TIGO

Business Context and Reporting Period

Company: Millicom International Cellular S.A.
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2009
Accounting Standards: International Financial Reporting Standards (IFRS)
Business Overview: Millicom is a global telecommunications group operating mobile telephony in 14 emerging markets across Central America, South America, Africa, and Asia. It also operates cable, broadband, and fixed telephony services in Central America through its Amnet subsidiary. The company focuses on a low-cost, prepaid strategy under the "tigo" brand.

Key Financial Metrics (Year Ended Dec 31, 2009)

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased 7% to $3.37 billion, driven by a 22% increase in the total mobile customer base to 33.9 million. Excluding currency effects, revenue grew 10%.
• Profit Surge: Net profit attributable to equity holders rose 64% to $851 million. This significant increase was largely driven by a $289 million net gain from the disposal of discontinued operations (Sri Lanka, Sierra Leone, and Cambodia).
• Discontinued Operations: The company completed the sale of its operations in Sri Lanka, Sierra Leone, and Cambodia in late 2009. The Laos operation was classified as held for sale.
• Customer Growth: Africa was the strongest growth region with a 35% increase in customers, led by Chad (88% growth) and Tanzania (73% growth). Central America revenue declined 5% due to reduced remittances from the US and new taxes on international traffic.
• Cost Structure: General and administrative expenses increased 22% due to network maintenance and staff costs. Interest expense rose 28% to $173 million.
• Liquidity Improvement: Cash and cash equivalents more than doubled to $1.51 billion, reducing net debt from $1.48 billion to $0.72 billion.

Guidance, Outlook, and Risks

Management Commentary and Outlook

• Strategy: Management continues to focus on the "Triple A" strategy: Affordability, Accessibility, and Availability. The focus for 2010 is on increasing customer penetration and usage rather than extensive new coverage roll-outs.
• Innovation: Value-added services (VAS) now account for 21% of recurring revenues. The company plans to launch mobile payment services and advanced SMS services.
• Dividends: The Board proposed a regular annual dividend policy of not less than 25% of annual net income, with a minimum of $1.20 per share. A dividend of $1.40 per share for 2009 was proposed for shareholder approval.
• Capital Expenditure: Capex is expected to focus on the new Rwanda operation and rolling out the tigo brand across Africa.

Risks and Contingencies

• Regulatory/Litigation: A significant dispute exists with the Government of Senegal regarding the validity of the Sentel license. Arbitration proceedings were initiated in 2008, and local court proceedings were filed by the government in 2009. Millicom believes the government's actions are baseless.
• Political Instability: Operations in Chad, DRC, and Bolivia face risks related to political instability, civil unrest, and potential nationalization or increased taxation.
• Foreign Exchange: The company faces significant currency risk as it reports in USD but earns revenue in local currencies. A net exchange loss of $32 million was recorded in 2009.
• Competition: Intense price competition and the entry of new operators in various markets could pressure margins and market share.

Key Facts for Investor Verification

• Disposal Gains: Verify the sustainability of the 2009 net profit, which includes a one-time $289 million gain from asset sales. Profit from continuing operations was $504 million.
• Senegal License Dispute: Monitor the status of the arbitration and local court proceedings in Senegal, as a loss of the license would materially impact the African segment.
• Debt Maturity: Review the maturity profile of the $2.35 billion total debt, noting that $434 million is due within one year.
• Remittance Sensitivity: Assess the impact of US economic conditions on Central American revenues, which are heavily dependent on remittances.
• Dividend Policy: Confirm the approval of the new dividend policy and the $1.40 per share payout at the upcoming Annual General Meeting.