UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

For the month of July, 2022.

Commission File Number: 001-38763

MILLICOM INTERNATIONAL CELLULAR S.A.

(Exact Name of Registrant as Specified in Its Charter)

2, Rue du Fort Bourbon,

L-1249 Luxembourg

Grand Duchy of Luxembourg

(Address of principal executive office)

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.

INDEX TO FURNISHED MATERIAL

Item
______

1. Half-Year Report for the six-month period ended June 30, 2022

2. Earnings Release for Q2 2022

Item 1

Millicom International Cellular S.A.

Half-year report

June 30, 2022

 

Contents

 

Interim Management Report

Purpose

This half-year report for the six-month period ended June 30, 2022 has been prepared in accordance with the requirements of Article 4 of the Luxembourg Transparency Law of 11 January 2008, and should be read in conjunction with the annual report of Millicom International Cellular S.A. (the Company) for the year ended December 31, 2021 (including the consolidated financial statements included therein) and the unaudited interim condensed consolidated financial statements included in this half-year report.

Cautionary statement considering forward-looking statements

Statements included herein that are not historical facts, including without limitation statements concerning future strategy, plans, objectives, expectations and intentions, projected financial results, liquidity, growth and prospects, are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Millicom’s results could be materially adversely affected. In particular, there is uncertainty about global economic activity and inflation, the demand for Millicom's products and services, and global supply chains. The risks and uncertainties include, but are not limited to, the following:

 

A further list and description of risks, uncertainties and other matters can be found under the heading “Risk Factors” in Item 1 of Millicom’s Report on Form 6-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 10, 2022, and in Millicom’s subsequent SEC filings, all of which are available at www.sec.gov. To the extent COVID-19 adversely affects Millicom's business and financial results, it may also have the effect of heightening many of the risks described in its filings.

All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. Except to the extent otherwise required by applicable law, we do not undertake any obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

Group performance

The consolidation of our Guatemalan operation is the most important factor affecting lines of the half-year financial performance of the Group when compared to the same period last year. For brevity purposes, we omit repeated mentions of the Guatemala transaction (see note 3) when discussing the reasons for changes in financial performance year-on-year.

Revenue

Group revenue increased 42.8% ($856 million) year-on-year to $2,856 million in H1 2022. The increase is largely due to positive organic growth in all business lines and countries, which more than offset the impact of weaker currencies in some countries.

Cost of sales

Cost of sales increased at a relatively slower rate of (35.9)% ($202 million) year-on-year to $765 million, due to the same reasons as explained above and a small increase in bad debt provision.

 

Operating expenses

Operating expenses increased (29.6)% ($217 million) year-on-year to $949 million reflecting increased investment to support the development and expansion of our Tigo Money Fintech business, as well as sales and marketing costs to support customer growth, especially in our Colombia mobile business.

Depreciation and Amortization

Depreciation increased (30.3)% ($118 million) year-on-year to $509 million, mostly due to the effect of the purchase accounting of Guatemala acquisition. Amortization expense decreased 3.8% ($7 million) year-on-year to $171 million reflecting our decision to replace the Cable Onda brand with Tigo in Panama in April 2021.

Share of profit in joint ventures

Millicom's share of profit in joint ventures was $20 million in H1 2022, a decrease of (84.5)% year-on-year as this line now reflects only our operations in Honduras after the consolidation of the Guatemalan operation in November 2021. Had our Guatemalan operations were fully consolidated in H1 2021 Millicom's share of profit in joint ventures would have been $19 million.

Other operating income (expenses), net

Other operating expenses, net, decreased by $38 million year-on-year mainly due to the $25 million charge recorded in Q1 2021 as part of the agreement signed to transfer our stake in the AirtelTigo joint venture in Ghana to the Government of Ghana and the $15 million loss on disposal of shares in Helios Towers recorded in Q2 2021.

Financial income/(expense), net

Financial income (expenses), net increased by $61 million to $305 million. The increase is mainly due to higher debt levels, following the recent acquisition of our Guatemalan operation.

Other non-operating (expenses) income, net

Loss from other non-operating items was $7 million in H1 2022 compared to a loss of $18 million in H1 2021. This decrease is due mainly to the Panama put option revaluation in H1 2021 that resulted in $26 million loss, as well as higher foreign exchange losses in H1 2022, partly offset by the mark-to-market revaluation of Jumia and Helios Towers ($18 million gain from the Helios Towers revaluation in H1 2021).

Charges for taxes, net

Tax expense was $147 million in H1 2022, increasing from $54 million in H1 2021 primarily due to the Guatemala acquisition, increased taxable profits and to a $26 million provision resulting from a one-off adverse tax ruling related to earlier years, in one of our operations.

Profit/ (loss) for the period

Net profit attributable to the owners of the Company was $152 million or 1.42 per share for H1 2022 compared to a loss of $58 million or $0.45 per share in H1 2021. Increase is mainly due to our Africa operation which was moved to discontinued operations as a result of the completion of the sale of our former Tanzania operation on April 5, 2022. Profit from discontinued operations of $111 million for H1 2022, which includes the gain disposal on Tanzania's sale of $107 million, compares to a profit from discontinued operations of $7 million for the same period last year.

 

Non-controlling interests share of net loss was $17 million in H1 2022 compared to a loss of $27 million in H1 2021, reflecting the share of losses of the Group's partners in Tigo Colombia.

Share Capital

At June 30, 2022, Millicom had 172.1 million issued and paid up common shares of par value $1.50 each (2021: 101.7 million). The increase in number of shares of 70.4 million is the result of the rights offering executed earlier this year. Out of the total net proceeds received of $718 million, $106 million have been allocated to share capital while $612 million were recorded against the Group's share premium account. Out of the 172.1 million issued and paid up common shares, 1.23 million were held by the Company as treasury shares (2021: 179 thousand). During H1 2022, the Company acquired approximately 87 thousand shares and issued around 397 thousand shares to management under the share-based remuneration plans as part of their annual remuneration and directors as part of director remuneration.

Risks and uncertainty factors

Inflation in many countries globally has been rising for the past several months due to a variety of factors, including significant disruptions to the global production and distribution of energy and food commodities caused by Russia’s invasion of Ukraine as well as the global response to that invasion. As a result, global economic prospects have been severely affected, including in our Latin America markets, a situation that is expected to continue at least throughout the remainder of 2022. As of the period ending June 30, 2022, macro-related impacts to the Group's performance have so far been limited, but this could change in future periods.

The Group continues to monitor the developments of the aforementioned events and their potential impact on performance and accounting considerations.

Financial risk management objectives and policies

Millicom’s financial risk management policies and objectives remain unchanged compared to what the Group presented in Section D. Financial risk management of the 2021 consolidated financial statements (included in Group's 2021 Annual Report).

Internal controls and Governance in the preparation of the consolidated financial statements are set out in the Governance section from pages 63 to 112 in Millicom's 2021 Annual Report.

Related-Party transactions

Millicom’s conducts transactions with certain related parties on normal commercial terms and conditions. Material related party transactions are subject to the review of the audit committee of the Company's board of directors. For further details on Millicom Group’s significant related parties please refer to note 12 to our unaudited interim condensed consolidated financial statements included in this half-year report.

 

Outlook¹

We continue to execute on the plans announced at the February Investor Day, and reconfirm the financial targets of organic OCF growth of around 10% per year on average and cumulative EFCF of between $800 million and $1 billion over the next three years. For the remainder of 2022, we expect organic OCF growth to accelerate significantly, achieving full-year 2022 organic OCF growth of around 10%.

Subsequent events

There are no significant subsequent event to report.

/s/ José Antonio Ríos García

Chairman of the Board of Directors

Luxembourg, July 28, 2022

¹ Operating Cash Flow ('OCF'), Equity Free Cash Flow ('EFCF'), as well as 'Organic Growth' are non-IFRS measures. Please refer to our 2021 Annual Report for a list and description of non-IFRS measures. 

 

Responsibility Statement

The Board of Directors and the executive management of the company reaffirm their responsibility to ensure the maintenance of proper accounting records disclosing the consolidated financial position of the Group with reasonable accuracy at any time, and ensuring that an appropriate system of internal controls is in place to ensure that the Group’s business operations are carried on efficiently and transparently.

In accordance with Article 4 of the law of January 11, 2008 on transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, Millicom declares that, to the best of our knowledge, the interim condensed consolidated financial statements for the six-month period ended June 30, 2022, prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted for use in the European Union, give a true and fair view of the assets, liabilities, financial position and results of the interim period.

In addition, management’s report includes a fair review of the development and performance of the Group’s operations during the interim period and of business risks, where appropriate, faced by the Group.

Signed on July 28, 2022

On behalf of Millicom International Cellular S.A., by:

/s/ Mauricio Ramos

Chief Executive Officer

/s/ Sheldon Bruha

Chief Financial Officer

Report on review of interim condensed consolidated financial statements

To the Shareholders, 

Millicom International Cellular S.A. 

2, rue du Fort Bourbon 

L – 1249 - Luxembourg

Introduction

We have reviewed the accompanying interim condensed consolidated financial statements of Millicom International Cellular S.A. as of 30 June 2022, which comprise the interim condensed consolidated statement of financial position as at 30 June 2022 and the related interim condensed consolidated statement of income, the interim condensed consolidated statement of comprehensive income, the interim condensed consolidated statement of changes in equity, the interim condensed consolidated statement of cash flow for the six-month period then ended and explanatory notes. Management is responsible for the preparation and fair presentation of these interim condensed financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting as adopted by the European Union (“IAS 34”). Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 as adopted by the European Union.

Ernst & Young

Société anonyme

Cabinet de révision agréé

/s/ Bruno Di Bartolomeo

Luxembourg, 28 July 2022

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Unaudited interim condensed consolidated statement of income for the three and six-month periods ended June 30, 2022

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Unaudited interim condensed consolidated statement of comprehensive income for the three and six-month periods ended June 30, 2022

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Unaudited interim condensed consolidated statement of financial position as at June 30, 2022

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Unaudited interim condensed consolidated statement of financial position as at June 30, 2022 (continued)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Unaudited interim condensed consolidated statement of cash flows for the six-month period ended June 30, 2022

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Unaudited interim condensed consolidated statement of cash flows for the six-month period ended June 30, 2022 (continued)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Unaudited interim condensed consolidated statements of changes in equity for the six-month period ended June 30, 2022

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Notes to the unaudited interim condensed consolidated statements

1. GENERAL INFORMATION

Millicom International Cellular S.A. (the “Company” or “MIC SA”), a Luxembourg Société Anonyme, and its subsidiaries, joint ventures and associates (the “Group” or “Millicom”) is a provider of cable and mobile services dedicated to emerging markets in Latin America. Millicom provides high speed broadband and innovation around The Digital Lifestyle^® services through its principal brand, TIGO.

On November 12, 2021, Millicom acquired the remaining 45% equity interest in its business in Guatemala (collectively, "Tigo Guatemala") and since that date owns 100% equity interest and fully consolidates Tigo Guatemala (see note 3). As a consequence this affects the comparability of the statements of income and cash flows in these unaudited condensed consolidated financial statements and the statement of financial position has been restated as a result of the finalization of the purchase accounting (refer to note 3).

On March 10, 2022, our operations in Tanzania were classified as discontinued operations in the statement of income and as assets held for sale in the statement of financial position after the Group obtained all necessary approvals to conclude the announced divestiture. The sale was completed on April 5, 2022. As a result, the numbers in the statement of income have been re-presented for all periods shown (see note 4).

On July 27, 2022, the Board of Directors authorized these unaudited interim condensed consolidated financial statements for issuance.

2. SUMMARY OF ACCOUNTING POLICIES

These interim condensed consolidated financial statements of the 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 ("IASB") and as adopted by the European Union ("EU"). In the opinion of management, these unaudited interim condensed consolidated financial statements reflect all adjustments that are necessary for a proper presentation of the results for interim periods. Millicom’s operations are not affected by significant seasonal or cyclical patterns.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the IASB and in conformity with IFRS as adopted by the EU. These financial statements are prepared in accordance with consolidation and accounting policies consistent with the December 31, 2021 consolidated financial statements, except for the changes described below.

We have made rounding adjustments to reach some of the figures included in these unaudited interim condensed consolidated financial statements. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them and percentage calculations using these adjusted figures may not result in the same percentage values as are shown in these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Inflation in many countries globally has been rising for the past several months due to a variety of factors, including significant disruptions to the global production and distribution of energy and food commodities caused by Russia’s invasion of Ukraine as well as the global response to that invasion. As a result, global economic prospects have been severely affected, including in our Latin America markets, a situation that is expected to continue at least throughout the remainder of 2022. As of the period ending June 30, 2022, macro-related impacts to the Group's performance have so far been limited, but this could change in future periods.

The Group continues to monitor the developments of the aforementioned events and their potential impact on performance and accounting considerations.

As of June 30, 2022, and for the six-month period ended June 30, 2022, management did not identify any significant adverse accounting effects as a result of the above-mentioned events.

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

2. SUMMARY OF ACCOUNTING POLICIES (Continued)

The following changes to standards have been adopted by the Group and did not have any significant impact on the Group’s accounting policies or disclosures and did not require retrospective adjustments:

Amendments effective for annual periods starting on January 1, 2023 that are not expected to have a significant impact on the Group consolidated financial statements:

The following changes to standards are effective for annual periods starting on January 1, 2023 and their potential impact on the Group consolidated financial statements is currently being assessed by Management:

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

3. ACQUISITION AND DISPOSAL OF SUBSIDIARIES, JOINT VENTURES, ASSOCIATES AND OTHER NON-CONTROLLING INTERESTS

Acquisitions for the six-month period ended June 30, 2022

There were no material acquisitions during the six-month period ended June 30, 2022.

Acquisitions 2021

On November 12, 2021, Millicom announced that it has closed the previously-announced agreement to acquire the remaining 45% equity interest in its joint venture business in Guatemala (collectively, "Tigo Guatemala") from its local partner for $2.2 billion in cash. The acquisition was initially financed through a bridge facility (see note 11).

As of June 30, 2022, Millicom has finalized the purchase accounting and determined the fair values of Tigo Guatemala's identifiable assets and liabilities and comparative figures as of December 31, 2021 have been restated accordingly. The finalization of the purchase accounting had an effect on the following financial position line items previously reported as of December 31, 2021:

The impact of the finalization of Guatemala's purchase accounting on the 2021 Group statement of income is immaterial. Therefore, no adjustments were made in that respect on comparative figures.

Further details of Guatemala acquisition are provided on the following page.

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

3. ACQUISITION AND DISPOSAL OF SUBSIDIARIES, JOINT VENTURES, ASSOCIATES AND OTHER NON-CONTROLLING INTERESTS (continued)

The table below shows the changes in fair values compared to the values reported as of December 31, 2021.

a) the customer lists for an amount of $514 million, with estimated weighted average useful lives of 9.3 years.

b) the spectrum and licenses held by Tigo Guatemala for $51 million, with a remaining useful life of 11 years.

c) the trademarks and brand held and operated by Tigo Guatemala for $62 million, bringing its carrying value to $910 million. Management determined that the latter have indefinite useful lives.

The goodwill is attributable to the workforce and the high profitability of Tigo Guatemala. It is currently not expected to be tax deductible. From November 12, 2021 to December 31, 2021, Tigo Guatemala contributed $223 million of revenue and $28 million of net profit to the Group. If Tigo Guatemala had been acquired on January 1, 2021, incremental revenue for the year 2021 would have been $1.38 billion and incremental net profit for the same period of $147 million. Acquisition related costs included in the statement of income under operating expenses were immaterial.

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Disposals 2022 - Tanzania

On March 10, 2022, Millicom obtained the final necessary regulatory approvals to sell its operations in Tanzania. The transaction was completed on April 5, 2022 (see note 4).

4. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Discontinued operations-Tanzania

As from March 10, 2022, and in accordance with IFRS 5, all assets and liabilities of our operations in Tanzania were classified as held for sale and their results have been removed from the results of continuing operations and are shown as a single line item on the face of the statement of comprehensive income under 'net result from discontinued operations'. Comparative figures of the statement of income have been re-presented accordingly.

On April 5, 2022, Millicom completed the sale for an initial cash consideration of approximately $101 million (subject to final price adjustment). As per the sale agreement, the initial sale price was adjusted to consider some outstanding tax and legal contingencies which management believes is sufficient to cover any future claims on pre-closing matters. Should the price adjustments not be sufficient, Millicom might be liable and need to make additional provisions that are not covered by the latter. In addition, the agreement also provides an IPO² adjustment clause valid until April 5, 2024, whereby Millicom would reimburse the buyer for any negative difference between the share price per share on the IPO date and the one implied by this sale. As of June 30, 2022, no additional provisions have been made by management in respect of the aforementioned items.

(a)        The net assets de-consolidated on the date of the disposal, as well as the gain on disposal, were as follows:

(b)       The operating results and cash flows of the discontinued operation for the three- and six-month periods ended June 30, 2022 and June 30, 2021 are set out below. The figures shown below are after inter-company eliminations.

² The Tanzanian government implemented in 2016 legislation requiring telecommunications companies to list their shares on the Dar es Salaam Stock Exchange and offer 25% of their shares in a Tanzanian public offering. The ´Tanzania Communications Regulatory Authority´ (TCRA) ordered the Tanzanian operations to complete such public offering by December 31, 2025, at the latest.

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

4. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE (Continued)

5. SEGMENT INFORMATION

Management determines operating and reportable segments based on the reports that are used by the chief operating decision maker to make strategic and operational decisions from both a business and geographic perspective. The Millicom Group’s risks and rates of return for its operations were predominantly affected by operating in different geographical regions. Until the divestiture of our Tanzania business, as discussed above, the Millicom Group had businesses in two main regions, Latin America and Africa, which constituted our two reportable segments. As a result of the sale of the Tanzania business and its classification as a discontinued operation, we no longer report an Africa segment in our unaudited condensed consolidated financial statements included elsewhere in this Report and will no longer report it in our consolidated financial statements for future periods. The Group now only operates in a single region, Latin America.

As a result, the Group now reports a single segment, called the ‘Group Segment’, which includes the results of our Latin American operations, and regional and central corporate costs. Group segment figures will continue to include our Honduras joint venture as if it was fully consolidated, as this reflects the way management reviews and uses internally reported information to make decisions about operating matters and to provide increased transparency to investors on those operations. Group segment figures also include our operations in Guatemala as if they were fully consolidated for all comparative periods, for the same reasons. On November 12, 2021, we acquired the remaining 45% equity interest in our Guatemala joint venture business, and we now fully consolidate our operations in Guatemala. Prior to this date, we held a 55% stake in our operations in Guatemala and accounted for it using the equity method of accounting, along with our operations in Honduras.

Revenue, operating profit (loss), EBITDA and other segment information for the three- and six-month periods ended June 30, 2022 and 2021, are shown on the following pages.

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

5. SEGMENT INFORMATION (Continued)

(iii)       Excluding spectrum and licenses

(vi)       Segment assets include goodwill and other intangible assets.

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

5. SEGMENT INFORMATION (Continued)

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

5. SEGMENT INFORMATION (Continued)

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

5. SEGMENT INFORMATION (Continued)

6. OTHER NON-OPERATING (EXPENSES) INCOME, NET

The Group’s other non-operating (expenses) income, net comprised the following:

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

7. EARNINGS PER COMMON SHARE

Earnings per common share (EPS) attributable to owners of the Company are comprised as follows:

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

8. INVESTMENTS IN JOINT VENTURES

Joint ventures are businesses over which Millicom exercises joint control as decisions over the relevant activities of each, such as the ability to upstream cash from the joint ventures, require unanimous consent of shareholders. Millicom determines the existence of joint control by reference to joint venture agreements, articles of association, structures and voting protocols of the board of directors of those ventures.

At June 30, 2022, the equity accounted net assets of our joint venture in Honduras totaled $434 million (December 31, 2021: Honduras: $406 million). These net assets do not necessarily represent statutory reserves available for distribution as these include consolidation adjustments (such as goodwill and identified assets and assumed liabilities recognized as part of the purchase accounting). Out of these net assets, $3 million (December 31, 2021: $3 million) represent statutory reserves that are unavailable to be distributed to the Group. During the six-month period ended June 30, 2022, Millicom's joint venture in Honduras repatriated cash of $26 million under the form of management fees and repayment of a shareholder loan. For the same period last year, Millicom's joint ventures in Guatemala and Honduras repatriated cash of $37 million, out of which $13 million represented dividends and dividends advances paid to the Company.

At June 30, 2022, Millicom had $69 million payables to Honduras joint venture which were mainly made up of loan advances (December 31, 2021: $69 million). In addition, Millicom had a total of $44 million receivable from Honduras (December 31, 2021: 62 million), mainly composed of a sale consideration following a shareholding restructuring in 2020, which is payable in several installments with a final settlement in November 2023.

(i) Share of profit is recognized under ‘Share of profit in the joint ventures’ in the statement of income for the period ended June 30, 2022.

9. PROPERTY, PLANT AND EQUIPMENT

During the six-month period ended June 30, 2022, Millicom added property, plant and equipment for $378 million (June 30, 2021: $261 million) and received $7 million from disposal of property, plant and equipment (June 30, 2021: $4 million).

10. INTANGIBLE ASSETS

During the six-month period ended June 30, 2022, Millicom added intangible assets for $192 million of which $116 million related to spectrum and licenses, and $76 million to additions of other intangible assets (June 30, 2021: $34 million of which $(14) million related to an adjustment on spectrum and licenses and $48 million to additions of intangible assets) and did not receive any proceeds from disposal of intangible assets (June 30, 2021: nil).

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

11. FINANCIAL OBLIGATIONS

A. Debt and financing

The most significant movements in debt and financing for the six-month period ended June 30, 2022 were as follows:

Luxembourg

On January 10, 2022, Millicom placed a SEK 2.2 billion (approximately $215 million at the June 30, 2022 exchange rate) senior unsecured sustainability bond (the "Bond") within its Sustainability bond framework. The Bond is due on 2027 and carries a floating coupon priced at 3m Stibor+300bps, The Bond is listed on the Nasdaq Stockholm sustainable bond list. On January 13, 2022, Millicom executed a swap on the principal amount to hedge it to USD (see note 13).

On April 13, 2022, Millicom repaid $100 million of the bridge loan with the proceeds received from the disposal of our operations in Tanzania. The remaining balance of $350 million has been repaid in June 2022 with the proceeds of the rights offering (see note 14).

Colombia

On January 21, 2022, Colombia Movil S.A. repaid $100 million of the outstanding amount of the Syndicated Loan Agreement dated June 8, 2017. On January 19, 2022, the respective cross currency swaps with Bancolombia and JP Morgan for $25 million, each, were terminated. As of June 30, 2022, there is still $50 million outstanding under the syndicated loan, which is covered by cross currency and interest rate swaps.

Guatemala

On January 27, 2022, our principal subsidiary in Guatemala, Comunicaciones Celulares, S.A. ("Comcel"), completed the issuance of a new 10-year $900 million Bond with a coupon of 5.125% per annum. The proceeds from this bond were used to repay a significant portion of the bridge financing that was used to fund the acquisition of the remaining 45% equity interest in the Tigo Guatemala operations (see note 3).

On March 31, 2022, Comcel executed a new 5-year $150 million loan agreement with Banco de Desarrollo Rural, S.A.. Proceeds were disbursed on April 27, 2022 and were used to refinance some of the credit agreements Comcel has with Banco Industrial.

Analysis of debt and financing by maturity

The total amount of debt and financing is repayable as follows:

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

The table below describes the outstanding and maximum exposure under guarantees and the remaining terms of the guarantees as at June 30, 2022 and December 31, 2021.

(i) If non-payment by the obligor, the guarantee ensures payment of outstanding amounts by the Group's guarantor.

(ii) Guarantee from Tanzania ceased to exist after the completion of the sale in our operations in Tanzania, see note 4.

The Group’s interest and other financial expenses comprised the following:

(i) Re-presented for discontinued operations (see note 4)

12. COMMITMENTS AND CONTINGENCIES

Litigation & claims

The Company and its operations are contingently liable with respect to lawsuits, legal, regulatory, commercial and other legal risks that arise in the normal course of business. As of June 30, 2022, the total amount of claims brought against Millicom and its subsidiaries is $250 million (December 31, 2021: $246 million). The Group's share of the comparable exposure for its joint venture in Honduras is $13 million (December 31, 2021: $13 million).

As at June 30, 2022, $27 million has been provisioned by its subsidiaries for these risks in the consolidated statement of financial position (December 31, 2021: $36 million). The Group's share of provisions made by the joint venture was $1 million (December 31, 2021: $1 million). While it is not possible to ascertain the ultimate legal and financial liability with respect to these claims and risks, the ultimate outcome is not anticipated to have a material effect on the Group’s financial position and operations.

Taxation

At June 30, 2022, the tax risks exposure of the Group's subsidiaries is estimated at $297 million, for which provisions of $63 million have been recorded in tax liabilities; representing the probable amount of eventual claims and required payments related to those risks (December 31, 2021: $343 million of which provisions of $69 million were recorded). The Group's share of comparable tax exposure and provisions in its joint venture amounts to $89 million (December 31, 2021: $68 million) and $6 million (December 31, 2021: $3 million), respectively.

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

Capital commitments

At June 30, 2022, the Company and its subsidiaries had fixed commitments to purchase network equipment, other fixed assets and intangible assets of $556 million of which $426 million are due within one year (December 31, 2021: $761 million of which $428 million are due within one year). The Group’s share of commitments in the joint ventures is $38 million and $38 million. (December 31, 2021: $41 million and $41 million).

13. FINANCIAL INSTRUMENTS

Other than the items disclosed below, the fair values of financial assets and financial liabilities approximate their carrying values as at June 30, 2022 and December 31, 2021:

(i)        Fair values are measured with reference to Level 1 (for listed bonds) or 2.

Derivative financial instruments

Currency and interest rate swap contracts

MIC S.A. entered into swap contracts in order to hedge the foreign currency and interest rate risks in relation to the 2024 SEK 2 billion and the foreign currency risk in relation to the 2027 SEK 2.2 billion (approximately $211 million and $236 million, respectively, using the exchange rate at the time of the issuance of each bond) senior unsecured sustainability bonds issued in May 2019 and January 2022, respectively). These swaps are accounted for as cash flow hedges as the timing and amounts of the cash flows under the swap agreements match the cash flows under the SEK bond. Their maturity dates are May 2024 and January 2027, respectively. The hedging relationships are highly effective and related fluctuations are recorded through other comprehensive income. At June 30, 2022, the fair values of the swaps amount to a liability of $48 million (December 31, 2021: an asset of $6 million).

Colombia and El Salvador operations have also entered into several swap agreements in order to hedge foreign currency and interest rate risks on certain long-term debts. These swaps are accounted for as cash flow hedges and related fair value changes are recorded through other comprehensive income. At June 30, 2022, the fair value of El Salvador amount to nil, (December 31, 2021: a liability of $1 million) and the fair value of Colombia swaps amount to an asset of $15 million (December 31, 2021: an asset of $15 million). On January 19, 2022, a portion of the cross-currency swaps with Bancolombia and JP Morgan were settled in cash for an amount of $8 million.

Interest rate and currency swaps are measured with reference to Level 2 of the fair value hierarchy.

Call and put options - Panama

As of June 14, 2022, the Group received the formal notification from the minority shareholders of Cable Onda S.A. confirming the exercise of their put option right to sell their remaining 20% shareholding to Millicom for an amount of approximately $290 million. The transaction closed on June 29, 2022 and the payment was applied against the already recorded put option liability of $290 million.

As a result, the non-controlling interests' carrying value of $78 million have been transferred to the Group's equity.

Unaudited Interim Condensed Consolidated Financial Statements for the three and six-month period ended June 30, 2022

 

There are no other derivative financial instruments with a significant fair value at June 30, 2022.

14. RIGHTS OFFERING

On May 18, 2022, the Board of Directors of Millicom resolved on a rights offering (the "Rights Offering") granting preferential subscription rights to existing holders of shares and Swedish Depositary Receipts ("SDRs") to subscribe for up to 70,357,088 shares in aggregate.

Those who were registered as holders of shares/SDR register on May 23, 2022, received one subscription right for each share ("Share Right") or SDR ("SDR right") held in Millicom. 10 share rights entitled a holder thereof to subscribe for 7 new shares in Millicom and 10 SDR Rights entitled a holder thereof to subscribe 7 new SDRs in Millicom. The subscription price was set at SEK 106 per new SDR and $10.61 per new share. The subscription price in SEK was determined based on the subscription price in U.S dollars as resolved by Millicom, $10.61 per new share, using the SEK-U.S dollar exchange rate published by the Swedish Central Bank on May 17, 2022.

The record date for participation in the Rights Offering was May 23, 2022. The subscription period ran from May 27, 2022 up to June 13, 2022.

The result of the Rights Offering showed that 68,822,675 shares, including those represented by SDRs, have been subscribed for by the exercise of basic subscription rights. The remaining 1,534,413 shares, including those represented by SDRs, have been allotted to those investors who have subscribed for them pursuant to over subscription privileges. The Rights Offering was thus fully subscribed, and Millicom received proceeds amounting to approximately $718 million after deducting underwriting commissions and other offering expenses of $28 million.

The Rights Offering resulted in the issuance of 70,357,088 new shares, which increased the number of outstanding shares in Millicom from 101,739,217 to 172,096,305. As a result, the share capital increased by $106 million to $258 million from $153 million. The remaining $612 million have been allocated to the Group's share premium account.

15. SUBSEQUENT EVENTS

There are no significant subsequent event to report.

Item 2

Earnings Release Q2 2022

Luxembourg, July 28, 2022

Sustained Growth Momentum in Q2

Fourth consecutive quarter of revenue growth across all countries and business lines

Highlights Q2 2022*

*See page 11 for a description of non-IFRS measures and for reconciliations to the nearest equivalent IFRS measures.

Millicom Chief Executive Officer Mauricio Ramos commented:

"We had a solid Q2, with service revenue growing organically in every country and business unit for the fourth consecutive quarter, while EBITDA grew both year-on-year and sequentially compared to Q1.

Colombia performed exceptionally well, as service revenue growth accelerated to more than 8%, driven by mobile, which grew nearly 20% fueled by high-single-digit ARPU growth resulting from the shift in mix toward postpaid, as we reap the benefits of our recent investments in spectrum, network and distribution. The improved mobile ARPU and revenue lifted underlying margins in Colombia for a third consecutive quarter.

Earnings Release Q2 2022

 

During the quarter, we advanced with our plans to carve out our infrastructure and fintech assets, and we plan to begin unlocking and crystallizing value from these assets with transactions in 2023. We also completed the planned rights offering designed to fund the Guatemala acquisition.

Finally, we were very active on the ESG front, as our climate targets were validated by the Science Based Targets initiative. We also joined the White House partnership for Central America, re-affirming our long-standing commitment to invest to build the digital highways that improve lives in the region.

We recognize that the current global macro context has become more challenging, but the business has continued to perform strongly and ahead of our plans thanks to the dedication and hard work of our approximately 20,000 employees throughout the region. In light of the very strong cash flow generation that we expect for the second half of this year, I am confident that we will deliver on the commitments we outlined at our recent investor day."

Earnings Release Q2 2022

 

Outlook

We continue to execute on the plans announced at the February Investor Day, and reconfirm the financial targets of organic OCF growth of around 10% per year on average and cumulative EFCF of between $800 million and $1 billion over the next three years. For the remainder of 2022, we expect organic OCF growth to accelerate significantly, achieving full-year 2022 organic OCF growth of around 10%.

Group Quarterly Financial Review - Q2 2022

(i) Since acquiring the remaining 45% equity interest on November 12, 2021, the Guatemala business is fully consolidated in our financial statements.

The consolidation of Guatemala is the most important factor affecting most lines of the Q2 2022 financial data when compared to Q2 2021. For brevity purposes, we omit repeated mentions of the Guatemala transaction when discussing the reasons for changes in financial performance year-on-year. To facilitate comparisons, proforma income statement data are included in the Financial & Operating Data Excel file published at www.millicom.com/investors alongside this earnings release.

Earnings Release Q2 2022

 

In Q2 2022, revenue increased 44.6% year-on-year, fueled by positive organic growth in all business lines and countries, which more than offset the impact of weaker currencies in some countries. Excluding the impact of the Guatemala acquisition and currency movements, revenue increased 5.5% on an organic basis.

Operating expenses increased 27.4% year-on-year, reflecting increased sales and marketing costs to support customer growth, especially in our Colombia mobile business, as well as increased investment to support the development and expansion of our Tigo Money fintech business. Energy costs, which amount to approximately 2% of revenue, increased by more than 10% in many countries, but this impact was mitigated by savings in other areas. Excluding the impact of the Guatemala acquisition and currency movements, operating expenses increased 4.4%.

Operating profit rose 99.6% year-on-year, significantly outpacing revenue growth of 44.6% due mainly to the consolidation of Guatemala, where margins are above the Group average.

Net financial expenses increased $50 million year-on-year, reflecting the increase in debt related to the Guatemala acquisition, partially offset by the benefit of refinancing activity in the last 12 months. Other non-operating expense of $11 million largely reflects foreign exchange losses and compares to an expense of $75 million in Q2 2021 related to foreign exchange losses and the revaluation of the put option liability in Panama.

Charge for taxes increased to $78 million in Q2 2022 from $33 million in Q2 2021 primarily due to the Guatemala acquisition as well as increased taxable profit in several other country operations. Non-controlling interests amounted to an $18 million share of losses in Q2 2022 compared to $8 million in Q2 2021 reflecting our partners' share of net losses in Colombia. Profit from discontinued operations of $117 million mainly reflects a gain on the sale of our former Tanzania operation, which was sold on April 5.

Net profit attributable to owners of the company was $129 million, or $1.14 per share, compared to a net loss of $100 million ($0.77 loss per share) in Q2 2021. The weighted average number of shares outstanding during the quarter was 113.49 million, reflecting the rights offering completed in June 2022. As of June 30, 2022, we had 172,096,305 shares outstanding, including 1,229,092 held in treasury.

Earnings Release Q2 2022

 

Cash Flow

* See page 11 for a description of non-IFRS measures discussed in the above table. On November 12, 2021, we acquired the remaining 45% interest in our Guatemala operation, and we began to consolidate Guatemala as of that date. As a result, Cash Flow metrics for 2022 are not directly comparable to those of 2021, which did not include Guatemala. Additionally, cash flow data includes our operation in Tanzania until its disposal on April 5, 2022.

Given meaningful seasonal variations, commentary in this section emphasizes year-to-date rather than quarterly performance.

Operating Free Cash Flow (OFCF) was $248 million in H1 2022, an increase of $146 million year-on-year, with most line items impacted primarily by the consolidation of Guatemala. Working capital investment of $193 million reflects timing differences that typically revert in the second half of the year. The level was roughly flat year-on-year despite the consolidation of Guatemala, reflecting typically-low working capital requirements in that country, where prepaid mobile is a relatively larger contributor to revenue.

The increase in taxes paid reflects primarily the effect of the Guatemala consolidation and related withholding taxes on the increased cash repatriation from that country. Finance charges increased $11 million year-on-year in H1 but were flat in Q2, as savings from refinancing activity offset the impact of higher average debt levels in Q2 of 2022 compared to Q2 of 2021.

Earnings Release Q2 2022

 

Finally, repatriation from joint ventures and associates was $27 million in H1 2022, a decline of $10 million compared to H1 2021, which also included Guatemala. As a result of the above factors, Equity Free Cash Flow (EFCF) was negative $73 million in H1, of which $12 million relates to the Africa operation. Excluding Africa, EFCF increased by $118 million, as a result of the Guatemala acquisition and improved performance. The negative EFCF in H1 is consistent with historical seasonal patterns, which primarily reflects the timing of annual cash payments for capex booked in Q4 but paid in Q1, income taxes, frequency and software licenses, and variable compensation.

Debt

* Net Debt, Net financial obligations, EBITDA and Leverage are non-IFRS measures and are IFRS consolidated figures. See page 11 for a description of non-IFRS measures and for reconciliations to the nearest equivalent IFRS measures. Cash includes term deposits of $3.2 million as of June 30, 2022. Proforma adjustments relate to the acquisition of the Guatemala operation on November 12, 2021.

As of June 30, 2022, debt was $6,864 million compared to $7,423 million at the end Q1 2022. The decline of $559 million reflects the proceeds from the rights offering and the sale of the Tanzania business, offset by the repayment of the outstanding balance on the bridge loan and the acquisition of the minority stake in Panama.

Approximately 62% of debt at June 30, 2022 was held at our operating entities, and 38% was at the corporate level. The average interest rate on our debt increased to 5.8% from 5.5% at the end of Q1 2022 mainly as a result of the increase in variable rates in Colombia. As of June 30, 2022, 41% of our debt was in local currency or swapped for local currency slightly down from 42% as of March 31, 2022. In addition, 85% of our debt was at fixed rates or swapped for fixed rates with an average maturity of 6.0 years, in line with our targets. On our dollar-denominated debt¹, the average rate was 5.0% with an average maturity of 6.3 years as of June 30, 2022, unchanged from levels as of March 31, 2022.

Earnings Release Q2 2022

 

Our cash position was $779 million as of June 30, 2022, an increase of $80 million compared to $699 million as of March 31, 2022, reflecting the previously stated activity in the quarter. Of our cash balance, 64% was held in U.S. dollars. As a result, our net debt was $6,085 million as of June 30, 2022, a decrease of $639 million during the quarter.

In addition, as of June 30, 2022, we had lease liabilities of $1,034 million, which represented 13% of gross financial obligations. Including these lease liabilities, net financial obligations were $7,118 million as of June 30, 2022, a decrease of $677 million during the quarter, which mostly reflects the previously stated activity in the quarter, as well as the benefit of weaker foreign exchange rates on our local currency debt. Leverage, which includes our lease obligations, was 3.14x as of June 30, 2022, decreasing from 3.46x as of March 31, 2022. Excluding the impact of leases, the ratio of net debt to EBITDAaL was 3.04x, compared to 3.37x as of March 31, 2022.

Operating performance

The information contained herein can also be accessed electronically in the Financial & Operating Data Excel file published at www.millicom.com/investors alongside this earnings release.

Business units

We discuss our performance under two principal business units:

1. Mobile, including mobile data, mobile voice, and mobile financial services (MFS) to consumer, business and government customers;

2. Cable and other fixed services, including broadband, Pay TV, content, and fixed voice services for residential (Home) customers, as well as voice, data and value-added services and solutions to business and government customers.

On occasion, we also discuss our performance by customer type, with B2B referring to our business and government customers, while B2C includes residential and personal consumer groups.

Market environment

Economic activity remained steady in our markets in Q2 2022, although inflation followed the global trend and was higher in the majority of our markets. Remittances from the U.S. to Central America sustained strong growth year-on-year. Foreign exchange rate volatility increased in some of our markets, with the Costa Rican colón and the Colombian peso both down about 10% during the quarter, while the currencies in other markets were significantly more stable. Foreign exchange rates and movements are presented on page 14.

¹ Including also SEK denominated bonds that have been swapped into US dollars.

Earnings Release Q2 2022

 

Key Performance Indicators

Mobile services

We ended Q2 2022 with 39.9 million customers, a decrease of 102,000 during the quarter mostly due to a change in commercial strategy in Bolivia that led to a decline in low-ARPU prepaid users in that country. This more than offset robust postpaid net additions of 226,000, of which more than 150,000 were in Colombia. 4G smartphone data users continue to grow and now account for 48% of our mobile customer base, up from 45% in Q2 2021.

Mobile ARPU declined 2.0% year-on-year partly due to weaker foreign exchange rates. In local currency terms, ARPU increased almost 7% in Colombia, and was also up sequentially, driven by the ongoing shift in mix toward postpaid.

* KPIs re-presented to include Guatemala in all periods and exclude Africa, which has been classified as discontinued operations, and our joint venture in Honduras, which is not consolidated in the Group figures.

Broadband and other fixed services

At the end of Q2 2022, our networks passed 12.4 million homes, an increase of 211,000 during the quarter, as we continued to ramp up our build. Additionally, we recently signed landmark wholesale agreements with ETB and Ufinet that give us access to approximately 1.5 million incremental homes through a variable cost, infrastructure-light model, more than doubling our commercial reach in Bogota, Colombia's largest city.

In the quarter, we added 21,000 net HFC/FTTH customer relationships, reflecting stable churn levels and softer gross additions, as consumer demand for communications services has shifted from home to mobile as workers gradually returned to the workplace. In addition, lower net additions in Colombia reflect increased competition as well as a commercial decision to slow new sales to some economic segments in order to mitigate the risk of higher churn in future periods. Penetration on our HFC/FTTH network increased to 33.5%, an increase of 0.1 percentage points from 33.4% in Q2 2021.

Earnings Release Q2 2022

 

Home ARPU declined 4.5% year-on-year, due largely to weaker currencies. Excluding the currency impact, Home ARPU declined 1.9% due to the shift in mix toward Broadband-only customers, which generate lower ARPU. In local currency, ARPU increased in El Salvador, Guatemala, Costa Rica and Panama, while ARPU declined in the remaining countries. In Paraguay, piracy also impacted demand for our Pay TV services, affecting both net additions and ARPU, which declined double-digits in Q2. However, law enforcement authorities recently detained some individuals and shut down their large illegal pay TV operations in the country.

Financial indicators

In Q2 2022, revenue increased 44.6% year-on-year to $1,447 million, while service revenue increased 39.1% to $1,315 million. Adjusting for the acquisition of Guatemala and for currency movements, organic service revenue growth was 4.5% year-on-year, reflecting a fourth consecutive quarter of positive growth in all countries and business units.

Colombia led the group with strong 8.5% local currency growth driven by 16.9% B2C mobile growth and mid single-digit B2B growth, while the Home business was flat due to the previously-mentioned change in commercial strategy and a decline in Pay TV customers, as well as more intense competition. El Salvador sustained its strong performance, with service revenue growing 6.9%, driven by growth in every business unit including double digit B2B growth. In Paraguay, 5.6% service revenue growth was due to double-digit B2B growth and from a fifth consecutive quarter of growth in consumer mobile, while growth in Home was flattered by an adverse $4 million one-off in Q2 2021. Excluding the impact of this one-off, Paraguay service revenue grew 2.3%. Finally, organic service revenue grew 7.4% in Nicaragua, 2.4% in Bolivia, 3.6% in Costa Rica, and 1.1% in Guatemala, which improved compared to Q1.