TIGO

Business Context and Reporting Period

Company: Millicom International Cellular S.A.
Reporting Period: Fiscal year ended December 31, 2011
Accounting Basis: International Financial Reporting Standards (IFRS)
Operations: Global mobile and fixed telephony, cable, and broadband services in 13 countries across Central America, South America, and Africa. The company operates under the "Tigo" brand in most markets.

Key Financial Metrics (2011)

Note: All figures in thousands of U.S. dollars unless otherwise noted. 2010 figures are restated due to accounting corrections detailed below.

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased 16% year-over-year, driven by a 12% growth in the mobile customer base (reaching 43.1 million customers) and increased uptake of Value Added Services (VAS), which represented 28.5% of recurring revenues.
• Profit Decline: Net profit attributable to equity holders decreased 43% to $925 million. This decline is primarily due to the absence of a $1.06 billion non-recurring gain in 2010 related to the revaluation of previously held interests in Honduras (Celtel and Navega).
• Restatement of 2010 Results: The company restated its 2010 financials to recognize a $769 million liability for a put option granted to a local partner in Honduras. This adjustment reduced 2010 net profit by approximately $32 million and reduced equity by $769 million.
• Discontinued Operations: The company completed the sale of its Laos operation in March 2011, recognizing a net gain of $37 million. Operations in Sri Lanka, Sierra Leone, and Cambodia were sold in 2009.
• Asset Monetization: Significant tower sale-and-leaseback transactions were completed in Ghana, Tanzania, DRC, and Colombia to reduce capital expenditure and operating costs.

Guidance, Outlook, and Risks

• Strategic Focus: Management is shifting focus from pure voice growth to data, entertainment, solutions, and mobile financial services. The company aims to stabilize Average Revenue Per User (ARPU) through VAS while managing voice ARPU erosion.
• Capital Allocation: In 2011, the company returned approximately $1 billion to shareholders via dividends ($494 million) and share buybacks ($498 million). A new $300 million buyback program was approved for 2012.
• Key Risks:
  • Regulatory & Political: Operations in emerging markets face risks of license revocation, tariff reductions, and increased taxation. A significant ongoing arbitration exists with the Senegalese government regarding the validity of the Sentel license.
  • Currency: Significant exposure to foreign exchange fluctuations, particularly in African and Latin American currencies against the U.S. dollar. The company incurred a net exchange loss of $26 million in 2011.
  • Competition: Intense price competition and the entry of new competitors in key markets.

Investor Verification Checklist

• Restatement Impact: Verify the full impact of the 2010 restatement regarding the Honduras put option liability on current leverage ratios and equity.
• Senegal Arbitration: Monitor the status of the ICSID arbitration against the Senegalese government, as the outcome could materially affect the Senegal operation's license and financials.
• Debt Maturity: Review the maturity profile of the $2.4 billion debt, noting that 52% is denominated in local currencies and 48% in U.S. dollars.
• Customer Churn: Assess churn rates, particularly in mature Latin American markets where penetration is high, versus growth markets in Africa.
• Tower Leasebacks: Confirm the operational impact and cost savings from the completed tower sale-and-leaseback agreements in Africa and Colombia.