For the month of March, 2022.
Indicate by check mark whether the registrant files
or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
MILLICOM INTERNATIONAL CELLULAR S.A.
Report of Independent Auditors
To the Shareholders and the Board of Directors of
Tigo Guatemala Companies
We have audited the accompanying
combined financial statements of Tigo Guatemala Companies, which comprise the combined statements of financial position as of December
31, 2020 and 2019, and the related income statements and statements of comprehensive income, changes in equity and cash flows for the
years then ended, and the related notes to the combined financial statements.
Management’s Responsibility
for the Financial Statements
Management is responsible for the
preparation and fair presentation of these combined financial statements in conformity with International Financial Reporting Standards
as issued by the International Accounting Standards Board; this includes the design, implementation and maintenance of internal control
relevant to the preparation and fair presentation of the combined financial statements that are free of material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express
an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express
no such opinion.
An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by Management, as well
as evaluating the overall presentation of the combined financial statements.
We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
![](https://content.edgar-online.com/edgar_conv_img/2022/03/02/0000950103-22-003743_image_002.jpg)
To the Shareholders and the Board of Directors of
Tigo Guatemala Companies
Page 2
Opinion
In our opinion, the combined financial
statements referred to above present fairly, in all material respects, the combined financial position of Tigo Guatemala Companies at
December 31, 2020 and 2019, and the combined results of its operations and its cash flows for the years then ended in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young
Ernst & Young, S.A.
Guatemala City, January 22, 2022
A-006-2022
Tigo Guatemala Companies - Combined Financial Statements
For the years
ended December 31, 2020 and 2019
Combined Income Statements for the years ended
December 31, 2020 and 2019
US$ ‘000 |
Notes |
2020 |
2019 |
Revenue from contracts with customers |
5 |
1,502,514 |
1,432,793 |
Cost of sales |
|
(359,889) |
(335,349) |
Gross profit |
5 |
1,142,625 |
1,097,444 |
Operating expenses |
|
(364,749) |
(350,472) |
Depreciation & amortization |
|
(237,064) |
(226,662) |
Other operating income (expenses), net |
|
(3,566) |
(6,773) |
Operating profit |
5 |
537,246 |
513,537 |
Interest expense |
16 |
(114,296) |
(90,051) |
Interest and other financial income |
|
18,951 |
24,496 |
Foreign exchange gain (loss), net |
|
(8,199) |
(6,865) |
Profit before taxes |
|
433,702 |
441,117 |
Charge for taxes, net |
7 |
(83,231) |
(78,418) |
Net profit for the period |
|
350,471 |
362,699 |
The accompanying notes are an integral part of these
combined financial statements.
Tigo Guatemala Companies – Combined Financial
Statements
As of December
31, 2020 and 2019 and for the years ended December 31, 2020 and 2019
Combined Statements of Comprehensive Income for
the years ended December 31, 2020 and 2019
US$ ‘000 |
2020 |
2019 |
Net profit for the period |
350,471 |
362,699 |
Other comprehensive income, net of tax: |
|
|
Item that may be reclassified to the income statement in subsequent periods |
|
|
Exchange differences on translation of operations to the US dollars reporting currency |
(4,540) |
2,695 |
Total comprehensive income for the period |
345,931 |
365,394 |
The accompanying
notes are an integral part of these combined financial statements.
Tigo Guatemala Companies - Combined Financial Statements
As of December
31, 2020 and 2019
Combined Statements of Financial Position as of
December 31, 2020 and 2019
US$ ‘000 |
Notes |
December 31,
2020 |
December 31,
2019 |
ASSETS |
|
|
|
NON-CURRENT ASSETS |
|
|
|
Intangible assets, net |
8 |
279,443 |
211,002 |
Property, plant and equipment, net |
9 |
533,175 |
548,675 |
Right of use assets, net |
10 |
214,785 |
238,812 |
Contract costs, net |
|
2,146 |
2,438 |
Deferred tax assets |
7 |
25,275 |
19,973 |
Amounts due from related parties |
25 |
50,010 |
317,010 |
Income tax assets |
7 |
4,134 |
6,651 |
Supplier advances for capital expenditure |
|
7,327 |
4,623 |
Other non-current assets |
|
2,793 |
2,989 |
TOTAL NON-CURRENT ASSETS |
|
1,119,088 |
1,352,173 |
|
|
|
|
CURRENT ASSETS |
|
|
|
Inventories |
11 |
25,767 |
32,909 |
Trade receivables, net |
12 |
51,748 |
45,538 |
Contract assets, net |
12 |
58,333 |
65,111 |
Amounts due from related parties |
25 |
367,447 |
338,419 |
Prepayments |
|
3,803 |
3,737 |
Other current assets |
|
23,812 |
18,604 |
Restricted cash |
13 |
7,105 |
6,006 |
Cash and cash equivalents |
13 |
188,542 |
189,130 |
TOTAL CURRENT ASSETS |
|
726,557 |
699,454 |
TOTAL ASSETS |
|
1,845,645 |
2,051,627 |
The accompanying
notes are an integral part of these combined financial statements.
Tigo Guatemala Companies - Combined Financial Statements
As of December
31, 2020 and 2019
Combined Statements of Financial Position as of
December 31, 2020 and 2019 (Continued)
US$ ‘000 |
Notes |
December 31,
2020 |
December 31,
2019 |
EQUITY AND LIABILITIES |
|
|
|
EQUITY |
|
|
|
Share capital and premium |
14 |
8,219 |
8,219 |
Equity contribution reserve |
|
13,070 |
12,781 |
Other reserves |
|
86,277 |
90,817 |
Retained earnings |
|
471,791 |
483,817 |
TOTAL EQUITY |
|
579,357 |
595,634 |
|
|
|
|
LIABILITIES |
|
|
|
Non-current liabilities |
|
|
|
Other debt and financing |
16 |
413,404 |
929,208 |
Lease liabilities |
2.23 |
205,255 |
221,976 |
Provisions and other non-current liabilities |
21 |
51,018 |
49,900 |
Deferred tax liabilities |
7 |
11,002 |
11,680 |
Total non-current liabilities |
|
680,679 |
1,212,764 |
|
|
|
|
Current liabilities |
|
|
|
Lease liabilities |
2.23 |
24,035 |
20,592 |
Amounts due to related parties |
25 |
367,095 |
14,353 |
Payables and accruals for capital expenditure |
17 |
32,464 |
51,208 |
Trade payables |
18 |
25,660 |
32,682 |
Accrued interest and other expenses |
19 |
53,608 |
66,598 |
Current income tax liabilities |
7 |
14,914 |
8,383 |
Contract liabilities |
20 |
35,959 |
34,636 |
Provisions and other current liabilities |
21 |
31,874 |
14,777 |
Total current liabilities |
|
585,609 |
243,229 |
TOTAL LIABILITIES |
|
1,266,288 |
1,455,993 |
TOTAL EQUITY AND LIABILITIES |
|
1,845,645 |
2,051,627 |
The accompanying
notes are an integral part of these combined financial statements.
Tigo Guatemala Companies - Combined Financial Statements
For the years
ended December 31, 2020 and 2019
Combined Statements of Cash Flows for the year
ended December 31, 2020 and 2019
US$ ‘000 |
Notes |
December 31,
2020 |
December 31,
2019 |
Cash flows from operating activities |
|
|
|
Profit before taxes |
|
433,702 |
441,117 |
Adjustments to reconcile to net cash: |
|
|
|
Interest expense |
|
114,296 |
90,051 |
Interest and other financial income |
|
(18,951) |
(24,496) |
Foreign exchange loss |
|
8,199 |
6,865 |
Adjustments for non-cash items: |
|
|
|
Depreciation and amortization |
8,9,10 |
237,064 |
226,662 |
Loss on disposal and impairment of assets |
5 |
3,146 |
4,734 |
Income tax risk provisions |
|
— |
1,232 |
Share-based compensation |
15 |
289 |
738 |
|
|
777,745 |
746,903 |
Increase
in trade receivables, prepayments, contract assets and other current
assets |
|
(8,980) |
(5,035) |
Decrease/(increase) in inventories |
|
6,896 |
(7,592) |
Increase in trade payables, contract liabilities, and other payables |
|
2,226 |
10,228 |
Changes in working capital |
|
142 |
(2,399) |
Interest paid on debt and other financing |
|
(86,455) |
(64,933) |
Interest paid on leases |
|
(20,259) |
(19,189) |
Interest received |
|
17,337 |
22,414 |
Taxes paid |
|
(81,675) |
(78,803) |
Net cash provided by operating activities |
|
606,835 |
603,993 |
Cash flows from investing activities: |
|
|
|
Purchase of property, plant and equipment |
9 |
(179,323) |
(156,891) |
Purchase of intangible assets |
8 |
(107,300) |
(52,302) |
Proceeds from sale of property, plant and equipment |
|
326 |
355 |
Proceeds from sale of intangibles |
|
11 |
686 |
Net increase in restricted cash |
|
(1,099) |
(212) |
Net cash used by investing activities |
|
(287,385) |
(208,364) |
Cash flows from financing activities |
|
|
|
Debt and other financing |
|
631,592 |
— |
Repayment of debt and other financing |
|
(798,632) |
— |
Loans granted to shareholders |
|
(80,000) |
(367,000) |
Repayment of leases (capital component) |
|
(25,867) |
(24,647) |
Income tax withheld on dividends paid |
22 |
(18,061) |
(15,482) |
Payment of dividends |
22 |
(21,718) |
(13,110) |
Net cash used by financing activities |
|
(312,686) |
(420,239) |
Exchange losses on cash and cash equivalents, net |
|
(7,352) |
(344) |
Net decrease in cash and cash equivalents |
|
(588) |
(24,954) |
Cash and cash equivalents at the beginning of the year |
|
189,130 |
214,084 |
Cash and cash equivalents at the end of the year |
|
188,542 |
189,130 |
The
accompanying notes are an integral part of these combined financial statements.
Tigo Guatemala Companies - Combined Financial Statements
For the years
ended December 31, 2020 and 2019
Combined Statements of Changes in Equity for the
years ended December 31, 2020 and 2019
US$ ‘000 |
Share
capital
(000's) |
Equity
Contribution
Reserve (i)
(000’s) |
Other
reserves
(ii)
(000’s) |
Retained
earnings
(000’s) |
Total
equity
(000's) |
At January 1, 2019 |
8,219 |
12,043 |
88,122 |
430,691 |
539,075 |
Profit for the period… |
— |
— |
— |
362,699 |
362,699 |
Currency translation differences |
— |
— |
2,695 |
— |
2,695 |
Total comprehensive income for the period |
— |
— |
2,695 |
362,699 |
365,394 |
Dividends |
— |
— |
— |
(309,573) |
(309,573) |
Share based compensation |
— |
738 |
— |
— |
738 |
At December 31, 2019 |
8,219 |
12,781 |
90,817 |
483,817 |
595,634 |
Profit for the period |
— |
— |
— |
350,471 |
350,471 |
Currency translation differences |
— |
— |
(4,540) |
— |
(4,540) |
Total comprehensive income for the period |
— |
— |
(4,540) |
350,471 |
345,931 |
Dividends (iii) |
— |
— |
— |
(362,497) |
(362,497) |
Share based compensation |
— |
289 |
— |
— |
289 |
At December 31, 2020 |
8,219 |
13,070 |
86,277 |
471,791 |
579,357 |
| (i) | Equity contribution reserve is made up only of share-based compensation – see note 15. |
| (ii) | Other reserves include legal reserves of $86 million and currency translation differences for $4.5 million in 2020 (2019: $2.7
million). Legal reserves are not distributable. |
| (iii) | Dividends – see note 22. |
The
accompanying notes are an integral part of these combined financial statements.
Tigo Guatemala Companies - Combined Financial Statements
As of December
31, 2020 and 2019 and for the years ended December 31, 2020 and 2019
Notes to the Combined Financial Statements for
the year ended December 31, 2020
The combined financial
statements are composed of ten companies (the “Combined Group”, “Tigo Guatemala”) as detailed in the table below:
Name of the
company |
Country |
|
|
Comunicaciones Celulares, S.A. |
Guatemala |
Comunicaciones Corporativas, S.A. |
Guatemala |
Servicios especializados en Telecomunicaciones, S.A.. |
Guatemala |
Distribuidora de Comunicaciones de Occidente, S.A. |
Guatemala |
Distribuidora Central de Comunicaciones, S.A. |
Guatemala |
Distribuidora de Comunicaciones de Oriente, S.A. |
Guatemala |
Distribuidora Internacional de Comunicaciones, S.A. |
Guatemala |
Servicios Innovadores de Comunicación y Entretenimiento, S.A.. |
Guatemala |
Navega.com, S.A. |
Guatemala |
Cloud2Nube, S.A. |
Guatemala |
Intertrust SPV (Cayman)
Limited, acting as trustee of the Comcel Trust, was a trust established and consolidated by Comunicaciones Celulares, S.A. for the purposes
of the bond issued (refer to note 16). The Comcel Trust was not a separate legal entity under Cayman Islands law. Intertrust SPV (Cayman)
Limited as Trustee carried out the purposes for which the Comcel Trust was established. All references herein to the Comcel Trust shall
be construed as references to Intertrust SPV (Cayman) Limited acting as Trustee under the Declaration of Trust.
In January 2014,
the Comcel Trust issued a bond of $800 million which is guaranteed by Comunicaciones Celulares, S.A. and is listed on the Luxembourg Stock
Exchange. In accordance with IFRSs, the Comcel Trust is consolidated within the combined Tigo Guatemala.
With the proceeds of
this bond, Comunicaciones Celulares, S.A. entered into a senior unsecured loan (“the Loan”) with Credit Suisse AG, Cayman
Islands Branch. The proceeds of the bond were used by the Comcel Trust to purchase a 100% participation interest in the Loan pursuant
to a credit and guarantee.
On November 18, 2020,
Comcel Trust board of directors decided to redeem the $800 million aggregate principal amount of its outstanding 6.875% Senior Notes due
2024. The redemption was officially announced on October 1st, 2020 at a redemption price equal to 102.292% of the principal amount of
the Notes to be redeemed plus accrued and unpaid interest of $16 million, resulting in an aggregate amount of $834 million settled on
November 18, 2020. As a result of the redemption, the Comcel Trust was terminated on November 18, 2020 and thereupon removed from the
Trust register.
To proceed with the
early repayment of bondholders, the Combined Group was financed through a mix of shareholders´ loan for $350 million for one-year
term with a fixed interest rate of 4% and loans with local banks for Q2,155 million (approximately $276.5 million) with terms ranging
from three to seven years, and with an effective interest rate of 5.97%.
The Combined Group
provides mobile and data telephony services, corporate solutions, fixed-line broadband, fixed-line telephone, cable TV and mobile financial
services to retail and business customers in Guatemala.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 1. | ORGANIZATION (Continued) |
All Tigo Guatemala
have registered offices located at Km 9.5 Carretera a El Salvador, Plaza Tigo Sta. Catarina Pinula, Guatemala. They are owned jointly
by Millicom Group (“MIC Group”), whose ultimate holding company is Millicom International Cellular S.A. (“MIC”)
and by Miffin Associates Corp., together the “Combined Group owners”.
The Combined Group
shareholders are Millicom Group and Miffin which own respectively 55% and 45% interests in each of the Tigo Guatemala. Those entities
form one single business in substance as all of the entities have one single common management. The Combined Group is governed by a shareholders’
agreement.
The representatives
to the Board of Directors (“Board”) of Comunicaciones Celulares, S.A. and the other Tigo Guatemala have authorized for issue
these combined financial statements for local management purpose on January 22, 2022.
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES |
The companies composing
the Combined Group are all companies in the telecommunications sector which are all owned 55% by Millicom International II, N.V. and 45%
by Miffin Associates Corp. Entities are fully combined from the date on which they are transferred to the Combined Group. They are de-combined
from the date that relation ceases.
The combined financial
statements of the Combined Group at December 31, 2020 and 2019 and for each of the two years in the period ended December 31, 2020, have
been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB).
As used in these notes
to the combined financial statements, the terms “the Combined Group”, “the Group”, “the Company”,
“we”, “us”, “our”, and similar terms refer to the Tigo Guatemala as described in note 1, unless the
context indicates otherwise.
The combined financial
statements are presented in US dollars and all values are rounded to the nearest thousand ($ '000) except when otherwise indicated. The
combined financial statements have been prepared on a historical cost basis except for certain financial assets and liabilities that have
been measured at fair value.
The preparation of
financial statements in conformity with IFRSs requires management to exercise its judgment in the process of applying IFRS. It also requires
the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period.
Although these estimates
are based on management’s best knowledge of current events and actions, actual results may ultimately differ from these estimates.
Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the combined financial
statements are disclosed in note 3.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
| 2.2 | COVID-19 - Qualitative and quantitative assessment on business activities, financial situation and
economic performance |
On March 11, 2020,
the World Health Organization declared the coronavirus outbreak a pandemic. Most countries globally, including Guatemala, reacted by implementing
severe restrictions on travel and public gatherings, including the closing of offices, businesses, schools, retail stores and other public
venues, and by instituting curfews or quarantines. These restrictions, as well as the dangers posed by the virus, produced a significant
reduction in mobility and a severe disruption in global economic activity, the effect of which was felt in Guatemala beginning in mid-March
2020.
Impact on our business
units
The government in Guatemala
implemented restrictions beginning in mid-March, and these were generally maintained throughout the second and third quarters of 2020.
As a result, many of our stores and distribution channels were forced to close temporarily and were gradually reopened. Our market experienced
reductions in mobility during this period, and these disruptions impacted our service ability, however after the third quarter, product
sales and services, have recovered.
Impact on accounting
matters
As
a consequence of this crisis, the Combined Group had identified potential significant accounting implications in the following areas:
• Impairment
of non-financial assets/goodwill
The Combined Group
has noticed reduced economic activity where it operates, however, no impairment indicators were identified. In addition, during the last
quarters of 2020 showed performance indicators higher than those predicted thus confirming that impairment adjustments were not needed.
• Impairment
of trade receivables
During the second quarter
of 2020, and as a result of worsening collections, the Combined Group has recognized additional bad debt provisions for an amount of $1.5
million compared to the level of provisions recorded in the first quarter of 2020 (pre-pandemic level). However, collections have significantly
improved during the last quarter of 2020 and the estimated credit losses levels have returned to their pre-pandemic level. As of December
31, 2020, the total estimated credit losses provision cover 100% of receivables overdue by more than 90 days.
• Revenue
recognition
Revenue recognition
has not had a significant impact and it is aligned to the accounting standards, Revenue recognized in the financial statements corresponds
to the service provided to customers and for which the collection is certain, as per guidance stablished by IFRS 15.13.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
The combined entities
and the combined financial statements have the same calendar year closing and use consistent accounting policies for each year presented.
All intra-group balances, transactions, income and expenses, and profits and losses resulting from intra-group transactions are eliminated.
Companies linked to one another by combination are integrated through the aggregation of accounts, in accordance with rules identical
to those for full consolidation.
The acquisition method
of accounting is used to account for acquisitions where there is a change in control (i.e. when the Combined Group owners obtain control
over another entity or business). The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued,
and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling
interest. The excess of the cost of acquisition over the fair value of the Combined Group’s share of the identifiable net assets
acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the business acquired, the
difference is recognized directly in the income statement. All acquisition related costs are expensed. Figures from entities entering
into the combination are added to the figures of the existing combination at the time of the entry into the Combined Group.
| 2.4 | Foreign currency translation |
Functional and
presentation currencies
Items included in the
financial statements of each of the Combined Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (“the functional currency”). The functional currency reflects the economic substance of the underlying
events and circumstances of these entities. Given the purposes of the Combined Group’s combined financial statements, those are
presented in U.S. dollars (the “presentation currency”) while the functional currency of all entities is the Guatemalan Quetzal.
The following table
presents relevant currency translation rates to the U.S. dollar as of December 31, 2020 and 2019 and average rates for 2020 and 2019:
Country |
Currency |
2020 Average rate |
2020Year-end rate |
2019 Average rate |
2019Year-end rate |
Guatemala |
Quetzal |
7.73 |
7.79 |
7.71 |
7.70 |
Transactions
and balances
Transactions denominated
in a currency other than the functional currency are translated into the functional currency using exchange
rates prevailing on transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions, and on translation
of monetary assets and liabilities denominated in currencies other than the functional currency at year-end exchange rates, are recognized
in the combined income statement, except when deferred in equity as qualifying cash flow hedges.
The effect of exchange
rate changes on cash and cash equivalents held or due in a foreign currency is reported in the statement of cash flows in order to reconcile
cash and cash equivalents at the beginning and end of the year.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
| 2.4 | Foreign currency translation (Continued) |
Translation into
presentation currency
The results and financial
position of all Combined Group entities are translated into US dollar as follows:
| i) | Assets and liabilities are translated at the closing rate at the date of the statement of financial position; |
| ii) | Income and expenses are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated
at the dates of the transactions); and |
| iii) | All resulting exchange differences are recognized as a separate component of equity (“Other reserves”). |
When a combined entity
is sold, exchange differences that were recorded in equity are recognized in the combined income statement as part of gain or loss on
sale.
Goodwill and fair value
adjustments arising on acquisition of a combined entity are treated as assets and liabilities of the foreign operation and translated
at the closing rate.
| 2.5 | Property, plant and equipment |
Items of property,
plant and equipment are stated at either historical cost or the lower of fair value less accumulated depreciation and accumulated impairment.
Historical cost includes expenditure that is directly attributable to the acquisition of items. The carrying amount of replaced parts
is derecognized.
Depreciation is calculated
using the straight-line method over the shorter of the estimated useful life of the asset and the remaining life of the license associated
with the assets, unless the renewal of the license is contractually possible.
Estimated useful lives
are:
Buildings |
40 years or lease period, if shorter |
Networks (including civil works) |
5 to 15 years |
Other |
2 to 7 years |
The carrying values
of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value
may not be recoverable. The assets’ residual value and useful life is reviewed, and adjusted if appropriate, at each statement of
financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if the carrying amount
is greater than its estimated recoverable amount.
Construction in progress
consists of the cost of assets, labor and other direct costs associated with property, plant and equipment being constructed by the Combined
Group. Once the assets become operational, the related costs are transferred from construction in progress to the appropriate asset category
and depreciation commenced.
Subsequent costs are
included in the asset’s carrying amount or recognized as a separate asset, as appropriate, when it is probable that future economic
benefits associated with the item will flow to the Combined Group and the cost of the item can be measured reliably. Repairs and maintenance
are charged to the income statement in the financial period in which they are incurred. Costs of major inspections and overhauls are added
to the carrying value of property, plant and equipment and the carrying amount of previous major inspections and overhauls is derecognized.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
| 2.5 | Property, plant and equipment (Continued) |
A liability for the
present value of the cost to remove an asset on both owned and leased sites is recognized when a present obligation for the removal exists
(“asset retirement obligations”). The corresponding cost of the obligation is included in the cost of the asset and depreciated
over the useful life of the asset.
Borrowing costs that
are directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that asset when
it is probable that such costs will result in future economic benefits for the Combined Group and the costs can be measured reliably.
Intangible assets acquired
separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is measured at
fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization
and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized
and expenditure is charged to the combined income statement in the year in which expenditure is incurred.
Intangible assets with
finite useful lives are amortized over their estimated useful economic lives using the straight-line method and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for intangible
assets with finite useful lives are reviewed at least at each financial year-end. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the assets are accounted for by changing the amortization period or method,
as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized
in the combined income statement in the expense category consistent with the function of the intangible assets.
Goodwill
Goodwill represents
the excess of cost of an acquisition, over the Combined Group owners’ share in the fair value of identifiable assets less liabilities
and contingent liabilities of the acquired business at the date of the acquisition. If the fair value of identifiable assets, liabilities
or contingent liabilities or the cost of the acquisition can only be determined provisionally, then the Combined Group initially accounts
for goodwill using provisional values. Within twelve months of the acquisition date, the Combined Group then recognizes any adjustments
to the 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 provisional fair values are made as if the adjusted fair values had been recognized from
the acquisition date. Goodwill on acquisition of subsidiaries is included in “intangible assets, net”. Following initial recognition,
goodwill is measured at cost less any accumulated impairment losses.
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 Combined 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 Combined Group are assigned to those units or groups of units. Each unit or group of units
to which the goodwill is allocated:
| • | Represents the lowest level within the Combined Group at which the goodwill is monitored for internal
management purposes; and |
| • | Is not larger than an operating segment. |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
| 2.6 | Intangible assets (Continued) |
Impairment is determined
by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units), to which the goodwill relates. Where
the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment
loss is recognized. Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation
within that unit is disposed of the goodwill associated with the operation disposed of is included in the carrying amount of the operation
when determining the gain or loss on disposal. Goodwill disposed of in this manner is measured based on the relative values of the operation
disposed and the portion of the cash-generating unit retained.
Programming and
content rights
Programming and content
master rights which are purchased which meet certain criteria are recorded at cost as intangible assets. The rights must be exclusive,
related to specific assets which are sufficiently developed, and probable to bring future economic benefits and have validity for more
than one year. Cost includes consideration paid or payable and other costs directly related to the acquisition of the rights and are recognized
at the earlier of payment or commencement of the broadcasting period to which the rights relate.
Programming and content
rights capitalized as intangible assets have a finite useful life and are carried at cost, less accumulated amortization and any accumulated
impairment losses. Amortization is calculated using the straight-line method to allocate the cost of the rights over their estimated useful
lives. The average useful lives of programming and content rights is five years.
Non-exclusive and programming
and content rights for periods less than one year are expensed over the period of the rights.
Licenses
Licenses are recorded
at either historical cost or, if acquired in a business combination, at fair value at the date of acquisition. Licenses were granted to
the Combined Group for an initial term between 12 and 15 years. Licenses were all renewed for 20 years in December 2012 and January 2013.
During 2020 new information was available to Management in connection with the acquisition and registration of new licenses triggering
a re-assessment of the useful lives of existing licenses. From this analysis Management concluded that all frequency licenses are indefinite
life assets; consequently, a change in the useful life’s estimation was made prospectively.
Based on the experience
of the renewal of licenses, since it was confirmed that it is easily renewed at low cost; the main facts include:
| • | The renewal involves an exclusively administrative procedure. |
| • | The cost of the renewal is insignificant. |
| • | The terms for which the frequency licenses have been granted are equal to
the original terms |
| • | The technology used in broadcasting is not expected to be replaced by another
technology at any time in the foreseeable future. Therefore, the license is expected to contribute to entity’s net cash inflows
indefinitely |
Consequently, the Combined
Group have determined that, as of January 1, 2020, it is appropriate to assign the intangible assets that originated by frequency licenses
granted by the SIT (Superintendence of Telecommunications), under the framework of the Telecommunications Law (Decree Legislative No.
94-96), an indefinite useful life. We will continue to monitor this assessment in future periods considering the regulatory environment.
The non-amortization
shows a better pattern of use of the asset; therefore, the Combined Group ceased to amortize licenses starting January 1, 2020. Due to
the change in the classification of frequency licenses as an indefinite life asset, the Combined Group conducted an impairment analysis
and will continue to conduct an impairment analysis on an annual basis over these assets under IAS 36. As of December 31, 2020, no impairment
was identified.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
Trademarks and
customer bases
Trademarks and customer
bases are recognized as intangible assets only when acquired or gained in a business combination. Their cost represents fair value at
the date of acquisition. Trademarks and customer bases have finite useful lives and are carried at cost less accumulated amortization.
Amortization is calculated using the straight-line method to allocate the cost of the trademarks and customer bases over their estimated
useful lives.
| 2.6 | Intangible assets (Continued) |
The estimated useful
lives for trademarks and customer bases are based on specific characteristics of the market in which they exist. Trademarks and customer
bases are included in “Intangible assets, net”.
Estimated useful lives
are:
Trademarks |
1 to 15 years |
Customer bases |
4 to 9 years |
Indefeasible
Rights-of-use (IRU)
Indefeasible rights-of-use
assets are permanent contractual agreements that cannot be undone, for example rights to use cables, fibers or capacity. IRU contracts
are usually long term, commonly lasting up to 30 years. Depending on the type of system, the Company might be buying exclusive use of
one or more assets. Only lit fiber arrangements (wavelength) can be capitalized as intangible assets, subject to the fulfillment of the
following criteria:
| · | Fulfill the criteria defined by IAS 38 to qualify
as an intangible asset (identifiable, measurable, controllable, generate future economic benefits); |
| · | The contract identifies the lit fiber (wavelength)
which are for the exclusive use of the Group; |
| · | The service orders clearly include specification
of the wavelength used; |
| · | The contract is for a duration of more than one
year. |
| 2.7 | Impairment of non-financial assets |
At each reporting date
the Combined Group assesses 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 Combined Group makes an estimate of the asset’s recoverable amount. The Combined
Group determines the recoverable amount based on the higher of its fair value less cost to sell, and its value in use, for individual
assets, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
Where the carrying
amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Where
no comparable market information is available, the fair value less cost to sell is determined based on the estimated future cash flows
discounted to their present value using a discount rate that reflects current market conditions for the time value of money and risks
specific to the asset. The foregoing analysis also evaluates the appropriateness of the expected useful lives of the assets. Impairment
losses of continuing operations are recognized in the combined income statement in expense categories consistent with the function of
the impaired asset.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
At each reporting date
an assessment is made as to whether there is any indication that previously recognized impairment losses may no longer exist or may have
decreased. If such indication exists, the recoverable amount is estimated. Other than for goodwill, a previously recognized impairment
loss is reversed if there has been a change in the estimate used to determine the asset’s recoverable amount since the last impairment
loss was recognized. If so, the carrying amount of the asset is increased to its recoverable amount. The increased amount cannot exceed
the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior
years. Such reversal is recognized in profit or loss. After such a reversal, the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
| 2.8 | Cash, cash equivalents and restricted cash |
Cash and cash equivalents
include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three
months or less. Cash held with banks related to mobile financial services which is restricted in use due to local regulations is denoted
as restricted cash.
Time deposits
Cash deposits with
banks with maturities of more than three months that generally earn interest at market rates are classified as time deposits.
Pledged deposits
Pledged deposits represent
contracted cash deposits with banks that are held as security for debts at corporate or operational entity level. The Combined Group is
unable to access these funds until either the relevant debt is repaid, or alternative security is arranged with the lender. Such amounts
are included within “other current assets” on the statement of financial position. As of 31 December 2019, there were no pledged
assets. (note 16)
Trade receivables are
initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for
impairment. From January 1, 2018, the Combined Group assesses, on a forward-looking basis, the expected credit losses. The impairment
methodology applied depends on whether there has been a significant increase in credit risk. The Combined Group applies the simplified
approach permitted by IFRS 9 Financial Instruments, which requires expected lifetime losses to be recognized from initial recognition
of the trade receivables. The provision is recognized in the combined income statement within cost of sales.
| 2.11 | Loans and receivables |
Loans and receivables
(from related parties or from third parties) are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting
period. These are classified within non-current assets. Loans and receivables are carried at amortized cost using the effective interest
method. Gain and losses are recognized in the income statement when the loans and receivables are derecognized or impaired, as well as
through the amortization process.
| 2.12 | Impairment of financial assets |
The Combined Group recognizes
an estimate for expected credit losses on financial assets recorded at amortized cost in profit or loss or on financial assets recorded
at fair value through changes in other comprehensive income using the simplified approach. The simplified approach does not require an
entity to track the changes in credit risk, but, instead, requires the entity to recognize a loss allowance based on lifetime expected
credit losses (ECLs) at each reporting date. The Combined Group has established a provision matrix that is based on its historical loss
experience, adjusted for forward looking factors specific for debtors and the economic environment.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
The Combined Group
considers that a financial asset is in default when the contractual payments are over 90 days overdue. However, in certain cases, the
Combined Group also consider that a financial asset is in default when internal or external information indicates that it is unlikely
that the Combined Group will receive the outstanding contractual amounts in full before taking into account any credit enhancements maintained
by the Combined Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Inventories (which
mainly consist of mobile telephone handsets and related accessories) are stated at the lower of cost and net realizable value. Cost is
determined using the weighted average method. Net realizable value is the estimated selling price in the ordinary course of business,
less applicable variable selling expenses.
Common shares are classified
as equity. Equity contribution presented in the combined financial statements is the sum of the equity contribution from the parents of
the combined entities as presented and described under Note 1.
Borrowings are initially
recognized at fair value, net of directly attributable transaction costs. After initial recognition borrowings are subsequently measured
at amortized cost using the effective interest rate method. Amortized cost is calculated by considering any discount or premium on acquisition
and any fees or costs that are an integral part of the effective interest rate. Any difference between the initial amount and the maturity
amount is recognized in the combined income statement over the period of the borrowing.
Borrowings (including
accrued or capitalized interest) are classified as current liabilities unless the Combined Group has an unconditional right to defer settlement
of the liability for at least 12 months after the statement of financial position date.
Provisions are recognized
when the Combined 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 Combined Group expects some or all a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain.
The expense relating
to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that reflects, where appropriate, risks specific to the liability. Where discounting
is used, increases in the provision due to the passage of time are recognized as interest expenses.
Trade payables are
initially recognized at fair value and subsequently measured at amortized cost using the effective interest method where the effect of
the passage of time is material.
| 2.18 | Revenue from contracts with customers |
Revenue from contracts
with customers is recognized when the control of the goods and services has been transferred to the customer for an amount that reflects
the consideration to which the Combined Group expects to be entitled in exchange for such goods or services.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
| 2.18 | Revenue from contracts with customers (Continued) |
The
Combined Group applies the following practical expedients foreseen in IFRS 15:
| • | No adjustment to the transaction price for the means of a financing
component whenever the period between the transfer of a promised good or service to a customer and the associated payment is one year
or less; when the period is more than one year the significant financing component is adjusted, if material. |
| • | Disclosure in the combined financial statements the transaction price
allocated to unsatisfied performance obligations only for contracts that have an original expected duration of more than one year (e.g.
unsatisfied performance obligations for contracts that have an original duration of one year or less will not be disclosed). |
| • | Application of the practical expedient not to disclose the price allocated
to unsatisfied performance obligations, if billing is equal to accounting revenue. |
| • | Application of the practical expedient to recognize the incremental
costs of obtaining a contract as an expense when incurred if the amortization period of the asset that otherwise would have been recognized
is one year or less. |
Bundled offers are
considered arrangements with multiple deliverables or elements, which can lead to the identification of separate performance obligations.
Revenue is recognized in accordance with the transfer of goods or services to customers in an amount that reflects the relative standalone
selling price of the performance obligation (e.g. sale of telecom services, revenue over time plus sale of handset, revenue at a point
in time).
Principal-Agent, some
arrangements involve two or more unrelated parties that contribute to providing a specified good or service to a customer. In these instances,
the Combined Group determines whether it has promised to provide the specified good or service itself (as a principal) or to arrange for
those specified goods or services to be provided by another party (as an agent). For example, performance obligations relating to services
provided by third-party content providers (i.e., mobile Value Added Services or “VAS”) or service providers where the Combined
Group neither controls a right to the provider’s service nor controls the underlying service itself are presented net because the
Combined Group is acting as an agent. The Combined Group generally acts as a principal for other types of services where the Combined
Group is the primary obligor of the arrangement. In cases the Group determines that it acts as a principal, revenue is recognized gross.
Combined
Group´s most significant revenues streams are:
| a) | Post-paid connection fees are derived from the payment of a non-refundable/one-time fee charged to customer
to connect to the network (e.g. connection / installation fee). Usually, it does not represent a distinct good or service, therefore does
not give rise to a separate performance obligation and revenue is recognized over the minimum contract duration. |
Unless the fee is paid
by a customer to get the right to receive goods or services without having to pay this fee again over his tenure with the Combined Group
(e.g. the customer can readily extend his contract without having to pay the same fee again), it is accounted for as a material right
and revenue should be recognized over the customer retention period.
| b) | Post-paid mobile/cable subscription fees are recognized over the relevant enforceable/subscribed service
period (recurring monthly access fees that do not vary based on usage). The service provision is usually considered as a series of distinct
services that have the same pattern of transfer to the customer. |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
| 2.18 | Revenue from contracts with customers (Continued) |
| c) | Prepaid scratch/SIM cards are services where customers purchase a specified amount of airtime or other
credit in advance. Revenue is recognized as the credit is used. Unused credit is carried in the statement of financial position as contract
liability within other current liabilities. Upon expiration of the validity period, the portion of the contract liability relating to
the expiring credit is recognized as revenue, since there is no longer an obligation to provide those services. |
| d) | Telephone and equipment sales are recognized as revenue once control of such goods is transferred to the
distributor or the final client. That criterion is fulfilled when the customer has the ability to direct the use and obtain substantially
all of the remaining benefits from those goods. |
| e) | Revenue from provision of Mobile Financial Services (MFS) is recognized once the primary service has been
provided to the customer. |
| f) | Customer premise equipment (CPE) are provided to customers as a prerequisite to receive the subscribed
Home services and shall be returned at the end of the contract duration. Since CPEs provided over the contract term do not provide benefit
to the customer on their own, they do not give rise to separate performance obligations and therefore are accounted for as part of the
service provided to the customers. |
| g) | Revenue from the sale of cables, fiber, wavelength or capacity contracts, when part of the ordinary activities
of the operation, is recognized as recurring revenue. Revenue is recognized when the cable, fiber, wavelength or capacity has been delivered
to the customer, based on the amount expected to be received from the customer. |
| h) | Revenue from operating lease of tower space is recognized over the period of the underlying lease contracts.
Finance leases revenue is apportioned between lease of tower space and interest income. |
Significant judgments
The determination of
the standalone selling price for contracts that involve more than one performance obligation may require significant judgment, such as
when the selling price of a good or service is not readily observable.
The Combined Group
determines the standalone selling price of each performance obligation in the contract in accordance to the prices that the Group would
apply when selling the same services and/or telephone and equipment included in the obligation to a similar customer on a standalone basis.
When standalone selling price of services and/or telephone and equipment are not directly observable, the Group maximizes the use of external
inputs and uses the expected cost, plus margin approach to estimate the standalone selling price.
The primary cost of
sales incurred by the Combined Group in relation to the provision of telecommunication services relate to interconnection costs, roaming
costs, rental of leased lines, costs of handsets and other accessories sold, and royalties. Cost of sales is recorded on an accrual basis.
| 2.20 | Incremental costs of obtaining a contract |
Incremental costs of
obtaining a contract, including dealer commissions, are capitalized as Contract Costs in the statement of financial position and amortized
in operating expenses over the expected benefit period, which is based on the average duration of contracts with customer (see practical
expedient in note 2.18).
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
Share based compensation
Share awards are granted
to management and key employees of the Combined Group. Awards are settled in shares of MIC.
The cost of share-based
compensation is based on the fair value (market value) of the shares on grant date and, is recognized, together with a corresponding increase
in equity contribution reserve, 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 recognized for share-based
compensation at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Combined
Group’s best estimate of the number of equity instruments that will ultimately vest.
No expense is recognized
for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested
irrespective of whether or not the market conditions are satisfied, provided that all other performance conditions are satisfied. Where
the terms of a share-based compensation are modified, as a minimum an expense is recognized as if the terms had not been modified. In
addition, an expense is recognized for any modification that increases the total fair value of the share-based payment arrangement or
is otherwise beneficial to the employee as measured at the date of modification.
Current tax
Current tax assets
and liabilities for current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.
The tax rate and tax laws used to compute the amount are those enacted or substantively enacted at the statement of financial position
date.
Deferred tax
Deferred income tax
is provided using the liability method and calculated from temporary differences at the statement of financial position date between the
tax base of assets and liabilities and their carrying amount for financial reporting purposes.
Deferred tax liabilities
are recognized for all taxable temporary differences, except where the deferred tax liability arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither accounting, nor taxable, profit or loss.
Deferred income tax
assets are recognized for all deductible temporary differences and 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 utilized, except where the deferred tax assets relate to deductible temporary differences from
initial recognition of an asset or liability in a transaction that is not a business combination, and, at the time of the transaction,
affects neither accounting, nor taxable, profit or loss.
The carrying amount
of deferred income tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to utilize the deferred income tax asset. Unrecognized deferred income tax assets
are reassessed at each statement of financial position date and are recognized to the extent it is probable that future taxable profit
will enable the deferred tax asset to be recovered.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
Deferred income tax
assets and liabilities are measured at the tax rate expected to apply in the year when the assets are realized or liabilities settled,
based on tax rates and tax laws that have been enacted or substantively enacted at the statement of financial position date.
Income tax relating
to items recognized directly in equity is recognized in equity and not in the combined income statement. Current and deferred tax assets
and deferred tax liabilities are offset where legally enforceable set off rights exist and the deferred taxes relate to the same taxable
entity and the same taxation authority.
| 2.23 | Changes in accounting policies |
The following changes
to standards effective for annual periods starting on January 1, 2019 have been adopted by the Combined Group:
IFRS 16 Leases
primarily affects the accounting for the Combined Group´s operating leases. The commitments are now recognized as right-of-use and
lease liabilities for future payments. As a result, on adoption, on January 1, 2019, an additional lease liability of $263 million has
been recognized. The application of the new standard decreased operating expenses by $43.8 million as compared to what our results would
have been if we had continued to follow IAS 17 for year ended December 31, 2019. The impact of the adoption of the leasing standard and
the new accounting policies are further explained below. The application of this standard also affected the Combined Group’s depreciation,
operating and financial expenses, debt and other financing and leverage ratios. The change in presentation of operating lease expenses
has resulted in a corresponding increase in cash flows derived from operating activities and a decline in cash flows from financing activities.
| 2.23 | Changes in accounting policies (Continued) |
Explanation and
effects of adoption of IFRS 16
The Combined Group adopted
the standard using the modified retrospective approach with the cumulative effects of applying the new Standard recognized in retained
profits as of January 1, 2019. Its application had no significant impact on the Combined Group’s retained earnings.
On adoption of IFRS
16, the Combined Group recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’
under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate as of January 1, 2019.
The right-of-use assets
were measured at an amount equal to the corresponding lease liabilities, adjusted by the amount of any prepaid or accrued lease payments
relating to the leases recognized in the statement of financial position immediately before the date of initial application.
The weighted average
incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 8.79%. Each lease commitment was individually discounted
using a specific incremental borrowing rate, following a build-up approach including risk-free rates, industry risk, country risk, credit
risk at cash generating unit level, currency risk and commitment´s maturity.
For leases previously
classified as finance leases, the Combined Group recognized the carrying amount of the lease asset and lease liability immediately before
transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The measurement
principles of IFRS 16 are only applied after that date.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
US$ ´000 |
2019 |
Operating lease commitments disclosed as of December 31, 2018 |
410,462 |
(Plus): Non-lease components obligations |
5,092 |
(Less): Short term leases recognized on a straight-line basis as expense |
_ |
(Less): Low value leases recognized on a straight-line basis as expense |
_ |
(Less): Forecast of indexation included in the lease commitments not part of the IFRS 16 opening balances |
(33,489) |
(Plus/less): Other |
1,687 |
Gross lease liabilities |
383,752 |
Discounted using the lessee's incremental borrowing rate at the date of the initial application |
(121,156) |
Incremental lease liabilities recognized at January 1, 2019 |
262,596 |
(Plus): Finance lease liabilities recognized at December 31, 2018 |
698 |
Lease liabilities recognized at January 1, 2019 |
263,294 |
|
|
Of which are: |
|
Current lease liabilities |
20,383 |
Non-current lease liabilities |
242,911 |
| 2.23 | Changes in accounting policies (Continued) |
The application of IFRS
16 affected the following items in the statement of financial position on January 1, 2019:
FINANCIAL POSITION
US$ ‘000
|
As of January 1, 2019 before
application
|
Effect of
adoption of
IFRS 16 |
As of January 1, 2019 after
Application
|
Reason for the change |
ASSETS |
|
|
|
|
Property, plant & equipment, net |
573,789 |
(764) |
573,025 |
(i) |
Right-of-use assets (non-current) |
_ |
263,360 |
263,360 |
(ii) |
Prepayments |
5,263 |
(2,565) |
2,698 |
(iii) |
LIABILITIES |
|
|
|
|
Lease liabilities (non-current) |
_ |
242,911 |
242,911 |
(iv) |
Debt & other financing (non-current) |
926,868 |
(615) |
926,253 |
(v) |
Lease liabilities (current) |
_ |
20,383 |
20,383 |
(iv) |
Trade payables |
22,125 |
(83) |
22,042 |
(v) |
| (i) | Transfer of previously capitalized assets under finance leases to right-of-use assets. |
| (ii) | Initial recognition of right-of-use assets, transfer of previously recognized finance leases and of lease
prepayments being part of the right-of-use asset cost at transition. |
| (iii) | Transfer of lease prepayments being part of the right-of-use assets’ cost at transition. |
| (iv) | Initial recognition of lease liabilities and transfer of previously recognized finance lease liabilities. |
| (v) | Transfer of previously recognized finance lease liabilities to new lease liabilities accounts. |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
As a result of the adoption
of IFRS 16 Leases, lease liabilities are presented in the statement of financial position as follows:
US$ ‘000 |
2020 |
2019 |
Opening balance |
242,568 |
263,294 |
Additions |
6,256 |
15,897 |
Liabilities amortization |
(25,867) |
(24,647) |
Liabilities remeasurement |
6,102 |
(10,841) |
Revaluation |
231 |
(1,135) |
Total lease liabilities (i) |
229,290 |
242,568 |
Lease liabilities (current) |
24,035 |
20,592 |
Lease liabilities (non-current) |
205,255 |
221,976 |
| (i) | And as a result of the application of IFRS 16, previous finance lease liabilities are included in the
total lease liabilities, $544 thousands in 2020 and $615 thousands in 2019. |
As permitted under IFRS16,
the Combined Group has elected not to recognize a lease liability for short term or for leases of low value assets. Payments associated
with short-term leases of vehicles and low-value assets associated with office furniture are recognized as an expense in the statement
of income.
In applying IFRS 16
for the first time, the Combined Group has used the following practical expedients permitted by the standard:
| · | the use of a single discount rate to a portfolio
of leases with reasonably similar characteristics, |
| · | reliance on previous assessments on whether leases
are onerous, |
| 2.23 | Changes in accounting policies (Continued) |
| · | the accounting for operating leases with a remaining
lease term of less than 12 months as of January 1, 2019 as short-term leases, |
| · | the exclusion of initial direct costs for the
measurement of the right-of-use asset at the date of initial application, and |
| · | the use of hindsight in determining the lease
term where the contract contains options to extend or terminate the lease. |
The Combined Group leases
various sites, towers, offices, warehouses, retail stores, equipment and cars. Rental contracts are typically made for fixed periods but
may have extension options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different
terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Through December 31,
2018, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases
(net of any incentives received from the lessor) were charged to the statement of income on a straight-line basis over the period of the
lease. From January 1, 2019, leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased
asset is available for use by the Combined Group. Each lease payment is allocated between the liability and finance cost. The finance
cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance
of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term
on a straight-line basis.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
| 2.23 | Changes in accounting policies (Continued) |
Assets and liabilities
arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following
lease payments:
| · | fixed payments (including in-substance fixed payments),
less any lease incentives receivable, |
| · | variable lease payment that are based on an index
or a rate, |
| · | amounts expected to be payable by the lessee under
residual value guarantees the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and |
| · | payments of penalties for terminating the lease,
if the lease term reflects the lessee exercising that option. |
The lease payments are
discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing
rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions. The incremental borrowing rate applied can have a significant impact on
the net present value of the lease liability recognized under IFRS 16.
The Combined Group is
also exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability
until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is adjusted against
the right-of-use asset by discounting the revised lease payments using either the initial discount rate or a revised discount rate.
According to the
IFRS 16, lease term is defined as the non-cancellable period for which a lessee has the right to use an underlying asset, together
with both: (a) periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and (b)
periods covered by an option to terminate if the lessee is reasonably certain not to exercise that option. The assessment of such
options is performed at the commencement of a lease. As part of the assessment, the Combined Group introduced the “time
horizon concept”, the reasonable term under which the company expects to use a leased asset considering economic incentives,
management decisions, business plans and the fast-paced industry Combined Group operates in. The assessment must be focused on the
economic incentives for Combined Group to exercise (or not) an option to early terminate/extend a contract. The Combined Group has
decided to work on the basis the lessor will generally accept a renewal/not early terminate a contract, as there is an economic
incentive to maintain the contractual relationship.
The Combined Group considered
the specialized nature of most of its assets under lease, there is a low likelihood the lessor can find a third party to substitute Combined
Group as lessee and past practice to conclude that the lease term can go beyond the notice period when there is more than an insignificant
penalty for the lessor not to renew the lease. This analysis requires judgment and has a significant impact on the lease liability recognized
under IFRS 16.
Right-of-use assets are
measured at cost comprising the following:
| · | the amount of the initial measurement of lease
liability, |
| · | any lease payments made at or before the commencement
date less any lease incentives received, |
| · | any initial direct costs, and |
Finally, the Combined
Group has taken the additional following decisions in adopting the standard:
| · | non-lease components are capitalized (IFRS16.15),
and |
| · | intangible assets are out of IFRS 16 scope (IFRS16.4). |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
New and amended
IFRS standards
The following changes
to standards effective for annual periods starting on January 1, 2020 have been adopted by the Combined Group and did not have any significant
impact on the Company´s accounting policies or disclosures and did not require retrospective adjustments:
| · | Amendments to the conceptual framework. The IASB
has revised its conceptual framework. |
| · | Amendments to IAS 1 Presentation of financial
statements, and IAS 8, ‘Accounting policies, changes in accounting estimates and errors’. |
| · | Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest
Rate Benchmark Reform. |
| · | Amendments to IFRS 3 - Definition of a business.
This amendment revises the definition of a business. |
| · | Amendment to IFRS 16 Leases
- COVID 19 Rent Concessions - effective for annual periods starting on June 1, 2020. This amendment provides an optional practical expedient
for lessees from assessing whether a rent concession related to COVID-19 is a lease modification. Lessees can elect to account for such
rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for
the concession as variable lease payments in the period(s) in which the event or condition that triggers the reduced payment occurs. |
The following changes
to standards not yet effective are not expected to materially affect the Combined Group:
| · | IFRS 17 Insurance Contracts -
effective for annual periods starting on January 1, 2023 - IFRS 17 will not have an impact for the Combined Group. IFRS 17 has not
been yet endorsed by the EU. |
| · | Amendments to IFRS 4 Insurance
Contracts (deferral of effective date of IFRS 9) - effective for annual periods starting on January 1, 2021 - These amendments
extend the effective date to apply IFRS 9 for insurance contracts to January 1, 2023 in order to align with the effective date of
IFRS 7. These amendments have not been endorsed by the EU and will not have an impact for the Combined Group. |
2.23 Changes
in accounting policies (Continued)
| · | Amendments to IAS 1 Presentation of
Financial Statements - effective for annual periods starting on January 1, 2023 - This amendment clarifies that liabilities are
classified as either current or non-current, depending on the rights that exist at the end of the reporting period. The amendment
also clarifies what IAS 1 means when it refers to the “settlement” of a liability. This amendment has not yet been
endorsed by the EU. |
| · | Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest
Rate Benchmark Reform - Phase 2 - effective for annual periods starting on January 1, 2021. The amendments address issues that arise during
the reform of an interest rate benchmark, including the replacement of one benchmark with an alternative one. The amendments are still
subject to EU endorsement. |
Amendments to
| · | IFRS 3 Business Combinations - Reference
to Conceptual Framework |
| · | IAS 16 Property, Plant and Equipment -
Proceeds before intended use |
| · | IAS 37 Provisions, Contingent Liabilities and
Contingent Assets - Cost of fulfilling a contract |
| · | Annual improvements to IFRS Standards 2018-2020,
affecting IFRS 1, IFRS 9, IFRS 16 and IAS 41 |
All these amendments
are effective for annual periods starting on January 1, 2022.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 3. | SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES |
Judgments
Management judgment
is applied in application of IFRS accounting policies and accounting treatment in preparation of these combined financial statements.
In particular, a significant level of judgment is applied regarding the following items:
| · | Contingent liabilities – the determination
of whether or not a provision should be recorded for any potential liabilities. |
| · | Leases – in determining the lease term,
including the assessment of whether the exercise of extension or termination option is reasonably certain and the corresponding impact
on the selected lease term. |
| · | Acquisition – allocation of excess of purchase
price between newly identified assets and goodwill, measurement of property, plant and equipment and intangible assets and assessment
of useful lives. |
| · | Scope of entities combined – the combined
financial statements only include subsidiaries of the Tigo Guatemala located in Guatemala and therefore do not consolidate other subsidiaries
outside Guatemala that are not material over which the Combined Group has control as of, and for, the periods presented. |
Estimates
Estimates are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. Because of inherent uncertainties in this evaluation process, actual results may be different from originally
estimated amounts. These estimates are subject to change as new information becomes available and may significantly affect future operating
results.
Estimates
(Continued)
Significant estimates
have been applied in respect of the following items:
| · | Estimating useful lives of property, plant and
equipment and intangible assets. |
| · | Estimation of provisions, particularly related
to bad debt, legal, tax risks and asset retirement obligations. |
| · | Revenue recognition (see note 2.18). |
| · | For leases, estimates in determining the incremental
borrowing rate for discounting the lease payments in case interest rate implicit in the lease cannot be determined. |
| · | Impairment testing including weighted average
cost of capital (WACC) and long-term growth rates. |
| · | Accounting for share-based payments, in particular
estimates of forfeitures and future performance criteria. |
For our critical accounting
estimates reference is made to the relevant individual notes to these combined financial statements, more specifically note 5 –
Breakdown of operating profit, note 7 – Taxes, note 8 – Intangible assets, note 9 – Property, plant and
equipment, note 10 – Right-of-use assets, note 12 – Trade receivables, note 15 – Shared based compensation, note 24
– Commitments and contingencies.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 4. | ACQUISITIONS OF BUSINESS |
During the twelve-month
period ended December 31, 2020, the Combined Group, made the following acquisition:
Alexa Project:
On September 1, 2020,
the Combined Group acquired a cable business of Alexa project for $2.3 million. The Combined Group acquired 100% of the customer list,
network infrastructure and operating assets of the entity. The acquisition was made considering its strategic region location, for both
its economy and its platform for convergence which will serve to penetrate the Combined Group brand at country level and thereby increase
the subscribers and the network infrastructure.
The Combined Group
measured the acquisition at fair value at the date of acquisition as follows:
US$ ‘000 |
Alexa |
Goodwill acquired |
1,520 |
Customer list |
569 |
Fair value of net assets |
208 |
Total |
2,297 |
The fair value of intangible
assets has been determined by applying the income approach technique. The calculation is based on variables that are not observable in
the market. The estimated fair value is based on:
| · | A terminal value calculated based on long-term
sustainable growth rates of 2%, which was used to determine revenues in the coming years. |
| · | An operating margin of 23.8%, a client loss rate
of 11% and an average rate of charges for contributory assets of 4.8%. |
During the twelve-month
period ended December 31, 2019, the Combined Group did not complete any acquisition.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 5. | BREAKDOWN OF OPERATING PROFIT |
The gross profit and
operating profit of the Combined Group can be summarized as follows for the years ended December 31:
US$ ‘000 |
2020 |
2019 |
Airtime revenue |
1,054,542 |
1,037,819 |
Telephone and equipment |
229,931 |
200,365 |
Home subscriptions |
136,894 |
117,450 |
Data links. |
50,226 |
48,253 |
Other income |
30,921 |
28,906 |
Revenue from contracts with customers |
1,502,514 |
1,432,793 |
Cost of rendering telecommunication services |
(359,889) |
(335,349) |
Gross profit.. |
1,142,625 |
1,097,444 |
Depreciation and amortization (see notes 8, 9 and 10) |
(237,064) |
(226,662) |
Dealer commissions |
(99,057) |
(90,639) |
Employee related costs (see note 6) |
(67,063) |
(64,940) |
Sites and network maintenance |
(63,622) |
(60,617) |
External services |
(38,170) |
(34,146) |
Other expenses |
(30,055) |
(29,809) |
Phone subsidies |
(28,178) |
(28,331) |
Advertising and promotion |
(23,051) |
(29,088) |
Other fees and costs |
(15,484) |
(14,224) |
Loss on disposal and impairment of assets, net |
(3,146) |
(4,734) |
Operating lease expense |
(489) |
(717) |
Operating profit |
537,246 |
513,537 |
Employee related costs
are comprised of the following for the years ended December 31:
US$ ‘000 |
2020 |
2019 |
Wages and salaries |
(66,608) |
(65,238) |
Social security. |
(4,474) |
(4,239) |
Other employee related costs |
(1,699) |
(3,111) |
Share based compensation |
(289) |
(738) |
Capitalized employee related costs |
6,007 |
8,386 |
Total |
(67,063) |
(64,940) |
The average number
of permanent employees during the years ended December 31, 2020 and 2019 was as follows:
|
2020 |
2019 |
Total average number of permanent employees |
3,272 |
3,177 |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
Guatemalan companies
are subject to all taxes applicable to Guatemalan limited liability companies. The effective tax rate in 2020 is 19% (2019: 18%). The
reconciliation between the average statutory tax rate and the effective average tax rate is as follows for the years ended December 31:
|
2020
% |
2019
% |
Statutory tax rate (based on income) |
25 |
25 |
Permanent differences |
(6) |
(7) |
Effective tax rate |
19 |
18 |
The charge for income
taxes is shown in the following table and recognizes that revenue and expense items may affect the financial statements and tax returns
in different periods (temporary differences) for the years ended December 31:
US$ ‘000 |
2020 |
2019 |
Income tax charge |
(89,363) |
(78,745) |
Net deferred income tax benefit (expense) |
6,132 |
327 |
Charge for taxes |
(83,231) |
(78,418) |
The tax effects of
significant items excluding the exchange movements and comprising the Combined Group’s net deferred income tax asset and liability
as of December 31, 2020 and 2019 are as follows:
US$ ‘000 |
Combined
Statement of
Financial
Position |
Combined
Income
Statement |
2020 |
2019 |
2020 |
2019 |
Temporary differences between book and tax basis of: |
|
|
|
|
Property plant and equipment |
25,750 |
24,023 |
|
|
Intangible assets |
(18,496) |
(19,449) |
|
|
Leases |
1,129 |
504 |
|
|
Contract assets, bad debt and others |
5,890 |
3,215 |
|
|
Deferred tax benefit |
|
|
6,132 |
327 |
Deferred tax assets, net |
14,273 |
8,293 |
|
|
Reflected in the statements of financial position as: |
|
|
|
|
Deferred tax assets |
25,275 |
19,973 |
|
|
Deferred tax liabilities |
(11,002) |
(11,680) |
|
|
Deferred income tax
assets and liabilities reflect temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. There are no carried forward tax losses within the combined entities.
Income tax assets and
liabilities for current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.
The tax rate and tax laws used to compute the amount are those enacted or substantively enacted by the statement of financial position
date.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
Income tax assets as of December 31, of
each year comprise:
US$ ‘000 |
2020 |
2019 |
Income tax assets |
4,134 |
6,651 |
Total |
4,134 |
6,651 |
As of December 31,
2020 the Combined Group has an income tax liability of $14,914 thousand (2019: $8,383 thousand)
Movements in intangible assets in 2020 were
as follows:
US$ ‘000 |
Goodwill |
Licenses |
Customer
lists |
Other (i) |
Total |
Opening balance, net |
79,510 |
46,801 |
25,133 |
59,558 |
211,002 |
Additions |
1,520 |
80,965 |
569 |
19,689 |
102,743 |
Amortization charge |
— |
— |
(4,187) |
(28,436) |
(32,623) |
Transfers (to)/from PP&E |
(11) |
— |
— |
80 |
69 |
Disposals |
— |
— |
— |
(11) |
(11) |
Exchange rate movements |
(1,257) |
325 |
(160) |
(645) |
(1,737) |
Closing balance, net |
79,762 |
128,091 |
21,355 |
50,235 |
279,443 |
As of 31 December 31, 2020 |
|
|
|
|
|
Cost |
79,762 |
168,069 |
50,373 |
156,317 |
454,521 |
Accumulated amortization |
— |
(39,978) |
(29,018) |
(106,082) |
(175,078) |
Net |
79,762 |
128,091 |
21,355 |
50,235 |
279,443 |
| (i) | Other caption mainly relates to IRUs and broadcasting rights. |
Movements in intangible assets in 2019 were
as follows:
US$ ‘000 |
Goodwill |
Licenses |
Customer
lists |
Other (i) |
Total |
Opening balance, net |
78,999 |
20,310 |
29,181 |
46,861 |
175,351 |
Additions |
— |
28,078 |
— |
17,287 |
45,365 |
Amortization charge |
— |
(1,664) |
(4,176) |
(19,522) |
(25,362) |
Transfers (to)/from PP&E |
— |
— |
— |
15,335 |
15,335 |
Disposals |
— |
— |
— |
(686) |
(686) |
Exchange rate movements |
511 |
77 |
128 |
283 |
999 |
Closing balance, net |
79,510 |
46,801 |
25,133 |
59,558 |
211,002 |
As of December 31, 2019 |
|
|
|
|
|
Cost |
79,510 |
87,272 |
50,307 |
148,102 |
365,191 |
Accumulated amortization |
— |
(40,471) |
(25,174) |
(88,544) |
(154,189) |
Net |
79,510 |
46,801 |
25,133 |
59,558 |
211,002 |
| (i) | Other caption mainly relates to IRUs and broadcasting rights. |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 8. | INTANGIBLE ASSETS (Continued) |
The following table
provides details of cash used for the purchase of intangible assets:
US$ ‘000 |
2020 |
2019 |
Additions (i) |
102,743 |
45,365 |
Decrease in payables for intangible assets |
4,557 |
6,937 |
Cash used for the purchase of intangible assets |
107,300 |
52,302 |
(i)
In 2020 it Includes the acquisition of radioelectric spectrum for $83 million and the Alexa
Project for $2.3 million. (2019, includes acquisitions of radioelectric spectrum for $30 million).
Impairment test of goodwill
As of December 31,
2020 and 2019, management tested goodwill for impairment. The Combined Group determines whether goodwill is impaired at least on an annual
basis. This requires an estimation of the recoverable amount of the cash-generating unit (or group of cash-generating units) to which
the goodwill is allocated.
The recoverable amount
of a cash-generating unit (“CGU”) or group of CGUs is determined based on discounted cash flows. The cash flow projections
used (adjusted operating profit margins, income tax, working capital, capital expenditure and license renewal cost) are extracted from
financial budgets approved by management and the Board of MIC and Miffin Group in Guatemala covering a period of fifteen years. The planning
horizon reflects industry practice in the country where the Combined Group operates. Cash flows beyond this period are extrapolated using
a perpetual growth rate of 1% (2019: 1.1%). The Combined Group has determined that the Combined Group is the only CGU based on the decision-making
process as well as the level of detail of available information .
The recoverable amount
has been determined for the cash generating unit based on discount rate of 8.2% for the year ended December 31, 2020 (2019: 9%). Based
on the results of the impairment test performed, management concluded that no impairment losses should be recorded on goodwill for the
years ended December 31, 2020 and 2019.
Sensitivity analysis
was performed on key assumptions within the impairment tests, including long-term growth rates, discount rates and operating profits.
The sensitivity analysis determined that sufficient margin exists from realistic changes to the assumptions that would not impact the
overall results of the testing.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 9. | PROPERTY, PLANT AND EQUIPMENT |
Movements in tangible
assets in 2020 were as follows:
US$ ‘000 |
Network
Equipment |
Land and Buildings |
Construction
in Progress |
Other (i) |
Total |
Opening balance, net |
485,094 |
9,542 |
39,139 |
14,900 |
548,675 |
Additions |
150,598 |
1,386 |
3,908 |
5,014 |
160,906 |
Net disposals |
(3,180) |
(72) |
(82) |
(137) |
(3,471) |
Depreciation charge |
(163,577) |
(1,944) |
— |
(5,934) |
(171,455) |
Asset retirement obligations |
3,491 |
— |
— |
— |
3,491 |
Transfers (to)/from intangible assets |
9,669 |
(16) |
(8,902) |
(682) |
69 |
Exchange rate movements |
(4,446) |
(110) |
(510) |
26 |
(5,040) |
Closing balance as of December 31, 2020 |
477,649 |
8,786 |
33,553 |
13,187 |
533,175 |
Cost |
1,616,759 |
21,336 |
33,553 |
57,323 |
1,728,971 |
Accumulated depreciation |
(1,139,110) |
(12,550) |
— |
(44,136) |
(1,195,796) |
Net |
477,649 |
8,786 |
33,553 |
13,187 |
533,175 |
(i)The caption “Other”
mainly includes office equipment and motor vehicles.
Movements in tangible
assets in 2019 were as follows:
US$ ‘000 |
Network
Equipment |
Land and Buildings |
Construction
in Progress |
Other (i) |
Total |
Opening balance, net |
483,007 |
9,065 |
48,341 |
33,376 |
573,789 |
Additions… |
101,328 |
1,986 |
45,247 |
7,379 |
155,940 |
Net disposals |
(3,904) |
(229) |
(447) |
(509) |
(5,089) |
Depreciation charge |
(155,655) |
(1,898) |
— |
(10,757) |
(168,310) |
Asset retirement obligations |
5,602 |
— |
— |
— |
5,602 |
Transfers (to)/from intangible assets |
53,083 |
570 |
(54,233) |
(14,755) |
(15,335) |
Exchange rate movements |
1,633 |
48 |
231 |
166 |
2,078 |
Closing balance as of December 31, 2019 |
485,094 |
9,542 |
39,139 |
14,900 |
548,675 |
Cost |
1,538,127 |
21,530 |
39,139 |
61,114 |
1,659,910 |
Accumulated depreciation |
(1,053,033) |
(11,988) |
— |
(46,214) |
(1,111,235) |
Net. |
485,094 |
9,542 |
39,139 |
14,900 |
548,675 |
(i) The caption “Other”
mainly includes office equipment and motor vehicles.
The following table
provides details of cash used for the purchase of property, plant and equipment for the years ended December 31:
US$ ‘000 |
2020 |
2019 |
Additions |
160,906 |
155,940 |
Change in suppliers’ advances |
2,737 |
4,413 |
Change in payables for property, plant and equipment |
15,680 |
(3,462) |
Cash used for the purchase of property, plant and equipment |
179,323 |
156,891 |
Borrowing costs capitalized
during the years ended December 31, 2020 and 2019 were not significant.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
Movements in right-of-use
assets in 2020 were as follows:
US$ ‘000 |
Sites
rental
RoU |
Land and Buildings RoU |
Tower
rental
RoU |
Other network equipment RoU |
Other PPE RoU |
Total |
Opening balance, net |
149,846 |
21,985 |
49,404 |
715 |
16,862 |
238,812 |
Additions. |
6,198 |
563 |
2,918 |
2,509 |
119 |
12,307 |
Net disposals |
(2,069) |
(260) |
(113) |
(934) |
28 |
(3,348) |
Depreciation charge |
(22,706) |
(3,707) |
(4,231) |
(126) |
(2,216) |
(32,986) |
Closing balance as of December 31, 2020 |
131,269 |
18,581 |
47,978 |
2,164 |
14,793 |
214,785 |
Cost |
176,820 |
25,348 |
56,383 |
2,584 |
18,477 |
279,612 |
Accumulated depreciation |
(45,551) |
(6,767) |
(8,405) |
(420) |
(3,684) |
(64,827) |
Net |
131,269 |
18,581 |
47,978 |
2,164 |
14,793 |
214,785 |
Movements in right-of-use
assets in 2019 were as follows:
US$ ‘000 |
Sites
rental
RoU |
Land and Buildings RoU |
Tower
rental
RoU |
Other network equipment RoU |
Other PPE RoU |
Total |
Opening balance, net |
169,370 |
24,234 |
52,972 |
854 |
17,917 |
265,347 |
Additions |
4,816 |
7,783 |
1,143 |
1 |
7,796 |
21,539 |
Net disposals |
(1,350) |
(6,373) |
(493) |
(51) |
(6,817) |
(15,084) |
Depreciation charge |
(22,990) |
(3,659) |
(4,218) |
(89) |
(2,034) |
(32,990) |
Closing balance as of December 31, 2019 |
149,846 |
21,985 |
49,404 |
715 |
16,862 |
238,812 |
Cost |
172,691 |
25,045 |
53,579 |
1,009 |
18,330 |
270,654 |
Accumulated depreciation |
(22,845) |
(3,060) |
(4,175) |
(294) |
(1,468) |
(31,842) |
Net |
149,846 |
21,985 |
49,404 |
715 |
16,862 |
238,812 |
Inventories (net of
impairment for obsolescence amounting to $1.9 million as of December 31, 2020 and $2.3 million as of December 31, 2019) as of December
31 of each year comprise:
US$ ‘000 |
2020 |
2019 |
Telephones and equipment |
19,113 |
20,830 |
Sim cards |
239 |
310 |
Other (i) |
6,415 |
11,769 |
Total |
25,767 |
32,909 |
(i) The caption “Other”
includes in-transit T&E inventory.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 12. | TRADE RECEIVABLES, NET |
US$ ‘000 |
December 31, 2020 |
December 31, 2019 |
Gross trade receivables |
77,444 |
72,262 |
Less: provisions for credit losses expected |
(25,696) |
(26,724) |
Trade receivables, net |
51,748 |
45,538 |
Contract assets, net |
58,333 |
65,111 |
Total |
110,081 |
110,649 |
Contract assets
The balance of contract
assets is presented below as of December 31:
US$ ‘000 |
2020 |
2019 |
Accrued income |
21,931 |
18,845 |
Contract assets |
36,402 |
46,266 |
Contract assets, net |
58,333 |
65,111 |
The nominal value
less provisions for credit losses expected of trade receivables approximates their fair values (see note 27). As of December 31,
2020, and 2019, the aging analysis of trade receivables is as follows:
US$ ‘000 |
Contrac-tual assets |
Accounts receivables |
Total |
Total |
Current |
Past due (net of credit losses
expected) |
<30 days |
30–90 |
>90 days |
2020 |
|
|
|
|
|
|
Accounts receivable |
41,625 |
47,684 |
4,948 |
3,678 |
21,134 |
77,445 |
Expected credit losses |
(5,223) |
(1,417) |
(1,371) |
(1,878) |
(21,030) |
(25,696) |
Total |
36,402 |
46,267 |
3,577 |
1,800 |
104 |
51,748 |
Expected credit losses |
13% |
3% |
28% |
51% |
100% |
|
US$ ‘000 |
Contrac
tual assets
|
Accounts receivables |
|
|
Total |
Current |
Past due (net of credit losses |
Total |
|
expected) |
|
<30 days |
30–90 |
>90 days |
|
2019 |
|
|
|
|
|
|
|
Accounts receivable |
46,891 |
39,813 |
6,822 |
4,062 |
21,565 |
72,262 |
|
Expected credit losses |
(625) |
(1,157) |
(1,647) |
(2,412) |
(21,508) |
(26,724) |
|
Total |
46,266 |
38,656 |
5,175 |
1,650 |
57 |
45,538 |
|
Expected credit losses |
1% |
3% |
24% |
68% |
100% |
|
|
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 13. | CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
Cash and cash equivalents comprised as of
December 31:
US$ ‘000 |
2020 |
2019 |
Cash and cash equivalents in U.S. Dollars |
107,170 |
115,016 |
Cash and cash equivalents in GTQ |
81,372 |
74,114 |
Total cash and cash equivalents |
188,542 |
189,130 |
Cash and short-term
deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months
or less, which are subject to an insignificant risk of changes in value. For the purpose of the combined statement of cash flows, cash
and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered
an integral part of the Group’s cash management.
Restricted cash comprised
as of December 31:
US$ ‘000 |
2020 |
2019 |
Restricted cash in GTQ |
7,105 |
6,006 |
Total restricted cash |
7,105 |
6,006 |
Restricted cash
mainly refers to cash within the mobile financial services business, which is restricted in accordance with local regulations.
As of years ended
December 31, 2020 and 2019 the issued share capital of the combined entities consists of:
Company names |
2020 |
2019 |
Shares |
Par value (GTQ) |
Shares |
Par value (GTQ) |
Comunicaciones Celulares, S.A. |
500 |
50,000 |
500 |
50,000 |
Comunicaciones Corporativas, S.A. |
20 |
500 |
20 |
500 |
Servicios Especializados en Telecomunicaciones, S.A. |
100 |
100 |
100 |
100 |
Distribuidora de Comunicaciones de Occidente, S.A. |
20 |
500 |
20 |
500 |
Distribuidora Central de Comunicaciones, S.A. |
20 |
500 |
20 |
500 |
Distribuidora de Comunicaciones de Oriente, S.A. |
20,020 |
500 |
20,020 |
500 |
Distribuidora Internacional de Comunicaciones, S.A. |
20 |
500 |
20 |
500 |
Servicios Innovadores de Comunicación y Entretenimiento, S.A. |
20 |
500 |
20 |
500 |
Cloud2Nube, S.A. |
40 |
500 |
40 |
500 |
Navega.com, S.A. |
200,017 |
100 |
200,017 |
100 |
The above-mentioned
shares have been fully issued and fully paid.
The total shared capital
and premium for the Combined Group for the years ended December 31, 2020 and 2019 is $8,219 thousand each period.
As of December 31,
2020 the Combined Group had fixed commitments to purchase network equipment, land and buildings and other fixed assets for $93 million
(2019: $40 million), from various suppliers.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 15. | SHARE BASED COMPENSATION |
| (a) | Long-Term Incentive Plans |
Long term incentive
awards consist of three-year deferred share awards and performance share awards plans. All shares issued are MIC shares (one of the ultimate
shareholders of the Tigo Guatemala), the cost of which is recorded as equity contribution reserve and the fair value of equity-settled
shares granted is estimated at the date of grant using the market price of MIC shares on that date. There are two types of plans applicable
for the Combined Group, a performance share plan and a deferred share plan.
Deferred share plan
(since 2014)
For the deferred awards
plan, participants are granted shares based on past performance, with 16.5% of the shares vesting on January 1 of each of year one and
two, and the remaining 67% on January 1 of year three (from 2019 plan shares vesting are 30% on January 1 of each of year one and two,
and the remaining 40% on January 1 of year three). Vesting is conditional upon the participant remaining employed with Comcel or any Tigo
Guatemala at each vesting date.
Performance share
plan (for plans issued in 2016 and 2017)
Shares granted under
this performance share plan vest at the end of the three-year period, subject to performance conditions, 25% based on Positive Absolute
Total Shareholder Return (Absolute TSR), 25% based on Relative Total Shareholder Return (Relative TSR) and 50% based on budgeted Earnings
Before Interest Tax Depreciation and Amortization (EBITDA) minus Capital Expenditure (Capex) minus Change in Working Capital (CWC) (Free
Cash Flow).
For the Performance
Share Plans, and in order to calculate the fair value of the TSR portion of those plans, it is necessary to make a number of assumptions
which are set out below. The assumptions have been set based on an analysis of historical data as of grant date. There were no performance
share plans granted to the Group in 2019 or 2020.
Assumptions and fair value of the shares under the TSR portion |
Risk-free rate |
Dividend yield |
Share price volatility (i) |
Award term (years) |
Share fair value
(In USD)
|
Performance Share Plan 2017 (Relative TSR) |
(0.40)% |
3.80% |
22.5% |
2.92 |
27.06 |
Performance Share Plan 2017 (Absolute TSR) |
(0.40)% |
3.80% |
22.5% |
2.92 |
29.16 |
Performance Share Plan 2016 (Relative TSR) |
(0.65)% |
3.49% |
30% |
2.61 |
43.35 |
Performance Share Plan 2016 (Absolute TSR) |
(0.65)% |
3.49% |
30% |
2.61 |
45.94 |
(i)
Historical volatility retained was determined on the basis of a 3-year historic average.
The cost of the long-term
incentive plans which are conditional on market conditions is calculated as follows:
Fair value (market
value) of shares at grant date (as calculated above) x number of shares expected to vest.
The Combined Group
has accounted for shared based compensation for the management and key employees of the companies included in the Combined Group.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 15. | SHARE BASED COMPENSATION (Continued) |
A summary of the shares
vested under the relevant plans as of December 31, 2020 and 2019 is as follows:
|
Shares vested as of December 2020 |
Shares vested as of December 2019 |
Plans |
|
|
2016 Deferred Plan (i) |
— |
25,487 |
2016 Performance Plan (i) |
— |
2,071 |
2017 Deferred Plan |
26,038 |
9,050 |
2017 Performance Plan |
3,106 |
3,296 |
2018 Deferred Plan |
6,705 |
— |
2019 Deferred Plan |
115 |
— |
Total |
35,964 |
39,904 |
(i) the third tranche
2016 plan was vested during Q1 2020.
| (b) | Total share-based compensation expense |
For plans with unvested
shares as of December 31, 2020, the number of share awards ultimately expected to vest as of December 31, 2020 under the current long-term
incentive plans is as follows:
|
Deferred
share
awards
2020 |
Deferred
share
awards
2019 |
Performance
shares
2018
|
Deferred
share
awards
2018 |
Shares granted |
774 |
383 |
2,129 |
19,977 |
Revision for actual and expected forfeitures |
— |
0 |
(2,129) |
(1,015) |
Shares vested |
— |
(115) |
— |
(6,705) |
Share awards expected to vest |
774 |
268 |
— |
12,257 |
Total share-based compensation
expense for the years ended December 31, 2020 and 2019 was as follows:
US$ ‘000 |
2020 |
2019 |
2017 LTIPs |
— |
357 |
2018 LTIPs |
263 |
364 |
2019 LTIPs |
7 |
17 |
2020 LTIPs |
19 |
— |
Total |
289 |
738 |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 16. | OTHER DEBT AND FINANCING |
Borrowings due after
more than one year as of December 31:
US$ ‘000 |
2020 |
2019 |
Bank financing |
413,404 |
138,592 |
Bond financing (i) |
— |
790,616 |
Total other debt and financing due after more than one year |
413,404 |
929,208 |
(i) Bonds were repaid
on November 18, 2020.
No borrowings are due
within one year.
The total amount of
debt and financing as of December 31 is repayable as follows:
US$ ‘000 |
2020 |
2019 |
Amounts due within 4 to 5 years (i) |
281,889 |
790,616 |
Amounts due after five years |
131,515 |
138,592 |
Total debt |
413,404 |
929,208 |
(i) Bonds were repaid on November 18,
2020
Significant individual
financing facilities as of December 31 are described below:
Comunicaciones Celulares,
S.A.
Description |
Maturity |
Currency |
Interest rate |
Amount
outstanding
US$'000
2020 |
Amount
outstanding
US$'000
2019 |
Senior Notes |
2024 |
GTQ |
(fixed) 6.875% |
— |
790,616 |
Banco Industrial, S.A. |
2025 |
GTQ |
(fixed) 7.20% |
22,366 |
22,642 |
Banco Industrial, S.A. |
2025 |
GTQ |
(fixed) 6.20% |
80,833 |
— |
Banco G&T Continental, S.A. |
2025 |
GTQ |
(fixed) 6.00% |
64,153 |
— |
Banco de América Central, S.A. |
2026 |
GTQ |
(fixed) 6.00% |
32,077 |
— |
Banco Agromercantil de Guatemala, S.A. |
2027 |
GTQ |
(fixed) 5.75% |
49,719 |
— |
Servicios Especializados
en Telecomunicaciones, S.A.
Description |
Maturity |
Currency |
Interest rate |
Amount outstanding
US$'000
2020 |
Amount outstanding
US$'000
2019 |
Banco Industrial, S.A. |
2025 |
GTQ |
(fixed) 7.20% |
54,594 |
55,268 |
Navega.com, S.A
Description |
Maturity |
Currency |
Interest rate |
Amount outstanding
US$'000
2020 |
Amount outstanding
US$'000
2019 |
Banco Agromercantil de Guatemala, S.A. |
2027 |
GTQ |
(fixed) 5.75% |
49,719 |
— |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 16. | OTHER DEBT AND FINANCING (Continued) |
Servicios Innovadores
de Comunicación y Entretenimiento, S.A.
Description |
Maturity |
Currency |
Interest rate |
Amount outstanding
US$'000
2020 |
Amount outstanding
US$'000
2019 |
Banco G&T Continental, S.A. |
2025 |
GTQ |
(fixed) 7.125% |
— |
60,682 |
Banco Industrial, S.A. |
2025 |
GTQ |
(fixed) 6.75% |
59,943 |
— |
The interest expense
for the years ended December 31 is comprised as follow:
US$ ‘000 |
2020 |
2019 |
Bonds interest (i) |
76,180 |
54,714 |
Banks interest |
15,142 |
13,873 |
Lease interest |
20,165 |
21,464 |
Shareholder´s interest |
2,809 |
— |
Total debt |
114,296 |
90,051 |
(i) Bonds’
interest for the year ended December 31, 2020 includes the redemption premium for early bonds repayment of $18 million and amortized costs
of $7.7 million.
In January 2014, Intertrust
SPV (Cayman) Limited, acting as trustee of the Comcel Trust, a trust established and consolidated by Comunicaciones Celulares, S.A. for
the purposes of the transaction, issued a bond (proceeds of $779 million after deduction of the various costs paid up front and relating
to this issuance) to refinance existing local and MIC S.A. corporate debt. The bond was issued at 98.233% of the principal and has an
effective interest rate of 7.168%. The bond was guaranteed by Comunicaciones Celulares, S.A. and listed on the Luxembourg Stock Exchange.
Simultaneously with, and using the proceeds from, the bond, Comunicaciones Celulares, S.A. entered into an $800 million senior unsecured
loan (“the Loan”) with Credit Suisse AG, Cayman Islands Branch. The proceeds of the bond were used by Intertrust SPV to purchase
a 100% participation interest in the Loan pursuant to a credit and guarantee.
The loan agreements
between Intertrust, Credit Suisse and Comunicaciones Celulares, S.A. remove any risk to Credit Suisse connected to the Loan, and as such
the Combined Group has derecognized both its asset and liability towards Credit Suisse from the date of the agreement.
During 2015, additionally,
Tigo Guatemala obtained loans from Guatemalan local banks as disclosed below increasing the interest expense in 2019 ($90 million) and
2018 ($73 million).
In June 2015, Tigo
Guatemala set up 10 years maturity loans in local currency with two local banks; Banco Industrial for GTQ 600 million ($78 million) and
Banco G&T for GTQ 1 billion ($122 million). The effective combined interest rate of the loans is 7.16%. Interest is paid in
monthly installments while the loan is repayable in one bullet with a 10 years maturity and with an option of early repayment after 5
years without any penalties.
In November and December
2018, the Combined Group redeemed GTQ 467 million ($60 million), of the principal amount of the debt with Banco G&T.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 16. | OTHER DEBT AND FINANCING (Continued) |
On June 19, 2020, Comunicaciones
Celulares, S.A. ("Comcel") entered into a credit agreement with Banco Industrial for GTQ 500 million (approximately $64 million
using the exchange rate as of December 31, 2020) for a 5-year term.
During the third quarter
of 2020, Comcel's board of directors decided to redeem the $800 million aggregate principal amount of its outstanding 6.875% Senior Notes
due 2024 on November 18, 2020. The redemption was officially announced on October 1, 2020 at a redemption price equal to 102.292% of the
principal amount of the Notes to be redeemed plus accrued and unpaid interest of $16 million, resulting in an aggregate amount of $834
million payable on November 18, 2020. As a result of the redemption, the Comcel Trust was terminated on November 18, 2020 and thereupon
removed from the Trust register.
To proceed with the
early repayment of bondholders, the Combined Group was financed through a mix of a shareholders´ loan for $350 million for one-year
term with a fixed interest rate of 4% and loans with local banks for Q2,155 million (approximately $276.5 million) with terms ranging
from three to seven years, and with an effective interest rate of 5.97%.
Fair value of financial liabilities
Borrowings are recorded
at amortized cost. The fair value of borrowings as of December 31, 2020 and 2019 is as follows:
US$ ‘000 |
2020 |
2019 |
Other debt and financing |
413,404 |
955,485 |
The fair value of the
bond as of December 31, 2019 is determined based on market prices (level 1). The fair value of the borrowings is calculated by discounting
the expected future cash flows at market interest rates (level 2). The carrying value of the other financial liabilities is assumed to
approximate their fair values (see note 27).
Guarantees
As of December 31,
2020, Tigo Guatemala is co-debtor of Comunicaciones Celulares, S.A, Servicios Especializados en Telecomunicaciones, S.A., Servicios Innovadores
de Comunicación y Entretenimiento, S.A. and Navega.com, S.A. on bank loans described in note 16; these bank loans have a joint
fiduciary guarantee.
Pledged assets
As of December 31,
2020 there are $174 of pledged deposits and 2019, there were no pledged assets.
| 17. | PAYABLES AND ACCRUALS FOR CAPITAL EXPENDITURE |
Payables and accruals for capital expenditure
at December 31 of each year comprise:
US$ ‘000 |
2020 |
2019 |
Accrued of intangible assets |
10,894 |
15,178 |
Payables of intangible assets |
10,800 |
9,493 |
Accrued of tangible assets |
5,638 |
10,640 |
Payables of tangible assets |
5,132 |
15,897 |
Total |
32,464 |
51,208 |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
Trade payables at December
31 of each year comprise:
US$ ‘000 |
2020 |
2019 |
T&E suppliers |
7,914 |
10,643 |
Fixed operators |
4,990 |
3,692 |
Roaming partners |
30 |
93 |
Mobile operators |
— |
1,879 |
Others. |
12,726 |
16,375 |
Total |
25,660 |
32,682 |
The “others”
caption contains the remaining all third-party suppliers of the Combined Group.
| 19. | ACCRUED INTEREST AND ACCRUED EXPENSES |
Accrued expenses and
accrued interest at December 31 of each year comprise:
US$ ‘000 |
2020 |
2019 |
Accrued of employee related costs |
13,847 |
10,752 |
Accrued of programming and advertising costs |
10,621 |
10,264 |
Accrued of network maintenance |
8,418 |
7,409 |
Accrued of interconnection costs |
6,385 |
4,815 |
Accrued interest |
1,884 |
24,151 |
Other accrued expenses |
12,453 |
9,207 |
Total |
53,608 |
66,598 |
The “other accrued
expenses” caption relates to various accruals.
Contract liabilities
at December 31 of each year comprise:
US$ ‘000 |
2020 |
2019 |
Deferred revenue |
35,137 |
34,126 |
Contract liabilities |
822 |
510 |
Total |
35,959 |
34,636 |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 21. | NON-CURRENT AND CURRENT PROVISIONS AND OTHER LIABILITIES |
Provisions and other
non-current liabilities at December 31 of each year comprise:
US$ ‘000 |
2020 |
2019 |
Long-term portion of asset retirement obligations |
48,389 |
45,650 |
Other non-current liabilities |
2,338 |
3,816 |
Provisions (non-current) |
240 |
383 |
Non-current litigation provisions (see note 23) |
51 |
51 |
Total |
51,018 |
49,900 |
Provisions and other
current liabilities at December 31 of each year comprise:
US$ ‘000 |
2020 |
2019 |
Customer and distributor restricted cash balances |
6,922 |
5,991 |
Current provisions |
1,107 |
1,243 |
Customer deposits |
121 |
218 |
Other |
23,724 |
7,325 |
Total |
31,874 |
14,777 |
The ability of the
Combined Group to make dividend payments is subject to, among other things, the terms of indebtedness, legal restrictions and the ability
to repatriate funds. In 2020, the entities of the Combined Group declared dividends of $363 million (2019: $310 million) which are usually
paid over two fiscal years: through shareholders’ loans the year the Combined Group makes the profit and through dividends paid
for the remaining amount the following year after the final dividend has been approved.
US$ ‘000 |
2020 |
2019 |
Dividends offset with accounts receivable from related parties |
322,381 |
275,060 |
Payment of dividends |
21,718 |
13,110 |
Income tax withheld on dividends paid |
18,061 |
15,482 |
Exchange rate movement |
337 |
5,921 |
Total |
362,497 |
309,573 |
| 23. | NON-CASH INVESTING AND FINANCING ACTIVITIES |
The following table
gives details of non-cash investing and financing activities as of December 31 of each year.
US$ ‘000 |
2020 |
2019 |
Investing activities. |
|
|
Change in asset retirement obligations (see note 9) |
3,491 |
5,602 |
Financing activities |
|
|
Right-of-use assets – additions (see note 10) |
12,307 |
21,539 |
Dividends
offset with accounts receivable from related parties (see note 22) |
322,381 |
275,060 |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 24. | COMMITMENTS AND CONTINGENCIES |
Operational environment
The Combined Group
operates in Guatemala, where the regulatory, political, technological and economic environments are evolving. As a result, there are uncertainties
that may affect future operations, the ability to conduct business, foreign exchange transactions and debt repayments and which may impact
upon agreements with other parties. In the normal course of business, the Combined Group faces uncertainties regarding taxation, interconnect
rate, license renewal and tariff arrangements, which can have a significant impact on the long-term economic viability of operations.
Litigation and
legal risks
The Tigo Guatemala
are contingently liable with respect to lawsuits and other matters that arise in the normal course of business. As of December 31, 2020
and 2019 $51 thousand in both periods have been accrued for these claims in the combined statement of financial position. Management is
of the opinion that while it is impossible to ascertain the ultimate legal and financial liability with respect to these claims, the ultimate
outcome of these contingencies is not anticipated to have a material effect on the Combined Group’s financial position and operations.
Tax claims
At December 31, 2020,
Navega.Com, S.A. is disputing through an administrative process an adjustment made by the Tax Authorities in regards with the goodwill
amortization of approximately $21.9 million related with business combinations completed in 2011 with an effective date on January 1,
2012. According to the Guatemalan income tax law, goodwill amortization is deductible for income tax purposes. However, tax authorities
considered that the goodwill originated in acquisitions made by Navega.com S.A. and its predecessor Asertel, S.A. do not meet the definition
of goodwill for tax purposes and proceeded to annul the amortization deducted by Navega.com, S.A. Even though the administrative process
has been initiated at the Supreme Court, the tax authority has requested that the attorney general’s office investigate this matter
through a criminal prosecution. Currently, a criminal court resolution is pending to define whether the process will be of an administrative
or criminal nature. At the current stage of the process, the Company has insufficient information to determine whether a provision would
be necessary.
On April 12, 2018,
the Constitutional Court notified Navega.Com, S.A. of an appeal filed by the Tax Authorities against the ruling of the Supreme Court of
Justice in regards with the 3% stamp tax on dividend payments from Navega.Com, S.A. to the shareholders for the 2007 and 2010 fiscal years.
The court has resolved these adjustments in a different way, and in some cases in favor of the tax payers, however, recently it has resolved
in favor of tax authorities, based on that jurisprudence, in 2019, Management decided to book a provision for $2 million associated with
this matter. Such amount was paid in 2020.
Taking into consideration
the new jurisprudence regarding the stamp tax on dividends distribution, in June 2020, management decided to record a provision for $7.3
million in Comunicaciones Celulares S.A. for a stamp tax adjustment by Guatemalan tax authorities on dividends declared by Comunicaciones
Celulares S.A. This provision includes the total adjustment plus a proportional part of fines and interest and represents management best
estimate of the outcome. This case is in an initial phase within the Supreme Court.
Capital commitments
As of December 31,
2020 the Combined Group had fixed commitments to purchase network equipment, land and buildings and other fixed assets for $93 million
(2019: $40 million), from various suppliers.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 24. | COMMITMENTS AND CONTINGENCIES (Continued) |
Millicom Group
subsidiaries
The Combined Group
receives business support and financing from various Millicom Group entities including MIC the ultimate holding company Millicom International
II NV (“MIC IINV”) and Millicom International Operations S.A. (“MIO S.A.”).
The Combined Group
also recharges to other Millicom Group entities certain services performed on their behalf.
The receivable balance
with MIC IINV at December 31, 2020 represents shareholder loans that are due in 2021.
Miffin Associates
Corp
The receivable balance
with Miffin at December 31, 2020 represents shareholder loans that are due in 2021.
Transactions with Miffin
shareholders represent recurring commercial operations such as purchase of handsets, lease of buildings and sites and sale of airtime.
Amount due from related
parties (non-current portion) as of December 31:
US$ ‘000 |
2020 |
2019 |
Millicom International II NV |
27,500 |
174,350 |
Miffin Associates Corp. |
22,500 |
142,650 |
Others |
10 |
10 |
Total |
50,010 |
317,010 |
Amount due from and
advanced to related parties (current portion) as of December 31:
US$ ‘000 |
2020 |
2019 |
Millicom International II NV |
201,692 |
185,064 |
Miffin Associates Corp. |
163,400 |
151,311 |
Metrored Cable Honduras |
473 |
345 |
MIC S.A.. |
368 |
1046 |
Newcom Nicaragua, S.A. |
232 |
57 |
Others |
1,282 |
596 |
Total |
367,447 |
338,419 |
Amount due to related
parties (current portion) as of December 31:
US$ ‘000 |
2020 |
2019 |
MIC, S.A (i) |
196,430 |
3,594 |
Miffin Associates Corp (i) |
164,232 |
6,341 |
Millicom Cable Costa Rica, S.A. |
2,486 |
1,711 |
Millicom Spain, S.L. |
1,163 |
287 |
Metrored Cable Honduras, S.A. de C.V. |
327 |
223 |
Others |
2,457 |
2,197 |
Total |
367,095 |
14,353 |
(i) As of December
31, 2020, includes shareholders’ loans $350 million (MIC $192.5 millon and Miffin $157.5 million)
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 25. | RELATED PARTY TRANSACTIONS AND BALANCES (Continued) |
The following significant
transactions were conducted with related parties for the years ended December 31:
US$ ‘000 |
2020 |
2019 |
Revenue (i)
|
341,563 |
321,690 |
Cost of sales and operating expenses (ii) |
(235,274) |
(233,701) |
| (i) | Mainly comprising airtime revenue, corporate transmissions and other revenue with Nexcel. |
| (ii) | Mainly composed by handset acquisition, network maintenance, site rental costs, airtime costs and other
direct costs with Celution Corporation, Lark Capital Group and Las Azaleas, S.A. |
Terms and conditions
of transactions with related parties
Outstanding balances
at the year-end are unsecured (except for intercompany receivables amounting to $415,092 (2019: $653,375), operating receivables and payables
with related parties do not generate interest) and are settled in cash. There have been no guarantees provided or received for any related
party receivables or payables. For the year ended December 31, 2020 and 2019, the Group has not recorded any impairment of receivables
relating to amounts owed by related parties. This assessment is undertaken each financial year through examining the financial position
of the related party and the market in which the related party operates.
| 26. | FINANCIAL RISK MANAGEMENT |
Terms, conditions
and risk management policies
Exposure to interest
rate, foreign currency, non-repatriation, liquidity and credit risks arise in the normal course of the Combined Group’s business.
Financial risk management is performed at MIC Group level, where each of these risks are analyzed individually on a MIC Group consolidated
level as well as on an interconnected basis. The MIC Group defines and implements strategies to manage the economic impact on the MIC
Group’s performance in line with its financial risk management policy. MIC Group’s risk management strategies may include
the use of derivatives. MIC Group’s policy is prohibiting the use of such derivatives in the context of speculative trading as presented
in its financial statements.
Interest rate
risk
Interest rate risk
generally arises on borrowings. Borrowings issued at floating rates expose the Combined Group to cash flow interest rate risk. Borrowings
issued at fixed rates expose the Combined Group to fair value interest rate risk. Since the bond and bank loans issuance (see note 16),
the Combined Group’s exposure to risk of changes in market interest rates relates to fair value interest rate risk only.
The table below summarizes, as of December
31, 2020, the Combined Group’s fixed rate debt:
US$ ‘000, except percentages |
Amounts due within |
1 year |
1-2 year |
2-3 years |
3-4 years |
4-5 years |
>5 years |
Total |
Fixed rate |
— |
— |
— |
— |
281,889 |
131,515 |
413,404 |
Weighted average nominal interest rate |
— |
— |
— |
— |
6.544% |
5.811% |
6.311% |
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 26. | FINANCIAL RISK MANAGEMENT (Continued) |
The table below summarizes, as of December
31, 2019, the Combined Group’s fixed rate debt:
US$ ‘000, except percentages |
Amounts due within |
1 year |
1-2 year |
2-3 years |
3-4 years |
4-5 years |
>5 years |
Total |
Fixed rate |
— |
— |
— |
— |
790,616 |
138,592 |
929,208 |
Weighted average nominal interest rate |
— |
— |
— |
— |
6.875% |
7.167% |
6.919% |
Foreign currency risk
The Combined Group
operates in Guatemala and is exposed to foreign exchange risk arising from the currency exposure in Guatemala Quetzal. Foreign exchange
risk arises from future commercial transactions and recognized assets and liabilities.
Foreign currency risk (continued)
Foreign currency risk
management is performed at MIC Group level. The MIC Group 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, the Combined Group may borrow in US Dollars
where it is either commercially more advantageous for subsidiaries to incur debt obligations in US Dollars or where US Dollar denominated
borrowing is the only funding source available to a subsidiary. In these circumstances, the MIC Group accepts the remaining currency risk
associated with financing its subsidiaries, principally because of the relatively high cost of forward cover, when available, in the currencies
in which the MIC Group operates.
At December 31, 2020,
if the US Dollar had weakened/strengthened by 10% against the Quetzal and all other variables held constant, then profit before tax would
have increased/decreased by $48 million, and $39 million, respectively (2019: $48 million and $39 million, respectively). This
increase/decrease in profit before tax would have mainly been as a result of the revaluation of the debts from US Dollar to Quetzal.
Credit
and counterparty risk
Financial instruments
that potentially subject the Combined Group to credit risk are primarily cash and cash equivalents, letters of credit, trade receivables,
amounts due from shareholders, supplier advances and other current assets. Counterparties to agreements relating to the Combined Group’s
cash and cash equivalents and letters of credit are with reputable financial institutions.
Combined Group management
does not believe there are significant risks of non-performance by these counterparties. Combined Group management has taken steps to
diversify its banking partners and is managing the allocation of deposits across banks so that the Combined Group’s counterparty
risk with a given bank stays within limits which have been set based on each bank credit rating to avoid any significant exposure to a
specific party.
A large portion of
turnover comprises prepaid airtime. For customers for whom telecom services are not prepaid, each combined entity follows risk control
procedures to assess the credit quality of the customer, taking into account its financial position, past experience and other factors.
Accounts receivable
are mainly derived from balances due from other telecom operators or business-to-business customers. Credit risk of other telecom operators
is limited due to the regulatory nature of the telecom industry, in which licenses are normally only issued to credit worthy companies.
Credit checks are being performed for business-to-business customers. The Combined Group maintains a provision for impairment of trade
receivables based upon expected collectability of all trade receivables.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
| 26. | FINANCIAL RISK MANAGEMENT (Continued) |
As the Combined Group
has a number of dispersed customers, there is no significant concentration of credit risk with respect to trade receivables.
Liquidity risk
Liquidity risk management
is performed at the MIC Group level. Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations
associated with financial liabilities. The MIC Group has incurred significant indebtedness but also has significant cash balances. The
MIC Group evaluates its ability to meet its obligations on an ongoing basis using a recurring liquidity planning tool. This tool considers
the operating net cash flows generated from its operations and the future cash needs for borrowing, interest payments, dividend payments
and capital and operating expenditures required in maintaining and developing its operating businesses.
The Combined Group
borrowings are concentrated to four bank loans (note 16). Combined Group management believes that there is sufficient liquidity available
to meet ongoing liquidity needs.
Liquidity risk
(continued)
The tables
below summarize the maturity profile of the Combined Group’s net financial liabilities:
Year ended December
31, 2020
US$ ‘000 |
Less than 1 year |
1 to 5 years |
>5 years |
Total |
Other debt and financing (see note 16) |
— |
— |
413,404 |
413,404 |
Lease liabilities (see note 2.22) |
24,035 |
124,828 |
80,427 |
229,290 |
Future interest commitments on debt |
26,090 |
104,362 |
13,360 |
143,812 |
Future interest commitments on leases |
22,383 |
44,235 |
16,461 |
83,079 |
Trade payables (excluding accruals) (see note 17 and 18) |
41,592 |
— |
— |
41,592 |
Other financial liabilities (including accruals) (see note 17, 19 and 25) |
437,235 |
— |
— |
437,235 |
Net financial liability |
551,335 |
273,425 |
523,652 |
1,348,412 |
Year ended December
31, 2019
US$ ‘000 |
Less than 1 year |
1 to 5 years |
>5 years |
Total |
Other debt and financing (see note 16) |
— |
790,616 |
138,592 |
929,208 |
Lease liabilities (see note 2.23) |
20,592 |
116,701 |
105,275 |
242,568 |
Future interest commitments on debt |
64,921 |
229,908 |
2,276 |
297,105 |
Future interest commitments on leases |
19,853 |
56,676 |
27,504 |
104,033 |
Trade payables (excluding accruals) |
58,072 |
— |
— |
58,072 |
Other financial liabilities (including accruals) |
106,769 |
— |
— |
106,769 |
Net financial liability |
270,207 |
1,193,901 |
273,647 |
1,737,755 |
Capital management
Capital management
is performed at the MIC Group and Miffin Associates Corp. levels. The primary objective of MIC Group’s capital management is to
ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.
The MIC Group and Miffin Associates Corp. manage their capital structure and make adjustments to it, in light of changes in economic conditions.
Tigo Guatemala Companies – Combined Financial
Statements
As of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019
The fair value of the
Combined Group’s financial instruments is included at the amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale.
Fair value measurement hierarchy
IFRS 7 requires for
financial instruments that are measured in the statement of financial position at fair value, the disclosure of fair value measurements
by level of the following fair value measurement hierarchy:
| • | Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| • | Level 2 - Inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). |
| • | Level 3 - Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs). |
Fair value measurement hierarchy (continued)
At December 31, 2020
and 2019, the Combined Group does not own any financial instruments that are measured at fair value.
The fair value of all
financial assets and all financial liabilities except debt and financing, approximate their carrying value largely due to the short-term
maturities of these instruments. Refer to note 16 for further details on fair value of debt and financing. The fair value of the bonds
has been determined based on their market price (level 1). The fair values of other debt and financing have been estimated by the Combined
Group management based on discounted future cash flows at market interest rates (level 2).
During July, 2021 the
Combined Group acquired a cable business of Ares Project for $3.3 million. The business acquisition included 100% of the customer list,
network infrastructure and operating assets of the entities. The acquisition was made considering its strategic region location, for both
its economic and its platform for convergence which will serve to penetrate the Combined Group brand at country level and thereby increase
the subscribers and the network infrastructure.
During
2021, the entities of the Combined Group had declared dividends related to 2020 retained profits of $366 million.
On
November 1, 2021, the Company experienced a Security Incident related to Ransomware which mostly affected its back-office functions, but
not the regular service of the Company to its customers nor the financial accounting systems. The incident is still under investigation;
however, the Company does not believe it has had or will have a significant impact on its operations or its financial statements.
On
November 12, 2021, Millicom acquired the remaining 45% equity interest in its joint venture business in Guatemala (collectively, “Tigo
Guatemala”) from Miffin for $2.2 billion in cash. As a result, Millicom owns 100% equity interest in Tigo Guatemala.
On December 10, 2021,
the Combined Group acquired new local bank loans for Q1,450 million ($187.6 million using the December 10, 2021 GTQ/USD exchange rate
of 7.73) with term ranging from four to five years and with an effective interest rate of 6%.
****
Item 2
Tigo Guatemala Companies
Unaudited Interim Condensed Combined Financial
Statements
As of September 30, 2021 and December
31, 2020
and for the nine-month periods ended
September 30, 2021 and 2020
January 22, 2022
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month
period ended September 30, 2021 and 2020
Unaudited interim condensed combined income statements
for the nine-month periods ended September 30, 2021 and 2020
US$ ‘000 |
Notes |
Nine months
ended
September 30,
2021 |
Nine months
ended
September 30,
2020 |
Revenue from contracts with customers |
4 |
1,190,224 |
1,104,887 |
Cost of sales. |
|
(263,728) |
(269,281) |
Gross profit. |
4 |
926,496 |
835,606 |
Operating Expenses |
|
(280,399) |
(267,631) |
Depreciation & amortization |
|
(178,692) |
(177,672) |
Other operating income (expenses), net |
|
(1,003) |
(2,135) |
Operating profit |
4 |
466,402 |
388,168 |
Interest expense (i) |
|
(42,780) |
(102,409) |
Interest and other financial income |
|
6,639 |
15,114 |
Foreign exchange gain (loss), net |
|
(515) |
(7,778) |
Profit before taxes |
|
429,746 |
293,095 |
Charge for taxes, net |
|
(67,355) |
(62,579) |
Net profit for the period |
|
362,391 |
230,516 |
| (i) | Interest expense is lower in the 9 month-period ended September 30, 2021 compared to same period last
year as a result of the early redemption of the Senior Notes in November 2020 (see note 8). Last year also included the provision for
the redemption premium fee of $18 million and remaining amortized costs of $7.7 million. |
The accompanying notes are an integral part of these
combined financial statements.
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
Unaudited interim condensed combined statements
of comprehensive income for the nine-month periods ended September 30, 2021 and 2020
US$ ‘000 |
Nine months
ended
September 30, 2021 |
Nine months
ended
September 30, 2020 |
Net profit for the period. |
362,391 |
230,516 |
Other comprehensive income, net of tax: |
|
|
Item that may be reclassified to the income statement in subsequent periods |
|
|
Exchange differences on translation of operations to the US dollars reporting currency |
5,282 |
2,695 |
Total comprehensive income for the period. |
367,673 |
233,211 |
The accompanying notes are an integral part of these
combined financial statements.
Tigo Guatemala – Unaudited Interim Condensed
Combined Financial Statements
As of September
30, 2021 and December 31, 2020
Unaudited interim condensed
combined statements of financial position as of September 30, 2021 and December 31, 2020
US$ ‘000 |
Notes |
September 30,
2021 |
December 31,
2020 |
ASSETS |
|
|
|
NON-CURRENT ASSETS |
|
|
|
Intangible assets, net |
6 |
290,189 |
279,443 |
Property, plant and equipment, net |
7 |
540,450 |
533,175 |
Right of use assets, net |
|
186,287 |
214,785 |
Contract costs, net |
|
2,283 |
2,146 |
Deferred tax assets |
|
26,232 |
25,275 |
Amounts due from related parties |
8 |
10 |
50,010 |
Income tax assets |
|
5,453 |
4,134 |
Supplier advances for capital expenditure |
|
20,388 |
7,327 |
Other non-current assets |
|
2,782 |
2,793 |
TOTAL NON-CURRENT ASSETS |
|
1,074,074 |
1,119,088 |
|
|
|
|
CURRENT ASSETS |
|
|
|
Inventories |
|
36,076 |
25,767 |
Trade receivables, net |
|
44,281 |
51,748 |
Contract assets, net |
|
52,545 |
58,333 |
Amounts due from related parties |
8 |
81,992 |
367,447 |
Prepayments |
|
6,887 |
3,803 |
Other current assets |
|
30,469 |
23,812 |
Restricted cash |
9 |
6,910 |
7,105 |
Cash and cash equivalents |
9 |
197,336 |
188,542 |
TOTAL CURRENT ASSETS |
|
456,496 |
726,557 |
TOTAL ASSETS |
|
1,530,570 |
1,845,645 |
The accompanying notes are an integral part of these
combined financial statements.
Tigo Guatemala – Unaudited Interim Condensed
Combined Financial Statements
As of September
30, 2021 and December 31, 2020
Unaudited interim condensed
combined statements of financial position as of September 30, 2021 and December 31, 2020 (Continued)
US$ ‘000 |
Notes |
September 30, 2021 |
December 31,
2020 |
EQUITY AND LIABILITIES |
|
|
|
EQUITY |
|
|
|
Share capital and premium |
|
8,219 |
8,219 |
Equity contribution reserve |
|
13,143 |
13,070 |
Other reserves |
|
91,559 |
86,277 |
Retained earnings |
|
468,080 |
471,791 |
TOTAL EQUITY |
|
581,001 |
579,357 |
|
|
|
|
LIABILITIES |
|
|
|
Non-current liabilities |
|
|
|
Other debt and financing |
10 |
416,621 |
413,404 |
Lease liabilities |
|
174,531 |
205,255 |
Provisions and other non-current liabilities |
|
54,143 |
51,018 |
Deferred tax liabilities |
|
10,633 |
11,002 |
Total non-current liabilities |
|
655,928 |
680,679 |
|
|
|
|
Current liabilities |
|
|
|
Lease liabilities. |
|
28,604 |
24,035 |
Amounts due to related parties |
8 |
54,229 |
367,095 |
Payables and accruals for capital expenditure |
|
37,656 |
32,464 |
Trade payables |
|
29,629 |
25,660 |
Accrued interest and other expenses |
|
64,360 |
53,608 |
Current income tax liabilities |
|
17,114 |
14,914 |
Contract liabilities. |
|
34,153 |
35,959 |
Provisions and other current liabilities |
|
27,896 |
31,874 |
Total current liabilities |
|
293,641 |
585,609 |
TOTAL LIABILITIES |
|
949,569 |
1,266,288 |
TOTAL EQUITY AND LIABILITIES |
|
1,530,570 |
1,845,645 |
The accompanying notes are an integral part of these
combined financial statements.
Tigo Guatemala – Unaudited Interim Condensed
Combined Financial Statements
For the nine-month
period ended September 30, 2021 and 2020
Unaudited interim condensed
combined statements of cash flows for the nine-month periods ended September 30, 2021 and 2020
US$ ‘000 |
Notes |
Nine months
ended
September 30, 2021 |
Nine months
ended
September 30, 2020 |
Cash flows from operating activities: |
|
|
|
Profit before taxes |
|
429,746 |
293,095 |
Adjustments to reconcile to net cash: |
|
|
|
Interest expense |
|
42,780 |
102,409 |
Interest and other financial income |
|
(6,639) |
(15,114) |
Foreign exchange loss |
|
515 |
7,778 |
Adjustments for non-cash items: |
|
|
|
Depreciation and amortization |
4 |
178,692 |
177,672 |
Loss on disposal and impairment of assets |
4 |
1,297 |
1,723 |
Share-based compensation |
5 |
73 |
263 |
|
|
646,464 |
567,826 |
Decrease/(increase) in trade receivables, prepayments, contract assets and other current assets |
|
10,945 |
(11,067) |
(Increase)/decrease in inventories |
|
(10,167) |
7,139 |
Increase
in trade payables, contract liabilities, and other payables |
|
12,890 |
23,858 |
Changes in working capital |
|
13,668 |
19,930 |
Interest paid on debt and other financing |
|
(29,017) |
(63,273) |
Interest paid on leases |
|
(13,742) |
(15,317) |
Interest received |
|
19,475 |
16,729 |
Taxes paid |
|
(68,596) |
(60,121) |
Net cash provided by operating activities |
|
568,252 |
465,774 |
Cash flows from investing activities: |
|
|
|
Purchase of property, plant and equipment |
7 |
(136,027) |
(126,433) |
Purchase of intangible assets |
6 |
(38,938) |
(108,473) |
Proceeds from sale of property, plant and equipment |
|
258 |
205 |
Net increase in restricted cash |
|
(195) |
(1,099) |
Net cash used by investing activities |
|
(174,902) |
(235,800) |
Cash flows from financing activities: |
|
|
|
Repayment of debt and other financing |
8 |
(318,538) |
— |
Repayment of leases (capital component) |
|
(20,075) |
(19,865) |
Income tax withheld on dividends paid |
|
(18,276) |
(18,061) |
Payment of dividends |
11 |
(25,124) |
(21,718) |
Loans granted to shareholders |
|
- |
(80,000) |
Net cash used by financing activities |
|
(382,013) |
(139,644) |
Exchange (loss)/gain on cash and cash equivalents, net |
|
(2,543) |
666 |
Net increase in cash and cash equivalents |
|
8,794 |
90,996 |
Cash and cash equivalents at the beginning of the year |
|
188,542 |
189,130 |
Cash and cash equivalents at the end of the period |
|
197,336 |
280,126 |
The accompanying notes are an integral part of these
combined financial statements.
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
Unaudited interim condensed
combined statements of changes in equity for the nine-month periods ended September 30, 2021 and 2020 and year ended December 31, 2020
US$ ‘000 |
Share
capital
(000's) |
Equity
Contribution
Reserve (i)
(000’s) |
Other
reserves
(ii)
(000’s) |
Retained
earnings
(000’s) |
Total
equity
(000's) |
At December 31, 2019 |
8,219 |
12,781 |
90,817 |
483,817 |
595,634 |
Profit for the period… |
— |
— |
— |
230,515 |
230,515 |
Currency translation differences |
— |
— |
(5,426) |
— |
(5,426) |
Total comprehensive income for the period |
— |
— |
(5,426) |
230,515 |
225,089 |
Dividends |
— |
— |
— |
(362,497) |
(362,497) |
Share based compensation |
— |
263 |
— |
— |
263 |
At September 30, 2020 |
8,219 |
13,044 |
85,391 |
351,835 |
458,489 |
Profit for the period |
— |
— |
— |
119,956 |
119,956 |
Currency translation differences |
— |
— |
886 |
— |
886 |
Total comprehensive income for the period |
— |
— |
886 |
119,956 |
120,842 |
Share based compensation |
— |
26 |
— |
— |
26 |
At December 31, 2020 |
8,219 |
13,070 |
86,277 |
471,791 |
579,357 |
Profit for the period |
— |
— |
— |
362,391 |
362,391 |
Currency translation differences |
— |
— |
5,282 |
— |
5,282 |
Total comprehensive income for the period |
— |
— |
5,282 |
362,391 |
367,673 |
Dividends (iii) |
— |
— |
— |
(366,102) |
(366,102) |
Share based compensation |
— |
73 |
— |
— |
73 |
At September 30, 2021 |
8,219 |
13,143 |
91,559 |
468,080 |
581,001 |
| (i) | Equity contribution reserve is made up only of share-based compensation expense. |
| (ii) | Other reserves include legal reserves of $86 million and currency translation differences as of September 30, 2021. Legal reserves
are not distributable. |
| (iii) | Dividends – see note 11. |
The accompanying notes are an integral part of these
combined financial statements.
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
Notes to the unaudited interim
condensed combined financial statements for the nine-month periods ended September 30, 2021 and 2020
The combined financial
statements are composed of ten companies (the “Combined Group”, “Tigo Guatemala” ) as detailed in the table below:
Name of the
company |
Country |
|
|
Comunicaciones Celulares, S.A. |
Guatemala |
Comunicaciones Corporativas, S.A... |
Guatemala |
Servicios especializados en Telecomunicaciones, S.A. |
Guatemala |
Distribuidora de Comunicaciones de Occidente, S.A. |
Guatemala |
Distribuidora Central de Comunicaciones, S.A. |
Guatemala |
Distribuidora de Comunicaciones de Oriente, S.A. |
Guatemala |
Distribuidora Internacional de Comunicaciones, S.A. |
Guatemala |
Servicios Innovadores de Comunicación y Entretenimiento, S.A.. |
Guatemala |
Navega.com, S.A... |
Guatemala |
Cloud2Nube, S.A. |
Guatemala |
In January 2014,
the Comcel Trust also comprised by the same entities of Tigo Guatemala, issued a bond of $800 million which was guaranteed by Comunicaciones
Celulares, S.A. and was listed on the Luxembourg Stock Exchange. In accordance with IFRS, the Comcel Trust was consolidated within the
combined Tigo Guatemala. With the proceeds of this bond, Comunicaciones Celulares, S.A. entered into a senior unsecured loan (“the
Loan”) with Credit Suisse AG, Cayman Islands Branch. The proceeds of the bond were used by the Comcel Trust to purchase a 100% participation
interest in the Loan pursuant to a credit and guarantee.
On November 18, 2020,
Comcel Trust board of directors decided to redeem the $800 million aggregate principal amount of its outstanding 6.875% Senior Notes due
2024. The redemption was officially announced on October 1, 2020 at a redemption price equal to 102.292% of the principal amount of the
Notes to be redeemed plus accrued and unpaid interest of $16 million, resulting in an aggregate amount of $834 million settled on November
18, 2020. As a result of the redemption, the Comcel Trust was terminated on November 18, 2020 and thereupon removed from the Trust register.
The early repayment
of the Senior Notes described beforehand was financed by a mix of cash, shareholders´ loans for $350 million for one-year term with
a fixed interest rate of 4%, and loans with local banks for Q2,155 million (approximately $276.5 million) with terms ranging from three
to seven years, and with an effective interest rate of 5.97%.
The Combined Group
provides mobile and data telephony services, corporate solutions, fixed-line broadband, fixed-line telephone, cable TV and mobile financial
services to retail and business customers in Guatemala.
All Tigo Guatemala
entities have registered offices located at Km 9.5 Carretera a El Salvador, Plaza Tigo Sta. Catarina Pinula, Guatemala. They are owned
jointly by Millicom Group (“MIC Group”), whose ultimate holding company is Millicom International Cellular S.A. (“MIC”)
and by Miffin Associates Corp., together the “Combined Group owners”.
The Combined Group
shareholders are Millicom Group and Miffin which own respectively 55% and 45% interests in each of the Tigo Guatemala. Those entities
form one single business in substance as all the entities have one single common Management. The Combined Group is governed by a shareholders’
agreement. On November 11, 2021, Millicom signed an agreement to acquire the remaining 45% equity interest in its joint venture business
in Tigo Guatemala from Miffin, as a result, Millicom will own a 100% equity interest in Tigo Guatemala.
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES |
The representatives
to the Board of Directors (“Board”) of Comunicaciones Celulares, S.A. and the other Tigo Guatemala have authorized for issue
these combined financial statements on January 22, 2022.
These interim condensed
combined financial statements of the Combined Group are unaudited. They are presented in US dollars ($) and have been prepared in accordance
with International Accounting Standard (“IAS”) 34 ‘Interim Financial Reporting’ as issued by the International
Accounting Standards Board. In the opinion of Management, these unaudited condensed interim combined financial statements reflect all
adjustments that are necessary for a proper presentation of the results for interim periods. The Combined Group’s operations are
not affected by significant seasonal or cyclical patterns.
These unaudited condensed
interim combined financial statements should be read in conjunction with the audited combined financial statements for the year ended
December 31, 2020. These unaudited condensed interim combined financial statements are prepared in accordance with consolidation and accounting
policies consistent with the December 31, 2020 combined financial statements, except for the changes described below.
COVID-19 - Qualitative
and quantitative assessment on business activities, financial situation and economic performance
Impact on our business
unit
During the first nine
months of 2021, economic activity continued to recover in our market, as most countries continued to ease lockdowns implemented at the
beginning of the pandemic, and remittances from the U.S. to Central America sustained double-digit growth year-on-year. During this period,
the country experienced spikes in the number of COVID cases during the period, but government generally refrained from imposing strict
lockdowns, choosing instead to use curfews, which had a negligible effect on commercial activity.
As of September 30,
2021, and for the nine-month period ended September 30, 2021, Management did not identify any significant adverse accounting effects as
a result of the pandemic.
New and amended
IFRS standards
The following changes
to standards have been adopted by the Combined Group and did not have any significant impact on the Combined Group’s accounting
policies or disclosures and did not require retrospective adjustments:
| • | Amendment to IFRS 16, “Leases” - COVID 19 Rent Concessions -
effective for annual periods starting on June 1, 2020. While the Combined Group has implemented this amendment already in 2020, the IASB
(in March 2021) extended its initial application beyond June 30, 2021, by one additional year. |
| • | Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest Rate
Benchmark Reform - Phase 2 - effective for annual periods starting on January 1, 2021. The amendments provide temporary reliefs which
address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest
rate. The main relief provided by the Phase 2 amendments that is relevant to the Combined Group relate to: |
| • | Changes to contractual cash flows, that is, when changing the basis for
determining contractual cash flows for financial assets and liabilities required by the reform this will not result in an immediate gain
or loss in the income statement but in an update of the effective interest rate (or an update in the discount rate to remeasure the lease
liability as a result of the IBOR reform). |
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
| 2. | SUMMARY OF COMBINATION AND ACCOUNTING POLICIES (Continued) |
The following changes
to standards not yet effective are not expected to materially affect the Combined Group:
Amendments
effective for annual periods starting on January 1, 2022:
| • | IFRS 3 “Business Combinations” - Reference to Conceptual Framework. |
| • | IAS 16 “Property, Plant and Equipment” - Proceeds before intended
use. |
| • | IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”
- Cost of fulfilling a contract. |
| • | Annual improvements to IFRS Standards 2018-2020, affecting IFRS 1, IFRS
9, IFRS 16 and IAS 41. |
Amendments effective
for annual periods starting on January 1, 2023 (not yet endorsed by the EU):
| • | Amendments to IAS 1, “Presentation of Financial Statements”:
These amendments clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end
of the reporting period. The amendments also clarify what IAS 1 means when it refers to the ‘settlement’ of a liability. The
IASB also issued 'Disclosure of Accounting Policies' with amendments that are intended to help preparers in deciding which accounting
policies to disclose in their financial statements. |
| • | IFRS 17, “Insurance contracts”, including amendments. |
| • | IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”
- Definition of accounting estimates. |
The following changes
to standards are effective for annual periods starting on January 1, 2023 (not yet endorsed by the EU) and their potential impact on the
Combined financial statements is currently being assessed by Management:
| • | Amendments to IAS 12, “Income Taxes: Deferred tax related to assets
and liabilities arising from a Single Transaction” - These amendments clarify that the initial recognition exception does not apply
to the initial recognition of leases and decommissioning obligations. These amendments apply prospectively to transitions that occur on
or after the beginning of the earliest comparative period presented. In addition, an entity should apply the amendments for the first
time by recognizing deferred tax for all temporary differences related to leases and decommissioning obligations at the beginning of the
earliest comparative period presented. |
| 3. | ACQUISITIONS OF BUSINESS |
During the nine-month
period ended September 30, 2021 the Combined Group acquired a cable business of Ares Project for $3.3 million.
During the nine-month
period ended September 30, 2020 the Combined Group acquired a cable business of Alexa Project for $2.3 million.
Both business acquisitions
included 100% of the customer list, network infrastructure and operating assets of the entities. The acquisitions were made considering
its strategic region location, for both its economic and its platform for convergence which will serve to penetrate the Combined Group
brand at country level and thereby increase the subscribers and the network infrastructure.
These acquisitions
were not material to the Combined Group for the nine month periods ended September 30, 2021 and 2020.
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
| 4. | BREAKDOWN OF OPERATING PROFIT |
The gross profit and
operating profit of the Combined Group can be summarized as follows:
US$ ‘000 |
Nine months
ended
September 30, 2021 |
Nine months
ended
September 30, 2020 |
Airtime revenue |
822,243 |
779,909 |
Telephone and equipment |
171,205 |
166,990 |
Home subscriptions |
131,975 |
97,763 |
Data links |
38,396 |
38,067 |
Other revenue |
26,405 |
22,158 |
Revenue
from contracts with customers |
1,190,224 |
1,104,887 |
Cost of rendering telecommunication services |
(263,728) |
(269,281) |
Gross profit |
926,496 |
835,606 |
Depreciation and amortization (see notes 6 and 7) |
(178,692) |
(177,672) |
Dealer commissions |
(70,733) |
(68,564) |
Employee related costs (see note 5) |
(54,401) |
(53,647) |
Sites and network maintenance |
(50,690) |
(47,922) |
External services |
(31,080) |
(26,459) |
Other expenses |
(22,139) |
(22,454) |
Phone subsidies |
(19,887) |
(21,212) |
Advertising and promotion |
(19,499) |
(16,216) |
Other fees and costs |
(11,287) |
(11,190) |
Loss on disposal and impairment of assets, net |
(1,297) |
(1,723) |
Low value and short-term leases expense |
(389) |
(379) |
Operating profit |
466,402 |
388,168 |
Employee related costs
are comprised of the following:
US$ ‘000 |
Nine months
ended
September 30, 2021 |
Nine months
ended
September 30, 2020 |
Wages and salaries |
(55,095) |
(53,992) |
Social security |
(3,470) |
(3,329) |
Other employee related costs |
(2,279) |
(2,426) |
Share based compensation |
(73) |
(263) |
Capitalized employee related costs |
6,516 |
6,363 |
Total |
(54,401) |
(53,647) |
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
The following table
provides details of cash used for the purchase of intangible assets:
US$ ‘000 |
Nine months
ended
September 30, 2021 |
Nine months
ended
September 30, 2020 |
Additions (i) |
35,068 |
98,469 |
Decrease in payables for intangible assets |
3,870 |
10,004 |
Cash used for the purchase of intangible assets |
38,938 |
108,473 |
(i)
Main variance comes from the spectrum acquisition (2020: $83 million; 2019: $14.5)
The charge for amortization
of intangible assets for the nine-month period ended September 30, 2021 was $26 million (September 30, 2020: $24 million).
During the nine-month
period ended September 30, 2021, Tigo Guatemala Companies did not receive any proceeds from disposal of intangible assets (September 30,
2020: nil).
| 7. | PROPERTY, PLANT AND EQUIPMENT |
The following table
provides details of cash used for the purchase of property, plant and equipment:
US$ ‘000 |
Nine months ended
September 30, 2021
|
Nine months
ended
September 30, 2020
|
Additions |
131,906 |
108,879 |
Change in suppliers’ advances |
13,071 |
4,949 |
Change in payables for property, plant and equipment |
(8,950) |
12,605 |
Cash used for the purchase of property, plant and equipment |
136,027 |
126,433 |
The charge for depreciation
on property, plant and equipment for the nine-month period ended September 30, 2021 was $153 million (September 30, 2020: $154 million).
During the nine-month
period ended September 30, 2021, Tigo Guatemala Companies received $258 thousand in cash from disposal of property, plant and equipment
(September 30, 2020: $205 thousand).
| 8. | RELATED PARTY TRANSACTIONS AND BALANCES |
Millicom Group
subsidiaries
The Combined Group
receives business support and financing from various Millicom Group entities including MIC the ultimate holding company Millicom International
2 NV (“MIC 2NV”) and Millicom International Operations S.A. (“MIO S.A.”). The Combined Group also recharges to
other Millicom Group entities certain services performed on their behalf.
The receivable balance
with MIC II NV as of September 30, 2021 represents loans to shareholders that are due in 2022, at the latest.
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
| 8. | RELATED PARTY TRANSACTIONS AND BALANCES (Continued) |
Miffin Associates
Corp (“Miffin”)
The receivable balance
with Miffin as of September 30, 2021 represents loans to shareholders that are due in 2022, at the latest.
Transactions with Miffin
shareholders represent recurring commercial operations such as purchase of handsets, lease of buildings and sites and sale of airtime.
The following transactions
were conducted with related parties during the nine-month period ended September 30, 2021 and September 30, 2020:
US$ ‘000 |
Nine months
ended
September 30, 2021 |
Nine months
ended
September 30, 2020 |
Costs & Operating Expenses |
|
|
Purchases of goods and services (Miffin) |
160,274 |
166,655 |
Purchase of goods and services (MIC) |
730 |
892 |
Purchases of goods and services (Other) |
6,710 |
6,300 |
Total…...…. |
167,714 |
173,847 |
US$ ‘000 |
Nine months
ended
September 30, 2021 |
Nine months
ended
September 30, 2020 |
Revenue |
|
|
Sale of goods and services (Miffin) |
268,136 |
238,177 |
Sale of goods and services (MIC) |
3,557 |
7,758 |
Sale of goods and services (Other) |
4,527 |
3,234 |
Total |
276,220 |
249,169 |
As of September 30,
2021 the Combined Group had the following balances with related parties:
US$ ‘000 |
As of September 30, 2021 |
As of December 31, 2020 |
Assets |
|
|
Millicom International II NV (i) |
42,503 |
229,192 |
Miffin Associates Corp (i) |
34,775 |
185,900 |
MIC S.A. |
1,630 |
368 |
Newcom Nicaragua, S.A. |
291 |
232 |
Navega, S.A. de C.V. |
133 |
473 |
Others |
2,670 |
1,292 |
Total |
82,002 |
417,457 |
(i) During 2021, there
was no upstream dividend due to shareholders loans received at the end of 2020 and which were repaid partially during 2021, see below.
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
| 8. | RELATED PARTY TRANSACTIONS AND BALANCES (Continued) |
US$ ‘000 |
As of September 30, 2021 |
As of December 31, 2020 |
Liabilities |
|
|
Miffin Associates Corp (i) |
43,913 |
164,232 |
Millicom International II N.V. (i) |
1,815 |
196,430 |
Millicom Cable Costa Rica |
2,771 |
2,486 |
Millicom Spain, S.L |
2,207 |
1,163 |
Navega, S.A. de C.V. |
93 |
327 |
Others |
3,430 |
2,457 |
Total |
54,229 |
367,095 |
(i) The shareholders’
loan received at the end of last year was partially reimbursed during 2021 for $318.5 million. As of September 30, 2021, the remaining
balance of the shareholders’ loan amounts to $31.5 million.
| 9. | CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
Restricted cash comprised:
US$ ‘000 |
As of September 30, 2021 |
As of December 31, 2020 |
Restricted cash in GTQ |
6,910 |
7,105 |
Total restricted cash |
6,910 |
7,105 |
Restricted cash
mainly refers to cash within the mobile financial services business, which is restricted in accordance with local regulations.
Cash and cash equivalents comprised:
US$ ‘000 |
As of September 30, 2021 |
As of September 30, 2020 |
Cash and cash equivalents in U.S. dollars |
134,862 |
107,170 |
Cash and cash equivalents in GTQ |
62,474 |
81,372 |
Total cash and cash equivalents |
197,336 |
188,542 |
Cash and short-term deposits
in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less,
which are subject to an insignificant risk of changes in value. For the purpose of the combined statement of cash flows, cash and cash
equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral
part of the Group´s cash Management.
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
| 10. | OTHER DEBT AND FINANCING |
Analysis of debt
and other financing by maturity
The total amount of
debt and financing is repayable as follows:
US$ ‘000 |
As of September 30, 2021 |
As of December 31, 2020 |
Amounts due within 4 to 5 years |
284,083 |
281,889 |
Amounts due after five years |
132,538 |
131,515 |
Total debt |
416,621 |
413,404 |
No borrowings are due
within one year.
On June 19, 2020, Comunicaciones
Celulares, S.A. ("Comcel") entered into a credit agreement with Banco Industrial for GTQ 500 million (approximately $64 million
using the exchange rate as of December 31, 2020) for a 5-year term.
On November 18, 2020,
Comcel redeemed the $800 million aggregate principal amount of its outstanding 6.875% Senior Notes due 2024 (see note 1). The early repayment
of the Senior Notes was financed by a mix of cash, shareholders’ loans for $350 million for one-year term with a fixed interest
rate of 4%, and loans from local banks for Q2,155 million (approximately $276.5 million) with terms ranging from three to seven years,
and with an effective interest rate of 5.97%.
The ability of the
Combined Group to make dividend payments is subject to, among other things, the terms of indebtedness, legal restrictions and the ability
to repatriate funds. During 2021, the entities of the Combined Group had declared dividends related to 2020 retained profits of $366 million
(2020: $362 million).
US$ ‘000 |
2021 |
2020 |
Dividends offset with accounts receivable from related parties |
322,695 |
322,381 |
Payment of dividends |
25,124 |
21,718 |
Income tax withheld on dividends paid |
18,276 |
18,061 |
Exchange rate movement |
7 |
338 |
Total |
366,102 |
362,497 |
| 12. | COMMITMENTS AND CONTINGENCIES |
Litigation and
legal risks
The Tigo Guatemala
are contingently liable with respect to lawsuits and other matters that arise in the normal course of business. As of September 30, 2021
and December 31, 2020, an amount of $51 thousands has been accrued for these claims in the combined statements of financial position.
Management is of the opinion that while it is impossible to ascertain the ultimate legal and financial liability with respect to these
claims, the ultimate outcome of these contingencies is not anticipated to have a material effect on the Combined Group’s financial
position and operations.
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
| 12. | COMMITMENTS AND CONTINGENCIES (Continued) |
Tax claims
As of September 30,
2021, Navega.Com, S.A. is disputing through an administrative process an adjustment made by the Tax Authorities in regards with the goodwill
amortization of approximately $22.9 million related with business combinations completed in 2011 with an effective date on January 1,
2012. Even though the administrative process has been initiated at the Supreme Court, the Tax Authorities have requested that the attorney
general’s office investigate this matter through a criminal prosecution. The criminal court dismissed the criminal prosecution.
Although this resolution could be appealed by the tax authorities, due to the favourable resolution from the criminal court and the Company’s
current assessment of the case, no provision has been deemed necessary at September 30, 2021.
In 2007 the tax authorities
made an adjustment regarding the stamp tax on dividend distributions made by Comunicaciones Celulares S. A, to its shareholders in that
year. The tax position resulting from the adjustment has been resolved in different ways by the courts, sometimes in favor of the tax
payers but in recent years in favor of the tax authorities. Taking in consideration the latest jurisprudence, management decided to recognize
in June 2020 a provision for $7.3 million. Such provision includes the total adjustment plus a portion of fines and interest and represents
management’s best estimate of the outcome. This case is in the judicial phase at the Guatemalan Supreme Court.
Capital commitments
As of September 30,
2021, the Combined Group had fixed commitments to purchase network equipment, land and buildings and other fixed assets for $75 million
(2020: $93 million), from various suppliers.
The fair value of the
Combined Group’s financial instruments is included at the amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale.
Fair value measurement hierarchy
IFRS 7 requires for
financial instruments that are measured in the statement of financial position at fair value, the disclosure of fair value measurements
by level of the following fair value measurement hierarchy:
| • | Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| • | Level 2 - Inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). |
| • | Level 3 - Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs). |
The fair value of all
financial assets and all financial liabilities except debt and financing, approximate their carrying value largely due to the short-term
maturities of these instruments. For further details on fair value of debt and financing. The fair value of the bonds has been determined
based on their market price (level 1).
Tigo Guatemala Companies – Unaudited Interim
Condensed Combined Financial Statements
For the nine-month period ended September 30, 2021
and 2020
| 13. | FINANCIAL INSTRUMENTS (Continued) |
Other than the items
disclosed below, the fair values of financial assets and financial liabilities approximate their carrying values as of September 30, 2021
and December 31, 2020:
|
Carrying Value |
Fair Value |
US$ ‘000 |
September 30, 2021
(unaudited) |
December 31, 2020
(audited) |
September 30, 2021
(unaudited) |
December 31, 2020
(audited) |
FINANCIAL LIABILITIES |
|
|
|
|
Other debt and financing… |
416,621 |
413,404 |
416,280 |
413,404 |
There was no transfer
between Level 1 and Level 2 fair value measurements during the period, and no transfer into or out of Level 3 fair value measurements
during the nine months ended 30 September 2021.
On
November 12, 2021, Millicom acquired the remaining 45% equity interest in its joint venture business in Guatemala (collectively, “Tigo
Guatemala”) from Miffin for $2.2 billion in cash. As a result, Millicom owns 100% equity interest in Tigo Guatemala since that date.
On
November 1, 2021, the Company experienced a Security Incident related to Ransomware which mostly affected its back-office functions, but
not the regular service of the Company to its customers nor the financial accounting systems. The incident is still under investigation;
however, the Company does not believe it has had or will have a significant impact on its operations or its financial statements.
On December 10, 2021,
the Combined Group acquired new local bank loans for Q1,450 million ($187.6 million using the December 10, 2021 GTQ/USD exchange rate
of 7.73) with term ranging from four to five years and with an effective interest rate of 6%.
****
Item 3
Millicom International Cellular S.A.
Unaudited Pro Forma Condensed Combined Statement
of Income
For the year ended December 31, 2021
March 1, 2022
Millicom International Cellular S.A. – Unaudited Pro Forma Condensed Combined Statement of Income
For the year ended December 31, 2021
INTRODUCTION
On November 12, 2021, Millicom
announced that it had closed the previously-announced agreement to acquire the remaining 45% equity interest it did not already own in
its joint venture business in Guatemala, which includes ten entities that comprise our operations in Guatemala, including Comunicaciones
Celulares, S.A., Comunicaciones Corporativas, S.A., Servicios especializados en Telecomunicaciones, S.A., Distribuidora de Comunicaciones
de Occidente, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional
de Comunicaciones, S.A., Servicios Innovadores de Comunicación y Entretenimiento, S.A., Navega.com, S.A. and Cloud2Nube, S.A. (collectively,
"Tigo Guatemala") from its local partner for $2.2 billion in cash. Prior to the acquisition, Millicom accounted for Tigo
Guatemala using the equity method. The following unaudited pro forma condensed combined financial information is based on Millicom’s
historical consolidated financial statements and Tigo Guatemala’s historical combined financial statements as adjusted to give effect
to the November 12, 2021 acquisition of the remaining 45% equity interest in Tigo Guatemala. The unaudited pro forma condensed combined
statement of income for the year ended December 31, 2021 give effect to the acquisition as if it had occurred on January 1, 2021. Because
Tigo Guatemala’s statement of financial position is consolidated with Millicom’s from the acquisition date, a pro forma statement
of financial position has not been presented.
The transaction accounting
adjustments for the acquisition consist of those necessary to account for the acquisition as if it had occurred on January 1, 2021. Millicom
also entered into a Bridge Loan Agreement for $2.15 billion (the Bridge Loan) with a consortium of banks, which was used to fund the acquisition.
The Bridge Loan bears a variable interest rate with a step up every three months and has a maturity period of six months, extendable for
an additional six months. The initial costs of issuance amounted to $28 million. The adjustments related to the issuance of the Bridge
Loan are shown in a separate column as “other transaction accounting adjustments.”
Basis of Presentation
The acquisition is being accounted for using the acquisition
method of accounting in accordance with IFRS 3. The IFRS 3 acquisition method of accounting applies the fair value concepts defined in
IFRS 13 - Fair Value Measurement (“IFRS 13”) and requires, among other things, most of the assets acquired
and the liabilities assumed in a business combination to be recognized by the acquirer at their fair values as of the acquisition date.
Any excess of the consideration transferred over the fair value of Tigo Guatemala’s assets acquired and liabilities assumed is recorded
as goodwill. The earnings of the combined group will reflect the impacts of purchase accounting adjustments, including any changes in
amortization and depreciation expense for acquired assets.
Fair value is defined in IFRS 13 as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. It is possible the application of reasonable judgment could develop different assumptions resulting in a range of alternative estimates
using the same facts and circumstances. The purchase accounting adjustments have not yet been completed. Millicom is currently determining
the fair value of Tigo Guatemala’s identifiable assets and liabilities, however, this purchase accounting is still provisional as
of the date hereof, particularly in respect of the evaluation of the tangible, intangible assets, right of use assets and lease liabilities.
For the purpose of the valuation of the intangible assets (excluding goodwill), the provisional values are based on the current carrying
values of tangible and intangible assets that were identified in 2016, at the time of Millicom’s deconsolidation of Tigo Guatemala
and the commencement of the accounting for Tigo Guatemala under the equity method.
The completion of the purchase accounting adjustments,
in which Tigo Guatemala’s assets acquired and liabilities assumed will be recognized at their respective fair values, with certain
limited exceptions, will be finalized in the one year measurement period provided for by IFRS 3 and could result in significantly different
valuations as well as differences in amortization, depreciation and other expenses, compared to those presented in the unaudited pro forma
condensed combined financial information.
Millicom International Cellular S.A. – Unaudited Pro Forma Condensed Combined Statement of Income
For the year ended December 31, 2021
The unaudited pro forma condensed combined financial
information presented is derived from (i) the audited consolidated statement of income of Millicom for the year ended December 31, 2021
included in its Form 20-F filed with the Securities and Exchange Commission (SEC) on March 1, 2022 and (ii) Tigo Guatemala’s unaudited
condensed combined statement of income for the period from January 1, 2021 to November 12, 2021, the acquisition date.
The historical consolidated financial statements of
Millicom and the historical combined financial statements of Tigo Guatemala are prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and in accordance with IFRS
as adopted by the European Union. There are no differences between IFRS as issued by the IASB and IFRS as adopted by the European Union
with respect to these consolidated financial statements.
The unaudited pro forma condensed combined financial
information presented should be read in conjunction with the historical 2021 consolidated financial statements of Millicom as included
in its Form 20-F, and the unaudited interim condensed combined financial statements as of and for the nine months ended September 30,
2021 and the audited combined financial statements of Tigo Guatemala for the year ended December 31, 2020, the accompanying notes thereto
and the other information contained in this Form 6-K.
The unaudited pro forma condensed combined financial
information is prepared in accordance with Article 11 of SEC Regulation S-X.
The unaudited pro forma condensed
combined financial information is presented for illustrative purposes only and should not be considered to be an indication of the results
of operations or financial position of the combined company following the acquisition. Further, unaudited pro forma condensed combined
financial information does not necessarily reflect what the combined company’s financial condition or results of operations would
have been had the acquisition and the related financing occurred on the dates indicated. It also may not be useful in predicting the future
financial condition and results of operations of the combined company. Our actual financial condition and results of operations may differ
significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma condensed combined financial
information is based upon available information and certain assumptions that management believes are reasonable.
Millicom International Cellular S.A. – Unaudited Pro Forma Condensed Combined Statement of Income
For the year ended December 31, 2021
Unaudited pro forma condensed combined statement
of income for the year ended December 31, 2021
US$ in millions
|
Millicom Group for the year
ended December 31, 2021 |
Tigo Guatemala for the period
from January 1, 2021 to November 12, 2021 |
Transaction Accounting Adjustments
(Note 2) |
Other Transaction Accounting
Adjustments (#3) |
Pro Forma Statement of Income |
Impact of Equity Method Accounting Adjustment (#1) |
Impact of Adjustment for Purchase Price Accounting (#2) |
Revenue |
4,617 |
1,373 |
— |
— |
— |
5,990 |
Cost of sales |
(1,302) |
(300) |
— |
— |
— |
(1,601) |
Gross profit |
3,316 |
1,073 |
— |
— |
— |
4,389 |
Operating expenses |
(1,677) |
(327) |
— |
— |
— |
(2,004) |
Depreciation & Amortization |
(1,196) |
(192) |
— |
(77) |
— |
(1,465) |
Share of net profit in Guatemala and Honduras |
210 |
— |
(183) |
— |
— |
27 |
Other operating income (expenses), net |
6 |
(1) |
— |
— |
— |
5 |
Operating profit |
659 |
554 |
(183) |
(77) |
— |
952 |
Interest expense |
(531) |
(45) |
— |
— |
(65) |
(641) |
Interest income |
23 |
4 |
— |
— |
— |
28 |
Revaluation of previously held interests |
670 |
— |
— |
— |
— |
670 |
Other non-operating income (expenses), net |
(50) |
— |
— |
— |
— |
(50) |
Gains (losses) from other JVs and associates, net |
(39) |
— |
— |
— |
— |
(39) |
Profit (loss) before tax |
732 |
513 |
(183) |
(77) |
(65) |
919 |
Net tax credit (charge) |
(189) |
(98) |
— |
— |
— |
(287) |
Profit (loss) for the period from continuing operations |
543 |
415 |
(183) |
(77) |
(65) |
633 |
Non-controlling interests |
48 |
— |
— |
— |
— |
48 |
Profit (loss) from discontinued operations |
— |
— |
— |
— |
— |
— |
Net profit (loss) for the period |
591 |
415 |
(183) |
(77) |
(65) |
681 |
Attributable to: |
|
|
|
|
|
|
Owners of the Company |
591 |
— |
— |
— |
— |
681 |
Non-controlling interests |
(48) |
— |
— |
— |
— |
(48) |
Earnings (loss) per common share for profit (loss) attributable to the owners of the Company: |
|
|
|
|
|
|
Basic and diluted (US$ per common share) |
|
|
|
|
|
|
From continuing operations |
5.84 |
— |
— |
— |
— |
6.73 |
From discontinued operations |
(0.00) |
— |
— |
— |
— |
(0.00) |
Total |
5.84 |
— |
— |
— |
— |
6.73 |
Weighted average number of ordinary shares (excluding treasury shares) for basic earnings (loss) per share |
101,129 |
— |
— |
— |
— |
101,129 |
Millicom International Cellular S.A. – Unaudited Pro Forma Condensed Combined Statement of Income
For the year ended December 31, 2021
Notes to the unaudited pro forma condensed combined
statement of income for the year ended December 31, 2021
| 1. | PRELIMINARY PURCHASE ACCOUNTING |
Millicom is currently determining the fair
value of Tigo Guatemala identifiable assets and liabilities, however, this purchase accounting is still provisional as of the date hereof.
For the purpose of the valuation of intangible assets (excluding goodwill), the provisional numbers are based on the current carrying
values of tangible and intangible assets identified in 2016, at the time of Millicom’s deconsolidation of Tigo Guatemala and the
commencement of the accounting for the investment under the equity method. The following table summarizes the preliminary allocation of
the $2.2 billion purchase price as of November 12, 2021, the transaction’s closing date (in millions):
At acquisition date – November 12, 2021 |
Provisional Fair Values (100%) (US$ in millions) |
Intangible
assets (excluding goodwill) |
1,294 |
Property,
plant and equipment |
547 |
Right
of use assets |
189 |
Other
non-current assets |
5 |
Current
assets (excluding cash) |
245 |
Trade
receivables |
42 |
Cash
and cash equivalents |
199 |
Total
assets acquired |
2,521 |
Lease
liabilities |
205 |
Other
debt and financing |
417 |
Other
liabilities |
280 |
Total
liabilities assumed |
901 |
Fair
value of assets acquired and liabilities, assumed, net – A |
1,620 |
Purchase
consideration (45%) – B |
2,195 |
Implied
fair value (100% of business) – C |
4,877 |
Carrying value of our investment in joint venture at acquisition date – D |
2,013 |
Goodwill
arising on change of control – B+D–A=E |
2,588 |
Revaluation
of previously held interests – C–B–D=F |
670 |
Total
provisional goodwill – E+F=G |
3,258 |
Millicom International Cellular S.A. – Unaudited Pro Forma Condensed Combined Statement of Income
For the year ended December 31, 2021
This
preliminary purchase price allocation has been used to prepare the transaction accounting adjustments in the unaudited pro forma condensed
combined statement of income. The final purchase price allocation will be determined when Millicom has completed the detailed valuations
and necessary calculations as described in more detail in the explanatory notes below. The final allocation is expected to be completed
within the one year measurement period and could differ materially from the preliminary allocation used in the transaction accounting
adjustments. The final allocation may include changes based on new information with respect to (1) fair values of property, plant and
equipment; (2) allocations to intangible assets, such as brands and trademarks, customer relationships and spectrum licenses, as
well as goodwill; and (3) other changes to assets and liabilities.
The acquisition has been determined as a business
combination achieved in stages, requiring Millicom to remeasure its 55% previously held equity investment in Tigo Guatemala at its acquisition
date fair value ($2,683 million); the resulting gain of $670 million has been recognized in Millicom’s statement of income under
the line "Revaluation of previously held interests". This revaluation is of a non-recurring nature.
| 2. | TRANSACTION ACCOUNTING ADJUSTMENTS |
| 1) | This adjustment eliminates Millicom’s equity method share of net profit in Tigo Guatemala for the period from January 1, 2021
to November 12, 2021. |
| 2) | As of the date hereof, the preliminary purchase price allocation is in the process of being completed. As a result, for the purpose
of the valuation of the tangible and intangible assets (excluding goodwill), the provisional numbers are based on the current carrying
values of intangible assets and tangible assets identified in 2016, at the time of the deconsolidation of Tigo Guatemala and the commencement
of the accounting for Tigo Guatemala under the equity method. The following table shows, as of the date of the deconsolidation, the fair
values of Tigo Guatemala’s assigned to them in connection with the deconsolidation and the subsequent aggregate depreciation and
amortization of such assets through the year ended December 31, 2021: |
US$ in millions |
Initial Fair Value
|
Initial Estimated Useful Life in
Years
|
Carrying Value as of December 31,
2021 (iii)
|
Annual 2021 Depreciation &
Amortization Expense
|
Depreciation & Amortization
Expense Already Recorded in the Millicom Group Statement of Income (i)
|
Incremental Amortization Expense |
Brand |
848 |
na (ii) |
848 |
— |
— |
— |
Customer
lists |
516 |
7 to 9 |
69 |
69 |
9 |
60 |
Licenses |
315 |
17 |
167 |
15 |
2 |
13 |
Other
tangible and intangible assets |
26 |
8 to 10 |
5 |
3 |
0 |
3 |
Total |
1,705 |
— |
1,089 |
88 |
11 |
77 |
| (i) | For the period from November 12, 2021 to December 31, 2021. |
| (ii) | Management concluded that the Tigo Guatemala brand has an indefinite useful life and currently expect that this will be the conclusion
upon completion of the purchase price allocation. |
| (iii) | The $1,084 million carrying value of intangible assets and the $5 million carrying value of tangible assets shown in the table
above are included within the $1,294 million of intangible assets and the $547 million of tangible assets which were consolidated on November
12, 2021 and which are shown under Note 1 above in the preliminary purchase price allocation table. |
Millicom International Cellular S.A. – Unaudited Pro Forma Condensed Combined Statement of Income
For the year ended December 31, 2021
The preliminary estimates of fair value and
useful lives will likely differ from final amounts Millicom will calculate after completing a detailed valuation analysis, and the differences
could have a material effect on the accompanying unaudited pro forma condensed combined financial information. Had Millicom recorded the
initial 2016 valuation of the intangible and tangible assets identified at the time of its deconsolidation of Tigo Guatemala, without
reflecting accumulated depreciation and amortization, goodwill would have been reduced by $616 million and intangible and tangible assets
would have been increased by the same amount.
An additional 10% change in the valuation of
intangible and tangible assets in this table would cause annual amortization and depreciation expense to increase by approximately $7
million, assuming an overall weighted average useful life of 11.3 years, also assuming that the brand will continue to be classified as
an indefinite life intangible asset. The incremental amortization expense and these fair value adjustments are not expected to have a
tax effect as a result of the tax regime followed by the main Tigo Guatemala entities to which the intangible assets relate.
Management does not expect material fair value
adjustments on other types of assets besides those already disclosed above.
| 3) | Millicom obtained short-term bridge financing of $2.15 billion (the “Bridge Loan”), with debt issuance costs of $28 million,
just before the acquisition closing date of November 12, 2021. The Bridge Loan bears a variable interest rate with a step up every three
months and has a maturity period of 6 months, extendable by Millicom in its discretion for an additional 6 months. |
The
adjustment to record interest expense assumes the Bridge Loan was obtained on January 1, 2021 and was outstanding for the entire year
ended December 31, 2021. The average interest rate assumed for purposes of preparing this pro forma financial information is 2.41%. This
rate factors in the one-month LIBOR of 0.16% on November 12, 2021 plus the various margins specified in the Bridge Loan agreement. Further,
the adjustment assumes that the debt issuance costs will be fully amortized in the year ended December 31, 2021 given the maturity period
of the Bridge Loan.
The following adjustments
have been recorded as incremental Interest Expense:
US$ in millions |
For the year ended December 31,
2021
|
Interest Expense Already Recorded
in the Millicom Group’s Statement of Income (i)
|
Incremental Interest Expense |
Estimated
interest expense on Bridge Loan facility |
52 |
5 |
47 |
Amortization
of debt issuance costs associated with Bridge Loan facility |
28 |
11 |
18 |
Other transaction accounting adjustments to interest expense……….. |
81 |
15 |
65 |
| (i) | For the period from November 12, 2021 to December 31, 2021. |
A 1/8 of a percentage point
increase or decrease in the benchmark rate would result in a change in interest expense of approximately $2.7 million for the year ended
December 31, 2021.
Item 4
Consent of Independent Auditors
We consent to
the incorporation by reference in the Registration Statement (Form S-8 No. 333-234307) pertaining to the Long-Term Incentive Performance
Share and Deferred Short-Term Incentive Share Programs of Millicom International Cellular S.A. of our report dated January 22, 2022,
relating to the combined financial statements of Tigo Guatemala Companies as of and for the years ended December 31, 2020 and 2019 appearing
in this Current Report on Form 6-K of Millicom International Cellular S.A.
/s/ Ernst
& Young, S.A. |
|
Guatemala City |
March 1, 2022