20-F 1 a2191853z20-f.htm 20-F

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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)    

o

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ý

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

OR

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

o

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

000-22828 Commission file number

MILLICOM INTERNATIONAL CELLULAR S.A.

(Exact name of Registrant as specified in its charter)

GRAND-DUCHY OF LUXEMBOURG

(Jurisdiction of incorporation or organization)

15 Rue Léon Laval, L-3372 Leudelange Grand-Duchy of Luxembourg

(Address of principal executive offices)

Francois Xavier Roger, T: +352 27759 114    E: francois.roger@millicom.com

(Name, Telephone, E-mail address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12 (b) of the Act: None
Securities registered or to be registered pursuant to Section 12 (g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Common Stock, par value $1.50 per share

         Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

108,297,507 shares of Common Stock as of December 31, 2008

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o

         If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o    No ý

         Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o

         If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

         Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

         o    U.S. GAAP    ý    International Financial Reporting Standards as issued by the International Accounting Standards Board    o    Other

         If 'Other' has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 o    Item 18 o


Table of Contents


TABLE OF CONTENTS

 
   
  Page  

FORWARD-LOOKING STATEMENTS

    2  

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

    3  

PART I

    4  
 

ITEM 1.

 

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

    4  
 

ITEM 2.

 

OFFER STATISTICS AND EXPECTED TIMETABLE

    4  
 

ITEM 3.

 

KEY INFORMATION

    4  
 

ITEM 4.

 

INFORMATION ON THE COMPANY

    16  
 

ITEM 4A

 

UNRESOLVED STAFF COMMENTS

    54  
 

ITEM 5.

 

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

    54  
 

ITEM 6.

 

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

    84  
 

ITEM 7.

 

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

    94  
 

ITEM 8.

 

FINANCIAL INFORMATION

    95  
 

ITEM 9.

 

THE OFFER AND LISTING

    96  
 

ITEM 10.

 

ADDITIONAL INFORMATION

    97  
 

ITEM 11.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

    106  
 

ITEM 12.

 

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

    107  

PART II

    108  
 

ITEM 13.

 

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

    108  
 

ITEM 14.

 

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

    108  
 

ITEM 15.

 

CONTROLS AND PROCEDURES

    108  
 

ITEM 16A.

 

AUDIT COMMITTEE FINANCIAL EXPERT

    108  
 

ITEM 16B.

 

CODE OF ETHICS

    109  
 

ITEM 16C.

 

PRINCIPAL ACCOUNTANT FEES AND SERVICES

    109  
 

ITEM 16D.

 

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

    109  
 

ITEM 16E.

 

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES

    109  
 

ITEM 16F.

 

CHANGE IN CERTIFYING ACCOUNTANT

    109  
 

ITEM 16G.

 

SIGNIFICANT DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES

    109  

PART III

    110  
 

ITEM 17.

 

FINANCIAL STATEMENTS

    110  
 

ITEM 18.

 

FINANCIAL STATEMENTS

    110  
 

ITEM 19.

 

EXHIBITS

    110  

Table of Contents


FORWARD-LOOKING STATEMENTS

        Certain of the statements made in this document may be considered to be "forward-looking statements" as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995, such as statements that include the words "expect", "estimate", "believe", "project", "anticipate", "should", "intend", "probability", "risk", "may", "target", "goal", "objective" and similar expressions or variations on such expressions. These statements appear in a number of places throughout the document including, but not exclusively, "Information on the Company", and "Operating and Financial Review and Prospects". These statements concern, among other things, trends affecting the Company's financial condition or results of operations, capital expenditure plans, the potential for growth and competition in areas of the Company's business, the potential for new agreements or extensions of existing agreements to be signed with business partners or governmental entities or licenses to be granted by governmental authorities, and the supervision and regulation of the telecommunications' markets. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties; actual results may differ materially as a result of various factors.

        These factors include, but are not limited to:

    general economic conditions, government and regulatory policies and business conditions in the markets served by the Company and its affiliates;

    telecommunications usage levels, including traffic and customer growth;

    competitive forces, including pricing pressures, technological developments and the ability of the Company to retain market share in the face of competition from existing and new market entrants;

    regulatory developments and changes, including with respect to the level of tariffs, the terms of interconnection, customer access and international settlement arrangements, and the outcome of litigation related to regulation;

    the success of business, operating and financing initiatives, the level and timing of the growth and profitability of new initiatives, start-up costs associated with entering new markets, costs of handsets and other equipment, the successful deployment of new systems and applications to support new initiatives, and local conditions; and

    the availability, terms and use of capital, the impact of regulatory and competitive developments on capital outlays, the ability to achieve cost savings and realize productivity improvements, and the success of the Company's investments, operations and alliances.

        Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of filing hereof with the U.S. Securities and Exchange Commission. Millicom International Cellular S.A. undertakes no obligation to release publicly the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof, including, without limitation, changes in Millicom International Cellular S.A.'s business or acquisition strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

        Unless the context otherwise requires, the term the "Company" refers only to Millicom International Cellular S.A., a stock corporation organized under the laws of the Grand-Duchy of Luxembourg, and the term the "Group", "Millicom", "we", "us" or "our" refers to Millicom and its subsidiaries, joint ventures and affiliates. Unless the context otherwise requires, when used herein with respect to a licensed area, "persons", "population" and "pops" are interchangeable and refer to the aggregate number of persons located in such licensed area and "equity pops" refers to the number of such persons in a licensed area multiplied by the Group's ownership interest in the licenses for such licensed area. The term "Attributable Subscribers" refers to 100% of subscribers in the Group's subsidiaries and the Group's percentage ownership of subscribers in each joint venture. Persons, population and pops data for 2008, 2007and 2006 have been extracted from the "CIA—The World Factbook" for 2008 for countries where the license area covers the entire country. In addition, information on the countries in which Millicom operates has been extracted from the "CIA—The World Factbook" for 2008 with updates, where appropriate, from the U.S. Department of State's website. Unless otherwise indicated, all financial data and discussions thereon in this annual report are based upon financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and subscriber figures represent the total number of mobile subscribers of systems in which the Group has an ownership interest. In this report, references to "dollars" or "$" are to U.S. dollars, references to "SEK" are to Swedish krona and references to "Euro" or "€" are to the Euro.

        As a foreign private issuer, the Company is exempt from the proxy rules of Section 14 under the Securities Act of 1934, as amended (the "Exchange Act"), and the reporting requirements of Section 16 under the Exchange Act.

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PART I

ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

        Not applicable for Annual Reporting filing.

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE

        Not applicable for Annual Reporting filing.

ITEM 3.    KEY INFORMATION

Selected Financial Information

        The Group reports under International Financial Reporting Standards, as adopted by the European Union ("IFRS"), with no difference for the Group to IFRS as issued by the International Accounting Standards Board.

        The following table sets forth summary financial data of the Group as of and for the years ended December 31, 2008, 2007, 2006, 2005, and 2004. The data are based upon the Group's audited consolidated balance sheets as of December 31, 2008, 2007, 2006, 2005 and 2004 and audited consolidated statements of profit and loss for the years then ended. The following information is qualified in its entirety by, and should be read in conjunction with, such statements.

        Unless otherwise indicated all financial data and discussions in this document are based upon financial statements prepared in accordance with IFRS.


SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

 
  Year Ended December 31,  
 
  2008   2007   2006   2005   2004  
 
  (in thousands of U.S. dollars, except per share data)
 

Profit and Loss Statement Data:

                     

Revenues

  3,412,380   2,623,854   1,570,086   912,438   654,898  

Operating profit

  867,283   671,703   447,958   275,476   173,596  

Profit for the period from continuing operations(1)

  426,838   465,086   246,582   104,590   29,414  

Net profit attributable to equity holders for the period

  517,516   697,142   168,947   10,277   65,891  

Basic earnings (loss) from continuing operations per common share

  $5.01   $4.46   $2.55   $1.00   $0.32  

Basic earnings (loss) per common share

  $4.80   $6.90   $1.68   $0.10   $0.79  

Weighted average number of shares in basic computation (in thousands)(2)

  107,869   101,088   100,361   98,803   83,335  

Diluted earnings (loss) from continuing operations per common share

  $4.98   $4.33   $2.52   $0.98   $0.30  

Diluted earnings (loss) per common share

  $4.77   $6.61   $1.67   $0.10   $0.73  

Weighted average number of shares in diluted computation (in thousands)(2)

  108,646   108,047   101,371   99,921   90,312  

Dividends per share

  $2.40          

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  As of December 31,  
 
  2008   2007   2006   2005   2004  
 
  (in thousands of U.S. dollars)
 

Balance Sheet Data:

                               

Property, plant and equipment, net

    2,787,224     2,066,122     1,267,159     671,774     575,649  

Intangible assets, net

    990,350     467,502     482,775     373,487     317,968  

Financial assets at fair value through profit or loss

                327,803     397,137  

Investments in associates(3)

    21,087     11,234     6,838     5,367     2,220  

Total assets

    5,220,808     4,413,826     3,320,994     2,559,656     2,046,213  

Current liabilities

    1,749,079     2,002,269     901,851     909,008     505,884  

Non-current liabilities

    1,812,554     1,043,221     1,442,716     1,070,140     1,259,892  

Minority interest

    (25,841 )   80,429     77,514     34,179     43,351  

Shareholders' equity

    1,677,918     1,287,907     504,874     299,605     237,086  

 

 
  As of and for Year Ended December 31,  
 
  2008   2007   2006   2005   2004  

Operating Data (unaudited)(4):

                               

Total Subscribers:

                               
 

Prepaid

    30,637,947     22,253,850     14,027,264     7,008,271     4,381,226  
 

Postpaid

    1,406,005     996,686     876,126     473,388     432,978  

Monthly churn (%)(5):

                               
 

Prepaid

    6.2     3.7     4.7     4.3     4.4  
 

Postpaid

    1.5     1.2     1.4     1.7     1.7  


(1)
Excludes Millicom Sierra Leone Limited classified as a discontinued operation in December 2008, Limited, Paktel Limited divested in 2007, Millicom Peru S.A.and Pakcom Limited, both divested in 2006 and Comvik International (Vietnam) A.B., the company that was a party to the Business Cooperation Contract in Vietnam that expired in May 2005; MIC Systems; Liberty Broadband Limited (formerly Tele2 (UK)); and Celcaribe S.A. have been shown as discontinued operations. A more complete description of discontinued operations is contained in Notes 7 of the "Notes to the Consolidated Financial Statements".

(2)
The average number of shares, which is calculated on a weighted average basis, does not include shares held by us that have no voting, dividend or other rights. These shares have been allocated to holders of share options upon the exercise of some of their share options. There were no treasury shares as of December 31, 2008.

(3)
Investments in associates under IFRS mainly represented Navega.com S.A. and its subsidiaries. See "Operating and Financial Review and Prospects—Results of Operations".

(4)
Operating data excludes discontinued operations.

(5)
We calculate churn rates by dividing the number of subscribers whose service is disconnected during a period, whether voluntarily or involuntarily (such as when a subscriber fails to pay a bill) by the average number of subscribers during the period. We believe that we apply conservative policies in calculating subscriber totals and the related churn rates. For example, Millicom counts a customer as a "subscriber" only when the customer has made a revenue-generating call within a 60-day period. Other operators with whom we compete generally use less restrictive definitions, such as labeling a "subscriber" a customer who has made a revenue-generating call within a 90- or 120-day period. Our conservative definitions may result in different churn rates and market share figures than if we used criteria employed by some other operators in calculating subscriber churn and market share.

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RISK FACTORS

        In addition to the other information contained in this Annual Report, investors should carefully consider the risks described below. Our financial condition or results of operations could be significantly affected by any of these risks.

        The following discussion contains a number of forward-looking statements. Please refer to the "Forward-Looking Statements" discussion at the front of this Annual Report for cautionary information.

         An economic downturn, a substantial slowdown in economic growth or deterioration in consumer spending could adversely affect our operating results and financial condition.

        In 2008, our business has been impacted by the general worldwide economic crisis and its effects will continue to impact our results in 2009, as the economic outlook for the next year has worsened significantly and the global economic recession appears set to continue for some time. Some recent events affected negatively the economies of the countries where we operate and could possibly impact our businesses: decline of remittances from the United States (affecting Central America), raw material price decrease (affecting Chad, Paraguay, DRC, Ghana) and less international tourism (impacting Senegal, Mauritius, Cambodia and Tanzania).

        In addition, further deterioration in the economic environment could have an adverse effect on the level of demand by our individual customers for our products and services. This could also impact the attainment of our growth targets, such as those relating to mobile telecommunications, or those relating to broadband products and services.

Risks Relating to our Business

Emerging Markets Risks

         Many of the countries that we operate in have had a history of political instability and any current or future instability may negatively affect our revenues or ability to conduct our business locally.

        We offer mobile telephony services in 16 emerging markets in Central and South America, Africa and Asia. Many of the countries in which we operate are considered to be emerging economies and, therefore, can be subject to greater political and economic risk than developed countries. The governments of these 16 countries differ widely with respect to type of government, constitution, and stability. Many of these 16 countries lack mature legal and regulatory systems. Some of the countries in which we operate, particularly Chad and Sri Lanka, suffer from political instability, civil unrest, or war-like actions by anti-government insurgent groups. These problems may continue or worsen, potentially resulting in civil war in these countries. Other countries in which we operate have only recently emerged from civil war and are attempting to rebuild their economies and governments, such as Sierra Leone and the Democratic Republic of Congo.

        As a result of the above, we face several risks, ranging from the risk that our networks may be disrupted to the risk that we may have to evacuate some or all of our key staff from certain countries, in which case there is no guarantee that we would be able to continue to conduct our local business as previously. Any of these events would adversely impact our revenues or results of operations.

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         Most of the countries in which we operate have weak legal and telecommunications regulatory regimes compared to those in developed countries and this creates risks for our operations.

        In order for our operations to provide mobile services, they must receive a license from the government of the country in which they operate. Our ability to operate is therefore dependent on the licenses granted by the government of each country. These licenses generally allow our companies to operate for a number of years, after which they are subject to renewal. To the extent that our operations depend on governmental approval and regulatory decisions, our local business may be adversely affected by changes in the political structure or by actions or decisions of specific government representatives in the relevant market. It is possible that a government could decide arbitrarily to revoke a license or impose new conditions that we do not agree with and may not get consulted about in advance. We may not always have access to efficient avenues for appeal and may have to accept arbitrary conditions imposed upon us. This could adversely impact our business and our revenues. Our favored recourse is often to the legal system of the relevant country; however, the legal and court systems of many countries in which we operate tend to be poorly developed and can be subject to political influence and other inherent uncertainties. It can therefore be difficult to obtain a rapid, fair and unbiased resolution of disagreements with governmental authorities.

        Even where we have other options, such as claiming compensation in arbitration proceedings for violations of a bilateral investment treaty, the process can be lengthy and costly. Even when the outcome is successful, the enforcement of any award favorable to us could be a challenge.

         Some of the countries in which we operate have political regimes that do not view foreign business interests favorably and may attempt to expropriate all or part of our local assets or impose controls on our operations.

        This risk potentially exists in any of the countries in which we operate, but might be highest in Bolivia at the moment under the current Government. The government of President Evo Morales in Bolivia had initially declared that a nationalization of the telecommunications sector may be contemplated in connection with the government's decision to regain more control over the Bolivian economy, as shown by certain measures implemented in the oil & gas sector in 2005-2006. We believe that nationalization of the telecommunications sector will probably not occur but that the Bolivian government will attempt to impose measures to lower tariffs offered to customers and improve the offer and availability of mobile telephony and other telecommunications services in isolated rural areas, or increased taxes on private foreign-owned businesses such as Telecel, our Bolivian operation, to increase government revenues. Measures like these may have the effect of increasing our network rollout costs and reducing the profitability of our Bolivian operation.

         Most of the countries in which we operate have underdeveloped economies with low gross domestic product ("GDP") per capita and therefore the increased inflationary pressures and downturns could significantly impact our revenues.

        Our operations are dependent on the health of the economies of the markets in which we operate. We offer our services in emerging market countries with economies at various stages of development or structural reform. Most of the economies of the countries in which we operate have large sectors where a percentage of the local population earns a living on a day-to-day basis and primarily spends its income on basic items such as food, housing and clothing, and has less income to spend on mobile telephony services. Therefore, downturns in the economies of any particular country or region in which we operate may adversely affect demand for our services, which would result in reduced revenues.

        Some of these countries have historically experienced high inflation rates, although in the recent years inflation rates in all countries where we operate have been relatively low. Periods of significant inflation in any of our markets could adversely affect our costs and financial condition.

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         Most of the countries where we operate lack infrastructure or have infrastructure in very poor condition and, particularly in Africa, have an insufficient electricity supply.

        With the exception of Mauritius, the countries in which we operate often lack basic infrastructure or have infrastructure in poor or very poor condition, including in particular roads and power networks. The lack of suitable infrastructure is particularly acute in countries recovering from civil wars, such as the Democratic Republic of Congo, and in countries suffering from civil war-like events, such as Chad and Sri Lanka. In general, the rural areas in each of our operations often lack even the most basic infrastructure, as any development tends to be concentrated in urban areas. Millicom must often build its cell sites without the benefit of roads and other infrasctructures, which increases our network development costs.

        The electricity supply is insufficient in certain countries in which we operate (predominantly Africa, with the exception of Mauritius) due to the growth experienced in such countries. We therefore have to rely on diesel-powered generators that we source, install, maintain and refuel. In Chad, at December 31, 2008, almost 100% of our radio sites were powered by diesel-powered generators, and in the Democratic Republic of Congo it was the case for about 45% of our sites. This increases our costs and impacts the profitability of our African operations.

         We have been subject to increasing foreign taxes or reducing tariffs in the countries in which we operate, which reduces amounts we receive from our operations and may increase our tax costs.

        Many of the foreign countries in which we operate have implemented new taxes or increased the rates of existing taxes applicable to corporations or reduced tariffs (interconnect rates) as a forced method of raising government revenue. Furthermore, competitive pricing pressure or the provisions of new tax laws may prevent us from passing these taxes onto our local customers. Consequently, any increase in taxes applicable to our local operating subsidiaries could reduce the amount of earnings they generate.

         We could be subject to the impact of a deteriorating economic environment within the developed countries.

        Many of our countries receive significant inflows of funds from relatives and friends in developed countries that work abroad. A significant deterioration in the developed country economies could impact the ability of those abroad to continue remitting funds because of job losses or reduced wages. Lower remittances would reduce the disposable income which would impact our revenues. A change in the situation was noticed in Central America where remittances went down of about 5% in the last quarter of 2008.

         The recent increase in food prices within developed countries could have an inflationary impact on the emerging market economies.

        A significant increase in food prices within our operating markets could impact the consumers' ability to pay for our products and services. Currently, we have not seen a noticeable difference in consumer behavior towards our products and services. This might be because there is an agricultural sector in many of the economies in which we operate which could be providing protection against inflationary food prices seen in developed countries, or because our products and services are essential for basic communication which is relatively high on the list of customer needs and therefore consumers are making sacrifices to continue spending on our services. However, this situation could change if food prices remain higher than before or increase.

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         Currency fluctuations or devaluations reduce the amount of profit and assets that we are able to report.

        Exchange rates for currencies of the countries in which our companies operate fluctuate in relation to the US$ and such fluctuations may have a material adverse effect on our earnings, assets or cash flows when translating local currency into US$. For each venture that reports its results in a currency other than the US$, a decrease in the value of that currency against the US$ reduces our profits while also reducing our assets, our liabilities, as well as our future dividends. To the extent that our operations retain earnings or distribute dividends in local currencies, the amount of US$ we receive is affected by fluctuations of exchange rates for such currencies against the US$, which could affect our results of operations. In addition, exchange rates are impacting Millicom's earnings, assets and cash flows as we have US$ debts, pushed down to the operations, because of lack of available financing in local currencies.

        We generally do not hedge our foreign currency exposures, because of lack of available intruments in the countries where we operate. Millicom had a net exchange loss of $56 million for the year ended December 31, 2008, compared to a gain of $15 million for the year ended December 31, 2007.

         Most of our operations receive revenue denominated in the local currency of the country of operation. In the future, any of the countries in which these operations are located may impose foreign exchange controls which will restrict our ability to receive funds from the operations.

        Most of the operations in which we have interests receive substantially all of their revenues in the currency of the countries in which they operate. We derive substantially all of our revenues through funds generated by our local operations and, therefore, we rely on their ability to transfer funds to the Company.

        Although there are foreign exchange controls in some of the countries in which our mobile telephone companies operate, none of these countries currently significantly restrict the ability of these operations to pay interest, dividends, technical service fees and royalties and repay loans by exporting cash, instruments of credit or securities in foreign currencies. Although we have so far experienced no major difficulty in obtaining permits to allow our operations to upstream cash directly or indirectly to the ultimate parent company of the Millicom group, this may not be the case in the future. Foreign exchange control restrictions may be introduced in countries where we operate or strengthened where such restrictions already exist, or other countries where we operate that do not currently have such restrictions may decide to impose them, in which cases the Company's ability to receive funds from the operations will subsequently be restricted, which will negatively impact the Company's revenues.

        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 are time delays in accumulating significant amounts of foreign currency and exchange risk, which could have an adverse effect on the Group's results of operations.

         Our ability to reduce our foreign currency exposure may be limited by restrictions on borrowings in local currency.

        At the operations level, we seek to reduce our foreign exchange exposure through a policy of matching, as far as possible, cash inflows and outflows. Where possible and where it is financially viable, we borrow in local currency to help hedge against local currency net inflows. Our ability to reduce our foreign currency exchange exposure may be limited by the lack of long term financing in local currency. As such, there is a risk that we may not be able to fund our local operation's capital expenditure needs or reduce our foreign exchange exposure by borrowing in local currency.

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         We own our operations through holding companies in jurisdictions which may effect changes to their respective laws that may unfavorably affect our financial status or tax treatment.

        We hold the interests in our mobile telephone companies through our subsidiaries in various jurisdictions in and outside Luxembourg, mainly but not exclusively through holding companies incorporated in the Netherlands and the Netherlands Antilles. The laws or administrative practices relating to taxation (including the current position as to withholding taxes on dividends paid by our local operations and tax concessions we have obtained in certain of our countries of operation), foreign exchange controls, or other matters, are periodically subject to change. Any such change could have a material adverse effect on our financial affairs and on our ability to receive, or the tax treatment of, funds from our local operations.

         Our failure to comply with worldwide laws and regulations could result in liabilities and sanctions and this would have a material adverse effect on our business.

        We are subject to several laws and regulations with worldwide application, including as promulgated by:

    the Organization for Economic Cooperation and Development (OECD),

    the European Union (EU), through directives that are either directly applicable or that get translated into the law of the country of incorporation,

    the federal laws of the United States of America, including the securities laws thereof and the U.S. Foreign Corrupt Practices Act of 1997, and

    the Grand-Duchy of Luxembourg, where the Company is incorporated.

        These laws and regulations impact where and how our business may be conducted. In addition, our shareholders, lenders, suppliers or other entities with which the Company and its operating subsidiaries conduct business may be subject to or seek to comply with these laws and regulations. Even though the Company has increased its compliance efforts, there is always a risk that non-compliance issues may arise with respect to the Company or its operating subsidiaries or any employee thereof. Any instances of non-compliance may result in consequences ranging from negative publicity and reputational damage to criminal and civil liability and the application of fines or disgorgement of profits to the Company on account of any of its employees or directors or the employees or directors of any of its operating subsidiaries. Any of the foregoing would have a negative impact on our business, financial condition or the results of operations.

Risks Related to our Operations and the Mobile Telephony Market

         We face intense competition in the mobile telephone operator market.

        Our mobile telephony operations face competition from other mobile telephone operators in the markets in which they operate, as well as fixed line operators in some markets. Our main competitor are Amercia Movil, MTN, Zain, France Telecom, Vodafone and Telefonica.

        We expect that additional mobile telephony licenses will be granted in some of our existing markets. Moreover, additional licenses may be awarded in markets where we already face competition from other technologies that are being or may be developed and/or perfected in the future. In some of our markets, there may be more mobile telephone operators than the market is likely to sustain. In addition, in some of our markets, our competitors may have a greater coverage area than us. The mobile telephone operators in each market compete for customers principally on the basis of services offered, quality of service, coverage area, accessibility of distribution and price. Many of our competitors have substantially greater capital resources than we do. Price competition is significant.

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        In addition, new competitors, such as mobile and fixed line operators in developed markets that are able to leverage their existing networks may enter emerging markets. The level of competition is influenced by the continuous and swift technological advances that characterize the industry, the regulatory developments that affect competition and alliances between market participants.

        There is also a risk that, as new competitors enter into our markets and price competition intensifies, our customers may move to another mobile telephone operator. This may result in our revenue declining, which would adversely affect our results of operations.

        Any failure by us to compete effectively or aggressive competitive behavior by our competitors in pricing their services or acquiring new customers could have a material adverse effect on our revenues and overall results of operations.

         The mobile telephony market is heavily regulated.

        The licensing, construction, ownership and operation of mobile telephone networks, and the grant, maintenance and renewal of mobile telephone licenses, as well as radio frequency allocations and interconnection arrangements, are regulated by national, state, regional or local governmental authorities in the markets that we service. In addition, such matters and certain other aspects of mobile telephone operations, including rates charged to customers and the resale of mobile telephone services, may be subject to public utility regulation in the relevant market. Our operations also typically require governmental permits, including permits for the construction and operation of cell sites. We do not believe that compliance with these permit requirements generally has a material adverse effect on our company. However, we may become subject to claims or regulatory actions relating to any past or future non-compliance with permit requirements.

        Changes in the regulation of our activities, such as increased or decreased regulation affecting prices or requirements for increased capital investments, may materially adversely affect us.

         Most of the countries in which we operate do not have universal service obligations and if such obligations were implemented the profitability of our operations may be negatively impacted.

        The purpose of universal service is to provide access to persons in non-urban areas and isolated areas with telephone and other telecommunications services by the telecommunications build-out in rural areas through subsidies. There is a telecommunications divide in all of the countries in which we operate in relation to access to telecommunications services (mobile, internet access, higher bandwidth telecommunication services) between urban and rural areas. When such services are available, they usually come at a significantly higher cost to the customer than in urban areas due to the lower population density in rural areas that are often hard to reach due to the lack of the most basic infrastructure, in particular roads and electricity. The goal of universal service is to promote the availability of quality services at fair, reasonable and affordable rates in all areas of the country, to increase access to advanced telecommunications services, and to enhance the availability of such services to all consumers, including those in isolated rural areas at rates that are reasonably comparable to those charged in urban areas. For instance, India has implemented a universal service obligation in its New Telecom Policy 1999 funded by telecommunications operators paying a part of their net earnings into the Universal Service Obligation Fund (USOF). We therefore believe that universal service obligations are a trend in telecommunications that will eventually become law in the countries in which we operate.

        To date, none of the emerging markets in which we operate in have universal service obligations.

        We expect that most of the countries in which we operate will do so in the future. We believe this may have a negative impact on our profitability.

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         We face substantial competition for obtaining, funding and renewing mobile telephone licenses.

        We may pursue new license opportunities. In each market we face competition for licenses from major international telecommunications companies as well as from local competitors. While we typically try not to pay large amounts for mobile licenses, the competition for the granting or renewal of licenses is increasingly intense worldwide. As such, we might have to pay substantial license fees in certain markets, as well as meet specified network build out requirements. We may not be successful in obtaining or renewing any mobile telephone licenses or, if licenses are awarded, in obtaining those licenses on terms acceptable to us. If we obtain further licenses or renew existing ones, we may need to seek future funding through additional borrowings or equity offerings, and we may not obtain such funding on satisfactory terms or at all.

         Our markets are characterized by rapid technological change, which could render our products obsolete and cause us to incur substantial costs to replace our products.

        Fixed network and other system equipment used in the mobile telephone industry have a limited life and must be replaced frequently due to damage or as a result of ordinary wear and tear. In addition, substantial expansion of existing networks is required to remain competitive. Our networks are based on the GSM standard. The GSM standard has been most appropriate for our markets because it has the greatest availability of handsets with strong functionality and has relatively low repair and maintenance costs. As new technologies develop, such as third generation systems, including WiMAX and 3G, equipment may need to be replaced or upgraded or a mobile telephone network may need to be rebuilt in whole or in part, at substantial cost, to remain competitive. Unforeseeable technological developments may also render our services unpopular with customers or obsolete. To the extent our equipment or systems become obsolete, we may be required to recognize an impairment charge to such assets, which may have a material adverse effect on our results of operations.

         The mobile telephony sector may be forced to open up access to its spectrum which may create further competition.

        In line with the current trend in the European Union ("EU"), where the European Commission intends to change spectrum regulation in such a way that spectrum (900 Mhz and 1800 Mhz bands) formerly reserved exclusively for GSM operators would be opened to other uses, such as 3G, we could find that new competitors are given access to the spectrum bands we operate in. Among the markets that we operate in, we believe that the region most likely to follow the trends in EU telecommunications regulation is Africa. Although we do not believe such changes will occur in the near future, we believe EU telecoms regulatory developments are likely to impact telecom regulatory trends in other parts of the world, particularly in Africa. If such trends become law, our competitive position in the relevant countries may become adversely affected.

         If we cannot successfully develop and manage our networks and distribution, for example as a result of natural disasters, we will be unable to expand our subscriber base and will lose market share and revenues.

        Our ability to increase our subscriber base depends upon the success of the expansion and management of our networks and distribution. The build-out of our networks and distribution is subject to risks and uncertainties which may delay the introduction of service and increase the cost of network construction. Such uncertainties may include natural disasters such as the tsunami in Sri Lanka (as occurred in late December 2004), the risk of hurricanes, volcanic activity and earthquakes in Central America, flooding in low-lying areas in Bolivia and Paraguay (as occurred in the first quarter of 2007) and in South-East Asia. Other risks include sabotage, which is an ongoing risk particularly in Colombia, DRC and Sri Lanka. To the extent we fail to expand our network and distribution capabilities on a timely basis, we may experience difficulty in expanding our subscriber base.

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        In addition, our ability to manage our operations successfully is dependent upon our ability to implement sufficient operational resources and infrastructure. The failure or breakdown of key components of our infrastructure, including our billing systems, may have a material negative effect on our profits and results of operations.

         Rapid growth and expansion may cause us difficulty in obtaining adequate managerial and operational resources and restrict our ability to expand successfully our operations.

        Our future operating results depend, in significant part, upon the continued contributions of key senior management and technical personnel. Management of growth will require, among other things:

    stringent control of network build-out and other costs;

    excellence in sales, marketing and distribution;

    continued innovative product development;

    continued development of financial and management controls and information technology systems;

    implementation of adequate internal controls;

    hiring and training of new personnel; and

    coordination among our logistical, technical, accounting, legal and finance personnel.

        Our success will also depend on our ability to continue to attract, retain and motivate qualified personnel. Competition for personnel in our markets is intense due to the small number of qualified individuals available in most of our markets. Our failure to successfully manage our growth and personnel needs would have a material negative effect on our business and results of operations.

         Our operations are dependent upon interconnection agreements and transmission and leased lines.

        Our operations are dependent upon access to networks not controlled by us, primarily networks controlled by current or former government owned public telecommunications operators or competing mobile telephone operators. Our financial results are affected by the cost of transmission and leased lines to effect interconnection. We may not be able to maintain interconnection or leased line agreements on appropriate terms to maintain or grow our business. A number of regulators have, or are expected to, reduce interconnection rates. Because we are often one of the larger suppliers of telephone services in the countries we service, this could have the effect of reducing our revenue. In December 2007, the Colombian regulator significantly reduced the interconnect rate. Since we have a customer base that receives significantly more calls from other networks than it makes, the change in the interconnect rate has had a significant impact on the revenues and profitability of this operation.

         Current concerns about the actual or perceived health risks relating to electromagnetic and radio frequency emissions, as well as the extensive publicity or possible resultant litigation, may have a negative effect on the market price of our shares, our financial position or the results of our operations.

        Media and other reports have suggested that electromagnetic and radio frequency emissions from mobile telephone handsets and base stations may cause health problems, including cancer. There is also some concern that these emissions may interfere with the operation of certain electronic equipment, including aircraft guidance systems, automobile braking and steering systems (e.g. GPS), and civil and military radars. Although we expect that the actual or perceived risks relating to mobile communications devices and base stations, or press reports about these risks will not significantly adversely affect us, its actual impact is difficult to estimate. It may have the effect of reducing our subscriber growth rate, subscriber base or average use per subscriber, which would have a negative impact on the market price of our shares.

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        If a link between electromagnetic or radio frequency emissions and adverse health concerns is demonstrated, government authorities will increase regulation of mobile handsets and base stations as a result of these health concerns. Mobile telephone operators and handset manufacturers, including us, would be held liable for all or part of the costs or damages associated with these concerns. Any such regulations, or any litigation brought by potential victims, would also have a materially adverse effect on our financial position and results of operations.

General Risks

         Our ability to generate cash depends on many factors beyond our control.

        Our ability to generate cash is dependent on our future operating and financial performance. This will be impacted by our ability to implement successfully our business strategy, as well as general economic, financial, competitive, regulatory, technical and other factors beyond our control. If we cannot generate sufficient cash, we may, among other things, need to refinance all or a portion of our debt, obtain additional financing, delay capital expenditures or sell assets. We may have difficulties to access to the financial markets as we are not an investment grade rated credit. In addition, banks are refocusing on their domestic markets and we are operating in Luxembourg with few national banks. This could impact the operating performance of our business.

         Our debt may have an adverse effect on our financial health and prevent us from fulfilling our obligations under such debt.

        As of December 31, 2008, Millicom's total consolidated indebtedness was $2.2 billion. Of this amount, $0.5 billion represented the Company's indebtedness and $1.7 billion represented our consolidated share of the indebtedness of our subsidiaries and joint ventures.

        Corporate guarantees issued by the Company secured $0.7 billion of the indebtedness of our operations at December 31, 2008. 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 was $1.3 billion at December 31, 2008.

        If we substantially increase our level of indebtedness, it may have important negative consequences for us. For example, it may:

    require us to dedicate a large portion of our cash flow from operations to fund payments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

    increase our vulnerability to adverse general economic or industry conditions or the loss of significant operations;

    limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;

    limit our ability to raise additional debt or equity capital in the future or increase the cost of such funding;

    restrict us from making strategic acquisitions or exploiting business opportunities;

    make it more difficult for us to satisfy our obligations with respect to the notes and our other debt; and

    place us at a competitive disadvantage compared to competitors who might have less debt.

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         Our ability to receive funds from, and to exercise management control over, our operations can be dependent upon the consent of our partners who are not under our control. Disagreements or unfavorable terms in the agreements governing our joint ventures may adversely affect our operations.

        We participate in the following operations where we have local partners with sufficient minority rights to prevent us from having full control: Guatemala, Cambodia, Honduras and Mauritius. Our participation in each operation differs from market to market. Often our ability to withdraw funds, including dividends, from these operations and to exercise management control over our partners depends on receiving the consent of the other participants. While the precise terms of the arrangements vary, our operations may be negatively affected if disagreements develop with our partners.

        We rely upon dividends and other payments from our operations to generate the funds necessary to meet the Company's obligations, including the Company's debt obligations. The local operations are legally separate and distinct from the Company and have no obligation to pay amounts due with respect to the Company's obligations or to make funds available for such payments. Our local operations do not guarantee the Company's obligations. The ability of our operations to make such payments to the Company will be subject to, among other things, the availability of funds, the agreement of our partners, the terms of each operation's indebtedness and local law. The majority of our local operations have entered into financing facilities, most of which are guaranteed by the Company, many of which restrict the payment of dividends by those operations to the Company. Claims of creditors of our operations, including trade creditors, will generally have priority over our claims and the holders of our indebtedness.

         Certain insiders own significant amounts of our shares, giving them a substantial amount of management control.

        Investment AB Kinnevik our largest shareholder owned 37,835,438 shares in Millicom, representing approximately 35% of the voting shares as at December 31, 2008. The Kinnevik group and its subsidiaries, the non-independent directors, the Stenbeck estate, and certain Stenbeck Trusts, beneficially owned 38,841,589 shares in Millicom, representing about 36% of Millicom's outstanding shares as at December 31, 2008. Kinnevik and its affiliates, having a significant ownership in Millicom, have significant influence over our management and affairs. The influence that they have may not always be consistent with your interests.

         A substantial number of our directors hold positions with Investment AB Kinnevik ("Kinnevik") or Tele2 AB, which may present conflicts that may be resolved in a manner not consistent with your interests.

        Three Millicom board members hold executive and/or director positions with Kinnevik and Tele2 AB, a pan-European telecommunications company offering fixed and mobile telephony. Tele2 AB is controlled by Kinnevik and certain of its affiliates.

        These positions may create, or appear to create, potential conflicts of interest when these directors are faced with decisions that may have different implications for us, Kinnevik or Tele2 AB. There is a risk that these conflicts may ultimately be resolved in a manner not consistent with your interests.

        While it is the current understanding and has been the practice to date that we have the initial right to consider any telecommunications opportunity that arises in the emerging non-European markets that we target, there is no contractual arrangement that grants us to this effect among us, Kinnevik and Tele2 AB.

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         The ability of investors to enforce civil liabilities under U.S. securities laws may be limited.

        We are incorporated under the laws of the Grand Duchy of Luxembourg (European Union). Most of our directors and executive officers are residents of countries other than the United States. Most or a substantial portion of our assets and those of most of our directors and executive officers are located outside the United States. As a result, it may not be possible for investors in our securities to effect service of process within the United States upon such persons or upon us or to enforce in U.S. courts or outside the United States judgments obtained against such persons. In addition, it may be difficult for investors to enforce, in original actions brought in courts in jurisdictions located outside the United States, liabilities predicated upon the civil liability provisions of the U.S. securities laws. We have been advised by our Luxembourg counsel, Allen & Overy, that the United States and Luxembourg do not have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by a federal or state court in the United States based on civil liability, whether or not predicated solely upon United States federal securities laws, is not enforceable in Luxembourg. However, if the party in whose favor such final judgment is rendered brings a new suit in a competent court in Luxembourg, the party may submit the final judgment that has been rendered in the United States to a Luxembourg court for the purpose of recognition by such court and enforcement in Luxembourg. A judgment by a federal or state court of the United States against us will be regarded by a Luxembourg court only as evidence of the outcome of the dispute to which such judgment relates, and a Luxembourg court may choose to rehear the dispute.

ITEM 4.    INFORMATION ON THE COMPANY

Background

Overview

        We are a global mobile telecommunications operator with operations in some of the world's emerging markets over which we generally exercise management and voting control. Our strategy of being a low cost provider, focused on prepaid services using mass market distribution methods, has enabled us to continue to pursue high growth while delivering operating profitability. In October 2008, we acquired Amnet Telecommunications Holding Limited (Amnet) a cable, broadband, fixed telephony and Corporate data business across Central America. The acquisition of Amnet will allow us to accelerate our broadband offering across the Central American region.

        We have interests in 16 mobile operations in 16 countries, focusing on emerging markets in Central America, South America, Africa and Asia. In December 2008 we successfully tendered for the third national mobile license in Rwanda.

        At December 31, 2008, the countries where we had mobile operations had a combined population of approximately 294 million. This means that our licenses cover 294 million people, which represents the number of people who could receive mobile services under the terms of our licenses if our networks covered the entire population. Our total number of mobile subscribers reached 32 million (28 million on an attributable basis) at December 31, 2008.

        Our markets are attractive for mobile services due to their relatively low degree of penetration of fixed and mobile telephony services as compared to more developed markets. Usage of telecommunications services has historically been low in the countries in which we operate due to poor or insufficient infrastructure, the unavailability and high costs of such services and the low levels of disposable income. We believe there is significant opportunity for further growth of mobile services in our markets because our services are essential for basic communication in the markets in which we operate, and therefore the percentage of GDP spent on mobile services will continue to grow in our markets.

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        Lastly, we are seeing growing demand for services beyond our traditional voice business, particularly with value-added services, data and broadband. These other services could be a source of significant future growth.

Summary of Highlights and Recent Developments

        On January 22, 2008, Millicom announced the completion of the early redemption of its $200 million 4% Convertible Bonds due 2010. Following the conversion of $1 million bonds into 28,686 Swedish Depositary Receipts ("SDRs") in October 2007, the bondholders converted a further $196 million of the remaining $199 million of the outstanding bonds into 5,420,235 Ordinary Shares and 202,236 SDRs. Millicom repaid in cash the face value of $3 million of bonds and accrued interests to those bondholders who did not convert their bonds as of the conversion deadline of January 11, 2008.

        On October 1, 2008, the Group acquired 100% interest in Amnet Telecommunications Holding Limited (together with its subsidiaries "Amnet" or "Amnet Group"). Acquisition cost amounted to $546 million and net cash acquired to $14 million; net cash used for the acquisition of Amnet therefore amounted to $532 million.

        On October 30, 2008, Millicom announced that the government of the Republic of Senegal had informed Millicom of its intention to revoke, effective October 31, 2008, its license to provide mobile telephony services of Sentel GSM, Millicom's operation in Senegal (see note 28).

        On November 17, 2008, Millicom announced that it had been successful in the tender for the 3rd national mobile license in Rwanda.

        On March 2, 2009, Millicom announced that the Board appointed Mikael Grahne to succeed Marc Beuls as President and Chief Executive Officer (CEO). Mikael Grahne has been the Chief Operating Officer of Millicom since February 2002 and has been responsible for the development of Millicom's operation strategies, including the development of the tigo® brand.

Strategy

        Our strategy is to operate with the lowest possible cost base from which we can offer the consumer better value for money through lower tariffs whilst at the same time offering network quality and wide distribution. We believe that, given the relatively low mobile penetration levels in our markets compared to more developed markets, we can continue to achieve significant growth in our subscriber base while continuing to improve our operating margins and cash flows by rolling out our tigo® brand across most of our operations and focusing on our triple "A" operating strategy:

    Affordability—means the best value for money by offering competitive tariffs but more importantly by having low denomination prepaid reload terms so that our services are suitable for low-income customers. This is vital in order to increase penetration levels, the rate of Millicom's subscriber acquisition, and minutes of use.

    Accessibility—means making the purchase of minutes as easy as possible by providing ready access to prepaid services, whether through scratch cards or e-PIN, which enables customers to top-up their prepaid minutes over the air. As at December 31, 2008 Millicom had approximately 610,000 distribution outlets (approximately 480,000 as of December 31, 2007), which we believe place us ahead of our competitors in providing greater accessibility to and visibility of our prepaid services.

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    Availability—means having an extensive network with sufficient capacity so that mobile services are readily available to our customers in as many locations as possible. Millicom has invested substantially in its networks installing GSM and more recently GPRS and EDGE and expanding these networks into rural as well as urban areas. As at December 31, 2008 we had a total of over 13,800 base stations (approximately 9,800 as of December 31, 2007) in our 16 countries of mobile operation.

        Focusing on growth.    We believe there is a significant opportunity for further growth in our markets due to the relatively low mobile penetration levels (the weighted average penetration rate in the markets in which we operate is 39%) as many of our markets have high growth potential and substantial unmet demand for basic voice telephony services. We believe we can grow our subscriber base and revenue by continuing to focus on prepaid services while controlling costs and maintaining our position with postpaid customers. We will continue to invest in our existing mobile operations, where we believe we can generate attractive returns. In addition, we intend to increase our equity ownership in those of our operations where we still have either joint-venture or minority partners, provided it is permitted under the terms of our license, through buy-outs of our partners when the opportunities arise. We may participate in consolidation within our markets through the careful evaluation, selection and pursuit of strategic opportunities. We may pursue new license opportunities in our adjacent markets within existing financial guidelines and provided there is group-wide synergy potential. We will also look to expand into other services such as broadband.

        Improving cost efficiencies and capturing synergies.    We continue to seek ways to further reduce our cost base by rationalizing our operations. We maintain a strict centralized cost control program across our operations which lowers our operating costs. In addition, we expect to realize additional synergies across our operations, such as sharing of information, human resources, best practices and technologies, and centralized negotiations of financing and supply contracts for network equipment.

        Introducing new technologies.    We will consider introducing new technologies in markets where customer demand is strong for the relevant technologies or products and where we believe they are likely to generate substantial incremental revenue.

        Some voice technologies, like VoIP (Voice over Internet Protocol), are becoming increasingly widespread. VoIP allows voice communication by sending data packages with voice encapsulated over data networks. These services are increasing their presence to compete with fixed-line services and international calls rather than with mobile telephony services.

        We are beginning to see strong demand for broadband services in some of our markets, particularly in the relatively more mature markets in Latin America. We are looking at the ways in which we can meet this growing customer demand, including deploying new technologies where this is economically justified. One of them is 3G (WCDMA) using HSDPA since this provides a very spectrally efficient wireless solution. This technology is being deployed in Asia and Africa in the 2100MHz spectrum while in the Americas 3G is using the current existing 850 and 1900MHz spectrum.

        Other new technologies will start to appear. One of them is mobile WiMAX 802.16m, Ultra Mobile Broadband (UMB) and Long Term Evolution (LTE) based on a new OFDMA technology. This eventually will allow operators to have an all IP packet only connection. On case by case basis, where ever we find convenient we are acquiring WiMAX licenses or spectrum in our countries of operation where they are available to ensure we can offer WiMAX- based services if and when our customers demand them and we are able to offer these services at reasonable prices.

        In the case that future successful technologies are different from the one adopted by the company then this will force additional investment in network equipment replacement and training.

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        Introducing new products and services.    In 2009, Millicom will continue to launch innovative value added services like music related services, interactive content services and advanced SMS services to address the needs of our customers. In selected markets, Millicom tested the mobile payment and transactional services that will add convenience to Millicom's customers. This will be another tool for us to retain customers.

        Sales, marketing and distribution.    We pursue a low-cost, innovative and high-impact approach to sales, marketing and distribution. Except in few countries , we do not provide handset subsidies for our prepaid subscribers. As a result, we typically have low overall subscriber acquisition costs. In addition, we are focused on strengthening our distribution footprint and expanding our mass-market customer reach by distributing prepaid cards through mass-market or retail outlets such as local convenience stores, newspaper stands, and street vendors.

        We believe that our focus on branded prepaid services helps us to expand our market share and reduces our operating costs. We focus our advertising on cost-effective promotions. We have rebranded almost all of our products under the tigo® brand.

Competitive Strengths

        We believe that our competitive strengths enable us to benefit from the increasing demand for the services provided by mobile operators in emerging markets. Our competitive strengths include:

        Established prepaid operator.    Our focus on prepaid mobile services for the mass market offers the advantage of lower subscriber acquisition and operating costs, which results in higher margins and a faster average payback time (on average, less than three months). In addition, prepaid customers allow us to eliminate customer bad debt issues and billing and collection costs. The introduction of prepaid mobile services has opened up the market for mobile services to customers who have previously been denied access to mobile service. Increased demand for prepaid mobile services is also arising from business users and those customers who purchase prepaid credits in order to control their telephone costs, creating a new segment of the market.

        Delivering profitable growth.    One of our key strengths is our ability to grow our businesses while enhancing our operating profitability. We have generally been able to acquire our licenses at low cost with minimum build-out requirements. We aim to achieve strong subscriber growth while decreasing subscriber acquisition costs through the creation of well-known perceived price leading brands. Additionally, we have developed an extensive distribution network at low cost that provides our customers with broad service coverage, further leveraging our brand names in most of our operations.

        Track record of innovation.    We believe that innovation is another key to our success. In nearly all of our markets, we were the first to launch branded prepaid mobile services which now predominate in our markets. We have been the first to focus on non-traditional distribution channels to increase our mass-market prepaid customer reach in our markets. For example, we have used freelance distributors, such as street vendors, and sold prepaid cards in mass market outlets, which has reduced our sales and marketing costs. We have also introduced e-PIN and per second billing in most of our markets. We pioneered the introduction of all you can eat plans in Africa with our "X-treme promotions". We will offer WiMAX services in those countries where we have acquired WiMAX licenses if and when our customers demand these services and we are able to provide them at reasonable prices. Because we focus on prepaid services and low costs, we believe that we offer the best value proposition to the customer.

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        Low operating costs and high capital efficiencies.    We establish services in markets that we believe offer high potential financial returns and substantial operational leverage. While we have always had a strategy to control costs, we initiated a stricter centralized cost reduction program for all of our operations in 2002 that we continue to apply today. We operate sizeable networks covering areas of the highest population density and business activity. Any further build-outs of our network infrastructure are demand-driven. In addition, our migration to GSM has lowered our investment per capacity minute with faster payback times. Historically, our operations have generated an operating profit before depreciation and amortization within 12 to 18 months of start-up.

        Integrated strategy.    We actively pursue the many synergies inherent in our multi-country operations and the increasing scale in our existing markets. Such synergies include sharing information and best practices about services, human resources, technologies and market strategies; centralized negotiation of financing and of supply contracts for network equipment, and the rollout of a single brand, tigo®, to most of our operations. For example, our operations in Africa have been able to draw on the operational and managerial experiences and resources of our operations in Central and South America, which allows us to operate in Africa with a low cost base.

        Diversified operations.    We believe our 16 mobile operations based in 16 countries on three continents provide a balance of established cash flow generation and high-growth potential. Our diversification across countries and continents also lessens our exposure to unfavorable changes in a single market or currency. For example, we have continued to grow our total mobile subscriber base and operating profitability despite the expiry of our BCC contract in Vietnam in May 2005 and the divestiture of our operations in Peru and Pakistan.

        Highly skilled senior management.    Our highly skilled senior management have extensive experience in both the telecommunications industry and the fast-moving consumer goods sector which are critical to properly implement our operating strategy. Many of our senior executives have spent more than 10 years working in emerging markets and have demonstrated their ability to manage costs while managing rapidly growing businesses and starting up and successfully integrating new businesses, as has been the case in Colombia and recently Amnet Operations in Central America.

License Acquisition

        As we established an early presence in most of the markets in which we operate, we have been able in most cases to secure our licenses at low cost. Historically, we have been successful in renewing our maturing licenses, generally on terms similar to the original licenses, although we may not be able to do so in the future. In some cases, we operate with prominent local business partners through companies over which we typically exercise management control.

        Licenses are generally sought through a competitive application process in which the license is awarded on the merits of the application. In some cases, our operations pay royalties on revenue or income to governments, and all of our mobile operations pay interconnection fees to other telecommunications operators during the license period. Although the pursuit of mobile telephone licenses is usually highly competitive, our operating companies have been successful in obtaining licenses in preference to other license applicants, including major international telecommunications companies.

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        It may happen from time to time that Millicom meets difficulties when negotiating the terms of existing licenses. Millicom is currently engaged in a dispute with the Senegalese government regarding the maintenance of the existing Sentel license. The government of Senegal alleges that it has cancelled Sentel's license and seeks damages against Sentel and Millicom under various theories. Millicom believes that the action filed by the Republic of Senegal is baseless and ignores the agreement between Sentel and the Republic of Senegal to submit any dispute concerning the license to an international arbitration forum. Millicom's commitment to its business in Senegal remains strong and its subsidiaries Millicom International Operations, B.V. and Sentel intend to vigorously pursue all available remedies in the matter before the international arbitration forum. Millicom is still in effective control of its Senegalese operations and discussions with the Senegalese authorities are in progress to find an amicable solution to both parties.

Management Structure

        The Millicom management team is led by Chief Executive Officer and President, Mikael Grahne, the former Millicom's Chief Operating Officer, who took over the position from the former Chief Executive Officer, Marc Beuls; on March 2, 2009 and who has overall responsibility for the business; he manages and coordinates the day-by-day operations. Our Chief Financial Officer, Francois-Xavier Roger, looks after the financial, administrative and accounting areas. Our Chief Officer Operations, Osmar Coronel is responsible for the IT, technical, commercial and procurement areas; our Chief of Tigo people, Carel Maasland, oversees the development of our employees, compensation and benefits and the recruitment of new talent.

        We operate in four major geographic regions of the world: Central America, South America, Africa and Asia. Mario Zanotti is the Head of Latin America (Central and South America) and Regis Romero is the Head of Africa, they both report directly to our Chief Executive Officer. Judy Tan is the Head of Asia and reports to our Chief Officer Operations. We believe this structure allows us to maintain a high degree of coordination, cooperation and cross- sharing of information among the various cluster managers while providing a degree of regional responsibility that ensures quick and effective decision making.

The Industry

Mobile Telephone Industry Overview

        Mobile Telephone Technology.    Mobile telephone systems are capable of providing high quality, high capacity voice and data communications to and from mobile handsets and devices. Mobile telephone systems are capable of handling thousands of calls simultaneously and providing service to hundreds of thousands of subscribers in any particular area.

        Mobile telephone technology is based upon the division of a given geographical area into a number of cells and the simultaneous use of radio channels in non-contiguous cells within the system. Each cell contains a low power transmitter/receiver at a base station that communicates by radio signal with mobile telephones in that cell. Each cell is connected by microwave or optical fiber to a central switching point or Mobile Switching Center (MSC or "switch") that controls the routing of calls and which, in turn, is connected to the public switched telephone network, if one exists, or to other mobile operators. It is the switch's mobility management function that allows mobile telephone users to move freely from cell to cell while continuing their calls through a process called hand-off.

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        Mobile telephone systems generally offer subscribers the features offered by the most up-to-date fixed-line telephone services. Mobile telephone systems are interconnected with both the fixed-line telephone network and other mobile networks. As a result, subscribers can receive and originate local, long-distance and international calls from their mobile telephones. Mobile telephone system operators therefore require an interconnect arrangement with the local fixed-line telephone companies and/or other mobile network operators, and the terms of such arrangements are material to the economic viability of the system.

        A mobile telephone system's capacity can be increased in various ways. Increasing demand may be satisfied, in the first instance, by adding available channel capacity to cells through the addition of extra transmitters. When all available channels are used, further growth can be accomplished through a process known as cell splitting. Cell splitting entails dividing a single cell into a number of smaller cells, through the construction of additional base stations, thereby allowing for greater channel reuse and hence increasing the number of calls that can be handled in a given area.

        Millicom uses mainly GSM technology in its operations that are GPRS and EDGE enabled. GSM is a digital standard for mobile telephone systems that countries have adopted as a common standard. GSM offers increased value-added services and enables transmissions to be made in encrypted form so that conversations cannot easily be intercepted. The GSM system allows subscribers to use their mobile telephones in any country where the GSM system has been adopted and where appropriate roaming agreements are implemented, providing increased mobility and flexibility. GSM systems are the most ubiquitous worldwide.

        In the United States, a number of digital standards have been developed and are being deployed. One of them is Code Division Multiple Access (CDMA), which is also popular in some parts of South America and in the Asia-Pacific region. An enhanced version of CDMA is the technology used for the third generation mobile systems (3G) called W-CDMA and CDMA2000 1X. What all third generation (3G) networks have in common is that they support high data bandwidth applications such as full motion video, video conferencing and full Internet access to mobile devices. Universal Mobile Telecommunications System (UMTS) is a type of 3G mobile technology which allows, besides voice and data, the delivery of audio and video to wireless devices anywhere through fixed, wireless and satellite systems.

        WiMAX stands for Worldwide Interoperability for Microwave Access and is a wireless industry coalition whose members organized to advance IEEE 802.16 standards for broadband wireless access (BWA) networks. WiMAX 802.16 technology is expected to enable multimedia applications with wireless connections.

        Competing Technologies.    Some niche technologies are available for certain services. One of these technologies consists of Trunking services that are also deployed using radio communications with a cell technology and allows mobility for the user, but do not provide full duplex communication among users. This limitation makes this service less desirable and this results in low competition as few operators use this technology. Another technology being deployed is "Push to talk" or "Push over Cellular" which utilizes the mobile telephony network capability of handling data to allow a service similar to Trunking but using more sophisticated mobile handsets. These services are complementary to mobile services and are usually deployed as an additional product within mobile services.

        Some other voice technologies, like VoIP (Voice over Internet Protocol), are becoming increasingly widespread. VoIP allows voice communication by sending data packages with voice encapsulated over data networks. These services are increasing their presence to compete with fixed-line services and international calls rather than with mobile telephony services.

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        New competing technologies are starting to be deployed. The first one of them is 3G (W-CDMA) using HSDPA since this provides a very spectrally efficient wireless solution. This technology is being deployed in Asia and Africa in the 2100MHz spectrum while in the Americas 3G is using the current existing 850 and 1900MHz spectrum.

        During 2008, in the Latin America markets operators introduced 3G networks based on W-CDMA/HSDPA (High-Speed Downlink Packet Access). WCDMA is a system based on the third generation (3G) of mobile phone standards and technology that allows the transmission of large volumes of data at high speeds. 3G technologies enable network operators to offer users a wider range of more advanced services while achieving greater network capacity through improved spectral efficiency. 3G enables operators in Latin America to offer new Services to our corporate as well as prepaid customers like , video calls, mobile broadband data, full internet experience with richer mobile content. The main reason to introduce 3G /HSDPA networks are:

        New market opportunities.    It allows us to enter new markets and provide new services, such as the wireless broadband market, which we believe has significant growth potential throughout Latin America.

        Increased voice capacity.    Our new networks give us more capacity to provide voice services than our existing GSM network using our current spectrum.

        Cost effective deployment.    3G networks can be collocated with existing infrastructure allowing faster and more cost effective network deployment.

        Other new technologies will start to appear. One of them is mobile WiMAX 802.16m, Ultra Mobile Broadband (UMB) and Long Term Evolution (LTE) based on a new OFDMA technology. This eventually will allow operators to have an all IP packet only connection.

        In the case that future successful technologies are different from the one adopted by the company then this will force additional investment in network equipment replacement and training.

        Operating Characteristics.    The mobile telephony industry is typically characterized by high fixed costs and low variable costs. Until technological limitations on total capacity are approached, additional mobile telephone system capacity can usually be added in increments that closely match demand and at less than the proportionate cost of the initial capacity. The industry is also seeing declining equipment prices in real terms. Once revenues exceed fixed costs, incremental revenues are expected to yield an increasing operating profit, giving mobile operators an incentive to stimulate and satisfy demand for their services in the market. The amount of profit, if any, under such circumstances is dependent on, among other things, prices and variable marketing costs, which, in turn, are affected by the amount and the extent of competition. As competition increases in markets, prices have fallen with the result that revenues and operating profits increase at a lower rate than subscriber growth. In addition, as penetration rates increase, there is a tendency for a higher proportion of new subscribers to use prepaid services. Prepaid subscribers tend to have lower usage than credit subscribers, but the operating margin on prepaid is generally higher than with credit subscribers as the risk of customer bad debt is eliminated and there generally is no subsidizing of handsets.

        As these services are using radio spectrum, which are generally monitored and regulated by governments, the utilization of frequencies generally requires that appropriate licenses are obtained from pertinent authorities. The granting of licenses may involve significant fees, either paid as fixed upfront amounts or as variable charges.

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Development of the Mobile Telephone Industry

        Mobile Telephony in Developed Countries.    The first mobile telephone networks were introduced in Scandinavia in the early 1980s and experienced modest growth for the first few years. Over the last 10 years, however, mobile telephony has grown rapidly. All developed countries now have mobile telephone service and levels of penetration increased substantially in these countries.

        Given the rapid growth of mobile telephone subscribers in developed countries and high levels of penetration, the industry is increasingly introducing new technology that will expand capacity and improve service, including the introduction of digital mobile telephone networks and the ability to access the Internet from handsets. In industrialized nations, mobile operators are in the process of introducing "third generation" mobile technology that will permit always-on faster access to the Internet and voice and data transmissions.

        Mobile Telephony in Developing Countries.    While the mobile telephone industry is well-established in the developed world, the mobile telephone industry in the developing world is still in a high growth phase. Millicom believes that mobile telephony will continue to grow rapidly in developing countries because of the poor quality of the existing fixed-line service, the unsatisfied demand for basic telephone service and the increasing demand from users who want the convenience of mobile telephones. In some countries the mobile telephone network provides significantly improved access to the local and international fixed-line network compared with the existing fixed-line service. In addition, developing countries are expected to benefit both from better technology and lower equipment costs than those at comparable stages of market development in developed countries. Penetration rates (the number of subscribers per 100 people) are lower in developing countries than in developed countries. Consequently, Millicom believes that its markets offer high growth potential.

        For developing countries, mobile telephone networks can represent a faster and more cost-effective method of expanding telecommunications infrastructure than traditional fixed-line networks. Fixed-line networks involve extensive outside infrastructure in the form of buried or overhead cable networks, while mobile telephone networks require less construction activities.

Other Mobile industry trends

        Other Mobile industry trend and new market opportunity has been to integrate the broadband and fixed services to offer triple and quadriple plays.

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Competitive Position in the Market

        The following table shows certain estimated information regarding Millicom's continuing operations' competitive position in each of its mobile telephony markets as at December 31, 2008. This information was derived from active subscribers based on interconnect activity on our own networks. Millicom operates in developing economies and markets and believes that the data research available in these countries is not always accurate, consistent or verifiable. Therefore, the information provided here is given in ranges of market share to indicate the relative size and market position of Millicom's mobile telephony operations in comparison to its competitors.

 
  Estimated Market Share Ranking at December 31, 2008  
Market
  Greater
than 50%
  Between 25%
and 50%
  Between 10%
and 25%
  Less
than 10%
  December 31,
2008(1)
 

Central America

                       

El Salvador

    Millicom   Am. Movil
Telefonica
Digicel
  Red Intelfon     1 of 5  

Guatemala

    Millicom
Am. Movil
  Telefonica       1 of 3  

Honduras

  Millicom     Am. Movil   Digicel
Honducel
    1 of 4  

South America

                       

Bolivia

    Entel
Millicom
  NuevaTel       2 of 3  

Colombia

  Am. Movil   Telefonica     Millicom     3 of 3  

Paraguay

  Millicom   Personal     Am. Movil
Vox
    1 of 4  

Africa

                       

Chad

  Celtel (Zain)   Millicom         2 of 2  

DRC

    Vodacom
Celtel
  Millicom
CCT
  Standard     3 of 5  

Ghana

  MTN     Millicom
One touch
  Kasapa T.
(Hutchison)
Zain
    2 of 5  

Mauritius

  Cellplus (France T).   Millicom     Mahanagar T.     2 of 3  

Senegal

  Sonatel Mobiles (France T).   Millicom         2 of 2  

Tanzania

    Vodacom
Zain
Millicom
      Zantel
TTCL Mobile
Bol
    3 of 6  

Asia

                       

Cambodia

  Millicom   Camshin   TMIC   Appliphone
Cadcom
Viettel
    1 of 6  

Laos

  Lao Tel.     ETL Mobile
Millicom
  Lao Asia Tel.
(LAT)
    3 of 4  

Sri Lanka

    Dialog
Millicom
Mobitel
      Hutchison     2 of 4  


(1)
Source: Millicom market share derived from active subscribers based on interconnect activity on our own networks.

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Operations

Description of operations

        Descriptions of each of our operations and other related businesses are provided below. The description of our operations is divided into the following regions and businesses:

            Central America—Millicom's mobile operations comprise El Salvador, Guatemala and Honduras.

            South America—Millicom's mobile operations comprise Bolivia, Colombia and Paraguay.

            Africa—Millicom's mobile operations comprise Chad, Democratic Republic of Congo, Ghana, Mauritius, Senegal and Tanzania. Millicom's operation in Sierra Leone was classified as discontinued in 2008.

            Asia—Millicom's mobile operations comprise Cambodia, the Lao People's Democratic Republic and Sri Lanka.

            Amnet—Millicom's cable, broadband, fixed telephony and Corporate data business across Central America acquired by Millicom in October 2008.

        The table below sets forth our revenue by geographical segment, in percent of total revenues, for the periods indicated.

 
  2008   2007   2006   2005  

Central America

    40 %   44 %   51 %   49 %

South America

    30 %   31 %   20 %   16 %

Africa

    21 %   18 %   20 %   22 %

Asia

    8 %   7 %   9 %   13 %

Amnet

    1 %            

Total

    100 %   100 %   100 %   100 %

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Table of Contents

Subsidiaries and their Market Presence

        The following table shows certain information for each of Millicom's mobile operations as at December 31, 2008.

Market
  Company Name   Ownership   Method of
Consolidation(1)
  Start-Up/
Acquisition
Date
  Estimated
Population
of Area
under
License(2)
  Mobile
Penetration
as of
December 31,
2008(3)
 
 
   
  (percent)
   
   
  (millions)
  (percent)
 

Central America

                                 

El Salvador

  Telemóvil El
Salvador S.A.
    100.0 % S     1993     7     96 %

Guatemala

  Comunicaciones
Celulares S.A.
    55.0 % JV     1990     13     72 %

Honduras

  Telefónica
Cellular S.A.
    66.7 % JV     1996     8     78 %

South America

                                 

Bolivia

  Telefónica Celular
de Bolivia S.A.
    100.0 % S     1991     9     42 %

Colombia

  Colombia Móvil S.A. E.S.P.     50.0
+1 share
%
S     2006     45     87 %

Paraguay

  Telefónica Celular
del Paraguay S.A.
    100.0 % S     1992     7     78 %

Africa

                                 

Chad

  Millicom
Tchad S.A.
    87.5 % S     2004     10     12 %

DR of Congo

  Oasis S.P.R.L.     100.0 % S     2005     66     9 %

Ghana

  Millicom Ghana
Company Limited
    100.0 % S     1992     23     44 %

Mauritius

  Emtel Limited     50.0 % JV     1989     1     77 %

Senegal

  Sentel GSM S.A.     100.0 % S     1999     13     42 %

Tanzania

  MIC Tanzania
Limited
    100.0 % S     1994     40     22 %

Asia

                                 

Cambodia

  Cam GSM
Company Limited
    58.4 % JV     1997     14     25 %

Lao People's Democratic Rep

  Millicom Lao
Co. Limited
    74.1 % S     2003     7     17 %

Sri Lanka

  Tigo (Pvt)
Limited
    99.9 % S     1989     21     35 %

Grand Total

                       
284
       


(1)
JV = Joint Ventures. Under IFRS, joint ventures are consolidated using the proportional method of accounting in which only our share of the assets, liabilities, income and expenses of the joint ventures in which we have an interest are consolidated. Millicom determines the existence of joint control by reference to the joint venture agreements, articles of association, capital structure and voting protocols of the boards of director of the relevant entity, as well as the influence it has over day-to-day operations.

S = Subsidiary. Subsidiaries are entities over which we have control and are fully consolidated.

(2)
Source: The U.S. Central Intelligence Agency's "The World Factbook" for 2006, except with respect to the population data for Guatemala for which the source is the National Institute of Statistics of Guatemala (INE). Excludes Sierra Leone as Millicom's mobile operation on that country has been classified as discontinued.

(3)
Source: Millicom. We derive penetration rates from estimates of the total active subscribers in the relevant market based on interconnect traffic.

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Table of Contents

Selected Operating Data

        The following table presents, at the dates and for the periods indicated, selected operating data for each of Millicom's mobile operations.

 
  As at December 31,  
 
  Total Subscribers   Prepaid Subscribers
as Percentage of
Total Subscribers
 
Market
  2008   2007   2006   2008   2007   2006  

Central America

                                     

El Salvador

    2,528,056     2,217,560     1,387,395     92 %   91 %   88 %

Guatemala

    4,413,519     3,681,405     2,223,059     97 %   97 %   95 %

Honduras

    4,239,676     2,925,959     1,553,713     95 %   95 %   94 %

Subtotal Central America

    11,181,251     8,824,924     5,164,167     95 %   95 %   93 %

South America

                                     

Bolivia

    1,399,048     1,055,823     936,374     94 %   96 %   97 %

Colombia

    3,313,851     2,769,884     2,120,284     87 %   90 %   85 %

Paraguay

    2,747,872     2,067,019     1,273,315     90 %   92 %   91 %

Subtotal South America

    7,460,771     5,892,726     4,329,973     90 %   92 %   89 %

Africa

                                     

Chad

    541,159     323,356     186,700     100 %   100 %   100 %

DR Congo

    1,048,419     546,500     50,337     100 %   100 %   99 %

Ghana

    2,887,927     2,023,091     1,211,904     100 %   100 %   100 %

Mauritius

    421,683     365,018     279,193     93 %   93 %   92 %

Senegal

    1,852,461     1,118,505     894,617     100 %   100 %   100 %

Tanzania

    2,297,003     1,191,678     760,874     100 %   100 %   100 %

Subtotal Africa

    9,048,652     5,568,148     3,383,625     100 %   99 %   99 %

Asia

                                     

Cambodia

    2,119,949     1,652,649     1,075,162     100 %   100 %   99 %

Lao People's Democratic Republic

    233,258     130,512     87,228     100 %   100 %   100 %

Sri Lanka

    2,000,071     1,181,577     863,235     99 %   99 %   99 %

Subtotal Asia

    4,353,278     2,964,738     2,025,625     99 %   99 %   99 %

Total

   
32,043,952
   
23,250,536
   
14,903,390
   
96

%
 
96

%
 
94

%


CENTRAL AMERICA

        Central America consists of Millicom's mobile telephony in El Salvador, Guatemala and Honduras. Millicom Central America's licenses covered approximately 28 million people as at December 31, 2008.

El Salvador

        El Salvador's government system is a democratic republic. Following deterioration in the country's democratic institutions in the 1970s, a civil war took place between 1980 and 1992 and came to an end as the two opposing sides signed a peace accord. The former president, Elías Antonio Saca González of the right-wing Arena political party, was elected in 2004 for a five-year term ending on June 1, 2009. New presidential elections took place on March 16, 2009 and Mauricio Funes, of the left-wing FMLN political party was elected as new president.

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        El Salvador is the third largest economy on Central America, but growth has been modest in recent years The economy is divided principally on services (59.1%), industry (29.8%) and agriculture (11.1%). Economic growth is expected to decelerate in 2009 due to the global slowdown and to El Salvador's dependence on US economy (mainly for exports and remittances). In 2006 El Salvador was the first country to ratify the Central America-Dominican Republic Free Trade Agreement (CAFTA). CAFTA has bolstered the export of processed foods, sugar, and ethanol, and supported investment in the maquila sector. El Salvador became a member of the World Trade Organization in 1995. As the country does not have control over its monetary policies following the adoption of the U.S. dollar in 2001, the government is committed to maintaining tight fiscal policies. El Salvador had a population of about 7 million in mid-2008. The 2008 GDP real growth rate was estimated at 3.2% and GDP per capita at about $6,400.

        El Salvador's telecommunications market is among the most liberalized in Central America. In 1996, the government passed a telecommunications law designed to encourage competition in all areas of the sector and permitted foreign investment for the first time. The law governs all activities of the telecommunications sector, with particular emphasis on the regulation of the public telephony service, utilization of radio spectrum, access to essential resources and numbering plans. Since the sector privatization in 1998, foreign and local operators have made significant investments in infrastructure improvement. This has resulted in considerable growth in the number of mobile connections, partly as a result of the underdeveloped fixed-line network with waiting time for connections often running to several years. Mobile operators have capitalized on this by offering fast, high quality service with nationwide coverage.

        Millicom has a 100.0% equity interest in Telemóvil El Salvador, S.A. Millicom accounts for this operation as a subsidiary using the full consolidation accounting method.

        Telemóvil launched its operations in 1993 and was the only mobile services provider until 1999. Since its entry into the market, Telemóvil has expanded its coverage of the main cities rapidly and remains the market leader. The full coverage GSM network was launched in August 2004. Services offered also include broadband internet, fixed wireless telephony and public telephony. Tigo's 3G Network was launched in September 2008 offering services like video calls, mobile internet (datacards) and all the current telecommunication services using 3G network.

        In 2008 there were 5 mobile services providers in the country. Telefónica and Telecom (initially owned by France Telecom) entered the market in 1999 as the second and third mobile operator, respectively Digicel (privately owned) entered the market in 2001 with a GSM network as the fourth operator. Digicel was recently acquired by the Caribbean operator with the same name. América Móvil of Mexico acquired France Telecom's interest in Telecom in 2003. In October 2005 Intelfon (privately owned) entered the market as the fifth mobile operator, offering services based on the iDen push-to-talk technology. Intelfon has a negligible market share to date.

        Telemóvil was awarded a 15-year mobile license in September 1991 which was subsequently extended until 2018. Telemóvil acquired WiMAX spectrum in 1998.

        Telemóvil's strategy is based on offering a combination of high quality network coverage and services at low prices showing the customer the "Aquí estoy" (here we are) culture. Leveraging Telemóvil's distribution capabilities through e-PIN, internet and other electronic means further enhances this strategy. Telemóvil also expanded its value added services and strengthened its customer services operations (18 service centers for customer direct care). As at December 31, 2008, Telemóvil's network comprised a total of 820 base stations with the capacity to handle a maximum of 2.5 million concurrent subscribers, and covered 89% of the total population leading the market with a share of 45.2% and area coverage of 97%.

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Table of Contents

Guatemala

        Guatemala's government system is a constitutional democratic republic. In 1996, peace accords were signed which brought an end to a 36-year civil war. Although Guatemala has completed a successful transition from military to civilian government, the military retains considerable political power. In November 2007, Mr. Alvaro Colom was elected President with 52.82% of votes. Mr Colom's Party is UNE, is of center-left tendency and does not control majority of seats in Congress.

        Guatemala is the largest and most populous of the Central American countries with a population of about 13 million in mid-2006. The agricultural sector accounts for about one-quarter of GDP, two-fifths of exports, and half of the labor force. Ongoing challenges include increasing government revenues, negotiating further assistance from international donors, upgrading both government and private financial operations, curtailing drug trafficking, fighting corruption, and narrowing the trade deficit. Remittances from a large expatriate community that moved to the United States during the civil war have become an important source of foreign exchange. Given Guatemala's large expatriate community in the United States, it is the top remittance recipient in Central America, with inflows serving as a primary source of foreign income equivalent to nearly two-thirds of exports. Economic growth is expected to slow in 2009 as export demand from US and other Central American markets drop, remittances from the United States come under pressure and foreign investment slows amid the global slowdown.

        The extension of the European Union's generalized system of preferences, under which Guatemalan exports enjoy preferential access to EU markets, is expected to have a positive impact on the economy going forward. Guatemala joined the GATT in 1991 and became member of the World Trade Organisation in 1995. The distribution of income in Guatemala remains very unequal with 75% of the population living under the poverty line, mostly in rural areas. The 2008 GDP real growth rate is estimated to be 3.9% and GDP per capita was about $5,400.

        Between 1996 and 1998, Guatemala implemented a liberalization and privatization program. The General Telecommunications Law was passed in 1996 and opened the sector to competition with immediate effect, including the removal of all regulatory restrictions on prices and quality of service, and also prepared the ground for privatization of the incumbent operator Guatel, re-named Telgua, which took place in 1998. The law also created a regulatory authority, the Superintendencia de Telecomunicaciones (SIT), which is primarily responsible for the allocation of radio spectrum, resolving access disputes and administering the national numbering plan.

        Millicom has a 55% equity interest in Comunicaciones Celulares, S.A. (Comcel). The remaining 45% of the company is owned by Miffin Associates Corp., a Panamian company controlled by our local partner Mr. Mario David Lopez Estrada. Millicom accounts for this operation as a joint venture using the proportionate accounting method.

        Comcel was the first mobile operator in Guatemala when it launched commercial operations in 1990. The company enjoyed a monopoly position until 1999 when Telefónica and Telgua (owned by América Móvil) entered the market as the second and third operators. In 2001, BellSouth of the U.S. entered the market as the fourth operator but Telefónica of Spain acquired BellSouth's operations in 2004. América Móvil offers an integrated telecommunications solution including fixed and mobile telephony, cable TV and internet services. América Móvil and Telefónica are Comcel's most challenging competitors. In March 2003 two additional mobile licenses were granted. One license was granted to Electrónica Industrial, S.A., which sold the usufruct of the spectrum to Comcel in November 2006. The other license was granted to Digicel Guatemala S.A., which as of March 30, 2009 had not launched commercial operations.

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Table of Contents

        Comcel operates a GSM/GPRS/EDGE and a 3G networks. The GSM/GPRS/EDGE network was launched in August 2004 and the 3G network was launched in August 2008. Comcel also provides international long-distance services, roaming service, internet services and local telephony services.

        In January 1990, Comcel was awarded its initial 20-year license to operate a nationwide 800MHz network. In March 2003, Comcel was awarded a revised license to operate 10MHz of frequency for a period of 15 years until 2018. In August 1998, as validated in October 2001, the license to operate another 4MHz spectrum was awarded for the period until 2013. This license can then be extended for a further 15 years. Comcel acquired 25Mhz in the 2.5Ghz spectrum to operate WiMAX in July 2006.

        At December 31, 2008 the GSM network comprised 1,844 radio base stations serving approximately 4.4 million subscribers, and the network covers approximately 86% of the total population.

Honduras

        Honduras' government system is a democratic constitutional republic. Since the regional peace process that took place in the late 1980s, democracy in Honduras has been strengthened. The last presidential elections took place in November 2005, with the opposition candidate Manuel Zelaya Rosales of the Partido Liberal party being elected. The new government took office in January 2006. The next elections are planned for November 2009 with the same political parties leading the polls; with candidates: Porfirio Lobo Sosa running for the National Party and Elvin Santos for the Liberal Party.

        Although GDP per capita in Honduras is one of the lowest in Latin America, it has increased since the 1990s and overall economic growth has been higher in recent years than in many other countries in the region. Real GDP growth dropped to 2.3% in 2008 as a result of smaller remittances from the U.S. and the general economic climate. GDP per capita was estimated at $3,700 in 2008. Honduras continues to focus on pursuing the economic and reform program agreed with the International Monetary Fund (IMF) under the poverty reduction and growth facility in February 2004. Although no recent figures are available, it is estimated that between half and two-thirds of Hondurans lived below the poverty line in 2006. Honduras suffers from a very unequal distribution of income and massive unemployment As the country has met most of its macroeconomic targets, it has achieved debt relief under the IMF-World Bank's heavily indebted poor countries initiative. The United States is Honduras' largest trading partner. Honduras became a member of the US-Central America Free Trade Agreement in May 2004. The economy relies heavily on a narrow range of exports, notably bananas and coffee, making it vulnerable to natural disasters and shifts in commodity prices, but in recent years has experienced a rapid rise in exports of light manufacturers. Growth remains dependent on the economy of the U.S., its largest trading partner, and on reducing the high crime rate, as a means of attracting and maintaining investment. Honduras had a population of about 8 million in mid-2008.

        The Comisión Nacional de Telecomunicaciones (Conatel) was created in October 1995 as the national regulatory authority and reports directly to the Ministry of Telecommunications. It operates a licensing system for all telecommunication services in Honduras and is in charge of promoting the modernization and development of the sector by encouraging private investment, free competition and improved quality of service. Although Empresa Hondureña de Telecomunicaciones (Hondutel), the state owned national incumbent operator, has monopoly over local and long-distance telephony services, the government has opened value added services and mobile telephony to competition. Mobile operators (Millicom's Celtel, the market leader; Megatel, owned by América Móvil and most recently Digicel) have the right to carry international traffic for their own customer base.

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        Millicom has a 66.67% equity interest in Celtel. The remaining 33.33% of Celtel is owned by Proempres Panama S.A., a privately-held company controlled by our local partners, Mr. Roberto Isaias Dassun and other members of his family. Millicom and Proempres entered into a revised shareholders agreement following the buy-out of a third shareholder, Motorola Inc. of the United States, in 2005, under which the two shareholders exercise joint control of Celtel. Millicom accounts for this operation as a joint venture using the proportionate accounting method.

        Celtel launched commercial operations in 1996 as the first mobile operator in Honduras and today operates a GSM and 3G networks. Until late 2003, Celtel enjoyed a monopoly status in the mobile market, when Megatel entered the market with a GSM network as the second operator, and in the first quarter of 2008 they launched their 3G Network. The third mobile license was issued to Hondutel (the State-owned fixed line incumbent) but their operations have only limited coverage in the 5 main cities of the country. A fourth license was issued to Digicel Honduras S.A., who launched operations on November 2008 with a GSM network.

        Celtel operates a GSM/GPRS/EDGE network and a 3G/HSDPA network. The 3G/HSDPA network was launched in August 2008. Celtel also provides international long-distance services and local telephony services.

        In June 1996, Celtel was awarded a 10-year license to operate a nationwide mobile network for a price of US$5.1 million. The license was transformed into a 25-year license in March 2005 with an expiry date of June 2021 at a cost of US$4.8 million. Celtel has already aquired a WiMAX license but have not yet performed a commercial launch.

        As at December 31, 2008 the GSM network comprised 1,326 radio base stations with the capacity to handle a maximum of 5 million concurrent subscribers and covered 98% of urban population and 82% of rural population.


SOUTH AMERICA

        Millicom's mobile operations in South America are located in Bolivia, Colombia and Paraguay. Our South American licenses covered approximately 61 million people as at December 31, 2008.

Bolivia

        Bolivia's system of government is a Unitary Democratic Republic. The government has pursued an economic and social reform agenda since the early 1990s. Democratic civilian rule was established in 1982, but leaders have faced difficult problems of deep-seated poverty, social unrest, and illegal drug production. In December 2005 Bolivians elected Movement Toward Socialism leader Evo Morales as president by the widest margin of any leader since the restoration of civilian rule in 1982, after he ran on a promise to change the country's traditional political class and empower the nation's poor majority. However, since taking office, his controversial strategies have exacerbated racial and economic tensions between the Amerindian populations of the Andean west and the non-indigenous communities of the eastern lowlands.

        One of these strategies was the "recuperation of the natural resources to the hands of the state": nationalization of the entire hydrocarbon sector (gas, production, transportation, refining, and storage companies), the main mining companies, and also Entel, the main telecom operator previously privatized in 1997. This nationalization process has been confirmed under the new constitution approved in January 2009. During 2009, all the new laws should be drafted and elections will be held in December 2009.

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        The new constitution guarantees the "concession previous rights". In this sense, our Concession Contract rights will not be affected. One of the most relevant changes result from the new constitution is the elimination of the Sirese system, an autonomous government agency responsible for regulating the five basic utility sectors: telecommunications, electricity, transport, oil and gas and water. These functions will be taken over by a Government Ministry.

        Bolivia's GDP per capita was estimated to be $4,700 in 2008. The GDP real growth rate in 2008 was estimated to be 4.8%. Oil and gas, mining, smelting, food and beverages, tobacco and clothing are the most important industries in Bolivia. The country became member of the World Trade Organization in 1995 and is a member of Mercosur (the Southern Common Market with Argentina, Brazil, Paraguay and Uruguay). In early 2008, higher earnings for mining and hydrocarbons exports pushed the current account surplus to 9.4% of GDP and the government's higher tax take produced a fiscal surplus after years of large deficits. Private investment as a share of GDP remains among the lowest in Latin America, and inflation was at double-digit levels in 2008. The decline in commodity prices in late 2008, the lack of foreign investment in the mining and hydrocarbon sectors, and the suspension of trade benefits with the United States will pose challenges for the Bolivian economy in 2009. Bolivia's population at end of 2008 was of 9 million.

        Millicom has a 100% equity interest in Telecel. In addition to offering mobile services (GSM and 3G) on a nationwide basis, Telecel offers national and international long-distance services and data transmissions (Wimax and 3G). Millicom accounts for this operation as a subsidiary, i.e. using the full consolidation accounting method.

        Telecel launched commercial operations in 1991 through an offering of analogue mobile services in Bolivia's three main cities of La Paz, Santa Cruz and Cochabamba. Telecel introduced the first prepaid mobile telephony offering in Bolivia at the end of 1996 and launched digital services through its TDMA network in 1997. Telecel started offering nationwide GSM services in December 2005 and is the first and only operator in Bolivia to offer 3G services since 2008.

        From 1991 to 1996 Telecel was the only mobile operator in Bolivia. Móvil de Entel, the mobile subsidiary of incumbent operator Entel, launched its mobile services in 1996. In 1997, the government of Bolivia privatized Entel by selling a 50.9% stake to Telecom Italia. Entel was recently renationalized. Then, in 2001 NuevaTel (a joint venture, now 72% owned by Trilogy International Partners of the U.S., and 28% by Cooperative of Telecommunications Cochabamba, one of Bolivia's largest telecommunication co-operatives) entered the market with a GSM network. By 2002, Móvil de Entel also started offering heavily subsidized GSM services. Consequently, Móvil de Entel became the leading operator in terms of subscriber numbers. In December 2005 Telecel introduced tigo® with its new GSM network and at the end of 2006 Telecel had consolidated its position as the second operator in the Bolivian mobile market.

        Telecel was awarded a 20-year license in 1990 to operate a mobile network in Bolivia's three main cities (La Paz, Santa Cruz and Cochabamba). The license was extended in 1995 and will expire in November 2015. Telecel's license was extended in 1997 to cover the rest of the country for a period of 20 years. In December 2002, Telecel was also awarded a 40-year license to provide long-distance telecommunication services in Bolivia. This license is mainly used to carry Telecel's mobile traffic. In May 2006 Telecel was awarded a 40-year data concession to provide services in Bolivia.

        At December 31, 2008, 591 base stations were in place, compared to 367 at December 31, 2007. Telecel's customer base reached 1,399,048 subscribers at the end of 2008. The number of Telecel subscribers grew 33% covering 54% of Bolivia's population.

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Colombia

        Colombia's system of government is a constitutional republic. The president of the Republic of Colombia is Mr. Alvaro Uribe who has been in office since August 2002 and was re-elected for another 4-year term in May 2006. A 40-year conflict between government forces and anti-government insurgent groups and illegal paramilitary groups, both heavily funded by the drug trade, escalated during the 1990s. The insurgents lack the military or popular support necessary to overthrow the government and violence has been decreasing since about 2002 but insurgents continue attacks against civilians and large parts of the countryside are under guerrilla influence. Most paramilitary members have demobilized since 2002 in an ongoing peace process, although their commitment to ceasing illicit activity is unclear. President Alvaro Uribe has stepped up efforts to reassert government control throughout the country. However, neighboring countries worry about the violence spilling over their borders.

        Colombia's GDP per capita was estimated to be $9,000 in 2008. Colombia's population was estimated at 45 million in mid-2008. Colombia's economy has experienced positive growth over the past four years despite a serious armed conflict and the GDP real growth rate was estimated at 3.8% in 2008. The economy slowed down in 2008 as a result of the global financial crisis, reducing the demand for Colombia's exports and weakening of internal demand. In response the government has quickly adopted measures to maintain investor confidence and to keep credit lines to the private sector. These actions have included the cut of capital controls, emergency credit lines from multilateral institutions and putting liquidity into the financial markets through the reduction of the interest rate from the central bank. The business sector is concerned about the impact of the global recession over Colombia's exports, as well as the approval of the FTA, which is installed in the US Congress.

        In October 2006, Millicom acquired 50% plus one share of the share capital of Colombia Móvil S.A. ESP for a price $124 million. Millicom accounts for this operation as a subsidiary, using the full consolidation accounting method.

        UNE Telecomunicaciones S.A. ESP, a company owned and controlled by the municipality of Medellín, and Empresa de Telecomunicaciones de Bogotà ETB S.A. ESP, a company owned and controlled by the municipality of Bogotà, each own 24.99% of the share capital of Colombia Móvil. Emtelco (a subsidiary of EPM), Colvatel (a subsidiary of ETB) and Empresa Aguas del Oriente Antioqueño (a subsidiary of EPM) each own one share in Colombia Móvil in order to comply with the minimum legal requirement of five shareholders.

        Mobile telephony was introduced in Colombia in 1993. The country was divided into three zones, with two licenses per zone, in band A and B in the 850 Mhz frequency band. Millicom operated in the northern zone of Colombia through a subsidiary called Celcaribe S.A. from 1993 to 2001 when it sold the business to América Móvil. After an initial period with six regional mobile players, the industry went through a consolidation process and today there are four mobile companies: Movistar, belonging to the Telefónica group, Comcel belonging to América Móvil, Avantel, a digital trunking operator (privately owned) and Colombia Móvil, majority owned by Millicom.

        Colombia Móvil S.A. ESP was awarded three licenses in February 2003 to offer Personal Communications System (PCS) services in the three zones, covering all of Colombia. The PCS licenses each have a term of 10 years and allow Colombia Móvil to offer voice, data and video services without additional license requirement for value added services. Additionally, Colombia Móvil has one license for offering carrier services, with a term of 10 years, extendable for 10 more years. Colombia Móvil S.A. ESP is operating in Colombia with GSM/GPRS technology, on the 1900 MHz band, with 40Mhz of spectrum in the 1900MHz band composed of 30 MHz awarded with the PCS license in 2003 with a 10yrs duration and 10MHz awarded in August 2008 for the same validity period as the PCS license.

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        In addition to the PCS license, Colombia Movil has another license that permits to offer several telecommunication services, named "Título Habilitante Convergente" which was awarded in April 2008 and it has a term of 10 years renewable. Through this license, Colombia Movil is offering value added services, international gateway services since July 2003 and is able to offer bearer services.

        Colombia Movil launched a 3G trial service in key cities on the last quarter of 2008.

        Colombia is a "calling party pays" country. Interconnection is mandatory and it cannot be interrupted without previous permission from the regulator. Colombia Móvil has fully operational interconnection agreements for voice and SMS services with the other mobile operators and is considering the interconnection conditions for other data services, such as MMS.

        The Communications Ministry manages the radio electric spectrum and in addition there is a regulatory entity known as the Telecommunications Regulatory Commission (CRT), which is in charge of issuing and controlling the regulatory framework applicable to the industry.

        The Colombian telecommunications market is very competitive with about 30 fixed local operators, two mobile operators, one mobile PCS, one digital trunking and around thirty five long distance operators, which are owned by private and public shareholders. Colombia Móvil has interconnection with all fixed operators through direct or indirect agreements. Interconnection charges have been commercially agreed or imposed by regulation, on December 2007 important reductions in interconnection charges were issued. Mobile operators mutually pay interconnection charges for call termination. As of December 31, 2008 Colombia Móvil had a market share of approximately 8,4%.

        Colombia Móvil rebranded and redesigned its services using tigo® in the last quarter of 2006. According to the Superintendencia de Industria y Comercio, the country has an estimate of 40 million active mobile subscribers reaching a penetration of 90%, most of which are using prepaid.

        As at December 31, 2008, Colombia Móvil's network comprised 2,680 radio base stations with the capacity to handle a maximum of 3.5 million concurrent subscribers. The network covered 78% of the total population at the end of 2008. The network is GSM/GPRS, EDGE and 3.5G enabled.

Paraguay

        Paraguay's governmental system is a Constitutional Republic. The 35-year military dictatorship of Alfredo Stroessner was overthrown in 1989 and, despite a marked increase in political infighting in recent years, relatively free and regular presidential elections have been held since then. President Nicanor Duarte Frutos of the Partido Colorado political party oversaw a period of economic recovery and greater stability of public finances after taking office in 2003. Presidential elections which took place last year resulted in the election of Fernando Lugo (a former bishop in alliance with the main opposition party, the Liberal party).

        Paraguay has a market economy characterized by a large informal sector. Soya and other agricultural products as well as meat are being exported to Mercosur, Europe and other countries, (66% of economic growth was due to exports of agricultural products) this, together with royalties from Itaipu (the largest hydro electric power plant worldwide) and remittances from Paraguayans living abroad, represent the main income sources. A large proportion of the population derives their living from agricultural activity, often on a subsistence basis. It is estimated that about 35% of the population continued to live below the poverty line in 2008. During the 1990s, the average annual growth rate in GDP per capita was negative with growth of only 0.5% between 1990 and 1995. Most observers attribute Paraguay's relatively poor economic performance to political uncertainty, corruption, limited progress on structural reform, and deficient infrastructure. The economy rebounded between 2003 and 2008 as growing world demand for commodities combined with high prices and favorable weather to support Paraguay's commodity-based export expansion. The real GDP growth rate was estimated at 4.7% in 2008. Paraguay had a population estimated at 7 million in 2008.

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        The Telecommunications Law of 1995 was aimed at liberalizing the sector through the creation of the Comisión Nacional de Telecomunicaciones (Conatel), the regulatory authority of the telecommunications sector. Although the law succeeded in opening up the mobile and value added sectors, including the internet service provider market, state owned incumbent Copaco has retained its monopoly position in the fixed-line and international calls market. This monopoly remains despite Conatel's decision to enforce regulation which will allow international connectivity to Internet Fiber Optic networks in the border with Argentina or Brazil, as VoIP services, though this is rejected by Copaco workers' Union.

        Telecel Paraguay is 100% owned by Millicom and started operations in 1992. It primarily operates a GSM network which is GPRS / EDGE enabled. Telecel also operates the largest broadband wireless network with WiMAX in Paraguay and was the market leader in the Paraguayan broadband market in 2007. In 2008, Telecel launced 3G services.

        Until 1998, Telecel enjoyed a monopoly position in the mobile market when Personal (owned by Telecom Italia) entered the market as the second operator. In 1999, Vox (a joint venture between KDDI Corporation of Japan and Mr. Toyotoshi, a local businessman) entered the market with a GSM network as the third operator. Hutchison Whampoa owned Porthable entered the market as the fourth mobile operator in 2001, followed in 2005 by América Móvil who acquired Porthable, re-named CTI, from Hutchison Whampoa, currently operating under the brand name Claro.

        Telecel was awarded a 10-year license for an 800MHz network in 1991, which was renewed in October 2001 until October 2006, when the license was again renewed until 2011. In 1997, The 1900MHz PCS license that expired in November 2007 was renewed for an additional 5 years period (until November 2012). This license is renewable for successive five-year periods. The ISP services and data transmission licenses were awarded in 1999, renewed in 2005 and 2004 and will expire in 2010 and 2009, respectively.

        Tigo Paraguay subscribers grew 33% in 2008. By the end of 2008, Tigo had 2,747,872 subscribers. At December 31, 2008, 737 radio base stations were in place.

        In August 2008 Tigo launched the Fiber to the Home services (FTTH), with an initial phase of 25 Central Offices and an initial capacity of 2,000 ports, covering the metropolitan area of Asuncion, Ciudad del Este and Encarnación.


AFRICA

        Millicom's Africa cluster consists of its mobile operations in Chad, the Democratic Republic of Congo, Ghana, Mauritius, Senegal and Tanzania. Our African licenses covered approximately 153 million people as at December 31, 2008.

Chad

        Chad's government system is a unitary republic based on the amended constitution of June 2005. The country endured three decades of civil war as well as an invasion by Libya before peace was restored in 1990. The government finally drafted a democratic constitution and held flawed presidential elections in 1996 and 2001. In 1998, a rebellion broke out in northern Chad, which continues to sporadically flare up despite several peace agreements between the government and the rebels. In 2005 new rebel groups emerged in western Sudan (Darfur) and have made probing attacks into eastern Chad. Power remains in the hands of an ethnic minority. In June 2005, President Idriss Déby held a referendum successfully removing constitutional term limits. In April 2006 an attempted coup against Mr. Déby's government was defeated. In May 2006, Mr. Déby was re-elected president for a five-year term. At the time of the election, the country was facing a growing conflict with Sudan, high unemployment, and a growing insurgency fueled by deserting members of the Chadian military and the United Front for Democratic Change rebel group. During the first two weeks of February 2008 rebel groups opposing the Government of Mr. Deby made attacks on cities along the Sudanese border and into N'Djamena. By order of the Government all networks were shut down in N'Djamena and along the Sudanese border.

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        Chad's primarily agricultural economy continues to be supported by major oil and gas projects which started in 2000. Over 80% of the country's population relies on subsistence farming and livestock for its livelihood. Chad's economy has long been handicapped by its landlocked position, high energy costs, and a history of instability. Chad relies on foreign assistance and foreign capital for most public and private sector investment projects. A consortium led by two U.S. companies has been investing $3.7 billion to develop oil reserves, estimated at 1 billion barrels, in southern Chad. The nation's total oil reserves has been estimated to be 2 billion barrels. Oil production came on stream in late 2003 and Chad began to export oil in 2004. Although cotton, cattle, gum arabic are important commodities produced for export in Chad, around 97% of the country's exports are derived from the oil and gas industry. Following the resumption of IMF assistance in early 2005, a new poverty reduction and strategy paper has begun to broadly shape future economic policy. Poverty remains a key issue in Chad with approximately 80% of the population living below the poverty line in 2006, and a 2008 GDP per capita estimated at $1,600. Real GDP growth in 2008 was estimated at 1.7%. Chad became a member of the World Trade Organization in 1996. Chad had a population of about 10 million in mid-2008 and had about 400,000 refugees from Sudan (Darfur) and Central Africa on its soil.

        The Ministry of Posts & Telecommunications was responsible for regulation of the telecoms sector until the Telecommunications Act was passed in 1998. The enactment of the law paved the way for the creation of a new regulatory authority, the Office Tchadien de Régulation des Télécommunications (OTRT), in 2000. In the same year, the Société des Télécommunications du Tchad (Sotel Tchad) was established to operate basic fixed-line telephony services in the country during a five-year exclusivity period. The amount of fixed telephone lines installed was estimated at 13,000 in 2004. The government is considering a partial privatization of Sotel Tchad although no timetable has yet been set.

        Millicom has an 87.5% equity interest in Millicom Tchad. The remaining 12.5% of the company is owned by a local business man, Mr. David Abtour. Millicom accounts for this operation as a subsidiary, i.e. using the full consolidation accounting method.

        Celtel Tchad, in which Kuwait based Zain (formerly MTC) is the 100% majority shareholder, is the only other major mobile operator in Chad.

        Millicom Tchad launched commercial operations in the capital city, N'Djamena, in October 2005. The company offers tigo® branded prepaid services over its GSM network and services include GPRS, EDGE, MMS and e-PIN and has an international gateway. In November 2004, Millicom Tchad was awarded a 10-year license to operate a nationwide GSM network in Chad. The company's license was amended in July 2005 to allow for international gateway operations and in January 2007 for GPRS/Edge. Millicom Tchad does not have a WiMAX license because no such licenses have yet been issued in Chad.

        As at December 31, 2008 Millicom Tchad's GSM network comprised 216 radio base stations with the capacity to handle a maximum of 850,000 concurrent subscribers and the network covered 54% of the total population.

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Democratic Republic of Congo (DRC)

        The DRC's government system is a unitary republic. Following the withdrawal of Rwandan forces from eastern DRC in 2002, the Pretoria Accord was signed by all relevant parties to end four years of regional war involving Angola, Chad, Namibia, Sudan and Zimbabwe supporting the Congolese regime being challenged by Rwanda and Uganda. A transitional government was set up in July 2003 with Joseph Kabila. He was joined by four vice-presidents representing the former government, former rebel groups and the political opposition. New elections had been due by June 2005 after a transition period of two years. The transitional government held a successful constitutional referendum in December 2005 and elections considered generally free and fair for the presidency, National Assembly, and provincial legislatures in 2006. These were the first democratic elections in about 40 years, since the election of Patrice Lumumba, Congo's first ever elected head of state. President Kabila was inaugurated president in December 2006. Provincial assemblies were constituted in early 2007, and elected governors and national senators in January 2007. 2008 saw again the war in the East starting again with one million refugees displaced, international community and UN fully involved into the humanitarian crisis.

        The economy of the DRC, a nation endowed with vast potential wealth, has declined drastically since the mid-1980s. The war, which began in August 1998, dramatically reduced national output and government revenue, increased external debt, and resulted in the deaths of about 3.5 million people from violence, famine, and disease. Foreign businesses curtailed operations due to uncertainty about the outcome of the conflict, lack of infrastructure, and the difficult operating environment. Conditions improved in late 2002 with the withdrawal of a large portion of the invading foreign troops. The transitional government has reopened relations with international financial institutions and international donors, and President Kabila has begun implementing reforms. Much economic activity lies outside the GDP data. Economic stability improved in 2003 - 7, although an uncertain legal framework, corruption, and a lack of openness in government policy continues to hamper growth. In 2005 - 07, renewed activity in the mining sector, the source of most exports, boosted the government's fiscal position and GDP growth. Business and economic prospects are expected to improve as a result of the announcement in February 2007 of the new government. Economic growth as measured by real GDP growth in DRC was estimated at over 7% in 2007, largely driven by the country's main industries such as mining, mineral processing and textiles. The country continues to suffer from severe lack of infrastructure and continued instability and attacks by rebels in the eastern parts of the country (Ituri region). DRC became a member of the World Trade Organization in 1997. DRC had a population estimated at about 66 million in 2007. GDP per capita was estimated at $300 in 2007. The percentage of persons living below the poverty line is not available but is clearly very large.

        As 2008 ends, the international crisis is now hitting DRC with all commodities (wood, minerals) exports dropping by more than 50% compared to previous quarter. Consequently, 50% of the mining companies already closed down, laid off more than 300 K employees and resulting in a deep recession in the Katanga region. According to the Governor of Central Bank of Congo, the crisis will result in the Franc Congolese dropping against US dollar in coming months.

        DRC's incumbent fixed line operator is the "Office Congolais des Postes et des Télécommunications" (OCPT). It operates an outdated, poorly managed analogue fixed-line network of approximately 10,000 lines mainly concentrated in the capital city of Kinshasa. The Autorité de Régulation de la Poste et des Télécommunications du Congo (ARPTC) is in charge of regulating the telecommunications sector. Legislation has been prepared but not yet implemented which will formally end the OCPT's monopoly and allow for market liberalization. To date, the government has no developed telecommunications policy. As the DRC lacks the funds to invest in a modern fixed-line infrastructure, the country's mobile sector has been facing high demand in recent years.

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        Millicom has a 100% equity interest in Oasis S.P.R.L. and accounts for this operation as a subsidiary, i.e., using the full consolidation accounting method.

        Millicom acquired Oasis from Orascom Telecom on September 13, 2005 for a total consideration of US$35 million and promptly engaged in the process of rebuilding the company's network coverage, product and service offering, marketing strategy and distribution network. This turnaround was completed during 2006 together with an accelerated network build-out and the building of a regional organization to support direct distribution effectively. Oasis also has an international gateway.

        Discussions have continued with the relevant authorities about whether, as a result of the acquisition of Oasis by Millicom, a license transfer fee of $14,8 million may be due under a ministerial decree dated July 29, 2005. Millicom's position is that no transfer fee is due because the wording of the law in question does not apply to the specific transaction structure by which Millicom acquired Oasis. However, there is a risk that Oasis may not be able to avoid the payment of the transfer fee in 2009.

        Three operators (Starcel, Comcel and Afritel) were offering limited analogue and CDMA mobile services in DRC when Oasis entered the market with its GSM offering. These operators had ceased to exist by the end of 2003. Initially Celtel Congo, owned by Kuwait based Zain (formerly MTC), was the only other GSM operator in the market, becoming the leading provider of mobile services in DRC with coverage in almost 100 cities. In 2001, Congolese Wireless Networks (CWN) entered into a joint venture with South African mobile operator Vodacom, creating a new operator, Vodacom Congo, which launched GSM services in DRC in April 2002 and extended its coverage to a large number of cities. The fourth operator, CCT, jointly owned by Chinese telecoms equipment provider ZTE (51%) and the DRC government (49%), launched its GSM network in January 2002.

        After several years of underinvestment, Oasis' market position had declined to a number four position in terms of subscribers when it was acquired by Millicom in mid-September 2005. Since then, Millicom has built up and re-launched the operation by introducing tigo® in January 2007 by offering a combination of improved coverage and quality of mobile voice services, innovative products and services, a direct distribution network, and a new pricing strategy. Starting with 50K subs in January 2007, tigo DRC ended 2008 with more than million subscribers (1,048K)..

        In November 1997 Oasis was awarded a 20-year license to operate a fixed-line network in DRC. An amendment to the license was signed in October 1999 which allows the company to construct a nationwide GSM network. Oasis does not have a WiMAX license. However Wimax operators already exist in DRC, positioned mainly in Kinshasa.

        Other GSM licenses were granted in 2008 to the following operators: Niletel (already present in Sierra Leone), Hits Telecom (present in Tanzania and Equatorial Guinea) and MTN.

        3G licenses should be auctioned in 2010 according to the Ministry of Telecommunications in charge to organize the auction.

        As of end of 2008, Oasis' GSM network comprises 607 base stations with the capacity to handle a maximum of 2 million concurrent subscribers. The network covers 30% of the total population, so 20 million people.

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Ghana

        On March 6, 1957, Ghana (formerly the Gold Coast), became the first sub-Saharan country in colonial Africa to gain independence. The country's constitution was temporarily suspended in 1981, following a series of alternating military and civilian governments. A new constitution, restoring multi-party politics, was approved in 1992 with Lt. Jerry Rawlings, being democratically voted in power for a term from 1992 to 1996 and another from 1996 to 2000. President Rawlings, was however constitutionally prevented from running for a third term in 2000, thus allowing now ex president John Kufuor an opportunity to govern Ghana from 2000 till the just ended second term, in December 2008. In December 2008, Ghanaians again enjoyed a free and fair election, voting President Evans Atta Mills as president from 2009 till 2012.

        Ghana's key industries include mining, lumber, light manufacturing, aluminum smelting and food processing. Gold, timber and cocoa production are major sources of foreign exchange. Ghana remains dependent on international financial and technical assistance from foreign bodies and governments. The country opted for debt relief under the IMF-World Bank's heavily indebted poor countries program in 2002 and in July 2004 it satisfied the program's conditions and the decision was taken to give Ghana debt relief of approximately US$3.5 billion on debt it owed to international institutions, resulting in debt service savings of approximately US$100 million per annum for the following 20 years. Policy priorities include tighter monetary and fiscal policies, accelerated privatization and improvement of social services. Ghana had an estimated 6.3% real GDP growth in 2008 and inflation rate at close to 16%. Ghana has been plagued with a recent energy crisis as its main source of electricity (the Akosombo hydro-electric dam) was unable to generate enough electricity to meet the needs of the growing population and the expanding industrial activities. The energy crisis lasted until the last quarter of 2007 when the water level in the dam improved slightly and the power generation became more stable. Ghana's GDP per capita was estimated at $1,500 in 2008. Although no reliable recent figures are available, it is estimated that at least a quarter of the estimated current population of 23million (December 2008) continues to live under the poverty line.

        Ghana has been at the forefront of Africa in liberalizing its telecommunications sector. In the early 1990s, the government recognized that the industry was underdeveloped but had the potential to stimulate economic growth. Consequently, the government introduced several initiatives to liberalize the industry to pave the way for competition and infrastructural improvement. Barely over a decade ago, was the National Communications Authority (NCA) established to oversee the implementation of government regulations and act as the mainstream regulatory body for the industry.

        Millicom Ghana (tigo) was the first mobile operator in Ghana having commenced operations in 1992. Millicom Ghana further pioneered the concept of prepaid services in Ghana in 1998. Tigo was the second largest mobile operator in Ghana as at December, 2008. In addition to Millicom Ghana, four other companies offer mobile services in the country: Kasapa, MTN, OneTouch and Westel. After nearly a decade of relatively slow growth, the mobile market in Ghana started seeing considerable growth in penetration starting in 2001 as a result of several favorable factors, including the development of a regulatory framework, increased competition and the improving macroeconomic environment. Mobile penetration has increased in recent years from 7% to almost 44% at the end of 2008.

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        MTN, a South African mobile operator previously known as Areeba, began operations in 1996 as the third operator and operates a nation-wide GSM 900 MHz network. As at December 2008 it was estimated to have the highest subscriber base amongst all the mobile operators in Ghana. The start of operations of MTN resulted in significant erosion in Millicom Ghana's market share and a consequential loss of its leadership position mainly due to the fact that it was not operating GSM service until 2002. MTN currently has the largest network coverage in Ghana. OneTouch is a division of Ghana Telecom, Ghana's main fixed line service provider, operating a GSM 900 MHz network. In 2000, OneTouch entered the market as the fourth operator when Millicom Ghana was applying for its GSM license. OneTouch was not allowed to launch commercial operations until July 2002. Kasapa, majority owned by Hutchison Whampoa, entered the market as the second operator with an AMPS network in 1995 when Millicom was enjoying its market monopoly. The company now operates (CDMA) service with limited coverage. Kasapa, formerly known as Celltel, is the smallest Mobile operator in Ghana. Westel, the national fixed line operator was bought by Zain during 2007. Westel has both fixed and mobile license and started providing services in 2008. Glo, a Nigerian operator, is expected to launch in 2009 as they started to preparing their network.

        The telecommunications sector in Ghana is regulated by the National Communications Authority (NCA). NCA has been in operation for the past decade and reports to the Ministry of Communications. The primary function of the NCA includes the issuance of telecommunication business licenses, the regulation of interconnection rates, and ensuring the provision of good quality services to the public.

        In December 2004, the government awarded GSM licenses to all four mobile operators in Ghana. Before this date, the operations were run based on a permission to use an allocated frequency. Millicom Ghana's GSM license authorizes it to provide mobile and local fixed wireless services. Although Millicom Ghana applied for a GSM license in 2000, it was not allowed to launch GSM services for approximately two years until July 2002 when it eventually launched its GSM operation, which led to an important growth in its subscriber base. NCA finally issued Millicom Ghana a formal GSM operating license in December 2004, valid for 15 years. Under this license, Millicom Ghana has 8 MHz of spectrum in the 900 band and has been granted an additional 10 MHz in the 1800 band. Millicom Ghana also acquired an International Gateway license in June 2005. This license is valid for 10 years.

        In March 2006, Millicom Ghana introduced tigo® and offered an array of Value-Added Services (VAS): General Packet Radio Services (GPRS), Wireless Application Protocol (WAP), Multimedia Messaging Services (MMS), Caller Ring Back Tones (CRBT) and other interactive value added services. Millicom Ghana acquiried a 3G license in the last quarter of 2008, but it has not yet started to prepare its current network to be compatible.

        Millicom Ghana's GSM network had a total of 665 radio base stations and the capacity to handle over 4.9 million concurrent subscribers at December 31, 2008. Its network covered slightly over 81% of the total population as at the same date.

Mauritius

        Mauritius' government system is a parliamentary democracy. After almost four centuries under Dutch, French and British control, the country gained its independence in 1968. A stable democracy with regular free elections, Mauritius has attracted considerable foreign investment and has earned one of Africa's highest per capita incomes. Sir Anerood Jugnauth has been president since 2003 and Navinchandra Ramgoolam of the Labor Party was elected prime minister in the July 2005 elections.

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        Since 1968 Mauritius has developed from a low-income, agriculturally based economy to a middle income diversified economy with growing industrial, financial and tourist sectors. For most of the period, economic growth (as measured by real GDP) has been between 5% and 6% per year, which has resulted in more equitable income distribution, increased life expectancy, and significantly improved infrastructure. Real GDP growth was estimated at over 5% in 2007 and GDP per capita (at PPP) at $11k. About 10% of the Mauritius population lived under the poverty line in 2007. Sugarcane is grown on approximately 90% of the cultivated land area and accounts for 25% of export earnings. The government's development strategy centers on foreign investment, expanding local financial institutions and expanding the domestic ICT industry. Mauritius, with its strong textile sector, is well positioned to take advantage of the Africa Growth and Opportunity Act. Mauritius had a population of about 1.3 million in mid 2008 .

        The Information and Communication Technology Authority (ICTA) is the country's telecommunications regulator. Mauritius has the highest mobile and fixed-line penetration rates in sub-Saharan Africa. The domestic telecommunications market is dominated by Mauritius Telecom.

        Millicom has a 50% equity interest in Emtel Limited. The remaining 50% of the company is owned by a local partner, Currimjee Jeewanjee & Co. Ltd, a leading diversified group in Mauritius. The two shareholders in Emtel jointly control the company. Millicom accounts for this operation as a joint venture, i.e., using the proportionate accounting method.

        Emtel entered the market in 1989 as the first mobile operator in the country. Until 1996 Emtel enjoyed a monopoly position when Cellplus, owned by incumbent Mauritius Telecom, entered the market as the second operator with the launch of a GSM network. As Emtel launched its GSM service offering in 1999, three years after its competitor, Emtel experienced a significant decline in market share at the end of the 1990s. Emtel launched 3G services in Mauritius in November 2004, making it the first mobile operator to offer such services in Africa. A third mobile operator, Mahanagar Telephone (Mauritius) Ltd., entered the market in December 2006 using CDMA technology.

        Emtel operates a GSM network which is GPRS enabled and a UMTS/3G /HSDPA network.

        Emtel owns licenses for mobile services, international long-distance and internet services . Emtel was awarded a 10-year license in 1989, including a seven year exclusivity period. Emtel's license was modified in November 2000 and is valid for a period of 15 years. Furthermore, Emtel obtained additional spectrum for UMTS/3G services in November 2004, an international long-distance license in December 2003 (valid until 2018) and an internet service license in May 2004 (valid until 2019). Since May 2006, Emtel has had temporary rights to offer WiMAX based services on a trial basis, and acquired a WiMAX license in March 2007. Emtel has a WIMAX network with currently 11 base stations and an HSDPA network of 65 base stations. HSPA trials are currently in progress. Implementation of the Telecommunications Directive (1 of 2008) to reduce interconnect tariffs to the state-owned fixed-line infrastructure has been implemented in May 2008.

        As at December, 2008-, Emtel's GSM network comprised 196 base stations with the capacity to handle a maximum of 485,000 concurrent subscribers, and covered 98% of the total population. As at the same date, Emtel's 3G network had 183 base stations with the capacity to handle 100,000 concurrent subscribers.

Senegal

        Senegal's government system is a unitary republic under multiparty democratic rule, having gained its independence in 1960. The political environment in the country passed a key milestone when the opposition socialist party led by Abdoulaye Wade came to power in the 2000 presidential elections and was re-elected President in free and fair elections in February 2007. Senegal remains one of the few stable democracies in Africa.

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        Real GDP growth was estimated at 4.8% in 2008 and GDP per capita at $1,800. About half of the population continues to live under the poverty line. The government continues to support the New Partnership for Africa's Development which, with the backing of the G8, aims to increase donor support and inflows of foreign direct investment to African countries in exchange for improvements in governance. Senegal also continues to pursue a donor supported economic reform program as outlined in the IMF's three-year poverty reduction and growth facility approved in April 2003. Senegal still relies heavily upon outside donor assistance. Under the IMF's Highly Indebted Poor Countries (HIPC) debt relief program, Senegal benefited from eradication of two-thirds of its bilateral, multilateral, and private sector debt. In 2007, Senegal and the IMF agreed to a new, non-disbursing, Policy Support Initiative program.

        The country's key industries include agriculture and fishing, mining, fertilizer production and petroleum refining. High unemployment, however, continues to prompt illegal migrants to flee Senegal in search of better job opportunities in Europe. Senegal was also beset by an energy crisis that caused widespread blackouts in 2008. Senegal became a member of the World Trade Organization in 1995. In September 2005, the World Bank and the IMF agreed to support Senegal's accelerated growth strategy, combining the goals fixed under the poverty reduction and growth facility with the goal of increasing real GDP growth from its current level to 8% p.a. by 2015. Senegal had a population of about 13 million in 2008.

        The telecommunications sector in Senegal was reformed in 1985 with the creation of state owned Sonatel. The country made commitments under the World Trade Organization's Basic Telecommunications Agreement to introduce a regulatory structure promoting competition by the end of 1997 and a new legislation was adopted in 1996, providing for the opening up of Sonatel's capital to private foreign and national partners and liberalization of some segments of the telecommunications market. Consequently, France Telecom acquired a 33% stake in Sonatel in 1997 and later increased the holding to 42.3%; other shareholders include the Senegalese government (27.7%), employees (10%), and the remaining shares are traded on the local stock exchange.

        In 2001 the government passed an updated Telecommunications Law aimed at bringing about further liberalization of the sector, mainly through the establishment of a new regulatory authority, the "Agence de Régulation des Télécommunications" (ART). ART is responsible for licensing, spectrum management, tariff approval, interconnection rates and frequency allocation. The law also paved the way for the opening of rural telephony to private investment as a means of achieving universal service.

        Senegal has developed one of the most extensive and modern telecommunication infrastructures in Africa. Mobile services were introduced in 1996 and, since the introduction of competition in 1999 with the start of Sentel's commercial operations, the number of mobile subscribers has grown substantially. Sonatel, controlled by France Télécom and Expresso controlled by Sudatel (services launched in January 2009) are the other mobile operators in Senegal in addition to Millicom's Sentel.

        Sentel was awarded a 20-year concession to operate a nationwide network in July 1998. The concession is renewable every five years after the expiry of the original concession, in 2018, subject to the approval of the Senegalese authorities and provided Sentel has complied with the terms of the concession. At the time of the grant of the concession, the Senegalese government had announced certain amendments to the concession. No amendments to the concession have been implemented to date. The government that took office in 2000 repeatedly publicly questioned the status and the validity of Sentel's concession. In August 2002, Millicom and the government entered into an agreement whereby they agreed to negotiate in good faith certain mutually acceptable new conditions that would constitute an amendment of Sentel's 1998 concession. In 2008 the government again questioned the status and the validity of Sentel's concession. This disagreement has led the government of Senegal to institute court proceedings against Sentel and for Sentel to institute arbitration proceedings against the Republic of Senegal with the International Center for the Settlement of Investment Disputes (ICSID).

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        On November 11, 2008 Millicom International Operations B.V. (MIO B.V.), a wholly-owned Millicom subsidiary and Sentel instituted arbitration proceedings with the International Center for the Settlement of Investment Disputes (ICSID) against the Republic of Senegal under provisions of Sentel license and international law. MIO B.V. and Sentel seek compensation for the purported expropriation of the Senegal license and monetary damages for breach of the license.

        On the same day, the Republic of Senegal instituted court proceedings in Senegal against Millicom and Sentel and has sought court approval for the revocation of Sentel's license and sought damages against Sentel and Millicom. Millicom believes that the action filed by the Republic of Senegal is baseless and also ignores the agreement between Sentel and the Republic of Senegal to submit any dispute concerning the license to an international arbitration forum.

        Sentel launched its commercial operations in 1999 as the second mobile operator in the country and it was the first mobile operator to introduce GPRS services. Sentel launched tigo® in November 2005. Sentel does not yet have a WiMAX license.

        As of December 31, 2008 Millicom had a 100% equity interest in Sentel.

        As of December 31, 2008 Sentel' s GSM network comprised 527 radio base stations with the network capacity to handle a maximum of 2,3 million concurrent subscribers and covered 82.8% of the urban population and 60.9% of the rural population.

Tanzania

        Tanzania's system of government is a federal republic formed by the union in 1964 of Tanganyika and Zanzibar. President Jakaya Mrisho Kikwete came to power after winning the last democratic elections held on December 14, 2005. One-party rule came to an end in 1995 with the first democratic elections held in the country since the 1970s. Zanzibar's semi-autonomous status and popular opposition have led to two contentious elections since 1995, which the ruling party won despite international observers' claims of voting irregularities. President Kikwete is continuing carrying out economic reforms that gathered pace during two terms in office of the previous president, Benjamin Mkapa.

        Tanzania is one of the poorest countries in the world. The economy depends heavily on agriculture, which accounts for almost half of GDP, provides 85% of exports, and employs 80% of the work force. Topography and climatic conditions, however, limit cultivated crops to only 4% of the land area. Industry traditionally featured the processing of agricultural products and light consumer goods, as well as tourism. The World Bank, the International Monetary Fund, and bilateral donors have provided funds to rehabilitate Tanzania's out-of-date economic infrastructure and to alleviate poverty. The government and the IMF have agreed to replace the poverty reduction and growth facility (PRGF), which ran to August 2006, with a policy support instrument (PSI), which provide extensive external monitoring of the government's reform efforts but would give no financial support, unlike the PRGF program. The PDI will continue to set the medium/term policy framework and maintain macroeconomic stability while the government pushes ahead with its long-term five-year National Strategy for Growth and Reduction of Poverty (NSGRP), usually referred to by its Swahili acronym (MKUKUTA), which is due to run to June 2010. Long-term growth through 2005 featured a pickup in industrial production and a substantial increase in output of minerals, led by gold. Recent banking reforms have helped increase private-sector growth and investment. Continued donor assistance and solid macroeconomic policies supported real GDP growth of almost 7% in 2007. Tanzania became a member of the World Trade Organization in 1995. Tanzania has a population of more than 39 million in 2007, with a growth of about 2%, 44% of the population is under the age of 14. Its 2007 GDP per capita was estimated at $1,100 and in 2004 (latest available figure) about 35% of the population lived below the poverty line.

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        Tanzania was among the first African countries to liberalize its telecommunications sector, with all segments of the market except fixed-line services now accessible to the private sector. In 1997 the government introduced its National Telecommunications Policy covering the period until 2020. Key goals of the policy initiative are to increase tele-density, develop fixed-line service coverage of rural areas, facilitate investments by domestic and international companies and institutions, and provide a regulatory framework to encourage private sector involvement and competition, with the goal to gradually divest the state's shareholding in the incumbent operator TTCL. The Tanzania Communications Regulatory Authority (TCRA) was established in 2003 and is responsible for the allocation and management of radio spectrum in Tanzania.

        Following the buy-out of the minority shareholder, Ultimate Communications Limited, in January 2006, Millicom owns 100% of MIC Tanzania Limited. Due to an attachment order on all the shares in MIC Tanzania, the 15.6% shareholding acquired from the minority shareholder has yet to be registered at the local Companies Registrar's office. The attachment order is the result of a lawsuit instituted in Tanzania by a disgruntled former employee. Millicom expects the issue of the judgment lifting the attachment order to occur during 2009. Although there is no assurance that the judgment will be in Millicom's favor, we expect it to be as the legal basis for the order is erroneous. Millicom accounts for this operation as a subsidiary, i.e., using the full consolidation accounting method.

        MIC Tanzania was the first mobile operator in Tanzania, launching commercial services in 1994 that initially covered Dar es Salaam, Zanzibar, Arusha and Mwanza. In 1999, it introduced its first GSM service offering and analogue services were discontinued in October 2005.

        The other mobile telephony operators in Tanzania are:

    Vodacom Tanzania, 65% owned now by Vodafone who recently took control of the operation and 35% owned by local Partner, entered the market in August 2000 and has become the leading provider of mobile services in Tanzania in terms of subscribers.

    Zain Tanzania, in which Kuwait-based MTC has a 100% shareholding, launched GSM services in the country in November 2001. With the same share composition 65% Zain and 35% local partner

    Zantel, jointly owned by the government of Zanzibar, Emirate Telecommunication Company, Kintbury Investment of the Channel Islands and a local technology firm, introduced GSM services in Zanzibar and the islands of Unguja and Pemba in August 1999, and entered the Tanzanian mainland in June 2005 through a national roaming agreement with Vodacom Tanzania. 65% owned by etisalat and 35% local equity

    Excellentcom Tanzania Ltd was on November 2007 licensed as a GSM mobile operator but has yet to start operations by 2009.

    On top of that, there are 3 CDMA operator with less than 3% of market share. TTCL, Bol, rural netco ltda,

    And the recently license awarded epocha, dovotel and mycell which are supposed to be rolling out their networks by 2009/10 (in total 11 licenses for mobile operators in Tanzania)

        In January 1994 MIC Tanzania was awarded a 15-year license to operate a nationwide mobile network and, in January 2004, the company's license was extended to a 25-year license expiring in January 2019. MIC Tanzania does not have a WiMAX license, but it will obtain one as part of the migration to the new converged licensing framework. At the moment its under negotioation since all spectrum has been awarded already.

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        In May 2007 we migrated to the converged licensing framework which is technological neutral. MIC Tanzania has been issued with three separate licences for Network facilities Services, Network Services and, Application Services. While the first two will last for 25 years, the last one will last for 5 years renewable.

        The GSM network comprises 937 base stations with a maximum capacity of handling 2,806,481 concurrent subscribers call attempts during busy hour. The network covers 59% of the total population


ASIA

        Millicom has three operations in Asia: Cambodia, Laos, and Sri Lanka. Millicom's Asian operations in Sri Lanka, Cambodia and Laos covered approximately 42 million people as at December 31, 2007.

Cambodia

        Cambodia is a constitutional monarchy. While the head of the state is King Norodom Sihamoni, the head of the Cambodian government ("GoC") is Prime Minister Hun Sen. Cambodia gained independence from France in 1954. Following over 20 years of political turmoil that ended in 1993, the country held its first democratic elections in 1993. Cambodia has been run by a coalition led by the dominant Cambodian Peoples Party ("CPP") since 1998.

        Cambodia has 14 million inhabitants and GDP (PPP) of $2,100. The population is primarily rural based, hence, it is heavily dependent on subsistence farming. Population growth is estimated at 2% p.a. The Cambodia Socio Economic Survey (CSES) of 2007 pegged the total labour force at about 7.5 million, or 56% of total population, with an approximated 0.2 million people entering the labour market every year.

        The Cambodian economy recorded significant growth in recent years due to the GoC's efforts to stabilize the economy and reduce poverty. Such expansion has been driven largely by the growth of the garment and tourism industries has produced a double digit GDP growth of 10 - 13% p.a. between 2004 and 2007. However, the growth for 2008 is estimated to be at 6.8% only due to slower growth expected for garment industry and negative growth for the construction sector, despite tourism sector and financial sector remaining relatively strong. The downward trend is likely to carry over to 2009. The anticipated launch of a Cambodia Stock Exchange Market by end of 2009 and exploitation of the extractive industries such as oil and gas continue to attract attention and draw big investors. As such, the economic growth could be speeded up if significant progress is made in critical reforms.

        Historically low inflation rate averaging 3% between 2002 and 2004 has jumped to 20.2% for 2008. Increase of prices of crude oil and food price in international market and depreciation of the US Dollars, as well as dependency on imported consumer goods, are the main reasons for this huge inflation. However, given the decrease in price of crude oil on international market, inflation is expected to decrease in 2009.

        The Council for Development of Cambodia approved 50 investment projects worth US$4.4 billion in fixed assets, representing five-fold increase in value versus 2007 although there is a decrease of 3.8% in number of projects. Prospects are slim that the number of projects approved in 2009 will increase significantly given the current global financial crisis and limited local skills and resources.

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        Taxation remains the main source of revenue for the GoC and is expected to account for 82.7% of total revenue and the GoC is still heavily reliant on multilateral aid to supplement its budget. Cambodia has been promised foreign aid amounting to nearly US$1 billion for 2009 which will be invested directly into agriculture and health sectors, education and infrastructure improvement. Although the GoC had made steps to diversify the economy, Cambodia remains heavily dependent on agricultural output. Furthermore, because of the high degree of dollarization of the economy, the central bank is limited in its ability to use monetary policy tools to manage the economy. Lack of governance and corruption remain major issues. Poverty and unemployment remain high as the economy is unable to absorb a rapidly growing labor force.

        The Cambodian market is characterized by low mobile (26.5% or 3.6 million subscribers). Cambodia's telecommunication sector is overseen by the Ministry of Post and Telecommunication ("MPTC"), which is both the policy making body and the sector regulator. There is no telecommunications law in place in Cambodia and in the absence of such law, the sector is governed by decrees and sub-decrees issued by MPTC and the Prime Minister. A draft telecommunications law has been in development over last several years by an independent consultant, with assistance from the International Telecommunication Union ("ITU") and the Asian Development Bank ("ADB"). The draft law proposes to separate the regulatory and policy making functions by setting up a regulator that will also assume traditional roles of license issuance, spectrum management, interconnection regulation, universal access, and numbering. The law also require that the provision of network and provision of services to be separated into autonomous independent entities. The draft Telecoms Law was submitted to the National Assembly for review prior to ratification, but was withdrawn without being reviewed. It is not clear when / if the Law will ever be ratified by the government.

        During the first half of 2006, the process was completed to split the MPTC's functions between two separate entities: a regulator still called MPTC, and an operational entity, Telecom Cambodia. A number of other service providers are active in the market, an arrangement which was made possible through joint ventures with the MPTC or under MPTC-issued licenses. While there have been plans to restructure the sector, the market has remained relatively unregulated thus far. Due to decades of war, there is very little telecommunications infrastructure remaining from pre-Khmer Rouge days. As a result, Cambodia bypassed rebuilding fixed-line infrastructure and proceeded straight away to digital mobile technology.

        Royal Millicom Company Ltd ("RMC") owns 100% of the equity in CamGSM. The principal shareholders of RMC are Millicom Holdings Cambodia BV (61.5%) (represented by Millicom International Cellular (58.4%) and a private business partner, Mr Muhammad Akhtar Zaman (3.1%); and the Royal Group of Companies (38.5%), represented by Mr. Neak Oknha Kith Meng.

        In April 1996, CamGSM was awarded a 25-year license to operate a nationwide GSM network, the first such license granted in Cambodia. In July 1999, the license was extended to 35 years. The license contains an option for CamGSM to extend license if it so desires.

        Although CamGSM launched commercial operations in 1997 as the fourth operator in Cambodia, it gained market leadership through early deployment of prepaid services and rapid network roll-out, starting with services exclusively in Phnom Penh that have since been expanded to cover five regional capitals as well as all provinces and major towns. CamGSM led the market with the introduction of new services and development of indirect distribution channels. In 2003, CamGSM succeeded in gaining a license to operate mobile broadband services in Cambodia.

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        There were three other mobile operators in Cambodia when CamGSM entered the market in 1997: Casacom (100% owned by Telekom Malaysia since late 2006), CamTel (wholly owned by Thai conglomerate CP and only offering analogue postpaid mobile services) and Tricelcam (Malaysian). CamGSM established its market position through the introduction of quality services, development of distribution outlets and branding aimed at the youth market segment. As a result, Tricelcam exited the market and CamTel has become unable to compete effectively with its AMPS platform. Shinawatra entered the Cambodian mobile market in 1999, having previously operated in Cambodia with a wireless local loop license, and has competed primarily based on price, providing lower quality services and coverage for lower-end users. Casacom has experienced erosion in its market share mainly due to slow adoption of prepaid services, failing to respond to price competition from Shinawatra, and lack of innovation.. Applifone, a Kazakhstan-based company, and local partners has started services in late 2007. In 2008, new competitors in the market are Cadscomm (launched a 3G network in March 2008 to target high end corporate clients but still with limited coverage) and Viettel (a Vietnamese operator launched in Q4 2008 and is aggressive in giving away free sims to military personnel, government officials and university students). Two new operators are expected to launch in early 2009, Vimpelcom (Russia) and Latelz (Turkey).

        Starting in 2006, the MPTC, acting as regulator, issued new licenses, bringing the total number of licenses issued in Cambodia to 13, and is in the process of restructuring the spectrum to accommodate the new operators. The restructuring saw CamGSM's frequency allocation reduced by 3.2MHz (to 9.3MHz), 5MHz (to 15MHz) 7MHz (to 15MHz) in the 900MHz, 1800MHz and 3G bands respectively. MPTC has been further notified CamGSM that the operating frequency has been reduced to 6.3MHz within the 900MHz spectrum effective from 1st July 2008. As 76% of the cell sites are operating on 900MHz spectrum, CamGSM needs to address the impact on existing infrastructure and all proposed expansion plans as the company may experience network outages and service degradation.

        On March 3, 2006 the MPTC advised CamGSM that it was increasing the revenue share associated with the license. CamGSM appealed the original sub-decree and on March 22, 2006 satisfactorily resolved this issue with the regulator. The revenue share and related taxes associated with the license have increased from around 34% to 43% of revenues, and should the ministry provide better terms to another operator in the future, the revenue share will be adjusted to match, in the spirit of a "most favored nations" clause. In Cambodia we also operate an international gateway, a high-speed data business, and a TV station (2 channels; the new channel MyTV was launched on 9 January 2009).

        At December 31, 2008, CamGSM's GSM network comprised 1,436 base stations. Two new MSCs were implemented to increase network calling capacity to 2.8 million subscribers and the whole of the CamGSM network was enabled to EGPRS (EDGE) with an average capability of MCS06 (up to 48kbps).

People's Democratic Republic of Lao (Laos)

        Laos' is a one-party Communist state. It began decentralizing control and encouraging private enterprises in 1986. Initial closer ties to Vietnam and socialization were replaced with a gradual return to private enterprise, a liberalization of foreign investment laws, and admission to ASEAN in 1997. Economic growth, as measured by real GDP, has averaged approximately 6% per year since the late 1980s except during the Asian financial crisis in 1997. Real GDP growth was 6.5% in 2008.

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        Key industries in the country include mining, electricity generation, timber, agricultural processing, construction, garments and tourism. Despite this high growth rate, Laos remains a country with relatively basic infrastructure facilities, particularly in the rural areas. It has no railroads, a rudimentary road system, and limited external and internal telecommunications, though the government is sponsoring major improvements in the road system with support from Japan and China. Electricity is available in urban areas and in most rural districts. Subsistence agriculture, dominated by rice, accounts for about 40% of GDP and provides 80% of total employment. The economy will continue to benefit from aid from international donors and from foreign investment in hydropower and mining. Construction will be another strong economic driver, especially as hydroelectric dam and road projects gain steam. Laos is taking steps to join the World Trade Organization in the next few years; the resulting trade policy reforms will improve the business environment. On the fiscal side, a pilot scheme for value-added tax regime has been introduced from January 2009 and it is expected to help streamline the government's inefficient tax system. Over 31% of Laos' population was estimated to live below the poverty line in 2007. Real GDP per capita was about $2,100 in 2008. Laos had a population of about 7 million in mid-2008.

        In April 2001, the Lao National Assembly adopted a new Telecommunications Act. One of the most significant changes has been the creation of a separate regulatory unit in the Ministry of Communications, Transport, Post and Construction which was regarded as a first step in the setting up of an independent regulator. In late 2002 two consultancy projects were initiated in the country, one funded by the Asian Development Bank and the other by the World Bank, for the purpose of assisting the government in preparing more detailed telecommunications regulations. In 2008, the government of Laos has split the erstwhile Ministry of Communications, Transport, Post and Construction, in to (1) The Ministry of Public Work and Transport and (2) The National Authority of Post and Communication (NAPT) which is the regulatory body for the telecommunications and directly controlled by the Prime Minister Association Office.

        Following Millicom's entry into neighboring Cambodia and Vietnam, Millicom started operations in Laos through its subsidiary Millicom Lao. In January 2002, Millicom Lao was awarded a 20-year license to operate a nationwide GSM network. Millicom has a 74% equity interest in Millicom Lao. The remaining equity interest in the company is owned by the government of Laos with 22% and by a private partner, Mr Muhammad Akhtar Zaman, who owns 4%. Millicom accounts for this operation as a subsidiary using the full consolidation accounting method.

        The company obtained a 50 MHz spectrum license for the 2.5GHz WiMAX band and permission to operate as Internet service provider in Aug 2006. Additional to this, Millicom Lao was granted an international gateway license in Jan 2008 to operate VoIP IDD calls.

        Although Millicom Lao entered the market as the fourth GSM operator, starting commercial service in April 2003, it has reached a market share of 20.0% as at December 31, 2008, mainly by targeting the younger population, making it the third largest mobile operator in the country in 2008. TiGO® was launched in Laos in March 2007.

        The other mobile operators in Laos are:

    Lao Telecom (MS 55.0%), the incumbent operator which is 49% owned by the government of Laos and 51% owned by Temasek Singapore;

    ETL (MS 21.4%), a spin-off from Lao Telecom and wholly owned by the government of Laos;

    Star Telecom (MS 3.6%), a joint venture which is 51% owned by the Laos Ministry of Defense and 49% owned by Viettel (Vietnam);

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        At December 31, 2008, Millicom Lao's GSM network comprised 274 radio base stations with the capacity to handle a maximum of 300,000 concurrent subscribers and covered 25% of the total population.

Sri Lanka

        Sri Lanka, also known as The Democratic Socialist Republic of Sri Lanka achieved independence in 1948 following decades of occupation by Portuguese, Dutch and the British. Sri Lanka is a South Asian country with a population of about 21 million and an estimated GDP (PPP) of $4,400 for 2008. Sri Lanka is a democratic country with an elected Executive President and a Parliament of 225 members. The last presidential elections were held in November 2005, with the next Presidential and Parliament elections due in 2011 and 2010, respectively. The country has been plagued by years of conflict since 1983, when tensions between the Sinhalese majority and Tamil separatists erupted into a war. Although the government and the rebels entered into a cease-fire in February 2002, violence between the Tamil Separatists (Liberation Tigers of Tamil Eelam, or LTTE, also known as the Tamil Tigers) and government forces intensified again in 2006. The conflict has escalated to a new level due to the Tamil separatists' demonstration of their air power capacity by attacking a government air force base located near the country's main international airport and some other targets in Colombo in 2007. In January 2008 the government formally withdrew from the cease-fire, and the violence has further escalated. However since then the government forces have won back all major towns controlled by the LTTE. According to military reports the LTTE is said to be confined to a mere 50 sq.km land stretch as of end Feb 2009 and the area under their control is further shrinking with the ongoing military advances. The government forces has also managed to reduce LTTEs Sea and Air powers drastically on top of gaining ground.

        In 1977, Sri Lanka opted for a more liberal economic policy, with export-oriented trade, and encouragement of foreign investments. Recent changes in government have brought some policy reversals and the ruling Sri Lanka Freedom Party currently follows a more statist economic approach which seeks to reduce poverty by steering investment to disadvantaged areas, developing small and medium enterprises, promoting agriculture, and expanding the already enormous civil service. The government has halted most privatizations. Although suffering from a brutal civil war that began in 1983. Sri Lanka saw GDP growth average 4.5% in the last ten years, with a brief interruption during the global downturn in 2001. In late December 2004, a major tsunami took about 31,000 lives, left more than 6,300 persons missing and 443,000 displaced, and destroyed an estimated $1.5 billion worth of property.

        Growth, partly spurred by reconstruction after the tsunami, was 6% in 2005 and 7.4% in 2006. Government spending on development and fighting the LTTE drove growth to about 6% per year in 2006 - 08, but high government spending and high oil and commodity prices also pushed inflation past 20% in 2008. Sri Lanka's most dynamic sectors now are food processing, textiles and apparel, food and beverages, port construction, telecommunications, and insurance and banking. In 2008, plantation crops made up only about 20% of exports (compared with more than 90% in 1970), while textiles and garments accounted for more than 40%. About 1.5 million Sri Lankans work abroad, 90% of them in the Middle East. They send home more than $2.5 billion a year. The 25-year civil conflict between LTTE and the government of Sri Lanka has been a serious impediment to economic activities in the past. However with the government's military victories in the North and East this could change for the better. The government has already established public administration in the East of Sri Lanka.

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        Expansion of telecommunication services in Sri Lanka first gained momentum after the liberalization of the sector in 1991 with the establishment of the Office of the Director General of Telecommunications, the country's regulatory authority. Further momentum was gained after the part-privatization of Sri Lanka Telecom (SLT) in 1997. In the same year, the government also established the Telecommunications Regulatory Commission (TRC), which took over from the Office of the Director General of Telecommunications to implement the targets of the National Telecommunications Policy of 1994/95. The provision of basic telephone services in Sri Lanka was the sole responsibility of monopoly provider SLT until 1996, but to achieve the targets detailed in the National Telecommunications Policy private-sector participation in the telecommunications market has been encouraged. The TRC has been tasked with the responsibility of facilitating and monitoring the operational aspects of the various service providers, settling interconnection issues, recommending new licenses to operators, allocating radio frequencies and promoting the general interest of the customer.

        Sri Lanka's telecommunications sector has been lagging behind in the development of a modern network infrastructure following almost two decades of violent political conflict. Due to the lack of nationwide fixed-line telecommunications services, mobile services have played a key role in the development of the telecommunications sector in Sri Lanka. As a result of this conflict, mainly in the north and east of Sri Lanka, mobile telephony operators have had to switch off telecommunication towers in the affected areas at regular intervals. This has hampered the development of mobile telephony mainly in the North and East of the country and negatively impact mobile telephony operators, including Millicom's Tigo (Pvt) Limited (formerly Celltel Lanka Limited).

        In addition to Tigo, three other operators were active in the Sri Lankan mobile market: Dialog Telekom, Sri Lanka Telecom (SLT) owned Mobitel and Hutchison Telecom. There is one dominant fixed-line operator (Sri Lanka Telecom) and two Wireless Local Loop service operators, Suntel and Lanka Bell. Airtel, the mobile company of Bharti Telecom of India entered the Sri Lankan market in Jan 2009 as fifth mobile operator. Dialog, the market leader, started commercial operations of its CDMA network in 2007. The Sri Lanka telecommunications market is characterized by intense price and non price competition. This has resulted in intense marketing and brand image building costs along with lower Rate Per Minute from all operators.

        There was no other mobile operator in Sri Lanka when Tigo (Pvt) Limited (Under the then brand name Celltel), entered the market in 1989. Until 1993, Celltel enjoyed a monopoly position when Call Link (at the initial stages owned by Singapore Telecom) and Mobitel (at the initial stages owned by Telstra) entered the market as the second and third operators. In 1995, Dialog (owned by Malaysia Telekom) entered the market as the fourth operator. After the privatization of Sri Lanka Telecom in 1997, SLT acquired 100% of Mobitel from Telstra. In 1998, Hutchison Telecom acquired Call Link from Singapore Telecom.

        Millicom has a 100% equity interest in Tigo (Pvt) Limited and accounts for this operation as a subsidiary, i.e., using the full consolidation accounting method.

        Tigo (Pvt) Limited operates a GSM network on the 900 Mhz and 1800 Mhz bandwidths. Tigo (Pvt) Limited owns three different licenses, namely a Mobile telephony, an Internet services and an External gateway operations license. Tigo now has a mobile telephone license valid until 2018. As at 31st December 2008, Tigo (Pvt) Limited's GSM network comprised of 940 base stations, and exceeded the 2 million active subscriber base.

        GPRS and EDGE services are already available to Tigo customers. The Company rebranded to Tigo in January 2007 and effective April 2007 the Company name too was changed into Tigo Private Limited.

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AMNET

        Amnet was founded in 1968 and entered into the Central American market with its first acquisition in Costa Rica in 1997. In 1998 it acquired one of the main cable TV operators in El Salvador and one year later it adopted the commercial name Amnet (American Network). In the same year it became the first internet provider in Costa Rica. In 2002 Amnet started offering digital PayTV in El Salvador and Costa Rica and in 2004, Amnet started offering internet services and data transmission, voice and video, followed by fixed telephony services for both residential and corporate segments a year after.

        Today, Amnet has a large network in Central America with approximately 1.2 million homes passed, which together with Millicom's existing mobile network gives Millicom opportunities for future growth along with cost efficiencies. Amnet has approximately 534 thousand Revenue Generating Units ("RGUs") across Central America with cable and broadband subscribers in El Salvador, Honduras and Costa Rica as well as corporate data customers in Guatemala, Nicaragua, El Salvador and Honduras.

        Amnet provides both analog and digital cable TV, broadband Internet, telephony, VOIP and Data Transmission. 60% of its network is composed of a two-way capability system bandwidth of 750 MHz. The remaining one-way video signal network is being rebuilt due to its limited capacity in order to accommodate various services, such as Internet, VOD, VOIP, and data transmission. This kind of network has the benefit for multi-service support for mobile subscribers, particularly for 3G and next-generation services in the near future.

        With the addition of Amnet to Millicom's existing mobile operations within Central America, Millicom can start offering bundled services as a quadruple player in the telecommunications industry. In addition Amnet's optical fiber network can be extended to the existing mobile radio base stations which could strengthen Millicom's competitiveness.

Costa Rica

        Costa Rica is a democratic republic government system. It has a population of 4 million within an area of 51,100 square km. Costa Rica's basically stable economy depends on tourism, agriculture, and electronics exports. Exports have become more diversified in the past 10 years due to the growth of the high-tech manufacturing sector, which is dominated by the microprocessor industry and the production of medical devices. Tourism continues to bring in foreign exchange, as Costa Rica's impressive biodiversity makes it a key destination for ecotourism. Foreign investors remain attracted by the country's political stability and relatively high education levels, as well as the fiscal incentives offered in the free-trade zones. The US-Central American Free Trade Agreement (CAFTA) entered into force on 1 January 2009, after significant delays within the Costa Rican legislature. The country has the highest GDP of the region with a very dynamic economy that has reached a growth up to 8%. Nevertheless, economic growth has slowed in 2009 as the global downturn reduced export demand and invesment inflows.

        Today, Amnet provides cable TV services in Costa Rica. It also serves the internet market together with RACSA (a subsidiary of ICE group), the state owned telecommunications company which holds the internet license. Using its fiber optic infrastructure, Amnet has been the main network provider to RACSA, which uses it to provide data services to corporate clients.

        The government of Costa Rica is moving to a total liberalized telecom market in the country beginning this year. A new Telecommunications Law was enacted in June 2008 and the new regulatory body SUTEL is already operating. Amnet has already requested licenses to provide telephony, internet, data and value added services. The government is also taking steps to introduce competition in the mobile market. The timeframe established by the Vice Ministry of Telecommunications indicates that mobile licenses will be granted in the first half of 2010.

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El Salvador

        Please see earlier section on El Salvador.

        Amnet is the leading player in the cable industry in El Salvador with a market share of approximately 80% of the market. Amnet also provides broadband, and telephony services. Bundled services are becoming increasingly popular and Millicom's acquisition has strengthened Amnet's position since it will now be able to offer the full bundled service packages: cable, broadband, fixed telephony and mobile services, providing its client base with value added services.

Guatemala

        Please see earlier section on Guatemala.

        Amnet through its VPN technology provides a broad number of services with corporate voice over IP, IP video conferencing and IP-PBX. Through private lines, Amnet supplies dedicated circuits between two or more client's offices.

Honduras

        Please see earlier section on Honduras.

        The broadband business began to develop in the late 1990s and today Amnet is one of the major providers of cable modem broadband access. Honduras has a TV household penetration of only 67% and the country's cable TV household penetration is 41%. Amnet is in the process of network rebuild, and recently launched triple play (cable TV, internet, fixed telephony), to be followed in the near future by an integration of Millicom's mobile services. Internet services are offered for residential subscribers and packages are offered for small and medium businesses. For a bigger corporate level, internet services are offered in larger capacities. In addition Amnet offers services such as data transmission, corporate networks, point- to-point connection and fiber access in the region.

Nicaragua

        The Pacific coast of Nicaragua was settled as a Spanish colony from Panama in the early 16th century. Independence from Spain was declared in 1821 and the country became an independent republic in 1838. Violent opposition to governmental manipulation and corruption spread to all classes by 1978 and resulted in a short-lived civil war that brought the Marxist Sandinista guerrillas to power in 1979. Nicaraguan aid to leftist rebels in El Salvador caused the US to sponsor anti-Sandinista contra guerrillas through much of the 1980s. Free elections in 1990, 1996, and 2001, saw the Sandinistas defeated. In the elections of November 2006 the former Marxist Guerrilla leader Daniel Ortega was reelected and its popularity was reconfirmed as its party won the municipal elections in November 2008. Economic growth will slow in 2009, due to decreased export demand from the US and Central American markets, lower commodity prices for key agricultural exports, and low remittance growth—remittances account for almost 15% of GDP.

        In 2005, the fixed line sector was officially privatized and a competition law was issued in 2006, however full liberalization is pending, which is not the case for the mobile sector, which is open to full competition. The Government is contemplating to add competition to the market by introducing a new player using a competitive bidding process set to start this year.


DISCONTINUED AND DIVESTED OPERATIONS

        In December 2008, Millicom decided to exit from its business in Sierra Leone. As a result Millicom's operation in Sierra Leone, Millicom Sierra Leone Limited has been classified as a discontinued operation. Millicom has appointed an investment bank to dispose of this asset.

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        In 2007, Millicom completed the sale of Millicom Paktel, for total proceeds of $284.8 million realising a net gain of $258.3 million. Millicom incurred costs of $14.2 million on the transaction and of the net proceeds of $270.6 million, Millicom received $263.0 million in 2007 and the remaining $7.6 million in January 2008.


OTHER

Property, Plant and Equipment

        We own, or control through long-term leases or licenses, properties consisting of plant and equipment used to provide mobile telephone services. In addition, we and our operating companies own, or control through leases, properties used as administrative office buildings and other facilities. These properties include land, interior office space and space on existing structures of various types used to support equipment used to provide mobile telephone services. The leased properties are owned by private and municipal entities.

        Plant and equipment used to provide mobile telephone services consist of:

    switching, transmission and receiving equipment;

    connecting lines (cables, wires, poles and other support structures, conduits and similar items);

    land and buildings;

    easements; and

    other miscellaneous properties (work equipment, furniture and plants under construction).

Insurance

        We maintain the types and amounts of insurance which we believe to be customary in the industry and countries in which we operate. We have conducted a review and analysis of our worldwide insurance coverage with the assistance of AON Sweden AB. We consider our insurance coverage to be adequate both as to risks and amounts for the business we conduct. As our insurance policies expire around the Group, we are standardizing our coverage along the reccomandations suggested by AON. These changes will increase our coverage terms at similar costs.

ITEM 4A.    UNRESOLVED STAFF COMMENTS

        Not applicable.

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

        The following discussion should be read in conjunction with and is qualified in its entirety by reference to our consolidated financial statements and the related notes thereto included in this report. The following discussion should be read in conjunction with "Presentation of Financial and Other Information" and "Selected Consolidated Financial and Operating Data". Except for the historical information contained in this report, the discussions in this section contain forward looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed below. See "Forward Looking Statements".

        Unless otherwise indicated, all financial data and discussions relating thereto in this discussion and analysis are based upon financial statements prepared in accordance with IFRS.

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Operating Results

        Millicom decided to dispose of its operation in Sierra Leone in December 2008, sold its two operations in Pakistan respectively in June 2006 and February 2007 and sold its operation in Peru in October 2006. These operations have been classified as discontinued operations. The below discussion focuses on the results from continuing operations.

Years Ended December 31, 2008 and 2007

        The following table sets forth certain profit and loss statement items for the periods indicated:

 
   
   
  Impact on
Comparative Results
for Period
 
 
  Year Ended December 31,  
 
  Amount of
Variation
  Percent
Change
 
 
  2008   2007  
 
  (in thousands of U.S. dollars, except percentages)
 

Revenues

    3,412,380     2,623,854     788,526     30 %

Cost of sales

    (1,255,077 )   (973,560 )   (281,517 )   29 %

Gross profit

    2,157,303     1,650,294     507,009     31 %

Sales and marketing

    (690,698 )   (486,779 )   (203,919 )   42 %

General and administrative expenses

    (537,884 )   (418,863 )   (119,021 )   28 %

Other operating expenses

    (61,438 )   (72,949 )   11,511     (16 )%

Operating profit

    867,283     671,703     195,580     29 %

Interest expense

    (149,111 )   (190,410 )   41,299     (22 )%

Interest and other financial income

    32,922     56,378     (23,456 )   (42 )%

Other non operating income (expenses),
net

    (55,593 )   10,213     (65,806 )   (644 )%

Profit from associates

    8,706     4,400     4,306     98 %

Profit before tax from continuing
operations

    704,207     552,284     151,923     28 %

Charge for taxes

    (277,369 )   (87,198 )   (190,171 )   218 %

Profit for the year from continuing operations

    426,838     465,086     (38,248 )   (8 )%

Profit/(loss) from discontinued operations, net of tax

    (22,397 )   245,898     (268,295 )   (109 )%

Minority interests

    113,075     (13,842 )   126,917     (917 )%

Net profit for the year attributable to equity holders

    517,516     697,142     (179,626 )   (26 )%

        We derive our revenues mainly from the provision of telecommunications services such as monthly subscription fees, airtime usage fees, roaming fees, interconnect fees, connection fees for subscription services and other services and equipment sales.

        Total revenues increased by 30% for the year ended December 31, 2008 to $3,412 million from $2,624 million for the year ended December 31, 2007. The increase is mainly due to growth in the number of mobile subscribers. Total mobile subscribers for the years ended December 31, 2008 and 2007 by segment were as follows:

Subscribers
  2008   2007   Growth  

Central America

    11,181,251     8,824,924     27 %

South America

    7,460,771     5,892,726     27 %

Africa

    9,048,652     5,568,148     63 %

Asia

    4,353,278     2,964,738     47 %

Total

    32,043,952     23,250,536     38 %

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        As of December 31, 2008, our worldwide total mobile subscriber base increased by 38% to 32,043,952 mobile subscribers from 23,250,536 mobile subscribers as of December 31, 2007.

        The higher capital expenditure resulted in improvements in the quality of our networks and increased capacity and coverage which attracted additional subscribers. Expansion of the distribution network also helped drive subscriber growth by increasing the points of sale where we sell our products, which makes the products more accessible. We are further driving higher penetration rates in our markets by continuing to drive down the entry price for our services by using innovative distribution channels and techniques. Future subscriber growth is highly dependant on the level of capital expenditure invested in the business; increased points of sale; innovative product development and continued focus on a competitive value proposition.

        Our mobile attributable subscriber base increased to 27,552,430 subscribers as at December 31, 2008 from 19,748,986 subscribers as of December 31, 2007, an increase of 40%. Prepaid subscribers accounted for 96% or 30,893,586 of the total mobile subscribers.

        In Central America, Honduras grew its mobile subscriber base by 45% year-on-year, Guatemala grew by 20% year-on-year and El Salvador by 14%. In South America, total mobile subscribers increased by 27% with Paraguay and Bolivia both showing increases of 33% and Colombia showing and increase of 20%. Growth was particularly strong in Africa. The two best performing markets in terms of net mobile subscriber additions were Tanzania which grew by 93% year-on-year and DRC, which grew by 92% year-on-year, to over 1 million mobile subscribers. Chad also showed a significant year-on-year net mobile subscriber growth of 67%. In Senegal, net mobile subscribers increased by 66% year on year but this growth occurred mainly in the first half of 2008. The dispute with the Senegalese government about the license (see note 28) led to a decline in mobile subscriber growth in the later part of the year. In Asia, mobile subscribers grew by 47% year-on-year, with Laos growing by 79% and Sri Lanka by 69%.

        Revenues:    Revenues for the years ended December 31, 2008 and 2007 by segment were as follows:

Revenue
  2008   2007   Growth  
 
  USD '000
  USD '000
   
 

Central America

    1,376,848     1,149,368     20 %

South America

    1,019,332     809,881     26 %

Africa

    711,364     469,833     51 %

Asia

    261,821     194,772     34 %

Amnet

    43,015          

Total

    3,412,380     2,623,854     30 %

        Central America—Revenue grew by 20% in 2008 to $1,377 million. The lower growth of revenues compared to the recent years was mainly due to a slowing in the growth in remittances of funds from the US during the last quarter of 2008, when previously year remittances were still growing by 5% year on year in Guatemala and Honduras and by 3% in El Salvador. In addition, during 2008, inflation in Central America, particularly on food and other essentials, raised in excess of 20% per annum, affecting consumption of the customers, although in the last quarter inflation began to ease again. The higher cost of basic needs meant that there were fewer discretionary dollars in customers' pockets available for the purchase of mobile minutes.

        Tax changes of the last quarter of 2008 in Honduras and El Salvador on incoming international calls increased the calling costs from overseas into Honduras by $3 cents per minute and into El Salvador by $4 cents per minute. This reduced the total international minutes of calling, although overall minutes of use have held up well, showing that the calling patterns of our existing customers have not changed significantly in 2008 despite the tougher economic environment.

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        South America—Revenues were positively impacted by the weak dollar which impacted the top line in translation for the first nine months of 2008. However, revenue increased by 26%, to $1,019 million for the year ended December 31, 2008, from $810 million for the year ended December 31, 2007. The currencies in South America have devalued as agricultural commodities, a key export, have fallen in price in the last quarter of the year.

        In Bolivia there has been some price pressure in the market but Tigo has differentiated its offer by having low recharges, this to increase the perception of affordability. Also, in terms of accessibility, Tigo has 37% e-PIN penetration and some 8,000 active e-PIN points of sale which makes its products attractive in terms of affordability.

        Tigo Colombia achieved a very positive development in its postpaid customer base in 2008 where it observed a 48% growth. In October 2008, Tigo became the second operator offering 3G services in Colombia. Including 3G revenues, VAS experienced a very strong growth of 112% in 2008.

        In Paraguay, for 2008, the focus was on the launch of 3G, the growth of VAS and improving the inventory levels of scratch cards and airtime in the points of sale. VAS now accounts for 32% of recurring revenue, growing some 78% in 2008 with SMS reaching 89% penetration by the end of 2008.

        Africa—Revenue grew by 51%, to $711 million for the year ended December 31, 2008, from $470 million for the year ended December 31, 2007. The effect of the strengthening dollar compared to the local currencies continued to be a factor that impacted the top line. However, Africa remains Millicom's fastest growing region and an increasing proportion of total Group capex has been invested in the region in 2008. In 2008, the African region was characterized by extensive network expansion and a build-up of the necessary capacity to accommodate the projected growth in the subscriber base. With increased capacity, Tigo is able to roll out products such as its 'Xtreme' offer ("all one can eat for one payment a day"). This offer was adapted by region so the price varies according to affordability and the network capacity, so Millicom could take advantage of spare network capacity in each area.

        In DRC, Tigo has found some real traction with 130% revenue growth year on year, despite inflation and then currency devaluation in the last quarter of 2008 and some instability in the East of the country. In DRC currency devaluation had only limited impact on our business as we trade locally in dollars. Our concern was more associated with the impact of the worldwide economic slowdown on DRC and the lower consumption that could follow the devaluation of the local currency. In all, Tigo has doubled its points of sale in DRC to 61 thousand in 2008.

        Chad has seen the introduction of per second billing which helped increase the perception of price leadership and has increased points of sale to some 14 thousand.

        In Senegal, mobile penetration was 43% and Tigo had 36% market share at year end but a third operator has entered the market in the last quarter of 2008. With the arrival of this operator, the Senegalese government has re-opened the issue on the status of our license in Senegal. This uncertainty caused by Government action has had a negative impact on mobile subscriber growth in the latter part of the year (see note 28).

        Penetration in Ghana reached 44% and Tigo had a market share of 28% at year end; it was number two in the market. One Touch, the third operator, has been taken over by Vodafone and Zain recently entered the market.

        Asia—Revenue was up by 34% to $262 million for the year ended December 31, 2008, from $195 million for the year ended December 31, 2007.

        Competition in Cambodia increased with the acquisition of the fifth player in the market by TeliaSonera and the launch of services by Viettel and this market is expected to become increasingly competitive in the future. In terms of capex, we have rolled out about 560 new sites in 2008, increasing our coverage to 62% of the population with over 1.4 thousand cell sites.

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        In Laos, Tigo was the fastest growing operator in 2008 and recently opened an International Gateway and launched Wimax broadband services. 99 new sites have been rolled out in 2008, giving a total of 274 sites covering 20% of a much dispersed population.

        In Sri Lanka, Tigo reached the 2 million subscribers milestone and recently saw the launch of various products such as 'Bonus on Reload' and 'Copy-A-Tune', which were innovative products that capture customers' imagination. Furthermore, recent independent market research showed that Tigo was the best mobile operator for customer satisfaction. In terms of network, some 300 new sites were built in 2008, bringing the total to 940 and giving over 70% population coverage. Since the year-end Bharti has launched operations in Sri Lanka.

        Amnet—Amnet is now a business with approximately 533 thousand revenue generating units (RGU) across Central America with cable and broadband customers in El Salvador, Honduras and Costa Rica and smaller corporate data businesses in Guatemala and Nicaragua. Revenues increased to $43 million for the year ended December 31, 2008, mainly driven by the broadband business and RGUs increased by 16% year on year. Amnet has an extensive HFC (Hybrid Fiber-Coax) network with 1.2 million homes passed and today some 69% have two-way coaxial cable.

        Further revenue growth will likely come from all of our operations as we continue to implement our triple "A" strategy, particularly in the countries where Tigo® was most recently launched. This strategy will continue to drive higher penetration rates in our markets. The average revenue per user (ARPU) will most likely fall over time as we penetrate deeper into the populations and reach customers with less disposal income. However, this might not happen immediately as we continue to see price elasticity amongst our existing customers and as we continue to develop our valued added services.

        Cost of sales:    Cost of sales increased by 29% for the year ended December 31, 2008 to $1,255 million from $974 million for the year ended December 31, 2007. The primary cost of sales incurred by us is in relation to the provision of telecommunication services relates to interconnection costs, roaming costs, leased lines to connect the switches and main base stations, and the depreciation of network equipment. The interconnection and roaming costs are directly related to revenues and increased as a result of the growth in revenues described above. The cost of leased lines increased as we continued to expand our networks and depreciation increased due to the higher capital expenditures on our networks. Gross profit margin remained stable at 63% for the year ended December 31, 2008.

        Future gross margin percentages will be mostly affected by the mix of revenues generated from calls, VAS and data made exclusively within our networks and those between our networks and other networks. Calls made exclusively within our networks have a higher gross margin because we do not incur interconnect charges to access other networks.

        Sales and marketing:    Sales and marketing expenses increased by 42% for the year ended December 31, 2008 to $691 million from $487 million for the year ended December 31, 2007. Sales and marketing costs were comprised mainly of commissions to dealers for obtaining customers on our behalf and selling prepaid reloads, general advertising and promotion costs for Tigo®, point of sales materials for the retail outlets, and staff costs. The increase in sales and marketing costs was mainly due to higher dealer commissions related to the higher revenues and the increase in mobile subscribers, and to the increased spending on brand awareness and point of sales materials. As a percentage of revenues, sales and marketing expenses increased from 19% for the year ended December 31, 2007 to 20% for the year ended December 31, 2008.

        Future sales and marketing costs will be impacted by the expansion of the distribution network which requires higher spending on brand awareness point of sales materials. The level of future sales and marketing spend will impact both revenues and operating profits.

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        General and administrative expenses:    General and administrative expenses increased by 28% for the year ended December 31, 2008 to $538 million from $419 million for the year ended December 31, 2007. This increase is mainly explained by the increase in network maintenance costs to support the expansion in our mobile operations, but also higher staff costs from more employees needed to manage the growth of Millicom's business. As a percentage of revenues, general and administrative expenses remained stable at 16% for the years ended December 31, 2008 and 2007.

        We continue to seek ways to further reduce our overall general and administrative cost base by identifying synergies to rationalize our support costs, such as sharing information, human resources, best practices and technologies amongst the operating companies. We also look to centralize negotiations of our financings and of our supply contracts for network equipment and handsets.

        Other operating expenses:    Other operating expenses decreased by 16% for the year ended December 31, 2008 to $61 million from $73 million for the year ended December 31, 2007. Last year figures were impacted by the reduction to the goodwill in our Colombian operation of $23 million. However, the costs related to the corporate staff and other group support functions has increased, and the necessity to oversee and support the significant growth in the operating companies will contribute to increase other operating expenses.

        Operating profit:    Operating profit for the years ended December 31, 2008 and 2007 by segment were as follows:

Operating profit
  2008   2007   Growth  
 
  USD '000
  USD '000
   
 

Central America

    642,851     526,369     22 %

South America

    149,848     106,591     41 %

Africa

    95,935     66,716     44 %

Asia

    49,061     41,041     20 %

Amnet

    6,537          

Unallocated

    (76,949 )   (69,014 )   11 %

Total

    867,283     671,703     29 %
Operating profit margin
  2008   2007   Change
in % pts
 

Central America

    47 %   46 %   1  

South America

    15 %   13 %   2  

Africa

    13 %   14 %   (1 )

Asia

    19 %   21 %   (2 )

Amnet

    15 %   %    

Total

    25 %   26 %   (1 )

        As a general rule, the companies with the highest market share, which have already achieved critical mass, were able to improve their operating margins. It was the case for Millicom operations in Central America (El Salvador, Guatemala and Honduras) and in South America (Bolivia and Paraguay).

        In addition Millicom's operation in the Democratic Republic of Congo continued to have operating losses, as it aggressively rolls out the triple "A" operating strategy for the company, incurring sales and marketing and network rollout costs ahead of an expected increase in revenues as a result of the 92% increase in subscribers in 2008. This lead to a reduction in Africa operating profit margin from 14% for 2007, to 13% for 2008.

        Finally, operating profit for Asia decreased from 21% to 19%.

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        In the future, Millicom's operating profitability will depend on the ability to continue growing revenues while maintaining control of costs and capex. Millicom is striving to improve the profitability of its operations in Colombia and the Democratic Republic of Congo and expects both of these operations to generate operating profits in the near future.

        Interest expense:    Interest expense for the year ended December 31, 2008 decreased by 22% to $149 million the year ended December 31, 2008, from $190 million for the year ended December 31, 2007. This mainly because Millicom reviewed in the third quarter of 2008 its position to early repay the Notes. The Board of Directors decided not to early redeem the Notes but to keep them until the contractual maturity date (December 1, 2013). This decision impacted the future expected cash flows and, as a result, the 5% premium accrued in 2007 was completely reversed and an interest income amounting to $29 million was recorded in 2008 (see note 24).

        Interest and other income:    Interest and other income for the year ended December 31, 2008 decreased by 42% to $33 million from $56 million for the year ended December 31, 2007. This was mainly due to the expenditure to acquire Amnet business (see note 4), that reduced the balance of cash and cash equivalent available for the Group.

        Other non operating income (expenses), net:    Other non operating income (expenses), net was an income of $10 million for the year ended December 31, 2007 and was an expense of $56 million for the year ended December 31, 2008. This decrease was mainly the result of higher exchange losses, mainly on borrowings, as a number of currencies weakened against the dollar in the last quarter of 2008.

        Charge for taxes:    The net tax charge for the year ended December 31, 2008 increased to $277 million from $87 million for the year ended December 31, 2007. This increase was mainly due to the impairment of the deferred tax asset booked in 2007 in our operation in Colombia.

        In October 2006, when the Group acquired Colombia Móvil, the operation had tax loss carry forwards. When completing the purchase price allocation, Millicom assessed that it was not probable that these tax loss carry-forwards would be used in the short term. Thus no deferred tax asset was recognized on acquisition. Given the 2007 actual results of Colombia Móvil and its forecasted performance, Colombia Móvil was expected to be profitable in a foreseeable future. Accordingly, an amount of $86 million was recorded in deferred tax assets corresponding to $39 million related to tax losses after the acquisition and $47 million related to tax losses prior to the acquisition. Management estimated that these tax losses were to be used against future taxable profit. As part of these losses existed at the time of acquisition some of the goodwill recorded at acquisition was reversed resulting in an expense of $23 million in 2007 recorded under the caption "other operating expenses".

        As the business conditions have been negatively impacted by the change in the interconnect rates, Colombia performance deteriorated since the first recognition of deferred tax assets. Therefore, it was no longer considered probable that Millicom could utilize these fiscal loss carryforwards in the near future. Therefore the previously recognized deferred tax asset was impaired through the profit and loss statement.

        As a consequence, the Group's effective tax rate increased from 16% in 2007 to 39% in 2008.

        The corporate expenses and interest exceed the income at the corporate holding companies and therefore the net total is not tax deductible. This causes the effective tax rate to increase. Millicom has been both increasing the corporate income by charging the operating companies management and brand fees and decreasing the corporate interest expense by replacing corporate debt with operating company debt.

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        In the future, as the business grows and the corporate staff increases its support to the operations, Millicom expects to be able to charge additional management fees and brand fees to the operating companies as the revenues of the operating companies grow, thus increasing the corporate income. In addition, as the Group's profit before tax grows, it will further reduce the impact of the net corporate expenses and interest on the Group's effective tax rate. In 2009 we expect that the beneficial impact of these three factors will likely be, at least partially, offset by the net losses expected to be incurred by the Democratic Republic of Congo business, which may be non recoverable.

        The Group effective tax rate was also impacted by operating companies that are taxed on revenues rather than profit before tax. There is a risk that these situations could change and that these operating companies could be taxed on profits before tax in future years. This would likely increase the Group effective tax rate.

        Net profit for the year attributable to equity holders of the company:    The net profit for the year ended December 31, 2008 was $517 million compared to a net profit of $697 million for the year ended December 31, 2007. Profit from continuing operations decreased to $427 million for the year ended December 31, 2008 from $465 million for the year ended December 31, 2007 for the reasons stated above. The loss from discontinued operations for the year ended December 31, 2008 was $22 million compared to the profit from discontinued operations for the year ended December 31, 2007 of $246 million.

Operating Results

Years Ended December 31, 2007 and 2006

        The following table sets forth certain profit and loss statement items for the periods indicated.

 
   
   
  Impact on
Comparative Results
for Period
 
 
  Year Ended December 31,  
 
  Amount of
Variation
  Percent
Change
 
 
  2007   2006  
 
  (in thousands of U.S. dollars, except percentages)
 

Revenues

    2,623,854     1,570,086     1,053,768     67 %

Cost of sales

    (973,560 )   (609,888 )   (363,672 )   60 %

Gross profit

    1,650,294     960,198     690,096     72 %

Sales and marketing

    (486,779 )   (245,826 )   (240,953 )   98 %

General and administrative expenses

    (418,863 )   (240,936 )   (177,927 )   74 %

Other operating expenses

    (72,949 )   (37,613 )   (35,336 )   94 %

Other operating income

        4,036     (4,036 )   (100 )%

Gain(loss) from sale of subsidiaries and joint ventures, net

        8,099     (8,099 )   (100 )%

Operating profit

    671,703     447,958     223,745     50 %

Interest expense

    (190,410 )   (120,510 )   (69,900 )   58 %

Interest and other financial income

    56,378     36,383     19,995     55 %

Other non operating expenses, net

    10,213     (1,145 )   11,358     (992 )%

Profit from associates

    4,400     1,483     2,917     197 %

Profit before tax from continuing operations

    552,284     364,169     188,115     52 %

Charge for taxes

    (87,198 )   (117,587 )   30,389     (26 )%

Profit for the year from continuing operations

    465,086     246,582     218,504     89 %

Loss for the year from discontinued operations, net of tax

    245,898     (86,599 )   332,497     (384 )%

Minority interests

    (13,842 )   8,964     (22,806 )   (254 )%

Net profit for the year attributable to equity holders

    697,142     168,947     528,195     313 %

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        Subscribers:    Total subscribers for the years ended December 31, 2007 and 2006 by segment were as follows:

Subscribers
  2007   2006   Growth  

Central America

    8,824,924     5,164,167     71 %

South America

    5,892,726     4,329,973     36 %

Africa

    5,568,148     3,383,625     65 %

Asia

    2,964,738     2,025,625     46 %

Total

    23,250,536     14,903,390     56 %

        We derive revenues from the provision of telecommunications services such as monthly subscription fees, airtime usage fees, roaming fees, interconnect fees, connection fees for subscription services and other services and equipment sales.

        As of December 31, 2007, our worldwide total mobile subscriber base increased by 56% to 23,250,536 mobile subscribers from 14,903,390 mobile subscribers as of December 31, 2006. Growth was particularly strong in Central America and Africa (71% and 65%, respectively). There were significant increases recorded in the following countries; the Democratic Republic of Congo (986%), Honduras (88%), Chad (73%), Ghana (67%) and Guatemala (66%). This subscriber growth was driven by substantially higher capital expenditure in 2007. The higher capital expenditure resulted in improvements in the quality of our networks and increased capacity and coverage which attracted additional subscribers. Expansion of the distribution network also helped drive subscriber growth by increasing the points of sale where we sell our products, which makes the products more accessible. We are further driving higher penetration rates in our markets by continuing to drive down the entry price for our services by using innovative distribution channels and techniques.

        Our attributable subscriber base increased to 19,748,986 mobile subscribers as at December 31, 2007 from 12,798,513 mobile subscribers as of December 31, 2006, an increase of 54%.

        Revenues:    Revenues for the years ended December 31, 2007 and 2006 by segment were as follows:

Revenue
  2007   2006   Growth  
 
  USD '000
  USD '000
   
 

Central America

    1,149,368     796,111     44 %

South America

    809,881     321,038     152 %

Africa

    469,833     306,091     53 %

Asia

    194,772     146,846     33 %

Total

    2,623,854     1,570,086     67 %

        Total revenues increased by 67% for the year ended December 31, 2007 to $2,624 million from $1,570 million for the year ended December 31, 2006. The increase is mainly due to strong growth in the number of subscribers which increased by 56% to 23 million as of December 31, 2007 from 15 million as of December 31, 2006. Revenue growth was seen throughout Millicom's segments and especially in South America where revenues increased by 152% for the year ended December 31, 2007, mainly as a result of having an additional $357 million in revenue in Colombia as for 2007 there was a full year of revenues for Colombia compared to one quarter in 2006. We have also seen a very strong growth in revenue from value-added services particularly in Paraguay. The increase in revenue for the year ended December 31, 2007 was 53% in Africa, 44% in Central America and 33% in Asia.

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        Central and South America were the key drivers of this growth reflecting the success of tigo® in its third year. tigo® represents our triple "A" operating strategy of a quality and widely available network, ubiquitous distribution and affordable products and services. Implementing this strategy across all our operations has been the key to driving revenue growth. This strategy drove higher penetration rates in our existing markets which increased the subscriber base. Furthermore, the existing subscribers increased their average airtime usage through additional voice minutes as we made the products more affordable and through the take up of value-added services.

        Cost of sales:    Cost of sales increased by 60% for the year ended December 31, 2007 to $974 million from $610 million for the year ended December 31, 2006. The primary cost of sales incurred by us is in relation to the provision of telecommunication services relates to interconnection costs, roaming costs, leased lines to connect the switches and main base stations, and the depreciation of network equipment. The interconnection and roaming costs are directly related to revenues and increased as a result of the growth in revenues described above. The cost of leased lines increased as we continued to expand our networks and depreciation increased due to the higher capital expenditures on our networks. Lastly, cost of sales was impacted by our Colombian business where we had a full year of costs in 2007 compared to one quarter in 2006. Gross profit margin increased slightly to 63% for the year ended December 31, 2007 compared to 61% for the year ended December 31, 2006.

        Sales and marketing:    Sales and marketing expenses increased by 98% for the year ended December 31, 2007 to $487 million from $246 million for the year ended December 31, 2006. Sales and marketing costs are comprised mainly of commissions to dealers for obtaining customers on our behalf and selling prepaid reloads, general advertising and promotion costs for tigo®, point of sales materials for the retail outlets, and staff costs. The increase in sales and marketing costs was mainly due to higher dealer commissions related to the higher revenues and the increase in subscribers, increased spending on brand awareness and point of sales materials, particularly where we were aggressively rolling out tigo® in Africa and Asia, and increased sales and marketing costs in Colombia as Millicom rebranded this operation to tigo® at the end of 2006. Furthermore, for 2007 there was a full year of sales and marketing expenses for Colombia compared to one quarter in 2006. As a percentage of revenues, sales and marketing expenses increased from 16% for the year ended December 31, 2006 to 19% for the year ended December 31, 2007.

        General and administrative expenses:    General and administrative expenses increased by 74% for the year ended December 31, 2007 to $419 million from $241 million for the year ended December 31, 2006. This increase is mainly explained by the increase in network maintenance costs to support the expansion in our operations, but also higher staff costs from more employees needed to manage the growth of the business. In addition, there was an increase in share compensation costs. Finally, for 2007 there was a full year of general and administrative expenses for Colombia compared to one quarter in 2006. As a percentage of revenues, general and administrative expenses increased to 16% for the year ended December 31, 2007, from 15% for the year ended December 31, 2006.

        Other operating expenses:    Other operating expenses increased by 94% for the year ended December 31, 2007 to $73 million from $38 million for the year ended December 31, 2006. This increase is mainly explained by:

    the increased size of its corporate staff and other group support functions to oversee and support the significant growth in the operating companies. Millicom will further add to its corporate staff in 2008 in order to manage and support further growth in the coming years; and

    a reduction to the goodwill in our Colombian operation of $23.4 million as due to the better than expected results of this operation a deferred tax benefit for pre-acquisition net operating losses was recognised.

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        Operating profit:    Operating profit for the years ended December 31, 2007 and 2006 by segment was as follows:

Operating profit
  2007   2006   Growth  
 
  USD '000
  USD '000
   
 

Central America

    526,369     334,923     57 %

South America

    106,591     49,657     115 %

Africa

    66,716     69,813     (4 )%

Asia

    41,041     36,070     14 %

Unallocated

    (69,014 )   (42,505 )   62 %

Total

    671,703     447,958     50 %

 

Operating profit margin
  2007   2006   Change
in %pts
 

Central America

    46 %   42 %   4  

South America

    13 %   15 %   (2 )

Africa

    14 %   23 %   (9 )

Asia

    21 %   25 %   (4 )

Total

    26 %   29 %   (3 )

        Total operating profit for the year ended December 31, 2007 was $672 million compared with $448 million for the year ended December 31, 2006. This increase in operating profit was due to the higher revenues. The operating profit margin fell from 29% to 26% mainly due to Millicom's operation in Colombia which incurred an operating loss of $31 million for the year ended December 31, 2007 compared to a operating loss of $5 million for the period from October 2, 2006, the date of acquisition by Millicom of this operation, to December 31, 2006. In addition Millicom's operation in the Democratic Republic of Congo increased its operating losses from $16 for the year ended December 31, 2006 to $35 million for the year ended December 31, 2007 as it aggressively rolls out the triple "A" operating strategy for the company, incurring sales and marketing and network rollout costs ahead of an increase in revenues as a result of the 986% increase in subscribers between December 31, 2006 and December 31, 2007. The operating margin for the segments varied from 2006 to 2007 mainly as a result of the different stages of implementation of the triple "A" operating strategy among the companies. In most cases, those where the triple "A" model was implemented before 2006, mainly Central and South America (excluding Colombia), were able to improve their operating margins. Those where the model has been implemented later, most African countries and Sri Lanka, saw pressure on the operating margins as they incurred costs ahead of revenues to implement the model, rebrand as tigo® and grow their businesses.

        Interest expense:    Interest expense for the year ended December 31, 2007 increased by 58% to $190 million from $121 million for the year ended December 31, 2006. This increase arose primarily as a result of Millicom's decision in the last quarter of 2007 to redeem its 10% Senior Notes in December 2008. Accordingly an additional interest expense of $31 million was taken, representing the remaining balance of the amortised costs of the 10% Senior Notes and a 5% premium to redeem these Notes before maturity. In addition interest expense increased as a result of the additional borrowings in the operations used to fund Millicom's increased capital expenditure

        Interest and other income:    Interest and other income for the year ended December 31, 2007 increased by 55% to $56 million from $36 million for the year ended December 31, 2006. This increase was mainly due to the interest income on the higher cash balances.

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        Other non operating expenses, net:    Other non operating income (expenses), net increased from an expense of $1 million for the year ended December 31, 2006 to an income of $10 million for the year ended December 31, 2007. This increase was mainly as a result of higher exchange gains, mainly on borrowings, as a number of currencies strengthened against the dollar offset by a charge of $5 million in respect of the repurchase by Millicom of part of the 10% Senior Notes.

        Charge for taxes:    The net tax charge for the year ended December 31, 2007 decreased to $87 million from $118 million in the year ended December 31, 2006. This decrease is due to recognition of a deferred tax benefit of $86 million in our operation in Colombia as a result of the net operating losses assumed as part of the acquisition of this operation and the losses incurred since the acquisition date. This benefit was offset by the increased tax charge as a result of the increased profitability of our operations in 2007. The Group's effective tax rate decreased from 32% in 2006 to 16% in 2007, mainly as a result of the recognition of the deferred tax assets in our operation in Colombia and a lower proportion of net corporate expenses and interest to total Group profit before taxes.

        The corporate expenses and interest exceed the income at the corporate holding companies and therefore the net total is not tax deductible. This causes the effective tax rate to increase. Millicom has been both increasing the corporate income by charging the operating companies management and brand fees and decreasing the corporate interest expense by replacing corporate debt with operating company debt.

        The Group effective tax rate is also impacted by operating companies that are taxed on revenues rather than profit before tax. In 2006, the Group effective rate benefited from these situations.

        Net profit for the year attributable to equity holders of the company:    The net profit for the year ended December 31, 2007 was $697 million compared to a net profit of $169 million for the year ended December 31, 2006. Profit from continuing operations increased to $465 million for the year ended December 31, 2007 from $247 million for the year ended December 31, 2006 for the reasons stated above. The profit from discontinued operations for the year ended December 31, 2007 was $245 million compared to the loss from discontinued operations for the year ended December 31, 2006 of $87 million and was significantly impacted by the gain on the sale of Paktel.

Liquidity and Capital Resources

Overview

        We believe that our funding is sufficient for our present requirements.

        As of December 31, 2008, Millicom's total consolidated outstanding debt and other financing was $2,158 million (2007: $1,834 million). Of this amount, $453 million (2006: 659 million) represented the Company's indebtedness and $1,705 million (2007: $1,175 million) represented the consolidated indebtedness of our subsidiaries and joint ventures.

        Of the total consolidated outstanding debt and other financing of $2,158 million:

    $453 million ($480 million in 2007), net of deferred financing fees, was in respect of the 10% Senior Notes;

    $1,705 million ($1,175 million in 2007) was in respect of the indebtedness of our operations.

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        At the operating company level, we seek, in the long term, to finance the costs of developing and expanding mobile operations on a project-by-project basis. Operations are typically financed initially by contributions from Millicom in the form of equity, shareholders' loans and, in some cases, debt. In many cases, we seek to replace such equity and debt with third party financing, which after the initial stages of an operating company's development, is non-recourse to Millicom whenever possible. Sources of financing at the operating company level have included vendor financing provided by equipment suppliers, project financing from commercial banks and international agencies such as the International Finance Corporation ("IFC"), PROPARCO, COFACE, EKB and the Overseas Private Investment Corporation ("OPIC") and bank lines of credit.

        We seek to obtain financing at an operating company level in the relevant local currency so as to limit the impact of currency fluctuations, although this is not always possible because of the lack of long term credit facilities in most countries where we trade.

Cash Upstreaming

        The continued improvement in the operating and financial performance of our operations has allowed us to continue to upstream excess cash to the Company, through a combination of dividends, technical service fees and shareholders' loans reimbursement. For the year ended December 31, 2008, we upstreamed $543 million from 9 of the 16 countries in which we operate. This upstreamed cash will be used to service our corporate debt obligations and for further investment. In 2007, we upstreamed $656 million from 13 of 16 countries in which we operated. In 2006, we upstreamed $361 million from 15 of 16 countries in which we operated.

Cash Flows

Years Ended December 31, 2008 and 2007

        For the year ended December 31, 2008, cash provided by operating activities was $1,147 million, compared to $850 million for the year ended December 31, 2007. The increase is mainly due to the growth of the profitability, as described in the preceding paragraphs.

        Cash used by investing activities was $1,899 million for the year ended December 31, 2008, compared to $836 million for the year ended December 31, 2007. In the year ended December 31, 2008 Millicom used $532 million in the acquisition of Amnet. Millicom also used $1,292 million to purchase property, plant and equipment compared to $851 million for the same period in 2007.

        Financing activities provided total cash of $286 million for the year ended December 31, 2008, compared to $245 million for the year ended December 31, 2007. In the year ended December 31, 2008, we repaid debt of $664 million while raising funds of $1,207 million through new financing and $3 million through the issuance of shares.

        The net cash outflow for the year ended December 31, 2008 was $500 million compared to an inflow of $518 million for the year ended December 31, 2007. Millicom had closing cash and cash equivalents balances of $674 million as at December 31, 2008 compared to $1,175 million as at December 31, 2007.

Years Ended December 31, 2007 and 2006

        For the year ended December 31, 2007, cash provided by operating activities was $850 million, compared to $515 million for the year ended December 31, 2006. The increase is mainly due to the growth of the profitability, as described in the preceding paragraphs.

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        Cash used by investing activities was $836 million for the year ended December 31, 2007, compared to $503 million for the year ended December 31, 2006. In the year ended December 31, 2007 Millicom used cash to purchase $851 million of property, plant and equipment compared to $439 million for the same period in 2006. In 2006, Millicom used $35 million, net of cash acquired, to purchase investments in the Democratic Republic of Congo, Ghana, Honduras and Sierra Leone.

        Financing activities provided total cash of $245 million for the year ended December 31, 2007, compared to $127 million for the year ended December 31, 2006. In the year ended December 31, 2007, we repaid debt of $316 million while raising funds of $546 million through new financing and $34 million through the issuance of shares.

        The net cash inflow in year ended December 31, 2007 was $518 million compared to an inflow of $60 million for the year ended December 31, 2006. Millicom had closing cash and cash equivalents balances of $1,175 million as at December 31, 2007 compared to $657 million as at December 31, 2006.

Investments, Acquisition, Divestments and Capital Expenditures

Investments

        Millicom will continue to invest in its existing mobile operations, where we believe we can generate attractive returns. In addition, we intend to increase our equity ownership in certain existing operations through opportunistic buy-outs of local partners. We may participate in consolidation within our markets through the careful evaluation, selection and pursuit of strategic opportunities. We may also pursue new license opportunities in our adjacent markets where the investment offers group-wide synergy potential. Such synergies include sharing information and best practices about services, human resources, technologies, market strategies, and the centralized negotiation of financings and supply contracts for network and subscriber equipment.

Acquisitions

        On October 1, 2008, the Group acquired 100% interest in Amnet Telecommunications Holding Limited (together with its subsidiaries "Amnet" or "Amnet Group"). Amnet is a provider of broadband and cable television services in Costa Rica, Honduras and El Salvador, of fixed telephony in El Salvador and Honduras, and of corporate data services in the above countries as well as Guatemala and Nicaragua. Acquisition cost amounted to $546 million and net cash acquired to $14 million; net cash used for the acquisition of Amnet therefore amounted to $532 million.

        On October 2, 2006, the Group acquired 50% plus one of the voting shares of Colombia Móvil S.A., a mobile operation in Colombia. The purchase price of Colombia Móvil S.A. was $124 million, including acquisition costs of $2 million, and was financed through borrowings.

        In July, 2006, Millicom completed its purchase for a total consideration of $5 million of the remaining 4% ownership interest in Telefonica Celular del Paraguay S.A., its subsidiary in Paraguay in which Millicom now has 100% ownership. The acquisition was approved by the regulatory authorities on July 12, 2006. Millicom recognised goodwill of $3 million as a result of the acquisition of the minority interest, recorded under the caption "Intangible assets, net".

        On March 14, 2006, Millicom purchased for a total consideration of $35 million the remaining 25% ownership interest in Sentel GSM, its operation in Senegal in which Millicom now has 100% ownership. Millicom recognised goodwill of $31 million as a result of the acquisition of the minority interest, recorded under the caption "Intangible assets, net".

        On January 23, 2006, Millicom purchased for a total consideration of $20 million the remaining 15.6% ownership interest in Millicom Tanzania Limited, its operation in Tanzania in which Millicom now has 100% ownership. Millicom recognised goodwill of $16 million as a result of the acquisition of the minority interest, recorded under the caption "Intangible assets, net".

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Divestments

        The sale of Pakcom, one of Millicom's operations in Pakistan, was completed in June 2006 for $1. As part of the sale of Pakcom Limited, Millicom transferred 10% of its ownership in Paktel Limited to the Arfeen group at no cost to the Arfeen group, reducing Millicom's ownership in Paktel Limited to 88.68%. No gain or loss was recorded on this disposal. This operation has been classified as a discontinued operation in the 2006 financial statements.

        Millicom decided to exit from its remaining business in Pakistan, Paktel Limited, on November 13, 2006. The agreement relating to the sale of our 88.68% interest in Paktel Limited to China Mobile Communications Corporation for an enterprise value of $460 million, resulting in net proceeds of approximately $284 million, was signed on January 21, 2007 and the transaction was completed on February 13, 2007. Paktel Limited has been classified as a discontinued operation in the 2006 financial statements.

        Millicom had entered in October 2003 into a Management Agreement to manage a mobile telephony network for Rafsanjan Industrial Complex Islamic Cooperative Company ("RIC") in Iran. On September 11, 2006, Millicom and RIC mutually agreed to terminate the Management Agreement, mainly because the business relationship with RIC had not developed as favorably as initially expected.

        Millicom also had an option to acquire at book value an equity ownership in a new Iranian company that would operate the mobile network to be contributed by RIC. Between February 9, 2004 and February 9, 2007 Millicom could acquire up to 47% of the equity of this company. After that date and until February 9, 2009, Millicom had the right to acquire an additional 30% of the equity in addition to any shares acquired before that date, provided that the total percentage acquired did not exceed 47%. Millicom intended to exercise the option if, among other conditions, RIC managed to negotiate a favorable interconnection agreement with Telecommunications Company of Iran ("TCI"), the incumbent Iranian telecommunications operator. As RIC failed to obtain favorable interconnection terms from TCI and in consideration of other factors, Millicom irrevocably terminated its rights under the option agreement in November 2006.

        In May 2006, Millicom divested its wholly-owned subsidiary MIC-USA Inc. for $1. A net gain of $6.1 million was recognized from the sale and MIC-USA Inc. ceased to be consolidated from the date of sale. As part of the sale of MIC-USA Inc., Millicom sold Great Universal Inc. and Modern Holdings Inc. Although Great Universal Inc. and Modern Holdings Inc were wholly-owned by Millicom, they were not consolidated because of the existence of outstanding warrants that enabled warrant holders to control Great Universal Inc. and Modern Holdings Inc. These entities were accounted for as financial assets available for sale. As a result, the revaluation reserve was reversed and no gain or loss was recorded on their disposal in 2006.

        Millicom also sold other minor subsidiaries and other joint-ventures in 2006, including Millicom Peru S.A., its operation in Peru, which has been treated as a discontinued operation, for $6.4 million net proceeds resulting in a gain of $2.7 million.

        Millicom has an 80% equity interest in Comvik International (Vietnam) AB ("Comvik") which had entered into a Business Cooperation Contract ("BCC") with a government-owned company to operate a nationwide cellular GSM network in Vietnam (Mobifone). The BCC expired in May 2005 and Millicom had been negotiating with the Vietnamese government to convert the BCC into an equity ownership interest. During the third quarter of 2006, Millicom concluded that it was unlikely that an acceptable agreement would be reached in the near future and therefore has classified Comvik as a discontinued operation from that date. Millicom has no other continuing operation in Vietnam. As of December 31, 2006, Comvik has been presented as an abandoned operation. As such its assets and liabilities are still included under the relevant individual balance sheet captions. There is likely to be limited financial impact from the closure of the BCC in 2007.

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Capital Expenditures

        Our capital expenditure of property, plant and equipment, licenses and other intangibles by geographical and business segment for the years ended December 31, 2008, 2007 and 2006 has been as follows:

 
  2008   2007   2006  

Central America

    294,011     291,678     202,649  

South America

    369,167     325,077     73,649  

Africa

    601,080     337,299     244,745  

Asia

    154,686     93,948     110,084  

Amnet

    11,548          

Unallocated items and discontinued operations

    12,199     7,600     127,054  

Total

    1,442,691     1,055,602     758,181  

        We expect to direct some of our capital expenditures towards our new operation in Rwanda and the roll out of tigo® across the rest of our African operations in 2009.

Commitments to Purchase Network Equipment within One Year

        As of December 31, 2008, we had commitments to purchase network equipment, land and buildings and other fixed assets with a value of $539 million from a number of suppliers, all of which was within one year except $15 million within two years. We expect to meet these commitments from our current cash balance and from the cash generated from our operations.

        As of December 31, 2007, we had commitments to purchase network equipment, land and buildings and other fixed assets with a value of $400 million from a number of suppliers, all of which was within one year except $28 million within two years.

Financing

        We finance our operations on a project-by-project basis at both the operational and parent entity level. Once a license is awarded, we make an initial investment in the form of equity and, in some cases, debt. The local operation typically is granted between six and 12 months to build out its initial mobile telephone network. During this initial phase, we frequently supplement our investment with financing provided by equipment suppliers for the purchase of network equipment. Generally, such financing covers a period of 18 months to three years and is often guaranteed by Millicom. We seek to refinance the vendor financing with longer-term borrowing from commercial banks and international agencies. Where practicable, we endeavor to obtain financing in local currencies and without recourse to Millicom. However, Millicom may guarantee such project financing for an initial period. We intend to continue to pursue a project-by-project approach to fund our systems. If additional investment is required, we seek, whenever possible, to fund such investment through shareholder loans from the Company. As our local operations become more established and local financial markets become more developed, we are increasingly able to finance at the operational level in the local currency on a non-recourse basis. As of December 31, 2008, 32% of our debt at the operating level was denominated in local currency.

        Millicom's total consolidated indebtedness as of December 31, 2008 was $2,158 million and our total consolidated net indebtedness (representing total consolidated indebtedness after deduction of cash, cash equivalents, short-term time deposits) was $1,484 million. Our annual interest expense for the years ended December 31, 2008 and 2007 was $149 million and $190 million, respectively.

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10% Senior Notes

        On November 24, 2003, Millicom issued $550 million aggregate principal amount of 10% Senior Notes (the "10% Senior Notes") due on December 1, 2013. The 10% Senior Notes bear interest at 10% per annum, payable semi-annually in arrears on June 1 and December 1. The effective interest rate is 10.7%.

        The 10% Senior Notes are general unsecured obligations of Millicom and rank equal in right of payment with all future unsecured and unsubordinated obligations of Millicom. The 10% Senior Notes are not guaranteed by any of Millicom's subsidiaries, joint ventures or affiliates, and as a result are structurally subordinated in right of payment to all indebtedness of such subsidiaries, joint ventures and affiliates.

        If Millicom experiences a Change of Control Triggering Event, defined as a rating decline resulting from a change in control, each holder will have the right to require Millicom to repurchase its notes at 101% of their principal amount plus accrued and unpaid interest and all other amounts due, if any.

        During 2007, Millicom repurchased $90 million of the 10% Senior Notes incurring in a charge of $5 million which is recorded under the caption "Other non operating income (expenses), net".

        In October 2007, Millicom decided that it would redeem the balance of the Notes in December 2008 and pay the contractual redemption premium of 5%. As a result, Millicom reclassified the 10% Senior Notes from non current to current and recorded an additional interest expense of $31 million for the year ended December 31, 2007, which represented the increase in financial liabilities due to the recognition of the 5% pre-payment expense and an increase in the amortised cost of the Notes due to the earlier settlement date. Millicom reviewed its position to early repay the Notes in September 2008 and the Board of Directors decided not to early redeem the Notes but to keep them until the contractual maturity date (December 1, 2013). This decision impacted the future expected cash flows and, as a result, the 5% premium accrued in 2007 was completely reversed and an interest income amounting to $29 million was recorded in 2008. In addition the 10% Notes were reclassified as non-current.

4% convertible Notes

        In January 2005, Millicom raised $200 million aggregate principal amount of 4% Convertible Notes due 2010 (the "4% Convertible Notes"). The net proceeds of the offering were received on January 7, 2005 in the amount of $196 million.

        The 4% Convertible Notes were general unsecured obligations of Millicom and rank equal in right of payment with all future unsecured and unsubordinated obligations of Millicom. The rate of interest payable on the 4% Convertible Notes was 4% per annum. Interest is payable semi-annually in arrears on January 7 and July 7 of each year, beginning on July 7, 2005. The effective interest rate was 9.6%.

        The 4% Convertible Notes were constituted by a trust deed dated January 7, 2005 between Millicom and The Bank of New York, as Trustee for the holders of notes.

        Millicom apportioned part of the value of the 4% Convertible Notes to equity and part to debt. The value allocated to equity as of December 31, 2007 was $39 million (2006: $39 million) and the value allocated to debt was $179 million (2006: $171 million).

        As of December 31, 2007, $1 million of the 4% Convertible Notes were converted into 28,686 SDRs.

        On January 22, 2008, Millicom converted a further $196 million of the outstanding bonds into 5,420,235 Ordinary Shares and 202,236 SDRs. On the same day Millicom repaid in cash the remaining $3 million of bonds that were not converted, including accrued interest. The conversion resulted in an increase of equity amounting to $175 million in January 2008.

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Other Debt and Financing

        Millicom's share of total other debt and financing analyzed by operation is as follows:

 
  2008   2007  
 
  US$ '000
  US$ '000
 

Amnet(i)

    231,523      

Bolivia(ii)

    103,111     41,874  

Colombia(iii)

    456,356     436,670  

Democratic Republic of Congo(iv)

    63,256     60,877  

El Salvador(v)

    192,045     199,715  

Ghana(vi)

    138,999     108,244  

Honduras(vii)

    90,817     56,961  

Paraguay(viii)

    64,147     26,019  

Senegal(ix)

    58,309     62,557  

Tanzania(x)

    168,793     51,471  

Other

    137,199     131,137  

Total other debt and financing

    1,704,555     1,175,525  

Of which:

             
 

due after more than 1 year

    1,208,011     945,206  
 

due within 1 year

    496,544     230,319  

        Significant individual financing facilities are described below:

i)    Amnet

        In October 2008 Millicom Cable N.V. signed a 1 year financing agreement with RBS and Standard Bank for $200 million to partly finance the acquisition of Amnet. The loan bears interest for the first six months at $LIBOR plus 2.5%, for months seven to nine at $LIBOR plus 2.875% and months ten to twelve at $LIBOR plus 3.125%. The loan was increased by $30 million in December 2008 through a financing agreement with Nordea. The total loan, amounting to $230 million, is fully guaranteed by the Company. $230 million was outstanding as at December 31, 2008.

        In addition as at December 31, 2008, Amnet had other debt and financing of $2 million.

ii)    Bolivia

        In December 2007, Telefonica Celular de Bolivia SA ("Telecel Bolivia"), Millicom's operation in Bolivia, signed a financing agreement for $40 million with the Nederlandse Financieringsmaatschappij Voor Ontwikkelingslanden, N.V. (FMO), also known as the Netherlands Development Finance Company. The A tranche of $20 million was provided directly by the FMO. This tranche is repayable over 7 years and bears an interest at $ LIBOR rate plus 2.25%. The B tranche of $20 million is provided equally by Nordea and Standard bank. This tranche is repayable over 5 years and bears interest at $ LIBOR plus 2%. Both tranches are guaranteed by the Company and were fully drawn as at December 31, 2008 and 2007.

        In March 2008, Telecel Bolivia signed a 4 year and 9 months financing agreement for $30 million with the International Finance Corporation. The loan bears interest at $LIBOR plus 2% and is fully guaranteed by the Company. This loan was fully drawn as at December 31,2008.

        In addition to the above, Telecel Bolivia also had vendor financings with Huawei (at interest rates of $LIBOR plus 2%) and FPLT totalling $32 million and $1 million of other debt and financing outstanding as at December 31, 2008 (2007: $2 million).

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iii)    Colombia

        In March 2008, Colombia Movil S.A. E.S.P ("Colombia Movil"), Millicom's operation in Colombia, entered into a COP 393 billion ($173 million), 5 year facility with a club of Colombian banks. This facility bears interest at DTF plus 4.5% and is 50% guaranteed by the Company. As at December 31, 2008 $173 million was outstanding on this facility.

        In October 2006, the Company acquired a majority ownership 50% plus 1 share in Colombia Movil. At the time of the acquisition the Company had a COP 168,539 million ($83 million) Hermes guaranteed export credit facility with Citigroup maturing in January 2012. This facility bears interest at IPC plus 6.30% and is 100% guaranteed by the minority shareholders. As at December 31, 2008 $37 million (2007: $54 million) was outstanding under this facility. In addition at the time of acquisition Colombia Movil also had a COP 309,800 million (total of $154 million, of which $94 million outstanding as at December 31, 2007) loan facility arranged by BBVA which was settled in 2008. This facility was bearing interest at DTF plus 4.15% and was 100% guaranteed by the minority shareholders.

        Colombia Movil S.A. E.S.P. also had local currency loans from the minority shareholders outstanding as at December 31, 2008 of $230 million (2007: $230 million). These loans bear interest at DTF plus 4.15% and mature between 2011 and 2013.

        In addition, as at December 31, 2008 Colombia Movil S.A. E.S.P. had no outstanding amount in respect of local currency 60 day treasury credits from various banks (2007: $57 million) and $16 million (2007: $2 million) of other debt and financing, in US$ and local currency.

iv)    Democratic Republic of Congo

        In September 2006, Oasis S.P.R.L. ("Oasis"), Millicom's operation in the Democratic Republic of Congo, entered into a $106 million, 7 year loan from the China Development Bank to finance equipment purchases from Huawei, an equipment supplier. The loan bears interest at $ LIBOR plus 2% and is repayable over 17 equal quarterly installments commencing in 2009. This financing is 100% guaranteed by the Company. As of December 31, 2008, $59 million was outstanding under this facility (2007: $56 million) and in addition Oasis had other debt and financing of $4 million (2007: $5 million).

v)    El Salvador

        In September 2006, Telemovil El Salvador S.A., Millicom's operation in El Salvador, entered into a $200 million 5 year loan. The loan was syndicated amongst a group of local and international banks and was arranged by ABN AMRO, Citigroup and Standard Bank. The loan bears interest at $ LIBOR plus 1.75%. As of December 31, 2008, $180 million of this facility was outstanding (2007: $200 million).

        In December 2008, Telemovil El Salvador S.A., entered into a $12 million 2 year loan with Banco Agrícola Comercial S.A. The loan bears interest at $ LIBOR plus 6%. As of December 31, 2008, the loan was fully drawn.

vi)    Ghana

        In December 2007 Millicom (Ghana) Limited, Millicom's operation in Ghana, entered into a $60 million local 5 year club-deal Facility. The loan bears interest at Libor plus 2%. In parallel a $80 million offshore 7 year DFI (Development Finance Institution) financing which bears interest at Libor plus 2.25% was arranged. As at December 31, 2008, $139 million (2007: $90 million) was outstanding under these facilities.

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        In July 2005, Millicom (Ghana) Limited entered into a $20 million loan agreement with Citibank N.A., 75% guaranteed by the Overseas Private Investment Corporation and 100% guaranteed by the Company. This loan was bearing interest at $ LIBOR plus 2.5% and was repaid in 2008. As at December 31, 2007, $15 million was outstanding under this facility.

        In addition as at December 31, 2008, Ghana had no other debt and financing (2007: $3 million).

vii)    Honduras

        Telefonica Celular S.A., Millicom's operation in Honduras, has facilities with several local banks maturing between 2009 and 2015. These facilities are in dollars and in Lempiras and are unsecured. Interest rates are either fixed or variable, ranging as of December 31, 2008 between 7.4% and 16% (2007: between 7.28% and 10.25%). As at December 31, 2008, the outstanding debt under these facilities was $91 million (2007: $57 million).

viii)    Paraguay

        In July 2008, Telefonica Cellular Del Paraguay, Millicom's operation in Paraguay entered into a $107 million, 8 year loan with the European Investment Bank ("EIB"). The loan is bearing interest at $LIBOR plus 0.125%. The outstanding amount as at December 31, 2008 was $50 million. The EIB is guaranteed for commercial risks by a group of banks.

        In addition as at December 31, 2008, Telefonica Cellular Del Paraguay had $14 million (2007: $26 million) of other debt and financing outstanding.

ix)    Senegal

        In December 2005, Sentel GSM, Millicom's operation in Senegal entered into a XAF12,500 million loan agreement with Crédit Lyonnais Sénégal ("CLS"). This loan bears a fixed interest rate of 8% and is fully repayable at maturity, in December 2010. The outstanding amount in US$ as at December 31, 2008 was $26 million (2007: $28 million). Sentel GSM also entered into a 5 year additional Tranche of XAF7,500 million with CLS in July 2007. This tranche bears an 8.5% fixed interest rate and was fully drawn at the end of 2007. The outstanding amount under this additional Tranche in US$ as at December 31, 2008 was $14 million (2007: $17 million). As at December 31, 2008 Sentel GSM was in breach of its debt covenants under the above facilities and as such these loans were reclassified as current. Negotiations are in progress with the bank to maintain the facilities and to waive the covenants.

        In September 2006, Sentel GSM additionally entered into a XAF2,500 million bridge loan with the Compagnie Bancaire de l'Afrique Orientale (CBAO). This loan was bearing interest at 7% and was repaid in March 2008 (outstanding amount as at December 31, 2007 amounted to $1 million). Additionally in 2007, Sentel GSM entered into a new short term facility with CBAO amounting in to XAF7,500 million maturing on October 31, 2008 and bearing fixed interest of 6.5%. The facility has been rolled over and the amount outstanding as at December 31, 2008 was $18 million (2007: $17 million).

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x)    Tanzania

        In December 2008, Millicom Tanzania Limited, Millicom's operation in Tanzania entered into facilities totaling $228 million comprising of a five year local currency syndicated tranche for TZS95 billion at the 180 days treasury Bill rate plus 3%, a seven year $116 million EKN guaranteed financing with 45% of the facility fixed at 4.1% and 55% of the facility at $LIBOR plus 0.665% and a seven year $40 million tranche with Proparco at $LIBOR plus 2.5%. All tranches are 100% guaranteed by the Company. As at December 31, 2008, the amount outstanding under these facilities was $152 million.

        In March 2007 Millicom Tanzania Limited entered into a new 5 year Citi-Opic facilities, bearing interest rate of LIBOR plus 2.5%, composed of a $17.4 million $ Tranche and a Tranche in local currency up to the equivalent of $5 million. The outstanding US$ amount under these facilities as at December 31, 2008 amounted to $17 million (2007: $23 million).

        At the same time Millicom Tanzania Limited entered into a 5 year $10 million Term Loan with Barclays bearing interest of LIBOR plus 3% and a 5 year $16.5 million vendor financing with Ericsson credit AB, priced at LIBOR plus 2.5%. The amount outstanding as at December 31, 2008 was nil (2007: $8 million) under the Barclays loan and nil (2007: $14 million) under the Ericsson loan.

        Millicom Tanzania Limited had no other debt and financing outstanding as at December 31, 2008 (2007: $6 million).

Guarantees

        In the normal course of business, the Company has issued guarantees to secure some of the obligations of some of its operations under bank financing agreements. As of December 31, 2008, the Company has issued $712 million of guarantees (2007: $206 million).

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 is $1,313 million (2007: $739 million). The assets pledged by the Group for these debts and financings amount to $610 million (2007: $449 million).

Effect of Exchange Rate Fluctuations

        Exchange rates for currencies of the countries in which our companies operate fluctuate in relation to the US$ and such fluctuations may have a material adverse effect on our earnings, assets or cash flows when translating local currency into US$. For each venture that reports its results in a currency other than the US$, a decrease in the value of that currency against the US$ reduces our profits while also reducing our assets, our liabilities, as well as our future dividends. To the extent that our operations retain earnings or distribute dividends in local currencies, the amount of US$ we receive is affected by fluctuations of exchange rates for such currencies against the US$, which could affect our results of operations. In addition, exchange rates are impacting Millicom's earnings, assets and cash flows as we have US$ debts, pushed down to the opoerations, because of lack of available debts in local currencies.

        We generally do not hedge our foreign currency exposures, because of lack of available intruments in the countries where we operate. Millicom had a net exchange loss of $56 million for the year ended December 31, 2008, compared to a gain of $15 million for the year ended December 31, 2007.

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Trend Information

        We believe there is a significant opportunity for rapid growth in our markets due to low mobile penetration in economies with high growth potential and substantial pent-up demand for basic voice telephony services. We believe we can grow our subscriber base and revenue by continuing to focus on prepaid services while controlling costs and maintaining our position with postpaid customers. We are developing a number of non-traditional distribution channels in our operations to expand our market share and reduce our operating costs. There is, however, a risk that, as new competitors enter our prepaid markets, as will be the case in Sri Lanka, Honduras and Ghana in 2009, and price competition intensifies, our prepaid customers may be more likely to move from one mobile operator to another than our postpaid customers. This also has the effect of driving prices down, thus eroding the profitability of the mobile operators. In addition, there is the risk of additional taxes, expecially in those countries that face budget constraints. In that event, we believe our strong service coverage and increasing use of non-traditional distribution channels, competitive tariffs and brand awareness will enable us to compete effectively in our prepaid markets. However, this may not always be the case and, if we determine that the business is not sustainable, we may decide to exit the relevant market.

Research and Development, Patents and Licenses, etc.

        As we established an early presence in most of the markets in which we operate, we have been able to secure our licenses at low cost. Historically, we have been successful in renewing our maturing licenses, generally on terms similar to the original licenses, although we may not be able to do so in the future. When necessary, we enter into partnerships with prominent local business partners through companies over which we typically exercise management control.

        We do not engage in research and development and we do not own any patents.

Off-balance Sheet and Other Arrangements

        Millicom has a number of commitments and contingencies, as described in Note 28 to the consolidated financial statements.

Critical Accounting Policies

        The consolidated financial statements as of December 31, 2008 are prepared in accordance with consolidation and accounting policies consistent with those of the previous financial years.

        In preparing the consolidated financial statements, management needs to make assumptions, estimates and judgments, which are often subjective and may be affected by changing circumstances or changes in its analysis. Material changes in these assumptions, estimates and judgments have the potential to materially alter our results of operations. We have identified below those of our accounting policies that we believe could potentially produce materially different results if we were to change our underlying assumptions, estimates and judgments. For a detailed discussion of these and other accounting policies, see Note 2 of the "Notes to the Consolidated Financial Statements".

Basis of Consolidation

        Entities over which we have control are fully consolidated. Entities over which we have joint control are consolidated using the proportional method that combines our proportional share of assets, liabilities, income and expenses. The definition of control is the power to govern the financial and operating policies of an entity so as to obtain benefits from it and is based on criteria such as the ability to vote through items at the shareholder and board level. The method of consolidation used for each entity is based on management's assessments as to whether they have full or joint control.

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Functional and presentation currencies

        Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The functional currency of each subsidiary, joint venture and associates reflects the economic substance of the underlying events and circumstances of these entities. The Company is located in Luxembourg and its subsidiaries, joint ventures and associates operate in different currencies. The Group's consolidated financial statements are presented in U.S. dollar (the "presentation currency"). The functional currency of the Company is the U.S. dollar because of the significant influence of the U.S. dollar on its operations.

Goodwill

        Goodwill represents the excess of cost of an acquisition over the Group's share in the fair value of the identifiable assets less the liabilities and contingent liabilities of the acquired subsidiary, joint venture or associate at the date of transaction. If the fair value of the identifiable assets, liabilities or contingent liabilities or the cost of the acquisition can be determined only provisionally, then Millicom initially accounts for the goodwill using these provisional values. Within twelve months of the acquisition date, Millicom then recognises any adjustments to these provisional values once the fair value of the identifiable assets, liabilities and contingent liabilities and the cost of the acquisition have been finally determined. Adjustments to the provisional fair values are made as if the adjusted fair values had been recognised from the acquisition date. Goodwill on acquisition of subsidiaries and joint ventures is included in "intangible assets, net". Goodwill on acquisition of associates is included in "investments in 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.

        Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment losses on goodwill are not reversed.

        For the purpose of impairment testing, goodwill acquired in a business combination is, from acquisition date, allocated to each of the Group's cash generating units or groups of cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:

    Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and

    Is not larger than a segment based on either the Group's primary or the Group's secondary reporting format.

        Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a cash-generating unit (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 of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed and the portion of the cash-generating unit retained. Impairment losses related to goodwill cannot be reversed in future periods.

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Trademarks and Subscriber bases

        Trademarks and subscriber bases are recognised as intangible assets only when acquired in business combinations or ownership increase transactions in joint ventures. Their cost corresponds to the fair value as at the date of acquisition. Trademarks and subscriber bases have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the trademarks and subscriber bases over their estimated useful lives. The estimated useful life for trademarks and subscriber bases are based on the specifications of the market in which they exist. Trademarks and subscriber bases are recorded under the caption "Intangible assets, net".

Impairment of Non-current Assets

        The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. The Group determines the recoverable amount based on the higher of its fair value less cost to sell and its value in use and is determined for an individual asset, 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 of the time value of money and the risk specific to the asset. In addition to the evaluation of possible impairment to the assets carrying value, the foregoing analysis also evaluates the appropriateness of the expected useful lives of the assets. Impairment losses of continuing operations are recognised in the consolidated statements of profit and loss in those expense categories consistent with the function of the impaired asset.

        An assessment is made at each reporting date as to whether there is any indication that previously recognised 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 recognised 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 recognised. If that is the case, 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 recognised for the asset in prior years. Such reversal is recognised 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.

        Where no comparable market information is available, management bases its view on recoverability primarily on cash flow forecasts. In addition to the evaluation of possible impairment to the assets carrying value, the foregoing analysis also evaluates the appropriateness of the expected useful lives of the assets.

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Trade receivables

        Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivable is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. 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 amount of the provision is recognised in the consolidated statements of profit and loss within "Cost of sales".

Non-current assets (or disposal groups) held for sale and related liabilities

        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 a sale transaction rather than through continuing use. The liabilities of disposal groups are classified as "Liabilities directly associated with assets held for sale".

Borrowings and borrowing costs

        Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statements of profit and loss over the period of the borrowing using the effective interest method.

        The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguishment, conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option, which is recognised and included in equity, net of income tax effects.

        Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

        Borrowing costs which are not capitalised are recognised as an expense when incurred.

Provisions

        Provisions are recognised 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 recognised 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, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as an interest expense.

Revenue Recognition

        Revenue comprises the fair value of consideration received or receivable for the sale of goods and services, net of value added tax, rebates and discounts and after eliminating sales within the Group.

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        Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

    Equipment revenues

        These revenues consist of the sale of handsets and accessories on a stand alone basis (if sold with other services, multiple element arrangements accounting would then apply). Revenue is recognised when the significant risks and rewards of ownership of handsets and accessories have been passed to the buyer.

    Revenues from provision of telecom services

        These recurring revenues consist of monthly subscription fees, airtime usage fees, interconnection fees, roaming fees and fees from other telecommunications services such as data services, short message services and other value added services. Recurring revenues are recognised on an accrual basis, i.e. as the related services are rendered. Unbilled revenues for airtime usage and subscription fees resulting from services provided from the billing cycle date to the end of each month are estimated and recorded.

        Subscription products and services are deferred and amortised over the estimated life of the customer relationship. Related costs are also deferred, to the extent of the revenues deferred, and amortised over the estimated life of the customer relationship. The estimated life of the customer relationship is calculated based on the percentage of disconnections for the same type of customer which has occurred historically.

    Prepayments

        Prepayments allow the forward purchase of a specified amount of airtime by customers. Revenues are recognised as credit is used. Unutilised airtime is carried in the balance sheet and is included under deferred revenue within "other current liabilities".

    Value added services

        Revenues from value added services such as text messaging, video messaging, ringtones, games etc., are recognised net of payments to the providers of these services when the providers are responsible for the contents and for determining the price paid by the subscriber and as such the Group is considered to be acting in substance as an agent only. Where the Group is responsible for the content and determines the price paid by the subscriber then the revenue is recognised gross.

    Multiple-element arrangements

        Revenue arrangements with multiple deliverables ("Bundled Offers" such as equipments and services sold together) are divided into separate units of accounting if the deliverables in the arrangement meet certain criteria. The arrangement consideration is then allocated among the separate units of accounting based on their relative fair values or on the residual method. Revenue is then recognized separately for each unit of accounting.

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Share-based Compensation

        Up until May 2006, share options were granted to Directors, management and key employees. The fair value of the equity instruments granted in exchange for the services received is recognised as an expense over the vesting period. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example profitability and sales growth targets). Non market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the Group revises its estimate of the number of options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in the consolidated statements of profit and loss, with a corresponding adjustment to equity. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

        Subsequent to May 2006, restricted share awards are granted to the Directors, management and key employees.

        The cost of these equity-transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employee becomes fully entitled to the award (the vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest.

        No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective 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 recognised as if the terms had not been modified. In addition, an expense is recognised for any modification, which 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.

Deferred tax

        Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amount for financial reporting purposes. Deferred tax liabilities are recognised 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 the accounting profit nor taxable profit or loss.

        Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary difference, and the carry-forward of unused tax credits and unused tax losses can be utilised except where the deferred tax assets relating to the deductible temporary difference arise from the 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 the accounting nor taxable profit or loss.

        The carrying amount of deferred income tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

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        Deferred income tax assets and liabilities are measured at the tax rate expected to apply to the year when the assets is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Income tax relating to items recognised directly in equity is recognised in equity and not in the consolidated statements of profit and loss. Deferred tax assets and deferred tax liabilities are offset, if legally enforceable rights exist to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Discontinued operations

        Revenues and expenses associated with discontinued operations are presented in a separate line on the consolidated statements of profit and loss. Comparative figures in the consolidated statements of profit and loss representing the discontinued operations are also reclassified to a separate line. Discontinued operations are those with identifiable operations and cash flows (for both operating and management purposes) and represent a major line of business or geographic unit which has been disposed of or is available for sale.

Recent Accounting Developments

IFRS Developments

        The following new and amended IFRIC interpretations were effective during the year. They did not have any effect on the financial performance or position of the Group.

    IFRIC 11, 'IFRS 2—Group and treasury share transactions'.

    IFRIC 12 Service Concession Arrangements.

    IFRIC 14, 'IAS 19—The limit on a defined benefit asset, minimum funding requirements and their interaction'.

        The following IFRS and IFRIC interpretations were issued with an effective date for annual periods beginning on or after July 1, 2008. The Group has chosen not to early adopt these standards and interpretations.

    IFRS 8 Operating Segments—This standard is to be applied for annual periods beginning on or after 1 January 2009. This standard requires disclosure of information about the Group's operating segments and replaced the requirement to determine primary and secondary reporting segments of the Group. The Group is evaluating the impact on its segmental reporting as the result of the adoption of IFRS 8.

    IAS 1R Presentation of Financial Statements—The revised IAS 1 Presentation of Financial Statements was issued in September 2007 and becomes effective for financial years beginning on or after January 1, 2009. The Standard separates owner and non-owner changes in equity. The statement of changes in equity will include only details of transactions with owners, with all non-owners changes in equity presented as a single line. In addition, the Standard introduces the statement of comprehensive income, which presents all items of income and expense recognized in profit or loss, together with all other items of recognized income and expense, either in one single line statement, or in two linked statements. The Group is still evaluating whether it will have one or two statements.

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    IFRS 3R Business combination and IAS 27R—Consolidated and Separate Financial Statements—The revised standards were issued in January 2008 and become effective for financial years beginning on or after 1 July 2009. IFRS 3R introduces a number of changes in the accounting for business combinations that will impact the amount of goodwill recognized, the reported results in the period that an acquisition occurs, and the future reported results. IAS 27R requires that a change in the ownership interest of a subsidiary is accounted for as an equity transaction. Therefore, such a change will have no impact on goodwill, nor will it give raise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary. The changes introduced by IFRS 3R and IAS 27R must be applied prospectively and will affect future acquisitions and transactions with minority interests.

    IFRS 2 Share-based payments—vesting conditions and cancellations—This amendments to IFRS 2 Share-based payments was published in January 2008 and becomes effective for financial years beginning on or after 1 January 2009. The standard restricts the definition of "vesting condition" to a condition that includes an explicit or implicit requirement to provide services. Any other conditions are non-vesting conditions, which have to be taken into account to determine the fair value of the equity instruments granted. In the case that the award does not vest as the result of a failure to meet a non-vesting condition that is within the control of either the entity or the counterparty, this must be accounted for as a cancellation. The Group does not expect significant implications on its accounting for share-based payments as a result of these amendments.

    IAS 32 (Amendment), 'Financial instruments: Presentation', and IAS 1 (Amendment), 'Presentation of financial statements'—'Puttable financial instruments and obligations arising on liquidation' (effective from 1 January 2009). The amended standards require entities to classify puttable financial instruments and instruments, or components of instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation as equity, provided the financial instruments have particular features and meet specific conditions. The Group does not expected the amendment to have any impact on its financial statements.

    IFRS 1 (Amendment) 'First time adoption of IFRS' and IAS 27 'Consolidated and separate financial statements'(effective from 1 January 2009). The amended standard allows first-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. The amendment also removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor. The amendment will not have any impact on the Group's financial statements.

    IFRIC 16, 'Hedges of a net investment in a foreign operation'. IFRIC 16 clarifies the accounting treatment in respect of net investment hedging. This includes the fact that net investment hedging relates to differences in functional currency not presentation currency, and hedging instruments may be held anywhere in the group. The requirements of IAS 21, 'The effects of changes in foreign exchange rates', do apply to the hedged item. The Group will apply IFRIC 16 from 1 January 2009; it is not expected to have an impact on the Group's financial statements.

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    IFRIC 13 Customer Loyalty Programmes—The interpretation requires that loyalty award credits granted to customers as part of a sales transaction are accounted for as a separate component of the sales transaction. The consideration received in the sales transaction is allocated between the loyalty award credits and the other components of the sale. The amount allocated to the loyalty award credits is determined by reference to their fair value and is deferred until the awards are redeemed or the liability is otherwise extinguished. If the cost of fulfilling the awards is expected to exceed the consideration received, the entity will have an onerous contract and a liability for the excess must be recognised. This interpretation will not have a material impact on Millicom financial position or results.

    IFRIC 15, 'Agreements for construction of real estates' (effective from January 1, 2009). The interpretation clarifies whether IAS 18, 'Revenue', or IAS 11,'Construction contracts' should be applied to particular transactions. It is likely to result in IAS 18 being applied to a wider range of transactions. IFRIC 15 is not relevant to the Group's operations as all revenue transactions are accounted for under IAS 18 and not IAS 11.

    IFRIC 17, 'Distribution of non-cash assets to owners' (effective from July 1, 2009). The interpretation clarifies that a dividend payable should be recognised when the dividend is appropriately authorised and is no longer at the discretion of the entity, that an entity should measure the dividend payable at the fair value of the net assets to be distributed and that an entity should recognise the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss. This interpretation will not have a material impact on Millicom financial position or results.

    IFRIC 18, 'Transfers of assets from customers'. IFRIC 18 clarifies the accounting for arrangements where an item of property, plant and equipment, which is provided by the customer, is used to provide an ongoing service. This is particularly relevant to the utility sector with the provision of the service being that of, for example, gas or electricity. The interpretation applies prospectively to transfers of assets from customers received on or after 1 July 2009, although some limited retrospective application is permitted. This interpretation will not have any impact on Millicom financial position or results.

    As part of its annual improvement project published in May 2008, the IASB slightly amended various standards. The improvements focused on areas of inconsistencies in IFRSs or where clarification of wording was required. The effective dates of these amendments vary depending on the standard concerned but are generally January 1, 2009. The Group does not expect any significant impact of these amendments on its consolidated financial statements.

Tabular Disclosure of Contractual Obligations

Contractual Obligations

        We have various contractual obligations to make future payments, including debt agreements, payables for license fees and lease obligations. The following table summarizes our obligations under these contracts due by period as of December 31, 2008.

 
  Within
1 year
  Within
2 - 5 years
  After
5 years
  Total  
 
  (in thousands of U.S. dollars)
 

Debt (including finance leases and after unamortized financing fees)

    496,544     1,573,444     88,038     2,158,026  

Future interest commitments

    169,116     408,065     10,980     588,161  

Operating leases

    43,113     140,581     143,644     327,338  

Capital expenditure

    523,416     15,375         538,791  

Total

    1,232,189     2,137,465     242,662     3,612,316  

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        The following table summarizes our obligations under these contracts due by period as of December 31, 2007.

 
  Within
1 year
  Within
2 - 5 years
  After
5 years
  Total  
 
  (in thousands of U.S. dollars)
 

Debt (including finance leases and after unamortized financing fees)

    889,085     806,936     138,270     1,834,291  

Future interest commitments

    100,180     137,916     8,679     246,775  

Operating leases

    25,732     101,191     110,918     237,841  

Capital expenditure

    372,116     28,038         400,154  

Total

    1,387,113     1,074,081     257,867     2,791,061  

ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Board of Directors

Directors

        Millicom's directors are as follows:

Name
  Position   Independent   Year
Elected
  Date of
Expiration
of Term
 

Daniel Johannesson

  Chairman   Yes     2003     May 2009  

Kent Atkinson

  Member   Yes     2007     May 2009  

Mia Brunell Livfors

  Member   No     2007     May 2009  

Donna Cordner

  Member   No     2004     May 2009  

Michel Massart

  Member   Yes     2003     May 2009  

Marten Pieters(i)

  Member   Yes     2008     May 2009  

Allen Sangines-Krause

  Member   Yes     2008     May 2009  

      (i)
      Up to February 6, 2009.

        Daniel Johannesson (born 1943)—Non-executive Chairman, Chairman of the Compensation and Nomination Committees. Mr. Johannesson was elected to the Board of Millicom in May 2003. He became Chairman on March 8, 2004. He has held a number of executive positions at major Swedish and Norwegian companies including Chief Executive Officer of Telenor Bedrift and Ececutive Vice President at the construction company Skanska, where he was responsible for their telecommunications and facilities management interests. He was also Chief Executive Officer of Investment AB Kinnevik and Director General of the Swedish national railway operator, SJ. He is also Chairman of Unibet Group PLC.

        Kent Atkinson (born 1945)—Non-executive Director and Member of the Audit and Compensation Committees. Mr. Atkinson was elected to the Board of Millicom in May 2007. Previously, Mr. Atkinson was employed by the Bank of London and South America (later acquired by Lloyds Bank) and held a number of senior managerial positions in Latin America and the Middle East before returning to the UK. He was Regional Executive Director for Lloyds TSB's South East Region from 1989 until he joined the main board in 1994 as Group Finance Director, a position he held for eight years until his retirement as an executive. He remained on the Lloyds TSB board for a further year as a non-Executive Director. Mr. Atkinson is the Senior Independent Director and Chairman of the Audit Committee of Coca-Cola HBC SA. He is a non-Executive Director and Chairman of the Group Audit, Risk and Compliance Committee of Standard Life plc, and a member of Standard Life's Investment Committee. Mr. Atkinson is also a non-Executive Director of Gemalto NV, a member of its Audit Committee and its Strategy and M&A Committee, and he is also a non-Executive Director and Chairman of the Audit Committee of Northern Rock plc and a member of Northern Rock's Risk Committee.

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        Mia Brunell Livfors (born 1965)—Non-executive Director and Member of the Compensation Committee.    Ms. Brunell was elected to the Board of Millicom in May 2007. From August 2006, Ms. Brunell has been Chief Executive Officer of Investment AB Kinnevik ("Kinnevik"), a Swedish public company managing a portfolio of long-term investments in a number of public companies such as Millicom. Ms. Brunell joined Kinnevik owned company Modern Times Group MTG AB in 1992, and was appointed Chief Financial Officer in 2001. As Chief Financial Officer, Ms. Brunell played a central role in MTG's development. Currently, Ms. Brunell is a member of the Board of Directors of Korsnäs AB, Mellersta Sveriges Lantbruks AB, Metro International S.A., Tele2 AB, Transcom WorldWide S.A., Modern Times Group (MTG), H&M Hennes & Mauritz AB.

        Donna Cordner (born 1956)—Non-executive Director.    Ms. Cordner was elected to the Board of Millicom in May 2004. She was formerly a Managing Director and Global Head of Telecommunications and Media Structured Finance group at Citigroup. She has also held senior management positions at Société Générale and ABN Amro Bank N.V. in the U.S. and Europe, including as Director of ABN's Latin American Telecommunications Project Finance and Advisory Group. Until July 2005, Ms. Cordner was the Chief Executive Officer of HOFKAM Limited, which is the largest rural microfinance company in Uganda, and continues to advise HOFKAM as a consultant. She was named Executive Vice President of Corporate Finance and Treasury for Tele2AB effective March 2007 and was named as Market Area Director and Chief Executive Officer for Russia in March 2008.

        Michel Massart (born 1951)—Non-executive Director, Chairman of the Audit Committee and Member of the Nomination Committee.    Mr. Massart was elected to the Board of Millicom in May 2003. Until June 2002, he was a partner of PricewaterhouseCoopers in Belgium, where he set up the corporate finance department in 1997. He is a former member of the Board of the Institute of Statutory Auditors. He is a professor at Solvay Business School in Brussels, Belgium.

        Marten Pieters (born 1953)—Non-executive Director, Member of the Audit Committee and Member of the Nomination Committee.    Mr. Pieters was elected to the Board of Millicom in May 2008. He was Chief Executive Officer of MSI, which became Celtel, from 2003 through its acquisition by MTC in early 2007. During this time, he was a driving force in Celtel's development as one of the leading pan-African telecommunications operators, serving some 20 million customers in 14 countries. Previously, from 1989 to 2003, Mr. Pieters worked at KPN, where, from 2000, he was a member of the executive management board of KPN Telecom with specific responsibility for KPN's Business Solutions Division. Prior to this he was Executive Vice President, KPN International Operations, covering Central and Eastern Europe, Asia and the US. Before this he was Managing Director of one Telecoms district, having joined KPN as Secretary to the Board of Management. Before starting his career in telecommunications, Mr. Pieters worked for 11 years at Royal Smilde Foods as Director of Finance and Strategic Planning and eventually as Chief Executive Officer in the Netherlands. On February 6, 2009, Mr. Pieters resigned from the Board of Millicom.

        Allen Sangines-Krause (born 1959)—Non-executive Director.    Mr. Sangines-Krause was elected to the Board of Millicom in May 2008. He worked for Goldman Sachs between 1993 and 2007, working in a variety of senior positions from Chief Operating Officer for Latin America based in Mexico City and New York and most recently as Managing Director out of London. Prior to joining Goldman Sachs, Mr. Sangines-Krause was with Casa de Bolsa Inverlat, in Mexico, and before that he was a Founding Partner of Fidem, S.C., a Mexican investment bank, which was acquired by Casa de Bolsa Inverlat in 1991. Mr. Sangines-Krause currently sits on the Board of Investment AB Kinnevik and is Chairman of Rasaland, a real estate investment fund. He is a member of the Council of the Graduate School of Arts and Sciences of Harvard University.

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Board Practices

        The Board has developed and continuously evaluates its work procedures in line with the corporate governance rules of NASDAQ in the United States of America regarding reporting, disclosure and other requirements applicable to NASDAQ listed companies. The Board received confirmation in early 2006 from the Stockholm Stock Exchange that it is exempt from the Swedish Code of Corporate Governance so long as it adheres to NASDAQ corporate governance rules. The Board's work procedures also take into account the requirements of the U.S. Sarbanes-Oxley Act of 2002 to the extent it applies to foreign private issuers.

        The Board has adopted work procedures to establish a division of work between the Board and the President and Chief Executive Officer. The Chairman conducts discussions with each member of the Board regarding the work procedures of the Board and performs a yearly evaluation of the Board's work. The members of the Board evaluate the performance of each other, each year. The Board also evaluates annually the performance of the Chief Executive Officer.

        The Board held 6 meetings in person and 5 meetings by way of telephone conference during 2008.

        The work of the Board is divided between the Board and its principal committees:

    the Audit Committee,

    the Compensation Committee

    the Corporate Social Responsibility ("CSR") Committee and

    the Nominations Committee.

        The main task of the Board committees is to work on behalf of the Board within their respective areas of responsibility. The Board also creates "ad hoc" committees from time to time to work on specific projects when the need arises. Any "ad hoc" committee reports back to the full Board.

        Audit Committee.    Millicom's directors have established an Audit Committee that convenes at least four times a year, comprising three directors, Mr. Massart (Chairman and financial expert), Mr. Atkinson and Mr. Pieters. On February 6, 2009, Mr. Pieters resigned from the Audit Committee and was replaced by Mr. Johannesson. This committee has responsibility for planning and reviewing the financial reporting process together with the preparation of the annual and quarterly financial reports and accounts and the involvement of external auditors in that process. The Audit Committee focuses particularly on compliance with legal requirements (including compliance with Sarbanes-Oxley Act) and accounting standards, independence of external auditors, audit fees, the internal audit function, the fraud risk assessment, the risk management and ensuring that an effective system of internal financial controls exists. The ultimate responsibility for reviewing and approving Millicom's annual report and accounts remains with the Board. The Audit Committee met 8 times during 2008 and Millicom's external auditors participated in each such meeting.

        Compensation Committee.    Millicom's Compensation Committee is chaired by Mr. Johannesson. Ms. Brunell and Mr. Atkinson became members of the Committee after the Annual Meeting of Shareholders on May 29, 2007. Ms. Brunell is a non-independent director and Mr. Atkinson is an independent Director. In this respect, Millicom has opted to follow home country (Luxembourg) corporate practice rather than NASDAQ Marketplace Rule 4350(c)(3). Allen & Overy, Millicom's Luxembourg legal counsel, have sent a letter to this effect to NASDAQ on February 12, 2007.

        The Compensation Committee reviews and makes recommendations to the Board regarding the compensation of the Chief Executive Officer, reviews the compensation of the other senior executives and oversees management succession planning. Millicom's share options program terminated in May 2006 and was replaced by grants of restricted shares to management under a new Long-Term Incentive Plan. The grants of restricted shares to management under this plan are determined by the Committee and approved by the Board.

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        CSR Committee.    Millicom's directors have established a Corporate Social Responsibility (CSR) Committee that convenes at least two times a year, comprising two directors, Ms. Brunell (Chairman) and Ms. Cordner. This committee has responsibility for overseeing and making recommendations to the Board regarding the management of CSR.

        Nominations Committee.    Millicom's Nominations Committee is chaired by Mr. Johannesson. The two other members are Mr. Massart, who replaced Ms. Cordner on February 13, 2007, and Mr. Pieters, who became a member on May 28, 2008. On February 6, 2009, Mr. Pieters resigned from the Nominations Committee and was replaced by Mr. Sangines-Krause. The Nominations Committee's main task is to recommend directors for election to the Board by the shareholders at the AGM. At the AGM, shareholders may vote for or against the directors proposed for election or may elect different directors. The Nominations Committee also reviews and recommends the fees and the grants of shares to directors, which are presented to the Board and voted on by the shareholders at the AGM.

        Corporate Policy Manual.    The Board has adopted the Millicom Corporate Policy Manual, which is Millicom's central reference for all matters relating to its corporate governance policy and other policies in the areas of ethics, accounting, human resources, etc. Regional policies that are more stringent or detailed than those set out in the Millicom Corporate Policy Manual are adopted as necessary. The Code of Ethics is a part of the Millicom Corporate Policy Manual. The Company's directors, senior executives and Group employees receive the Code of Ethics upon their joining Millicom and must acknowledge that they have read, understood and will comply with the Code of Ethics.

        Directors' Service Agreements.    None of Millicom's directors have entered into service agreements with Millicom or any of its subsidiaries providing for benefits upon termination of their respective directorships.

Remuneration of Directors

        The remuneration of the members of the board of directors of the Company (the "Board") is comprised of an annual fee and share-based compensation. Up until May 2006, the Directors were issued share options. Subsequent to May 2006, the Directors are issued restricted shares. The annual fee and the share based compensation grants are proposed by the Board and approved by the shareholders at the Annual General Meeting of Shareholders (the "AGM").

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        The remuneration charge for the Board for the years ended December 31, 2008, 2007 and 2006 was as follows:

 
  Chairman   Other members of the board    
 
 
  Total  
 
  No. of shares
and share
options
  US$ '000   No. of shares
and share
options
   
 
 
  US$ '000   US$ '000  

2008

                               

Fees

          100           410     510  

Share based compensation:(i)

                               
 

Restricted shares(ii)

    1,446     165     4,927     562     727  

Total

          265           972     1,237  

2007

                               

Fees

          82           305     387  

Share based compensation:(i)

                               
 

Restricted shares(ii)

    960     82     4,074     350     432  

Total

          164           655     819  

2006

                               

Fees

          75           415     490  

Share based compensation:(i)

                               
 

Restricted shares(ii)

    1,122     50     8,976     400     450  
 

Charge for share options

          164           1,104     1,268  

Total

          289           1,919     2,208  


(i)
See note 22.

(ii)
Restricted shares cannot be sold for one year from date of issue.

        The number of shares and share options beneficially owned by the Board as at December 31, 2008 and 2007 was as follows:

 
  Chairman   Other
members of
the Board
  Total  

2008

                   

Shares

    28,528     71,619     100,147  

Share options

    20,000     55,000     75,000  

2007

                   

Shares(i)

    2,082     2,100,753     2,102,835  

Share options

    45,000     55,000     100,000  

      (i)
      The amount for Other members of the Board included 2,032,932 shares owned by the Stenbeck Family, of which 1,156,589 shares were held by The 1980 Stenbeck Trust.

Senior Management and Employees

Senior Management

Name
  Position

Mikael Grahne

  President and Chief Executive Officer (from March 2, 2009)

Marc Beuls

  President and Chief Executive Officer (up to March 2, 2009)

Francois Xavier Roger

  Chief Financial Officer

Mario Zanotti

  Head of Latin America

Regis Romero

  Head of Africa

Osmar Coronel

  Chief Officer Operations

Carel Maasland

  Chief tigo People

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        Mikael Grahne, born 1953, President and Chief Executive Officer. Mikael Grahne was appointed Chief Executive Officer in March 2009, he joined Millicom in February 2002 as the Chief Operating Officer, having previously been President of Seagram Latin America. Prior to joining Seagram, he was the regional president of a division of the EMEA region at PepsiCo and held various senior management positions with Procter & Gamble. Mr. Grahne has an MBA from the Swedish School of Economics in Helsinki, Finland.

        Marc Beuls, born 1956, former President and Chief Executive Officer. Marc Beuls was President and CEO of Millicom from January 1998 till February 2009. He was formerly Senior Vice President Finance. Mr. Beuls joined Millicom in March 1992. From 1982 to 1992, he worked for Générale de Banque of Belgium. Marc Beuls has a degree in Economics from Limburg Business School in Belgium, with specialization in Finance and Accounting.

        François-Xavier Roger, born 1962, Chief Financial Officer. François-Xavier Roger joined Millicom in September 2008 from Groupe Danone where he served as Vice-President Corporate Finance since 2006 and previously as Chief Financial Officer for Danone Asia from 2000 to 2005. Prior to this he worked at Sanofi Aventis and at Hoechst Marion Roussel where he managed businesses for Hoechst in Asia, Africa and Latin America. He majored in Marketing for his MBA at The Ohio State University and has a Master's degree in Major Accounting from Audencia Business School in France.

        Mario Zanotti, born 1962, Chief of Latin America. Mario Zanotti was appointed Chief of Latin America in 2008 having previously been Head of Central America since 2002 having joined Millicom in 1992 as a General Manager of Telecel in Paraguay. In 1998 he became Managing Director of Tele2 Italy and in 2000 he was appointed Chief Executive Officer of YXK Systems. Before joining Millicom he worked as an electrical engineer at the Itaipu Hydroelectric Power Plant and later as Chief Engineer of the biggest electrical contractor company in Paraguay. He has a degree in Electrical Engineering from the Pontificia Universidade Catolica in Porto Alegre, Brazil and an MBA from INCAE and the Universidad Catolica de Asuncion, Paraguay.

        Regis Romero, born 1971, Chief of Africa. Regis Romero was appointed Chief of Africa in 2008. He has been with Millicom since 1998, previously as Commercial Manager in Bolivia, then as Chief Operating Officer in Paraguay and as Co-Head of Africa since 2006. Prior to joining Millicom, Mr. Romero worked as investment consultant for Interamerican Development Bank in Paraguay. He has a Bachelors' degree in Business Administration from National University, California, United States of America. He also holds a Master's degree in Business Management from EDAN in Asuncion, Paraguay.

        Osmar Coronel, born 1964, Chief Officer Operations. Osmar Coronel was appointed Chief Officer Operations of Millicom in 2008. He was previously the Chief Technical Officer of Millicom and prior to that Chief Technical Manager of Millicom's operations in Paraguay and Guatemala since 2002. Prior to joining Millicom, he was a Division Manager of the Paraguay PTT. He was awarded a Fulbright Scholarship (1992/93). Osmar Coronel is an MBA from Northwestern University's Kellogg School of Management, U.S., has a degree in Electrical Engineering from the National University of Asuncion, Paraguay and a Master's degree in Electrical Engineering from Southern Illinois University, U.S.

        Carel Maasland, born 1968, chief tigo People. Carel Maasland joined Millicom in March 2009 as Chief Tigo People / Global Head of Human Resources. He started his career as a management consultant, working in The Netherlands and within Central and Eastern Europe. Since 2002 he was an HR director at IKEA, initially for the Dutch operations. He then went on to hold a global HR role based at the Corporate Centre in Sweden. Prior to joining Millicom he was HR responsible for IKEA's emerging operations in Russia & the C.I.S. region. He holds an HR Master's degree from the Erasmus—Rotterdam School of Management.

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Remuneration of Officers

        The remuneration of the Officers of the Company ("Officers") comprises of an annual base salary, an annual bonus, share-based compensation, social security contributions, pension contributions and other benefits. The bonus and share-based compensation plans are based on actual performance (including individual and Group performance). Up until May 2006, the Officers were issued share options. Subsequent to May 2006, the Officers were issued restricted shares. Share-based compensation is granted once a year by the Compensation Committee of the Board. For 2006, the annual base salary and other benefits of the Chief Executive Officer ("CEO") was proposed by the Compensation Committee and approved the Board and the annual base salary and other benefits of the Chief Operating Officer ("COO") and Chief Financial Officer ("CFO") were set by the CEO and approved by the Board.

        The remuneration charge for the Officers for the year ended December 31, 2008, 2007 and 2006 was as follows:

 
  Chief Executive
Officer
  Chief Operating
Officer
  Chief Financial
Officer(vi)
 
 
  US$ '000
  US$ '000
  US$ '000
 

2008

                   

Base salary

    2,406     750     920  

Bonus

    1,309     882     125  

Pension

            85  

Other benefits

        231     7  

Total

    3,715     1,863     1,137  

Share based compensation:(i)

                   
 

Shares issued/charge under long term incentive plans(ii)

    3,737     1,410     958  
 

Charge for share options

    59     29     240  

2007

                   

Base salary

    2,351     629     690  

Bonus

    2,008     547     500  

Pension

            83  

Other benefits

        138      

Total

    4,359     1,314     1,273  

Share based compensation:(i)

                   
 

Shares issued/charge under long term incentive plans(ii)

    2,076     850     539  
 

Charge for share options

    104     54     171  

2006

                   

Base salary

    1,982     624     568  

Bonus(iii)

    1,669     712     468  

Pension

            73  

Other benefits

        138      

Total

    3,651     1,474     1,109  

Share based compensation:(i)

                   
 

Restricted shares(iv)

    104     62     48  
 

Charge for long term incentive plans(v)

    1,031     397     265  
 

Share options granted/charge for share options

    240     113     228  


(i)
See note 22.

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(ii)
Share awards of 45,074, 22,812 and 18,226 were granted in 2008 under the 2008 LTIP to the CEO, COO and CFO. Share awards of 62,381, 25,434 and 16,189 were granted in 2007 under the 2007 LTIP to the CEO, COO and CFO. Share awards at target performance of 42,634, 16,409 and 10,952 were granted in 2007 under the 2006 LTIP to the CEO, COO and CFO. The maximum shares to be issued under the 2006 LTIP was 132% of these awards.

(iii)
$1 million of the 2007 bonus was settled in Millicom shares, by issuing 6,878 shares to the CEO, 2,609 shares to the COO and 1,713 shares to the CFO. $1 million of the 2006 bonus was settled in Millicom shares, by issuing 7,975 shares to the CEO, 3,390 shares to the COO and 2,235 shares to the CFO.

(iv)
Restricted shares cannot be sold for one year from date of issue.

(v)
Accrual for the 2006 Long Term Incentive Plan finalized in 2007.

(vi)
Includes the remuneration for 2008 of the former CFO, David Sach, and the actual CFO, Francois Xavier Roger, who took over the position from September 1, 2008.

        The number of shares, share options and unvested share awards beneficially owned by the senior management as at December 31, 2008 and 2007 was as follows:

 
  Chief
Executive
Officer
  Chief
Operating
Officer
  Chief
Financial
Officer
  Total  

2008

                         

Shares

    1,695,175     592,308         2,287,483  

Share options

    30,000     15,040         45,040  

Share awards not vested

    146,678     63,342     4,500     214,520  

2007

                         

Shares

    1,664,770     578,897     9,700     2,253,367  

Share options

    45,000     22,560     100,000     167,560  

Share awards not vested

    96,488     38,561     24,951     160,000  

Severance Payments

        If the employment of the majority of Millicom's senior managers is terminated, severance of up to 12 months salary is potentially payable.

        The senior executives have each entered into a Change of Control Agreement effective January 1, 2006, whereby if the executive's employment is terminated during the period commencing on a change of control of Millicom and ending on the second anniversary of such event, either by the Millicom entity employing the executive without cause (other than by reason of disability or death) or by the executive for "good reason", in lieu of any other severance benefits to which the executive would be entitled under any other plans or programs of his employer or Millicom, the executive will be entitled to the following benefits:

    Immediately preceding the change of control event, each share option then held by the executive and each share of restricted share issued to the executive under any Restricted Stock Plan will become fully vested and each such fully vested option shall be cancelled in exchange for a cash payment to the executive in an amount determined by multiplying the number of option shares by the positive difference between the price per share of Millicom common share payable after consummation of any change of control and the per share exercise price of such option, net of any applicable withholding tax.

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    The executive will receive the sum of accrued unpaid base salary through the termination date, any prior year bonus earned but not paid and the full value of all vacation accrued but not used as of the termination date.

    The executive will receive an amount equal to one times the sum of the executive's base salary and bonus amount (calculated as the average of the bonuses of the last three years).

    The executive will receive an amount in cash equal to the total of the executive's entitlement based on his employment agreement to a car allowance, housing and school fees benefits, if applicable; the executive's pro-rated participation in any pension and long-term incentive plans that Millicom may have maintained immediately prior to the change of control event as if the executive had remained employed for 12 additional complete months of service from the termination date, assuming the executive's annual compensation comprised of base salary plus final year amount during such period is equal to his compensation immediately prior to the change of control event; and the executive's pro-rated share in any employer contributions (including employer matching contributions) that Millicom made during such period to any defined contribution plan in which the executive was a participant immediately prior to the change of control event in an amount equal to the amount of such contribution for the plan year immediately preceding the occurrence of the change of control event, in each case assuming that the executive is fully (100%) vested under any retirement plan in which he was a participant immediately prior to the change of control event.

    The executive will receive any other benefits under other plans and programs of Millicom in accordance with their terms.

        Each employee of Millicom worldwide and each of the nine members of Millicom's Board of Directors who owns options to purchase Millicom share has entered into an agreement effective as of March 1, 2006 with Millicom which gives the employee/director the same benefits as those given to the senior executives in respect of immediate vesting of share options in the event of a change of control, as outlined in the first bullet point above.

Employees

        The average number of permanent employees during the years ended December 31, 2008, 2007 and 2006 was as follows:

 
  2008   2007(i)   2006(i)  

Continuing operations

    6,509     4,692     3,192  

Discontinued operations

    98     76     501  

Total average number of permanent employees

    6,607     4,768     3,693  

      (i)
      Figures for 2007 and 2006 have been adjusted, excluding Millicom operation in Sierra Leone.

Long-Term Incentive Plans

        In May 2006 at the AGM a long term incentive plan ("2006 LTIP") was approved although the terms and conditions of the plan were not finalized until 2007. This long term incentive plan was based on a target share award granted to eligible Millicom employees, limited to Millicom senior-level employees, key high potential employees and certain critical new recruits. The shares granted are subject to a one-year holding period once the shares are vested.

        The shares awarded under the 2006 LTIP will vest at the end of a three year period, subject to specified market and performance conditions related to Millicom's share price growth compared to a peer group index, revenue growth, EBITDA margin, and profit margin. The achievement of a certain level of each condition, measured at the end of the three years, yields a specific percentage of shares awarded to each employee at the grant date.

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        The plan has been designed so that the shares normally vest at the end of the three-year performance period. However, for the performance period from 2006 through 2008 only, the shares granted vest 20% on December 31, 2006, 20% on December 31, 2007 and 60% on December 31, 2008. In addition at the end of the third-year performance period there was an additional 32% of shares that vested, because performance targets relating to Millicom's share price growth compared to a peer group index, revenue growth, EBITDA margin, and profit margin were achieved.

        The total charge for the above plan was $23 million which was recorded over the service period.

        Long term incentive awards for 2008 ("2008 LTIP") and 2007 ("2007 LTIP") were approved by the Board on December 4 and on March 15, 2007. These plans consist of two elements: performance share plan and a matching share award plan.

        The shares awarded under the performance share plan will vest at the end of a three year period, subject to performance conditions related to Millicom's "earnings per share". The achievement of a certain level of each condition, measured at the end of the three years, yields a specific percentage of shares awarded to each employee at the grant date.

        The matching share award plan requires employees to invest in shares of the Group in order to receive potential matching shares. The shares awarded under this plan vest at the end of a three year period, subject to market conditions that are based on the "total shareholder return" ("TSR") of Millicom's shares compared to the TSR of five similar mobile telephony companies during the three-year period of the plan. A fair value has been determined for potential shares under this plan based on this market condition and this value is applied to the total potential number of matching shares and will be expensed over the vesting period. Under the matching share award plan rules, Millicom issued 9,344 new shares on June 16, 2008 and 9,214 new shares on June 22, 2007 which were purchased by employees at fair market value.

        As at December 31, 2008, the total charge for the above plans was estimated at $13 million for the 2008 LTIP and at $15 million for the 2007 LTIP, both to be recorded over the service periods.

        The number of share awards under the long term incentive plans is as follows:

 
  Matching
share award
plan 2008
  Performance
shares 2008
  Matching
share award
plan 2007
  Performance
shares 2007
  Performance
shares 2006
 

Maximum share awards

    168,396     223,829     187,470     253,489     446,600  

Revision for expected forfeitures

    (37,061 )   (3,991 )   (59,021 )   (15,817 )   (109,509 )

Revision for expectations in respect of performance conditions

        (195,850 )       (142,588 )   (25,520 )

Shares issued

                    (108,760 )

Share awards expected to vest

    131,335     23,988     128,449     95,084     202,811  

    Options

        The following table summarizes information about share options outstanding at December 31, 2008. The market price of the Company's shares as at December 31, 2008 was $44.91 (2007: $117.94).

 
  Options outstanding   Options exercisable  
Range of exercise price $
  Weighted
average
exercise price
  Number
outstanding at
December 31, 2008
  Weighted
average
exercise price
  Number
exercisable at
December 31, 2008
 

3.32 - 3.75

    3.54     5,332     3.54     5,332  

20.56

    20.56     300,567     20.56     59,071  

25.05 - 29.75

    26.82     88,225     26.82     88,225  

31.88 - 35.91

    34.06     99,996     34.06     99,996  

3.32 - 35.91

    24.23     494,120     27.73     252,624  

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        Share options outstanding at the end of the year have the following expiry date and exercise prices:

Date issued
  Number of options
outstanding as at
December 31, 2008
  Exercise price $   Terms of option

May 1996, May 1997, May 1998, May 2000 and May 2004

    173,328     25.05 - 35.91   Exercisable immediately. Options have an indefinite life.

May 2005

   
35,000
   
20.56
 

Exercisable immediately. Options have a twenty year life.

December 2002, May 2003 and May 2004

   
20,225
   
3.32 - 25.05
 

Exercisable over a three-year period in equal installments. Options expire after six years from date of grant.

May 2005

   
165,567
   
20.56
 

Exercisable over a five year period in equal installments. Options expire after six years from date of grant.

July 2005 and May 2006

   
100,000
   
20.56
 

Exercisable over a three-year period in equal installments from the start of the fourth year. Options expire after six years from date of grant.

ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Principal Shareholders

        The table below sets out certain information known to Millicom as at February 28, 2009, unless indicated otherwise, with respect to beneficial ownership of Millicom common share, par value $1.50 each, by:

    each person who beneficially owns more than 5% of Millicom common stock, and

    significant related parties to Millicom.
Shareholder
  Amount of Shares   Percentage  

Investment AB Kinnevik

    37,835,438     35 %

The Bank of New York Mellon Corporation

    8,466,387     8 %

The Stenbeck Family(1)

    958,424     1 %

      (1)
      Includes 874,542 shares held by The 1980 Stenbeck Trust, an irrevocable trust that was created under the laws of the State of New York exclusively for the benefit of the wife and children of Mr. Jan H. Stenbeck. The sole and exclusive voting control of the Millicom common stock held by the 1980 Stenbeck Trust is vested in the trustees. The trustees of the 1980 Stenbeck Trust are Leonard Gubar and Henry Guy. Mr. Gubar is an attorney in New York State. Mr. Guy is the Chief Executive Officer of Modern Holdings. The trustees have disclaimed beneficial ownership of the shares owned by the 1980 Stenbeck Trust.

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        Except as otherwise indicated, the holders listed above have sole voting and investment power with respect to all shares beneficially owned by them. The holders listed above 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 each person, or group of persons, named above on a given date, any security which such person or persons 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.

Related Party Transactions

Kinnevik

        The Company's principal shareholder is Investment AB Kinnevik ("Kinnevik") and subsidiaries. Kinnevik is a Swedish holding company with interests in the telecommunications, media, publishing, paper industries and financial services. As of December 31, 2008, Kinnevik owned approximately 35% of Millicom (2007: 37%).

        During 2008 and 2007, Kinnevik did not purchase any Millicom shares.

Services purchased and sold to related companies

        For the year ended December 31, 2008 the Group made purchases for an amount of $3 million (2007: $4 million; 2006: $5 million) and had outstanding balances as at December 31, 2008 of $1 million (as at December 31, 2007: $1 million) with related parties. These related parties are companies where Kinnevik is the principal shareholder. The services purchased and supplied covered fraud detection, network and IT support, acquisition of assets and customer care systems. These purchases were made on an arm's length basis.

        There were no sales to related companies. As of December 31, 2008 and 2007, Millicom had no receivables from related parties.

ITEM 8.    FINANCIAL INFORMATION

Financial Statements and Other Information

        We file our financial statements under Item 18.

Legal Proceedings

        We are a party to various litigation or arbitration matters in almost each jurisdiction in which we operate, but in management's opinion these matters will not, either singly or taken together, have a material negative impact on our financial position or operations.

Dividend Policy

        Holders of Millicom common share are entitled to receive dividends ratably when, as and if declared by the Company's Board of Directors, subject to Luxembourg legal reserve requirements. Millicom paid its first cash dividend to its shareholders in 2008. In the past, Millicom retained any earnings for use in the operation and expansion of its business. The Group has not yet established a formal dividend policy. Any future dividends will be based on the free cash flows of the Group going forward.

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Significant Changes

        No significant adverse change has occurred since the date of the consolidated financial statements.

ITEM 9.    THE OFFER AND LISTING

        The principal trading market of Millicom common stock is the NASDAQ National Market.

        On February 16, 2004, an Extraordinary General Meeting of Millicom passed a resolution approving a stock split of the issued shares of Millicom by exchanging one existing ordinary share with a par value of $6.00 for four new ordinary shares with a par value of $1.50 each, which became effective on February 20, 2004.

        All prices quoted below have been adjusted to reflect the reverse stock split effected in February 2003 and the one effected in February 2004. All figures presented are based upon a par value of $1.50 each.

 
  High   Low  

Year ended December 31, 2003

  $ 20.23   $ 0.99  

Year ended December 31, 2004

  $ 28.51   $ 14.15  

Year ended December 31, 2005

  $ 27.09   $ 15.60  

Year ended December 31, 2006

  $ 63.82   $ 27.38  

Year ended December 31, 2007

  $ 127.40   $ 60.21  

First Quarter 2007

  $ 82.04   $ 60.21  

Second Quarter 2007

  $ 95.91   $ 79.16  

Third Quarter 2007

  $ 99.81   $ 66.00  

October 2007

  $ 119.27   $ 82.38  

November 2007

  $ 124.66   $ 98.50  

December 2007

  $ 127.40   $ 104.50  

Year ended December 31, 2008

  $ 122.97   $ 24.75  

First Quarter 2008

  $ 120.21   $ 86.10  

Second Quarter 2008

  $ 122.97   $ 87.00  

Third Quarter 2008

  $ 103.52   $ 60.27  

October 2008

  $ 67.91   $ 24.75  

November 2008

  $ 46.98   $ 28.18  

December 2008

  $ 46.35   $ 33.43  

January 2009

  $ 51.50   $ 36.02  

February 2009

  $ 47.26   $ 36.17  

        On March 30, 2009, the closing market price for Millicom common stock on the NASDAQ National Market was $36.99.

        Our shares are also traded on the Stockholmsbörsen (the Stockholm Stock Exchange) as SDR.

NASDAQ Corporate Governance Exemption

        The NASDAQ Stock Market granted an exemption to Millicom with respect to the quorum requirement under Rule 4350(f), which requires each issuer to provide for a quorum specified in its by-laws for any meeting of the holders of common stock, which may not be less than 331/3% of the outstanding shares of the company's common voting stock. Our articles of association do not provide any quorum requirement that is generally applicable to general meetings of our shareholders. This absence of a quorum requirement is in accordance with Luxembourg law and generally accepted business practice in Luxembourg.

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ITEM 10.    ADDITIONAL INFORMATION

Articles of Association

Registration and Object

        Millicom International Cellular S.A. 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 articles of incorporation of Millicom define its purpose as follows: "[...] to engage in all transactions pertaining directly or indirectly to the acquisition of participating interests in any business enterprise, including but not limited to, the administration, management, control and development of any such enterprise, and to engage in all other transactions in which a company created under the laws of Luxembourg may engage".

Directors

        Restrictions on voting—In case a director has a personal material interest in a proposal, arrangement or contract to be decided by Millicom, the articles of incorporation provide that the validity of the decision of Millicom is not affected by a conflict of interest existing with respect to a director. However, any such personal interest must be disclosed to the board of directors ahead of the vote and the relevant director may not vote on the relevant issue. Such conflict of interest must be reported to the next general meeting of shareholders.

        Compensation and nomination—The decision on the annual remuneration of the directors ("tantièmes") is reserved by the articles of incorporation to the general meeting of shareholders. Directors are therefore prevented from voting on their own compensation. However, the directors may vote on the number of shares they may be allotted under any share-based compensation scheme.

        The Nominations Committee also makes recommendations for the election of directors to the AGM. At the AGM, shareholders may vote for or against the directors proposed or may elect different directors. The Nominations Committee reviews and recommends the directors' fees which are approved by the shareholders at the AGM.

        Borrowing powers—The directors generally have unrestricted borrowing powers on behalf of and for the benefit of Millicom.

        Age limit—There is no age limit for being a director of Millicom. Directors could be elected for a maximum period of six years, but Millicom decided to elect them annually.

        Share ownership requirements—Directors need not be shareholders in Millicom.

Shares

        Rights attached to the shares—Millicom has only one class of shares, common share, and each share entitles its holder to:

    one vote at the general meeting of shareholders,

    receive dividends out of distributable profits when such distributions are decided, and

    share in any surplus left after the payment of all the creditors in the event of liquidation. There is a preferential subscription right under any share or rights issue for cash, unless the board of directors restricts the exercise thereof.

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        Redemption of shares—The articles of incorporation provide for the possibility and set out the terms for the repurchase by Millicom of its own shares, which repurchase is at Millicom's discretion.

        Sinking funds—Millicom shares are not subject to any sinking fund.

        Liability for further capital calls—All of the issued shares in Millicom's capital are required to be fully paid up. Accordingly, none of Millicom's shareholders are liable for further capital calls.

        Principal shareholder restrictions—There are no provisions in the articles of incorporation that discriminate against any existing or prospective holder of Millicom's shares as a result of such shareholder owning a substantial number of shares.

Changes to Shareholder's Rights

        In order to change the rights attached to the shares of Millicom, a general meeting of shareholders must be duly convened and held before a Luxembourg notary, as under Luxembourg law such change requires an amendment of the articles of incorporation. A quorum of presence of at least 50% of the shares present or represented is required at a meeting held after the first convening notice and any decision must be taken by a majority of two thirds of the shares present or represented at the general meeting. Any change to the obligations attached to shares may be adopted only with the unanimous consent of all shareholders.

Shareholders' Meetings

        General meetings of shareholders are convened by convening notice published in the Luxembourg official Gazette and in a Luxembourg newspaper, twice with an interval of eight days, at least eight days prior to the meeting. If all the shares are registered shares, a convening notice may, as an alternative to the publication, be sent to each shareholder by registered mail at least eight days before the annual general meeting (AGM). According to article 17 of the articles of incorporation of Millicom, the board of directors determines in the convening notice the formalities to be observed by each shareholder for admission to the AGM. An AGM must be convened every year on the date provided for in the articles of incorporation, which is the last Tuesday in May each year. The 2009 AGM will take place in Luxembourg on May 26, 2009 at 4:00 p.m. Other meetings can be convened as necessary.

Limitation on Securities Ownership

        There are no limitations imposed under Luxembourg law or the articles of incorporation on the rights of non-resident or foreign entities to own shares of Millicom or to hold or exercise voting rights on shares of Millicom.

Change of Control

        There are no provisions in the articles of incorporation of Millicom that would have the effect of delaying, deferring or preventing a change in control of Millicom and that would operate only with respect to a merger, acquisition or corporate restructuring involving Millicom, or any of its subsidiaries. Luxembourg laws impose the mandatory disclosure of an important participation in Millicom and any change in such participation.

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Disclosure of Shareholder Ownership

        There are no provisions in Millicom's articles of incorporation according to which Millicom shareholders must disclose to Millicom their reaching of a certain ownership threshold. As Millicom common stock has its primary listing on NASDAQ, each time a shareholder acquires beneficial ownership of more than 5% of our common stock, the shareholder must file within 10 days of acquisition a Schedule 13D with the U.S. Securities and Exchange Commission, who will notify Millicom and NASDAQ accordingly. Also, as required by the Luxembourg law on transparency obligations of 11 January 2008 (the "Transparency Law"), any person who acquires or disposes of shares in Millicom's capital must notify Millicom's board of directors of the proportion of shares held by the relevant person as a result of the acquisition or disposal, where that proportion reaches, exceeds or falls below the thresholds referred to in the Transparency Law. As per the Transparency Law, the above also applies to the mere entitlement to acquire or to dispose of, or to exercise, voting rights in any of the cases referred to in the Transparency Law.

Material Contracts

    10% Senior Notes

        On November 24, 2003, Millicom issued $550 million aggregate principal amount of 10% Senior Notes (the "10% Senior Notes") due on December 1, 2013. The 10% Senior Notes bear interest at 10% per annum, payable semi-annually in arrears on June 1 and December 1. The effective interest rate is 10.7%.

        The 10% Senior Notes are general unsecured obligations of Millicom and rank equal in right of payment with all future unsecured and unsubordinated obligations of Millicom. The 10% Senior Notes are not guaranteed by any of Millicom's subsidiaries, joint ventures or affiliates, and as a result are structurally subordinated in right of payment to all indebtedness of such subsidiaries, joint ventures and affiliates.

        If Millicom experiences a Change of Control Triggering Event, defined as a rating decline resulting from a change in control, each holder will have the right to require Millicom to repurchase its notes at 101% of their principal amount plus accrued and unpaid interest and all other amounts due, if any.

        During 2007, Millicom repurchased $90 million of the 10% Senior Notes incurring in a charge of $5 million which is recorded under the caption "Other non operating income (expenses), net".

        In October 2007, Millicom decided that it would redeem the balance of the Notes in December 2008 and pay the contractual redemption premium of 5%. As a result, Millicom reclassified the 10% Senior Notes from non current to current and recorded an additional interest expense of $31 million for the year ended December 31, 2007, which represented the increase in financial liabilities due to the recognition of the 5% pre-payment expense and an increase in the amortised cost of the Notes due to the earlier settlement date. Millicom reviewed its position to early repay the Notes in September 2008 and the Board of Directors decided not to early redeem the Notes but to keep them until the contractual maturity date (December 1, 2013). This decision impacted the future expected cash flows and, as a result, the 5% premium accrued in 2007 was completely reversed and an interest income amounting to $29 million was recorded in 2008. In addition the 10% Notes were reclassified as non-current.

    4% convertible Notes

        In January 2005, Millicom raised $200 million aggregate principal amount of 4% Convertible Notes due 2010 (the "4% Convertible Notes"). The net proceeds of the offering were received on January 7, 2005 in the amount of $196 million.

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        The 4% Convertible Notes were general unsecured obligations of Millicom and rank equal in right of payment with all future unsecured and unsubordinated obligations of Millicom. The rate of interest payable on the 4% Convertible Notes was 4% per annum. Interest is payable semi-annually in arrears on January 7 and July 7 of each year, beginning on July 7, 2005. The effective interest rate was 9.6%.

        The 4% Convertible Notes were constituted by a trust deed dated January 7, 2005 between Millicom and The Bank of New York, as Trustee for the holders of notes.

        Millicom apportioned part of the value of the 4% Convertible Notes to equity and part to debt. The value allocated to equity as of December 31, 2007 was $39 million (2006: $39 million) and the value allocated to debt was $179 million (2006: $171 million).

        As of December 31, 2007, $1 million of the 4% Convertible Notes were converted into 28,686 SDRs.

        On January 22, 2008, Millicom converted a further $196 million of the outstanding bonds into 5,420,235 Ordinary Shares and 202,236 SDRs. On the same day Millicom repaid in cash the remaining $3 million of bonds that were not converted, including accrued interest. The conversion resulted in an increase of equity amounting to $175 million in January 2008.

Exchange Controls

        There are no governmental laws, decrees, regulations or other legislation of Luxembourg that may affect:

    the import or export of capital including the availability of cash and cash equivalents for use by the Group, or

    the remittance of dividends, interests or other payments to non-resident holders of Millicom's securities other than those deriving from the U.S.-Luxembourg double taxation treaty.

Luxembourg Taxation

        The following paragraphs describe very generally the tax laws of Luxembourg as they apply to shareholders in the Company, which is a Luxembourg corporation. The following is intended merely as a general summary of the principal Luxembourg tax consequences of the holding and disposition of Millicom common stock and should be treated with the appropriate caution. This summary does not purport to be a complete analysis of all material tax considerations that may be relevant to a holder or prospective holder of shares in the Company. This summary also does not take into account the specific circumstances of particular shareholders. The following is not intended as a substitute for professional tax advice that takes into account the particular circumstances relevant to a specific shareholder. Accordingly, shareholders should consult their own professional advisors on the possible tax consequences of holding or disposing of Millicom common stock, under the laws of Luxembourg as well as their countries of citizenship, residence or domicile.

        This summary is based on the laws, regulations and applicable tax treaties as in effect in Luxembourg on the date hereof, all of which are subject to change, possibly with retroactive effect.

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        As used herein, a "Luxembourg Individual Holder" means an individual resident in Luxembourg who is subject to personal income tax ("impôt sur le revenu") on his or her worldwide income from Luxembourg and foreign sources, and a "Luxembourg Corporate Holder" means a company resident in Luxembourg subject to corporate income tax ("impôt sur le revenu des collectivités") on its worldwide income from Luxembourg and foreign sources. Companies whose registered office and/or central administration is in Luxembourg are considered resident companies. Luxembourg Individual Holders and Luxembourg Corporate Holders are collectively referred to as "Luxembourg Holders". A "Non-Luxembourg Holder" means any shareholder in the Company's shares other than a Luxembourg Holder. A "Non-Luxembourg Individual Holder" refers to an individual shareholder in the Company's shares that is not a Luxembourg Individual Holder, while a "Non-Luxembourg Corporate Holder" refers to a corporation that is not a Luxembourg Corporate Holder holding shares in the Company.

Luxembourg withholding tax on distributions

        Dividends distributed by the Company will in principle be subject to a withholding tax at a rate of 15% of the gross amount except (i) if exemption from that withholding tax is applicable under Luxembourg domestic tax law (e.g., based on the implementation of the EU Parent-Subsidiary Directive) or (ii) if a lower rate or an exemption applies under any applicable double taxation treaty.

Luxembourg income tax on dividends and capital gains

Luxembourg Corporate Holders

        Dividends received by Luxembourg Corporate Holders, are in principle, subject to income tax. However, such dividends may benefit, under certain conditions from a full or 50% exemption.

        Capital gains realized by Luxembourg Corporate Holders are subject to income tax at ordinary rates, unless the conditions of the Grand Ducal Decree of December 21, 2001 (as amended) are fulfilled.

Luxembourg Individual Holders

        Dividends received by Luxembourg Individual Holders who act in the course of the management of either their private wealth or their professional or business activity, are subject to income tax at the progressive ordinary rate (i.e. currently at a maximum rate of 38.95%). However, 50% of the gross amount of dividends received by such holders may be exempt from income tax under the conditions of article 115 15. a. of the Luxembourg Income Tax Law ("LITL") .

        Capital gains realized on the sale of the shares by Luxembourg Individual Holders who act in the course of the management of their private wealth are only taxable, if the shares are sold within six months after their acquisition or if the holder together with his/her spouse, life partner or minor children holds a direct or indirect participation exceeding 10% of the Company's share capital at the date of the sale or during the 5 years preceding the date of the sale.

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Non-Luxembourg Individual Holders

        Capital gains realized on the sale of shares by Non-Luxembourg Individual Holder that does not have a permanent establishment, fixed place of business or permanent representative in Luxembourg would only be taxable in Luxembourg if the Non-Luxembourg Individual Holder together with his/her spouse, life partner or under age children holds a direct or indirect participation exceeding 10% of the Company's share capital at the date of the sale or during the 5 years preceding the date of the sale and either the disposal of the Company's shares happens within a period of six months from the acquisition of the shares or the Non-Luxembourg Individual Holder has been a Luxembourg taxpayer during more than 15 years and became a non-resident taxpayer less than five years before the realization of the capital gain. However, a double tax treaty (if any) may allocate the taxation right regarding the capital gains to the country of residence of the Non-Luxembourg Individual Holder.

        For Non-Luxembourg Individual Holders, having a permanent establishment, fixed place of business or permanent representative in Luxembourg to which the Company's shares are allocated, dividends distributed by the Company and gains realized on the sale of shares in the Company are normally subject to Luxembourg income tax at the applicable progressive rate. Dividends may, however, be exempt from Luxembourg income tax for 50%.

Non-Luxembourg Corporate Holders

        Capital gains realized by Non-Luxembourg Corporate Holders on the sale of shares which are not attributed to a Luxembourg permanent establishment, fixed place of business or permanent representative will only be taxable in Luxembourg if such holders hold at the date of the sale or during the 5 years preceding the date of the sale a direct or indirect participation exceeding 10% of the Company's share capital and either the disposal of the Company's shares happens within a period of six months from the acquisition of the shares or the Non-Luxembourg Corporate Holder has been a Luxembourg taxpayer during more than 15 years and became a non-resident taxpayer less than five years before the realization of the capital gain. However, a double tax treaty (if any) may allocate the taxation right regarding the capital gains to the country of residence of the Non-Luxembourg Corporate Holder.

        Dividends received and capital gains realized on the sale of shares by Non-Luxembourg Corporate Holders, having a permanent establishment, fixed place of business or permanent representative in Luxembourg are subject to income tax in Luxembourg. However, such dividends and gains may be exempt provided that the Luxembourg participation exemption conditions are met.

        Furthermore, the permanent establishment, fixed place of business or permanent representative of a Non-Luxembourg Corporate Holder may under certain conditions benefit from a 50% exemption on dividends received if the conditions of the Luxembourg participation exemption are not met.

Luxembourg Net Wealth Tax

        Luxembourg imposes an annual Net Wealth Tax (hereafter: "NWT") of 0.5% on the net asset value of corporate taxpayers as of January 1. The net asset value will be reduced by the value of substantial participations (as defined in § 60 of the NWT law). As from the year 2006 NWT has been abolished for resident and non-resident individuals. In general Luxembourg resident companies subject to NWT are taxed on their worldwide net wealth (unless a double tax treaty provides for an exemption). Luxembourg non-resident companies subject to NWT are only taxable on their Luxembourg wealth.

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Luxembourg inheritance and gift tax

        Luxembourg inheritance tax may be levied if shares in the Company are transferred upon the death of an inhabitant of Luxembourg.

        Gift tax may be due on a gift or donation of the Company's shares if embodied in a Luxembourg deed or otherwise registered in Luxembourg.

U.S. Federal Income Tax Considerations

        The following is a discussion of certain U.S. federal income tax consequences of owning and disposing of Millicom shares by the U.S. Holders described below, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a particular person's decision to hold Millicom shares. This discussion does not address U.S. state, local and non-U.S. tax consequences. The discussion applies only to U.S. Holders who hold shares as capital assets for U.S. federal income tax purposes and it does not address special classes of holders, such as:

    Certain financial institutions;

    Insurance companies;

    Dealers and traders in securities or foreign currencies;

    Persons holding shares as part of a hedge, straddle, conversion or other integrated transaction;

    Persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

    Partnerships or other entities classified as partnerships for U.S. federal income tax purposes;

    Persons liable for the alternative minimum tax;

    Tax-exempt entities, including an "individual retirement account or "Roth IRA";

    Persons holding shares that own or are deemed to own 10% or more of Millicom's voting stock; or

    Persons holding shares in connection with a trade or business conducted outside of the United States.

        If an entity that is classified as a partnership for U.S. federal income tax purposes holds shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding shares and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of holding and disposing of the shares.

        This discussion is based on the Internal Revenue Code of 1986, as amended, administrative pronouncements, judicial decisions and final, temporary and proposed U.S. Treasury regulations, as well as the Treaty, all as of the date hereof. These laws are subject to change, possibly on a retroactive basis. Prospective investors should consult their own tax advisors concerning the U.S. federal, state, local and non-U.S. tax consequences of purchasing, owning and disposing of shares in their particular circumstances, including their eligibility for the benefits under the Treaty.

        As used herein, a "U.S. Holder" is a beneficial owner of shares that is, for U.S. federal income tax purposes: (i) a citizen or resident of the United States; (ii) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; or (iii) an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

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        This discussion assumes that Millicom was not, and will not become, a passive foreign investment company ("PFIC"), as described below.

Taxation of Distributions

        Distributions received by a U.S. Holder on shares, including the amount of any Luxembourg taxes withheld, other than certain pro rata distributions of shares to all shareholders, will constitute foreign source dividend income to the extent paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). Because the Company does not maintain calculations of its earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Holders as dividends. The amount of the dividend a U.S. Holder will be required to include in income will equal the U.S. dollar value of the euro, calculated by reference to the exchange rate in effect on the date the payment is received by the holder, regardless of whether the payment is converted into U.S. dollars on the date of receipt. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the amount of the dividend is not converted into U.S. dollars on the date of receipt. If a U.S. Holder realizes gain or loss on a sale or other disposition of euros, it will be U.S. source ordinary income or loss. Corporate U.S. Holders will not be entitled to claim the dividends-received deduction with respect to dividends paid by the Company. Subject to applicable limitations, dividends paid by certain "qualified foreign corporations" to certain non-corporate U.S. Holders in taxable years beginning before January 1, 2011 will be taxable at a maximum rate of 15%. Millicom expects to be considered a qualified foreign corporation. Non-corporate U.S. Holders should consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to be taxed at this favorable rate.

        Luxembourg taxes withheld from dividends on shares will be creditable against a U.S. Holder's U.S. federal income tax liability, subject to applicable restrictions and limitations that may vary depending upon the holder's circumstances. Instead of claiming a credit, a U.S. Holder may elect to deduct such Luxembourg taxes in computing its taxable income, subject to generally applicable limitations. The limitation of foreign taxes eligible for credit is calculated separately with respect to specific classes of income. The rules governing foreign tax credits are complex. Therefore, U.S. Holders should consult their own tax advisors regarding the availability of foreign tax credits in their particular circumstances.

Sale and Other Disposition of Shares

        A U.S. Holder will generally recognize capital gain or loss on the sale or other disposition of shares, which will be long-term capital gain or loss if the holder has held such shares for more than one year. The amount of the U.S. Holder's gain or loss will be equal to the difference between the amount realized on the sale or other disposition (as determined in U.S. dollars) and such holder's tax basis in the shares (as determined in U.S. dollars). Any gain or loss will generally be U.S. source gain or loss for foreign tax credit purposes.

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Passive Foreign Investment Company Considerations

        Millicom believes that it was not a PFIC for U.S. federal income tax purposes for its 2008 taxable year. In general, a non-U.S. company will be considered a PFIC for U.S. federal income tax purposes for any taxable year in which (i) 75% or more of its gross income consists of passive income (such as dividends, interest, rents and royalties) or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. As PFIC status depends upon the composition of our income and assets and the market value of our assets (including, among other things, any equity investments in less than 25%-owned entities) from time to time, there can be no assurance that Millicom will not be considered a PFIC for any taxable year. In particular, the market value of our assets may be determined in large part by the market price of our shares, which is likely to fluctuate.

        If the Company were to be treated as a PFIC for any taxable year during which a U.S. Holder held shares, certain adverse U.S. federal income tax rules would apply on a sale or other disposition (including certain pledges) of shares by the U.S. Holder. In general, under those rules, gain recognized by the U.S. Holder on a sale or other disposition of shares would be allocated ratably over the U.S. Holder's holding period for the shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before Millicom became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the amount allocated to each such taxable year. Further, the same rule would apply to any distribution in respect of shares in excess of 125% of the average of the annual distributions on shares received by the U.S. Holder during the preceding three years or the U.S. Holder's holding period, whichever is shorter. Certain elections may be available that would result in alternative treatments (such as a mark-to-market treatment) of the shares. U.S. Holders should consult their tax advisors to determine whether any such elections are available and, if so, what the consequences of the alternative treatments would be in those holders' particular circumstances.

        In addition, if Millicom were to be treated as a PFIC in a taxable year in which it pays a dividend or the prior taxable year, the 15% dividend rate discussed above with respect to dividends received by certain non-corporate U.S. Holders would not apply.

Information Reporting and Backup Withholding

        Payment of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless the U.S. Holder is a corporation or other exempt recipient or, in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder's U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

Documents on Display

        It is possible to read and copy documents referred to in this annual report on Form 20-F that have been filed with the Securities and Exchange Commission at the Securities and Exchange Commission's public reference room located at 450 Fifth Street, NW, Washington D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges.

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ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

        The principal market risks to which we are exposed are interest rate risk and foreign currency exchange risk.

Interest Rate Risk

        The interest rate risk generally arises from borrowings. Borrowings issued at floating rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group's exposure to the risk for changes in market interest rates relates to both of the above. To manage the risk, the Group's policy is to maintain a combination of fixed and floating rate debt in which neither category of debt falls below 25% of the total debt. The Group actively monitors its borrowings to ensure the compliance with this policy. At December 31, 2008, approximately 26% of the Group's borrowings are at a fixed rate of interest (2007: 43%).

        The table below summarizes, as at December 31, 2008, our fixed rate debt and floating rate debt:

 
  Amounts due within  
 
  1 year   1 - 2 years   2 - 3 years   3 - 4 years   4 - 5 years   >5 years   Total  
 
  (in thousands of U.S. Dollars, except percentages)
 

Fixed rate

    108,815     5,209     754     774     454,246     1,398     571,196  

Average nominal interest rate

    8.0 %   7.8 %   9.7 %   9.1 %   10.0 %   6.3 %   9.6 %

Floating rate

    387,729     200,841     334,352     313,519     263,749     86,640     1,586,830  

Average nominal interest rate

    6.0 %   8.6 %   9.1 %   8.7 %   8.4 %   7.8 %   8.0 %

Total

    496,544     206,050     335,106     314,293     717,995     88,038     2,158,026  

Average nominal interest rate

    6.4 %   8.6 %   9.1 %   8.7 %   9.4 %   7.8 %   8.4 %

        The table below summarizes, as at December 31, 2007, our fixed rate debt and floating rate debt:

 
  Amounts due within  
 
  1 year   1 - 2 years   2 - 3 years   3 - 4 years   4 - 5 years   >5 years   Total  
 
  (in thousands of U.S. Dollars, except percentages)
 

Fixed rate

    716,916     13,260     43,328     11,400     8,262     2,289     795,455  

Average nominal interest rate

    8.5 %   8.5 %   8.6 %   8.6 %   8.6 %   6.3 %   8.5 %

Floating rate

    172,169     172,657     152,222     270,746     135,061     135,981     1,038,836  

Average nominal interest rate

    10.8 %   9.9 %   8.4 %   9.5 %   9.9 %   9.5 %   9.7 %

Total

    889,085     185,917     195,550     282,146     143,323     138,270     1,834,291  

Average nominal interest rate

    8.9 %   9.8 %   8.4 %   9.5 %   9.8 %   9.4 %   9.1 %

        A one hundred basis point fall or rise in market interest rates for all currencies in which the group had borrowings at December 31, 2008, would increase or reduce profit before tax for the year by approximately $16 million (2007: $10 million).

        We have not historically used interest rate swaps, forward rate agreements or other futures contracts but instead have mainly managed our interest exposure by diversifying our debt between fixed and floating-rate loans. In the future, we may use such instruments to manage our interest exposure. There can be no assurance, however, that the use of any such instruments will be effective.

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Foreign Currency Risk

        The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures where the Group 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. In some cases, Millicom may borrow in US dollars because it is either advantageous for joint ventures and subsidiaries to incur debt obligations in US dollars or because US dollar denominated borrowing is the only funding source available to a joint venture or subsidiary. In these circumstances, Millicom has currently decided to accept the remaining currency risk associated with the financing of 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.

        Millicom had a net exchange loss of $56 million for the year ended December 31, 2008, compared to a gain of $15 million for the year ended December 31, 2007.

        To some extent, the broad mix of currencies in which we conduct our businesses and the geographic spread of our operations provide us with some measure of protection against specific exchange rate movements and reduces the overall sensitivity of our results to specific exchange rate fluctuations. We do not generally hedge our foreign currency exposure mainly by lack of available instruments in the currencies we trade into.

        The following table summarizes our debt detailing the balances at December 31, 2008 and 2007, that were denominated in US$ and in other local currencies.

 
  2008   2007  
 
  US$ '000
  US$ '000
 

US$

    1,466,494     1,226,332  

Colombia

    456,356     435,615  

Honduras

    48,199     41,352  

Senegal

    58,309     62,557  

Sri Lanka

    37,007     48,016  

Tanzania

    74,536     5,516  

Others

    17,125     14,903  

Total local currency

    691,532     607,959  

Total

    2,158,026     1,834,291  

ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

        Not applicable for Annual Report filing.

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PART II

ITEM 13.    DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES

        Not applicable.

ITEM 14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

        Not applicable.

ITEM 15.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

        As of December 31, 2008, the Group, under the supervision and with the participation of the Group's management, including the Chief Executive Officer and the Chief Financial Officer, performed an evaluation of the effectiveness of the Group's disclosure controls and procedures. The Group's disclosure controls and procedures are designed to ensure that information required to be disclosed under the Securities Exchange Act of 1934 is accumulated and communicated to the Group's management to allow timely decisions regarding required disclosures. The Group's management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature can provide only reasonable assurance regarding management's control objectives. Based on this evaluation, the Group's Chief Executive Officer and the Chief Financial Officer concluded that as at December 31, 2008 the Group's disclosure controls and procedures are effective at the reasonable assurance level for recording, processing, summarizing and reporting the information the Group is required to disclose in the reports it files under the Securities Exchange Act of 1934 within the time periods specified in the SEC's rules and forms.

Management's annual report on internal control over financial reporting

        The Group's management has performed an assessment of the Group's internal control over financial reporting which can be found on page F-2 of the financial statements filed with this annual report on Form 20-F.

Changes in internal control over financial reporting

        There has been no significant change in the Group's internal controls over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.

Attestation report of the registered public accounting firm

        The registered public accounting firm that audited the Group's financial statements included in this annual report on Form 20-F has issued an attestation report on the Group's internal control over financial reporting. The "Report of Independent Registered Public Accounting Firm " can be found on pages F-3 and F-4 of the financial statements filed with this annual report on Form 20-F.

ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT

        The Board of Directors has appointed Michel Massart as its Audit Committee financial expert. Mr. Massart is an "independent" financial expert as such term is defined under the NASDAQ National Market listing requirements.

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ITEM 16B.    CODE OF ETHICS

        Millicom has adopted a Code of Ethics applicable to all Millicom's employees and to Directors. The text of this code is available free of charge upon written request addressed to: General Counsel, Millicom International Cellular S.A., 15 rue Leon Laval, L-3372 Leudelange, Grand-Duchy of Luxembourg, fax: +352 27 759 353. Millicom will make its Code of Ethics available in 2009 on its website www.millicom.com.

ITEM 16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The following table summarizes the aggregate amounts paid to Millicom's auditors for the years ended December 31, 2008 and 2007.

 
  2008   2007  
 
  US$ '000
  US$ '000
 

Audit Fees

    4,276     3,801  

Audit-Related Fees

    15     14  

Tax Fees

    52     54  

All Other Fees

    5     12  

Total

    4,348     3,881  

        Audit-related services consist principally of consultations related to financial accounting and reporting standards, including making recommendations to management regarding internal controls and the issuance of certifications of loan covenant compliance required by Millicom's debt agreements. Tax services consist principally of tax planning services and tax compliance services. Other services are services not included in the other categories.

Audit Committee Pre-approval Policies

        The policies and procedures provide that no non-audit services can be rendered by Millicom's auditors without the prior consent of the Audit Committee.

ITEM 16D.    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

        Not applicable.

ITEM 16E.    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES

        Not applicable.

ITEM 16F.    CHANGES IN CERTIFYING ACCOUNTANT

        Not applicable.

ITEM 16G.    SIGNIFICANT DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES

        The Board has developed and continuously evaluates its work procedures in line with the corporate governance rules of NASDAQ in the United States of America regarding reporting, disclosure and other requirements applicable to NASDAQ listed companies, with the following two excdeptions:

    one of the member of the Compensation Committee, Ms. Brunell, is not independent, and

    Millicom's Article of Association does not provide any quorum requirement applicable to the general meetings of Millicom's shareholders.

        The Board received confirmation in early 2006 from the Stockholm Stock Exchange that it is exempt from the Swedish Code of Corporate Governance so long as it adheres to NASDAQ corporate governance rules.

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PART III

ITEM 17.    FINANCIAL STATEMENTS

        Not applicable.

ITEM 18.    FINANCIAL STATEMENTS

        See pages F-1 through F-66.

ITEM 19.    EXHIBITS

  1.1   Articles of Association of Millicom International Cellular S.A.

 

2.1

 

Indenture, dated January 7, 2005 between Millicom International Cellular S.A. and The Bank of New York, as Trustee.*

 

2.2

 

Indenture, dated as of November 24, 2003 between Millicom International Cellular S.A. and The Bank of New York, as Trustee, as amended (incorporated by reference to Exhibits 4.1 and 4.3 of the Company's registration statement on Form F-4 (File No. 333-112948) filed on February 19, 2004 and January 31, 2005, respectively).**

 

12.1

 

Certification of Mikael Grahne required by Securities Exchange Act of 1934, as amended ("Exchange Act"), Rule 13a 14(a).

 

12.2

 

Certification of Francois-Xavier Roger required by Exchange Act Rule 13a 14(a).

 

13.1

 

Certification of Mikael Grahne required by Exchange Act Rule 13a 14(b).

 

13.2

 

Certification of Francois-Xavier Roger required by Exchange Act Rule 13a 14(b).

*
Previously filed with the Securities and Exchange Commission with the Company's Form 20 F filed on May 2, 2005 and incorporated herein by reference.

**
Previously filed with the Securities and Exchange Commission with the Company's Form 20 F filed on April 30, 2004 and herein incorporated by reference.

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SIGNATURES

        Under the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20 F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
   
   
Dated: March 24, 2009   MILLICOM INTERNATIONAL CELLULAR S.A.

 

 

By:

 

/s/ MIKAEL GRAHNE

Name:  Mikael Grahne
Title:  
Chief Executive Officer

 

 

By:

 

/s/ FRANCOIS XAVIER ROGER

Name:  Francois Xavier Roger
Title:  
Chief Financial Officer

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INDEX TO FINANCIAL STATEMENTS

F-1


Table of Contents

Management's Report on Internal Control Over Financial Reporting

        The management of Millicom International Cellular S.A. 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 as well as those issued by the International Accounting Standards Board.

        Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements.

        Management has assessed the effectiveness of Millicom International Cellular S.A. internal control over financial reporting as of December 31, 2008. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Management concluded that based on its assessment, Millicom International Cellular S.A. internal control over financial reporting was effective as of December 31, 2008.

        Management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal control of Amnet Telecommunications Holding Ltd, Continental Programming Services Ltd, Teleservicios Centroamericanos Ltda and its subsidiaries, a group acquired in October 2008, which is included in the 2008 consolidated financial statements of Millicom International Cellular S.A. and represented total assets of $739 million at December 31, 2008 and $43 million of revenues for the period from the acquisition in October 2008 to December 31, 2008.

        PricewaterhouseCoopers S.à.r.l has issued an unqualified report on our 2008 financial statements as a result of the audit and also has issued an unqualified report on our internal control over financial reporting which is attached hereto.

March 24, 2009   By:   /s/ MIKAEL GRAHNE

        Name:   Mikael Grahne
        Title:   Chief Executive Officer

 

 

By:

 

/s/ FRANCOIS XAVIER ROGER

        Name:   Francois Xavier Roger
        Title:   Chief Financial Officer

F-2


Table of Contents

Report of Independent Registered Public Accounting Firm

To the Shareholders of
Millicom International Cellular S.A.

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of profit and loss, changes in shareholders' equity and cash flows present fairly, in all material respects, the financial position of Millicom International Cellular S.A. (the "Company") and its subsidiaries (together the "MIC Group") at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and in conformity with International Financial Reporting Standards as adopted by the European Union. Also in our opinion, the MIC Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's Board of Directors is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in "Management's Report on Internal Control Over Financial Reporting" appearing on page F-2. Our responsibility is to express opinions on these financial statements and on the MIC Group's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        A company's 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 purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

F-3


Table of Contents

        As described in "Management's Report on Internal Control Over Financial Reporting", management has excluded Amnet Telecommunications Holdings Ltd, a limited liability company organized under the laws of Bermuda, Continental Programming Services Ltd, a limited liability company organized under the laws of Bermuda, and Teleservicios Centroamericanos Ltda, a limited liability company organized under the laws of El Salvador