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:

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

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.

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

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

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.

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:

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

Translation into presentation currency

The results and financial position of all Combined Group entities are translated into US dollar as follows:

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.

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:

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

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:

Tigo Guatemala Companies – Combined Financial Statements

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:

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

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.

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:

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:

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

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.

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.

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.

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

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.

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

The Combined Group applies the following practical expedients foreseen in IFRS 15:

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:

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.

Tigo Guatemala Companies – Combined Financial Statements

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.

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

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

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.

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.

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

The application of IFRS 16 affected the following items in the statement of financial position on January 1, 2019:

Tigo Guatemala Companies – Combined Financial Statements

As a result of the adoption of IFRS 16 Leases, lease liabilities are presented in the statement of financial position as follows:

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 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

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:

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:

Finally, the Combined Group has taken the additional following decisions in adopting the standard:

Tigo Guatemala Companies – Combined Financial Statements

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:

The following changes to standards not yet effective are not expected to materially affect the Combined Group:

2.23 Changes in accounting policies (Continued)

Amendments to

All these amendments are effective for annual periods starting on January 1, 2022.

Tigo Guatemala Companies – Combined Financial Statements

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:

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:

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

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:

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:

During the twelve-month period ended December 31, 2019, the Combined Group did not complete any acquisition.

Tigo Guatemala Companies – Combined Financial Statements

The gross profit and operating profit of the Combined Group can be summarized as follows for the years ended December 31:

Employee related costs are comprised of the following for the years ended December 31:

The average number of permanent employees during the years ended December 31, 2020 and 2019 was as follows:

Tigo Guatemala Companies – Combined Financial Statements

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:

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:

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:

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

Income tax assets as of December 31, of each year comprise:

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:

Movements in intangible assets in 2019 were as follows:

Tigo Guatemala Companies – Combined Financial Statements

The following table provides details of cash used for the purchase of intangible assets:

(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

Movements in tangible assets in 2020 were as follows:

(i)The caption “Other” mainly includes office equipment and motor vehicles.

Movements in tangible assets in 2019 were as follows:

(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:

Borrowing costs capitalized during the years ended December 31, 2020 and 2019 were not significant.

Tigo Guatemala Companies – Combined Financial Statements

Movements in right-of-use assets in 2020 were as follows:

Movements in right-of-use assets in 2019 were as follows:

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:

(i) The caption “Other” includes in-transit T&E inventory.

Tigo Guatemala Companies – Combined Financial Statements

Contract assets

The balance of contract assets is presented below as of December 31:

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:

Tigo Guatemala Companies – Combined Financial Statements

Cash and cash equivalents comprised as of December 31:

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:

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:

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

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.

(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

A summary of the shares vested under the relevant plans as of December 31, 2020 and 2019 is as follows:

(i) the third tranche 2016 plan was vested during Q1 2020.

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:

Total share-based compensation expense for the years ended December 31, 2020 and 2019 was as follows:

Tigo Guatemala Companies – Combined Financial Statements

Borrowings due after more than one year as of December 31:

(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:

(i) Bonds were repaid on November 18, 2020

Significant individual financing facilities as of December 31 are described below:

Comunicaciones Celulares, S.A.

Servicios Especializados en Telecomunicaciones, S.A.

Navega.com, S.A

Tigo Guatemala Companies – Combined Financial Statements

Servicios Innovadores de Comunicación y Entretenimiento, S.A.

The interest expense for the years ended December 31 is comprised as follow:

(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

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:

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.

Payables and accruals for capital expenditure at December 31 of each year comprise:

Tigo Guatemala Companies – Combined Financial Statements

Trade payables at December 31 of each year comprise:

The “others” caption contains the remaining all third-party suppliers of the Combined Group.

Accrued expenses and accrued interest at December 31 of each year comprise:

The “other accrued expenses” caption relates to various accruals.

Contract liabilities at December 31 of each year comprise:

Tigo Guatemala Companies – Combined Financial Statements

Provisions and other non-current liabilities at December 31 of each year comprise:

Provisions and other current liabilities at December 31 of each year comprise:

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.

The following table gives details of non-cash investing and financing activities as of December 31 of each year.

Tigo Guatemala Companies – Combined Financial Statements

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

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:

Amount due from and advanced to related parties (current portion) as of December 31: