to the Board.
Once again, we thank Mauricio Ramos,
our CEO, and his leadership team for their
dedication and drive, and for inspiring every
colleague to achieve our vision of enabling our
trademark The Digital Lifestyle for millions of
customers and for the benefit of all our
stakeholders.
Outlook
The opportunities before us are many. Some
external conditions in our markets remain
challenging but thanks to prudent stewardship,
we are now better placed than ever to capitalize
on these to create and deliver sustainable value
for shareholders and digital connectivity for our
customers.
Tom Boardman
Chairman of the Board of Directors
Millicom Annual Report 2017
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For information on our business model,
please see pages 10-11
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Digital connectivity
for tomorrow’s world...
connected women
6
Millicom Annual Report 2017
EVP Chief External Affairs Officer Rachel
Samrén on Responsible Leadership at GSMA
Mobile 360 Africa
CEO Mauricio Ramos addresses the need to
close the gender gap, during Tigo Paraguay’s
25th anniversary celebrations
Today, 200 million fewer women than men
own a mobile phone across low and middle
income countries. This is a reality that hinders
the growth and development of these
countries as women are being left behind in
this connected world. It also represents a great
opportunity for companies to step up while
reaping the benefits of a more inclusive society.
We are proud to be part of the Connected
Women initiative set up by the GSMA (the
mobile network industry’s main organization)
that aims at reducing this gap and promoting
the use of mobile technology by women.
All of our operations in Africa have made a
commitment with this initiative and, during
2017, five of our operations in Latin America
added their commitment as well, with the
sixth on track to join in Q1 2018.
We have also rolled out specific actions
aimed at incorporating more women
into The Digital Lifestyle. We have trained
more than 24,000 women in how to make
better use of their mobile phones not only
in their day-to-day lives but also as
business entrepreneurs.
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Millicom Annual Report 2017
7
Market overview
Opportunities for growth
Operating in emerging markets brings its share
of challenges, however the opportunities for
growth make these markets both exciting and rewarding.
Fixed communications, cable and pay-TV
Fixed-line telecommunications infrastructure has
historically been underdeveloped in most of our
markets. Coverage is limited to the main urban
centers, with typically poor infrastructure in rural
or remote areas and limited availability of
fixed-line telecommunications services overall.
Meanwhile, the cable industry is highly
fragmented, with multiple providers operating
only in some municipalities or regions. Due to
their lack of scale, many of these smaller
players operate network services constrained
by lack of investment. This provides an
opportunity for larger, well-capitalized
operators like us to consolidate this industry.
In its detailed research into the mobile
economy in Latin America (Latam), the GSMA
regards the region as one of the most dynamic
in the mobile marketplace of the future.
Penetration levels for both fixed and mobile in
our markets are lower than in larger, more
developed Latam markets.
We believe these markets offer high
opportunities for superior growth, given their
relatively young and growing populations
with steadily increasing disposable incomes
and purchasing power.
Competitive position in the mobile market
As mobile broadband connections continue
to increase, the use of smartphones is also
surging ahead, and 4G adoption rates are
soaring at double-digit growth rates.
The mobile ecosystem is a major contributor
to the regional economy and provides a large,
scalable platform for innovation.
There are also differences between the
individual countries in which we operate
and between our regions of Africa and Latam
themselves. For instance, higher income
levels in Latam are reflected in both higher
Average Revenue per User (ARPU) and higher
smartphone penetration than in Africa;
in addition, Latam public and private
operators have invested in fixed-line
telephone, cable and broadband networks
which are often less developed in Africa.
While the level of market maturity varies
between countries, we believe the following
key themes are relevant across our footprint.
Mobile
The rapid increase in the consumption of
mobile and data services has been bolstered
by the prevalence of multiple SIM card usage
in our markets.
However, customer penetration rates
where we operate still lag behind those
of developed markets. This suggests that
there is further potential for growth as
these economies develop.
According to the GSMA, some 37% of
mobile users in emerging markets now own
a smartphone, up from 21% five years ago.
The availability of lower-end smartphones sold
for around US$40 is improving affordability for
a growing number of people wishing to access
the Internet. This is also driving demand for
data services across our markets.
While smartphone adoption is strong,
4G remains a minority at around 22% of our
mobile base in Latin America. Nevertheless,
4G mobile coverage throughout Latam
continues to grow, with our 4G networks now
covering more than 50% of the population in
our Latam footprint.
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Millicom Annual Report 2017
What we do…
...in Latin America
Bolivia, El Salvador, Guatemala,
Honduras, Paraguay, Colombia
B2C Mobile, B2C Home, B2B
Costa Rica
B2C Home, B2B
Nicaragua
B2B
...in Africa
Tanzania, Chad, Ghana
B2C Mobile, B2B
We also see an opportunity to grow our B2B
business. 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. As the economies in our markets grow,
so does demand from our business and
government customers for high-speed
business broadband services and datacenters.
Mobile financial services
Many of our current and potential customers
have limited access to traditional banking
services and live in largely cash-based
economies. This creates an opportunity for
mobile operators to provide mobile financial
services (MFS) to bridge the gap and drive
greater financial inclusion. We believe the
rapid uptake of MFS in some of our markets
reflects the growth potential of these services
in markets where banking regulation allows.
Revenue by region...
Africa Home and Content, B2B and Other 0%
Africa B2C Mobile
& MFS 9%
Latam B2C Mobile
& MFS 49%
Latam Other* 7%
10%
Africa
Latam B2B 16%
90%
Latam
Latam Home & Content 19%
*Other revenue is mostly revenue related to telephone and equipment sales.
Millicom Annual Report 2017
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Our business model
How we create value
To become a high-performing, high-growth,
fixed-mobile convergent operator requires digital
innovation, the best-connected customers, and
a talented and engaged workforce.
Through these services...
We combine...
To deliver...
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Millicom Annual Report 2017
B2BHomeMobiledataEmployees + TechnologyDigital transformation + Customer experience Driving digital connectivity for tomorrow’s
world is at the heart of our business.
We provide state-of-the-art voice, cable,
data, and B2B services to customers in
emerging markets. We do so in a responsible
and sustainable way that benefits all our
stakeholders.
By empowering our customers to join the
digital highways, we are creating value for
them and for Millicom.
4G mobile coverage throughout
Latin America continues to grow,
with 4G networks now covering more
than 50% of our Latam footprint
We do this first, by building high-speed
networks to support our growing Mobile data,
Home and B2B businesses. For mobile, we are
expanding the coverage of our 4G networks,
as these enable us to deliver high volumes of
data at faster speeds in a more cost-efficient
manner than on 3G networks. We are also
accelerating the roll-out of our high-speed
Hybrid Fiber-Coaxial (HFC) fixed network.
Second, we do this by bringing the best services
and relevant content to our customers,
including sports, movies, video and music,
through a growing number of partnerships with
global and local digital content providers and
media. We rely on innovation to drive mobile
data adoption and usage in the price-sensitive
and predominantly prepaid markets in which
we operate.
Third, we invest heavily to provide a seamless
and integrated experience to our customers
across sales and care touchpoints that link our
digital innovation and business processes with
a highly engaged and talented workforce.
Providing digital connectivity is only part of
the story. In many of our markets, our Tigo
services are part of the national fabric, and
we take that responsibility seriously. We are
in business for the long haul, not simply for
short-term gain. Consequently, we are deeply
committed to our corporate responsibility and
being agents of positive change throughout
our footprint.
Doing business the right way protects the
future. Our corporate responsibility framework
helps to empower, protect and enhance our
customers, our staff, our suppliers and as a
result, our reputation and ability to create
sustainable value.
To help in this, we work through a variety
of partnerships with local and international
organizations, such as the GSMA, UNICEF,
Reach for Change and Global Network
Initiative, to acquire a deeper knowledge of
some of the issues we face and how best to
tackle them in our markets.
Which create...
Millicom Annual Report 2017
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Read more in the Performance section
of our Annual Report see pages 17-46
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Efficiencies + Revenue growth + Customer satisfaction + Social progress
Chief Executive Officer’s
statement
Thanks to the continuing commitment to our strategy,
Millicom is well positioned to capitalize on the significant
growth opportunity before us.”
12
Millicom Annual Report 2017
I am pleased to report that
2017 was a year of impressive
progress against our strategy
– we accelerated the pace
at which we deploy our high-
speed data networks, and we
connected a record number
of new customers.
Our financial results improved throughout the
year, and our company starts 2018 with
strong momentum and with confidence that
our strategy is working.
In the past 12 months, we expanded our
hybrid fiber-coaxial (HFC) network to pass
an additional 1.3 million homes. This is our
fastest-ever build rate and well ahead of our
target. We also connected a record number
of more than 250,000 homes, confirming our
view that there is significant pent-up demand
in our markets for affordable and reliable
high-speed data and pay-TV services.
On the mobile front, we continue to focus
our investment dollars and our commercial
activity on 4G, which enables a superior
customer experience and fosters increased
data consumption. We added 3.7 million new
4G customers in 2017, more than doubling our
4G subscriber base during the year.
Our strategy is to provide the best data
network – both fixed and mobile – in our
markets.
Opportunity
We currently serve around 33 million mobile
users in our Latin American (Latam) markets,
but only seven million of these consume our
4G data services using a smartphone. This
implies a very low 4G penetration rate of only
22%, and we are therefore taking advantage
of the growing proliferation of low-cost
smartphones to drive increased adoption of
4G going forward.
The same is true for cable, where our networks
currently pass around 9.1 million homes out of
a total of some 27 million households in our
Latam footprint. Given rapid household
formation and expansion of the middle-class in
most of our markets, we see an opportunity to
expand our network to reach at least 15 million
homes over the next few years. This implies a
planned 66% increase in our footprint – and
yet this target still only represents slightly more
than half of the total number of homes.
Finally, we see significant growth potential in
B2B. In our markets, the number of small and
medium-sized businesses (SMBs) has doubled
in the past seven years; and under our Tigo
Business brand we already serve more than
240,000 customers from the one million plus
SMBs registered today. With our growing
infrastructure, dedicated staff, and a unique
set of assets, we have scope to grow faster
than the market and gain B2B share in the
majority of our Latam markets.
Convergence
As we expand the size of our HFC network,
our ability to offer both fixed and mobile
services provides us with another way to
differentiate ourselves from the competition
in most of our markets. Convergence also
allows us to leverage our existing tangible
and intangible assets, such as our network,
our brand, and our local management talent
and market knowledge, to capture business
synergies, generate new revenue streams from
existing customers, attract new customers,
and reduce overall customer churn.
Sustainable benefits
As a leading operator in our markets, we
have a unique ability to bring about positive
change. While part of this is facilitating digital
connectivity for everybody – and boosting
the economies in the communities we serve –
it is also about doing so in a responsible
manner to ensure the benefits are sustainable.
That is why governance is so important and
why we regard compliance in particular as an
integral part of our business.
By fostering a culture of ethics and compliance
from the top, across all our lines of business, we
help everyone make the right decisions, and our
business becomes more agile, responsive and
competitive.
The more we can do to promote compliance
– to our business partners, our suppliers,
government agencies, employees, and
everyone we work with – the more we create a
multiplier effect that makes our markets
prosperous places to invest, live and work.
It is equally important that we monitor and
manage the risks we face in each region to
ensure Millicom, our customers, and everyone
we work with is protected. The Risk
Management section of this report provides
visibility of those risks.
Performance
Revenue of USD$6.02 billion for the year
increased 0.8% year-over-year, while service
revenue increased 1.2% to reach
USD$5.66 billion; and EBITDA expanded 3.6%
to USD$2.19 billion. Our results improved
throughout the year, capped by the fourth
quarter, the strongest of the year by most
measures. Meanwhile, our laser-focused
strategy is making us more efficient when
making capital investments, allowing us to
maintain our overall capex almost flat
year-over-year in 2017 even as we expanded
our HFC network in Latam by 65%. This
improved efficiency drove a 39% increase in
equity Free Cash Flow, which reached
USD$356 million in 2017, compared to
USD$256 million in 2016.
People
Our people underpin the strategy that is
driving our success. It is important that we
continue to develop a diverse, high-
performance, operationally excellent, and
customer-centric culture and that our talent
remains best-in-class throughout the
organization. We already have a competitive
advantage by recruiting and retaining the best
talent in the countries where we operate.
I can’t be more proud of the fact that our Tigo
operations in Latin America made it to the top
20 companies across industries in the Great
Place to Work ranking; the only
telecommunications company to do so. And
I’d like to take this opportunity to thank our
Executive team and every single one of our
18,802 employees who have helped deliver
our success.
Mauricio Ramos
Chief Executive Officer
Read more about our Executive
management team in the Governance
section of our Annual Report on pages 76-79
Millicom Annual Report 2017
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Our strategy…
We have developed a simple and focused customer-centric
strategy that will enable us to grow and prosper in an
increasingly data-centric world. Our goal remains to become
a high-performing, high-growth, fixed-mobile convergent
operator focused on sustainable value creation.
• Product innovation: We drive customer
adoption by expanding our range of digital
services and aggregating third-party
content, as well as some exclusive local
and international content, enabling us to
differentiate ourselves from our
competitors. For example, we have
agreements with local soccer teams,
leagues and sports channels in Bolivia,
El Salvador, Colombia, Guatemala and
Paraguay to air matches exclusively on our
pay-TV channels. We are committed to
bringing the best content to our customers,
and for that we partner with various
players in the ecosystem, from studios to
Over-the-Top providers (OTTs) and sports
industry players.
Expanding B2B
The expansion of our HFC network as well
as the development of state-of-the-art
datacenters, analytics and Cloud services
is also creating new opportunities for us
to target B2B customers by offering a
more complete suite of Information and
Communications Technology (ICT) services.
Our strategy is to selectively evolve our
portfolio into ICT-managed services to avoid
excessive fragmentation and operational risk,
while building the Tigo Business brand and
differentiating ourselves through our service
model and frontline execution. We believe
that the small and medium-size business
(SMB) segment represents a particularly
attractive opportunity for growth, as SMBs
digitize their business and operations using
digital communications, and implement Cloud
and datacenter solutions in line with what we
see in more developed markets.
Digital innovation and customer-centricity
We are focusing our digital innovation on
products and customer-facing developments
that drive user adoption of high-speed data
services such as: data monetization and video
consumption, including Tigo Play; and this
year’s launch of Tigo ONEtv with TiVo.
Through Tigo ONEtv, our next-generation user
experience platform, we bring a cutting-edge
pay-TV entertainment experience for our
customers, with advanced personalization and
recommendations, seamless integration of
content across linear, on-demand, and robust
multiscreen capabilities. We also provide a
superior digital user experience through our
Tigo Shop App for prepaid, Mi Tigo App for
post-paid, and MFS.
Our focus remains firmly set on driving the
adoption and enjoyment of these digital
channels by our customers.
Total channel active users (m)
2017
2016
5.1
3.8
Year-over-year growth 35%
We are evolving our strong commercial
distribution network to operate digitally,
which we believe will improve both customer
experience and operational efficiency. To
enable a seamless and integrated experience
across sales and care touchpoints, we are
implementing a business transformation that
interlinks user experience, digital innovation,
business processes, and our back-end
information and Communications
Technology systems.
We have also adopted and deployed a net
promoter score (NPS) program, designed to
strengthen our customer-centric culture.
Monetizing mobile data
Our mobile networks continue to experience
rapid data traffic growth, and we are very
focused on making sure that incremental
traffic translates into additional revenues.
Our mobile data monetization strategy is
built around several key drivers:
• 4G/LTE network expansion: Our 4G
networks enable us to deliver high volumes
of data at faster speeds in a more cost-
efficient manner than with 3G networks.
• Smartphone adoption: More data-capable
smartphone devices, particularly 4G/LTE,
with a strong device portfolio and post-paid
strategy to enable our customers to use
data services on the move.
• Stimulating data usage: More compelling
data-centric products and services to
encourage our consumers to consume
more data, while maintaining price
discipline and sustaining our mobile data
margins. For example, we have introduced
digital innovations with access to specific
applications charged according to time-
usage rather than data consumption.
Building cable
We are moving quickly to meet the growing
demand for high-speed data from residential
and business customers alike in our Latin
American markets. We are doing this by:
• Accelerating our hybrid fiber-coaxial (HFC)
network expansion: We are hastening the
roll-out of our high-speed HFC fixed network
while complementing our organic build-out
with small, targeted acquisitions. In 2016,
we expanded our HFC network to pass an
additional 777,000 homes. In 2017 we’ve
nearly doubled this, adding 1.3 million.
• Increasing our commercial efforts to fill the
HFC network: As we expand the network, we
also deploy commercial resources necessary
to begin monetizing our investment.
Specifically, the HFC network allows us to sell
additional services to existing customers that
drive ARPU growth over time.
14
Millicom Annual Report 2017
Measuring progress
against strategy…
Monetize mobile data
Build cable
Financial*
19.6%
Organic revenue growth1
Financial*
7.6%
Grow B2B
Financial*
4.0%
Organic revenue growth2
Organic revenue growth
2017
2016
1,336
1,101
2017
2016
1,126
1,032
2017
2016
936
887
Revenue (US$m)
Revenue (US$m)
Revenue (US$m)
Operational
3.5m
Operational
253,300
Operational
36,000
4G smartphone data users additions3
HFC homes connected net additions4
Total SMBs customers increase5
17.2%
SMBs customer base YoY growth %
* These financial and operational KPIs focus on the Latin America business which represents the majority of Millicom’s business in 2017
(90% of total revenue), excluding Africa which has a different business and operational profile
Corporate Responsibility
Employees who have
acknowledged the
Code of Conduct
96%
Children reached by
Child Online Protection
Training6
188,615
Women in
senior management
33%
Strategic suppliers
who signed the Supplier
Code of Conduct
89%
Read more on compliance.
See pages 172-174
Read more on Child
rightws and online
protection. See pages 169-171
Read more on diversity.
See pages 179-181
Read more on responsible
supply chain management.
See pages 184-186
† Service revenue is Group revenue related to the provision of ongoing services excluding Telephone and equipment sales.
1 Mobile Data revenue is Group revenue related to the provision of data to residential customers.
2 Home revenue is Group revenue related to the provision of residential services such as broadband internet, TV and fix telephony.
3 Active subscribers with a smartphone and using Data in 4G network. Only residential users are included.
4 Homes passed that has at least one connected Revenue Generating Unit (RGU).
5 Number of unique accounts between 0-50 FTE and with both fixed and mobile services. Small and Medium size Business (SMB) = clients with less than 50 Full Time Employees (FTE).
6 Cumulative since 2016.
Millicom Annual Report 2017
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Performance...
This section provides a multifaceted overview
of our performance in 2017, including a report
from our Chief Financial Officer, our risk profile
and how it impacts our strategy, an operational
review of our regions, and a performance review
of our corporate responsibility.
Chief Financial Officer’s review
Risk management
Latin America
Africa
Corporate responsibility
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44
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Chief Financial Officer’s
review
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Throughout 2017, we saw a steady improvement in revenue
growth across the vast majority of our markets and business lines.
We maintained our cost discipline and produced another year of margin
expansion and free cash flow growth, and we made great strides
to improve our return on capital by disposing of under-performing
assets and by opportunistically refinancing some of our debt.”
Millicom Annual Report 2017
17
Chief Financial Officer’s review – continued
Key financial highlights of the year1 2
US$m
Revenue
Service revenue
Organic growth (%)
EBITDA
Capex
Operating cash flow (OCF)
Return on Invested Capital (ROIC)3
Net debt
2017
6,024
5,659
0.2
2,190
993
1,197
16.2
4,071
2016
5,979
5,591
0.5
2,114
988
1,126
13.1
4,181
% change
0.8
1.2
1
2
Guatemala and Honduras businesses fully consolidated.
See Additional information on page 157 to 160 for
reconciliation with IFRS numbers.
Alternative performance measures 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 157 to 160 for
definitions and reconciliations to the closest respective
equivalent IFRS measures.
3 Group ROIC after corporate costs.
3.6
0.5
6.2
NM
(2.6)
Revenue
Revenue was $6,024 million, a gain of 0.8%
on a reported basis but a decrease of 0.4%
in local currency terms. Service revenue in
the full year was $5,659 million, 0.2% higher
than in 2016 on an organic basis. Handset
and equipment sales declined 6.0% on a
reported basis, mainly a result of our strategy
to focus on providing reliable and high-
quality service, and to rely more heavily on
third parties for the sale of handsets, where
growth potential and return on investment
are less attractive for us.
Gross margin
Gross profit was $4,445 million, 0.7% higher
year-over-year, and the gross margin of 73.8%
was stable compared to 2016, reflecting the
benefit of a lower proportion of handset sales
in the revenue mix, offset by modest service
margin erosion in Africa.
Earnings before interest and tax
Operating expenses totaled $2,255 million,
a reduction of $47 million, or 2.0%, compared
to $2,301 million in 2016. For the year, we
reduced general and administrative costs by
$77 million and corporate costs by $18 million,
and we increased spending in selling and
marketing by $41 million to support revenue
growth initiatives in some of our Latam
markets. Smaller items explain the remaining
$6 million difference versus 2016. EBITDA
totaled $2,190 million, an increase of 3.6%
year-over-year in reported terms and of
2.2% organically.
Operating profit
Depreciation increased 1.3% year-over-year to
$993 million, and amortization of intangibles
decreased 5.8% to $317 million, mostly due
to the impact of the decommissioning of our
fixed wireless network in Colombia at the end
of 2016, which caused us to accelerate and
complete the amortization of related
spectrum assets during 2016. Other operating
income of $39 million in 2017 compares to a
loss of $38 million in 2016, primarily due to
gains on the sale of towers and other assets in
2017, whereas the loss in 2016 largely reflects
a $23 million impairment of assets related to
a large government contract in Guatemala.
Operating profit reached $919 million,
an increase of 21.1% or $160 million year-
over-year, compared to the $759 million
reported in 2016.
Profit (loss) before tax
Net financial expenses were $471 million in
2017, an increase of $15 million year-over-year
primarily due to a $17 million increase in
finance lease expenses related to the
leaseback of a portion of our tower portfolios
in Paraguay and Colombia. Interest on our
debt decreased by $20 million as a result of
refinancing activity, which allowed us to
extend maturities and lower the cost of our
debt funding. However, these savings were
largely offset by early redemption charges,
which increased $18 million year-over-year in
2017 due to our debt refinancing activity,
which was concentrated mostly in the second
half of the year.
Other non-operating income of $6 million
in 2017 compares to income of $2 million in
2016 and mostly reflects gains from foreign
exchange, as the currencies where we operate
appreciated slightly on average for the year.
Losses from associates of $85 million in 2017
increased from $49 million in 2016 mainly due
to an impairment of our investment in Latin
America Internet Holding (LIH). Profit before
tax increased 43.7% year-over-year to
$368 million compared to a profit of
$256 million in 2016, as higher operating
profit was partially offset by an increase in the
other non-operating items described above.
Tax
Tax expense was $252 million in 2017, almost
unchanged compared to $251 million in 2016.
Net profit
Profit for continuing operations totaled
$116 million in 2017, up $110 million year-over-
year from $6 million in 2016. The share of
profits attributable to non-controlling interests
also increased to $102 million in 2017, from
$38 million in 2016, mostly due to the impact
of restructuring charges incurred in Colombia
in 2016. Discontinued operations, which
include Senegal, Ghana and the Democratic
Republic of Congo (DRC), generated profits of
$71 million in 2017 compared to a profit of
$1 million in 2016. The improved performance
in 2017 largely reflects a gain stemming from
the merger involving our Ghana operations in
2017 and to the result on the sale of our
business in DRC in 2016. The net profit for
Reconciliation from operating profit to EBITDA
US$m
Operating profit
Depreciation and amortization
Other operating income (expenses), net
EBITDA
EBITDA as a % of revenue
2017
919
1,310
(39)
2,190
36.4
2016
759
1,317
38
2,114
35.4
Millicom Annual Report 2017
18
Performance
US$m
Revenue
Cost of sales
Gross profit
Operating expenses
EBITDA
Depreciation and amortization
Other operating income (expenses), net
Operating profit
Net financial expenses
Other non-operating income (expenses), net
Gains (losses) from associates, net
Profit (loss) before tax
Net tax credit (charge)
Profit (loss) for the period from continuing
operations
Non-controlling interests
Profit (loss) from discontinued operations
Net profit (loss) for the period
Adjusted net profit (loss) for the period
Adjusted earnings per share
2017 was $85 million, or $0.85 per share,
compared to a net loss of $32 million, or
$0.32 per share in 2016. When adjusting for
non-operating items, adjusted net profit
reached $108 million, or $1.08 per share,
in 2017, an 18.3% increase as compared to
$91 million, or $0.91 per share, in 2016.
Return on invested capital
The Group’s return on invested capital (ROIC)
was 16.2% in 2017, compared to 13.1% in
2016. The ROIC improvement was underpinned
by operating efficiencies mainly in Latam, as
well as the benefit of the tower transactions in
Colombia and Paraguay, and the disposal of
operations in Senegal and Ghana.
2017
6,024
(1,580)
4,445
(2,255)
2,190
(1,310)
39
919
(471)
6
(85)
368
(252)
116
(102)
71
85
108
1.08
2016
5,979
(1,564)
4,415
(2,301)
2,114
(1,317)
(38)
759
(456)
2
(49)
256
(251)
6
(38)
1
(32)
91
0.91
% change
0.8
1.0
0.7
(2.0)
3.6
(0.5)
NM
21.1
3.4
NM
74.0
43.7
0.7
NM
NM
NM
NM
18.8
18.3
Latam
Total revenue in Latin America grew 1.7% in
reported terms and 0.2% on an organic basis
to $5,441 million in 2017. Service revenue
increased 0.9% organically year-over-year, to
$5,078 million. In our B2C Mobile unit, data
revenue expanded 19.6% organically, but this
was not quite enough to offset the continued
erosion of our voice and SMS revenue, such
that B2C Mobile revenue declined 2.4%
organically for the year. Our Home business
continued to perform well in 2017, with service
revenue growth of 7.6% year-over-year similar
to the 7.4% achieved in 2016. Our B2B unit
grew 4.0% organically, with our fixed business
expanding 6.8%, while Mobile was negative
at -1.3%, both on an organic basis.
EBITDA in Latam increased 4.2% on a
reported basis and by 2.8% organically,
and the EBITDA margin increased 98 basis
points year-over-year to 39.5% in 2017.
The improved profitability is the result of both
increased revenue and reductions to our
operating expenses.
Scope changes
During 2017, Millicom announced an
agreement to dispose of its business in
Senegal, and the results from this
operation are reported as discontinued
operations in our financial statements.
Also in 2017, we agreed with Bharti Airtel
to combine our operations in Ghana to
form a joint venture in which we retain
a 50% ownership stake. The results from
these operations are now accounted for
as a joint venture.
Finally, we reached an agreement to sell
our operations in Rwanda, but as regulatory
approval had not yet been obtained as of
December 31, 2017, we did not classify our
Rwanda operations as discontinued.
Capex for the region reached $907 million
in 2017, up 5% from $867 million in 2016,
due mostly to higher levels of spending on
customer premise equipment (CPE) to support
the growth of our Home business.
Investments in our networks accounted for
88% of Latam capex, while the remaining
12% went towards IT and Other. Network
investment was split approximately 63% fixed
and 37% mobile. Spending on CPE increased
39% year-over-year and accounted for more
than 25% of our total capex in the region.
Within Mobile, the bulk of our capital
investment remains focused on adding
coverage and capacity to our 4G networks.
Operating cash flow (OCF) in Latam grew
4.0% year-over-year to $1,244 million,
representing an OCF margin of 22.9%,
an improvement of 50 basis points compared
to 22.4% in 2016.
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19
Chief Financial Officer’s review – continued
Joti joins forces with Tigo services:
Lucas Mhuvile (also known as Joti) is one of
Tanzania’s best-known actors and comedians,
and has starred in Tigo marketing campaigns
since 2015
Africa
2017 was a challenging year for our African
operations, due to a combination of higher
taxes, new regulatory obligations, intense
competition and a weaker macro backdrop
in some of our key markets.
Our B2C Mobile customer base declined
by 1.0% or almost 175,000, mostly due to our
strict adherence to new SIM card registration
regulation, which caused higher levels of churn
and slowed our ability to sign up new
customers. On the other hand, the number of
customers who use our mobile financial
services increased 13.7% year-over-year to
reach almost eight million at the end of 2017.
Revenue declined 7.1% on a reported basis
and 5.6% organically, with the difference
reflecting slightly weaker currencies in our
markets.
EBITDA of $173 million in 2017 was 12.1%
lower than $200 million in 2016, and the
EBITDA margin contracted 212 basis points
to 29.8% in 2017 from 31.9% in 2016.
Capex for the year reached $81 million
in 2017, down $36 million compared to
$118 million in 2016, as we continue to focus
on improving capacity utilization after years
of significantly investing in our mobile
networks. As a result, OCF improved to
$93 million in 2017, an improvement of
$11 million from $82 million in 2016.
Free cash flow
US$m
EBITDA (excluding discontinued operations)
EBITDA from discontinued operations
EBITDA (including discontinued Operations)
Net cash capex (excluding spectrum and licenses)
Change in working capital and other non-cash items
Operating cash flow
Taxes paid
Operating free cash flow
Interest paid, net
Free cash flow
Advances for dividends to non-controlling interests
Equity free cash flow
2017
2,190
58
2,248
(955)
(69)
1,224
(255)
969
(449)
520
(164)
356
2016
2,114
62
2,176
(1,053)
2
1,125
(276)
850
(429)
421
(165)
256
Equity free cash flow
Equity free cash flow for the full year 2017
was $356 million, $100 million above the level
generated in 2016 and more than covering
the proposed Millicom Group dividend
payment of $265 million. The increase stems
largely from lower levels of cash capex in 2017,
as higher EBITDA generation was offset by
higher working capital, while lower cash taxes
were offset by higher interest paid.
Excluded from cash capex and from equity
free cash flow are cash payments related to
spectrum and licenses, which totaled
$53 million in 2017, a reduction compared
to $39 million paid in 2016. Spectrum costs in
2017 include a $16 million deposit related to
the recent 4G spectrum auction in Paraguay.
20
Millicom Annual Report 2017
Assets, liabilities and equity
US$m
Intangible assets, net
Tangible assets, net
Investments in joint ventures and associates
Cash and cash equivalents and restricted cash
Other (non-)current assets
Total assets
Equity attributable to owners
Non-controlling interests
Debt and financing
Other (non-)current liabilities
Total equity and liabilities
Intangible assets
Intangible assets decreased by $305 million
during the year due primarily to the
amortization of assets including the purchase
price adjustment in Guatemala and, to a lesser
extent, from the deconsolidation of our
Senegal and Ghana operations.
Tangible assets
Tangible assets declined by $234 million,
as the impact from the deconsolidation of
our Senegal and Ghana operations, and of
regular depreciation charges, were partially
offset by net additions to our
network equipment.
Investment in joint ventures and
associates
Investment in joint ventures and associates
increased slightly to $337 million, as the
inclusion of our 50% stake in our Ghana joint
venture was largely offset by our share in the
loss of Helios Towers Africa (HTA) and an
impairment loss in LIH.
Equity and non-controlling interests
Equity attributable to the owners of the
company declined by $71 million mainly
because declared dividends of $265 million
exceeded our reported net income of
$85 million in 2017. Foreign exchange
translation explains the rest. Non-controlling
interests declined by $131 million mainly due
to the effects of dividends declared by our
Guatemala and Honduras operations in 2017,
partly offset by profits and currency gains.
2017
4,313
3,971
337
1,095
1,841
11,556
2,905
964
5,168
2,519
11,556
2016
4,618
4,205
331
1,103
1,627
11,884
2,976
1,095
5,290
2,523
11,884
Change
(305)
(234)
6
(8)
214
(328)
(71)
(131)
(122)
(4)
(328)
Debt and key financing activities
Gross debt as of December 31, 2017, including
finance leases, decreased to $5,168 million
from $5,290 million at the end of 2016, driven
by the final redemption of the 2021 Notes on
October 15, 2017.
Approximately 69% of group gross debt at
December 31, 2017 was held in Latam, with
approximately 7% held in Africa and the
remaining 24% held at the corporate level.
Finance leases of $365 million represented
7% of group gross debt, and these liabilities
increased by almost $73 million in the year as
we sold and leased-back towers in Paraguay
and Colombia, and we renegotiated our
contract with HTA in Tanzania.
As of December 31, 2017, 67% of group gross
debt was at fixed rates, and 40% was in local
currency, in line with our targets and in order
to mitigate our exposure to currency volatility.
The average maturity of our debt stood at
5.5 years, and our average cost of debt
excluding finance leases was 6.2%.
Group net debt, including Guatemala and
Honduras on a fully consolidated basis, was
$4,071 million at the end of 2017, down from
$4,181 million as of end of 2016. The decline
in net debt reflects cash flow generation,
as well as the net benefit from the tower
transactions. Net debt-to-EBITDA, based on
the last twelve-month EBITDA, was 1.86x
at December 31, 2017, compared to 1.93x
as of year-end 2016.
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Millicom Annual Report 2017
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Digital connectivity
for tomorrow’s world...
connected classrooms
Accra schoolchildren take part in Tigo Ghana’s
literacy drive “Raising Readers”
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Tigo El Salvador’s social investment programs
are highlighting tech education for girls
Tigo Ghana’s Digital Changemaker Ernestina
Appiah teaches pupils how to code
When we signed up to the 2030 Information
and Communication Technologies Alliance for
the Americas, we made a pledge to provide
Internet connection to 2,100 schools and
public institutions across Latin America by
2030. This continues to be one of the drivers
of our social investment focus.
We strongly believe in the impact that being
connected to the Internet can have for the
education and overall lives of the children in the
countries where we operate, which is why we
continue seeking opportunities for investment
and are determined to meet our pledge ahead
of schedule.
By 2017, Millicom has provided Internet access
to 1,259 schools and public institutions across
Latin America and also Africa. So far, through
this initiative, Millicom has given Internet
access to more than 467,000 students, up
from 375,000 students connected last year.
Connected students
+25%
Connected schools and
public institutions
+1,259
Millicom Annual Report 2017
23
Risk management
Our approach to balancing risk with reward is carefully
aligned with our business strategy to protect our
stakeholders and deliver sustainable value
Risk management framework and approach
Governance
Strategy
and risk appetite
Policy, roles
and responsibilities
Process
Tools and technology
Risk identification and assessment
Monitoring, escalation and reporting
Risk treatment and contingency planning
Culture and
compliance
Training and awareness
Behavior, performance and reward
Assurance
Millicom’s Enterprise Risk Management (ERM)
framework is illustrated in the pyramid shown
above. Governance is provided by the Board
and oversight by the Audit Committee, in
conjunction with those who make up the team
in our Risk function.
Risk management processes are embedded
operationally both geographically (by country)
and functionally (by business area). Risk and
control culture activities are led by the CEO
and Executive team, and supported by the
Business Controls, Compliance, Risk, Corporate
Responsibility and Internal Audit functions.
We recognize that both strategic and
operating risks are influenced by both internal
and external factors, some of which are
outside our control, and some of which cannot
be insured against. Risks are inherent in
business and we accept these risks to the
extent that opportunities for sufficient returns
exist and that systems and controls are in
place and are operating effectively to manage
risks to an acceptable level.
Our approach to risk management is consistent
across the entire business. Key strategic and
operating risks are assessed from an overall
Group perspective, as well as by individual
country and business unit. Action plans that
seek to balance risks with returns are developed,
implemented and modified over time as the
underlying risks evolve. Actions are
implemented both globally and locally by
country executives and key decision makers.
A network of Risk Officers is in place at the
Group level and each significant operating
country level. The risk function is tasked with
identifying, analyzing, monitoring and
coordinating our approach to balancing risk
with return and reporting to the Executive
team. The Audit Committee, on behalf of the
Board, reviews the effectiveness of risk
function activities on a regular basis.
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On the inside
Over the past year we have continued
to manage efficiencies and develop more
effective digital solutions in key areas such
as the prevention of cybercrime.
Risk landscape and appetite
As an international company operating in
emerging markets across Latin America and
Africa, identifying and managing risk plays a
significant role in our decision-making process.
Our markets expose us to an inherently higher
degree – and potentially different set – of risks
than similar companies operating in larger,
more established and mature economies.
We operate in the rapidly evolving mobile
telephony and cable services business, where
the pace of technological change can have a
significant impact on the demand for services,
and the ability of service providers to generate
sufficient returns on investment. This pace of
change is expected to continue as consumers
seek to improve their lifestyles with new and
higher quality products and services wherever
they may be.
Consequently, Millicom’s risk appetite
is higher than many of its peers in the
telecommunications industry, and its risk
profile wider than that of many international
businesses.
Evolution of risk in 2017
In 2017, Millicom continued to experience a
degree of regulatory and macro-economic
uncertainty in many countries. However, the
significant negative impact of currency
movements experienced in 2016 (particularly
in Colombia) was not repeated.
The past year continued to see the rapid
transformation of our business and in our
geographic footprint – both internally, as we
manage efficiencies and develop more
effective digital solutions, and externally,
as we build fixed networks at unprecedented
pace, and bring more customers into the
digital data experience. We carefully focus
on those risks that most closely reflect the
execution of our strategy to facilitate this
transformation and growth.
Information and network access security,
and in particular the protection of customer
data, continue to emerge as significant risks
for all consumer-based businesses. With the
increased global threat of cybercrime, and
denial of service attacks, in 2017 we allocated
additional specialized resources and executed
a number of prevention-related projects and
controls to increase our defences in this area.
Risk assessment and measurement
Our risk assessment and measurement
activities are performed from both top-down
and bottom-up and both functional and
geographic perspectives. Risks are identified
and managed, from strategy and strategic
direction at Board and Senior Management
levels, down to specific transactional processes
by business owners in our operating countries.
During 2017, Millicom continued to refine the
way in which risks are classified and these fall
within five broad categories: strategic,
financial and competition, operations and
execution, political and regulatory,
governance, compliance and reputational.
While we manage and monitor many more
risks within the Millicom risk universe, we have
highlighted as follows, areas of risk that were a
key focus and significance to Millicom in 2017.
Millicom Annual Report 2017
25
Risk management – continued
Competition and
Customer Experience
Demand for new and a wider range of products and services has created opportunity,
but added complexity. We also face markets which are now saturated in terms of mobile
operators and mobile penetration rates.
Choices of product and service, development and delivery (internal, strategic partnerships,
acquisitions) are carefully considered to fit with business objectives, size of opportunity,
expected payback, and ability to deliver.
We strive to deliver a first-rate customer service, and are never complacent. Poor customer
experience could dramatically affect our reputation and our ability to compete effectively
in our markets.
To ensure we continue to improve our quality, and being mindful of evolving customer demands,
we use a variety of tools including customer engagement, local and regional trends, and
consumption patterns to identify and improve access channels.
We have standardized and digitized our customer experience metrics across all markets to
provide a consistent and positive experience and make it easier for customers to promote and
receive instant feedback.
Financial and
Macro-economic
Unfavorable macro-economic conditions (including local currency devaluation against the
US dollar, inflation and other factors impacting consumer spending power) may reduce
customer ARPU and impact our dollar-based results and cash flows.
Political and
Regulatory
Technical Transformation
and Convergence
Our cash flow planning process involves careful analysis of the timing and amounts of cash flows
required to service Group level debt while balancing cash flow needs of each of our operations.
The diverse geographical spread of the countries, economies and currencies in which we
generate revenues and cash flows reduces our exposure to fluctuations in individual countries
or currencies.
We repatriate cash as early as possible.
Lack of transparency and predictability in regulation and regulatory and tax rulings can lead to
associated penalties and reputational damage, as well as operational change requirements.
We constantly monitor and review potential changes in regulations. Efficiency programs are
sought in all aspects of our business to offset the impact of newly introduced or expected
changes in taxes and regulations.
Indirect taxation and regulatory pressure through tariffs, taxes and service penalties continued
to increase in 2017. In Chad, for example, legislation was enacted requiring a tax of 18% to be
levied on revenue. As a result, we were forced to increase our prices.
Failure to set up business structures and models that facilitate efficient and effective operations
could negatively impact competitive positions, and business value.
Millicom has now evolved from a traditional mobile operator to a provider of a comprehensive
range of services through fixed line, mobile, satellite, and MFS platforms.
As we expand our HFC networks, our ability to offer convergent services is enhanced, and we
are investing to deploy IT solutions that allow us to efficiently market and support convergent
solutions for our customers. We expect that convergence will help differentiate us in the
marketplace and will increase customer satisfaction and loyalty, thereby lowering customer
churn and costs. Our focus on convergence also reflects our expectation that future network
deployments, such as 5G, will require significant fiber network capacity and capillarity, as well as
the spectrum, radio, and other components of today’s mobile networks. In essence, we expect
future networks to be convergent by nature.
26
Millicom Annual Report 2017
Portfolio Management
Networks and
Infrastructure Resilience
The acquisition or retention of businesses either poorly aligned to strategy, or which are
overpriced, risk bringing lower than required return on investment, and inefficient allocation
of capital and resource.
Opportunities to acquire, merge or divest businesses are carefully considered in light of
market dynamics, portfolio balance and long-term value creation.
This year, as part of this process, we have reached agreements to sell our operations in
Senegal and Rwanda, and merged with Bharti Airtel in Ghana.
Our customers rely upon our networks to provide them access to the services they need on a
daily basis. Any disruption to that service, or compromised ability to restore services to customers
in acceptable timeframes, needs to be minimized to reduce any consequential loss of revenue,
impact on customer experience, and cost of restoration to required levels of service.
Our network resilience controls, and mitigating activities include network redundancy,
as well as business continuity management plans which are tested on a regular basis.
Cyber Security and
Data Protection
Information security and data protection are increasingly placing a burden of compliance
and responsibility on companies such as Millicom who retain, handle and process sensitive
customer data.
Spectrum and
Licenses
People – workplace and
wellbeing
Compliance and
Ethics
Our network and IT system development processes include regular assessments of threats
and vulnerabilities to security breaches, and deployment of resources to mitigate those risks.
The availability of licenses and spectrum is limited, closely regulated and can be expensive.
We may not be able to obtain these from the regulator or third parties at all or at a price that
we deem to be commercially acceptable given competitive conditions.
Our license and spectrum planning are critical components of our mobile business.
Renewal/retention is often negotiated in initial allocation contracts and opportunities to
acquire new spectrum are carefully considered in terms of spectrum quality, fit with network
needs, and driven by customer demand.
Most of our employees live and work in emerging markets. Many of these countries have
security issues, including civil unrest, armed and organized criminal activity and, to a lesser
extent, the threat of terrorism. As a result, staff are sometimes exposed to situations which
may threaten their personal security.
We manage the health, safety, and wellbeing of staff based on international (OHSAS)
standards, industry best practice, as well as advice and support from local authorities. With a
central security and safety team, we have empowered and trained operational teams, and every
market has a professionally trained and certified physical security and health and safety officer.
All our third-party partners must also abide by our security and safety standards.
A lack of accountability and discipline in ensuring sufficient anti-bribery, anti-corruption and
anti-money laundering procedures and controls could have a catastrophic effect on our
business. It could result in potential penalties, fines, reputational damage, and operational
restrictions.
We have zero tolerance for bribery and corruption in all of our business dealings. Through clear
policies, risk awareness training and monitoring activities, we ensure that all our staff are aware
of the risk to them as individuals and to the Company and know how to act if faced with the risk.
Our Global Compliance and Business Ethics team works closely to follow up on all concerns
raised. We also work with our suppliers and other third parties to ensure they have clarity on
our principles and policies in this area.
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Millicom Annual Report 2017
27
Digital connectivity
for tomorrow’s world...
connected responsibly
28
Millicom Annual Report 2017
Tigo-hosted workshops are raising
awareness around child rights, privacy
and freedom of expression
Enseñanza Tecnologica
(education in technology) training certificates,
awarded by Fundacion Tigo
Suppliers who graduated from this program
have gone on to create policies and procedures
aimed at reducing their risk to corporate
responsibility standards. This has allowed them
to better compete in the market place.
During 2017 we trained 121 suppliers in Latin
America on key issues like Child Rights, Health
and Safety, Anti Bribery and Anti Corruption
(ABAC) and Eco-Efficiency, amongst others.
This training program consisted of eight
face-to-face training sessions as well as onsite
visits totaling more than 45 hours of training
for each supplier.
These suppliers were chosen for being key to
the company’s activity and also for being
categorized as being of risk to Millicom’s
corporate responsibility.
Suppliers trained on ABAC and CSR policies
Training hours per supplier
121
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Millicom Annual Report 2017
29
Performance
How we are doing
in Latin America...
Our Latin American footprint covers eight countries
and contributes 90% to Millicom’s Group revenue.
Our Tigo brand has often become part of the national
fabric. Our strategy has paved the way for positive
revenue growth as we continue to build the digital
highways across the region.
5,078
Service Revenue
Organic growth +0.9%
2,151
EBITDA
Organic growth +2.8%
The financial information is based on the Management
reporting numbers, with Guatemala (55% owned)
and Honduras (66.7% owned) as if fully consolidated.
See Additional information on pages 157 to 160.
* Other service revenue non-allocated to the Business
Units includes revenues from towers rental and contact
center services.
** Other includes SMS, Mobile Financial Services (MFS),
other VAS services and Visitors roaming revenue; DVNE,
DVNO, MVNO network access revenue and other small
atomized items
Service revenue
by country
Other
3%
El Salvador
8%
Guatemala
23%
Paraguay
12%
18%
B2B
US$936m
+4.0%
26%
B2C Mobile Data
US$1,336m
19.6%
22%
B2C Home
US$1,126m
+7.6%
Revenue
by service*
32%
B2C Mobile Voice & Other**
US$1,640m
-15.2%
Honduras
11%
Colombia
32%
Bolivia
11%
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Millicom Annual Report 2017
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More than 60,000 people attended
Tigo Music’s three-day international
Estereo Picnic festival in Bogota #FEP2017
We have deep roots in many of the countries
where we operate. In some cases, we have
been providing services for 25 years. Where
we work we are committed to growing our
presence and supporting their economic and
social development.
Our services
We provide Mobile Voice, SMS, and Mobile
Data services through our 2G, 3G, and 4G
enabled wireless networks in El Salvador,
Guatemala, Honduras, Bolivia, Colombia
and Paraguay.
Our goal
Our goal remains to become a high
performing, customer-centric, high-growth
fixed mobile convergent (FMC) digital
operator in Latin America. We want to be the
leading provider of digital services and content
to promote and develop the adoption of The
Digital Lifestyle by our customers.
Our markets
Millicom is well established in Latin America
and has developed strong connections to
the countries where we operate, helping us
achieve our goals. In many of our markets
we are one of the largest employers in the
country, and have robust talent identification
programs that help us fill our management
ranks with local employees who know our
markets best. Our expertise can only come
from decades of working in our communities,
all of which contribute to our success.
We are also one of the largest tax payers
in each of the markets we operate in.
Thanks to our local commitments, we have a
historically strong position in our markets with
a revenue market share near or above 40%,
with the exception of Colombia where we are
the challenger.
Our fixed business provides television and
Internet in El Salvador, Guatemala, Honduras,
Costa Rica, Bolivia, Colombia, Paraguay and
Nicaragua, and wireline voice in El Salvador,
Guatemala, Honduras, Costa Rica, and
Colombia. We provide these services through
a mix of technologies, but are increasingly
focused on expanding our Hybrid Fiber-
Coaxial (HFC) network which offers the best
customer experience and highest quality
service in our markets.
Revenue reconfiguration
As our customers’ expectations change and
the appetite for Mobile data and fixed
Internet grows while use of legacy services
such as Voice and SMS decline across the
world, we have been adapting our business to
the new reality by focusing on bringing high
quality Internet access to more customers
and providing more services to the corporate
segment. This focus is paying off and in the
second half of 2017 revenue grew 19.6%
year-over-year for mobile data and 11.8%
in fixed, more than compensating for the
decline in legacy revenue.
To drive this reconfiguration we have been
investing heavily in our mobile and fixed
networks and expanding our service offering
for businesses.
For Mobile, over the past year we have
expanded our 4G Points of Presence (PoP) by
53%, and increased our 4G network coverage to
more than half of the population in our markets.
This has allowed us to more than double our 4G
smartphone users to 6.9 million in the region.
In addition, we have grown the size of our
Fixed HFC network by 18.1%, adding almost
1.3 million Homes Passed, reaching 56.3% of
our 15 million opportunity. We have also been
filling this network with subscribers, adding
more than 250,000 HFC Homes Connected in
2017 and 673,000 HFC Revenue Generating
Units (RGUs) in our Home business.
Over the past six years we have created a near
billion-dollar Tigo Business revenue stream,
and seen the segment grow rapidly as we
continue to expand our infrastructure and
service portfolio to become the first-choice
partner for the diverse range of private and
public clients in the markets where we operate.
One example of this expansion is in Colombia
where we inaugurated a Tier-3 datacenter in
Q4 to expand our portfolio of Cloud services.
This way we now include Infrastructure as a
Service (IaaS) and Platform as a Service
(PaaS) to support our clients by backing up
and managing their critical information.
In addition, we continued presenting relevant
new technologies to business leaders and
current and potential clients through hosting
Tigo Business Forums, to show how we can
support our clients’ growth and their transition
to a digital environment.
This approach of building, educating, and
partnering helped us grow our client base by
16.4% in 2017.
Millicom Annual Report 2017
31
Latin America performance review – continued
Digital innovation
We operate in fast-moving and competitive
markets and sell our products through some
of the largest commercial distribution
networks in the region and interact with
millions of customers every day through
our stores, call centers, and online portals.
With our need to respond quickly to market
changes and customer needs, we continuously
develop and implement solutions across our
business to improve efficiency and serve our
customers better.
In 2017, for our B2C Mobile customers we
developed the Tigo Shop and Mi Tigo apps
that allow customers themselves to answer
the most common questions and permit us to
know our customers better and communicate
with them more effectively. Internally we have
put in place high performance data platforms
to speed up transaction times. These also give
us the ability to perform just-in-time marketing
campaigns to support our fast-moving
commercial business. For our front-line staff
we provide state-of-the-art digital care tools
that allow for greater customer understanding
and more personalized care.
In 2018 we will continue improving our internal
processes and procedures to help us be more
lean and better able to serve our customers.
A member of our communities
Corporate responsibility is an integral part
of our business success and strategy. The very
nature of our relationships with many of our
countries means that our growth is intrinsically
linked to theirs. When they grow, we grow.
Therefore, supporting local development
is not simply a side effect, but a shared goal,
inextricably linked with our business.
We work with key stakeholders in understanding
where we can make a difference in the
communities where we operate, where we can
have greater positive impacts in people’s lives
and how we can work together to bring them
the benefits of the online world through an
understanding of a productive and responsible
use of online tools.
We understand the significance of
incorporating corporate responsibility principles
throughout our organization and throughout
our value chain. That’s why for example we
work closely with suppliers, promoting
sustainable practices that will make them more
competitive while managing our own risks.
Building, educating, and
partnering has helped us
grow our client base.”
Our results
Our strategy is starting to pay off as service
revenue has grown by 0.9% year-over-year in
2017 but year-over-year by 2.3% in Q3 and by
3.1% in Q4. This growth has been driven by
our 12.9% year-over-year growth in strategic
service revenue (Mobile Data + Home) and
6.4% growth in subscription revenue (B2C
Postpaid + B2C Home + B2B). This
reconfiguration, along with a series of
efficiency initiatives whose effects will be felt
even more in the future, has helped us drive
EBITDA growth by 2.8% year-over-year.
Within each business unit our results were
also very positive.
B2C Mobile service revenue declined by
2.4% year-over-year due to the drop in legacy
revenue, but growth improved to 0.2% in Q4
as Mobile data fully compensated for the
decline in legacy Voice and SMS revenue.
This compensation in mobile revenue is the
result of our strategy to connect more users
with 4G through smartphones. With this
strategy, B2C Mobile data revenue grew
19.6%, driven by our addition of almost
3.5 million new 4G smartphone data users
bringing our total close to seven million.
These customers are particularly important
and are proving our strategy as they use
over 50% more data per month when they
migrate from 3G to 4G.
In our Home business, our investments in
building new fixed HFC infrastructure are
paying off. This year we passed 1.3 million
new homes with HFC and connected more
than 250,000 new homes with 673,000
new HFC RGUs. This strategy, combined
with renewed focus on bundling, has driven
Home service revenue up by 7.6% this year.
At the same time, we have increased our
differentiation in the market with the launch
of our next generation TV service, Tigo ONEtv,
in Colombia, which we plan to deploy across
the rest of our markets in 2018.
Customers first
As our markets become more competitive,
we are responding by retooling our operations,
touch points, and processes to align with our
customers’ needs and wants. This focus on our
customers is central to our continued success,
and it touches everything we do.
Tigo Bolivia’s customer service network
features more than 2,800 agents nationwide
in addition to customer care centers, flagship
stores and Tigo branches
32
Millicom Annual Report 2017
Tigo ONEtv:
Bringing the next generation of TV to Latin America
The future is now. We continue to enhance
our products and services through
convergence-focused IT capabilities that bring
entertainment to our customers’ fingertips.
2017 marked an important milestone
in the way Millicom offers TV content
to customers. In collaboration with TiVo
Corporation, we launched Tigo ONEtv in
Colombia, with plans for expansion across
the rest of our Latin American markets.
This cutting-edge service, a first in the
region, combines a high-quality
entertainment experience with advanced
personalization and recommendations,
seamless integration of content, and
robust multiscreen capabilities.
As pay-TV, fixed line broadband and mobile
continue to grow at a fast pace in Latin
America, Tigo ONEtv caters to a very real
need in our customers’ lives providing them
with content that they value.
Millicom has therefore integrated content
from cable television and video streaming
websites under one roof. With an offer that
includes content from Sony’s Crackle,
FOX, YouTube and HBO, customers can now
watch a full range of content, integrated
through one set-top box, using one
remote control.
Tigo ONEtv is enabling Millicom to
effectively address its diverse customer
segments and take advantage of the
opportunities offered demand for content.
Since its launch in mid-September 2017,
more than ten thousand homes have
accessed the service across Colombia.
We will roll it out to the rest of our Latin
American markets during 2018. With the
increasing rollout, and by expanding the
possibility of streaming lineal channels out
of the set-top box, Millicom positions itself
as the provider of choice for content among
customers looking for a personalized and
integrated experience.
Millicom Annual Report 2017
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Latin America performance review – continued
Millicom creates value by
being proactive to change.”
Marc Beuls,
CEO, 1997
During the 1990s Millicom reported
simultaneous interests in more than 20
countries worldwide, as rapid economic
development created significant demand
2004
Millicom’s commercial
Tigo brand is launched;
inspired by an
abbreviation of the
Spanish word “contigo”
(“with you”)
2005
Enhanced Data GSM
Environment technology
launched to speed up
data services
Tigo revolutionizes
mobile service
affordability with
charge-per-second and
mini-charge products
1999
Wireless Personal
Communication Service
(PCS) phone systems
introduced, providing
faster mobile Internet
access
2000
Tigo Paraguay launches
Internet Service
Provider brand Telesurf,
for faster wireless
Internet access
2006
Millicom is the second
best performing stock
on the NASDAQ
2007
Growth in data services
for Blackberry and
WiMAX
iPhone launched thanks
to ARM 11 chip
Paraguay’s fiber optic
network goes
nationwide
Micro recargas
(micro recharges)
from $500 pesos
Millicom shares listed
on Nasdaq Global
Select Market
“Triple A” strategy in
place: Affordability,
Accessibility and
Availability
Millicom Annual Report 2017
1997
Pre-paid SIM cards
launched in ten markets,
first in Latin America,
no contract needed
CPP (Calling Party Pays)
products launched
70 million Internet users
worldwide, according
to the International
Data Corporation (IDC)
1992
Paraguay and
El Salvador launch their
first mobile network
services
Telecel (later Tigo)
becomes first mobile
operator in Paraguay
1991
President Jaime Paz
Zamora places Bolivia’s
first mobile call
34
Millicom has been on a
transformational journey.”
Tom Boardman,
Chairman, 2018
2017
Tigo launches fully
convergent, next-
generation TV service
ONEtv
Titanium Tier 3
datacentre opens
in Colombia
Tigo HFC cable network
in LatAm adds
1.3 million homes
passed. New record!
Tigo Sports unveils new
central broadcasting
center and recording
studios in Asuncion,
Paraguay
Tigo Guatemala
launches App by App
Millicom operations
sign GSMA’s Connected
Women Commitment
initiative
Tigo LatAm operations
partner with Crianza
Tecnologica as part of
Child Online Protection
program
Tigo ranks for the
first time among top
20 multinational
companies across all
industries to work for in
Latin America, in Great
Place to Work (GPTW)
awards
Tigo Paraguay
(3.6 million customers)
celebrates 25 years of
service
Business Impact on
Child Rights assessment
tool co-developed by
Millicom / UNICEF for
wider use within the
mobile network industry
2013
4G LTE network in
Colombia / shared
spectrum with Empresa
de Telecomunicaciones
de Bogota
2015
Exclusive social media
partnerships announced
Tigo Guatemala
introduces 4G
Tigo Sports App
launches in key markets
Tigo Shop App launch
Tigo passes 60 million
mobile customers,
operating in 15 markets
2016
506k Homes Passed
added to fixed-line
network (4 new cities)
Tigo Money launched
in Bolivia
Tigo Play launch
in Guatemala
NETFLIX partnership
and residential services
bundles
All you can App launch
in El Salvador
First Tigo Business
Forum exclusive for
SMBs
First state-of-the-art
Tier 3 data center
Tigo Paraguay launches
Telemedicina
Tigo El Salvador’s
“connecting schools”
program wins LatAm
region CEMEFI award
for best practice in
public / private sector
alliance
Millicom’s 25th
anniversary film
The Digital Torch wins
global PR award for
Best Employee
Communications
B2B services unveiled
via new Tigo Online
platform
2014
TigoUne merger
completed in Colombia
Tigo Star broadband
and cable network
launched
First Tigo Business
Forum hosted in
Guatemala
FIFA World Cup App
launched
Direct to Home satellite
technology launched in
Bolivia
4G LTE launched in
Honduras and Bolivia
Tigo Sports Paraguay
launched
LatAm’s first Child
Online Protection
workshop, hosted in
Paraguay
The Tigo brand is proud to sponsor national soccer teams
such as Paraguay’s league champions Cerro Porteño
2011
HSPA+ (3G tech known
as Evolved High Speed
Packet Access) in
Colombia
Smartphone purchase
prices fall below US$100
“Paquetigos” voice and
SMS customized
packages
High Definition tv
channels on-air in
Costa Rica
New fibre optic cable
connects Bolivia to
international networks
Tigo Mobile Financial
Services (MFS) launch
in El Salvador
Navega acquisition
expands fixed line
B2B services
2012
Unlimited music
streaming service
(Tigo Music)
Colombia concession
contract renewed for
ten years
International remittance
services in Guatemala
Tigo launches Mobile
Financial Services
(MFS) in Guatemala
and Honduras
2008
3G and 3.5G networks
launch in key Tigo
markets
Acquisition of Amnet in
Central America adds
residential cable
network services to
Tigo portfolio
Mobile money platform
Tigo Cash launches in
Paraguay
2009
Open-band phones
launched to market
Devolvato campaign
rewards customers with
minutes to the value of
their purchased phone
Broadband penetration
in Latin America at 4.9%
Paraguay has access to
international Internet
backbone
2010
USSD communications
protocol for more
responsive messaging
services
First Tigo Fest
(multi-artist concert)
Tigo TV soccer
coverage in HD
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Digital connectivity
for tomorrow’s world...
connected business
“The Internet of Things – connecting your business
to the future”. Tigo Guatemala hosts its annual
Tigo Business Forum.
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Millicom Annual Report 2017
Empowering our Business Customers
Through Tigo Business we empower our
business customers and support them as they
strive for greater innovation, cost reduction,
process optimization or growth.
To illustrate, when Shell Guatemala needed help
with reducing the monitoring and patrolling
costs of their service station and delivery trucks,
we created a tailor-made solution.
It was important for Shell to retain the
real-time analytics, video footage and GPS
location of their distribution system while the
trucks were moving. They also wanted secure
storage for their data.
Our solution focused on data linking and
Cloud storage using our state-of-the-art
datacenters, with optimized video analytics.
We installed cameras in 110 stations with
a direct connection to Tigo Cloud , allowing
operators to monitor footage in real time,
with every second of data safely stored for a
month. We also installed a GPS device and
cameras on 30 delivery trucks, which transmit
data through a dedicated fiber optic link.
Number of SMBs within Tigo Guatemala’s
fiber network footprint in Guatemala City
Tigo Business Guatemala is the
market leader for large companies
25,000
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Performance
How we are doing
in Africa...
Our Africa operations deliver around 10% of Millicom’s
Group revenue. We are continuing to accelerate and
monetize mobile data, while growing our B2B and
Mobile Financial Services capabilities.
580
Service Revenue
Organic growth -5.5%
173
EBITDA
Organic growth -12.1%
Service revenue
by country
Tanzania
66%
Rwanda
10%
5%
B2B
28m
+3.0%
94%
B2C Mobile
546m
-5.7%
Revenue
by service*
Chad
24%
Revenue and EBITDA organic growth represents year-over-
year growth in local currency at constant perimeter.
See Additional information on pages 157 to 160.
* Other Service Revenue non-allocated to the Business Units
includes revenues from towers rental.
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Since 1995, Tigo Tanzania’s commitment
has been to ensure everybody can enjoy the
benefits of mobile technology. We currently
cover 80% of the population
Mobile data revenues continue to show
year-over-year growth driven by an increase in
data penetration and smartphone adoption.
We also saw a substantial increase in our
4G subscriber base driving higher data usage
and ARPU.
Our B2B services are also gaining traction and
our growing reputation as an innovative and
reliable information and communications
technology provider has enabled us to make
significant inroads within the corporate sector
as well the public sector. We have strengthened
our position with the launch of innovative
solutions, the rapid development of our direct
and indirect sales channels as well as
investments in fiber networks and datacenters
to provide future proof services to businesses
in Africa.
A major milestone has been the delivery of
positive equity free cash-flow for the first time.
Most of our operations are now self-funding
as our strategy maintains momentum.
We continue to operate in Tanzania and
Chad and we have a joint venture in Ghana
with Bharti Airtel. In 2017, we discontinued
our operations in Senegal and we signed an
agreement to sell our operations in Rwanda.
In Chad, pressure on revenue was increased
following the introduction of an 18% tax on
revenue, forcing us to raise our prices. While
our customer numbers increased and their
spending went up, our net revenues fell.
Our markets and goals
While business in Africa continues to be
extremely challenging in parts, we have seen
growth in revenue driven by data, B2B and MFS.
One of our goals is to continue focusing on the
High Value Segment, retaining and growing
our existing customer base which accounts for
50% of our revenues. We have deployed our
efforts on increasing data and MFS
penetration in this segment.
We are also focusing on the youth market
(who account for more than 40% of the
population in the region) with the launch
of dedicated value propositions targeting
young people in Chad as well as social packs
across our markets.
Increasing mobile data connections and
smartphone adoption will help us continue
executing our strategy to monetize data and
strengthen our MFS and B2B services.
Our revenue from voice over the past year
has been flat or in decline, especially driven
by a decline in net revenues in Chad and
competitive pressures in Rwanda, but this
has been mostly offset by the diversification
of our offering.
MFS continues to offer opportunities for
growth as we continue to optimize our agent
network across our markets and develop the
ecosystem. With an active subscriber
penetration greater than 45% of our base,
MFS also helps us to retain subscribers and
uplift their ARPU through access to a wider
range of services.
The introduction of stricter controls around
customer identity in Tanzania, our biggest
market, has also had an impact on subscriber
numbers as compared to 2016. The process is
now electronic and since its introduction, sales
of SIM cards have fallen by a quarter, although
in Q4 this was offset by churn reduction,
recovering growth prospects for 2018.
Nevertheless, after a challenging first
semester Tanzania delivered a stronger
performance in the second half of the year,
following a number of commercial actions,
and improved customer experience that
increased ARPU and accelerated growth in
data, MFS and B2B.
Our results
The number of B2C mobile customers at
the year end was above 17 million, while
operating cash flow increased 16% to
US$93 million with an EBITDA of
US$173 million – a fall of 12.1%.
Our turnaround plan
in Tanzania had positive
impact on revenue growth.”
Mohamed Dabbour,
Head of Africa
Millicom Annual Report 2017
39
Africa performance review – continued
Tigo Korosho: an
innovative solution for
rural farmers to access
financial services
Tigo Tanzania launched Tigo Korosho,
the first of its kind mobile money
payment system specifically for cashew
nut farmers, and has entered into a
contract with 40 cashew nut Agricultural
Marketing Cooperative Unions (AMCOs)
to have their payments for the
2017/2018 season transacted directly
via the innovative Tigo Korosho service.
Tigo Korosho offers farmers the
reliability of receiving their payments
on time whenever expected, security of
receiving their payments directly into
their mobile accounts thus eliminating
the hassle of traveling and risk of
carrying cash, and the efficiency of
being able to receive and access their
cash from anywhere in the country,
enabling them to conduct transactions
through their mobile phone.
So far payments worth TZS 90m
(US$755,000) have already been
disbursed to 10 AMCOs, giving the
farmers added convenience, security,
efficiency and proximity for them to
access their money from our Tigo
brand’s wide and secure network of
Tigo Pesa agents.
This project aims to effectively address
the long-standing issues of delayed
payments to cashew nut farmers as
well as the issue of access to financial
services for rural communities.
Millicom Annual Report 2017
The Tigo brand is a major contributor
to national economies as a top tax payer
and as a major investor in infrastructure,
goods and services
Our impact in accelerating
financial inclusion
continues to be significant.”
Mohamed Dabbour,
Head of Africa
40
Mobile
B2C Mobile accounts for 94% of our
African service revenue which this year is down
5.5% at US$580 million, as the number of
customers dipped slightly to a total of just
over 17 million. This was largely as a result
of taxation in Chad and competitive
pressures in Rwanda.
B2C ARPU slightly declined by 4.4% to US$2.6.
MFS revenues have grown 11.5%, with
Tanzania as our biggest growth contributor,
driven mainly by increased ARPU and
transactions as a result of improved customer
engagement and partnerships.
Efforts to increase mobile adoption and
effectively monetize traffic yielded a 14.4%
year on year growth in data revenues while
mobile data penetration increased to 31%.
Smartphone penetration increased to slightly
over 20%. 4G subscribers reached 0.3m.
Training was a key focus throughout the year.
Almost all staff were involved in a range
of opportunities from sustainability to
anti-bribery and corruption training to
modules on compliance, diversity and
change management.
Corporate responsibility
We feel a powerful responsibility to support
all the communities in which we work.
When countries do well, so does Tigo.
We are committed to improving social, digital
and financial inclusion across our footprint
and invest in a large number of diverse
corporate responsibility projects.
This year our partnership with Reach for
Change celebrates five years of driving
locally-led development of youngsters in
Africa. Since 2012, the partnership has
supported 194 young social entrepreneurs
who are bringing innovative solutions to
improve communities and who have in
turn improved the lives of nearly 900,000
children in Africa.
To mark the event,
we have created a special
5th anniversary social impact report
We are proud to
contribute to the digital
transformation of Africa”
Mohamed Dabbour,
Head of Africa
B2B
Our enterprise division, focused on meeting
the needs of all business segments within our
footprint, continues to deliver growth, up 3%
this year with revenues of about US$28 million.
Over the past two years, Tigo Business has
transformed from a pure value challenger to a
world-class solutions provider now recognized
for its high quality of service and future proof
technologies. In 2017, Tigo Business secured
landmark, multinational deals by delivering
the only state of the art datacenter facilities in
Chad, Ghana and Tanzania. Tigo Business
now serves almost 130,000 business
customers in Africa.
People
Our succession planning has helped us
through several leadership changes this
year and allowed us to promote from within
in the majority of cases. We now have a
stable and strong cadre of leaders
throughout all our operations.
Information and
communications
technology training
for women in Chad
It is essential for Millicom to increase
the participation of women in the
growing mobile economy and to unlock
significant commercial and socio-
economic opportunities for them
through access to mobile internet and
mobile financial services.
That’s why Millicom is taking concrete
actions to accelerate digital and
financial inclusion for women and
help them advance.
In Chad, Tigo partnered with the
Women’s association liaison unit
(CELIAF) to train women in the use
of digital technologies.
The goal is to familiarize the
16,000 members of the CELIAF with
information and communications
technology tools through ‘train the
trainers’ sessions taking place across
the country.
CELIAF members are also receiving
training on Tigo products and services
via Tigo Sales School, giving them an
opportunity to become sales agents and
sell Tigo products in their communities.
The Tigo brand is transforming the lives
of young generations through Internet
connectivity and supporting improvements
to their learning environments
Millicom Annual Report 2017
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Regina Honu won Tigo financial and business
support for her Tech needs Girls program
Technidev is promoting gender equality
in Chad by empowering girls with tech skills
In addition in 2012 Millicom also began to
work with Reach for Change in its African
operations to bring the success the
organization had achieved in Sweden to
Millicom’s African operations. The Tigo Digital
Changemakers competition is designed to
create social impact in a way the also drives
Tigo’s business objectives. The Reach for
Change team also supports Millicom with
strategic social investment tasks as requested
by Millicom.
Reach for Change’s relationship with Millicom
started with Millicom being one of the
co-founders of Reach for Change in 2009
alongside Kinnevik and other key members
of the Kinnevik Group (MTG, Tele2 and the
Stenbeck Foundation).
The goal was to set up an organization
that could take entrepreneurial leadership
which is the DNA of Millicom and the other
organizations in the Kinnevik Group and apply
it to social issues for the benefit of children.
Currently Reach for Change is an independent
foundation operating in 17 countries and
Millicom and the other co-founders are
represented on our board of directors and make
financial contributions to the organization.
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Digital connectivity
for tomorrow’s world...
connected communities
At Millicom, it’s not about how much we spend on
social investment efforts. It’s about how much we
can be a responsible leader and agent of positive
change in the communities where we operate.
Millicom Annual Report 2017
43
Growing responsibly
and with purpose
We think of our core business as promoting social good.
By building the digital highways of the future, we
become agents of positive change in our markets.
Our commitment to corporate responsibility is central
to our success as a company, it enhances and protects
our customers and the communities in which we operate.
By monitoring and measuring our eight most important
corporate responsibility topics, we help not only to
safeguard our reputation but we also enhance our
ability for ongoing development and success.
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Millicom Annual Report 2017
How corporate responsibility
contributes to our success...
We regard corporate responsibility as
integral to our business and, consequently,
as a fundamental part of our strategy.
Our aim is to move beyond compliance and
industry standards to nurture and embed
a culture of social responsibility that extends
to every touchpoint of our operations.
There are many benefits created through
mobile communications. By operating in
emerging markets, we are in an excellent
position to empower people with our services
and to positively influence social and
economic development in our markets.
Our corporate responsibility strategy
has three long-term objectives:
• Measure the success and health of
our company beyond financials;
• Promote, protect, and strengthen
our reputation; and
• Demonstrate thought leadership in
areas that couple with business success.
In 2017, we continued to focus on the eight
topics identified as most material in 2016 to
enable continuity and maturation. That said,
materiality is a dynamic concept, even more
so in a fast-evolving industry such as ours.
As a result, in 2018, we will perform a new
materiality assessment. This will give us a
better understanding of the changes that
have taken place over the past few years,
deepen our knowledge of what matters most
to our stakeholders, and help us to better align
our strategy and goals with the topics where
we make the most impact. 2018 is the fifth
year of the five-year plan laid out in 2014,
therefore it’s marking the opportunity to
build on the lessons learned and capabilities
acquired, to renew and redefine targets.
See key performance indicators
as outlined under each topic,
from page 166 onwards.
The eight material topics were:
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
7 Responsible supply chain
management
8 Social
investment
Millicom Annual Report 2017
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Corporate responsibility – continued
Each of these topics is monitored internally,
understanding the integral and transversal
approach necessary for managing them.
Engaging with our stakeholders is also part of
our commitment to responsible leadership,
through which we work towards becoming
leaders in our industry by doing business in the
right way. It is, indeed, a crucial aspect in how
we define issue-specific courses of action and
seek feedback in the effort to address our
impacts and their expectations with improved
precision year after year.
Stakeholder engagement is a part of each
one of our focus areas. We are constantly
improving our abilities to listen, and
establishing fluent dialogs with governments,
NGOs, our communities, our suppliers and
our own people, among others.
Through this, we can better understand
where we can have greater impact and how
we can optimize our work.
Throughout this report you will find examples
of our work with UNICEF, our participation in
the Global Network Initiative (GNI) and our
engagement with governments. All of these
– and the rest of the vital work we do –
help illustrate our commitment to corporate
responsibility at Millicom.
Our social and environmental priorities
Key
Key corporate responsibility focus areas
Other topics
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Disaster preparedness and response
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
1 Privacy and freedom of expression
2 Child rights and online protection
3 Acting responsibly: anti-corruption compliance
6 Taking care of our people
7 Responsible supply chain management
Social innovation through our products and services
Clarity of pricing and billing
Talent attraction and development
Local recruitment and ethnic diversity
Responsible marketing
LGBT rights
Safe use of mobile phones while driving
Employment of disabled people
Digital inclusion of blind and deaf people
Executive and Board remuneration
4 Reducing our environmental footprint
5 Diversity
8 Social investment
Stability and reliability of the network
High importance for our business strategy
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Millicom Annual Report 2017
Governance…
For the year ended December 31, 2017
Chairman’s report
Shareholder and Board governance
Corporate Governance Framework
Shareholders and shareholders’ meeting
Board of Directors and Board committees
Board profile – skills and experience
Board program
Board committees
Audit Committee
Compliance and Business Conduct Committee
Compensation Committee: Remuneration Report
Millicom CEO and Executive Team
Management responsibility statement
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Chairman’s report
The Governance section of Millicom’s 2017 Annual Report sets
out Millicom’s commitment to good corporate governance and
describes what has been achieved during the year.
Millicom’s Board of Directors “the Board” and
its committees have dealt with a number of
significant strategic, operational and
compliance matters during the year. These
have included the enhancement of
governance structures related to the
Guatemala, Honduras and Ghana joint
ventures, and further development of
compliance and control programs.
Governance and compliance are the
cornerstones from which decision making and
strategic direction are based.
Role of the Board
The Board is responsible for approving
Millicom’s strategy, financial objectives and
operating plans and for oversight of
governance. The Board also plans for CEO
succession and reviews plans for other senior
management positions.
Board changes
In May 2017, we welcomed three new Board
members: Mr. José Antonio Ríos García,
Mr. Anders Jensen, and Mr. Roger Solé Rafols.
Mr. José Antonio Ríos García brings to the
Board significant experience in leading
consumer technology businesses in Latin
America, including in the telecommunications
and electronics industries. Mr. Ríos is the
Chairman of the Compensation Committee.
Mr. Anders Jensen also brings us extensive
knowledge in telecommunications and media
businesses, in particular his knowledge of
company transformations and consumer
insight in both mature and emerging markets.
Mr. Jensen is a member of the Compliance
and Business Conduct Committee.
Mr. Roger Solé Rafols complements the
existing Board with his in-depth knowledge
of the telecommunications sector, marketing
and convergence.
I would like to thank Mr. Lorenzo Grabau
and Mr. José Miguel García Fernández, the
departing members of the Board, for their
service to the Board and its committees.
Strength through diversity and teamwork
One of Millicom’s key strengths is the diversity
of people in our operating countries, offices
and headquarters. We value different
perspectives, promote equal opportunity, and
encourage sharing of viewpoints, benefiting
from the wide range of experience and
backgrounds across the Group. These are
important elements that we continue to foster
as part of Millicom’s corporate culture. We are
proud of our success in fostering strong work
place environments and the accolades
received in this respect.
Compliance
During 2017, we continued building and
enhancing our compliance program,
supported by the Executive Committee and
our Compliance and Business Ethics team.
On behalf of the Board, I would like to
reconfirm our commitment to strong
corporate governance, and supporting the
success and strength that comes with a
culture of compliance and strong internal
control. We firmly believe that Millicom can
lead the way in its dedication to ethics and
compliance in all 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
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Millicom Annual Report 2017
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 2017.
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 August 10, 1915 on
Commercial Companies (as amended),
incorporated on June 16, 1992, and registered
with the Luxembourg Trade and Companies’
Register (Registre du Commerce et des
Sociétés de Luxembourg) under number B 40
630. The 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
Swedish Code of Corporate Governance
Guiding Principles
Luxembourg Law
EU Directives and Regulations
Nasdaq Stockholm Issuer Rule Book
Legislation
Legislation
Regulation
Philosophy
Comply or Explain
Comply
Comply
Comply
Good Stock Market Practice
Guiding Principles
Corporate Citizenship
Millicom governance deviated in 2017 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 an employee of the Company), the
meeting Secretary and an appointed Scrutineer.
While this represents a deviation from the
Swedish Code, Millicom follows Luxembourg
Law in connection with procedures and rules
for its shareholders’ meetings.
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.
The Company believes that this vesting
schedule ensures alignment between the
interests of the Company’s shareholders
and its employees.
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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.
Shareholders’ meeting
Nomination Committee
Board of Directors
Compliance and Business
Conduct Committee
Compensation Committee
Audit Committee
3.
CEO and Executive management,
and its main functions managing
governance, risk, compliance and
ethics (including security), corporate
responsibility, controls.
Chief Executive Officer
Internal Audit
Executive Management Team
Compliance and Business
Ethics
Business Control
Risk Management
Corporate Responsibility
(i)
During 2017 it was resolved by the Board to combine the activities of the Special Committee (which was established in 2015 to manage the Board’s response to the potential improper
payments on behalf of its Guatemala joint venture) into the mandate of the Compliance and Business Conduct Committee.
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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 May 4, 2017) set the Annual General
Meeting of Shareholders (AGM) to be held
within six months of the close of the financial
year in Luxembourg.
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.
At the 2017 AGM which was held on May 4,
2017, within six months of the end of the
financial year (as required by the Articles of
Association, as amended, and the Swedish
Code), the following key items were decided:
• Approval of the 2016 Consolidated
Financial Statements and distribution
of a dividend of US$2.64 per share;
• Election and re-election of the Directors
until the date of the 2018 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 setting of the date of
future AGMs.
Nomination Committee
Nomination Committee
Ms. Cristina Stenbeck
Mr. Tom Boardman
Mr. John Hernander
Mr. Scott Cobb
On behalf of:
Kinnevik AB
Kinnevik AB
Nordea Investment Funds
Southeastern Asset Management
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, considering 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.
Nomination Committee proposals to the AGM
AGM include:
• Election and remuneration of Directors of
the Board, and Chairman of the Board;
• Appointment and remuneration of the
external auditor; and
• Proposal of the Chairman of the AGM.
Under the terms of the 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 September 2017, in
consultation with larger shareholders of the
Company at August 31, 2017 and in
accordance with the resolution of the 2017
AGM.
The table below sets out beneficial ownership
of Millicom common shares, par value
US$1.50 each, by each person who
beneficially owns more than 5% of Millicom
common stock at December 31, 2017.
Shareholder
Kinnevik AB
Dodge & Cox
Number of
shares
38,559,080
10,744,648
%
Shareholding
37.9
10.6
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.
Millicom Annual Report 2017
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Shareholder and Board governance – continued
2. Board of Directors and
Board committees
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.
Role of the Board
Millicom’s Board of Directors (the “Board”) is
responsible for deciding Millicom’s strategy,
financial objectives and operating plans, and
for oversight of governance. The Board also
plans for management succession of the CEO
and reviews 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 2017 AGM set the number
of Directors at nine, comprising a Chairman
and eight 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”.
Further details on the roles and activities of
the various committees, their responsibilities
and activities are set out later in this section.
Independence of the Board:
Board of Directors
Chairman and eight members
Non-Executive Directors
Independent from the Company
and its Executive Management
Not independent of the major shareholders
100%
Tom Boardman
Odilon Almeida
Simon Duffy
Tomas Eliasson
Alejandro Santo Domingo
Janet Davidson
Anders Jensen
José Antonio Ríos García
Roger Solé Rafols
16%
Tom Boardman
Anders Jensen
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:
I. 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
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.
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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 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
If elected, 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 is 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.
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 of 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 annually within six months
of the end of the financial 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 past 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.
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Shareholder and Board governance – continued
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;
• at least two of those independent Directors
must also be independent from the
Company’s major shareholders (eight 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
Male
Female
92%
8%
Tenure of Directors
1st year
2nd year
3rd year
4th year
5th year
3
3
1
1
1
Nationalities
Swedish
2
1
Spanish
1
British
1
Venezuelan
American
1
Colombian
1
1
Brazilian
South African 1
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Millicom Annual Report 2017
Board profile – skills and experience
Mr. Tom Boardman
(South African)
Chairman, Non-Executive Director
Mr. José Antonio Ríos García
(Venezuelan and American)
Non-Executive Director
Mr. Odilon Almeida
(Brazilian)
Non-Executive Director
(First appointed: May 2016)
(First appointed: May 2017)
(First appointed: May 2015)
Mr. José Antonio Ríos García was elected a
new member of the Board in May 2017. He is
Chairman of the Compensation Committee.
Mr. Ríos, born in 1945, is currently the
Chairman and CEO of Celistics Holdings, a
leading provider of distribution and intelligent
logistics solutions for the consumer
technology industry in Latin America. Prior to
joining Celistics in 2012, Mr. Ríos was the
founding President and CEO of DIRECTV
LATIN AMERICA (GLA), and the International
President of Global Crossing, the
telecommunications company later acquired
by Level 3 Communications.
Mr. Ríos holds an Industrial Engineering
degree from the Universidad Católica Andrés
Bello, Caracas, Venezuela.
Mr. Ríos brings to the Millicom Board his
significant experience in leading a variety of
consumer technology businesses in Latin
America including the telecommunications
and electronics industries.
Independent from the Company, its
Executive Management, and its major
shareholders.
Millicom shareholding at January 31,
2018: 868 shares.
Mr. Tom Boardman was re-elected as a
Director and Chairman of the Board in May
2017. He is a member of the Compensation
Committee, the Audit Committee, and the
Compliance and Business Conduct
Committee.
Mr. Boardman, born in 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.
Mr. Boardman is also a Non-Executive Director
of Woolworths Holdings and African Rainbow
Minerals, and was a Non-Executive Director of
Vodacom Group between 2009 and 2011.
Mr. Boardman holds a Bachelor of Commerce
degree and CTA from the University of
Witwatersrand in South Africa and is a
chartered accountant.
Mr. Boardman brings to the Millicom Board
in-depth experience in leadership, corporate
governance, risk management and oversight
of both technology-driven entrepreneurial
businesses as well as financial groups and
retail businesses.
Independent from the Company and its
Executive Management.
Non-Independent from the major
shareholder Kinnevik AB.
Millicom shareholding at January 31,
2018: 7,000 shares.
Mr. Odilon Almeida was re-elected to the
Board in May 2017. He is Chairman of the
Compliance and Business Conduct
Committee.
Mr. Almeida, born in 1961, is the President for
Western Union Global Money Transfer. He
leads Western Union’s global consumer
omni-channel business across more than 200
countries and territories, bridging all
continents.
His board experience, along with business
leadership at Western Union, includes
BankBoston (now Bank of America), The
Coca- Cola Company and Colgate-Palmolive.
Mr. Almeida holds a Bachelor of Civil
Engineering degree from the Maua
Engineering School in São Paulo, Brazil, a
Bachelor of Business Administration degree
from the University of São Paulo and an MBA
with specialization in Marketing from the
Getulio Vargas Foundation, São Paulo. He
advanced his education with executive studies
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, and a leadership
style anchored in growth acceleration and
business turnarounds involving retail and
digital transformation, organic growth and
successful M&A.
Independent from the Company, its
Executive Management, and its major
shareholders.
Millicom shareholding at January 31,
2018: 2,421 shares.
Millicom Annual Report 2017
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Shareholder and Board governance – continued
Board profile – skills and experience continued
Ms. Janet Davidson
(American)
Non-Executive Director
Mr. Simon Duffy
(British)
Non-Executive Director
Mr. Tomas Eliasson
(Swedish)
Non-Executive Director
(First appointed: May 2016)
(First appointed: May 2016)
(First appointed: May 2014)
Ms. Janet Davidson was re-elected to the
Board in May 2017. She is a member of the
Compliance and Business Conduct
Committee.
Ms. Davidson, born in 1956, has been a
Supervisory Board member of
STMicroelectronics since 2013. Prior to that,
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 also been recognized by Working
Woman Foundation and 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.
She brings to Millicom’s Board her long
experience in strategy, compliance and
customer care in the telecommunications and
IT sectors.
Ms. Davidson has a Bachelor of Arts degree in
physics from Lehigh University, a Masters
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 January 31,
2018: 1,763 shares.
Mr. Simon Duffy was re-elected to the Board
in May 2017. He is a member of the Audit
Committee.
Mr. Tomas Eliasson was re-elected to the
Board in May 2017. He chairs the Audit
Committee.
Mr. Duffy, born in 1949, is Non-Executive
Chairman of YouView TV and a Non-Executive
Director of Modern Times Group, Oger
Telecom, Telit Communications and Wizz Air.
Previously Mr. Duffy has been the Executive
Chairman of Tradus, Executive Vice Chairman
of ntl: Telewest and formerly 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.
He brings to Millicom’s Board his extensive
experience in leading telecommunications
and media businesses as well as governance
and risk management in emerging industries
and markets.
Independent from the Company, its
Executive Management, and its major
shareholders.
Millicom shareholding at January 31,
2018: 1,763 shares.
Mr. Eliasson, born in 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 appliances manufacturer.
Mr. Eliasson has also held various
management positions in Sweden and
abroad, including ABB Group, Seco Tools AB
and Assa Abloy AB.
Mr. Eliasson holds a Bachelor of Science
Degree in Business Administration and
Economics from the University of Uppsala.
Mr. Eliasson brings to the Millicom Board his
significant experience as a CFO for
multinational and global Swedish companies,
roles including governance and oversight over
financial reporting, internal control and risks
management processes and procedures
within global finance functions.
Independent from the Company, its
Executive Management, and its major
shareholders.
Millicom shareholding at January 31,
2018: 3,008 shares.
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Mr. Anders Jensen
(Swedish)
Non-Executive Director
Mr. Alejandro Santo Domingo
(Colombian)
Non-Executive Director
Mr. Roger Solé Rafols
(Spanish)
Non-Executive Director
(First appointed: May 2017)
(First appointed: May 2013)
(First appointed: May 2017)
Mr. Anders Jensen was elected to the Board of
Millicom in May 2017. He is a member of the
Compensation Committee.
Mr. Jensen, born in 1969, is Executive Vice
President, CEO Sweden and Chairman of
Nordic Entertainment at Modern Times Group
MTG.
Between 2011 and 2014, Mr. Jensen was Head
of Consumer and Group Chief Marketing
Officer at Danish telecommunications
company TDC Group. Between 2005 and
2011, Mr. Jensen held various leadership
positions at Norwegian telecommunications
company Telenor Group, including CEO of
Telenor Hungary, CEO of Grameenphone in
Bangladesh, and Chief Marketing Officer and
Head of Consumer at Telenor Sweden.
Mr. Jensen brings to the Millicom Board his
significant experience in company
transformations and knowledge of consumers
in both mature and emerging markets in the
telecommunications and media industries.
Independent from the Company, its
Executive Management, but Non-
Independent due to his role as CEO of MTG,
owned by Kinnevik AB.
Millicom shareholding at January 31,
2018: 1,368 shares.
Mr. Alejandro Santo Domingo was re-elected
to the Board in May 2017. He is a member of
the Compliance and Business Conduct
Committee.
Mr. Santo Domingo, born in 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).
Mr. Santo Domingo is Chairman of the Board
of Bavaria S.A. in Colombia, and Chairman of
the Board of Valorem, a company which
manages a diverse portfolio industrial and
media assets in Latin America.
Mr. Santo Domingo is also a Director of JDE
(Jacobs Douwe Egberts) Keurig Green
Mountain; ContourGlobal plc.; Florida Crystals,
the world’s largest sugar refiner; Caracol TV,
Colombia’s leading broadcaster; El
Espectador, a leading Colombian Daily; and
Cine Colombia.
Mr. Santo Domingo brings to the Millicom
Board his knowledge and experience of
business in Latin America and consumers in
FMCG markets.
Mr. Roger Solé Rafols was elected to the Board
in May 2017.
Mr. Solé, born in 1974, is the Chief Marketing
Officer of Sprint Corporation, the leading
American telecommunications company.
Prior to joining Sprint in 2015, he spent seven
years at TIM Brasil (owned by Telecom Italia)
as Chief Marketing Officer and previously as
Marketing Director. Before TIM Brasil, he was
the Marketing Director for Vivo in Brazil
(owned by Telefonica and PT) and previously
the Head of Innovation and VAS.
Mr. Solé holds a BA and MBA in Business
Administration from ESADE Business & Law
School in Barcelona.
Mr. Solé brings to the Millicom Board his
in-depth knowledge of the
telecommunications sector, marketing and
convergence of traditional
telecommunications products with innovative
products and services.
Independent from the Company, its
Executive Management, and its major
shareholders.
Mr. Santo Domingo holds a Bachelor of Arts
Degree from Harvard University.
Millicom shareholding at January 31,
2018: 868 shares.
Independent from the Company, its
Executive Management, and its major
shareholders.
Millicom shareholding at January 31,
2018: 8,008 shares.
Millicom Annual Report 2017
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Shareholder and Board governance – continued
Board program
The Board’s annual program includes:
1
2
3
4
Company strategy and
strategic direction;
Operating and financial
performance review;
Governance and
compliance matters;
Corporate Responsibility;
5
6
Government relations;
Corporate culture;
7
External financial
reporting;
8
Risk management;
9
Dividend policy;
10
11
12
Acquisitions and
divestments;
Evaluation of CEO and
self-evaluation; and
Human Resource matters,
including compensation,
health, safety and
well-being.
Summary of Board activities in 2017
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.
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.
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Summary of areas of focus in 2017
Activity/issues covered
Reports of committees
Board actions
• The Board regularly reviewed reports from its Audit, Compliance and Business Conduct,
and Compensation Committees on recent activities.
• Discussion of Nomination Committee Director appointment proposals.
Operational Review
• Priorities and challenges for each of the Latin American and African businesses were regularly
Strategic Review
presented and discussed by the Board, including development of cable and mobile data
businesses, efficiency measures and capital expenditure allocation.
• The Board discussed and approved the 2018 budget.
• The Board devotes one full Board meeting every year exclusively to discuss strategy.
• The Board discussed with the Executive Team industry and geographic trends and the
operational and financial strategy for each region of the Group, including the portfolio strategy.
Organizational structure
• The Board was involved in the process of appointment of new hires into the Executive Team,
Review and approval of capital
structure and dividend
and management organizational and reporting structures.
• Refinancing of the US$ bond.
• Amendment of existing terms and conditions of certain bonds.
• Additional financing in several markets.
• Recommendation of a dividend of US$2.64 per share to the 2017 AGM.
Review and approval of
corporate governance
• Revisions to the Corporate Policy Manual (including Board and Committee charters).
• Updates to the Authority matrix.
• Election of Committee members.
Mergers, acquisitions, disposals and joint
ventures
• The Board discussed acquisition and disposal developments across the Group, including
approval of and disposals transactions such as the sale of the Group’s businesses in Senegal
and Rwanda and the joint venture in Ghana.
Review and approval of financial reports
• 2016 Annual Report including the 2016 Consolidated Financial Statements of the Group,
and interim consolidated financial statements.
• Standalone financial statements of Millicom International Cellular SA (the parent company).
Risk management
• Review of the key risks facing the Group and approach to managing risk.
• Setting of risk appetite.
The external affairs organization
• Review of the finalized external affairs strategic framework and functions for suitability
for the organization’s need.
Political environment
• Periodical reviews of the political situation per market with a specific focus on election periods
and advice on risk management required in relation thereto.
Government relations, engagement
and Regulatory affairs
• Review of regulatory and engagement challenges with advice from the Board on best-practice
engagement strategy.
• Review of the state of government relations in our markets and internationally.
Millicom’s non-financial performance
• Review of main non-financial performance and trends.
• Recommendation for continued focus in line with existing non-financial focus areas.
Update on privacy and freedom
of expression issues
• 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.
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Shareholder and Board governance – continued
Board meetings/attendance at scheduled meetings of the Board in the 2017 financial year
Director
Mr. Tom Boardman (Chairman)
Mr. José Antonio Ríos García
Mr. Odilon Almeida
Ms. Janet Davidson
Mr. Simon Duffy
Mr. Tomas Eliasson
Mr. Anders Jensen
Mr. Alejandro Santo Domingo
Mr. Roger Solé Rafols
Attendance of current Directors
Former Directors (until May 2017):
Mr. José Miguel García Fernández
Mr. Lorenzo Grabau
Overall attendance
Attendance %
100
100
86
100
100
100
100
100
100
98
Meeting
7/7
5/5
6/7
7/7
7/7
7/7
5/5
7/7
5/5
56/57
2/2
2/2
60/61
100
100
98
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 (in 2017 to El
Salvador), 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 2017 was conducted by an external
evaluation firm by way of interviews and
assessment of 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.
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Millicom Annual Report 2017
The Committee also reviewed and discussed
actions and activities around the important
regulatory updates and upcoming changes in
financial reporting, treasury, tax, risk
management, 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 2018 AGM.
Mr. Tomas Eliasson
Chairman of the Audit Committee
Audit Committee
2017 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 implementation projects of
new accounting standards, regular reporting
and internal audit activities. The Committee
convened eight scheduled meetings during
the year – two more than last year – and
covered internal audit and internal control
activities during all meetings.
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 2017 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.
The same year, the Board also established a
new permanent Compliance and Business
Conduct Committee to cover compliance
related activities. Since then this Committee
assumed oversight of non-financial
compliance related matters from the Audit
Committee.
In 2017, the Board incorporated activities
previously delegated to the Special
Committee into the already existing
Compliance and Business Conduct
Committee. The Board believed that, due to
the status of the work of the Special
Committee, future activities would be
manageable within the wider compliance
program and mandate of the Compliance
and Business Conduct Committee.
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Shareholder and Board governance – continued
Audit Committee membership and attendance in 2017
Audit Committee
Mr. Tomas Eliasson
Mr. Tom Boardman
Mr. Simon Duffy
Mr. José Miguel García Fernández
Overall attendance
Position
Chairman*
Member
Member
Former member
* Designated as having specific accounting competence per EU Directive.
First appointment
May 2014
May 2016
May 2016
May 2016
Meetings/Attendance %
100
100
100
100
100
8/8
8/8
8/8
3/3
27/27
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,
and Group Risk Officer, together with reports
from other officers of the Company
as required. More particularly, the Audit
Committee has received from the external
auditor the required information in
accordance with the Luxembourg regulations.
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 robustness, integrity and effectiveness of
financial reporting, risk management, internal
controls, internal audit, the external audit
process, as well as compliance with related
laws and regulations.
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.
Ultimate responsibility for reviewing and
approving Millicom’s Annual Report and
Accounts remains with the Board.
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Millicom Annual Report 2017
2017 meetings
During 2017, the Audit Committee met eight times, mainly coinciding with key dates in Millicom’s external reporting:
Activity/issues covered
Governance
Financial reporting
How the Audit Committee addressed the issues
• Reviewed and amended Audit Committee Charter.
• Reviewed key accounting and reporting issues at each meeting.
• Reviewed and approved each quarter’s earnings release, the 2016 annual earnings release
and summary financial statements, and the 2017 half year earnings release and interim
financial statements.
• Reviewed and discussed activities around the implementation of IFRS 15 (“Revenue from
Contracts with Customers”), IFRS 9 (“Financial Instruments”) 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
Internal audit activities
Financing, treasury and tax
Risk management
Internal controls
reporting, accounting and audit issues.
• Approved the 2017 external audit strategy and fees.
• Reviewed the new format of the external audit report.
• 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.
• Approved the 2017 internal audit plan.
• Reviewed internal audit findings arising from the delivery of the 2017 audit plan.
• Reviewed the Group’s tax strategy and structure and approved the tax policy.
• Approved the updated Group treasury and related policies, including the policy on financial
risk management.
• Reviewed the implications of Base Erosion Profit Schemes (BEPS) driven disclosures, including
the ‘Country by Country’ Reporting.
• Provided guidance and oversight over risk management processes.
• Reviewed alignment of top risks with strategy.
• Reviewed regular risk reports and IT remediation plan.
• 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 2017 internal targets.
• Approved 2018 targets for internal control maturity.
Fraud management
• Reviewed fraud policies and quarterly fraud reports, as well as proposed actions to remediate
identified cases.
Finance transformation
Revenue assurance
• Were presented with the initiatives taken to transform the Group’s finance function.
• Received quarterly updates on revenue assurance activities.
• Reviewed trends and actions taken to minimize loss and revenue leakage.
Related party transactions
• Reviewed related party transactions was performed at each meeting.
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Shareholder and Board governance – continued
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. In
2017, attention was mainly focused on:
• Significant accounting issues where
judgment has been applied;
• The review of the effectiveness of internal
financial control;
• The implementation projects around the
adoption of new accounting standards, in
particular the future adoption of the new
revenue recognition and lease standards,
IFRS 15 and IFRS 16, respectively;
• The appropriateness of and application of
the Group’s accounting policies and
practices;
• Compliance with financial reporting
standards and other financial reporting
requirements;
• The completeness and compliance of all
structural disclosures made in the financial
statements; and
• The financial reporting implication of BEPS
legislation for future reporting, including the
‘Country by Country’ 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
December 31, 2017 were:
1) Africa divestment – also refer to note
A.1.3. of the consolidated financial
statements
During 2017, Millicom entered into several
agreements for the disposal or merger of
multiple operations in Africa, namely Senegal,
Ghana and Rwanda. As of December 31, 2017,
the deals in Senegal and Rwanda are still to
complete, pending necessary approvals. These
transactions and their classification as assets
held for sale and/or discontinued operations
require management’s judgment. The effect
of disposal and assessment have been
presented and discussed with the Committee.
2) Measurement of the Group’s interests
in our newly created joint venture in Ghana
– also refer to note A.2.4 of the consolidated
financial statements
As required by IFRS, the Group has completed
the measurement at fair value of its
investment in the joint venture in Ghana (with
Airtel) as of October 12, 2017, date of
completion of the deal. Millicom determined
the fair value of this investment based on a
discounted cash flow model. Accounting
effects and valuation based on external
advice were presented to the Committee for
discussion.
3) Tower sale and leaseback – also refer to
notes C.3.4. of the consolidated financial
statements
During 2017, Millicom entered into tower sale
and leaseback transactions in Paraguay and
Colombia whereby Millicom sells its passive
infrastructure to tower companies and leases
back a portion of the towers and ground, plus
additional operating costs. These transactions
require management judgment in respect of
the asset classification on the balance sheet
and as to whether the leaseback qualifies as a
finance or operating lease or as a service
agreement.
The above accounting treatments and
decisions were extensively discussed with the
Committee.
4) 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
impairment losses had to be recognized on
our operation in Rwanda, on a minor
investment in Guatemala as well as 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.
5) 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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Millicom Annual Report 2017
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.
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
both operational and 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 remained focused on the
need to promote the development of internal
controls, both financial and non-financial.
The Group Head of Business Controls made
a progress report at each meeting. Regular
updates were provided on the Group’s
program of Internal Control Self-Assessment
and also the status of ongoing control
improvement projects.
Targets for internal control improvement in
2017 were established. At the December
meeting, the Audit Committee evaluated
progress on a country and process level
against the targets and discussed the strategy
for internal control development for 2018.
Internal Audit
The execution of the 2017 Internal Audit Plan
provided Executive Management and the
Audit Committee an independent view on the
effectiveness of Millicom’s internal control
environment 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 December 2016, the Audit Committee
ratified the Internal Audit Plan for the
following year, which included reviews
focusing on revenue assurance and billing,
information security, IT and network resilience,
financial control, regulatory compliance and
the successful implementation of large
business and 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 findings had
been identified.
Fraud risk and whistleblowing
The Audit Committee received and reviewed
quarterly fraud reports in accordance with the
Group’s Fraud policy. The Policy was reviewed
and updated during the year. 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, contractors
and third parties.
6) 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 completing the
implementation of 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.
7) Capitalization and assets useful lives –
also refer to note G.3.1. of the consolidated
financial statements
The assessment and timing of whether assets
meet the capitalization criteria set out in the
relevant accounting standards, the estimation
of appropriate useful economic lives and the
assessment of whether any impairment
indicators are present, such as redundant
assets, as well as the identification and the
classification of leases, all require judgment. In
addition, Management regularly review and
benchmark its assets useful lives with peers.
Once a year, Management presents its
conclusions to the Audit Committee.
8) 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 October 21, 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 July 14, 2017, the International
Commission Against Impunity in Guatemala
(CICIG), disclosed an ongoing investigation
into alleged illegal campaign financing that
includes a competitor of Comcel, our
Guatemalan joint venture. The CICIG further
indicated that the investigation would include
Comcel.
Millicom Annual Report 2017
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Shareholder and Board governance – continued
For the year ended December 31, 2017, the
Audit Committee approved fees for audit
services of US$4.7 million, together with fees
for non-audit work of US$0.9 million.
Under European rules, the current audit
partner will have to rotate off for the audit
of the consolidated financial statements
as of December 31, 2019.
Audit tendering
EY was first appointed auditor of the
Company for the year ended December 31,
2012 following a competitive tender.
Based on the 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).
External 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
EY.
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.
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Millicom Annual Report 2017
During the year, increased emphasis was
placed on the Anti-Money Laundering (AML)
program, with the appointment of the new
Global AML Director, and updating the AML
framework to comply with new regulatory
requirements in the Know-Your-Customer
(KYC) area.
Great effort towards a step change in
advancing the standards of the compliance
program over the past year saw diligent
pursuit of a best-in-class compliance
framework.
I want to thank the members of the
Compliance and Business Conduct
Committee, the Company’s management
team and Millicom’s Board and Chairman for
their unwavering commitment and dedication
to the compliance program in 2017. I look
forward to continuing this journey in 2018.
Mr. Odilon Almeida
Chairman of the Compliance
and Business Conduct Committee
During 2017, the Compliance and Business
Conduct Committee met six times and
continued to focus on the three pillars of
Prevent, Detect, and Respond. The Committee
members were actively engaged in the Global
Compliance Awareness Week, hosted in
November to support a corporate culture
change program and help drive ownership
and accountability at all levels of the
company.
The Committee oversaw processes and
procedures in setting up the major building
blocks of the governance framework. This
included implementation of a new third party
due diligence tool and the restructure of the
Ethics & Compliance team to enhance
capacity and capability of the function.
Regional and Local Compliance Officers were
appointed, and Information Security was
moved into the Ethics & Compliance team. A
new global role was created, and the new
Chief Information Security Officer was
appointed, aimed at achieving greater
alignment of security processes in the digital
area.
We saw important additions to the
Compliance Investigations team with the
appointment of three senior investigators at
global level to respond to needs throughout all
local operations and help determine and deal
with potential threats.
Compliance and Business
Conduct Committee
The Board of Millicom continues to assign the
highest priority to upholding compliance and
standards of business conduct across every
level of the organization. The Board’s core
objective is to reinforce a culture of
compliance that is practiced wholeheartedly
by every employee, across all ranks, with no
exceptions.
As Millicom advances through its financial,
operational, and strategic goals – the
company has adopted a living theme under
the hashtag #IntegrityStartsWithYou. Under
this theme, we educate the employees by
operationalizing compliance, as part of
everyday life.
Compliance and Business Conduct Committee membership and attendance 2017
Committee
Mr. Odilon Almeida
Mr. Alejandro Santo Domingo
Ms. Janet Davidson
Mr. Tom Boardman
Overall attendance
Position
Chairman
Member
Member
Member
First
appointment
November 2015
November 2015
May 2016
May 2016
Meetings/Attendance %
100
100
100
100
100
6/6
6/6
6/6
6/6
24/24
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Shareholder and Board governance – continued
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 Group’s Compliance program,
including the activities performed by the
Compliance Team and its interaction with
the rest of the organization;
• 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.
Management representatives invited to
attend the Compliance and Business Conduct
Committee include the Group CEO, the Chief
Compliance and Ethics Officer, General
Counsel, and Group CFO.
Summary of Committee activities in 2017
The Committee convened, as planned, six
times during the year. The Committee
Chairman prepares the agenda in conjunction
with the Chief Ethics and Compliance Officer
and the Chief Ethics and Compliance Officer,
reports on the status of the Compliance
Program and any compliance related issues
including investigations and issues, anti-
money laundering, and information security.
The CEO and Executive Team have been
demonstrably committed and continue to be
actively involved in driving a compliance
change program to strengthen the
Compliance function, culture, and tone at
Millicom.
Summary of areas of focus in 2017
Activity/issues covered
Restructure Compliance
How the Compliance and Business Conduct Committee addressed the issues
• In order to better meet the needs of the company compliance program a new structure was
implemented with enhanced resources at global, regional and local level.
Key roles appointed
• A series of key roles were appointed including the new Chief Information Security Officer, Vice
President Investigations, and Global Anti-Money Laundering Director.
New building blocks
• Third Party Management – A new, group-wide third-party due diligence tool was
implemented to enhance the KYC and third-party management process.
• Information Security – Recognizing this growing global threat, the Chief Technology and
Information Officer and Chief Ethics and Compliance Officer worked together to better
structure the assurance activities in this area.
• Millicom Ethics Line – With increased focus on concerns raised, the company brought in a
highly-qualified investigator to increase quality of case management and improve response
time to issues raised.
Program enhancements
• Simplified compliance policies and digitalization of key compliance processes, e.g. conflicts
of interest disclosure procedures
• Training of high-risk third parties
• Internal audit issue remediation following the compliance focused auditor added to the
Internal Audit team
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Millicom Annual Report 2017
The Committee also reviewed Millicom’s
renewed approach to benchmarking
compensation and talent, which led to
important work in recalibrating job grades
and roles.
We are confident that these steps will ensure
that 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 2018 AGM.
Mr. José Antonio Ríos García
Chairman of the Compensation Committee
Compensation Committee
In 2017, the Compensation Committee
continued to focus on the review of Millicom’s
reward strategy to ensure that senior
management compensation reflects company
performance closely.
Compensation Committee membership and attendance 2017
Committee
Mr. José Antonio Ríos García
Mr. Tom Boardman
Mr. Anders Jensen
Mr. José Miguel García Fernández
Mr. Lorenzo Grabau
Overall attendance
Position
Chairman
Member
Member
Former member
Former Chairman
First
appointment
May 2017
May 2016
May 2017
May 2016
May 2015
Meetings/attendance %
100
100
80
100
5/5
6/6
4/5
1/1
1/1
17/18
100
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Shareholder and Board governance – continued
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 requires
Board approval. The long-term incentive plans
are 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 2017. The results of the
review and evaluation were communicated to
the CEO by the Chairman. The Compensation
Committee comprises three members.
Main activities of the Committee
during 2017
The Compensation Committee met five times
in 2017.
Activity/issues covered
How the Compensation Committee addressed the issues
Bonus and performance reports
• Reviewed and approved the variable compensation target and performance results.
• Received and reviewed senior executive performance reports and Executive Committee
Compensation review
rewards for exceptional performance.
• Reviewed and decided on Africa stretch incentives.
• Reviewed guidelines and methodology for setting 2018 compensation.
• Approved all payments for Executive Committee members.
• Approved of Peer group for Executive Benchmarking.
• Reviewed Executive Benchmarking for CEO and all Executive Committee members.
• Approved of changes to CEO and Executive Committee compensation elements based on
market competitiveness.
Share-based incentive plans
• Approved 2017 Share Plan Rules.
• Reviewed and approved all equity grants.
• Review performance and projections of outstanding LTI plans.
Global reward strategy and
executive remuneration review
• Reviewed the new HR Calendar timeline and planned activities for all the reward components.
• Reviewed and discussed the company’s Remuneration Approach, emphasizing importance of
Variable pay design
Recruitment
Separation arrangements at
Executive level
Remuneration Committee
governance
a performance-based incentive opportunity culture.
• Reviewed the performance of individual members of the Executive Team and their
compensation packages.
• Reviewed and approved the Variable Plans Redesign (STI / LTI) for 2018.
• Reviewed employment conditions for candidate for the position of Chief Human Resources Officer.
• Discussed, modified and subsequently approved separation arrangements with former
members of the Executive Team.
• Reviewed and updated Remuneration Committee Remit and Obligations.
• Selected Mercer as the Remuneration Committee consultant, after reviewing 3 potential
alternatives.
• Reviewed and aligned Remuneration Committee’s Annual Cycle and Calendar, added one
annual Remuneration Committee meeting for 2018.
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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.
Use and relative weighting of performance
target measures under the variable
compensation rules are equal to all employees
regardless of seniority.
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.
Bonus measurements
Rationale
Service Revenue(i)
EBITDA
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 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.
Personal performance
The individual goals and objectives of Millicom
management and employees are critical in
achieving its financial objectives and in long-term
value creation.
Total
(i) The use of Service Revenue as a performance measure replaced use of Total Revenue from January 2016.
Weighting
23.33%
23.33%
23.33%
30%
100%
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Shareholder and Board governance – continued
Executive Team remuneration 2017
Compensation of the Executive Team
(US$ ’000)
2017
Base salary
Bonus (for 2017 performance)
Pension
Other benefits
Termination benefits
Total salary and benefits
Compensation shares (number)
Performance share plan(i)
Deferred share plan(ii) (for 2017 performance)
CEO Dividend Share Award
Total shares (number)
Value of shares(iii) (US$ ’000)
CEO
1,000
707
150
64
—
1,921
11,865
10,688
1,179
23,732
1,588
Other
Executives
(9 members)
3,822
1,590
629
1,193
—
7,233
10,044
24,040
34,084
2,280
CFO
648
455
97
15
—
1,215
6,230
6,877
13,107
877
(i) Amounts relating to the 2015 performance share plan based on the actual performance over the three year period. The value of shares is based on the closing market value of Millicom
shares in US$ at December 29, 2017 of US$66.91. These shares will vest on March 1, 2017. Final performance metrics will be approved by the Remuneration Committee on March 5, 2018.
(ii) Amounts relating to the 2017 deferred share plan (awarded in 2018). The value of shares is based on the closing market value of Millicom shares in US$ at December 29, 2017 of US$66.91.
These shares will vest over three years from the award date, dependent on continued service of the employee.
(iii) The value is calculated on the basis described above which differs from the value calculated for the IFRS financial statements.
Compensation of the Executive Team
(US$ ’000)
2016
Base salary
Bonus (for 2016 performance)
Pension
Other benefits
Termination benefits
Total salary and benefits
Compensation shares (number)
Performance share plan(i)
Deferred share plan(ii)
Sign-on grant(iii)
Total shares (number)
Value of shares(v) (US$ ’000)
CEO
CFO
Other
Executives
(9 members)(iv)
1,000
660
150
48
—
1,858
—
15,017
2,358
17,375
743
599
450
82
18
—
1,149
—
10,250
—
10,250
450
3,797
1,411
513
720
—
6,441
13,024
32,122
—
45,146
2,385
(i) Amounts relating to the 2014 performance share plan based on the actual performance over the three year period to December 31, 2016. The value of shares is based on the closing market
value of Millicom shares in US$ at December 31, 2016 of US$42.76. These shares vested on January 1, 2017.
(ii) Amounts relating to the 2016 deferred share plan (awarded in 2017). The value of shares is based on the closing market value of Millicom shares in US$ at December 31, 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.
(iv) Includes former Executives who left Millicom during 2016.
(v) The value is calculated on the basis described above which differs from the value calculated for the IFRS financial statements.
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In 2017, 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.
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 CEO and CFO are participating in the
Group’s PSP, with target opportunities as per
the table below.
LTIP Plans
Deferred Share Plan (DSP)
Eligibility
CEO, CFO, other Executives and
other (global) senior
management*
Maximum
shares awarded
in 2017
467,911**
Participants
354
Performance Share Plan (PSP) CEO, CFO, other Executives and
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other (global) senior
management
*A limited number of High-Potential employees and employees in key roles can be nominated by exception.
** *Does not included Extraordinary Dividend Award, 1,179 shares
Basis for
calculating award
20–50%
on base salary,
as per 31.12.16
200%
160%
35%–160%
on base salary,
as per 01.01.17
Comment
CEO
CFO
Global senior
management team
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
Performance Share 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.
1 year
16.5%
–
Vesting period
2 years
16.5%
–
3 years
67%
100%
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Shareholder and Board governance – continued
CEO compensation
At the AGM on May 15, 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.
• an annual base salary of US$1 million;
• variable remuneration with a target of
100% of base salary;
• participation in Millicom’s share-based
compensation plans;
• the continued vesting of the sign-on share
At target US$’000
Cash
1,915
49
Benefits
Shares 2,750
Total 4,714
41%
58%
1%
26%
74%
At target US$’000
Fixed
1,214
Variable 3,500
Total 4,714
At maximum US$’000
2,015
Cash
Benefits
49
Shares 2,850
Total 4,914
41%
At maximum US$’000
1,214
Fixed
Variable 3,700
Total 4,914
58%
1%
25%
75%
One-third of the total share amount vests (and
is deliverable to the CEO along with accrued
dividends) on each of January 1, 2016,
January 1, 2017 and January 1, 2018. The
vesting of shares is conditional upon the CEO
not being dismissed for cause.
The share grant was proposed by the Board
following review by the Compensation
Committee of the entire compensation
package for the CEO. The 2017 components
of this package are:
grant; and
• other standard benefits, as described under
the senior management remuneration
principles earlier in this report.
CEO earnings opportunity from 2017
award levels
The tables below provide estimates of the
potential future remuneration for the Chief
Executive Officer based on the remuneration
opportunity granted in the 2017 financial year.
Potential outcomes are based on different
performance scenarios.
Assumptions underlying each scenario are
described below.
Fixed
• Fixed income consists of base salary, employment benefits and company
pension contributions.
• Base salary is at December 31, 2017.
• Benefits are valued using the figures in the total remuneration for the 2017
financial year table detailed above.
• Pension contributions are made at 15% of base salary as at December of the
preceding year.
Mauricio Ramos
Base
(US$’000)
1,000
Benefits
(US$’000)
64
Pension
(US$’000)
150
Total Fixed
(US$’000)
1,214
Variables
on target
• Values are based on what the Chief Executive Officer 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 total shareholder
return (TSR) performance being positive and at peer group median.
Variables at
maximum
• Maximum award opportunity under the annual cash bonus is 120% of
base salary.
• 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 TSR outperforms the peer group by at least 5 percentage points.
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Details of share purchase and sale activity
During 2017 Millicom’s CEO, Mauricio Ramos
acquired 25,000 Millicom shares.
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.
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.
Global Senior Management Level
CEO
CFO
EVPs
General managers and VPs
Shares and unvested share awards granted from company equity plans
(number of shares)
December 31, 2017
Shares
Share awards not vested
December 31, 2016
Shares
Share awards not vested
2017 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.
2018 onwards
2017
Transition requirements % Full requirement %
400
200
50–100
25
CEO
Other
Executives
53,920
148,324
25,781
114,739
58,129
299,067
34,472
173,340
400
200
100
50
Total
112,049
447,391
60,253
288,079
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 Antonio Ríos García
Mr. Odilon Almeida
Ms. Janet Davidson
Mr. Simon Duffy
Mr. Tomas Eliasson
Mr. Anders Jensen
Mr. Alejandro Santo Domingo
Mr. Roger Solé Rafols
Former Directors (until May 2017):
Ms. José Miguel García Fernández (former Deputy Chairman)
Mr. Lorenzo Grabau
Total in SEK 000’s
Total (US$’000)(i)
Remuneration
2017
SEK 000’s
Remuneration
2016
SEK 000’s
2,150
1,075
1,050
950
1,050
1,250
950
950
850
2,025
—
1,050
950
1,050
1,250
—
950
—
—
—
SEK 10,275
US$1,122
1,300
950
SEK 9,525
US$1,143
(i)
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 2017
AGM date (in total 8,731 shares). Net remuneration comprised 52% in shares and 48% in cash (2015: 50% in shares and 50% in cash).
Millicom Annual Report 2017
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Shareholder and Board governance – continued
Millicom CEO and Executive Team
CEO
Position
Role and responsibilities
Mr. Mauricio Ramos
CEO
• 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.
Millicom shareholding at January 31,
2018: 80,159 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:
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.
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.
Mr. Mauricio Ramos
Chief Executive Officer
Mauricio Ramos, born in 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.
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
Mr. Mohamed Dabbour
Mr. Xavier Rocoplan
Chief Operating
Officer – Latam
Head of Africa
Division
Chief
Technology and
Information
Officer
Operations and development of the Latin American businesses.
Operations and development of the African businesses.
Networks, information technology and procurement within the Group.
Ms. Rachel Samrén
Chief External
Affairs Officer
Government relations, regulatory affairs, corporate communications and corporate
responsibility.
Mr. Salvador Escalón
General Counsel
Ms. Susy Bobenrieth
Mr. HL Rogers
Mr. Rodrigo Diehl
Chief Human
Resources
Officer
Chief Ethics and
Compliance
Officer
Chief Strategy
Officer
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.
Human Resource matters including talent acquisition and management, compensation,
diversity and inclusion.
Compliance matters including ethics, anti-bribery, anti-corruption and related compliance
programs. Also, corporate security and information security.
Strategy development and direction setting
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Millicom Annual Report 2017
The profiles of the CFO and Executive Team members are provided below:
Mr. Tim Pennington
Executive Vice President, Chief Financial
Officer
Tim Pennington joined Millicom in June 2014
as Senior Executive Vice President, Chief
Financial Officer.
Mr. Esteban Iriarte
Executive Vice President, Chief Operating
Officer, Latin America
Esteban Iriarte was appointed as Executive
Vice President, Chief Operating Officer (COO),
Latin America in August 2016.
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, based
in Hong Kong. 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 January 31,
2018: 10,386 shares
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 January 31,
2018: 14,057 shares
Mr. Mohamed Dabbour
Executive Vice President, Head of Africa
Division
Mohamed Dabbour joined Millicom in 2008
and has held a broad variety of roles in the
Africa region including Chief Financial Officer
in Chad in 2009 and Chief Financial Officer in
Ghana in 2011. Prior to being appointed as
Head of the Africa division he held the
position of Chief Financial Officer, Africa since
August 2015.
Prior to joining Millicom, Mohamed worked for
BESIX, the largest Belgian construction
company. He started his career at
PricewaterhouseCoopers in Brussels as a
Senior Accountant.
Mohamed holds an Executive MBA degree
from London Business School.
Millicom shareholding at January 31,
2018: 3,105 shares
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77
Shareholder and Board governance – continued
The profiles of the CFO and Executive Team members are provided below:
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.
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 Masters
degrees in engineering from Ecole Nationale
Supérieure des Télécommunications de Paris
and in economics from Université Paris IX
Dauphine.
Millicom shareholding at January 31,
2018: 18,073 shares
Ms. Rachel Samrén
Executive Vice President, Chief External
Affairs Officer
Rachel Samrén joined Millicom in July 2014
and manages the Group’s External Affairs
function which encompasses government
relations, regulatory affairs, 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 January 31,
2018: 500 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 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 January 31,
2018: 9,467 shares
78
Millicom Annual Report 2017
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Ms. Susy Bobenrieth
Executive Vice President, Chief Human
Resources Officer
Susy Bobenrieth, a global Human Resource
professional, joins Millicom with over 25 years
of experience in major multi-national
companies that include Nike Inc., American
President Lines and IBM.
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.
As an ex-Nike Executive, she has extensive
international knowledge and proven results
in leading large scale organizational
transformations, driving talent management
agenda and leading teams. She is passionate
about building great businesses and winning
with high performing teams.
Susy was raised in the USA by her Chilean
immigrant parents and is one of 8 children.
She has deep international experience having
lived and worked in Mexico, USA, Brazil,
Netherlands, and Spain.
She received a degree from the University of
Maryland, University College in 1989
Millicom shareholding at January 31,
2018: no shares
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 January 31,
2018: 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 January 31,
2018: 300 shares
Millicom Annual Report 2017
79
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.
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.
Chief Executive Officer
Executive Management Team
1.
Business Control
2.
Risk Management
3.
Compliance and
Business Ethics
(including Security)
4.
Corporate
Responsibility
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 updated 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.
Monitoring systems
A process of internal control self-assessment is
operated and requires self-certification of the
operation of key controls. Self-certified
responses are then subject to review and
challenge by the Group Business Controls
team and Global Process Owners. The results
are also compared to findings from Internal
and External Audit. 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 2017, three self-assessment
exercises were performed (2016:3). All
in-scope countries and operations met their
internal targets for 2017.
Fraud management and reporting
Business Control has responsibility for fraud
risk management. During the year, the
Group’s Fraud Policy, first adopted in 2015,
was updated and communicated. Education
activities continued, including an awareness
campaign aligned with International Fraud
Awareness Week in November.
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 December 31, 2017 and concluded that it
was effective.
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Millicom Annual Report 2017
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.
Management and governance of
compliance activities
The Millicom Management Team
fundamentally believes in the positive impact
of the Compliance program on the
organization as well as the world around us.
This is not simply a tick-box exercise. We aim
to be a driver of positive change in the
countries where we operate and therefore we
strive to have a best-in-class compliance
function to help us differentiate ourselves as a
partner of choice for our customers, our
business partners, and our employees.
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.
Ethics and Compliance
The Millicom Ethics and Compliance function
has overall responsibility for the group-wide
Millicom compliance program including the
anti-bribery and anti-corruption program. It
also manages the anti-money laundering
(AML) program, has overall responsibility for
investigations and manages the Information
Security and the Corporate Security areas.
The Ethics and Compliance function is built
around the three pillars: Prevent, Detect, and
Respond. All our initiatives and achievements
in 2017 were focused around these three
pillars of a complete compliance function.
The corporate and local compliance
committees have been expanded to cover
more areas of the Compliance program and
will continue to be the focus of oversight and
assurance for the planned and new
compliance initiatives.
The Corporate Compliance Committee
consists of all members of the Millicom
Executive Team including the Chief Ethics and
Compliance Officer. The local committees are
managed by the Local Compliance Managers,
together with the local general managers and
their management teams.
The Chief Ethics and Compliance Officer
reports on all matters relating to the
Compliance program to the Executive Team
and Corporate Compliance Committee. On a
regular basis reports are shared with the
general Millicom Board and the Compliance
and Business Conduct Committee of the
Board.
Speak up Policy and Issue Management
The Millicom Group operates the Millicom
Ethics Line with the help of an independent
third party to safeguard anonymity and
non-retaliation of reporters of potential issues.
The Millicom Ethics Line is managed by the
Ethics and Compliance Team and any
investigative work needed is managed by the
Vice President Investigations. The Millicom
Ethics Line is available on the Millicom website,
and is available to all employees as well as
third parties.
A quarterly report on matters raised is
reviewed by the Investigation Review
Committee, headed by the Vice President
Investigations and with members of the
corporate compliance team, Human
Resources, Internal Controls, Legal and
Internal Audit. Regular updates are shared
with the Corporate Compliance Committee,
consisting of the Executive Team, and to the
Compliance and Business Conduct Committee
of the Board.
Key governance initiatives
The areas of responsibility under the Chief
Ethics and Compliance Officer have been
expanded to include Information Security and
Corporate Security. A new compliance
structured was implemented with several new
key roles appointed.
The Corporate Compliance Team added
resources at global regional and local level.
Most notable was the introduction and
appointment of Regional Compliance Officers
for Latin America and Africa and the
introduction of Local Compliance Officers in
all local operations.
The Vice President Investigations was
appointed, with key members of the global
investigation team, to increase the quality and
focus on issued raised through the Millicom
Ethics Line and other channels of
communication. The Corporate Security
responsibilities were assumed by the Vice
President Investigations. The cross-functional
Investigations Review Committee (IRC)
continued to oversee and manage all ethics
and compliance concerns raised in one central
clearing house.
A new Global AML Officer was appointed and
a new Regional AML Officer for Latin America.
A new role, Chief Information Security Officer,
was created and appointed under the Chief
Ethics and Compliance Officer focusing on
group wide Information Security.
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81
Management governance – continued
The Code of Conduct and Anti-Corruption
training completion continues to be linked to
bonus eligibility. The target threshold is 90%
of staff completion rate, which was achieved
enterprise wide (see Corporate Responsibility
Performance Appendix pages 172 to 174).
Internal Audit appointed a new auditor
focusing on Compliance audits. There were
frequent reviews of the Compliance
framework and associated risks during the
year and the Compliance team focused
efforts on issue remediation through the
scorecard deliverables and additional
initiatives.
Heavy emphasis was put on managing our
third-party space. We have an ability to be an
agent of positive change with our third
parties. We want to work with business
partners that see the value of operating with
high ethical standards and together we can
help make a positive difference in the lives of
the customers and employees we touch.
To help us understand who we are doing
business with and identify the risks that a
genuine business relationship can expose us
to, we implemented a new third party due
diligence process and on-boarded a new
group-wide tool to support the process.
The compliance program in Guatemala
continues to strengthen with the appointment
of a dedicated Local Compliance Officer. The
internal control environment continued to
strengthen with several operational initiatives
such as an updated Code of Conduct and
subsequent employee training.
Corporate responsibility
This is the second year that Millicom has
integrated corporate responsibility-related
performance data and information in our
annual financial and operational report to
demonstrate how managing key “growing
responsibly” topics and subsequent risks support
successful delivery of our business strategy.
Millicom’s Corporate Responsibility (CR) team
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.
The CR team actively interacts 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 stakeholders.
In addition to anticipating and improving
preparedness on risks, the CR function also
adds value by seeking responsible leadership
opportunities for the Group to improve
reputation and brand perception, and
monitoring cost savings from environmental
initiatives.
Governance of CR
Millicom’s Board of Directors oversees the
Government Relations (GR), Regulatory
Affairs, Corporate Responsibility (CR) and
Social Investment (SI) functions of the Group
which fall under the umbrella of External
Affairs. This is due to the depth and
materiality of these topics, the current
maturity level of the programs, and the
importance of monitoring risks and
opportunities relating to them. The Executive
Vice President (EVP) Chief External Affairs
Officer, a direct report of the CEO, is
accountable for delivering updates on the CR
and SI strategy to the Board. Progress on CR
and SI strategy implementation and issues
management is also reported 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:
As part of the External Affairs
function, CR oversees, advises and
makes recommendations to
Management regarding our strategy
and activities in the areas of CR and
social investment.
Board of Directors
Chief Executive Officer
Executive Management Team
sponsors for managing CR
Chief Ethics and
Compliance Officer
EVP
Chief External Affairs
Officer
Direct reports
to the CEO
EVP
Chief Technology and
Information Officer
Senior
management
Corporate Compliance
Corporate
Investigations &
Security
Corporate Anti-Money
Laundering
Corporate Information
Security
Vice President
Corporate
Responsibility
Responsible for:
Corporate Responsibility,
Environmental and
Social Investment
programs
Vice President
Supply Chain
Responsible for:
Responsible supply
chain management
82
Millicom Annual Report 2017
Security
Millicom has a robust professional security
and safety model, managed by the Vice
President of Global Investigations, reporting
into the Executive Vice President, Chief Ethics
& Compliance Officer. The Security team
identifies, mitigates, and manages
developments that may pose a threat to the
resilience and continued operations of the
organization. Moreover, Corporate Security
oversees the implementation of policy and
Group standards in physical security, health
and safety, crisis management/business
continuity, and information security by local
operational teams.
The focus of the Corporate Security team is to
protect life, assets, and reputation; to promote
well-being; and to build resilience throughout
the business to unexpected events or crises.
The Corporate Security team continues to
implement international standards such as
OHSAS 18001, and ISO 22301 and 31000 in
order to secure additional services as well as
mitigating risk to the business.
Business Continuity and
Crisis Management
Our global and operational business continuity
and crisis management system is designed to
address significant disruption that might
affect our capabilities to perform critical
day-to-day activities. This function continues
to mature and has responded to events such
as extreme weather, civil unrest, and criminal
and political activities in the countries in which
we operate.
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. Risk
assessment is a continuous process.
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
In 2017, Millicom reorganized its Information
Security effort in order to further the maturity
of the global program. Reporting into the
Executive Vice President, Chief Ethics &
Compliance Officer, the program is managed
by the Global Chief Information Security
Officer (CISO), who is responsible for the
identification, management, and mitigation
of technology-centric risks throughout the
company. The CISO oversees the regional
Information security teams to ensure the
confidentiality, integrity, and availability of all
business-critical systems and assets;
identifying emerging threats and risks
potentially detrimental to Millicom; and
safeguard proprietary and personal customer
information. Additionally, the regional teams
work closely with business and technology
leadership to ensure compliance to corporate
policies and regional Information security-
related regulatory requirements within the
various countries where Millicom conducts
business.
The Global CISO meets regularly with the
Compliance Committee and Audit Committee
to ensure appropriate risks have been elevated
and are being addressed. As part of the move
to centralize Information Security services, the
Information Security team will be re-
evaluating the existing technology risk
management processes and consolidating all
identification and mitigation efforts under the
new global function beginning in 2018.
Health and Safety Management
All operating entities across Millicom including
corporate are in compliance with the current
internal OHSAS 18001 standard , seven of
which – or 46% – were externally certificated
this year with those remaining central America
and Africa due in 2018. Additionally, there will
be a transitional period at the later end of
2018 as the company prepares to move to the
new ISO 45001 standard.
There was a total of 10 fatalities, ranging from
road traffic accidents (RTA), falls from height,
violent crime associated with criminal gangs,
and one case of suicide, among our
contracted staff or our managed service
supplier.
In 2017, there was a 120% increase in the
overall number of reported health, safety and
security incidents in comparison to 2016. The
increase in reported numbers in 2017
compared to 2016 is likely the result of a
substantial reporting campaign across the
company on accidents and incidents
reporting.
Significant improvements in our due diligence
process have been completed for our staff
and suppliers in the health and safety area,
bolstering training and awareness in auditing,
health and safety vetting and site inspections.
In 2016, we targeted the top 20 suppliers
across each operating entity and during 2017
our teams targeted the top five suppliers with
the most significant health and safety and
security risks, and carried out a comprehensive
audit of their business to ensure they comply
with our strict requirements in this area.
The external verification of our OHSAS 18001
standards highlighted several observations in
regard to the management of occupational
health across the company. As such areas
around capturing sickness absence, health
awareness campaign messages and trend
analysis to identify specific levels of
absenteeism and their underlying causes have
been a key focus area.
This will continue to be a major focus for all
departments in the coming year.
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Millicom Annual Report 2017
83
Directors’ Financial and Operating Report…
Group performance
Growth returned to our Latam markets during
the second half of 2017, thanks largely to our
strategic focus on building digital highways
and accelerating the transition from legacy
voice and SMS to high-speed data services,
both in mobile and fixed.
In 2017, our financial statements show total
revenue for the Group was US$4,133 million.
Gross profit was US$2,915 million, or a margin
of 70.5%.
Operating expenses represented 39.3% of
revenue. The Group has continued delivering
on operational efficiencies which underpinned
our margins and cash flows, delivering a lower
operating cost run rate as well as Capex.
Our operating profit amounted to
US$629 million, an 15.2% margin impacted
positively by the gain on tower deals
completed in Colombia and Paraguay.
Net financial expenses were US$385 million,
including one-off costs in respect of early
redemptions of the 2020 and 2021 Senior
Notes outstanding bonds.
Profit before taxes at US$155 million included
the effects of the increase in interest expenses
described above, the gains on disposals of
part of our towers in Paraguay and Colombia
as well as the impairments of the value of our
operations in Rwanda, of a minor investment
in Guatemala and of our interest in LIH, an
equity investment.
The Group net tax charge in 2017 was
US$158 million leaving a net loss for the year
from continuing operations at US$(3) million.
The profit of US$71 million from discontinued
operations reflected the profit on the merger
of our business in Ghana.
As a result, the net profit for the year was
US$68 million. The share of losses of
non-controlling interests was US$17 million.
The net profit for the year attributable to
Millicom owners was US$85 million. Earning
per share was 0.85 cents.
Share Capital
At December 31, 2017, Millicom had
101.7 million issued and paid up common
shares of par value US$1.50 each, of which
1.2 million were held by the Company as
treasury shares (2016: 1.4 million). During the
year, the Company acquired approximately
32,000 shares and issued around 224,000
shares to management and employees under
the LTIP remuneration plans and
approximately 9,000 shares to Directors as
part of their annual remuneration.
Distribution to shareholders
and proposed distributions
On May 4, 2017, 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 2016 and 2015.
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 both 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 the level of disposable income and
consumers’ attitudes and demand for our
products and services.
The telecommunications, cable and content
industries are evolving at an unprecedented
pace. Demand and supply of access to the
internet and content channels continues to
gather pace, particularly in emerging markets.
Remaining competitive in this increasingly
diverse and interconnected business requires
innovation, constant commitment and
attention to customer experience, relevant
products and services, strategic partnerships,
and provision of high-quality content.
Access to, and allocation of, capital and
resources in the right place at the right time
directly impacts competitive advantage.
Decision making in this regard remains key to
ensuring the right balance of risk with 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 24 to 27.
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.
Internal controls and risk management on the
preparation of the consolidated financial
statements are set out in the Governance
section from pages 47 to 83.
Non-financial information
Non-financial information, such as
environmental, social, human rights and the
fight against corruption, are set out in the
Corporate Responsibility Performance
Appendix pages 161 to 188 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, HR, compliance and finance.
During 2017, the Executive Management
team position of chief human resources
officer, was filled. In addition, we hired our first
chief information security officer.
At December 31, 2017, the Group’s headcount
from continuing operations reached
approximately 19,000, up from almost 18,000
at December 31, 2016.
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Outlook for the Group
For our Latam segment, we expect 2018
service revenue growth of 2-4% and EBITDA
growth of 3-6% year-on-year in constant
currency, and capex for the region should total
approximately US$1 billion. In our B2C mobile
unit, we expect to add three million new 4G
data customers and to end the year with ten
million. In our B2C Home business, we
anticipate adding one million new HFC homes
passed to reach ten million total homes, and
we expect to connect an incremental 300,000
hybrid fiber-coaxial (HFC) homes to our
network. For Africa, we expect the region will
continue to produce positive equity Free Cash
Flow.
Tom Boardman
Chairman of the Board of Directors
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Millicom Annual Report 2017
85
Management
responsibility
statement
We, Mauricio Ramos, Chief Executive Officer
and Tim Pennington, Chief Financial Officer,
confirm, to the best of our knowledge, that
these 2017 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, February 6, 2018
Mauricio Ramos
Chief Executive Officer
Tim Pennington
Chief Financial Officer
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Millicom Annual Report 2017
Our financials...
This section details our financial performance for 2017
Independent auditor’s report
Introduction
Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
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93
99
100
101
103
104
105
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Independent auditor’s report
on the consolidated financial statements
To the shareholders of Millicom International Cellular S.A.
• Assessing the accounting applied to
commercial offers, particularly in light
of the revenue recognition criteria set by
IAS 18;
• Performing tests on the accuracy of
customer bill generation on a sample
basis and testing of a sample of the
credits and discounts applied to
customer bills;
• Substantive testing of deferred income,
through validation reports used in its
determination at period end;
• Testing cash receipts for a sample of
customers back to the customer invoice;
• Performing substantive analytical
procedures on revenue and deferred
revenue based on our industry
knowledge, forming an expectation of
revenue based on key performance
indicators taking into consideration
disconnections, installations, changes in
rates and trends in deferred income;
• Assessing the adequacy of the provision
for impairment of trade receivables,
including the appropriateness of the
methodology used to calculate the
provision, and analyzing individual
significant long outstanding balances;
• Assessing the adequacy of the Group’s
disclosures in respect of the accounting
policies on revenue recognition as
disclosed in note B1 of the consolidated
financial statements;
Opinion
Following our appointment by the General
Meeting of the shareholders dated May 4,
2017, we have audited the accompanying
consolidated financial statements of Millicom
International Cellular S.A. (the Group)
included on page 93 to page 156, which
comprise the consolidated statement of
financial position as of December 31, 2017,
the consolidated income statement, the
consolidated statement of comprehensive
income, the consolidated statement of cash
flows and the consolidated statement of
changes in equity for the year then ended,
and a summary of significant accounting
policies and other explanatory information.
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 December 31, 2017, 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.
Basis for opinion
We conducted our audit in accordance with
EU Regulation N° 537/2014, the Law of July
23, 2016, on the audit profession (the “Law of
23 July 2016”) and with International
Standards on Auditing (ISAs) as adopted for
Luxembourg by the “Commission de
Surveillance du Secteur Financier” (CSSF). Our
responsibilities under the regulation, law and
standards are further described in the
Responsibilities of the “réviseur d’entreprises
agréé” for the audit of the consolidated
financial statements section of our report. We
are also independent of the Company in
accordance with the International Ethics
Standards Board for Accountants’ Code of
Ethics for Professional Accountants (IESBA
Code) as adopted for Luxembourg by the
CSSF together with the ethical requirements
that are relevant to our audit of the
consolidated financial statements in
Luxembourg, and we have fulfilled our other
ethical responsibilities under those ethical
requirements. We believe that the audit
evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in
our professional judgment, were of most
significance in our audit of the consolidated
financial statements of the current period.
These matters were addressed in the context
of our audit of the consolidated financial
statements as a whole, and in forming our
opinion thereon, and we do not provide a
separate opinion on these matters.
1. Revenue recognition – accuracy of
revenue recorded given the complexity
of systems
Risk identified
The Group’s revenue consists of mobile and
data telephony services, corporate
solutions, fixed-line broadband, fixed-line
telephone, cable TV and mobile financial
services to retail and business customers.
Revenue from these services is considered
a significant risk due to both the bundling
of these services and the complexity of the
Group’s systems and processes used to
record revenue. Also, the application of
revenue recognition accounting standards
is complex and involves a number of key
judgments and estimates.
Our answer
Our audit procedures over revenue
included, among others:
• Testing of controls, assisted by our
information technology specialists
including those over: set-up of customer
accounts, pricing data, segregation of
duties and the linkage to usage data
that drives revenue recognition;
• Testing the end-to-end reconciliation
from business support systems to billing
and rating systems to the general
ledger. This testing included validating
material journal entries processed
between the billing systems and general
ledger;
• Testing of transactions for main
revenues streams (calls, data, SMS,
content);
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Millicom Annual Report 2017
2. Carrying value of goodwill and cash
3. Recognition of tax contingencies and
generating units (CGUs)
Risk identified
tax assets
Risk identified
Under EU-IFRSs, the Group is required to
annually test the amount of goodwill for
impairment. This annual impairment test
was significant to our audit because the
balance of US$599 million as of December
31, 2017, is material to the consolidated
financial statements. In addition, the
Group’s assessment process includes
significant judgments and is based on
assumptions derived from the Group’s five
year plans, which are affected by expected
future market or economic conditions.
Our answer
Our audit procedures included, amongst
others, an assessment of the historical
accuracy of management’s estimates and
budgets, evaluation and challenge of the
assumptions, methodologies, CGU
determination, the WACC and data used
by the Group, for example by comparing
them to external data. We have involved
our valuation experts to assist us with our
assessment of the WACC, expected
inflation rates and the appropriateness of
the model used. Furthermore, we have
analyzed sensitivities if a lower growth rate
or higher WACC were used.
The Company’s disclosures about goodwill
are included in note E.1.5. and E.1.6.
Income tax positions were significant to
our audit because the assessment process
is complex and involves a high degree of
judgment and the amounts involved are
material to the consolidated financial
statements as a whole. The Group’s
operations are subject to income taxes in
various jurisdictions resulting in different
subjective and complex interpretation of
local tax laws as uncertainty prevails in the
emerging markets economies in which
Millicom is operating. Management
exercises judgment in assessing the level of
provision required for taxation when such
taxes are based on the interpretation of
complex tax laws. The future actual
outcome of the decisions concerning these
tax exposures may result in materially
higher or lower amounts than the accrual
included in the accompanying
consolidated financial statements.
The Group’s deferred income tax assets as
at December 31, 2017, amount to
US$180 million. Under EU-IFRS, the Group
is required to periodically determine the
valuation of deferred tax asset positions.
This area was significant to our audit
because of the related complexity of the
valuation process which involves significant
management judgment, given it is based
on assumptions that are affected by
expected future market or economic
conditions.
Our answer
Our procedures included, among others,
assessing the appropriateness of
management’s assumptions and estimates
in relation to uncertain tax positions, and
considering advice received by
management from external parties to
support their position. We have involved
our tax specialists, where relevant, to
consider management’s assessment of the
tax positions and related provision/liability
accruals when necessary.
We assessed the business plans to
determine the appropriateness of
management assessment that recovering
the deferred tax assets based on future
taxable profits within the five year plan
approved by the Board of Directors is
probable and assessed the adequacy of
disclosures on the assumptions and
sensitivities in such business plans.
We also assessed the adequacy of the
Group’s disclosures in respect of the tax
contingencies and tax positions as set out
in note B.6. and G.3.2.
4. Discontinued operation and asset held
for sale classification of Ghana and
Senegal
Risk identified
Discontinued operations are those which
have identifiable operations and cash flows
and represent a major line of business or
geographic area which has been disposed
of, or are held for sale. As disclosed in notes
A.4 and E.3.2 of the consolidated financial
statements, Millicom disposed of its Ghana
operation on October 12, 2017, and
classified the operation as discontinued
operation. In addition, Millicom has
announced on July 28, 2017, the sale of its
Senegal operation to a consortium
consisting of NJJ, Sofima and Teylium
Group, subject to customary closing
conditions and regulatory approvals. While
the transaction is still subject to regulatory
approval at December 31, 2017,
management assessed that there is a high
probability that the sale will be completed
and has classified the operation as
discontinued operation and as held for
sale.
This area is relevant to our audit since the
classification of asset held for sale and
discontinued operation requires significant
judgment over the likelihood of the
transaction and it impacts the
presentation in the consolidated income
statement and the statement of financial
position including restatements of prior
year results for comparison purposes.
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Independent auditor’s report
on the consolidated financial statements – continued
To the shareholders of Millicom International Cellular S.A.
Our answer
As part of our audit procedures, we have
considered the share purchase agreements
for both Ghana and Senegal operations
and management documentation to
assess that the criteria for classification as
asset held for sale under IFRS 5 have been
met.
We have also assessed that the criteria to
qualify for discontinued operation have
been met.
We also assessed the adequacy of the
Group’s disclosures in respect of
discontinued operations as set out in note
A.4. and E.3.2..
5. IT systems and controls
Risk identified
The Group is heavily dependent on its
information technology infrastructure for
the continuity of the business processes. To
be in a position to place a high level of
reliance on the Group’s information
technology system and key internal
controls, a significant proportion of our
audit effort was conducted in this area.
Our answer
We understood and assessed the overall IT
control environment and the controls in
place, which included controls over access
to systems and data, as well as system
changes. We tailored our audit approach
based on the financial significance of the
system and whether there were automated
procedures supported by that system.
The procedures performed, among others,
included testing the operating
effectiveness of controls over appropriate
access rights and validating that only
appropriate users had the ability to create,
modify or delete user accounts for the
relevant in-scope applications.
In addition, we tested the operating
effectiveness of controls around system
development, program changes and IT
dependent business controls to establish
that changes to the system were
appropriately authorized and also
developed and implemented properly.
6. Capitalization and asset lives
Risk identified
The net book value of fixed assets at
7. Potential improper payments in
Guatemala
Risk identified
December 31, 2017, is US$2,880 million.
The assessment and timing of whether
assets meet the capitalization criteria set
out in the relevant accounting standards,
the estimation of appropriate useful
economic lives and the assessment of
whether any impairment indicators are
present, such as redundant assets, as well
as the identification and the classification
of leases all require judgment.
Our answer
Our audit procedures included, among
others:
• Evaluating the design and testing the
operating effectiveness of controls
around the asset capitalization cycle;
• Considering material contracts signed
during the year regarding new
indefeasible rights of use (IRU), licenses,
frequency charges or broadcasting
rights to assess the appropriateness of
accounting treatment;
• Assessing management assumptions
over the carrying value and useful
economic life of key assets by
consideration of internal and external
available data;
• Testing a sample of fixed asset
additions to third party evidence such
as purchase invoice and bank statement
to assess the validity, valuation and
appropriateness of capitalization of
those additions;
• Considering the circumstances as to
whether any additions or prevailing
events would give rise to indicators of
impairment such as redundant assets;
• Assessing the adequacy of the Group’s
disclosures in respect of PP&E and
intangible assets as set out in Notes E.2.
and E.1.
On October,21, 2015, Millicom reported to
law enforcement agencies in the USA and
Sweden potential improper payments
made on behalf of the Company’s joint
venture in Guatemala (Comcel). On July 14,
2017, the International Commission
Against Impunity in Guatemala (CICIG),
disclosed an ongoing investigation into
alleged illegal campaign financing that
includes a competitor of Comcel. The
CICIG further indicated that the
investigation would include Comcel. On
November 23/24, 2017, Guatemala’s
attorney general and CICIG executed
search warrants on the offices of Comcel.
Considering the current situation, the
Group has not been able to estimate the
outcome of these cases and therefore the
potential financial impact on its financial
position and accordingly, has disclosed
these matters in note G.3. of the
consolidated financial statements.
Our answer
Our audit procedures included, amongst
others:
• Inquiring of Millicom’s lawyers dealing
with the matter and we obtained
external confirmation from these
lawyers as part of our audit procedures.
We also inquired of Group management
on the matter;
• Inquiring of the head of compliance to
understand the remediation actions
taken from an internal control
perspective and involved our forensic
specialists to discuss such remediation
with management;
• Testing the fact that Millicom’s updated
anti-bribery and anti-corruption policy
and Code of Conduct have been rolled
out in Group’s operations;
• Performing test of controls over the
procure to pay process;
• Assessing the adequacy of the Group’s
disclosures in respect of these matters
as set out in Note G.3.
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Millicom Annual Report 2017
Other information
The Board of Directors is responsible for the
other information. The other information
comprises the information included in the
consolidated management report from pages
84 to 85 and the accompanying corporate
governance statement from pages 47 to 83,
but does not include the consolidated
financial statements and our report of
“réviseur d’entreprises agréé” thereon.
Our opinion on the consolidated financial
statements does not cover the other
information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the
consolidated financial statements, our
responsibility is to read the other information
and, in doing so, consider whether the other
information is materially inconsistent with the
consolidated financial statements or our
knowledge obtained in the audit, or otherwise,
appears to be materially misstated. If, based
on the work we have performed, we conclude
that there is a material misstatement of this
other information, we are required to report
this fact. We have nothing to report in this
regard.
Responsibilities of the Board of Directors
and of those charged with governance for
the consolidated financial statements
The Board of Directors is responsible for the
preparation and fair presentation of the
consolidated financial statements in
accordance with IFRSs as adopted by the
European Union, and for such internal control
as management determines is necessary to
enable the preparation of consolidated
financial statements that are free from
material misstatement, whether due to fraud
or error.
In preparing the consolidated financial
statements, the Board of Directors is
responsible for assessing the Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related to
going concern and using the going concern
basis of accounting unless management
either intends to liquidate the Group or to
cease operations, or has no realistic
alternative but to do so.
Those charged with governance are
responsible for overseeing the Group’s
financial reporting process.
Responsibilities of the “réviseur
d’entreprises agréé” for the audit of the
consolidated financial statements
Our objectives are to obtain reasonable
assurance about whether the consolidated
financial statements as a whole are free from
material misstatement, whether due to fraud
or error, and to issue a report of the “réviseur
d’entreprises agréé” that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that an
audit conducted in accordance with EU
Regulation N° 537/2014, the Law of 23 July
2016 and with the ISAs as adopted for
Luxembourg by the CSSF will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error
and are considered material if, individually or
taken together, they could reasonably be
expected to influence the economic decisions
of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with EU
Regulation N° 537/2014, the Law of July 23,
2016, and with ISAs as adopted for
Luxembourg by the CSSF, we exercise
professional judgment and maintain
professional skepticism throughout the audit.
We also:
• Identify and assess the risks of material
misstatement of the consolidated financial
statements, whether due to fraud or error,
design and perform audit procedures
responsive to those risks, and obtain audit
evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk
of not detecting a material misstatement
resulting from fraud is higher than for one
resulting from error, as fraud may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of
internal control;
• Obtain an understanding of internal
control relevant to the audit 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 Company’s
internal control;
• Evaluate the appropriateness of
accounting policies used and the
reasonableness of accounting estimates
and related disclosures made by
management;
• Conclude on the appropriateness of
management’s use of the going concern
basis of accounting and, based on the
audit evidence obtained, whether a
material uncertainty exists related to
events or conditions that may cast
significant doubt on the Company’s ability
to continue as a going concern. If we
conclude that a material uncertainty exists,
we are required to draw attention in our
report of the “réviseur d’entreprises agréé”
to the related disclosures in the
consolidated financial statements or, if
such disclosures are inadequate, to modify
our opinion. Our conclusions are based on
the audit evidence obtained up to the date
of our auditor’s report. However, future
events or conditions may cause the
Company to cease to continue as a going
concern;
• Evaluate the overall presentation, structure
and content of the consolidated financial
statements, including the disclosures, and
whether the consolidated financial
statements represent the underlying
transactions and events in a manner that
achieves fair presentation;
• Obtain sufficient appropriate audit
evidence regarding the consolidated
financial information of the entities or
business activities within the Group to
express an opinion on the consolidated
financial statements. We are responsible
for the direction, supervision and
performance of the group audit. We
remain solely responsible for our audit
opinion.
We communicate with those charged with
governance regarding, among other matters,
the planned scope and timing of the audit
and significant audit findings, including any
significant deficiencies in internal control that
we identify during our audit.
Millicom Annual Report 2017
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Independent auditor’s report
on the consolidated financial statements – continued
To the shareholders of Millicom International Cellular S.A.
The accompanying corporate governance
statement from pages 47 to 83 is the
responsibility of the Board of Directors. The
information required by article 68ter
paragraph (1) letters c) and d) of the law of
December 19, 2002, on the commercial and
companies register and on the accounting
records and annual accounts of undertakings,
as amended, is consistent with the
consolidated financial statements and has
been prepared in accordance with applicable
legal requirements.
Other matter.
The corporate governance statement includes
the information required by article 68ter
paragraph (1) of the law of December 19,
2002, on the commercial and companies
register and on the accounting records and
annual accounts of undertakings, as
amended.
Ernst & Young
Société anonyme
Cabinet de révision agréé
Olivier Lemaire
Luxembourg, February 6, 2018
We also provide those charged with
governance with a statement that we have
complied with relevant ethical requirements
regarding independence, and to communicate
with them all relationships and other matters
that may reasonably be thought to bear on
our independence, and where applicable,
related safeguards.
From the matters communicated with those
charged with governance, we determine those
matters that were of most significance in the
audit of the consolidated financial statements
of the current period and are therefore the key
audit matters. We describe these matters in
our auditor’s report unless law or regulation
precludes public disclosure about the matter
or when, in extremely rare circumstances, we
determine that a matter should not be
communicated in our report because the
adverse consequences of doing so would
reasonably be expected to outweigh the
public interest benefits of such
communication.
Report on other legal and regulatory
requirements
We have been appointed as “réviseur
d’entreprises agréé” by the General Meeting
of the shareholders on May 4, 2017, and the
duration of our uninterrupted engagement,
including previous renewals and
reappointments, is six years.
The consolidated management report from
pages 84 to 85, and 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.
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Millicom Annual Report 2017
Introduction
Corporate information
Millicom International Cellular S.A. (the
“Company” or “MIC SA”), 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, internet, TV (incl. DTH and
PayTV) and investments in online businesses
in Latin America (Latam) and Africa.
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 July 19, 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
December 31 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.
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 6 February, 2018, 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 (AGM) to be held on May 4, 2018.
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 and Tanzania).
Millicom operates various cable and fixed line
businesses in Latam (Colombia, Costa Rica, El
Salvador, Guatemala, Honduras, Nicaragua,
Bolivia and Paraguay). Millicom also provides
direct to home satellite service in many of its
Latam countries.
On December 31, 2015, Millicom
deconsolidated its operations in Guatemala
and Honduras which are, since that date and
for accounting purposes, under joint control
(see note A.2.2., for further details).
Millicom has investments in
online/e-commerce businesses in several
countries in Latam 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.
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
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:
i)
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.
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Introduction – continued
IFRS consolidated financial statements - continued
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 December 31, 2017 and 2016.
Exchange rates to the US dollar
Bolivia
Chad and Senegal
Colombia
Costa Rica
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
Cedi (GHS)
Quetzal (GTQ)
Lempira (HNL)
Euro (EUR)
Cordoba (NIO)
Guarani (PYG)
Rwandan Franc (RWF)
Krona (SEK)
Shilling (TZS)
Pound (GBP)
2017
Average rate
6.91
588
2,961
571
n/a
4.36
7.36
23.58
0.89
30.05
5,626
832
8.53
2,233
0.77
2017
Year-end rate
6.91
558
2,984
573
n/a
4.42
7.34
23.67
0.83
30.79
5,590
845
8.18
2,245
0.74
2016
Year-end rate
6.91
626
3,001
561
n/a
4.20
7.52
23.59
0.95
29.32
5,767
820
9.11
2,181
0.81
Change
%
n/a
12
1
(2)
n/a
(5)
2
—
12
(5)
3
(3)
10
(3)
9
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Objective
New and amended IFRS accounting standards
Standards or
amendments
Adopted by Millicom on January 1, 2017, with no material impact to the consolidated financial statements
IAS 7 Disclosure
Initiative –
Amendment to IAS 7
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.
IAS 12 Recognition of
Deferred Tax Assets
for Unrealized Losses
This amendment did not have a material impact for the Group. The disclosure required has been
added to these consolidated financial statements, see note C.5.
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.
This amendment did not have a material impact for the Group.
IASB
effective date
January 1, 2017
January 1, 2017
Not yet effective and not early adopted by Millicom on January 1, 2017
IFRS 15 Revenue from
Contracts with
Customers
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.
January 1, 2018
The Group will adopt the accounting standard on January 1, 2018, and identified a limited impact
on its Group financial statements. IFRS 15 mainly affects the timing of recognition of revenue as it
introduces more differences between the billing and the recognition of the revenue. However, it will
not affect the cash flows generated by the Group.
As a consequence of adopting this standard in 2018:
1) Some revenue will be recognized earlier, as a larger portion of the total consideration received in
a bundled contract will be attributable to the component delivered at contract inception (i.e.
typically a subsidized handset). Therefore, this will produce a shift from service revenue (which
will decrease) to the benefit of telephone and equipment revenue. This will result in the
recognition of a contract asset on the statement of financial position as more revenue is
recognized upfront while the cash will be received along the subscription period (which is usually
between 12 to 36 months). Contract assets (and liabilities) will be reported on a separate line in
current assets even if their realization period is longer than 12 months. This is because they are
realized / settled as part of the normal operating cycle of our core business;
2) The cost incurred to obtain a contract (mainly commissions) will be capitalized in the statement
of financial position and amortized over either the average customer retention period or the
contract term, depending on the circumstances. This will result in the recognition of a contract
costs capitalized on the statement of financial position;
3) There will be no material changes for the purpose of determining whether the Group acts as
principal or an agent in the sale of products.
Management identified some other adjustments that are much less meaningful than the
adjustments explained above.
The Group will adopt the standard using the cumulative catch-up transition method. Hence, the
cumulative effect of initially applying the standard will be recognized as an adjustment to the
opening balance of retained earnings as at January 1, 2018, and comparatives will not be restated.
The Group expects an increase of approximately US$50 million on the retained earnings as of
January 1, 2018. Expected impact has been determined based on outstanding contracts as of
September 30, 2017, and are therefore estimates. The cumulative effect that will be recorded on
January 1, 2018, will be based on December 31, 2017,figures.
Millicom Annual Report 2017
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Introduction – continued
Standards or
amendments
IFRS 15 Revenue from
Contracts with
Customers –continued
IFRS 9 Financial
Instruments
IFRS 16 Leases
Objective
Additionally, the Group has decided to take some of the practical expedients foreseen in the
standard, such as:
•
•
•
•
Millicom will not adjust the transaction price for the means of a financing component whenever
the period between the transfer of a promised good or service to a customer and the
associated payment is one year or less; when the period is more than one year the significant
financing component will be adjusted, if material;
Millicom will disclose in the Group financial statements the transaction price allocated to
unsatisfied performance obligations only for contracts that have an original expected duration
of more than one year (e.g. unsatisfied performance obligations for contracts that have an
original duration of one year or less will not be disclosed);
Millicom will apply the practical expedient not to disclose the price allocated to unsatisfied
performance obligations, if the consideration from a customer directly corresponds to the value
to the customer of the entity’s performance to date (i.e. if billing = accounting revenue);
Millicom will apply the practical expedient to recognize the incremental costs of obtaining a
contract as an expense when incurred if the amortization period of the asset that Millicom
otherwise would have recognized is one year or less.
IFRS 9 addresses the classification, measurement and recognition, and impairments of financial
assets and financial liabilities as well as hedge accounting. 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 hedge
accounting to continue under IAS 39. IFRS 9 also clarifies the accounting for certain modifications
and exchanges of financial liabilities measured at amortized cost.
The application of IFRS 9 will not have an impact for the Group on classification, measurement
and recognition of financial assets and financial liabilities compared to current rules, but it will have
a limited impact on impairment of trade receivables and contract assets (IFRS 15) as well as on
amounts due from joint ventures and related parties – with the application of the expected credit
loss model instead of the current incurred loss model. Similarly to IFRS 15 adoption, the Group will
adopt the standard using the cumulative catch-up transition method and will therefore not restate
comparative periods. Hence, the cumulative effect of initially applying the Standard will be
recognized as an adjustment to the opening balance of retained earnings as at January 1, 2018,
and comparatives will not be restated. The Group expects a decrease of approximately
US$20 million on the retained earnings as of January 1, 2018. Additionally, the Group will continue
applying IAS 39 rules with respect to hedge accounting. Finally, the clarification introduced by IFRS
9 on the accounting for certain modifications and exchanges of financial liabilities measured at
amortized cost will have no impact for the Group.
The application of the standard will affect primarily the accounting for the Group’s operating
leases. As at the reporting date, the Group has operating lease commitments of US$808 million,
see note G.2.2. However, the Group is still assessing 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 profit 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 exception 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 January 1, 2019.
IASB
effective date
January 1, 2018
January 1, 2019
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Millicom Annual Report 2017
Standards or
amendments
IFRIC 22 Foreign
currency transactions
and advance
consideration
IFRIC 23 Uncertainty
over income tax
treatments
Annual improvements
2014–2016
Annual improvements
2015–2017
Objective
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.
IFRIC 23 clarifies how the recognition and measurement requirements of IAS 12 Income taxes, are
applied where there is uncertainty over income tax treatments. The interpretation is effective for
annual periods beginning on or after January 1, 2019. Earlier application is permitted. This
interpretation has not been endorsed by the EU yet. The Group is currently assessing the impact of
this interpretation but does not expect any significant effect of applying it.
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.
IFRS 12, Disclosure of interests in other entities regarding clarification of the scope of the standard
(effective 1 January 2017). IAS 28, Investments in associates and joint ventures regarding
measuring an associate or joint venture at fair value. The Group does not expect these
improvements to have a material impact on the consolidated financial statements. These
improvements have not been endorsed by the EU yet.
These amendments impact four standards: IFRS 3, Business Combinations and IFRS 11 Joint
Arrangements regarding previously held interest in a joint operation. IAS 12, Income Taxes
regarding income tax consequences of payments on financial instruments classified as equity. And
finally, IAS 23, Borrowing Costs regarding eligibility for capitalization. Again, the Group does not
expect these improvements to have a material impact on the consolidated financial statements.
These improvements have not been endorsed by the EU yet.
IASB
effective date
January 1, 2018
January 1, 2019
January 1, 2018
January 1, 2019
Millicom Annual Report 2017
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Introduction – continued
• 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.).
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 notes B.4.1., B.4.2.).
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.);
98
Millicom Annual Report 2017
Consolidated statement of income
for the year ended December 31, 2017
US$ millions
Revenue
Cost of sales
Gross profit
Operating expenses
Depreciation
Amortization
Share of profit in our joint ventures in Guatemala and Honduras
Other operating income (expenses), net
Operating profit
Interest expense
Interest and other financial income
Other non-operating (expenses) income, net
Income (loss) from other joint ventures and associates, net
Profit (loss) before taxes from continuing operations
Charge for taxes, net
Profit for the year from continuing operations
Profit (loss) for the year from discontinued operations, net of tax
Net profit (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.).
The accompanying notes are an integral part of these consolidated financial statements.
Notes
B.1.
B.2.
B.2.
E.2.2.
E.1.3.
A.2.
B.2.
B.3.
C.3.3.
B.5.
A.3.
B.6.
E.3.2.
A.1.4.
B.7.
B.7.
2017
4,133
(1,218)
2,915
(1,623)
(711)
(150)
142
57
629
(401)
16
(4)
(85)
155
(158)
(3)
71
68
85
(17)
0.14
0.71
0.85
0.14
0.71
0.85
2016(i)
4,105
(1,187)
2,918
(1,661)
(698)
(178)
115
(15)
481
(377)
21
13
(49)
88
(179)
(91)
1
(90)
(32)
(58)
(0.33)
0.01
(0.32)
(0.33)
0.01
(0.32)
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Consolidated statement of comprehensive income
for the year ended December 31, 2017
US$ millions
Net profit (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 income (loss) for the year
Attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income (loss) for the period arises from:
Continuing operations
Discontinued operations
The accompanying notes are an integral part of these consolidated financial statements.
2017
68
85
4
(2)
156
171
(15)
96
60
2016
(90)
(14)
(3)
(2)
(109)
(60)
(49)
(108)
(1)
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Consolidated statement of financial position
at December 31, 2017
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
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 capex
Other current assets
Restricted cash
Cash and cash equivalents
TOTAL CURRENT ASSETS
Assets held for sale
TOTAL ASSETS
The accompanying notes are an integral part of these consolidated financial statements.
Notes
December 31
2017
December 31
2016
E.1.
E.2.
A.2.
A.3.
B.6.
D.1.2.
G.5.
F.2.
F.1.
G.5.
C.4.
C.4.
E.3.2.
1,265
2,880
2,967
241
180
—
113
7,647
45
386
37
145
99
18
90
145
619
1,585
233
9,465
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
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Consolidated statement of financial position
at December 31, 2017 – continued
US$ millions
EQUITY AND LIABILITIES
EQUITY
Share capital and premium
Treasury shares
Other 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 ventures
Provisions and other non-current liabilities
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
CURRENT LIABILITIES
Debt and financing
Payables and accruals for capex
Other trade payables
Amounts due to non-controlling interests, associates and joint ventures
Accrued interest and other expenses
Current income tax liabilities
Derivative financial instruments
Provisions and other current liabilities
TOTAL CURRENT LIABILITIES
Liabilities directly associated with assets held for sale
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
The accompanying notes are an integral part of these consolidated financial statements.
Notes
December 31
2017
December 31
2016
C.1.
C.1.
A.1.4.
C.3.
D.1.2.
G.5.
F.4.2.
B.6.
C.3.
G.5.
D.1.2.
F.4.1.
E.3.2.
637
(106)
(470)
2,950
85
3,096
185
3,282
3,600
—
124
335
56
4,116
185
304
288
296
353
81
56
425
1,989
79
6,183
9,465
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
102
Millicom Annual Report 2017
Consolidated statement of cash flows
for the year ended December 31, 2017
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
Share of profit in our joint ventures in Guatemala and Honduras
Loss on disposal and impairment of assets, net
Share based compensation
(Income) loss from other joint ventures and 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
Total 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
Proceeds from disposal of subsidiaries and associates, 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
Cash (used in) provided by other investing activities, net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from debt and financing
Repayment of debt and financing
Advances for, and dividends to non-controlling interests
Payment of dividends to equity holders
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
Effect of cash in disposal group held for sale
Cash and cash equivalents at the end of the year
(i) Re-presented for discontinued operations.
The accompanying notes are an integral part of these consolidated financial statements.
Notes
E.3.2.
A.2.
E.1.6., E.3.2.
C.1.
A.3.
B.5.
A.1.
A.2.2.
E.3.2., A.3.2.
E.1.4.
E.2.3.
C.3.4.
D.1.2
C.3.
C.3.
A.1./A.2.
C.2.
E.3.2
2017
155
71
226
416
(16)
879
(142)
(99)
24
85
(2)
6
16
(83)
(61)
(372)
16
(132)
820
(22)
203
22
(133)
4
(650)
179
31
(367)
996
(1,195)
—
(265)
(464)
4
(8)
646
(19)
619
2016(i)
88
(5)
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)
713
(821)
(68)
(265)
(441)
(8)
(123)
769
—
646
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103
Consolidated statement of changes in equity
for the year ended December 31, 2017
—
—
—
—
Number
of shares
(000’s)
US$ millions
Balance on December 31, 2015 101,739
Total comprehensive income for
the year
Dividends(iv)
Purchase of treasury shares
Share based compensation(v)
Issuance of shares under share
—
based compensation schemes
Balance on December 31, 2016 101,739
Total comprehensive income for
the year
Dividends(iv)
Purchase of treasury shares
Share based compensation(v)
Issuance of shares under share
based compensation schemes
—
—
—
—
—
Number
of shares
held by
the Group
(000’s)
(1,574)
—
—
(37)
—
Share
capital(i)
153
Share
premium
486
Treasury
shares
(143)
Retained
profits(ii)
3,513
Other
reserves(iii)
(531)
Total
3,477
Non-
controlling
interests
251
—
—
—
—
—
—
—
—
—
—
(3)
—
(32)
(265)
—
—
(28)
—
—
14
(60)
(265)
(3)
14
(49)
—
—
—
Total
equity
3,728
(109)
(265)
(3)
14
216
(1,395)
—
153
(1)
485
23
(123)
(1)
3,215
(17)
(562)
4
3,167
—
201
4
3,368
—
—
(32)
—
233
—
—
—
—
—
—
—
—
—
(1)
—
—
(3)
—
21
85
(265)
—
—
87
—
—
24
171
(265)
(3)
24
1
(18)
1
(15)
—
—
—
—
156
(265)
(3)
24
1
185
3,282
Balance on December 31, 2017 101,739
(i) Share capital and share premium – see note C.1.
(ii) Retained profits – includes profit for the year attributable to equity holders, of which $345 million (2016: $321 million) are not distributable to equity holders.
(iii) Other reserves – see note C.1.
(iv) Dividends – see note C.2.
(v) Share-based compensation – see note C.1.
(1,195)
3,096
3,035
(106)
(470)
153
484
The accompanying notes are an integral part of these consolidated financial statements.
104
Millicom Annual Report 2017
Notes to the consolidated financial statements
for the year ended December 31, 2017
A. The Millicom Group
The Group comprises a number of holding companies, operating subsidiaries and joint ventures with various combinations of mobile, fixed-line
telephony, cable and wireless Pay TV, Internet and Mobile Financial Services (MFS) businesses. The Group also holds investments in a tower
holding company investing in Africa and in online businesses in Latin America (Latam) 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:
December 31
2017
% holding
December 31
2016
% holding
Activity
Country
100.0
100.0
100.0
100.0
100.0
100.0
50.0-1 share
50.0-1 share
50.0-1 share
El Salvador
El Salvador
El Salvador
Costa Rica
Bolivia
Paraguay
Colombia
Colombia
Colombia
100.0
100.0
100.0
100.0
100.0
100.0
50.0-1 share
50.0-1 share
50.0-1 share
Mobile, MFS
Cable, DTH
Cable, DTH
Cable, DTH
Mobile, DTH, MFS, Cable
Mobile, MFS, Cable, PayTV
Mobile
Fixed-line, Internet, PayTV, Mobile
Fixed-line, Internet, PayTV, Cable
Entity
Latin 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.
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(ii)
Sentel GSM S.A.(iii)
MIC Tanzania Limited(iv)
Millicom Tchad S.A.
Millicom Rwanda Limited (iii)
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) Merged with Airtel Ghana in October 2017 and classified as discontinued operations for the year then ended (see note E.3.2.). Merged entity is accounted for as a joint venture as
from merger date (see note A.2.3)
(iii) See note A.1.3.
(iv) See note H.
Holding Company
Holding Company
Holding Company
Holding Company
Holding Company
Holding Company
Luxembourg
Netherlands
Netherlands
Netherlands
Netherlands
Spain
Mobile, MFS
Mobile, MFS
Mobile, MFS
Mobile, MFS
Mobile, MFS
Mobile, MFS
Ghana
Senegal
Tanzania
Chad
Rwanda
Tanzania
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
100.0
100.0
100.0
100.0
100.0
85.0
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105
Notes to the consolidated financial statements
for the year ended December 31, 2017 – 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 December 31, 2017, Tigo Paraguay completed the acquisition of TV Cable Parana for a total consideration of
approximately US$18 million, net of cash acquired. The purchase accounting was finalized in March 2017. The purchase price has been mainly
allocated to a customer list (US$14 million) and to other tangible and intangible fixed assets (US$3 million). As a result, the final goodwill
amounted to US$1 million.
In addition, the Group did some other minor acquisitions for US$4 million.
During the year ended December 31, 2016, Millicom did not make any significant acquisition.
A.1.3. Disposal of subsidiaries and decreases in non-controlling interests of subsidiaries
Rwanda
On December 19, 2017, Millicom announced that it has signed an agreement for the sale of its Rwanda operations to subsidiaries of Bharti Airtel
Limited. The total consideration of the transaction is approximately 6x 2017 adjusted EBITDA, payable over two years, consisting of a mix of cash,
vendor loan note and earn out. As of December 31, 2017, the transaction was subject to regulatory approvals whose obtention remained
uncertain and, as a consequence, operations had not been classified as assets held for sale and discontinued operations as of December 31, 2017.
Ghana merger
On March 3, 2017, Millicom and Bharti Airtel Limited (“Airtel”) announced that they had entered into an agreement for Tigo Ghana Limited and
Airtel Ghana Limited to combine their operations in Ghana. The transaction was completed on October 12, 2017 (see note E.3.).
Senegal
On February 2, 2017, Millicom announced that it had agreed to sell its Senegal business to Wari Group, a financial services company, for a cash
consideration of US$129 million, subject to regulatory approvals and customary closing conditions. On July 28, 2017, Millicom exercised its right to
terminate that agreement and subsequently agreed to sell the Senegal business to a consortium consisting of NJJ, Sofima (managed by the Axian
Group) and Teylium Group, subject to customary closing conditions and regulatory approvals (see note E.3.).
DRC
On February 8, 2016, Millicom announced that it had signed an agreement for the sale of its businesses in the Democratic Republic of Congo
(DRC) to Orange S.A. (see note E.3.).
Other disposals
For the years ended December 31, 2017 and 2016, Millicom did not dispose of any other significant investments.
106
Millicom Annual Report 2017
A.1.4. Summarized financial information relating to significant subsidiaries with non-controlling interests
At December 31, 2017, Millicom’s subsidiaries with material non-controlling interests were the Group’s operations in Colombia.
Balance sheet – non-controlling interests
December 31 (US$ millions)
Colombia
Others
Total
Profit (loss) attributable to non-controlling interests
(US$ millions)
Colombia
Others
Total
2017
197
(11)
185
2017
(13)
(4)
(17)
2016
207
(6)
201
2016
(55)
(3)
(58)
The summarized financial information for material non-controlling interests in our operations in Colombia is provided below. This information is
based on amounts before inter-company eliminations.
Colombia
(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
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
2017
1,739
(647)
106
(25)
(13)
2,193
1,771
422
211
(14)
197
—
331
(209)
(46)
3
80
2016
1,717
(660)
40
(110)
(55)
2,221
1,776
445
223
(16)
207
67
366
(340)
(24)
1
3
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Millicom Annual Report 2017
107
Notes to the consolidated financial statements
for the year ended December 31, 2017 – 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
Bharti Airtel Ghana Holdings B.V.
Country
Activity
Guatemala
Guatemala
Honduras
Honduras
Ghana
Mobile, MFS
Cable, DTH
Mobile, MFS
Cable
Mobile, MFS
The carrying values of Millicom’s investments in joint ventures were as follows:
Carrying value of investments in joint ventures at December 31 (US$ millions)
Honduras operations(i)
Guatemala operations(i)
Ghana operations
Total
(i) Includes all the companies under the Honduras and Guatemala groups.
%
66.7
55
50
The table below summarizes the movements for the year in respect of the Group’s joint ventures carrying values:
US$ millions
Opening balance at January 1, 2017
Change in scope
Results for the year
Dividends declared during the year
Currency exchange differences
Closing balance at December 31, 2017
(i) Share of profit (loss) is recognized under ‘Share of profit in our joint ventures in Guatemala and Honduras’ in the income statement.
(ii) Share of profit (loss) is recognized under ‘Income (loss) from other joint ventures and associates, net’ in the income statement.
Guatemala(i)
2,180
—
127
(168)
7
2,145
December 31
2017
% holding
December 31
2016
% holding
55
55
66.7
66.7
50
2017
726
2,145
96
2,967
2017
Honduras(i)
765
—
16
(46)
(6)
726
55
55
66.7
66.7
—
2016
766
2,179
—
2,945
Ghana(ii)
—
102
(6)
—
—
96
At December 31 2017 and 2016 the Group had not incurred obligations, nor made payments on behalf of Guatemala, Honduras or Ghana
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 in case it was a subsidiary
of the Group before transaction). 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 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.
108
Millicom Annual Report 2017
A.2.2. Material joint ventures – Guatemala and Honduras operations
Summarized financial information for the years ended December 31, 2017 and 2016, of the Guatemala and Honduras operations is as follows.
This information is based on amounts before inter-company eliminations.
Guatemala(i)
(US$ millions)
Revenue
Depreciation and amortization
Operating profit(ii)
Financial income (expenses), net
Profit before taxes
Charge for taxes, net
Profit for the year
Net profit for the year attributable to Millicom
Dividends and advances paid to Millicom
Total non-current assets (excluding goodwill)
Total non-current liabilities
Total current assets
Total current liabilities
Cash and cash equivalents
Debt and financing – non-current
Debt and financing – current
2017
1,328
(295)
352
(60)
305
(74)
230
127
162
2,406
1,052
756
220
303
995
—
2016
1,284
(281)
330
(73)
261
(67)
194
106
77
2,297
1,039
909
211
289
987
—
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) In 2016, operating profit included a provision for impairment of $24 million related to amounts receivables from the video surveillance contracts with the Civil National Police. In 2017,
498
(171)
(315)
2
14
438
(174)
(127)
(3)
134
it also includes an additional impairment of $10 million (2016: US$18 million) on the fixed assets bought in the context of the video surveillance contracts.
Millicom Annual Report 2017
109
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Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
A.2.2. Material joint ventures – Guatemala and Honduras operations – continued
Honduras(i)
(US$ millions)
Revenue
Depreciation and amortization
Operating profit
Financial income (expenses), net
Profit before taxes
Charge for taxes, net
Profit for the year
Net profit for the year attributable to Millicom
Dividends and advances paid to Millicom
Total non-current assets (excluding goodwill)
Total non-current liabilities
Total current assets
Total current liabilities
Cash and cash equivalents
Debt and financing – non-current
Debt and financing – current
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.
2017
585
(156)
70
(27)
41
(18)
24
16
40
576
407
208
282
16
308
80
152
(74)
(74)
3
2016
609
(160)
54
(27)
13
—
13
9
66
645
454
259
237
13
339
63
85
(17)
(69)
(1)
A.2.3. Ghana merger
As mentioned in note A.1.3., Millicom and Airtel have signed a Combination Agreement, whereby both investors decided to combine their
respective subsidiaries in Ghana, namely Tigo Ghana Limited and Airtel Ghana Limited under an existing company – Bharti Airtel Ghana Holdings
B.V. (the ‘JV’ or ‘AirtelTigo Ghana’) both Millicom and Airtel each owning 50%. Necessary regulatory approvals were received on September 18,
2017. As part of the transaction, Millicom, to a certain extent, and Bharti granted to the government of Ghana an option to acquire a 25% stake in
the newly combined entity for a period of two years.
On October 12, 2017, both parties announced the completion of the transaction. As consideration received, each party owns 50% of the equity
capital and voting rights of the JV, and Millicom owns a US$40 million loan against Tigo Ghana (the “Millicom Note”), which shall rank in priority to
all other obligations of the Group owed to its shareholders. The Millicom Note bears interest and is classified under ‘other non-current assets’ in
the statement of financial position.
Decisions about the relevant activities require the unanimous consent of the parties sharing control. Therefore, based on IFRS 11, this agreement
results in Millicom and Airtel having joint control over the combined entity, which is a joint venture. Millicom therefore uses the equity method to
account for its investment in the combined entity since October 12, 2017.
On the same date, each investor agreed and committed to fund the operations of the JV in accordance with the approved business plan on an
equal basis and on the same terms. In this regard, both parties have agreed to provide, on an equal basis, a committed credit facility in the total
aggregate amount of US$50 million, with Millicom providing a commitment of US$25 million and Airtel providing the same. The credit facility
would bear interest and would be subordinated to the Millicom Note.
As a consequence, on that date, Millicom deconsolidated its investments in Ghana operations and accounted for its investment in the combined
entity under the equity method, initially at fair value of US$102 million, resulting in a gain on the deconsolidation of these operations amounting
to US$118 million, excluding recycling of foreign currency exchange losses accumulated in equity of US$79 million. The net gain of US$36 million
has been recognized under ‘Profit (loss) for the year from discontinued operations, net of tax’. As of December 31, 2017, the purchase price
allocation is still provisional.
Fair value has been determined using valuation techniques such as discounted cash flows and comparable transaction multiples. As of December
31, 2017, Millicom determined the fair value of the option granted to the government to be immaterial.
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Millicom Annual Report 2017
A.2.3. Ghana merger – continued
AirtelTigo Ghana
(US$ millions)
Revenue
Depreciation and amortization
Operating loss
Financial income (expenses), net
Loss before taxes
Charge for taxes, net
Loss for the period
Net loss for the period attributable to Millicom
Dividends and advances paid to Millicom
Total non-current assets (excluding goodwill)
Total non-current liabilities
Total current assets
Total current liabilities
Cash and cash equivalents
Debt and financing – non-current
Debt and financing – current
Net cash from operating activities
Net cash from (used in) investing activities
Net cash from (used in) financing activities
Net increase in cash and cash equivalents
(i) From the date of merger (October 12, 2017) to December 31, 2017, for income statement and cash flow metrics.
2017(i)
58
(11)
(1)
(10)
(12)
—
(12)
(6)
—
184
214
60
106
15
145
—
13
—
(3)
10
A.2.4. Impairment of investment in joint ventures
While no impairment indicators were identified for the Group’s investments in joint ventures in 2017, 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 3.1%–3.2% (2016: 1.0%–2.0%). Discount rates used in determining recoverable
amounts were 9.3% and 10.2%, respectively (2016: 8.3% and 9.9%).
Our investment in Ghana JV has not been tested for impairment given the recent transaction and valuation performed in October 2017.
For the year ended December 31, 2017, 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.
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111
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
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
Latam 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)
West Indian Ocean Cable Company Limited
(WIOCC)(ii)
Latin America
MKC Brilliant Holding GmbH (LIH)
Unallocated
Milvik AB
(i) On February 8, 2017, Millicom announced that it initiated a process to sell its stake in HTA. At December 31, 2017, this process is still ongoing.
(ii) WIOCC was acquired as part of Zantel acquisition..
Mauritius
Germany
Republic of Mauritius Telecommunication carriers’ carrier
Holding of Tower infrastructure company
Online marketplace, retail and services
Online marketplace, retail and services
Germany
Sweden
Other
At December 31, 2017, the carrying value of Millicom’s main associates was as follows:
Carrying value of investments in associates at December 31
(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
The summarized financial information for the Group’s main material associates (i.e. HTA and AIH) is provided below.
Summary of statement of financial position of associates at December 31
(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 HTA and AIH
Millicom’s carrying value of its investment in other associates
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 loss for the year
Millicom’s share of results from HTA and AIH
Millicom’s share of results from other associates
Millicom’s share of results from other joint ventures (Ghana)
Millicom’s share of results from other joint ventures and associates
December 31
2017
% holding
December 31
2016
% holding
22.83
10.15
9.1
35.0
12.3
2017
—
61
149
16
14
241
2017
409
766
1,176
268
602
870
306
211
30
241
2017
449
(321)
(148)
(220)
(34)
(45)
(6)
(85)
22.83
10.15
9.1
35.0
26.75
2016
55
64
189
9
14
331
2016
384
707
1,091
528
170
698
429
253
78
331
2016
378
(302)
(167)
(228)
(39)
(39)
—
(39)
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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.
Various shareholder funding rounds were signed 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 were duly executed and as a result Millicom’s shareholding in AIH was reduced to 10%. This triggered the recognition of a net dilution
gain of US$43 million in the 2016 Group income statement under Income (loss) from associates, net.
Millicom investment in African towers company, Helios Towers Africa
During 2016, Millicom’s shareholding was diluted from 28.2% to 22.8% as a result of previous committed cash calls and new investors’ funding.
This resulted in Millicom recognizing a gain on dilution of US$16 million. The gain was recorded in the 2016 Group income statement under
Income (loss) from associates, net.
MKC Brilliant Holding GmbH (LIH)
In April 2017, LIH completed the disposal of its shareholding in Easy Taxi to Cabify. As a result, and ultimately, LIH received cash and shares in
Cabify. The transaction resulted in Millicom recognizing a loss of US$11 million (Millicom’s share). Additionally, as a result of the annual
impairment test conducted in 2017, Management decided to fully impair the remaining carrying value of its investment in LIH for US$48 million.
These losses are recorded under the caption Income (loss) from other joint ventures and associates, net.
During 2016, Millicom’s 35% investment in LIH had 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.
Milvik AB (‘BIMA’)
On December 19, 2017, Millicom announced that it sold a portion of its ownership stake in BIMA (from 20.4% to 12.0% – on a fully diluted basis)
to Kinnevik and a new investor, with the latter contributing $97 million in the micro-insurance business. As a result of the transaction, Millicom
received US$24 million in cash and recognized a gain on disposal of US$21 million. In addition, and as a consequence of the subsequent capital
increase made by the new investor, the Group recognized a gain on dilution of US$11 million. Both gains have been recorded under the caption
Income (loss) from other joint ventures and associates, net, in the income statement. Both transactions were carried out at the same fair value on
an arm’s length basis.
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 Senegal and Tigo Ghana have been classified as assets held for sale as from February 7 and
September 28, 2017, respectively, and their results were classified as discontinued operations. The comparative figures presented in the notes to
these consolidated financial statements have also been restated accordingly and when necessary. For further details, refer to note E.3.
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113
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
B. Performance
B.1. Revenue
Millicom’s revenue comprises sale of services from its mobile, cable and 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, MFS 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
Fixed
Telephone and equipment and other
Total
Revenue from continuing operations by country or operation
(US$ millions)
Colombia
Paraguay
Bolivia
El Salvador
Tigo Tanzania
Chad
Costa Rica
Other countries
Total
2017
2,307
1,520
305
4,133
2017
1,739
662
555
422
348
140
153
114
4,133
2016
2,380
1,394
331
4,105
2016
1,717
623
542
425
347
166
152
133
4,105
B.1.1. Accounting for revenue
Revenue recognition
Revenue is measured at the fair value of consideration received or receivable for the sale of goods
and discounts and after eliminating intra-group sales. Generally, this is the value of the invoice to the customer.
and services, net of value added tax, rebates
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.
Revenue from content services such as video messaging, ringtones, games, music, 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 MFS 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.
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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
Site and network maintenance costs
Employee related costs (B.4.)
External and other services
Rentals and operating leases
Other operating expenses
Operating expenses, net
The other operating income and expenses incurred by the Group can be summarized as follows:
Other operating income (expenses), net
(US$ millions)
Income from tower deal transactions
Impairment of intangible assets and property, plant and equipment
Gain (loss) on disposals of intangible assets and property, plant and equipment
Other income (expenses)
Other operating income (expenses), net
B.2.1. Accounting for cost of sales and operating expenses
Cost of sales
Cost of sales is recorded on an accrual basis.
Notes
C.3.4.
E.1., E.2.
2017
(925)
(220)
(73)
(1,218)
2017
(469)
(223)
(459)
(154)
(118)
(199)
(1,623)
2017
63
(23)
1
16
57
2016
(869)
(255)
(64)
(1,187)
2016
(451)
(203)
(458)
(221)
(129)
(199)
(1,661)
2016
—
(7)
(8)
—
(15)
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.
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115
Notes to the consolidated financial statements
for the year ended December 31, 2017 – 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: Latam and
Africa. The figures below include Honduras and Guatemala as if they are fully consolidated by the Group, as this reflects the way management
reviews and uses internally reported information to make decisions about operating matters. Honduras and Guatemala are shown under the
Latam segment. Our joint venture in Ghana is not reported as if fully consolidated. Revenue, operating profit (loss), EBITDA and other segment
information for the years ended December 31, 2017 and 2016, were as follows:
Year ended December 31, 2017
(US$ millions)
Revenue
Operating profit (loss)
Add back:
Depreciation and amortization
Share of profit in our joint ventures
in Guatemala and Honduras
Other operating income (expenses),
net
EBITDA(i)
EBITDA from discontinued
operations
EBITDA incl. discontinued
operations
Capex(ii)
Changes in working capital
and others(iii)
Taxes paid
Operating Free Cash Flow(iv)
Latin
America
5,441
1,025
Africa
582
44
1,174
129
—
(49)
2,151
—
2,151
(855)
(59)
(239)
998
—
—
174
58
232
(99)
(7)
(18)
108
Unallo-
cated
Total (a)
— 6,024
919
(150)
Guatemala
and
Honduras(vi) (b)
(1,892)
(431)
Eliminations
and
transfers (c)
Subtotal
(a)+(b)+(c)
— 4,133
629
142
6
—
1,310
(450)
—
861
—
—
(142)
(142)
Disc
ops(vii)
242
79
18
—
Total
4,375
709
878
(142)
10
(134)
(39)
2,190
(18)
(899)
—
(57)
— 1,291
(39)
58
(96)
1,349
—
58
(134)
(1)
(2)
1
(136)
2,248
(955)
(69)
(256)
969
Total assets(v)
Total liabilities
10,411
5,484
1,298
1,673
782
1,465
11,556
7,687
(5,400)
(1,941)
3,309
439
9,465
6,183
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Millicom Annual Report 2017
B.3. Segmental information – continued
Guatemala
and
Honduras(vi) (b)
(1,875)
(394)
Eliminations
and
transfers (c)
—
115
7
—
—
—
—
—
—
54
137
877
(440)
1,317
1,173
3
200
42
2,063
Africa
626
60
Disc
ops(vii)
309
16
Total (a)
5,979
759
Unallo-
cated
—
(150)
Latin
America
5,352
848
Subtotal
(a)+(b)+(c)
4,105
481
Year ended December 31, 2016
(US$ millions)
Revenue
Operating profit (loss)
Add back:
Depreciation and amortization
Share of profit in our joint ventures
in Guatemala and Honduras
Other operating income
(expenses), net
EBITDA(i)
EBITDA from discontinued
operations
EBITDA incl. discontinued
operations
Capex(ii)
Changes in working capital
and others (iii)
Taxes paid
Operating Free Cash Flow(iv)
Total assets(v)
Total liabilities
(i) EBITDA is used by the management to monitor the segmental performance and for capital management. EBITDA is defined in the front section of the Annual Report.
(ii) Cash spent for capex excluding spectrum and licenses of US$53 million (2016: US$39 million) and cash received on tower deals of US$167 million (2016: nil).
(iii) Changes in working capital and others include changes in working capital as stated in the cash flow statement, as well as share-based payments expense.
(iv) Operating Free Cash Flow is EBITDA less capex (excluding spectrum and license costs) less change in working capital, other non-cash items (share-based payment expense) and
37
(233)
981
10,386
5,229
2
(275)
850
11,883
7,812
(33)
(9)
(197)
1,357
1,997
(2)
(33)
66
1,406
1,852
(5,589)
(1,942)
2,176
(1,053)
2,063
(886)
9,627
6,258
3,332
388
39
2,114
15
1,257
(148)
(6)
262
(161)
(6)
(148)
(24)
(858)
(9)
62
—
—
(115)
(115)
62
62
—
—
—
Total
4,414
497
931
(115)
6
1,319
taxes paid.
(v) Segment assets include goodwill and other intangible assets.
(vi) Including eliminations for Guatemala and Honduras as reported in the Latam segment.
(vii) See note E.3.2. DRC, Senegal and Ghana operations were part of the Africa segment.
B.4. People
Number of permanent employees
Continuing operations(i)
Joint ventures (Guatemala, Honduras and Ghana – for 2017)
Discontinued operations
Total
2017
14,548
4,326
253
19,127
(i) Emtelco headcount are excluded from this report and any internal reporting because their costs are classified as direct costs and not employee related costs.
(US$ millions)
Wages and salaries
Social security
Share based compensation
Pension and other long-term benefit costs
Other employee related costs
Total
Notes
B.4.1.
B.4.2.
2017
(325)
(57)
(24)
(8)
(45)
(459)
2016
13,368
4,023
594
17,985
2016
(296)
(68)
(14)
(6)
(74)
(458)
Millicom Annual Report 2017
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Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
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)
2014 incentive plans
2015 incentive plans
2016 incentive plans
2017 incentive plans
Total share based compensation
2017
—
(3)
(6)
(14)
(24)
2016
(1)
(3)
(10)
—
(14)
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 January 1 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.
Sign-on CEO share plan (new in 2015 – one off)
As part of his employment contract Millicom CEO (from April 1, 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.
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 minus CAPEX minus 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 for the
deferred share plan. As at December 31, 2017, this plan is vested.
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 FCF 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.
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B.4.1. Share based compensation – continued
Performance share plan (issued since 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 2017 (Relative TSR)
Performance share plan 2017 (Absolute TSR)
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
%
(0.40)
(0.40)
(0.65)
(0.65)
(0.32)
(0.32)
(0.32)
Dividend yield
%
3.80
3.80
3.49
3.49
2.78
N/A
N/A
Share price
volatility(i)
%
22.5
22.5
30
30
23
23
23
Award term
(years)
2.92
2.92
2.61
2.61
2.57
2.57
2.57
Share fair value
(in US$)
27.06
29.16
43.35
45.94
32.87
53.74
29.53
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.
2017 plans
2016 plans
Perform-
ance plan
Deferred
plan
2,868
(6,590)
29,406
(32,884)
Plan awards and shares
expected to vest
(number of shares)
Initial shares granted
Additional shares granted(i)
Revision for forfeitures
Total before issuances
Shares issued in 2015
Shares issued in 2016
Shares issued in 2017
Performance conditions
Shares still expected to vest
Estimated cost over the vesting
period (US$ millions)
4
(i) Additional shares granted represent grants made for new joiners and/or as per CEO contractual arrangements.
Deferred
Perform-
plan
ance plan
279,807 438,505 200,617 287,316
—
(53,653)
276,085 435,027 169,968 233,663
—
(1,733)
(43,579)
—
276,085 432,341 168,002 188,351
Perform-
ance plan
98,137
—
(37,452)
60,685
—
(771)
(357)
—
59,557
—
—
— (2,686)
—
—
—
—
— (1,214)
(752)
—
—
(30,649)
21
10
6
5
2015 plans
2014 plans
3,537
CEO
plan
Future
plan
Deferred
plan
—
—
— (67,528) (124,603)
Execu-
tive plan
40,664
—
—
40,664
—
—
— (25,781)
— (28,139)
—
—
40,664
Deferred
plan
77,344 237,620 164,015 219,767
1,306
(79,702)
39,412 141,371
— (32,555)
— (25,508)
(83,308)
—
n/a
80,881 170,092
—
(38,745)
(30,124)
—
26,961 101,223
(39,412)
—
n/a
2
6
12
n/a
n/a
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119
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
B.4.2. 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 for UNE 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
In addition, 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 December 31, 2017, the defined benefit obligation liability amounted to US$39 million (2016: US$37 million) and payments expected in the
plans in future years totals US$87 million (2016: US$86 million). The average duration of the defined benefit obligation at December 31, 2017 is
seven years (2016: seven years). The termination plans apply to employees that joined UNE prior to December 30, 1996. The level of payments
depends on the number of years in which the employee has worked before retirement or termination of their contract with UNE.
Except for the UNE pension plan described above, there are no other significant defined benefits plans in the Group.
B.4.3. Directors and executive management
The remuneration of the members of the Board of Directors comprises an annual fee and shares. Director remuneration is proposed by the
Nomination Committee and approved by the shareholders at their Annual General Meeting (AGM).
Remuneration charge for the Board (gross of withholding tax)
(US$ ’000)
Chairperson
Other members of the Board
Total(i)
(i) Cash compensation converted from SEK to USD at exchange rates on payment dates each year. Share based compensation based on the market value of Millicom shares on the
2017
233
889
1,122
2016
243
900
1,143
2017 AGM date (in total 8,731 shares). Net remuneration comprised 52% in shares and 48% in cash (SEK) (2016: 50% in shares and 50% in cash).
Shares beneficially owned by the Directors
(number of shares)
Chairperson
Other members of the Board
Total
2017
7,000
20,067
27,067
2016
3,000
24,316
27,316
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.
120
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B.4.3. 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) are proposed by
the Compensation Committee and approved by the Board.
Remuneration charge for the Executive Team
(US$ ’000)
2017
Base salary
Bonus
Pension
Other benefits
Total before share based compensation
Share based compensation(i)(ii) in respect of 2017 LTIP
Total
CEO
1,000
707
150
64
1,921
2,783
4,704
Executive Team
(9 members) (iii)
CFO
648
455
97
15
1,215
1,492
2,707
3,822
1,590
629
1,193
7,233
5,202
12,435
CEO
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
(i) See note B.4.1.
(ii) Share awards of 61,724 and 167,371 were granted in 2017 under the 2017 LTIPs to the CEO, and Executive Team (2016: 49,171 and 104,573, respectively).
(iii) ‘Other Executives’ compensation includes Daniel Loria, former CHRO.
1,000
660
150
48
—
1,858
2,660
4,518
599
450
82
18
—
1,149
1,481
2,630
Executive team
(9 members)
CFO
3,797
1,411
513
720
—
6,441
4,031
10,472
Shares and unvested share awards beneficially granted to the Executive team
(number of shares)
2017
Shares
Share awards not vested
2016
Shares
Share awards not vested
CEO Executive team
Total
53,920
148,324
25,781
114,739
58,129
299,067
34,472
173,340
112,049
447,391
60,253
288,079
B.5. Other non-operating (expenses) income, net
Non-operating items mainly comprise changes in fair value of derivatives and the impact of foreign exchange fluctuations on results of
the Group.
US$ millions
Change in fair value of derivatives (see note D.1.2.)
Exchange gain (loss), net
Other non-operating income (expenses), net
Total
Year ended
31 December
2017
(22)
18
(1)
(4)
Year ended
31 December
2016
3
19
(8)
13
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 at the 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.
Millicom Annual Report 2017
121
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Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
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 (2016:
10% to 40%). Income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated income statement.
2017
2016
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
155
(6)
2017
Discont’d
operations
71
(16)
(11)
19
(63)
(74)
17
1
(39)
1
(3)
(158)
3.9%
101.9%
—
—
4
—
—
—
—
12
—
—
Continuing
operations
88
13
2016
Discont’d
operations
(5)
2
14
1
(65)
(44)
29
(16)
(109)
18
(20)
(179)
(14.8)%
203.4%
—
—
8
—
—
—
(11)
—
6
5
Total
226
(22)
(11)
19
(59)
(74)
17
1
(39)
13
(3)
(158)
9.7%
69.9%
(74)
(85)
(159)
(12)
(171)
23
19
42
(38)
4
9
13
(158)
—
(158)
(44)
(73)
(117)
(27)
(144)
48
1
49
(91)
(42)
7
(35)
(179)
5
(174)
Total
83
15
14
1
(57)
(44)
29
(16)
(120)
18
(14)
(174)
(17.9)%
207.1%
122
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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)
Balance at January 1, 2016
Acquisitions
Transfers to Assets Held for Sale
(Charge)/credit to income statement
(Charge)/credit to other comprehensive income
Exchange differences
Deferred tax assets
Deferred tax liabilities
Balance at December 31, 2016
(Charge)/credit to income statement
Exchange differences
Deferred tax assets
Deferred tax liabilities
Balance at December 31, 2017
Fixed
assets
(47)
—
(1)
24
—
1
(23)
84
(107)
(23)
53
2
32
88
(56)
32
Unused tax
losses
109
—
—
3
—
1
113
113
—
113
(61)
—
52
52
—
52
Unremitted
earnings
(16)
—
—
(16)
—
—
(32)
—
(32)
(32)
1
(1)
(32)
—
(32)
(32)
Other
92
—
—
(47)
1
5
51
65
(14)
51
20
1
72
79
(7)
72
Offset
—
(96)
96
—
(39)
39
—
Total
138
—
(1)
(36)
1
7
109
166
(57)
109
13
2
124
180
(56)
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123
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
B.6.3. Deferred tax – continued
Deferred tax assets have not been recognized in respect of the following deductible temporary differences:
Deductible temporary differences
(US$ millions)
At December 31, 2017
At December 31, 2016
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
68
Unused tax
losses
4,844
4,501
Other
162
190
2017
39
494
4,311
4,844
Total
5,074
4,759
2016
27
493
3,981
4,501
With effect from 2017, Luxembourg tax losses incurred may be carried forward for a maximum of 17 years. Losses incurred before 2017 may be
carried forward without limitation of time.
At December 31, 2017, Millicom had US$842 million of unremitted earnings of Millicom operating subsidiaries for which no deferred tax liabilities
were recognized (2016: US$873 million). Except for intragroup dividends to be paid out of 2017 profits in 2018 for which deferred tax of
US$32 million has been provided, it is anticipated that intragroup dividends paid in future periods will be made out of profits of future periods.
B.7. Earnings per share
Basic earnings per share are calculated by dividing net profit for the year attributable to equity holders of the Company by the weighted average
number of ordinary shares outstanding during the year.
Diluted earnings per share are calculated by dividing the net profit for the year attributable to equity holders of the Company by the weighted
average number of ordinary shares outstanding during the year, plus the weighted average number of dilutive potential shares.
Net profit/(loss) used in the earnings per share computation
(US$ millions)
Basic and diluted:
Net profit/(loss) attributable to equity holders from continuing operations
Net profit attributable to equity holders from discontinued operations
Net profit/(loss) attributable to all equity holders to determine the basic earnings per share
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
2017
2016
14
71
85
2017
100,384
—
100,384
(33)
1
(32)
2016
100,337
—
100,337
124
Millicom Annual Report 2017
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
Share capital (US$ millions)
Share premium (US$ millions)
Total (US$ millions)
2017
133,333,200
101,739,217
US$1.50
153
484
637
2016
133,333,200
101,739,217
US$1.50
153
485
638
Other equity reserves
(US$ millions)
As of December 31, 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 December 31, 2016
Share based compensation
Issuance of shares – 2014, 2015, 2016 LTIPs
Remeasurements of post-employment benefit
obligations
Cash flow hedge reserve movement
Currency translation movement
As of December 31, 2017
Legal reserve
16
—
—
Equity settled
transaction
reserve
46
14
(17)
Hedge
reserve
(1)
—
—
Currency
translation
reserve
(593)
—
—
Pension
obligation
reserve
1
—
—
—
—
—
16
—
—
—
—
—
16
—
—
—
43
24
(18)
—
—
—
49
—
(3)
—
(4)
—
—
—
4
—
—
—
—
(23)
(616)
—
—
—
—
85
(532)
(2)
—
—
(1)
—
—
(2)
—
—
(4)
Total
(531)
14
(17)
(2)
(3)
(23)
(562)
24
(18)
(2)
4
85
(470)
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 2016 or 2017 as the 10% minimum level was reached in 2011 and
maintained each subsequent year.
C.1.2. Equity settled transaction reserve
The cost of 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 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 (including 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.
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125
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
C.2. Dividend distributions
On May 4, 2017, a dividend distribution of US$2.64 per share from Millicom’s retained profits at December 31, 2016, was approved by the
shareholders at the AGM and distributed in May 2017.
On May 17, 2016, a dividend distribution of US$2.64 per share from Millicom’s retained profits at December 31, 2015, was approved by the
shareholders at the AGM and distributed in May 2016.
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 December 31, 2017, US$345 million (December 31, 2016: US$321 million) of
Millicom’s retained profits represent statutory reserves that are unavailable to be distributed to owners of the Company.
C.3. Debt and financing
Debt and financing by type
(US$ 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
Total debt and financing
Debt and financing by location (i)
(US$ millions)
Millicom International Cellular S.A. (Luxembourg)
Colombia
Paraguay
Bolivia
Tanzania
Rwanda
Chad
Ghana (i)
Senegal (i)
Costa Rica
El Salvador
Total debt and financing
(i) Classified as assets held for sale in the course of 2017. See note E.3.2.
Note
C.3.1.
C.3.2.
C.3.3.
C.3.1.
C.3.2.
C.3.3.
2017
2016
2,147
1,158
362
74
3,742
(142)
3,600
—
40
3
—
43
142
185
2,561
940
290
95
3,886
(65)
3,821
—
—
5
10
15
65
80
3,785
3,901
2017
1,255
1,130
488
352
217
50
70
—
—
76
147
3,785
2016
1,747
841
408
306
192
80
76
54
14
92
89
3,901
126
Millicom Annual Report 2017
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
Bond financing
(US$ millions)
SEK Senior Unsecured Variable Rate Notes
USD 4.75% Senior Notes
USD 6% Senior Notes
USD 6.625% Senior Notes
USD 5.125% Senior Notes
USD 6.75% Senior Notes
BOB 4.75% Notes
BOB 4.05% Notes
BOB 4.85% Notes
BOB 3.95% Notes
BOB 4.30% Notes
BOB 4.30% Notes
BOB 4.70% Notes
BOB 5.30% Notes
UNE Bond 1 (tranches A and B)
UNE Bond 2 (tranches A and B)
UNE Bond 3 (tranche A)
UNE Bond 3 (tranche B)
UNE Bond 3 (tranche C)
Total bond financing
(i) STIBOR – Swedish Interbank Offered Rate.
Note
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(7)
(7)
(7)
(7)
(7)
(7)
(7)
(8)
(8)
(8)
(8)
(8)
Country
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Paraguay
Bolivia
Bolivia
Bolivia
Bolivia
Bolivia
Bolivia
Bolivia
Bolivia
Colombia
Colombia
Colombia
Colombia
Colombia
Maturity
2019
2020
2025
2021
2028
2022
2020
2020
2023
2024
2029
2022
2024
2026
2020
2023
2024
2026
2036
Interest rate
%
STIBOR +3.3(i)
4.75
6
6.625
5.125
6.75
4.75
4.05
4.85
3.95
4.30
4.30
4.70
5.30
CPI + 5.10
CPI + 3.70 / 4.80
9.35
CPI+4.15
CPI+4.89
2017
243
—
496
—
494
296
86
11
85
50
25
30
35
13
50
50
54
85
43
2,147
2016
217
333
495
652
—
296
112
15
85
50
25
—
—
—
50
50
53
85
43
2,561
(1) SEK Senior Unsecured Notes
In April and September 2016, Millicom redeemed 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).
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.
On April 21, 2016, Millicom also completed the placing of a new SEK 2 billion (approximately US$250 million) three-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 April 17, 2019, with a first call option
on April 17, 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.
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127
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
C.3.1. Bond financing – continued
(2) USD 4.75% Senior Notes
On May 22, 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 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.
In June 2017, the Company announced the redemption of all of the aggregate principal amount of the outstanding 4.750% Senior Notes due
2020 ($342 million). The early redemption fees amounting to US$8 million and US$7 million of related unamortized costs have been expensed in
June 2017 under interest expenses. At December 31, 2017, there are no 2020 Notes outstanding.
(3) USD 6% Senior Notes
On March 11, 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 October 16, 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 August 14, 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 had been expensed in December 2016 under interest expenses.
On September 11, 2017, the Group made a tender offer for the outstanding 6.625% Senior Notes. On September 20, 2017, MIC S.A. repurchased
US$186 million in principal amount in the tender offer using the proceeds of the issue of the 5.125% Notes – see below. Also on September 11,
2017, the Group delivered a redemption notice for the 6.625% Senior Notes. MIC S.A. redeemed the remaining US$473 million in principal
amount on October 15, 2017. The total early redemption fees amounting to US$22 million and US$6 million of related unamortized costs have
been expensed in September 2017 under interest expenses. At December 31, 2017, there are no 2021 Notes outstanding.
(5) USD 5.125% Senior Notes
On September 20, 2017, MIC S.A. issued a US$500 million, ten-year bond with an interest rate of 5.125% at an issue price of 100% (the 5.125%
Notes) and will mature in 2028. Withheld costs of issuance of US$7 million are amortized over the seven-year life of the notes (effective interest
rate is 5.24%).
(6) USD 6.75% Senior Notes
On December 7, 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 June 13 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.
128
Millicom Annual Report 2017
C.3.1. Bond financing – continued
(7) BOB Notes
In May 2012, Telecel Bolivia issued Boliviano (BOB) 1.36 billion of notes repayable in installments until April 2, 2020. Distribution and other
transaction fees of BOB5 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 series 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 August 11, 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.
On October 12, 2017, Tigo Bolivia placed approximately US$80 million of local currency debt in three tranches, which will mature in 2022, 2024
and 2026 and bear an average interest rate of 4.66%.
(8) UNE Bonds
In March 2010, UNE issued a COP300 billion (approximately US$126 million) bond consisting of two tranches with five and ten-year maturities.
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 COP300 billion (approximately US$126 million) bond consisting of two equal tranches with five and 12-year maturities.
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 COP540 billion bond (approximately US$176 million) consisting of three tranches (approximately US$52 million,
US$83 million and US$41 million respectively). Interest rates are either fixed or variable depending on the tranche. Tranche A bears fixed interest
at 9.35%, while tranche B and C bear variable interest, based on CPI, (respective margins of CPI + 4.15% and CPI + 4.89%), in Colombian peso.
UNE applied the proceeds to finance its investment plan and repay one bond (COP150 billion tranche). Tranches A, B and C will mature in May
2024, May 2026 and May 2036, respectively.
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Millicom Annual Report 2017
129
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
C.3.2. Bank and Development Financial Institution financing
(US$ millions)
Fixed rate loans
Long-term loans
PYG Long-term loan
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 Long-term loans
USD Senior Unsecured Term Loan Facility
USD Credit Facility
USD Credit Facility
Other Long-term loans
Total Bank financing
(i) IBR – Colombia Interbank Rate.
Country
Paraguay
Paraguay
Costa Rica
Chad
Rwanda
Tanzania (Zantel)
Bolivia
Ghana
Colombia (UNE)
Colombia (Tigo)
El Salvador
El Salvador
El Salvador
Various
Maturity
2020/2023
2022
2021
2019
2019
2020
2019
2018
2025/2028
2021/2022
2021
2021
2022
Interest rate
%
9.0
10.0
4 variable
4 variable
2.9 variable
4.1 variable
6 variable
3.5 variable
10.4 variable(i)
LIBOR + 2.5
LIBOR + 3.0
LIBOR + 2.25
LIBOR + 3
Various
2017
106
65
76
3
40
96
—
—
363
297
50
29
50
25
1,198
2016
103
—
92
7
69
99
1
40
400
—
50
33
—
46
940
Colombia
In June 2017, Colombia Movil completed a $300 million syndicated loan. The loan, denominated in US dollars, which carries an interest rate of
LIBOR + 2.50% will be repaid in three tranches of $100 million in June and December 2021 for the two first tranches, and in June 2022 for the last
tranche. Proceeds have been used to repay an inter-company loan from Millicom, which used the funds to reduce holding company debt (see note
C.3.1.) and for general corporate purposes.
Paraguay
On July 4, 2017, our Paraguayan subsidiary signed a five-year loan agreement with the IPS (Instituto de Prevision Social) and the Inter-American
Development Bank for a total amount of PYG367,000 million (approximately US$66 million). The loan, denominated in local currency carries a
9.75% interest rate per annum and start amortizing in Q4 2019. This facility is guaranteed by the Company.
MIC S.A. term loan facility
In July 2016, MIC S.A. entered into a US$50 million term loan facility agreement, of which half was repaid in 2017 and half was repaid in January
2018. The facility bears variable interest rate at six-month LIBOR + 2.25% per annum.
El Salvador
On April 15, 2016, Telemovil El Salvador, S.A. de C.V. entered into a Senior Unsecured Term Loan Facility up to US$50 million maturing in April 2021
and bearing variable interest at LIBOR + 3.0% per annum, which was restated and amended with date May 30, 2017, for a second tranche of
US$50 million and bearing an interest rate at LIBOR + 3% per annum. This facility is guaranteed by the Company.
On June 6, 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 guaranteed by the Company.
Rwanda
In January 2018, the Group repaid the remaining US$40 million loan with DNB and Nordea.
MIC S.A. revolving credit facility
On January 30, 2017, the Company announced the closing of a new $600 million, five years revolving credit facility (RCF) 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).
Interest on amounts drawn under the revolving credit facility is payable at LIBOR or EURIBOR, as applicable, plus an initial margin of 1.5%. As of
December 31, 2017, the committed facility was fully undrawn.
In addition to the bank financing arrangements described above, as of December 31, 2017, a Millicom subsidiary has an agreement with a bank
whereby the bank provided loans amounting to EUR134 million (2016: EUR134 million) to the Millicom subsidiary with a maturity date in 2020.
Simultaneously Millicom deposited the same amount with the bank.
130
Millicom Annual Report 2017
C.3.2. Bank and Development Financial Institution 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.
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.
C.3.3. Interest expenses
The Group’s interest expense comprised the following:
(US$ millions)
Interest expense on bonds and bank financing
Interest expense on finance leases
Early redemption charges
Others
Total interest expenses
Year ended
December 31
2017
(246)
(70)
(43)
(42)
(401)
Year ended
December 31
2016
(262)
(54)
(25)
(36)
(377)
C.3.4. 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.
The sale and leaseback of towers and related site operating leases and service contracts are accounted for in accordance with the underlying
characteristics of the assets, and the terms and conditions of the lease agreements. When sale and leaseback agreements are concluded, the
portions of assets that will not be leased back by Millicom are classified as assets held for sale as completion of their sale is highly probable. Asset
retirement obligations related to the towers are classified as liabilities directly associated with assets held for sale. On transfer to the tower
companies, the portion of the towers leased back are accounted for as operating leases or finance leases according to the criteria set out above.
The portion of towers being leased back represents the dedicated part of each tower on which Millicom’s equipment is located and was derived
from the average technical capacity of the towers. Rights to use the land on which the towers are located are accounted for as operating leases,
and costs of services for the towers are recorded as operating expenses. The gain on disposal is recognized upfront for the portion of towers that is
not leased back. It is deferred and recognized over the term of the lease for the portion leased back.
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Millicom Annual Report 2017
131
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
C.3.4. Finance leases – continued
Finance lease liabilities
(US$ millions)
Lease of tower space
Lease of tower space
Lease of tower space
Lease of poles
Lease of tower space
Other finance lease liabilities
Total finance lease liabilities
Country
Tanzania
Colombia Movil
Ghana
Colombia (UNE)
Paraguay
various
Maturity
2029
2023/2029
2023/2025
2029
2029
various
2017
121
87
—
100
21
37
365
2016
78
77
14
83
—
43
295
Tower Sale and Leaseback – Paraguay
On April 26, 2017, the Group announced an agreement to sell and leaseback approximately 1,400 wireless communications towers in Paraguay to
a subsidiary of American Tower Corporation (ATC) whereby Millicom agreed the sale of tower assets and to lease back a dedicated portion of each
tower to locate its network equipment in exchange for cash. As a result of this transaction, our operation in Paraguay will receive approximately
Gs700 billion (equivalent to US$125 million) in cash. The portions of the assets that will be transferred and that will not be leased back by our
operation in Paraguay are classified as assets held for sale as completion of their sale is highly probable.
The first closing of 836 towers occurred on August 11, 2017 and ATC paid Gs426 billion (approximately US$76 million). This triggered the
recognition of an upfront gain on sale of US$26 million under Other operating income (expenses), net. The financial lease liability recognized in
respect of the lease back of a portion of these towers amount to US$21 million. An additional closing occured early January 2018.
Tower Sale and Leaseback – Colombia
On July 18, 2017, the Group announced that its subsidiary Colombia Móvil S.A. E.S.P (Tigo Colombia) agreed to sell approximately 1,200 wireless
communications towers to a subsidiary of ATC in Colombia. As a result of the transaction, Tigo Colombia will receive approximately COP448 billion,
equivalent to US$147 million, in cash.
The first closing of 696 towers occurred in December 2017 and ATC paid COP258 billion (approximately US$85 million). This triggered the
recognition of an upfront gain on sale of US$37 million under Other operating income (expenses), net. The financial lease liability recognized in
respect of the lease back of a portion of these towers amount to US$7 million. The next closing is expected to occur early 2018.
C.3.5. Guarantees and pledged assets
Guarantees
Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it
incurs because the specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee
contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the
guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at
the reporting date and the amount recognized, less cumulative amortization.
Liabilities to which guarantees are related are recorded in the consolidated statement of financial position under Debt and financing, and liabilities
covered by supplier guarantees are recorded under Trade payables or Debt and financing, depending on the underlying terms and conditions.
Maturity of guarantees
(US$ 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 December 31.
(ii) The maximum exposure represents the total amount of the Guarantee at December 31.
At December 31, 2017
At December 31, 2016
Outstanding
exposure(i)
159
368
144
—
671
Maximum
exposure(ii)
159
368
144
—
671
Outstanding
exposure(i)
38
348
250
4
640
Maximum
exposure(ii)
38
348
250
4
640
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 December 31, 2017, was US$671 million (2016: US$643 million), out of this, assets pledged by the Group over this debt
and financing at the same date amounted to US$1 million (2016: US$3 million). The remainder represented primarily guarantees issued by
Millicom S.A. to guarantee financings raised by other Group operating entities.
132
Millicom Annual Report 2017
C.3.6. Covenants
Millicom’s financing facilities are subject to a number of covenants including net leverage ratio, debt service coverage ratios, debt to earnings
ratios, and cash levels. In addition, certain of its financings contain restrictions on sale of businesses or significant assets within the businesses. At
December 31, 2017 there were no breaches in financial covenants.
C.4. Cash and deposits
C.4.1. Cash and cash equivalents
(US$ millions)
Cash and cash equivalents in USD
Cash and cash equivalents in other currencies
Total cash and cash equivalents
2017
302
317
619
2016
411
235
646
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
2017
143
2
145
2016
136
9
145
Cash held with banks related to MFS which is restricted in use due to local regulations is denoted as restricted cash.
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 December 31, 2017, there were no non-current pledged deposits (2016: US$nil).
At December 31, 2017, current pledged deposits amounted to US$1 million (2016: 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
2017
3,785
(619)
(145)
(1)
—
3,019
56
3,075
Assets
Liabilities from financing activities
Cash and cash
equivalents
646
10
(22)
—
4
(19)
—
—
619
Restricted
cash
145
17
—
—
(3)
(14)
—
—
145
Bond and bank
debt and
financing
3,606
(177)
3
8
34
(49)
10
(14)
3,420
Other
4
(1)
—
—
—
(2)
—
—
2
Finance lease
liabilities
295
(22)
195
(1)
(2)
(13)
—
(86)
365
Net debt as at January 1, 2017
Cash flows
Additions / acquisitions
Interest accretion
Foreign exchange movements
Transfers to/from assets held for sale
Transfers
Other non-cash movements
Net debt as at December 31, 2017
Millicom Annual Report 2017
2016
3,901
(646)
(145)
(3)
(2)
3,105
84
3,189
Total
3,105
(226)
219
7
31
(27)
10
(101)
3,019
133
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Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
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.
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.
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 in
late 2017. 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.
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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 and 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.
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.
Note
C.4.3.
C.3.
Fair values of financial instruments at December 31
(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.
Carrying value
2017
—
—
73
386
77
145
18
90
145
619
1,553
1,440
113
3,785
288
304
56
420
353
371
5,577
1,753
3,824
2016
—
32
72
387
17
171
23
110
145
646
1,603
1,499
104
3,901
297
326
84
386
376
400
5,770
1,531
4,239
Fair value(i)
2017
—
—
73
386
77
145
18
90
145
619
1,553
1,440
113
3,971
288
304
56
420
353
371
5,763
1,753
4,010
2016
—
32
72
387
17
171
23
110
145
646
1,603
1,499
104
4,234
297
326
84
386
376
400
6,103
1,531
4,572
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135
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
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 late 2017.
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 fixed 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 December 31, 2017, 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)
2017
(55)
—
(55)
2016
(84)
32
(52)
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 December 31, 2017, approximately 65% 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 (2016:
70%).
D.1.1. Fixed and floating rate debt
Financing at December 31, 2017
(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 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
1 year
87
7.17%
98
4.24%
185
5.61%
1 year
41
7.52%
39
4.20%
80
Amounts due within
1–2 years
365
2–3 years
141
3–4 years
104
4–5 years
396
>5 years
1,369
5.52%
134
2.37%
500
4.68%
8.28%
206
8.40%
347
9.92%
327
12.20%
431
8.35%
11.65%
Amounts due within:
7.73%
188
1.98%
584
5.88%
1–2 years
85
2–3 years
314
3–4 years
435
4–5 years
720
7.54%
168
9.46%
252
5.41%
204
3.63%
518
5.62%
213
2.89%
649
7.11%
130
1.21%
850
7.68%
370
2.25%
1,738
6.52%
>5 years
1,141
8.51%
411
3.86%
1,552
Total
2,462
7.48%
1,323
3.06%
3,785
5.94%
Total
2,736
7.28%
1,165
3.16%
3,901
5.90%
8.81%
4.71%
4.72%
6.20%
7.28%
6.05%
A 100 basis point fall or rise in market interest rates for all currencies in which the Group had borrowings at December 31, 2017 would increase or
reduce profit before tax from continuing operations for the year by approximately US$13 million (2016: US$12 million).
136
Millicom Annual Report 2017
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 Financial Risk Management policy. Details of these arrangements are provided below.
Interest rate and currency swaps on SEK denominated debt
These 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 SEK bond. Their maturity date is April 2018 but might be extended. The hedging relationship is highly effective and related
fluctuations are recorded through other comprehensive income. At December 31, 2017, the fair values of the swaps amount to a liability of
US$56 million (December 31, 2016: a liability of US$84 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 Euros and receive USD to hedge against exchange
rate fluctuations on an intercompany seven-year Euro 134 million principal and related interest financing of its operation in Senegal (Note C.3.2.). .
The outstanding 2020 Notes were repaid in August 2017 and as a result these swaps have been settled. The year-to-date revaluation of the swap
resulted in a US$22 million loss. The Group finally received US$10 million in cash on settlement date. This instrument was measured with reference
to Level 2.
The above hedge was considered ineffective, with fluctuations in the fair value of the hedge recorded through profit and loss.
No other financial instruments have a significant fair value at December 31, 2017.
D.2. Foreign currency risks
The Group is exposed to foreign exchange risk arising from various currency exposures in the countries in which it operates. Foreign exchange risk
arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.
Millicom seeks to reduce its foreign currency exposure through a policy of matching, as far as possible, assets and liabilities denominated in foreign
currencies, or entering into agreements that limit the risk of exposure to currency fluctuations against the US dollar reporting currency. In some
cases, Millicom may also borrow in US dollars where it is either commercially more advantageous for joint ventures and subsidiaries to incur debt
obligations in US dollars or where US dollar denominated borrowing is the only funding source available to a joint venture or subsidiary. In these
circumstances, Millicom accepts the remaining currency risk associated with financing its joint ventures and subsidiaries, principally because of the
relatively high cost of forward cover, when available, in the currencies in which the Group operates.
D.2.1. Debt denominated in US dollars and other currencies
Debt denomination at December 31
(US$ millions)
Debt denominated in US dollars
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
2017
1,983
834
61
121
337
—
191
243
15
1,802
3,785
2016
2,266
841
69
93
288
13
103
217
11
1,635
3,901
At December 31, 2017, 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$95 million and US$(116) million
respectively (2016: US$51 million and US$(63) million respectively). This increase/decrease in profit before tax would have mainly been as a result
of the conversion of the USD-denominated net 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 swap contracts.
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137
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
D.3. Non-repatriation risk
Most of Millicom’s operating subsidiaries and joint ventures 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.
A large portion of revenue of the Group is comprised of 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. The provision for impairment will be impacted in 2018 with the application of IFRS 9
Financial Instruments.
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.
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Millicom Annual Report 2017
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. Millicom believes that there is sufficient liquidity available in the markets to meet ongoing liquidity
needs. Additionally, Millicom is able to arrange offshore funding. Millicom has a diversified financing portfolio with commercial banks representing
about 30% of its gross financing (2016: 24%), bonds 57% (2016: 66%), Development Finance Institutions 3% (2016: 2%) and finance leases
10% (2016: 8%).
Maturity profile of net financial liabilities at December 31 2017
(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 December 31, 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
Less than 1 year
(185)
619
145
1
—
(56)
524
(255)
(427)
(1,239)
386
144
(867)
Less than 1 year
(80)
646
145
3
2
—
716
(283)
(443)
(1,174)
387
131
(666)
1 to 5 years
(1,862)
—
—
—
—
—
(1,862)
(785)
—
(124)
—
113
(2,658)
1 to 5 years
(2,269)
—
—
—
—
(84)
(2,353)
(916)
—
—
—
71
(3,199)
> 5 years
(1,738)
—
—
—
—
—
(1,738)
(68)
—
—
—
—
(1,806)
> 5 years
(1,552)
—
—
—
—
—
(1,552)
(71)
—
—
—
—
(1,622)
Total
(3,785)
619
145
1
—
(56)
(3,075)
(1,108)
(427)
(1,363)
386
257
(5,331)
Total
(3,901)
646
145
3
2
(84)
(3,189)
(1,270)
(443)
(1,174)
387
202
(5,487)
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139
Notes to the consolidated financial statements
for the year ended December 31, 2017 – 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 local economic conditions and imposed restrictions such as debt covenants. To maintain
or adjust its capital structure, the Group may make dividend payments to shareholders, return capital to shareholders through share repurchases
or issue new shares. At December 31, 2017, 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(ii)
Net debt to EBITDA
Gearing ratio
(US$ millions)
Net debt(i)
Equity(iii)
Net debt and equity
Gearing ratio
(i) Including net debt of Guatemala and Honduras operations for US$1,052 million (2016: US$1,076 million).
(ii) Including EBITDA of Guatemala and Honduras operations for US$898 million (2016: US$858 million).
(iii) Including equity of Guatemala and Honduras operations for US$(191) million (2016: US$(191) million).
Note
C.5.
B.3.
Note
C.5.
C.1.
2017
4,071
2,190
1.86
2017
4,071
2,905
6,976
58%
2016
4,181
2,172
1.93
2016
4,181
2,976
7,157
58%
E. Long-term assets
E.1. Intangible assets
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.
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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, among 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.
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Notes to the consolidated financial statements
for the year ended December 31, 2017 – 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 sublet) 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 capacity IRUs 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.
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E.1.3. Movements in intangible assets
Movements in intangible assets
in 2017
(US$ millions)
Opening balance, net
Change in scope (ii)
Additions
Amortization charge
Impairment
Disposals, net
Transfers
Transfers to/from assets held
for sale (see note E.3.)
Exchange rate movements
Closing balance, net
Cost or valuation
Accumulated amortization
and impairment
Net
Goodwill
615
3
—
—
(7)
—
(2)
(8)
(1)
599
599
—
599
Licenses
380
—
40
(49)
(8)
—
3
Customer lists
32
15
—
(15)
—
—
—
(50)
7
324
650
(327)
324
(1)
1
33
225
(192)
33
Goodwill
621
—
—
—
—
—
Licenses
387
89
(64)
—
—
(6)
Customer lists
57
—
(26)
—
—
—
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
Cost or valuation
Accumulated amortization
—
and impairment
615
Net
(i) Other includes intangible assets identified in business combinations (including trademarks – see note E.1.1.).
(ii) See note A.1.2.
(23)
(3)
380
702
(11)
5
615
615
—
1
32
210
(178)
32
(321)
380
IRUs
114
—
(2)
(14)
—
—
8
—
—
105
181
(76)
105
IRUs
119
4
(13)
(2)
—
1
—
4
114
177
(64)
114
Broadcast and
other rights
—
—
—
—
—
—
—
—
—
—
11
(11)
—
Broadcast and
other rights
32
—
(3)
—
—
(29)
—
—
—
11
(11)
—
Other(i)
219
1
92
(75)
—
(1)
(28)
(5)
2
204
621
(417)
204
Other(i)
213
98
(80)
(1)
(6)
(4)
(7)
5
219
579
(360)
219
Total
1,359
20
130
(153)
(15)
(1)
(19)
(64)
9
1,265
2,288
(1,022)
1,265
Total
1,429
192
(186)
(3)
(6)
(38)
(42)
13
1,359
2,293
(934)
1,359
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143
Notes to the consolidated financial statements
for the year ended December 31, 2017 – 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 cash generating units (CGUs), net of exchange rate movements and after
impairment
(US$ millions)
El Salvador
Costa Rica
Paraguay
Colombia
Tanzania (Zantel)
Other
Total
2017
130
3
133
2017
194
123
57
199
10
16
599
2016
192
(49)
143
2016
194
126
53
198
11
33
615
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 CGUs or groups of CGUs 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 December 31, 2017
Goodwill was tested for impairment by assessing the recoverable amount (first using a value-in-use model) against the carrying amount of the
CGU based on discounted cash flows. The cash flow projections used (adjusted operating profit margins, income tax, working capital, capex and
license renewal cost) are extracted from financial budgets approved by management and the Board usually covering a period of five years. 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 1.1%–3.8% (2016: 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 by using recent offers received from third
parties (Level 1).
As a result of the annual impairment testing and the recent deal signed with Airtel for the disposal of the Group’s operations in Rwanda,
management concluded that this CGU, part of the Africa segment, should be impaired. Hence, in accordance with IAS 36, an impairment loss of
US$8 million has been allocated to reduce the carrying amount of the fixed assets of our operations in Rwanda (there was no goodwill remaining)
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 has determined that the impairment loss should be allocated, for most of it, to
intangible assets. In addition, the Group recorded an impairment of US$7 million on a minor investment held in Guatemala. The impairment has
been classified within the caption Other operating expenses, net, in the Group’s income statement. At December 31, 2017, the carrying value of
the CGU corresponds to its fair value less costs of disposal (Level 1).
No impairment losses were recorded on goodwill for the year ended December 31, 2016.
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E.1.6. Impairment testing of goodwill – continued
Sensitivity analysis was performed on key assumptions within the impairment tests. The sensitivity analysis determined that sufficient margin
exists from realistic changes to the assumptions that would not impact the overall results of the testing.
Discount rates used in determining recoverable amount
(US$ millions)
Bolivia
Chad
Colombia
Costa Rica
El Salvador
Ghana (See note E.3.)
Paraguay
Rwanda (See note A.1.3.)
Senegal (See note E.3.)
Tanzania
Discount rate after tax (%)
2017
11.2
15.8
9.9
11.9
13.2
na
10.2
14.7
na
14.6
2016
9.4
16.5
8.6
10.9
11.9
17.7
9.3
14.6
14.0
14.3
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
Duration
40 years or lease period, if shorter
5 to 15 years or lease period, if shorter
2 to 7 years
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the
carrying value may not be recoverable. The assets’ residual value and useful life is reviewed, and adjusted if appropriate, at each statement of
financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its
estimated recoverable amount.
Construction in progress consists of the cost of assets, labor and other direct costs associated with property, plant and equipment being
constructed by the Group, or purchased assets which have yet to be deployed. When the assets become operational, the related costs are
transferred from construction in progress to the appropriate asset category and depreciation 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.
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145
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
E.2.2. Movements in tangible assets
Movements in tangible assets in 2017
(US$ millions)
Opening balance, net
Change in scope
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 December 31, 2017
Network
equipment(ii)
2,525
2
201
(6)
(115)
(663)
18
613
(184)
9
2,399
6,164
(3,764)
2,399
Land and
buildings
147
1
—
—
—
(9)
2
7
(3)
2
147
191
(44)
147
Construction
in progress
250
—
616
1
3
—
—
(650)
(16)
3
206
206
—
206
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 December 31, 2016
(i) Other mainly includes office equipment and motor vehicles.
(ii) The net carrying amount of network equipment under finance leases at December 31, 2017, was US$329 million (2016: US$245 million).
Network
equipment(ii)
2,476
45
(2)
(11)
(677)
15
775
(123)
27
2,525
6,138
(3,613)
2,525
Construction
in progress
431
632
(2)
(3)
—
—
(814)
(2)
9
250
250
—
250
Land and
buildings
149
—
—
—
(12)
2
9
(5)
3
147
185
(38)
147
Other(i)
135
—
7
(2)
(1)
(53)
—
48
(8)
1
127
477
(349)
128
Other(i)
142
5
(4)
—
(58)
—
62
(9)
(4)
135
474
(339)
135
Total
3,057
3
824
(8)
(114)
(725)
20
19
(211)
15
2,880
7,038
(4,158)
2,880
Total
3,198
683
(7)
(14)
(747)
17
31
(139)
36
3,057
7,047
(3,990)
3,057
Borrowing costs capitalized for the years ended December 31, 2017 and 2016 were not significant.
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Millicom Annual Report 2017
E.2.3. Cash used for the purchase of tangible assets
Cash used for property, plant and equipment additions
(US$ millions)
Additions
Change in advances to suppliers
Change in accruals and payables for property, plant and equipment
Finance leases
Cash used from continuing operations for additions
2017
824
(8)
26
(192)
650
2016
683
(16)
51
1
719
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
The following table summarizes the nature of the assets and liabilities reported under assets held for sale and liabilities directly associated with
assets held for sale as at December 31, 2017:
Assets and liabilities reclassified as held for sale
(US$ millions)
Senegal operations
Towers Paraguay (see note C.3.4.)
Towers Colombia (see note C.3.4.)
Other
Total assets of held for sale
Senegal operations
Towers Paraguay
Total liabilities directly associated with assets held for sale
Net assets held for sale / book value
As at
December 31
2017
223
7
1
2
233
77
2
79
154
As at
December 31
2016
—
—
—
5
5
—
—
—
5
Ghana merger
As mentioned in note A.2.3., on March 3, 2017, Millicom and Bharti Airtel Limited (Airtel) announced that they have entered into an agreement for
Tigo Ghana Limited and Airtel Ghana Limited to combine their operations in Ghana. As per the agreement, Millicom and Airtel would have equal
ownership and governance rights in the combined entity. Necessary regulatory approvals were received in the course of September. As a result, our
operations in Ghana have been classified as assets held for sale and discontinued operations as from September 28, 2017. The merger was
completed on October 12, 2017.
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147
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
E.3.2. Millicom’s assets held for sale –continued
The assets and liabilities deconsolidated as a result of the merger were as follows:
Assets and liabilities reclassified as held for sale – Ghana
(US$ millions)
Intangible assets, net.
Property, plant and equipment, net
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 / book value
October 12
2017
12
77
29
8
126
51
50
102
24
For further details on the effect of the deconsolidation of our operations in Ghana, refer to note A.2.3..
Senegal
As mentioned in note A.1.3. Millicom announced that it had agreed to sell its Senegal business to a consortium consisting of NJJ, Sofima
(managed by the Axian Group) and Teylium Group, subject to customary closing conditions and regulatory approvals. While the transaction is still
subject to regulatory approval at December 31, 2017, there is a high probability that the sale will be completed. Management concluded that,
given the conditions and circumstances, the operations in Senegal should remain classified as discontinued operations and assets held for sale.
The assets and liabilities were transferred to assets held for sale in relation to our operations in Senegal as at February 7, 2017. The following
assets and liabilities are classified as assets held for sale as at December 31, 2017:
Assets and liabilities reclassified as held for sale – Senegal
(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 held for sale / book value
December 31
2017
50
124
1
37
11
223
17
60
77
146
DRC
On February 8, 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 April 20, 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 December 31, 2017. 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. The sale of these operations generated a cash
inflow of US$147 million, net of US$33 million of cash disposed.
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Millicom Annual Report 2017
E.3.2. Millicom’s assets held for sale –continued
The following assets and liabilities of DRC were classified as assets held for sale as at the date of disposal:
Assets and liabilities reclassified as held for sale – Oasis S.A.
(US$ 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 / Book value
April 20, 2016
58
133
11
42
33
277
44
84
128
149
In accordance with IFRS 5, the Group’s businesses in DRC (2016), Senegal and Ghana have also been classified as discontinued operations in the
income statement. Comparative figures have therefore been represented accordingly. Financial information relating to the discontinued
operations for the year ended December 31, 2017, is set out below. Figures shown below are after intercompany eliminations.
Results from discontinued operations
(US$ millions)
Revenue
Cost of sales
Operating expenses
Depreciation and amortization
Other operating income (expenses), net
Gross gain on disposal of discontinued operations
Other expenses linked to the disposal of discontinued operations
Operating profit
Interest income (expense), net
Other non-operating (expenses) income, net
Profit before taxes
Credit (charge) for taxes, net
Net profit from discontinued operations
Cash flows from discontinued operations
(US$ millions)
Cash from (used in) operating activities, net
Cash from (used in) investing activities, net
Cash from (used in) financing activities, net
As at
December 31
2017
242
(81)
(103)
(18)
7
39
(7)
79
(15)
6
71
—
71
Year ended
December 31
2017
26
(33)
(22)
As at
December 31
2016
309
(106)
(141)
(54)
(5)
32
(19)
16
(18)
(3)
(5)
5
1
Year ended
December 31
2016
10
(53)
18
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$11 million. In October 2016, the date on which
UNE stopped rendering 4G services, the 4G spectrum was fully depreciated.
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149
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
F. Other assets and liabilities
F.1. Trade receivables
Millicom’s trade receivables mainly comprise interconnect receivables from other operators, postpaid mobile and residential cable subscribers, as
well as B2B customers. The nominal value of receivables adjusted for impairment approximates the fair value of trade receivables.
(US$ millions)
Gross trade receivables
Less: provisions for impairment of receivables
Trade receivables, net
Aging of trade receivables
(US$ millions)
2017:
Telecom operators
Own customers
Others
Total
2016:
Telecom operators
Own customers
Others
Total
2017
597
(211)
386
2016
593
(206)
387
Neither past
due nor
impaired
Past due (net of impairments)
30–90 days
>90 days
Total
29
186
43
259
26
162
57
244
16
52
16
83
20
66
23
108
4
34
5
43
9
25
3
36
49
273
64
386
54
252
82
387
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 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 December 31
2017
28
6
3
9
45
2016
32
7
6
17
62
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Millicom Annual Report 2017
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 December 31, 2017, is recognized in Trade payables for an amount
of US$25 million (2016: 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
Withholding 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
Accruals and payables in respect of spectrum and license acquisitions
Other non-current liabilities
Total
2017
86
13
24
57
144
17
1
83
425
2017
15
69
73
76
31
70
335
2016
112
9
12
44
139
17
10
134
477
2016
28
78
18
76
31
54
286
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151
Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
G. Additional disclosure items
G.1 Fees to auditors
(US$ millions)
Audit fees
Audit related fees
Tax fees
Other fees
Total
2017
4.7
0.3
0.2
0.7
5.9
2016
4.3
0.3
0.2
1.8
6.6
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 December 31, 2017, 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$194 million of which US$182 million are due within one year (December 31, 2016:
US$179 million of which US$162 million are due within one year). Out of these commitments, respectively US$25 million and US$23 million
related to Millicom’s share in joint ventures. (December 31, 2016: US$17 million of which US$14 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 December 31, 2017, was US$118 million (2016: US$129 million – see
note B.2.).
Annual operating lease commitments from continuing operations
(US$ millions)
Within one year
Between one and five years
After five years
Total
(i) The Group’s share in joint ventures operating lease commitments amount to US$194 million (2016: US$210 million) and are excluded from the table above.
2017(i)
135
396
277
808
2016
121
332
209
663
Finance leases
Finance leases, which transfer substantially all risks and benefits incidental to ownership of the leased item to the lessee, are capitalized at the
inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of
the liability. Finance charges are charged directly against income. Where a finance lease results from a sale and leaseback transaction, any excess
of sales proceeds over the carrying amount of the assets is deferred and amortized over the lease term. Capitalized leased assets are depreciated
over the shorter of the estimated useful lives of the assets, or the lease term if there is no reasonable certainty that the Group will obtain
ownership by the end of the lease term.
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G.2.2 Lease commitments – continued
Finance leases mainly comprise lease of tower space in Paraguay, Tanzania and Colombia (see note C.3.3.), lease of poles in Colombia and tower
sharing in other countries. Other financial leases mainly consist of lease agreements relating to vehicles and IT equipments.
Annual minimum finance lease commitments from continuing operations
(US$ millions)
Within one year
Between one and five years
After five years
Total
(i) The Group’s share in joint ventures finance lease commitments amount to US$5 million (2016: nil) and are excluded from the table above.
2017(i)
103
424
489
1,016
2016
81
330
353
764
The corresponding finance lease liabilities at December 31, 2017, were US$365 million (2016: US$295 million). Interest expense on finance lease
liabilities amounts to US$70 million for the year 2017 (2016: US$54 million).
G.3. Contingent liabilities
G.3.1. Litigation and legal risks
The Company and its operations are contingently liable with respect to lawsuits, legal, regulatory, commercial and other legal risks that arise in the
normal course of business. As of December 31, 2017, the total amount of claims and litigation risks against Millicom and its operations was
US$438 million, of which US$5 million related to its share in joint ventures (December 31, 2016: US$406 million, of which US$3 million related to
its share in joint ventures).
As at December 31, 2017, US$29 million, of which US$2 million related to its share in joint ventures (December 31, 2016: US$43 million, of which
US$1 million related to its share in joint ventures), has been provided for these 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 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. Millicom continues to fully consolidate Tigo Tanzania and
no provision has been recorded in relation of this claim.
On July 14, 2017, the International Commission Against Impunity in Guatemala (CICIG), disclosed an ongoing investigation into alleged illegal
campaign financing that includes a competitor of Comcel, our Guatemalan joint venture. The CICIG further indicated that the investigation would
include Comcel. On November 23 and 24, 2017, Guatemala’s attorney general and CICIG executed search warrants on the offices of Comcel. As
at December 31, 2017, 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 December 31, 2017.
The following specific risks are excluded from the US$438 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 December 31, 2017, 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 October 21, 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 May 4, 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 December 31, 2017, this 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 December 31, 2017.
Millicom Annual Report 2017
153
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Notes to the consolidated financial statements
for the year ended December 31, 2017 – 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 to 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 December 31, 2017, potential tax risks estimated by the Group amount to US$313 million of which provisions of US$53 million have been
recorded representing the probable amount of eventual claims and required payments related to those risks (2016: US$311 million of which
provisions of US$65 million were recorded). Out of these potential claims and provisions, respectively US$38 million (2016: US$96 million) and
US$2 million (2016: 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, including finance leases
Asset retirement obligations
Financing activities
Finance leases
Share based compensation
Note
E.2.2.
E.2.3.
G.2.2.
B.4.1.
2017
(174)
(20)
192
24
2016
34
(17)
1
14
154
Millicom Annual Report 2017
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;
Helios Towers Africa Ltd, 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.
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 December 31, 2017, Kinnevik owned approximately 38% of Millicom (2016: 38%). During 2017 and
2016, 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 2017 and 2016, the Company purchased services from Kinnevik subsidiaries including fraud detection, procurement and professional
services. Transactions and balances with Kinnevik Group companies are disclosed under Other in the tables below. Also refer to note A.3. for further
details with respect to the disposal of one portion of our investment in Milvik AB.
Helios Towers
Millicom sold its tower assets and leased back a portion of space on the towers in several African countries and contracted for related operation
and management services with 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 Miffin
Purchases of goods and services from EPM
Lease of towers and related services from Helios
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
As at December 31, the Company had the following balances with related parties:
US$ millions
Non-current and current liabilities
Payables to Guatemala joint venture(i)
Payables to Honduras joint venture(ii)
Payables to EPM
Other accounts payable
Sub-total
Finance lease liabilities to tower companies(iii)
Total
(i) Shareholder loans bearing interests. Out of the amount above, US$124 million are due over more than one year.
(ii) Amounts payable mainly consist in dividend advances. Dividend is expected to be declared in 2018.
(iii) Disclosed under Debt and other financing in the statement of financial position.
Millicom Annual Report 2017
2017
(181)
(36)
(28)
(4)
(250)
2017
18
277
1
295
2016
(167)
(22)
(35)
(9)
(233)
2016
18
261
10
289
Year ended
December 31
2017
Year ended
December 31
2016
273
135
3
10
421
108
529
245
118
3
20
386
85
471
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Notes to the consolidated financial statements
for the year ended December 31, 2017 – continued
G.5. Related party balances and transactions – continued
US$ millions
Non-current and current assets
Receivables from EPM
Receivables from Guatemala and Honduras joint ventures
Advance payments to Helios Towers Tanzania
Receivable from TigoAirtel Ghana(i)
Other accounts receivable
Total
(i) Disclosed under Other non-current assets in the statement of financial position. See note A.2.3..
Year ended
December 31
2017
Year ended
December 31
2016
3
25
8
40
1
77
4
—
10
—
3
17
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 required all Tanzanian licensed
telecom operators to sell 25% of the authorized share capital in a public offering on the Dar Es Salaam Stock Exchange by December 31, 2016. As
of December 31, 2017, only one company had completed a public offering. Early 2017, Tigo Tanzania, Zantel and Telesis each received from the
Tanzanian Communications Regulatory Authority (TCRA) a notice of material breach of the license giving thirty-days to comply. Millicom has
signaled its intention for its subsidiaries to comply with the law and list its businesses but did not complete the public offerings by such time and
will not be able to do so until the incorrect filing related to Tigo Tanzania made in the commercial register are corrected (see note G.3.1.).
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 although to-date there has been no notification from the TCRA of any indication or
intention to proceed with sanctions. 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 to be unlikely) and therefore, no provision has been recorded as of
December 31, 2017.
I. Subsequent events
Dividend
On February 6, 2018, Millicom’s Board decided to propose to the AGM of the shareholders a dividend distribution of US$2.64 per share to be paid
in two equal installments in May and November 2018, out of Millicom profits for the year ended December 31, 2017 subject to the Board’s
approval of the 2017 Consolidated Financial Statements of the Group.
Africa disposals
On January 31, 2018, the Group announced that it has completed the transaction announced on December 19, 2017 for the sale of its Rwanda
operation to subsidiaries of Bharti Airtel Limited.
Tower sale and lease back – El Salvador
On February 6, 2018, we entered into a sale-leaseback agreement with SBA Communications related to a portfolio of approximately 800 towers in
El Salvador. As a result of the transaction, Millicom expects to receive cash proceeds of around US$145 million.
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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 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, MFS 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;
• Home revenue is Group revenue related to the provision of residential services such as broadband internet and
TV. Home revenue is included in service revenue.
Organic growth represents year-over-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. Operating profit
includes our share of profit from joint ventures in Guatemala and Honduras, as these 2 operations are considered
as strategic investments for the Group. However, the operating profit does not include the share of income from
joint venture in Ghana, which is therefore accounted for under Income (loss) from other joint ventures and
associates, net.
EBITDA is operating profit excluding impairment losses, depreciation and amortization and gains/losses on the
disposal of fixed assets.
Adjusted net profit is net profit adjusted for exceptional or non-operating items such as gain on tower sales,
foreign exchange gains / losses and changes in fair value of derivatives attributable to the owners of the
Company, early redemption premium for debts and other financing, dilution gains and impairments on
investments in subsidiaries and associates and similar items classified under Other non-operating (expenses)
income, 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 capex excluding spectrum and license costs, and finance lease capitalizations from
tower sale and leaseback transactions;
• Cash Capex represents the cash spent in relation to capex, excluding spectrum and licenses.
Cash flow measures
• Operating cash flow is EBITDA less capex (excluding spectrum and license costs, and finance lease
capitalizations from tower sale and leaseback transactions);
• 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.
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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 (loss)
Operating expenses
EBITDA
EBITDA margin
Depreciation & amortization
Share of profit in our joint ventures in Guatemala
and Honduras
Other operating income (expenses), net
Operating profit (loss)
Net financial expenses
Other non-operating income (expenses), net
Income (loss) from other joint ventures and
associates, net
Profit (loss) before tax from continuing operations
Net tax credit (charge)
Profit (loss) for the year from continuing operations
Profit (loss) from discontinued operations
Non-controlling interests
Net profit (loss) for the year
Consolidated statement of financial position
Year ended
December 31, 2017
Management reporting
(Unaudited)
6,024
(1,580)
4,445
(2,255)
2,190
36.4%
(1,310)
—
39
919
(471)
6
(85)
368
(252)
116
71
(102)
85
US$ millions
Assets
Non-current assets
Intangible assets, net
Property, plant and equipment, net
Investments in joint ventures
Investments in associates
Other non-current assets
Total non-current assets
Current assets
Inventories, net
Trade receivables, net
Other current assets
Restricted cash
Cash and cash equivalents
Total current assets
Assets held for sale
Total assets
Guatemala
and Honduras
(1,892)
322
(1,530)
631
(899)
47.5%
450
—
18
(431)
86
(10)
—
(355)
95
(260)
—
119
(142)
Joint Venture
adjustment
Year ended
December 31, 2017
IFRS
(Audited)
4,133
(1,218)
2,915
(1,623)
1,291
31.2%
(861)
142
142
142
142
142
142
57
629
(385)
(4)
(85)
155
(158)
(3)
71
17
85
December 31, 2017
Management reporting
(Unaudited)
IFRS
adjustments
December 31, 2017
IFRS
(Audited)
4,313
3,971
96
241
411
9,031
75
487
635
157
938
2,292
233
11,556
(3,047)
(1,090)
2,871
—
(118)
(1,384)
(30)
(101)
(245)
(12)
(319)
(707)
—
(2,091)
1,265
2,880
2,967
241
293
7,647
45
386
389
145
619
1,585
233
9,465
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Consolidated statement of financial position – continued
US$ millions
Equity and liabilities
Equity
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Liabilities
Non-current liabilities
Debt and financing
Provisions and other non-current liabilities
Total non-current liabilities
Current liabilities
Debt and financing
Provisions and other current liabilities
Total current liabilities
Liabilities directly associated with assets held for sale
Total liabilities
Equity and 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
Effect of cash in disposal group held for sale
Cash and cash equivalents at the end of the year
December 31, 2017
Management reporting
(Unaudited)
IFRS
adjustments
December 31, 2017
IFRS
(Audited)
2,905
964
3,869
4,903
547
5,450
265
1,893
2,158
79
7,687
11,556
191
(778)
(587)
(1,303)
(31)
(1,335)
(80)
(89)
(169)
—
(1,504)
(2,091)
3,096
185
3,282
3,600
515
4,116
185
1,804
1,989
79
6,183
9,465
Year ended
December 31, 2017
(Unaudited)
IFRS
adjustments
Year ended
December 31, 2017
IFRS
(Audited)
368
71
439
1,475
(828)
(642)
5
10
947
(19)
938
(213)
—
(213)
(655)
460
178
(2)
(18)
(301)
—
(319)
155
71
226
820
(367)
(464)
4
(8)
646
(19)
619
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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 2017
1,526
1,558
2.1%
1.3%
—
(0.8%)
Q4 2017
1,417
1,456
2.8%
2.0%
—
0.8%
Q4 2017
520
561
7.9%
6.9%
—
1.0%
Q4 2016
1,636
1,526
(6.7%)
(2.6%)
(3.8%)
(0.3%)
Q4 2016
1,505
1,417
(5.9%)
(1.5%)
(4.0%)
(0.4%)
Q4 2016
502
520
3.6%
4.1%
(0.2%)
(0.2%)
12M 2017
5,979
6,024
0.8%
(0.4%)
—
1.1%
12M 2017
5,591
5,659
1.2%
0.2%
—
1.0%
12M 2017
2,114
2,190
3.6%
2.2%
—
1.4%
12M 2016
6,572
5,979
(9.0%)
(1.1%)
(2.8%)
(5.1%)
12M 2016
6,056
5,591
(7.7%)
0.5%
(3.0%)
(5.2%)
12M 2016
2,188
2,114
(3.4%)
1.8%
(0.6%)
(4.6%)
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Corporate responsibility
performance…
This section details our corporate responsibility
performance for 2017
Independent limited assurance report
Corporate responsibility is crucial to our success
1. Privacy and freedom of expression
2. Child rights and online protection
3. Acting with integrity: 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
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161
Independent limited assurance report
To the Management and Directors of Millicom International Cellular S.A.
Scope of work
We have undertaken a limited assurance engagement in relation to the Millicom
International Cellular S.A (Millicom) Corporate Responsibility Performance section
the Corporate Responsibility Report) of the Millicom Annual Report 2017.
The scope determined by Millicom for the preparation of this independent limited
assurance report is described below:
Reporting Section
Privacy and freedom
of expression
Indicator Description
% of operations with controls systematically
applied in line with the Group guideline
Total number of law enforcement requests
(Group)
Number of major events
Acting with integrity % of employees who acknowledged the Code
(of conduct)
% of employees who have completed the
Code training
% of procurement staff trained on ABAC
% of senior managers trained on ABAC
Number of cases of unethical behavior
reported and investigated
Investigations resulting in written warning
Investigations resulting in termination of
employee contract
Turnover of procurement staff
Total Energy Consumption / Sources of energy
by asset type
Scope 1 and 2 carbon emissions
% of women in senior management positions
Absentee rate
Total number of suppliers invited to complete
an EcoVadis assessment
% of strategic suppliers who signed the
supplier code
% of all suppliers who have signed the
supplier code
Reducing our
environmental footprint
Diversity
Taking care of our
people
Responsible supply
chain management
KPI Reference Review
Period 2017
Q4 2016 – Q3 2017
Q4 2016 – Q3 2017
Q1 2017 – Q4 2017
Q1 2017 – Q4 2017
Q1 2017 – Q4 2017
Q1 2017 – Q4 2017
Q1 2017 – Q4 2017
Q1 2017 – Q4 2017
Q1 2017 – Q4 2017
Q1 2017 – Q4 2017
Q4 2016 – Q3 2017
Q4 2016 – Q3 2017
Q4 2016 – Q3 2017
Q1 2017 – Q4 2017
Q4 2016 – Q3 2017
Q4 2016 – Q3 2017
Q4 2016 – Q3 2017
Q4 2016 – Q3 2017
The Millicom Corporate Responsibility Report was prepared in accordance with AA1000
AccountAbility Principles Standard 2008 (AA1000 APS 2008).
Criteria
Our review was carried out based on:
• AA1000 AccountAbility Assurance
Standard 2008, with a moderate level of
type 2 assurance.
• Standard ISAE 3000, Assurance
Engagements, issued by the International
Auditing and Assurance Standard Board
(IAASB) of the International Federation
of Accountants (IFAC), with a limited
scope of assurance.
Management’s Responsibility
The management of Millicom is responsible
for the preparation and fair presentation of
the Corporate Responsibility Report in
accordance with the Criteria, and is also
responsible for the selection of methods used
in the Criteria. Further, Millicoms’
management is responsible for establishing
and maintaining internal controls relevant to
the preparation and presentation of the
Corporate Responsibility Report that is free
from material misstatement, whether due to
fraud or error; selecting and applying
appropriate criteria; maintaining adequate
records and making estimates that are
reasonable in the circumstances.
Assurance Practitioner’s Responsibility
Our responsibility is to provide with
independent third-party limited assurance
of the content of Millicom’s Corporate
Responsibility Report 2017, pages 161 to 188.
Our procedures were designed to obtain a
limited level of assurance on which to base
our conclusion, and, as such, do not provide
all of the evidence that would be required to
provide a reasonable level of assurance.
The procedures performed depend on the
assurance practitioner’s judgment including
the risk of material misstatement of the
Corporate Responsibility Report, whether
due to fraud or error. While we considered
the effectiveness of management’s internal
controls when determining the nature and
extent of our procedures, our assurance
engagement was not designed to provide
assurance on internal controls.
Our procedures did not include testing controls
or performing procedures relating to checking
aggregation or calculation of data within IT
systems, which would have been performed
under a reasonable assurance engagement.
Independence
We have performed our work in accordance
with the standards of independence required
by the Code of Ethics of the International
Federation of Accountants (IFAC).
Applied procedures
Our assurance procedures consisted in
requesting information from Millicom
Corporate Responsibility department and
business areas participating in the preparation
of the Corporate Responsibility Report and
applying analytical procedures and sampling
tests as described in general terms below:
1. Interviews with senior managers
responsible for management of Corporate
Responsibility issues and review of selected
evidences to support issues discussed.
The list of interviewees included Executives
with overall responsibility for Millicom’s
Corporate Responsibility strategy and
programmes and for specific functions,
including Supply Chain, Health and Safety,
Privacy and Compliance. The purpose of
these interviews was to obtain awareness
of the Corporate Responsibility objectives
and policies as well as how they are put
into practice and integrated into
Millicom’s strategy
162
Millicom Annual Report 2017
2. Review of Millicom’s approach to
stakeholder’s engagement and outputs.
3. Review of the processes for gathering and
consolidating the specified performance
data and, for a sample, checking the data
consolidation.
4. Checks on a sample basis of the
quantitative information included in the
Corporate Responsibility Report as well as
its adequate compilation from data
supplied by information sources. The tests
have been defined to provide limited
assurance levels in line with the criteria
described in this report.
5. Site visits in Millicom’s operations in El
Salvador and Paraguay to review process and
systems for preparing site level corporate
responsibility data and implementation of
corporate responsibility strategy.
Conclusions
Based on our limited assurance procedures
described above, nothing has come to our
attention that causes us to believe that the
Corporate Responsibility Report is not
presented fairly, in all material respects, in
accordance with the Criteria (the principles
established in standard AA1000 APS 2008)
such as:
1. Inclusiveness
• During the site visits in Paraguay and
El Salvador, it has been observed that
the local Corporate Responsibility
representatives concretely engage with
stakeholders and organizations on various
Corporate Responsibility (CR) initiatives.
• Millicom developed trainings for both
internal and external stakeholders in
2017. For example, suppliers in Latin
America were trained on sustainability
topics through an external agency and
a company-wide Compliance training
was conducted in November 2017 in
order to refresh employees’ commitment
to the Code of Conduct.
• Millicom has a mechanism in place to
identify stakeholders and has developed
two registers in order to keep track of
stakeholder engagement: one of them
at a corporate level and the other one
compiles all the information regarding
stakeholder engagement related to the
top-20 priority stakeholders for each of
the country operations.
• Millicom strives to follow a collaborative
approach on Corporate Responsibility
issues as they are not only managed by
the Corporate Responsibility
department, but also by all the relevant
internal stakeholders and departments
within the organization.
2. Materiality
• Millicom takes into account the changing
sustainability context and maturity of
issues and concerns through regular
meetings with stakeholders.
• Millicom has in place and has access to
the necessary competencies to apply the
materiality determination process.
3. Responsiveness
• Millicom involves stakeholders and
considers the relationship between
the maturity of an issue and the
appropriateness of a response.
• While some local trainings were provided
on Corporate Responsibility Reporting,
further awareness and capacity building
sessions of internal stakeholders at
various levels of Millicom’s organization
should be considered for 2018.
2. Materiality
• We maintain our recommendation to
further develop the materiality
assessment process according to a
staged approach in order to first broaden
the spectrum of material issues and in a
second phase eventually better monitor
materiality assessment at country level.
• As Environment is a material issue for
Millicom, the data collection system
and control of the most material items
could be further enhanced to get
more granularity.
3. Responsiveness
• As part of its active membership within
GNI, Millicom interacted with key market
players on privacy topics.
• Most of the Corporate Responsibility
operations and actions planned to
address stakeholders expectations have
been pursued in spite of the changes of
CR Vice President and CR Reporting
Manager during the reporting period.
• In 2017, Millicom introduced a ‘vendor
pre-qualification process’ that includes
sustainability criteria for a better
monitoring and response on supply
chain matters.
Recommendations
We also presented to Millicom our
recommendations regarding areas of
improvement related to the application of
standard AA1000 APS 2008 as well as to
actions taken with main stakeholders.
The most significant recommendations
are summarized below:
1. Inclusiveness
• Although Millicom has identified
its stakeholders, we maintain our
recommendation from the previous year,
to better include key stakeholders such
as customers and employees in the
yearly materiality assessment
consultation and to formalize the
process for identifying stakeholders
(that could be briefly described it in the
Corporate Responsibility Report).
• Although an H&S reporting system has
been put in place, the data collection, the
control and setup for the categorization
of events could be improved to get more
clarity and ability to ensure a more
detailed follow-up. Moreover the focus on
better communication with external
providers on H&S issues should be
pursued and strengthened.
• A formalized process to communicate
with stakeholders that is applied across
the organization (at local and group level)
allowing more integrated and traceable
way to engage with the Millicom’s
stakeholders can be recommended.
Ernst & Young
Société Anonyme
Cabinet de Révision Agréé
Olivier Lemaire
Partner
David Cau
Director
Luxembourg, 6 February 2018
000-222
Millicom Annual Report 2017
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Corporate responsibility performance
Corporate responsibility
is crucial to our success…
At Millicom, we believe that our commitment
to corporate responsibility differentiates us
in our markets, makes us more competitive and
helps us strengthen our position as a partner
and employer of choice.
As our CR strategy has evolved, we have
moved from taking a centralized approach
to operating in a more integrated, multi-
functional manner across our business.
This has fostered greater collaboration
between subject matter experts and created
more opportunities to embed corporate
responsibility policies and strategies into
different areas of our organization.
We regard corporate responsibility as an
invaluable means of learning more about
our capabilities and contributions to local
economies and communities which we serve.
For Millicom, corporate responsibility is critical
to our success in business and with our
communities and stakeholders. That is why
our corporate responsibility strategies and
objectives are directly linked and dependent
upon our core business competencies,
strategies and objectives.
Learning in community
Instructor delivering computing lessons to
senior citizens at a telecenter in Colombia.
Learning is a common theme across the different
aspects of our corporate responsibility strategy
164
Millicom Annual Report 2017
Our eight most important corporate
responsibility 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
7 Responsible supply
chain management
8 Social
investment
Our corporate responsibility objectives…
The table on the right shows our progress
against our three long-term objectives, per our
5-year plan laid out in 2014. The rest of this
appendix highlights what we have achieved
over the past year in each of the material
CR topics we have identified.
As mentioned on page 45, 2018 is a milestone
year given that it is the last of the 2014
five-year plan. This is why no 2018 targets
have been included in the performance tables,
as, starting as early as January 2018, we
will set a new 5-year plan which will include
updated targets and metrics per internal
and stakeholder feedback and cross-
functional collaboration.
This corporate responsibility report includes
the Honduras and Guatemala joint ventures
as if fully consolidated in accordance with our
management reporting. Reported indicators
exclude Senegal, EMTELCO and Ghana.
Additional exclusions, where applicable, are
detailed in footnotes.
Measure the success
and health of our
company beyond
financials
What we did in 2017
• Continued to implement joint initiatives
with other business functions.
• Decentralized the data-gathering process
to foster higher ownership among
functions and areas.
Promote, protect
and strengthen our
performance and
reputation
Demonstrate
thought leadership
in areas that link to
business success
What we did in 2017
• Continued to actively engage with our
investors, partners and other key stakeholders.
• Became full Global Network Initiative
(GNI) members.
What we did in 2017
• Consolidated our leadership in
Child Online Protection and broadened
our child protection scope.
• Rolled out Corporate Responsibility
training for suppliers in Latam.
• Committed to GSMA’s Connected
Women initiative.
Millicom Annual Report 2017
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Corporate responsibility performance –
continued
1. Privacy and freedom of expression
Millicom is committed to the responsible
stewardship of personal data and the
protection of the right to privacy and
freedom of expression for all our
customers, each of whom remains at
the center of all we do.
As a founding member of the
Telecommunications Industry Dialogue (TID)
on Freedom of Expression and Privacy, Millicom
played an active part in creating principles,
tools and joint advocacy on privacy and
freedom of expression goals and challenges.
Given the strong cross-over of work and topics,
as well as its widening stakeholder reach,
we strongly urged the TID to merge with the
Global Network Initiative (GNI).
We are pleased to report that in March 2017,
we became a full member of this new
multi-stakeholder group. Millicom and its
former TID colleagues (Vodafone, Orange,
Telefonica, Nokia, TeliaCompany and Telenor)
now play an active part in the GNI,
collaborating on Freedom of Expression and
Privacy issues alongside investors, academics,
NGOs and internet companies, including
Facebook, Google, Oath and Microsoft.
Our activity has included:
• Active engagement in the GNI, including
board meetings and policy and learning
committees;
• Attending RightsCon, the world’s largest
digital rights conference which took place
in Brussels in March. The conference
covered a diverse range of the leading
topics and challenges facing human rights
in the digital age and we participated in
several major panels, including the UNICEF
panel on Freedom of Expression and
Children’s Rights;
• Taking part in the Stockholm Internet
Forum – an international event for in-depth
dialogue and discussions on how a free,
open and secure internet promotes human
rights and development worldwide;
• Regular engagement with UN Special
Rapporteur David Kaye, providing input
to his 2016 and 2017 reports to the
UN Human Rights Council; and
• Engaging with local NGOs such as TEDIC
(Paraguay) and Karisma (Colombia) to
discuss their transparency assessments/
rankings which include Millicom’s local
subsidiaries in those countries.
We also continue to engage with wider
civil society outside of the GNI, and partnering
with NGOs and multilateral organizations
to advocate for the protection our
customers’ rights.
Our customers trust us to respect their
privacy and freedom of expression. This is
of paramount importance for our business.
At the same time, we recognize the right to
privacy and freedom of expression must be
balanced with our duty to comply with local
laws in the countries where we operate.
Local laws sometimes require us to disclose
information to law enforcement agencies and
other government authorities citing national
security or public safety issues, or to prevent
or investigate crime. Whenever we face such a
legal request, we seek to minimize the impact
on our customers’ right to privacy and
freedom of expression.
Moreover, when any conflict between local
law and the Universal Declaration of Human
Rights and other international human rights
standards arise, we strive to resolve that
conflict in a manner which respects the right
to privacy and freedom of expression as well
as the fundamental right to access the
internet and/or communications services.
In 2017, we carried out a human rights risk
assessment of our operating environment to
assess the risk level for government requests
that may impact on our customers’ rights.
We analyzed the legal frameworks for
government interventions in each of our
markets and identified the salient and
material risks posed by each country using
the Verisk Maplecroft’s risk indices.
Our significant presence in our markets means
that we have a strong understanding of
potential risks. Nevertheless, we plan to
formalize this assessment across our network
and broaden our analysis by working with
external stakeholder groups to create an
ongoing and dynamic assessment tool.
166
Millicom Annual Report 2017
Once completed during 2018, we will formally
launch a company-wide privacy program
including related policies, training and human
rights impact assessments as part of our
continued efforts to improve transparency
and to conduct business in a way that respects
rights across our footprint.
The LED annual report
Millicom’s annual Law Enforcement Disclosure
(LED) report, provides information about the
nature and extent of our interaction with law
enforcement agencies and governments. It
highlights the key issues that affect the
privacy or freedom of expression of our
customers connected to our
telecommunications networks in Latam and
Africa.
This year marks the third edition of our
standalone LED report, and we continue
to raise our reporting and transparency
standards by providing a case study of the
types and sources of requests received in one
unnamed country. We made the decision to
anonymize this data in order to respect local
disclosure requirements and protect our local
staff. We hope that this level of granularity will
provide further context to the nature of
government requests and demonstrate the
complexity and variety of actors involved in
these processes.
What we learned this year
Increased stakeholder engagement is the
best way to tackle challenges and risks around
privacy and freedom of expression. That is
why we joined the GNI and why we continue
to increase our participation with a wide range
of stakeholders in our markets on these
key topics.
Law Enforcement Disclosure
During 2017, our internal Millicom Law
Enforcement Disclosure (LED) Committee
met twice to review risks and actions related
to freedom of expression and privacy.
The committee consists of senior members
of Millicom’s management team – from the
Regulatory, Legal, Corporate Responsibility,
Compliance, Communications and
Security functions.
The LED Committee provides guidance and
input on how Millicom can best approach
these issues, and balance national security
interests in each of our countries with our
customers’ right to privacy, freedom of
expression and assembly. The meetings also
provide members with an overview of the
extent and context of government requests
for information.
Given the sensitive nature of some
government investigations, the LED
Committee also discusses the levels of
disclosure it can legally provide on such topics
within Millicom’s law enforcement disclosure
report. We strive for maximum transparency
but we must also comply with local laws which
prohibit public disclosure altogether or in
varying degrees across all our markets. We
must protect the safety of our staff and assets
which may be impacted in the course of
government investigations.
In 2017, we revised our internal policies
and processes relating to law enforcement
assistance and major events escalation to
ensure they are readily accessible and clear to
all our operations. To this end, we assessed the
current state of our policies and processes with
external expert support and against generally
accepted international standards and best
practices to identify any gaps and learnings
so that we better understand how best to
improve our policies and processes.
We also provided training on law enforcement
requests for our Latam in-country staff at our
regional team summits, and plan to do the
same for our Africa team members this year.
We will continue to revise and adjust these
resources as part of an ongoing process, to
ensure that they are robust and that our staff
is equipped with the tools to deal with the
challenges and risks posed in our markets.
Read more about our progress in
implementing the Principles of
the TID/GNI and our work on privacy
and freedom of expression in our Law
Enforcement Disclosure Report 2017
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Corporate responsibility performance –
continued
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.
KPI
2016 value
2017 value
2017 target
Status
% of operations with controls
systematically applied in line with the
Group guideline1
92%
100%
Total number of law enforcement requests
(Group)
47,632
41,323
Number of major events
18
14
All operations to have controls assessed
and systematically applied in line with
the Group guideline
Conduct human rights impact
assessment focused on privacy
and freedom of expression in all
our Latam operations
1 2017 data is based on 11 operations.
Law enforcement requests
KPI
Number of law enforcement requests – Latam
Interception
Customer metadata
MFS
Content Takedown
Number of law enforcement requests – Africa
Interception
Customer metadata
MFS
Content Takedown
Overview of major events by type2
KPI
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
2 Data reported for financial year, including 2016 data..
2016 value
2017 value
927
39,279
267
0
5
6,827
326
1
971
32,340
181
1
0
7,705
251
3
2016 value
2017 value
8
5
2
1
1
1
2
4
1
2
0
5
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Key
Completed/achieved
In progress
2. Child rights and online protection
We take great pride in our recognition as
leaders in Child Online Protection (COP)
and we will continue our work in this area
to ensure that we address the wellbeing of
children and their ability to thrive with the
safe and responsible use of our products
and services.
Our child rights work in the past has
positioned us as a strong leader in child
protection within our industry. We have
worked closely with expert organizations, such
as the UN, to better understand our impact on
Child Rights and we continue to help provide
a safe online environment for children, while
focusing on the importance of the responsible
and productive use of the internet as a
catalyst for their development and education.
Our focus on COP goes beyond creating
awareness of risks. We believe that an integral
approach includes optimizing the responsible
use of the internet amongst children for their
education, communication and understanding,
while exercising of their rights.
In a report published by UNICEF highlighting our
work on child rights, Andrew Mawson, Chief of
Child Rights and Business for UNICEF, stated:
I commend Millicom for taking leadership on child rights,
for being transparent on its findings, learnings and
areas for improvement. Above all, I commend them for
recognizing that the job is never done and that this is a
continuous work in progress. I encourage other companies
to think carefully about what child rights means for them
and hope that this report serves as an example for how
to undertake or broaden their own child rights journey.”
Our COP program centers on three pillars:
Education, Thought Leadership and Protection.
With this approach, we cover a broad scope of
actions on a global and a local level that we
execute jointly with partner organizations.
Three pillars of the program
1. Education • Trainings for teachers, parents, students
• Customer awareness resources: portal, brochure
• eLearning/app to customer-facing teams
• Tigo volunteers
Responsible use
and online risks
2. Thought
leadership
• COP Workshops
• UNICEF collaboration
• Regulatory advocacy
• Industry level collaboration and advocacy
• Research into use of ICT by children
3. Protection • Helplines support
• Parental controls
• Child Sexual Abuse Content (CSAC) blocking
• Notice and takedown procedures
• Hotlines for CSAC reporting
Child sexual
abuse and
victimization
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Corporate responsibility performance –
continued
Ongoing collaboration with UNICEF
Continuing our fruitful cooperation for the
past three years developing tools and best
practices for the industry on Child Rights and
Business, in 2018 we signed a new agreement
that will fund projects in the Latam region for
the next three years, focused on violence
prevention amongst youth, particularly
through the strengthening of child helplines
that will allow children to seek help and
assistance on a wide range of topics regarding
their rights and protection.
Child Helplines –
support when it is most needed
At Millicom, we support independent
child helplines by waiving their fees if any
of our customers calls a helpline in Latam,
where it’s available.
Calls received by helplines cover a broad range
of risk situations; children often use these
helplines to seek advice because of bullying
at school, because they live in abusive
households, or simply to better understand
their rights. In some extreme cases, calls come
in from boys and girls who are considering
suicide. Child helplines not only help children,
they can also save lives.
We are currently in partnership with UNICEF
and Child Helpline International (CHI), to
support the creation of additional child
helplines in Honduras and El Salvador, as well
as to strengthen the existing helpline
in Guatemala. Through these efforts we hope
that, soon, thousands of children in these
countries will have a go-to space to find
advice, support and a friendly voice that can
help them in tough times.
In Costa Rica, we sponsored the Latin America
regional consultation where organizations
that host helplines from all over the continent
came together to share experiences and learn
best practices.
Child Online Protection training at a school in
Medellín, Colombia. October, 2017.
What we learned this year
There is significant potential for us to further
engage with children, their families and
teachers. We want to include their concerns in
our product and service design processes, and
optimize our approach to COP. We will also
continue advancing the safe and responsible
use of our products and services by children,
their families and teachers.
Generally, most findings at the country
level revealed the need to work on the
implementation of our policies in greater
detail with specific internal teams.
In all operations, there was a clear need to
provide training on COP to all customer-facing
employees. To this end, we worked with
Crianza Tecnológica (Raising Children in a
Digital World), an informative website with
content developed by the Paniamor
Foundation in Costa Rica. It provides
information for adults on how to raise children
in an online world. Crianza Tecnológica is now
available in all of our Latam markets, and it
has proven to be a valuable asset.
As COP remains one of the cornerstones of
our corporate responsibility strategy, we have
created a more consistent approach across
our operations to better leverage our best
practices and lessons learned. When
appropriate, we adapt our practices and tailor
them to local culture, needs and
opportunities1.
As represented in the table on next page,
our COP program has been steadily evolving
and is now more aligned across all operations,
particularly those in Latin America. We have
done this by prioritizing actions that hold
measurable and positive impacts for children.
We will continue to establish child online
protection portals, and strengthen the
operations that block child sexual abuse
content, as well as increase the number
of children – and adults – we reach through
our training.
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1
See more examples in our Social Investment section
(pages 187 and 188)
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 Latam.
• 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.
2017 value
2017 target
Status
KPI
% of operations with controls
systematically applied in line with the
minimum age policy
% of operations with child risk impact
assessments conducted to date
2016
value
100%
100%
38%
57%
% of operations that have hosted a
multi-stakeholder COP workshop to date
54%
86%
% of operations with a child online
protection portal
0%
71%
% of operations in Latam with customer
leaflets on COP
29%
43%
Number of children reached by COP
training (’000)
122
188.6 1
% of operations in Latam blocking child
sexual abuse content
14%
71%
All operations to 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 the Tigo brand 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
1 Cumulative from 2016. From October 1, 2016 to September 30, 2017, the number of children reached by COP training was 66,115 in Latam.
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Corporate responsibility performance –
continued
3. Acting with integrity:
anti corruption compliance
At Millicom we are determined to drive
positive change in the countries where
we operate. It is important for us to be the
preferred partner for our employees, our
customers and all other business partners.
A strong compliance culture not only helps
us do the right thing, it helps us create an
ethical environment where our business
can thrive.
To ensure the right level of awareness and
provide adequate guidance, we placed strong
emphasis on compliance training with a mix
of e-learning, workshops and deep-dives,
and in-person training to accommodate the
diverse needs of our staff. This maximizes our
reach and provides constant reminders to
our staff on the importance of a strong
compliance culture.
Throughout 2017, we focused on the
enhancement of our compliance framework
to become world class. We continued
improving the basic building blocks including
updated policies, enhanced tools and training.
We strengthened our people resources and
centralized key risk areas under the umbrella
of Ethics & Compliance, such as Information
Security and Corporate Security. We put more
compliance officers in place at local level and
created new roles at regional and global levels.
We also added resources to our investigations
and information security teams for additional
focus and emphasis on both reactive and
proactive risk management.
We also further improved our third-party
management program, where we redesigned
our due diligence process and updated our
control framework and policies. We did this by
introducing a new business-wide due diligence
platform, fully configured to Millicom’s high
ethical standards, to manage our relationships
with third-parties in a standardized manner
across the business.
We have also adopted a standalone
Government Interactions Policy. Our business
has bona fide interactions with government
and public officials. We put in place a separate
policy to help our employees gain a deeper
understanding of the compliance risks that
may arise in connection with our dealings
with government representatives.
As part of our updated suite of policies
we designed new disclosure procedures
for conflicts of interests and hospitality.
A key decision was made to adopt a
no-gifts policy across all operations.
Our first Global Compliance Awareness
campaign took place across the business
during a full week in November to highlight
the importance of acting with integrity.
We had daily messages, visual aids and videos
by members of the Board and Executive
Committee, setting the tone at the top,
demonstrating their commitment and
support, and emphasizing the links between
compliance, the company, and the world
in which we operate.
We made use of various channels of
communication and had very positive
feedback from our employees.
As part of the Global Compliance Awareness
week, there was a day dedicated to the
Millicom Ethics Line through a Speak Up
campaign. This was supported by the updated
Speak Up policy that we launched alongside
the other updated compliance policies and
the additional resources provided by the
Global Compliance Investigation team.
We ran our annual refresher training on the
Code of Conduct (the Code) and anti-
corruption principles, which cover a wide range
of risk-based topics and examples. The
training is linked to our annual bonus scheme
and acts as a gateway to bonus eligibility.
Our minimum acceptable goal is to reach at
least a 90% completion rate as the threshold.
The overall completion rate was 96% for 2017
as compared to 92% last year.
In 2018, efforts will focus on continued quality
in the three pillars of Prevent, Detect and
Respond and on moving the needle from
compliance to ethics with emphasis on
behavior, culture, training and communication.
Strengthening anti-money
Laundering Controls
In 2017, the global Anti-Money Laundering
(AML) team was expanded when we
introduced regional AML managers in
Africa and Latam, as well as a new global
AML director. This has enabled us to continue
identifying and mitigating risk, as well
as establishing specific plans to improve
our processes.
Throughout the year, we conducted
independent, external AML assessments
in three of our Latam operations using
an external auditor. These assessments
provided us with an additional view of
new opportunities for improvement in
the AML area of these operations.
New controls are being implemented across
the operations following these assessments.
Through these practices, we seek to ensure
compliance with local AML regulatory
requirements and internal policies. We strive
to align our approach to AML with our Mobile
Financial Services (MFS), and its capability for
life-changing financial inclusion, so that it
remains a powerful tool for progress.
What we learned this year
Having significantly diversified the capabilities
and specialization of our global compliance
team, we became more aware of the dynamic
nature of an integrity culture.
Our business is constantly changing, and we
need to ensure our compliance framework is
more agile in order to adapt and evolve our
practices at the same pace as the business.
With a compliance officer in each of our
operations, the compliance team will play
a key role in effectively anticipating and
tackling compliance in a relevant, timely
and effective manner.
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Key
Completed/achieved
In progress
Millicom has a set of indicators that monitor maturity and progress of the compliance program on a quarterly and annual basis.
These indicators are shared with the Corporate Compliance Committee (Executive Committee) and the Compliance and Business Conduct
Committee (Board of Directors) of the Millicom Board. We believe that continuous training, reviews of conflict of interest disclosures and
detecting and responding to potential concerns or breaches of laws and our policies are key to maintaining a healthy compliance program.
It is equally important that we transparently share prudent information about such indicators with our external stakeholders.
In the table below we have listed the results for 2017 in these three key areas.
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.
KPI
2016 value
2017 value
2017 target
Status
% of employees who acknowledged
the Code
% of employees who have completed
the Code training
81
92
% of procurement staff trained on ABAC
44
% of senior managers trained on ABAC
% of employees who filled and signed
the conflict of interest declaration form
Number of cases of unethical behavior
reported and investigated
Investigations resulting in
written warning
Investigations resulting in
termination of employee contract
% revenue from MFS represented by
operations audited for AML controls
65
74
97
6
18
83
% of operations (where) we conducted
a compliance risk assessment or audit
new KPI
for 2017
Turnover of procurement staff (%)
14
961
962
96
983
90.5
1644
6
58
275
45
17
All employees to acknowledge the Code
90% of employees to complete the Code
and ABAC training
Incorporate elements of the Code and
ABAC training into onboarding training
Incorporate elements of the Code and
ABAC training into onboarding training
All employees to complete and sign the
conflict of interest declaration form
Continue strengthening the global
investigations process
Run a communication campaign around
Millicom Ethics Line
90% completion rate on the Code
and ABAC trainings, which feature
guidelines on how to raise concerns and
non-retaliation policies for all good-faith
reports of wrong-doing.
Conduct audits in each market in a
three-year cycle
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 The percentages of employees who acknowledged the Code and who have completed the Code training are the same as both were done simultaneously for 2017.
2
In the framework of the 2017 Global Compliance Awareness Week, held in November 2017, acknowledgment of the Code was simultaneous with the training, hence the identical
percentages. Employees are required to complete a training session on both the Code and Anti-Bribery and Anti-Corruption at least once a year. The Corporate Offices’ training completion
rate excludes employees on long-term leave.
3 Training completion is a bonus gateway, therefore training completion was a clearly communicated goal for all employees.
4
Incidents reported through Millicom Ethics Line, Linea Etica TigoUne and Linea Etica Tigo Guatemala. Incidents reported through Linea Etica Tigo Guatemala are included as of 2017. In
addition to the inclusion of the incidents reported through Línea Ética Tigo Guatemala, the increase in incident count can be attributed to the efforts placed in promoting the Ethics lines.
In 2017, our operations Bolivia, Honduras, El Salvador and Paraguay were subject to external assessments on their AML controls.
5
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Corporate responsibility performance –
continued
Overview of cases reported to Millicom Ethics Line1
Bribery and corruption
KPI
Number of cases reported and investigated
Cases resulting in written warning
Cases resulting in termination
Discrimination and harassment
KPI
Number of cases reported and investigated
Cases resulting in written warning
Cases resulting in termination
Human rights and labor
KPI
Number of cases reported and investigated
Cases resulting in written warning
Cases resulting in termination
Conflict of interest
KPI
Number of cases reported and investigated
Cases resulting in written warning
Cases resulting in termination
Fraud
KPI
Number of cases reported and investigated
Cases resulting in written warning
Cases resulting in termination
Other
KPI
Number of cases reported and investigated
Cases resulting in written warning
Cases resulting in termination
2016 value
2017 value
8
0
1
7
0
0
2016 value
2017 value
12
0
0
12
0
0
2016 value
2017 value
17
0
0
22
2
0
2016 value
2017 value
14
2
1
7
0
0
2016 value
2017 value
15
1
5
10
0
3
2016 value
2017 value
19
0
2
22
4
1
1
The metric “Cases resulting in written warning or termination” reports number of cases with that outcome; not number of written warning and/or terminations.
One case can include warnings and/or terminations to multiple employees.
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4. Reducing our environmental footprint
Reducing our environmental footprint
holds in it the potential of becoming a
leaner and more innovative business,
while contributing to the protection and
wise use of the natural systems and
resources we depend on.
Reducing our environmental footprint and
becoming a more competitive and productive
operation are far from being unrelated goals.
On the contrary, when the two are paired,
there is greater opportunity for innovative
business solutions that drive success without
compromising responsible environmental
stewardship. During 2017, our greatest areas
of focus have been on improving our energy
efficiency and increasing the reach of our
e-waste program.
Since its launch in 2016, our global efficiency
program HEAT has continued to provide the
framework within which several initiatives
have been deployed, with environmental and
financial benefits.
Our projects are diverse, but they can be
grouped in three main, often overlapping,
categories:
• Technology modernization: we are moving
to more efficient technologies, which have
inherently lower energy consumption,
such as LED lighting;
• Improved programming and planning:
this allows for smarter equipment setup,
which enables energy savings through
adjustments made in consumption to
accommodate real-time demand; and
• Smart architecture: this entails the
reconfiguration of our network layout to
reduce our environmental footprint and
lower the consumption of energy through
more efficient network access.
Electronic waste management program
Given the rapid growth of the industry in
which we operate and the importance of
electronics for all our business areas, we have
an undeniable responsibility of caring for the
end-of-life of these electronics. By partnering
with ethical and committed local e-waste
suppliers, we are effectively protecting natural
resources by reducing the need for extraction
of raw materials, ensuring toxic substances are
not released into the environment and
additionally, we are guarding ourselves
against possible corporate fines imposed for
dumping hazardous waste.
The sum of these initiatives, among others,
have enabled us to maintain our operational
expenses as stable as possible while our
network has almost doubled, keeping the
same or better levels of service. The benefits
of achieving network growth without a
proportional increase of energy consumption
(and its related costs) range from
environmental to financial. This, in turn,
provide our customers with affordable service
and improved coverage.
Furthermore, several of our operations are
implementing projects of varying scales
involving the increase of alternative energy
sources. This not only allows us to reduce
our carbon emissions, but also to achieve
greater coverage, stability and continuity
despite potential outages in the grid or
remote locations.
Data virtualization
Since 2014, and especially in Latam,
we have aggressively adopted
virtualization technology to consolidate
our physical servers (hardware and data
centers). This has resulted in a significant
reduction in the use of electricity and
physical space required, as well as
valuable optimization and operational
efficiency in the countries where this
initiative has been deployed.
The physical waste resulting from this
process is diverted from landfills and
recovered or recycled. By the end of 2017,
we consolidated 836 physical servers
and have migrated 96% of data initially
targeted. In Latam, this initiative
achieved the removal of 4,353,720 kWh
of energy (the average electric power
consumption per capita in our countries
is 959kWh1).
1
World Bank, https://data.worldbank.org/indicator/
EG.USE.ELEC.KH.PC
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Corporate responsibility performance –
continued
Solar reach in Guatemala
During 2017, our Operation in Guatemala
achieved up to 40% reductions in fossil
fuel consumption per site, in 45 sites
currently operating with solar panel
systems and batteries with significant
backup capacity. In most cases, we could
not have provided service had it not been
for the access to that source of energy.
In addition, a total of US$422,000 in
energy related cost savings was captured
through this initiative.
Minimizing electronic waste is a key aspect
of reducing our environmental footprint.
It prevents the accumulation of waste that
may contain hazardous materials and
prevents pollution. In addition, it reduces
natural resource depletion by recovering
valuable materials that would otherwise
end up discarded.
For the period from October 1, 2016 to
September 30, 2017, over 2,496 tonnes of
e-waste were recycled, more than tripling the
amount of the previous reporting period
which, in turn, had more than tripled the
baseline in 2015.
Total weight of e-waste recycled
through our responsible e-waste
management program (tonnes)
2015 179
2016
2017
882
2,496
To be eligible for the e-waste disposal process,
the suppliers that provide us with this service
must meet several criteria. Their score in the
EcoVadis tool1, is used to assess their
sustainability performance, and reflects
whether e-waste is disposed of correctly and
in compliance with applicable local laws.
Ensuring the right framework for
environmental stewardship
In 2017, we focused on updating and
implementing our core Environmental Policy
and Standards enabling us to establish a
clear governance structure to manage our
environmental impact and outline the roles
and responsibilities for each function whilst
protecting the environment.
Our corporate offices were certified to the ISO
14001 management system and all operating
entities have an environmental management
system established, with Honduras and
Paraguay having been certified during 2017.
What we learned this year
We are proud of the progress achieved during
the year in our efforts to consolidate our
efficiency programs and in finding alternative
ways to positively mitigate our impacts. Next
year, we plan to standardize the procedures
across the region and scale some of the pilot
projects launched during the year. There are
many opportunities on which we can
capitalize and we will further explore using
Big Data, Internet of Things (IoT) and
Smart services.
As in other parts of our business, we face
environmental challenges, which affect the
way in which we operate. By making use of
new technologies and innovation, we can help
to better address the environmental issues
affecting our business.
At Millicom we are ready to continue our
mission and build digital highways in a
sustainable manner.
Over three times more
recycled e-waste in
2017 vs 2016.
1 See our Supply Chain chapter, pages 184 to 186.
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New energy-efficient
datacenter in Bogotá,
Colombia
With an investment of $14 million, in 2017
Colombia has inaugurated a new 10,000 sq.
meters. Uptime Institute-certified Tier 3
data center near Bogotá. Cooling is the main
source of energy consumption for data
centers and this one, which uses free-cooling
as primary source of temperature
management, will allow us to remarkably
lower our energy consumption. This
investment in cutting edge technology is
expected to not only significantly reduce the
running costs and environmental footprint,
but also promote the digital economy in
Colombia by offering to individuals and
corporations, IoT, cloud servers, virtual
desktops, big data and analytics services,
among the others).
Tier III Certification of Constructed Facility and Tier III
Certification of Design Documents.
Inauguration of TigoUne’s Titanium
Datacenter in Colombia, in October, 2017
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.
e-waste recycled through responsible waste management program (tonnes)1
KPI
Bolivia
Colombia
Costa Rica
El Salvador
Guatemala
Honduras
Paraguay
Tanzania
1 Program also set up in Ghana and Chad. No values available for these operations.
2016 value
2017 value
206
89
101
267
75
474
77
44.5
162
1,037
3.52
236
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Corporate responsibility performance –
continued
Key
Completed/achieved
In progress
Energy use
Total Energy Consumption/Sources of energy by asset type
KPI
Base station and fixed network sites
Fuel (’000 l)
Energy from fuel (MWh)
Electricity
Our fleet2
Fuel (’000 l)
Energy from fuel (MWh)
Electricity (MWh)
Datacenters and offices3
Fuel (’000 l)3
Energy from fuel (MWh)
Electricity (MWh)
Shops
Fuel (’000 l)
Energy from fuel (MWh)
Electricity (MWh)
2016 value
2017 value
16,474
164,469
464,483
14,7321
147,0731
354,949
9,713
93,202
N/A
4,218
42,084
50,235
268
2,678
17,254
6,335
60,756
N/A
9884
24,0824
55,8855
332
3,312
15,5096
1 Zantel excluded.
2 Fuel consumption for fleet includes gasoline and diesel consumption. Fleet fuel consumption from Guatemala is calculated based on number of vehicles in fleet and distance driven.
3 Many of our data centers are co-located with our offices. Therefore, they often do not have separate meters to enable us to report on data center consumption separately.
4 Fuel consumption and Energy from fuel for offices and datacenters excludes Chad.
5 Electricity consumption for offices and datacenters in El Salvador excluded.
6 Rwanda excluded.
KPI
2016 value
2017 value
2017 target
Status
Total weight of e-waste recycled
through our responsible e-waste
management program
Scope 1 emissions (tonnes CO2e)
Scope 2 emissions (tonnes CO2e)
Scope 3 emissions (tonnes CO2e)
% of operations set up on global
responsible e-waste recycling program
% of operations with controls
systematically applied in line with
the environment policy
822
78,799
118,000
54,541
62
New KPI
for 2017
58,7871
114,8832
NA3
91
100
Tonnes of CO2e emissions
per USD1,000 revenue
0.0314
0.029
Roll out the program in at least 10
operations, accounting for over 75%
Develop and roll out an
implementation manual for the
environment policy and update the
internal control manual accordingly
Quantify emissions savings
achieved through key HEAT initiatives,
including network energy consumption
and logistics
1
2
3
4
Emissions from fuel are calculated using World Resources Institute (2015) GHG Protocol tool for stationary combustion, version 4.1.
Emissions from electricity are calculated using Electricity Emission Factors from IEA, version 2016, except in the cases of Paraguay, Chad and Rwanda, where other official sources were used.
Not included, as we are currently reassessing our methodology for reporting Scope 3 emissions.
For reasons of comparability, we recalculated this indicator excluding Scope 3 emissions. Reported value in Annual Report 2016 (which included Scope 3 emissions) was 0.04 tonnes of CO2e
per USD 1,000 revenue; see Annual Report 2016, page 71.
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5. Diversity
We are encouraged by trends which
demonstrate that we are headed in the right
direction. For instance, between 2016 and
2017, female representation in the Global
Strategic Management Team (our company’s
top 60 positions) increased from 16% to 20%.
Global Strategic Management Team
representation
2017
Female 12
5
5
2
Europe
USA
Ops
Male
Europe
USA
Ops
2016
Female
Europe
USA
Ops
Male
Europe
USA
Ops
48
15
22
11
9
6
2
1
48
17
19
12
Diversity is both a given and a challenge.
We have a rich, multicultural organization
and we strive to continue building a
workplace where our staff’s talent has
an opportunity to flourish regardless –
or, better yet, because of different
perspectives, styles, backgrounds,
generations, religions, genders and
sexual orientation.
At Millicom, we aspire to create an environment
in which we maximize the potential and power
of our team by embracing our differences and
developing passionate people who energize
others with respect. We promote working with
integrity and communicating with transparency
as we drive innovation and accelerate the
growth of our business.
As part of our positive work environment
campaign, we have developed a set of
principles to which we expect every employee
to adhere, including those in the most
senior positions. The campaign seeks to foster
a culture of inclusion where equality is
non-negotiable and where there is no
retaliation but only collaboration,
transparency and dignity for all employees.
The support and development of women
into leadership roles is central to our business
performance and to economic prosperity
everywhere. We know that organizations in
which women thrive increase their profitability
and innovation.
Today, many women still do not have the
same access to technology as men,
particularly in many of the markets where
Tigo operates. Companies cannot afford to
ignore women as potential customers and
need to better understand the impact that
access to technology can have on their lives
and their communities. Technology allows
them to flourish as leaders and entrepreneurs.
This entails having a workforce that is
successful at closing the gap we seek to
address in our communities.
Supporting gender equality
Diversity and inclusion are increasingly
important as we seek to implement innovative
ways to remove barriers that prevent women
from joining and flourishing in the workforce.
We understand this reality and are
implementing initiatives that expand global
awareness and incorporate local insight.
In El Salvador, for example, we are one of 10
companies in the country that have pioneered
an alliance with the Ministry of Labour to
create policies, agreements and practices that
help drive equality in the workplace.
In 2017, both the
percentages of women
in senior management
positions and women
across our employee base
have increased; a positive
trend that has been
ongoing for over four years.
Access to Technology
Tigo understands the impact that access to
technology can have on lives and communities.
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Corporate responsibility performance –
continued
GSMA Connected Women works with partners
to close the gender gap in mobile data and
mobile money usage through inclusive
programs that promote the access to and use
of mobile phones and life-enhancing mobile
services by women in developing markets.
As examples of how we are working on
bringing more women online is the
Connected Women initiative in El Salvador
through which our objective is to train
100,000 women by 2020 in using technology.
Indeed, the success of the program has been
highlighted by one of the country’s leading
supermarket chains which has adopted it to use
in their own community outreach programs.
The Municipality of El Salvador has also
participated with 100 women of their
workforce taking part in the program last year.
In Guatemala, Tigo is working in partnership
with Sheva, an organization dedicated to teach
girls and women on how to use the internet and
mobile tools to improve their lives. They focus
on three areas: entrepreneurship, education
and personal growth. The initiative seeks to
facilitate access to information through mobile
learning workshops as a means to reduce the
digital gender gap by teaching women and girls
how to use and take advantage of existing and
life-changing tools found on mobile technology,
targeting economically active women between
the ages of 16 and 30. Since May 2017, a total
of 10,407 women and girls have been trained in
these workshops.
In 2018, we will continue to expand these
partnerships to include universities and
companies from other industries to reach
more and more women.
What we learned this year
Almost half of those identified as high-
potential employees in our most recent talent
mapping exercise are women. These are the
people from across our network who will drive
the future of our company.
This shows we are well-positioned to continue
advancing towards increasing the percentage
of women in senior positions. We do need to
continue understanding and creating the
conditions for all key talent to thrive and reach
their full potential while continuing to be their
employer of choice.
The business case of diversity is as strong as
ever, and we look forward to bringing forth the
best of everyone that works with us.
Tapping into our potential
It is not just about what we do,
but about who we are.
Training and awareness
We have maintained a focus on creating
greater awareness of our goals regarding
gender diversity, inclusion and unconscious bias
across our senior executives and management
teams through a range of training initiatives,
assessment tools and mentoring.
Tigo El Salvador also signed a number
of agreements with UN Women to raise
awareness about gender equality in
Millicom. Part of this alliance includes the
implementation of a self-assessment survey
to detect actions that help empower women
in their workplace.
Last year, Guatemala was the first country
to implement a one-day workshop focused
on creating more inclusive workspaces. This
workshop was also implemented in Costa Rica
and laid the groundwork for initiatives that
have been shared among our other offices.
Paraguay continues the “Women’s Talent
and Leadership Program”, which has trained
more than 50 women this year alone. The
goal is for women to reach their full potential
through workshops designed to harness their
skills, as well as to provide coaching on
career development.
Bolivia launched a “Women Leadership”
program, in which 25 women participated
in 2017. This is a 12-month intensive training
course for high-potential women in the
organization.
El Salvador launched the “Empoderate”
mentoring program. With the slogan
“Tigo women empowering Tigo women”,
12 women managers have helped to empower
12 female apprentices through a series of
mentoring sessions.
Millicom is also committed to providing
suitable breastfeeding facilities in each of
our main offices in our operations. All our
operations in Latam have dedicated nursing
rooms, to help support new mothers. In Africa,
our Ghana operation has been the first to
enable this facility.
Broadening diversity
We understand that diversity goes well
beyond gender equality so we are also
working on promoting inclusion for people
with disabilities. In Honduras, for example,
we are working closely with organizations
that specialize in rehabilitation to increase
the number of talented people with
disabilities in the Tigo brand.
Tigo Guatemala has also launched a pilot
program to attract people who are visually
and hearing impaired, ensuring they are
fully supported at work.
Connected Women
GSM (Groupe Spéciale Mobile) Association
(GSMA)’s Connected Women Initiative has
continued to inspire our operations to launch
local projects.
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Key
Completed/achieved
In progress
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.
KPI
2016 value
2017 value
2017 target
Status
% of operations with breastfeeding rooms
38
64
% of women in senior management positions 29
33
% of women across our employee base
39
40.3
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
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Corporate responsibility performance –
continued
6. Taking care of our people
We want to hold all our staff and those
of suppliers working with us to the highest
safety standards, as it is only in a safe
workplace that people can function at
their best and prosper.
We are pleased that all operating entities
across Millicom, including corporate offices,
are compliant with the current internal OHSAS
18001 standard1. Seven were externally
certified in 2017, with those remaining in
Central America and Africa due later this year.
We are committed to being a zero-fatality
business. Unfortunately, we had one
employee and nine contracted or managed
service supplier fatalities, ranging from road
traffic accidents (RTA) to falls from heights,
violent crime and one suicide.
Raising awareness about the importance of
proper and timely incident reporting remains
a priority. We have invested in upgrading
our reporting systems to include more data.
This will allow for more accurate and detailed
incident information and, in turn, for more
learning opportunities and effective
prevention measures.
Significant improvements in our Health and
Safety due diligence process have been
completed for our staff and suppliers,
bolstering training and awareness in auditing,
health and safety vetting, site inspections and
more. In 2016, we included the top 20
suppliers across each operating entity in our
specialist training sessions. Last year, our
teams worked with the top five suppliers with
the most significant health and safety and
security risks to carry out a comprehensive
audit of their business to ensure compliance
with our strict requirements. Millicom engaged
Safety Management Systems to conduct
external auditing and support of Chain and
Due Diligence to contracted services.
1
OHSAS 18001 is the globally recognized Health and
Safety Management System.
Engineer on the go in safety passport
training in Tanzania.
Audits where completed in Bolivia, Paraguay,
El Salvador, Costa Rica, Tanzania Tigo and
Zantel and Ghana.
The Health and Safety Committees in our
operations strive to interface across the
workplace to support the implementation of
our core policies and safe working practices.
In addition, they provide vital information to
address underlying risks and concerns
affecting the local workforce.
What we learned this year
The external verification of our OHSAS 18001
standards highlighted several issues about the
management of occupational health across
the company. This resulted in enhancements
in our health awareness campaign messages,
and improved trend analysis to identify
specific levels of absenteeism and their
underlying causes. This will be a major focus
for us in the year ahead.
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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.
KPI1
2016 value
2017 value
2017 target (status)
2018 target
% of operations with controls
systematically applied in line with our
Group health and safety policy
% of operations in line with
OHSAS 18001
% of operations certified against
OHSAS 18001
Number of employee fatalities1
Number of contractor fatalities
Number of health and safety
incidents reported
Lost-time injury rate per 1000 workers
Absentee rate
100
100
100
100
23
46
0
5
12
92
155
3872
1.47
0.68
2.62
0.8
Continue conducting internal audits
to assess compliance with our H&S
policy and internal controls
Achieve OHSAS 18001 certification
for all remaining operations
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
Numbers of employee and contractor fatalities reported for 2017 are aligned with the financial year, same as 2016 numbers reported.
Indicators not included in external assurance as in 2017 we migrated our previous information to a new upgraded version of our Incident Management risk analysis system.
1
2
The upgraded version will allow us to record, investigate and mitigate in greater detail in order to deliver a safer workplace and environment for all our staff, managed services and customers.
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Corporate responsibility performance –
continued
7. Responsible supply chain
management
Corporate responsibility training for suppliers
In 2017, we launched a successful Corporate
Responsibility Training program. The training,
which covered topics such as Child Rights,
Health and Safety, Anti Bribery and Anti
Corruption (ABAC) and Eco-Efficiency, was
delivered to 121 of our suppliers in Latin
America by a non-profit organization covering
the region (Paraguay, Bolivia, Colombia,
Guatemala, Costa Rica, Honduras and
El Salvador). It included seven workshops,
e-learning, two site visits and a final EcoVadis
assessment, totaling more than 45 hours of
training for each supplier.
Our impacts do not end with our own
behavior, but with that of the partners
we do business with. Therefore, we need
to be aware of our suppliers’ ethical,
social and environmental performance
and work with them to ensure they have
values aligned with ours.
In 2017, our sustainable procurement journey
focused on capitalizing on the achievements
of the past three years, with the
establishment of Supplier Code of Conduct
signature from our suppliers as a mandatory
requirement, strengthening participation of
our suppliers considered high-risk in the
EcoVadis rating solution1 and development of
procurement teams’ awareness on
responsible supply chain benefits.
On supplier Code of Conduct, all our operations
have strongly developed management and
monitoring of signatures and refusal, with the
support of our New Internal Control targets
and the Global supplier due diligence program.
Also, at a global level, we have clarified the
content to make it more understandable to
suppliers and align with new corruption and
anti-bribery policies.
Regarding EcoVadis coverage, we achieved
as end of 2017-Q3 (excluding Corporate
Responsibility Training):
• 9% increase of companies invited
compared to the total number of supplier
invited since 2015,
• 2% of invitations converted in a score,
• 7% of scores above the minimum threshold
set by the Group.
With the aim to continuously monitor and
support our current suppliers to align with
our business values, we have enhanced our
Supply Chain Relationship management
practices, by integrating sustainable
procurement criteria as part of our Business
Review Meetings (BRMs) with our top
20 suppliers. Using Ecovadis as a reference,
during the BRM suppliers are requested to
either take the assessment for the first time,
or to re-assess to evaluate improvements in
score. Furthermore, we launched a new
global supplier due diligence program, which
integrates industry-specific CR risks as part
of supplier pre-qualification and identifies
mitigation actions
1
The EcoVadis online rating solution helps businesses
to reduce risks and drive performance and innovation
in their supply chain.
Closing of supplier training in Paraguay
with participants and local Supply Chain
and Corporate Responsibility teams.
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Thanks to Tigo’s initiative, our company now has
another point of view regarding social responsibility;
considering that before it was not as relevant for us,
we now understand the importance of all the social
aspects that promote the sustainable growth our
company wants to have. Being part of these workshops
has left us interested in further understanding more
of what it means to be a socially responsible company.
I thank Tigo for making us part of this.”
Roberto Moran
Country Manager, Resuelva de Honduras SA (supplier of callcenter services for Tigo Honduras),
who participated in the supplier training program
Cross functional collaboration
with Compliance
With the expertise and guidance of the
Compliance department, we ran one and
two-day workshops on third-party
management, our updated third party
duediligence process and new platform.
The training was in the form of a classroom
session with the Africa, Latam and corporate
Supply Chain teams.
The Latam session was held in our offices in
El Salvador and the Africa session including
Corporate staff members was held off-site
in the United Arab Emirates. The sessions
were attended by between one and five staff
members from each local operation and
regional/global Compliance and Supply
Chain teams.
What we learned this year
Our supplier Corporate Responsibility Training
was a remarkable success. It was a first of its
kind in the telecommunications industry in
Latam and, building on this success, our
procurement teams will work on growing the
numbers of participants this year.
This year has been a milestone for Millicom’s
sustainable procurement initiatives. Our
Supplier Code of Conduct coverage was
extended efficiently and set as a business
pre-requisite for all new suppliers.
CR training in Latin America facilitated higher
awareness in our procurement teams and
amongst our supplier base, highlighting the
importance of building business partnerships
with a sustainability approach.
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Key
Completed/achieved
In progress
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 corporate responsibility-related risks.
KPI
2016 value
2017 value
2017 target
Status
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)
Number of CAPs requested from suppliers
by EcoVadis categories
Environmental
Labor rights
Fair business practices
Sustainable procurement
% of strategic suppliers who signed the
supplier code
% of all suppliers who have signed the
supplier code
% of spend represented by suppliers who
completed assessments on EcoVadis
to date
% of procurement teams trained on
responsible supply chain management
221
100
38
2
35
108
73
44
79
36
48
79
321
68
42
47
58
127
88
63
89%
61%1
47.3
96%2
Number of suppliers trained on Millicom's
corporate responsibility strategy and
requirements
New KPI
for 2017
121
Expand reporting to % of suppliers
who refuse to sign the Code and how
we manage those cases, in line with
our Supplier Code Guidelines
Expand reporting to % of suppliers
who refuse to sign the Code and how
we manage those cases, in line with
our Supplier Code Guidelines
Increase response rate to EcoVadis
assessment requests
Continue to provide training to
procurement staff on implementing
and following corrective action plans
on EcoVadis3
Identify a training partner that
specializes in corporate responsibility
and jointly roll out training to suppliers
across Latam3
1 Guatemala’s information excluded from this percentage, as a different definition was applied to calculate the indicator locally.
2 Procurement teams training focused on Anti-Bribery, Anti-Corruption (ABAC) in 2017, as reported in the Compliance section (page 173).
3 This target was addressed through the inclusion of the Ecovadis requirements explicitly included in Business Review Meetings (page 184).
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8. Social investment
• Through education and volunteer programs,
Tigo Guatemala worked with the Ministry
of Education to help build and remodel
21 schools and equip them with digital
classrooms. 306 computers and 236 water
eco-filters were donated, which benefited
over 5,630 children and 250 teachers.
• Tigo Tanzania has selected 50 secondary
schools to launch its e-schools’ projects
across the country, as part of its initiative
to digitize secondary education by providing
digital learning materials. In 2016,
Tigo partnered with the Ministry of
Communications, Works and Infrastructure
to facilitate a two-year program which rolls
out internet access points in the country’s
secondary schools. This complemented the
government’s e-schools project.
Corporate volunteering
Through our “Crianza Tecnológica” program,
we have trained volunteers to become trainers
themselves, showing adults how to raise their
children safely in an online world, our first
audience being teachers. So far, we have
trained over 500 teachers in Latam, and have
created a condensed course for all employees
to understand the risks children are exposed to
by being online as well as all the opportunities
for development.
As we transition towards a more strategic
approach to corporate volunteering, the
number of volunteering hours has decreased.
Seizing opportunities to make a difference by
doing what we do best is at the core of
Millicom’s Responsible Leadership strategy,
and we will continue to encourage employees
to become agents of positive change through
an increasingly focused framework.
Our goal is to align our social investment
activities with our core business strategy.
To that end, our activities are focused on
supporting digital and financial inclusion,
education and entrepreneurship, Child
Online Protection, and gender diversity.
In Latam, we have been particularly active in
promoting child online protection (as detailed
on pages 169-170 and facilitating dialogue on
this topic across our industry.
As part of the ICT Alliance for the Americas,
we have committed to connect 2,100 schools
and public institutions in Latin America by
2030, and to launch training programs for
teachers and parents around COP. Driven by
the Organization of American States, the ICT
Alliance for the Americas aims to provide not
only connectivity but also educational
programs to children and teachers about the
use of technology, and connecting safely.
We have made satisfactory progress on this
commitment to connecting schools, thanks
in part to our collaboration with governments
and NGOs.
• In May, Tigo Honduras, in partnership
with CONATEL, the National Commission
of Telecommunications, launched a free
internet service in 28 learning centers,
benefiting approximately 11,500 students.
• El Salvador connected 19,000 students
and 329 public schools in cooperation
with USAID and the Ministry of Education
through portable modems. This allows
teachers to research and plan lessons,
students to access information online,
and faculties to communicate more
effectively with each other.
Volunteers at work: teaching digital literacy
skills to children with disabilities in Sucre, Bolivia
Millicom Annual Report 2017
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Corporate responsibility performance –
continued
Key
Completed/achieved
In progress
Five years supporting entrepreneurs
in Africa
Millicom and Reach for Change have
partnered in Africa for the past five years,
helping hundreds of communities and
children alike.
Through the Accelerator and Incubator
programs run by Reach for Change and
funded by Millicom, a total of 194 social
entrepreneurs with innovative ideas
received coaching and business advice
that have allowed them to scale their
ventures and provide sustainable social
impact for children.
You can read the Reach for Change social
impact report here.
What we learned this year
We see great potential in aligning our
core CR initiatives with the United Nations
Sustainable Development Goals (SDGs) to
help reduce poverty and help people prosper,
especially in emerging markets.
In 2018, we will place a particular focus
on helping to achieve gender equality
and to empower all women and girls
(Sustainable Development Goal 5)
both inside our organization and by
promoting digital inclusion in our markets.
We will also strengthen the means of
implementation and revitalize the global
partnership for sustainable development
(Sustainable Development Goal 17)
by continuing to foster partnerships that
enhance and broaden the impact of
our programs.
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.
KPI
2016 value
2017 value
2017 target
Status
Monetary value of employee volunteering
(US$ ’000)
237
170
Continue social investment through
cash and in-kind contributions
Total cash contributions (US$ ’000)
4,921
3,203
In-kind giving (US$ ’000, at cost)
2,420
6,399
Schools and public institutions
connected to the Internet
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
1,061
1,259
375
20
322
467.6
73.8
53 1
Continue social investment through
cash and in-kind contributions
Continue social investment through
cash and in-kind contributions
Additional 100 schools connected
in Latam
Additional 50000 students connected
Increase to 25%
Focus on increasing the social impact
of entrepreneurs winning the award
to date
Number of volunteering hours
21,915
14,841
Increase volunteering hours by 15%
1
In 2017 we did not issue a Tigo Digital Changemakers Award, hence the difference in entrepreneurs supported for the year.
188
Millicom Annual Report 2017
Designed by
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www.fhflondon.co.uk
For further information please contact:
investors@millicom.com
millicom.com