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As filed with the Securities and Exchange Commission on March 1, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number: 001-38763
MILLICOM INTERNATIONAL CELLULAR S.A.
(Exact name of Registrant as specified in its charter)
Grand Duchy of Luxembourg
(Jurisdiction of incorporation)
2, Rue du Fort Bourbon,
L-1249 Luxembourg
Grand Duchy of Luxembourg
(Address of principal executive offices)
Mauricio Ramos
President and Chief Executive Officer
Millicom International Cellular S.A.
2, Rue du Fort Bourbon,
L-1249 Luxembourg
Grand Duchy of Luxembourg
Phone: +352-277-59018; +1 786 628 5270; +1 786 628 5303
Email: investors@millicom.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Shares, par value $1.50 per share | TIGO | The Nasdaq Stock Market LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
101,739,217 common shares as of December 31, 2021
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x No ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Yes ☐ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer x Accelerated Filer ☐ Non-accelerated Filer ☐ Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes ☒ No ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☐ U.S. GAAP
x International Financial Reporting Standards as issued by the International Accounting Standards Board
☐ Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes☐ No x
TABLE OF CONTENTS
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Financial statement information
We have included in this Annual Report the Millicom Group’s (as defined below) audited consolidated financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019. The Millicom Group’s financial statements included herein and the accompanying notes thereto have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). We end our fiscal year on December 31. References to fiscal 2021, fiscal 2020 and fiscal 2019 refer to the years ended December 31, 2021, 2020 and 2019, respectively.
Our 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 are predominantly affected by operating in different geographical regions. The Millicom Group has businesses in two main regions, Latin America and Africa, which constitute our two segments. Our Latin America segment includes our Honduras joint venture as if it were fully consolidated, as this reflects the way our management reviews and uses internally reported information to make decisions about operating matters and to provide increased transparency to investors on those operations. Our Latin America segment also includes our operations in Guatemala. See also note A.1.2. to our audited consolidated financial statements for information regarding our acquisition of the remaining 45% equity interest in our Guatemala joint venture business on November 12, 2021. This acquisition had no impact on the presentation of our Latin America segment because we previously included our Guatemala joint venture as if it were fully consolidated. Finally, even prior to its formal disposal in October 2021, our Africa segment did not include our joint venture in Ghana because our management did not consider it a strategic part of our Group. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Our segments.”
Presentation of data
We present operational and financial data in this Annual Report. Operational data, such as the number of customers, unless otherwise indicated, are presented for the Millicom Group, including our subsidiaries and excluding our operations in Guatemala (until November 12, 2021 as explained below) and Honduras joint venture. Prior to its disposal in October 2021, we excluded the Ghana joint venture from the Africa operational data because, unlike our other joint ventures, we did not consider it a strategic part of our Group.
Latin America ("Latam") figures include our Honduras joint venture as if it were fully consolidated, as this reflects the way management reviews and uses internally reported information to make decisions. Latam figures also include our operations in Guatemala. 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 them using the equity method of accounting and as a joint venture, along with our operations in Honduras.
Financial data is presented either at a consolidated level or at a segmental level, as derived from our financial statements, including the notes thereto.
We have made rounding adjustments to reach some of the figures included in this Annual Report. Accordingly, numerical figures shown as totals in some tables may not be an exact 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 this Annual Report.
Certain references
Unless the context otherwise requires, references to the “Company” or “MIC S.A.” refer only to Millicom International Cellular S.A., a public limited liability company (société anonyme) organized and established under the laws of the Grand Duchy of Luxembourg, and the terms “Millicom,” “Millicom Group,” “our Group”, “we”, “us” and “our” refer to Millicom International Cellular S.A. and its consolidated subsidiaries and, where applicable, our joint ventures in Guatemala (that is, prior to the acquisition of the remaining interest) and Honduras.
Unless otherwise indicated, all references to “U.S. dollars,” “dollars” or “$” are to the lawful currency of the United States of America; all references to “Euro” or “€” are to the lawful currency of the participating Member States in the Third Stage of European Economic and Monetary Union of the Treaty Establishing the European Community, as amended from time to time; and all references to “Swedish Krona” or “SEK” are to the lawful currency of the Kingdom
of Sweden. For a list of the functional currency names and abbreviations in the markets in which we operate, see the introduction to the notes to our audited consolidated financial statements.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS SUMMARY
This Annual Report contains statements that constitute “forward-looking” statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended. This Annual Report contains certain forward-looking statements concerning our intentions, beliefs or current expectations regarding our future financial results, plans, liquidity, prospects, growth, strategy and profitability, as well as the general economic conditions of the industries and countries in which we operate. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future sales or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, our business strategy and the trends we anticipate in the industries and the economic, political and legal environments in which we operate and other information that is not historical information.
Many of the forward-looking statements contained in this Annual Report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate” and “potential,” among others. These statements appear in a number of places in this Annual Report and include, but are not limited to, statements regarding our intent, belief or current expectations with respect to:
•global economic conditions and foreign exchange rate fluctuations as well as local economic conditions in the markets we serve;
•potential disruption due to diseases, pandemics, political events, piracy or acts by terrorists, including the impact of the outbreak of the COVID-19 virus and the ongoing efforts throughout the world to contain it;
•telecommunications usage levels, including traffic, customer growth and the accelerated transition from traditional to digital services as a result of the COVID-19 pandemic;
•competitive forces, including pricing pressures, the ability to connect to other operators’ networks and our ability to retain market share in the face of competition from existing and new market entrants as well as industry consolidation;
•the achievement of our operational goals, financial targets and strategic plans, including the acceleration of cash flow growth, the reduction in net leverage, the expansion of our fixed broadband network, and the implementation of a share repurchase program and environmental, social and governance standards;
•legal or regulatory developments and changes, or changes in governmental policy, including with respect to the availability of spectrum and licenses, the level of tariffs, laws and regulations which require the provision of services to customers without charging or the ability to disconnect such services during the COVID-19 pandemic, tax matters, the terms of interconnection, customer access and international settlement arrangements;
•our ability to grow our mobile financial services business in our Latin American markets;
•adverse legal or regulatory disputes or proceedings;
•the success of our business, operating and financing initiatives and strategies, including partnerships and capital expenditure plans;
•our expectations regarding the growth in fixed broadband penetration rates and the return that our investment in broadband networks will yield;
•the level and timing of the growth and profitability of new initiatives, start-up costs associated with entering new markets, the successful deployment of new systems and applications to support new initiatives;
•our ability to create new organizational structures for the Tigo Money and Towers businesses and manage them independently to enhance their value;
•relationships with key suppliers and costs of handsets and other equipment;
•our ability to successfully pursue acquisitions, investments or merger opportunities, integrate any acquired businesses in a timely and cost-effective manner and achieve the expected benefits of such transactions;
•the availability, terms and use of capital, the impact of regulatory and competitive developments on capital outlays, the ability to achieve cost savings and realize productivity improvements;
•technological development and evolving industry standards, including challenges in meeting customer demand for new technology and the cost of upgrading existing infrastructure;
•the capacity to upstream cash generated in operations through dividends, royalties, management fees and repayment of shareholder loans;
•other factors or trends affecting our financial condition or results of operations; and
•various other factors, including without limitation those described under “Item 3. Key Information—D. Risk Factors.”
This list of important factors is not exhaustive. You should carefully consider the foregoing factors and other uncertainties and events, especially in light of the political, economic, social and legal environments in which we operate. Forward-looking statements are only our current expectations and are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors, including, but not limited to, those identified under the section of this Annual Report entitled “Item 3. Key Information—D. Risk Factors.” These risks and uncertainties include factors relating to the markets in which we operate and global economies, securities and foreign exchange markets, which exhibit volatility and can be adversely affected by developments in other countries, factors relating to the telecommunications industry in the markets in which we operate and changes in its regulatory environment, and factors relating to the competitive markets in which we operate.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable to Annual Report filing.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable to Annual Report filing.
ITEM 3. KEY INFORMATION
A. Selected Financial Data
Historical financial information
The following tables present selected historical financial data for the Millicom Group. The statement of income data for the Millicom Group set forth below for the years ended December 31, 2021, 2020 and 2019 and the statements of financial position data set forth below as of December 31, 2021 and 2020 are derived from the Millicom Group’s audited consolidated financial statements included elsewhere in this Annual Report.
Our 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 are predominantly affected by operating in different geographical regions. The Millicom Group has businesses in two main regions, Latin America and Africa, which constitute our two segments. Latin America ("Latam") figures include our Honduras joint venture as if it were 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. On November 12, 2021, we acquired the remaining 45% shareholding in our Guatemala business, and we now fully consolidate our operations in Guatemala from that date. Prior to this date, we held a 55% stake in our operations in Guatemala and accounted for them as a joint venture, along with our operations in Honduras. Prior to its disposal in October 2021, we excluded the Ghana joint venture from the Africa operational data because, unlike our other joint ventures, we did not consider it a strategic part of our Group. Financial data is presented either at a consolidated level or at a segmental level, as derived from our financial statements, including the notes thereto.
You should read this selected financial data together with “Item 5. Operating and Financial Review and Prospects” and the financial statements and accompanying notes included in this Annual Report. The historical results are not necessarily indicative of the Millicom Group’s future results of operations or financial condition.
Selected statement of income data
| | | | | | | | | | | | | | | | | |
| December 31 |
| 2021(i) | | 2020 | | 2019(ii) |
| (U.S. dollars in millions) |
Revenue | 4,617 | | | 4,171 | | | 4,336 | |
Cost of sales | (1,302) | | | (1,171) | | | (1,201) | |
Gross profit | 3,316 | | | 3,000 | | | 3,135 | |
Operating expenses | (1,677) | | | (1,505) | | | (1,604) | |
Depreciation | (878) | | | (890) | | | (825) | |
Amortization | (318) | | | (318) | | | (275) | |
Share of profit in joint ventures | 210 | | | 171 | | | 179 | |
Other operating income (expenses), net | 6 | | | (12) | | | (34) | |
Operating profit | 659 | | | 446 | | | 575 | |
Interest and other financial expenses | (531) | | | (624) | | | (564) | |
Interest and other financial income | 23 | | | 13 | | | 20 | |
Revaluation of previously held interests in Guatemala | 670 | | | — | | | — | |
Other non-operating (expenses) income, net | (50) | | | (106) | | | 227 | |
Profit (loss) from other joint ventures and associates, net | (39) | | | (1) | | | (40) | |
Profit (loss) before taxes from continuing operations | 732 | | | (271) | | | 218 | |
Tax (charge) credit, net | (189) | | | (102) | | | (120) | |
Profit (loss) from continuing operations | 543 | | | (373) | | | 97 | |
Profit (loss) from discontinued operations, net of tax | — | | | (12) | | | 57 | |
Net profit (loss) for the period | 542 | | | (385) | | | 154 | |
Attributable to: | | | | | |
Owners of the Company | 590 | | | (344) | | | 149 | |
Non-controlling interests | (48) | | | (41) | | | 5 | |
Earnings (loss) per common share for profit (loss) attributable to the owners of the Company | 5.84 | | | (3.40) | | | 1.48 | |
Earnings (loss) per common share for profit (loss) from continuing operations attributable to owners of the Company | 5.84 | | | (3.28) | | | 0.92 | |
(i) 2021 figures include the impact of our acquisition of the remaining 45% shareholding in our operations in Guatemala (approximately 1.5 months of statement of income data as from November 12, 2021). See note A.1.2. to our audited consolidated financial statements.
(ii) 2019 figures include the impact of our acquisitions: 8 months of Telefonía Celular de Nicaragua, S.A. and 4 months of Telefónica Móviles Panamá, S.A., each acquired in 2019. See note A.1.2. to our audited consolidated financial statements.
Selected statement of financial position data
| | | | | | | | | | | | | | |
| December 31 | |
| 2021(i) | | 2020 | |
| (U.S. dollars in millions) | |
Assets | | | | |
Total non-current assets | 12,852 | | | 10,114 | | |
Total current assets | 2,286 | | | 2,307 | | |
Assets held for sale | — | | | 1 | | |
Total assets | 15,139 | | | 12,422 | | |
Equity and Liabilities | | | | |
Total non-current liabilities | 7,914 | | | 7,540 | | |
Total current liabilities | 4,485 | | | 2,608 | | |
Liabilities directly associated with assets held for sale | — | | | — | | |
Total liabilities | 12,399 | | | 10,148 | | |
Equity attributable to owners of the Company | 2,583 | | | 2,059 | | |
Non-controlling interests | 157 | | | 215 | | |
Total equity | 2,740 | | | 2,274 | | |
Total equity and liabilities | 15,139 | | | 12,422 | | |
(i) 2021 figures include the fully consolidated statement of financial position of our operations in Guatemala following our acquisition of the remaining 45% shareholding on November 12, 2021 (see note A.1.2. to our audited consolidated financial statements).
| | | | | | | | | | | | | | | | | |
| As of and for the year ended December 31, |
| 2021 |
| 2020 |
| 2019 |
Share capital | 153 | | | 153 | | | 153 | |
Number of shares (in thousands) | 101,739 | | | 101,739 | | | 101,739 | |
Dividend declared per share (over the period) | — | | | — | | | 2.64 | |
Diluted net income (loss) per share (over the period) attributable to the owners of the Company | 5.84 | | | (3.40) | | | 1.48 | |
Other revenue data
In addition to consolidated revenue data, the following table sets forth for the periods indicated certain segment revenue data, which has been extracted from note B.3. to our audited consolidated financial statements, where segment data is reconciled to consolidated data:
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021(i) | | 2020 | | 2019(ii) |
Consolidated: | | | | | |
Mobile revenue | 2,347 | | | 2,116 | | | 2,150 | |
Cable and other fixed services revenue | 1,947 | | | 1,803 | | | 1,928 | |
Other revenue | 60 | | | 52 | | | 51 | |
Total service revenue | 4,354 | | | 3,971 | | | 4,130 | |
Telephone and equipment | 263 | | | 201 | | | 206 | |
Total Consolidated Revenue | 4,617 | | | 4,171 | | | 4,336 | |
| | | | | |
Latin America segment: | | | | | |
Mobile revenue | 3,372 | | | 3,220 | | | 3,258 | |
Cable and other fixed services revenue | 2,275 | | | 2,097 | | | 2,197 | |
Other revenue | 70 | | | 60 | | | 60 | |
Total service revenue | 5,716 | | | 5,377 | | | 5,514 | |
Telephone and equipment | 503 | | | 466 | | | 449 | |
Latin America Segment Revenue | 6,220 | | | 5,843 | | | 5,964 | |
| | | | | |
Africa segment: | | | | | |
Mobile revenue | 347 | | | 357 | | | 372 | |
Cable and other fixed services revenue | 9 | | | 8 | | | 9 | |
Other revenue | — | | | 1 | | | 1 | |
Total service revenue | 357 | | | 366 | | | 382 | |
Telephone and equipment | — | | | — | | | — | |
Africa Segment Revenue | 357 | | | 366 | | | 382 | |
(i) 2021 figures include the fully consolidated statement of financial position of our operations in Guatemala following the acquisition of the remaining 45% shareholding on November 12, 2021 (see note A.1.2. to our audited consolidated financial statements).
(ii) 2019 figures include the impact of our acquisitions: 8 months of Telefonía Celular de Nicaragua, S.A. and 4 months of Telefónica Móviles Panamá, S.A., each acquired in 2019. See note A.1.2. to our audited consolidated financial statements.
B. Capitalization and Indebtedness
Not applicable to Annual Report filing.
C. Reasons for the Offer and Use of Proceeds
Not applicable to Annual Report filing.
D. Risk Factors
In addition to the other information contained in this Annual Report, you should carefully consider the following risk factors before investing in our shares. The risks and uncertainties we describe below are not the only ones we face. Additional risks and uncertainties of which we are not aware or that we currently believe are less material may also adversely affect the business, financial condition and results of operations, cash flows or prospects of the Millicom Group. If any of the possible events described below were to occur, the business, financial condition and results of operations of the Millicom Group could be materially and adversely affected. If that happens, the market price of our shares could decline, and you could lose all or part of your investment.
This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks described below and elsewhere in this Annual Report.
Summary of Risk Factors
The following is a summary of the risk factors our business faces. The list below is not exhaustive, and investors should read this "Risk Factors" section in full. Some of the risks we face include:
•our ability to adapt to rapid technological change and continually evolving industry standards;
•our ability to generate expected returns on substantial investments;
•our ability to expand our customer base and retain market share by developing and operating our mobile, cable and broadband networks, MFS and distribution systems;
•the impact of the COVID-19 global pandemic on our operations, business and financial condition;
•our ability to achieve the anticipated benefits of the acquisition of the remaining 45% equity interest in our Guatemala joint venture business;
•the potential adverse effects of long-term content and service commitments;
•the impact of rising content and programming costs;
•our dependence on the availability of an attractive selection of television programming from content providers;
•the impact of competition from a variety of content and programming platforms on the demand for our pay-TV services;
•our ability to acquire and renew licenses for spectrum;
•the potential adverse impact of legal proceedings, litigation, and government investigations;
•the failure of our MFS product to gain sufficient market acceptance;
•the impact of equipment and network systems failures, including as a result of a natural disaster, sabotage or terrorist attack;
•risks associated with the collection and processing of customer personal data;
•the failure to prevent or rapidly detect and respond to cyber-attacks, and the disruption such failure could cause to our networks and systems;
•our ability to compete with larger providers of telecommunications, cable and broadband services;
•our dependency on key suppliers to provide us with products, devices, networks and systems;
•the effect of international actions on our supply chain, including trade sanctions;
•our reliance on third parties to operate and maintain parts of the networks we use;
•our access to interconnection and capacity agreements that are required to transmit voice and data to and from our networks;
•the impact of the political, legal and economic risks associated with the emerging markets in which we operate;
•our ability to successfully implement our strategic priorities, including through acquisitions or mergers, and efficiently allocate capital;
•our dependence on short-term mobile revenue that is generated from prepaid customers;
•the effect that changes in economic, political and regulatory conditions in the United States could have on the economies in which we operate;
•the impact of fluctuations or devaluations in local currencies in the markets in which we operate;
•our ability to convert local currencies into U.S. dollars to make payments, including on our indebtedness;
•the failure of our risk management and internal controls to prevent or detect fraud, violations of law or other inappropriate conduct;
•the impact of U.S. or other international sanctions laws, including restrictions on our ability to interact with business partners or government officials;
•our ability to obtain, maintain, enforce or defend the intellectual property rights required to conduct our business;
•the effect of work stoppages that result from renegotiations of our labor contracts;
•our ability to generate cash in order to service our debt;
•our dependency on cash flow from our operations in Guatemala; and
•our ability to effectively monitor and respond to expectations regarding environmental, social and governance matters.
Additionally, the risk factors described in this section have been separated into four separate but interrelated areas:
1.Risks related to the telecommunications, cable and Mobile Financial Services ("MFS") industries
2.Risks related to Millicom’s businesses in the markets in which it operates
3.Risks related to Millicom’s size, structure and leadership
4.Risks related to share ownership, governance practices, and registration with the Securities and Exchange Commission ("SEC")
1.Risks related to the telecommunications, cable and MFS industries
a.Evolution of the telecommunications, cable and MFS industries
The telecommunications industry is characterized by rapid technological change and continually evolving industry standards.
The telecommunications industry is characterized by rapidly changing technology and evolving industry standards. The technology we use is increasingly complex, which leads to higher risks of implementation failure or service disruption. Success in the industry is increasingly dependent on the ability of operators to adapt to the changing technological landscape. The technologies utilized today may become obsolete or subject to competition from new technologies in the future. For example, our hybrid fiber-coaxial ("HFC") services may become obsolete once faster and more affordable fiber-to-the-home ("FTTH") services are available for consumers.
Growth in internet connectivity has led to the proliferation of entrants offering Voice over Internet Protocol (“VoIP”) services and video content services delivered over the internet. Such operators could displace the services we provide by using our customers’ internet access (which may or may not be provided by us) to enable the provision of communication, entertainment and information services directly to our customers. Failure to transform to data-driven products could have a negative impact on our legacy services and impact our results from operations.
Our ability to attract and retain customers is, in part, dependent on our ability to meet customer demand for new technology at the same, or at a quicker rate, than our competitors are able to do.
Failure to adapt and evolve could harm our competitive position, render our products obsolete and cause us to incur substantial costs to replace our products or implement new technologies.
Implementing new technologies requires substantial investments which may not generate expected returns.
The introduction of new technologies may require significant capital expenditure on infrastructure and there can be no guarantee that those investments will generate expected returns. For example, penetration rates for fixed broadband services in our markets are low relative to penetration rates in other markets globally. As the use of these services has the potential to increase substantially over time, we have expended significant resources to deploy both HFC and FTTH networks in several of our markets. However, an increasing number of local and regional providers of fiber connections are offering internet services with the same or higher data speeds at competitive prices, and competition for dedicated fiber optic services is intense. While we continue to expand these networks with the intention of capturing the anticipated demand, future offerings by our competitors that are aggressively priced or that offer additional services may prevent us from achieving the expected returns on this investment. If we are required to implement new technologies that are unable to generate sufficient returns, our profitability and ability to generate cash flow would be negatively affected, and we may be required to scale back our investments or delay the implementation of new technologies, which may have a negative impact on our growth and ability to attract and retain customers.
In addition, if competitive or other factors compel the need to invest in new technologies earlier than anticipated, previous equipment or technology may need to be impaired or written-down if replaced earlier than originally anticipated.
If we cannot successfully develop and operate our mobile, cable and broadband networks, MFS and distribution systems, we will be unable to expand our customer base and may lose market share and revenue.
Our ability to increase or maintain our market share and revenue is partly dependent on the success of our efforts to expand our business, the quality of our services and the management of our networks and distribution systems. As new technologies are developed or upgraded, such as advanced 5G systems and fiber optic cable networks, our equipment may need to be replaced or upgraded or we may need to rebuild our mobile, cable or broadband network, in whole or in part. In some cases, the COVID-19 pandemic has accelerated the transition from traditional to digital services, including MFS, and the heightened customer expectations in these areas may require us to invest greater resources in technological improvements.
The initial build-out of our networks and distribution systems, together with sustaining sufficient network performance and reliability, is a capital-intensive process that is subject to risks and uncertainties which may delay the introduction of services and increase the cost of network construction or upgrade. With regard to our strategic efforts in broadband services, we seek to increase our market share in both the residential and commercial broadband markets by investing significant resources in HFC and FTTH networks, in addition to fixed broadband services through wireless communication networks, known as fixed wireless access ("FWA"). The provision of broadband services is highly capital intensive, and the long-term nature of the return on investment increases the risks to our operations. Potential difficulties include constraints on our ability to fund additional capital expenditures, as well as external forces, such as obtaining necessary permits from regulatory and other local authorities.
Unforeseeable technological developments may also render our services or distribution channels unpopular with customers or obsolete. To the extent we fail to expand, upgrade and modernize our networks and distribution systems on a timely basis relative to our competitors, we may not be able to expand our customer base and we may lose customers to competitors. If any of these risks materialized, we may be at a competitive disadvantage, which could result in the loss of customers or the inability to attract new customers and maintain or grow our market share. In turn, this would impact our revenue and profitability and our ability to generate cash to grow or sustain our businesses.
b.Content and content rights
Content and programming costs are rising (especially those with exclusivity rights), and we may not be able to pass the increased costs on to our customers.
In recent years, the cable and pay-TV industry has experienced a rapid escalation in the cost of content rights and programming. We expect these costs may continue to increase, particularly those related to exclusive and live broadcasts of sporting and other events. We currently have exclusivity rights over local soccer content in several of our markets, including Bolivia, Costa Rica, El Salvador, Guatemala, Honduras and Paraguay, and we expect that the costs of these rights may continue to increase significantly. If we are unable to moderate the growth in these costs or fully pass these on to our customers in the form of price increases, we may lose our rights to this content. Any failure to maintain such rights may reduce the desirability of our networks and negatively affect our profitability.
In addition, content is often priced in US dollars, which may result in fluctuations in costs in the countries in which we sell content due to foreign exchange fluctuations.
We make long-term content and service commitments in advance even though we cannot predict the popularity of the services or ratings the programming will generate, and our mobile applications and cable content may not be accepted or widely used by our customers.
We acquire rights to distribute certain content or services for use by our mobile, pay-TV and broadband customers, and we have strategic partnerships with major digital players, such as Amazon. We make long–term commitments in advance even though we cannot predict the popularity of the services or ratings the programming will generate. In some instances, our commitments include minimum guarantees, which means that we are required to pay a certain agreed upon amount regardless of the amount collected from the provision of such services. The commercial success of applications or content also depends on the quality and acceptance of other competing applications or content released into the marketplace at or near the same time.
The success of our pay-TV services depends on our ability to access an attractive selection of television programming from content providers.
The ability to provide movie, sports and other popular programming is a major factor that attracts customers to pay-TV services. We may not be able to obtain sufficient high-quality programming from third-party producers or exclusive sports content for our cable TV services on satisfactory terms or at all in order to offer compelling cable TV services, which could result in reduced demand for, and lower revenue and profitability from, our cable services.
Consumers are increasingly able to choose from a variety of platforms from which to receive content and programming.
A number of content providers have begun to sell their services through alternative distribution channels including IP-based platforms, smart-TVs and other app-compatible devices. Consumers may choose to purchase on-demand content through these alternative transmission methods, which may lead to reduced demand for our pay-TV services. If our customers choose to source their content through transmission methods that we do not offer, our customer base and revenue generation from content-related services such as pay-TV may decline, which would negatively impact our cash flow generation and return on investment in content-related services.
We may be subject to legal liability associated with providing online services or media content.
We host and provide a wide variety of services and products that enable our customers to conduct business, and engage in various online activities. The law relating to the liability of providers of these online services and products for the activities of their customers is still unsettled in some jurisdictions. Claims may be threatened or brought against us for defamation, negligence, breaches of contract, copyright or trademark infringement, unfair competition, tort, including personal injury, fraud, or other theories based on the nature and content of information that we use and store. In addition, we may be subject to domestic or international actions alleging that certain content we have generated or third-party content that we have made available within our services violates applicable law or third-party rights.
We also offer third-party products, services and content. We may be subject to claims concerning these products, services or content by virtue of our involvement in marketing, branding, broadcasting, or providing access to them, even if we do not ourselves host, operate, provide, or provide access to these products, services or content. Defense of any such actions could be costly and involve significant time and attention of our management and other resources, may result in monetary liabilities or penalties, and may require us to change our business in an adverse manner. For example, in Colombia we have faced litigation for the provision of services to customers that used our mobile services to attempt to extort money from third parties.
c.Licenses and spectrum
Available spectrum is limited, closely regulated and increasingly expensive.
The availability of spectrum is limited, closely regulated and can be expensive, and we may not be able to obtain it from the regulator or third parties at all or at a price that we deem to be commercially acceptable given competitive conditions. If we acquire spectrum through acquisition, regulators may require us to surrender spectrum to secure regulatory approval. We may need to incur significant capital expenditures in order to acquire or renew licenses or access infrastructure needed to continue to offer services to our customers or improve our current services.
Additional or supplemental licenses may be required to implement 5G technology in order to remain competitive, and we may be unable to acquire such licenses on reasonable terms or at all.
We may not be able to acquire or retain sufficient quantities of spectrum in our preferred band(s) which could impact the quality and efficiency of our networks and services and may negatively impact our profitability.
Our licenses may be suspended or revoked and we may be fined or penalized for alleged violations of law or regulations.
If we fail to comply with the conditions of our licenses or with the requirements established by the legislation or if we do not obtain permits for the operation of our networks and equipment, use of frequencies or additional licenses for broadcasting directly or through agreements with broadcasting companies, we may not have sufficient opportunity to cure any non-compliance. In the event that we do not cure any non-compliance, the applicable regulator may: levy fines; suspend or terminate our licenses, frequency permissions, or other governmental permissions; or refuse to renew licenses that are up for renewal.
Most of our licenses are granted for finite periods.
Most of our licenses are granted for specified terms, and we have no assurance that any license will be renewed upon expiration. Licenses due to expire in the medium-to-near term include our mobile telecommunications licenses in Paraguay (2022 and 2023), Nicaragua (2023) and Colombia (2023). In El Salvador, we have been in the process of renewing certain portions of the 3.5 GHz band with local coverage (not at a national level), which expired in 2018-2020. However, the regulator has shown an interest in reorganizing the band to prepare it for an auction for spectrum with national coverage during the second half of 2022. Other portions of the 3.5 GHz band will expire during 2026 and 2027.
Other licenses due to expire include our license for data transmission and DTH services in Honduras (2022 and 2024), concessions to operate telephone services and pay-TV services in Panama (2022 and 2024) and spectrum licenses for fixed wireless services in Paraguay (2024). In Tanzania, our national and international applications services licenses are due to expire in 2022 and 2030, respectively.
Licenses may contain additional obligations.
Licenses may contain additional obligations, including payment obligations, requirements to cover reduced service areas or permit a more limited scope of service (for example, around prisons in El Salvador and Honduras). The cost of extending coverage to reduced service areas may exceed the revenue generated from providing such services. Licenses may also contain coverage obligations, like in Colombia where recent 700 MHz frequency acquisitions were paid partly with cash and partly by committing to provide coverage to 1,636 districts over the course of 5 years. In addition, increased regulations may impose additional obligations on operators and these obligations may affect the retention and renewal of licenses or spectrum. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation.”
d.Quality and resilience of networks and service
Equipment and network systems failures, including as a result of a natural disaster, sabotage or terrorist attack, could negatively impact our business.
Our business is dependent on certain sophisticated critical systems, including exchanges, switches, fiber, cable headends, data centers and other key network elements, physical infrastructure and billing and customer service systems. Our technological infrastructure is vulnerable to damage and disruptions from numerous events, including fire, flood, windstorms and other natural disasters, power outages, terrorist acts, equipment and system failures, human errors and intentional wrongdoings, including breaches of our network and information technology security. For example, in 2020, our mobile network was partially affected due to storm damage in Honduras, which resulted in the deterioration of service in certain parts of the country. Ongoing risks to our network include state-sponsored censorship, sabotage, theft and poor equipment maintenance.
Inability to manage a crisis could harm our brand and lead to increased government obligations in the future.
Telecommunications networks provide essential support to first responders and government authorities in the event of natural disasters, terrorist attacks, pandemics and other similar crises. If we fail to develop and implement detailed business continuity and crisis management plans, we may be unable to provide service at the level that is required or perceived to be required by the government, the regulator, our customers and by the public at large, and this could lead to reputational harm and to new and burdensome regulatory obligations in the future.
e.Regulation
The telecommunications and broadcasting market is heavily regulated.
The licensing, construction, ownership and operation of mobile telephone, broadband and cable TV networks, and the grant, maintenance and renewal of the required licenses or permits, as well as radio frequency allocations and interconnection arrangements, are regulated by national, state, regional or local governmental authorities in the markets in which we operate, which can lead to disputes with government regulators. For example, the Colombian regulator previously challenged Colombia Móvil’s license fee, stating that it should be a significantly higher amount than we had recorded, although Colombia Móvil prevailed.
Certain other aspects of mobile telephone operations, including rates charged to customers, resale of mobile telephone services, and user registrations may be subject to public utility regulation in each market. Also, because of our market share, regulators could impose asymmetric interconnection or termination rates, which could undermine our competitive position in the markets in which we operate. Additionally, in light of the COVID-19 pandemic, governments in several of our markets have discussed and/or imposed obligations to provide free service or limitations on our ability to collect sums due from customers. Specifically, several countries prohibited the disconnection of customers with past due accounts for an extended period. Any such measures could once again significantly impact our revenues and/or collections.
Changes in regulations may subject us to legal proceedings and regulatory actions and may disrupt our business activities.
Regulatory changes may reduce or prohibit the provision of our services on a temporary or long-term basis. For example, since 2014, mobile operators in El Salvador and Honduras have been required to shut down services or reduce signal capacity in and around prisons. Similar laws have been enacted in Guatemala, although these were later nullified.
Regulations which make it commercially unviable to subsidize our mobile customers’ handsets, or set an expiry date on when our customers must use their prepaid minutes, data or short message service ("SMS") bundles, could reduce revenue and margins for mobile services. For example, in 2015, the regulator in Colombia determined that handsets and telecommunication services could not be bundled and had to be invoiced separately. This had a direct impact on handset affordability and caused a sharp decline in our handset sales. In 2016, the regulator in Paraguay extended the unused prepaid data allowance from 30 to 90 days, which impacted the frequency at which a portion of our prepaid customers purchase additional data allowances from us. In 2019, the Legislative Assembly in El Salvador made a reform to the Consumer Protection Law, which required a change in the telecommunication companies' commercial activities. It demanded the maintenance for up to 90 days of unused data allowances and prohibited automatic renewals, changing our financial results. Additionally, it banned broadcasts and collection activities outside business hours, impacting our clients' churn trends and payment behavior.
Our MFS product may be subject to new legislation and regulation.
We provide a broad range of MFS such as payments, money transfers, international remittances, real-time loans and micro-insurance. In most markets in which we have launched MFS, the laws and regulations governing our MFS are new and evolving, and, as they develop, regulations could become more onerous, requiring licensing by or registration with local regulators, imposing additional reporting or controls or limiting our flexibility to design new products, which may limit our ability to provide our services efficiently or at all.
The lack of established laws and regulations may make it difficult to identify which licenses and approvals (if any) are necessary and the processes for obtaining them, as well as the implications of holding such licenses or receiving such approvals. For the same reason, we cannot be certain that we will be able to maintain licenses and approvals that we previously obtained, or renew them upon their expiration. While we currently believe that some of our MFS fall outside the scope of licensing requirements and do not require certain approvals, there can be no assurance that our interpretations of the rules and their exemptions are or will remain consistent with those of local regulators.
We have, in most of our markets, seen that fintech legislation is evolving, particularly as it relates to anti-money laundering and suspicious activity reporting. Any such changes may require us to make additional investments in tools and resources to meet such requirements. If we are unable to modify our service provision in time to comply with any new regulatory requirements, or new regulations are applied retroactively, we may be subject to penalties and the discontinuation or restriction of our operations, which could have a material adverse effect on our business, financial condition and results of operations.
For more information on the regulatory environment in the markets in which we operate, see “Item 4. Information on the Company—B. Business Overview—Regulation.”
f.Cybersecurity and data protection
Cyber-attacks may cause equipment failures that render our networks or systems inoperable and could cause disruptions to our customers’ operations.
Cyber-attacks, including through the use of malware, computer viruses, dedicated denial of services attacks, credential harvesting, social engineering and other means for obtaining unauthorized access to or disrupting the operation of our networks and systems and those of our suppliers, vendors and other service providers, could have an adverse effect on our business. Ransomware attacks are a type of cyber-attack in which a business becomes unable to access its own information and is presented with a demand to pay a ransom in order to once again have access to its information. Cyber-attacks may cause equipment failures as well as disruptions to our customers' operations. Cyber-attacks against companies, including Millicom, have increased in frequency, scope and potential harm in recent years.
The inability to operate or use our networks and systems or those of our suppliers, vendors and other service providers as a result of cyber-attacks, even for a limited period of time, may result in significant expenses to Millicom and/or a loss of market share to other communications providers. Although we have taken and continue to take measures designed to prevent, detect and mitigate such incidents, there can be no assurance that we will be able to adequately anticipate or prevent them, as the techniques used are constantly evolving. The costs associated with a major cyber-attack on Millicom could include expensive incentives offered to existing customers and business partners to retain their business, increased expenditures on cybersecurity measures and the use of alternate resources and lost revenue from business interruption and litigation.
Cyber-attacks could result in data loss or other security breaches.
Our business involves the receipt, storage, and transmission of confidential information, including sensitive personal information and payment card information, confidential information about our employees and suppliers, and other sensitive information about Millicom, such as our business plans, transactions and intellectual property. Unauthorized access to confidential information may be difficult to anticipate, detect, or prevent. We have been subject in the past, and may be subject again, to unauthorized access or distribution of confidential information by third parties or employees, errors or breaches by third-party suppliers, or other breaches of security that compromise the integrity of confidential information.
As many companies do, Millicom has experienced occurrences of denial of service, phishing, ransomware attacks, and internal and external malicious actors targeting our systems and networks. Most recently, we were subject to ransomware attacks related to our operations in Guatemala and El Salvador and an attack on a web portal related to our operations in Colombia, which affected a small number of subscribers of our services. While the effect that these attacks had on our services was minimal and resulted in limited data loss, there can be no assurance that we will be able to prevent future cyber-attacks that result in a material loss of data or other security breaches.
Our control environment and controls may not be sufficient to prevent or rapidly detect and respond to cyber-attacks, or identify the perpetrators of such attacks.
The perpetrators of cyber-attacks are not restricted to particular groups or persons. These attacks may be committed by company employees or external actors operating in any geography, including jurisdictions where law enforcement measures to address such attacks are unavailable or ineffective, and may even be launched by or at the behest of nation states. Cyber-attacks may occur alone or in conjunction with physical attacks, especially where disruption of service is an objective of the attacker. While we have established security controls that are designed to detect and prevent cyber-attacks, such attacks are becoming increasingly complex and sophisticated, and our control environment may not be sufficient to address future threats.
We collect and process customer personal data.
We increasingly collect, use and store customer personal data that is protected by privacy and data protection laws. Data privacy laws and regulations apply broadly to the collection, use, storage, disclosure and security of personal information that identifies or may be used to identify an individual, such as names
and contact information. Many countries have additional laws that regulate the processing, retention and use of communications data (both content and metadata), and in some countries, authorities can intercept communications, sometimes directly or without our knowledge. These laws and regulations are subject to frequent revisions and differing interpretations, and have generally become more stringent over time.
Requests from local law enforcement for customer data may also come into conflict with applicable privacy and data protection laws and customer expectations, creating risks to our local businesses arising from our responses to these requests.
Since we may offer certain services accessed by, or provided to customers within, the European Union and the United States, we may be subject to the European Union and U.S. privacy and data protection regulations, which impose significant penalties for non-compliance.
In addition, most of the countries in which we operate are considering or have passed legislation imposing data privacy requirements that could increase the cost and complexity of providing our services. Although we take precautions to protect data, we cannot guarantee that our safeguards will prevent any leakage of certain data or any unauthorized use. If changes are made to data privacy laws and regulations, we may need to incur additional costs to ensure that we are in compliance with such changes, which could include investments in data processes, data collection tools or data warehouses to further protect customer and employee data.
g.Competition
Our industry is experiencing consolidation that may intensify competition among operators.
The telecommunications and cable industry has been characterized by increasing consolidation and a proliferation of strategic transactions. As a result, we are increasingly competing with larger competitors that may have substantially greater resources than we do. We expect this consolidation and strategic partnering to continue. Acquisitions or strategic relationships could harm us in a number of ways. For example:
•competitors could acquire or enter into relationships with companies with which we have strategic relationships and discontinue our relationship, resulting in the loss of distribution opportunities for our services or the loss of certain enhancements or value-added features to our services; For example, if a competitor entered into partnerships or negotiated exclusive rights to premium content, this could result in consumers choosing to move away from our service offerings to those of our competitors;
•a competitor could be acquired by a party with significant resources and experience that could increase the ability of the competitor to compete with our services, as was the case in Guatemala recently when América Móvil acquired the mobile business of Telefónica; and
•other companies with related interests could combine to form new, formidable competition, which could preclude us from obtaining access to certain markets or content, or which could dramatically change the market for our services. For example, if global companies that offer services such as information, social media or on-demand content services obtained or entered into distribution agreements with infrastructure partners in our markets, we could lose customers to those providers.
Consumers in our industry can change service providers relatively easily at little to no cost, which renders the competition for subscribers between operators intense.
If new competitors enter into our markets or existing competitors offer more competitively priced products or services, such as eliminating installation fees, subsidizing handsets, modems, wireless routers or set-top boxes, or offering content, channels or applications that we do not offer, our customers may move to another operator. Most of our mobile customers are prepaid, which allows them to switch operators at any time without monetary penalty, and some of our cable operator competitors incentivize customers to accept longer contracts, making it difficult to subsequently switch operators.
Some of our customers use devices with dual SIM card capability, allowing them to also utilize our competitors' services, which may negatively affect our mobile revenue. If we are unable to develop strategies to encourage customers to retain us as their primary or sole provider, we could lose a larger percentage of our revenue to our competitors. Mobile number portability in our markets removes a disincentive to changing providers and increases competition and churn. As devices with eSIMs are introduced in our markets, allowing customers to change providers without changing their SIM cards, churn and pricing competition among providers may also increase.
If we are unable to compete effectively and match or mitigate our competitors' strategies or aggressive competitive behavior, in pricing our services or acquiring new and preferred customers, or if we are unable to develop strategies to encourage customers to retain us as their primary or sole provider, we could suffer
adverse revenue impacts or higher costs for customer retention, which could, individually or together, have a material adverse effect on our business, financial condition and results of operations.
Consumers in the telecommunications industry now have many alternative means of communicating.
The proliferation of VoIP offerings and other services delivered over the internet (referred to as “Over-the-Top” or “OTT” services) for voice, instant messaging, and content has significantly increased competitive risk and has driven down revenue from legacy voice and SMS services. While these alternative communication methods require usage of data, there are no guarantees that consumers will use our networks to obtain data services.
h.Environment and sustainability
Failure to comply with environmental requirements could result in monetary fines, reputation damage or other obligations.
Certain of our business operations are subject to environmental laws and regulations since they involve fuel consumption, carbon dioxide emission, and disposal of network equipment and old electronics. Environmental requirements have become more stringent over time and pending or proposed new regulations could impact our operations or costs.
Increasing scrutiny and evolving expectations from customers, regulators, investors and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
Companies are facing increasing scrutiny from customers, regulators, investors and other stakeholders with respect to their environmental, social and governance (“ESG”) practices. Views about ESG are diverse and rapidly changing, particularly as they relate to the environment, health and safety, diversity, labor conditions and human rights. New regulations or guidance relating to ESG standards, as well as the perspectives of customers, investors and other stakeholders regarding these standards, may affect our business activities and increase disclosure requirements, which may increase costs. If investors and other stakeholders determine that we have not made sufficient progress on or adequately addressed ESG matters, we could be subject to negative publicity in traditional or social media, and our reputation, ability to retain customers and employees, and financial condition and results of operations could be adversely affected.
i.Supplier management
We are dependent on key suppliers to provide us with products and devices.
We rely on handset distributors, manufacturers and application developers to provide us with the handsets, hardware and services demanded by our customers. The key suppliers of our handsets and set-top boxes, in terms of both volume of sales and importance to our operations, are Samsung, Huawei, Apple, Motorola, BMobile, Alcatel, Bold, Sky, LG, Xiaomi, Commscope, and Kaon. We import directly, or we source our handsets through resellers in our markets such as Brightstar Corp.
We are dependent on key suppliers to provide us with networks and systems.
We seek to standardize our network equipment to ensure compatibility, ease equipment replacement and reduce downtime of our network and contract with a limited number of international suppliers to achieve economies of scale, which means that we rely on a limited number of manufacturers to provide network and telecommunications equipment and technical support. The key suppliers of equipment and software for our existing networks are Huawei, Ericsson, Nokia, Commscope, Harmonic, Kaon, Technicolor, NEC, Intraway and VMWare.
We have limited influence over these key suppliers, and even less over their suppliers and the continuity of their supply chains, which could be disrupted in many ways. Therefore, we cannot assure you that we will be able to obtain required products or services on favorable terms or at all. Any failure of key suppliers to provide software and equipment could interfere with our operations. For example, we have experienced significant disruptions in the supply of microchips due to the global shortage that our suppliers are facing. While we have accumulated strategic inventories and substituted alternative products to sustain our operations, there can be no assurance that these inventories and products will be sufficient to meet our customers' needs.
International actions including trade sanctions could disrupt or otherwise negatively impact our supply chain.
In May 2019, the U.S. government announced executive action aimed at addressing U.S. national security risks arising from the use of non-U.S. technology. In furtherance of this order, the U.S. Department of Commerce issued a rule in January 2021 that allows the U.S. government to prohibit certain information and
communications technology and services (“ICTS”) transactions to address U.S. national security threats. Shortly after this rule became effective in March 2021, the U.S. Department of Commerce also published a notice of proposed rulemaking regarding a potential licensing or other pre-clearance process for ICTS transactions. Although the extent and potential consequences of this rule and any potential licensing or pre-clearance process remain uncertain, they may have a material and adverse effect on our ability to maintain and expand our networks and business. There are a number of alternative suppliers available to us; however, if we are unable to obtain adequate alternative supplies of equipment or technical support in a timely manner, on acceptable commercial and pricing terms, our ability to maintain and expand our networks and business may be materially and adversely affected.
We rely on interconnection and capacity agreements, the terms of which could be made less favorable due to market participants or regulatory changes.
Interconnection and capacity agreements are required to transmit voice and data to and from our networks. Our ability to provide services would be hampered if our access to local interconnection and international capacity was limited, or if the commercial terms or costs of interconnect and capacity agreements with other local, domestic and international carriers of data and communications were significantly altered, or if an operator is not able to provide interconnection due to operation and maintenance issues or natural disasters.
We depend upon certain third parties to operate and maintain parts of the networks we use, including certain towers and network infrastructure, and related services.
We have sold and leased back a significant number of our towers, including in El Salvador, Colombia, Tanzania and Paraguay, as further discussed under “Item 4. Information on the Company—D. Property, Plant and Equipment—Tower infrastructure,” and we may engage in similar transactions in the future in our other markets.
We have entered into managed services agreements in certain of our markets to outsource the maintenance and replacement of our network equipment. Although the contracts impose performance obligations on the operators and tower management companies, we cannot guarantee that they will meet these obligations or implement remedial action in a timely manner, which may result in these towers or networks not being properly operated. If our managed services agreements terminate, we may be unable to find a cost-effective, suitable alternative provider, and we may no longer have the necessary expertise in-house to perform comparable services. For example, if our tower network service provider is unable to properly maintain our towers, we may suffer a degradation in the quality or coverage of our mobile services.
We and our customers are dependent on third-party suppliers of electricity to power transmission and customer premise equipment.
Significant failure or disruption in the supply of power to the businesses and households that subscribe to our services, or to the data centers that we operate, could have a negative impact on the experience of our customers, which could result in claims against us for failure to provide services and reduce our revenue.
2.Risks related to Millicom’s business in the markets in which it operates
The COVID-19 global pandemic has affected and may continue to affect our operations, business and financial condition, and our liquidity could be negatively impacted, particularly if the economies of the countries in which we operate remain unstable for a significant amount of time.
The outbreak of a novel and highly contagious form of coronavirus (“COVID-19”), which the World Health Organization has declared a pandemic, has resulted in numerous deaths, adversely impacted global commercial activity and contributed to significant volatility in global equity and debt markets and business uncertainty. The impact of the outbreak continues to evolve, and most countries globally, including a majority of the countries where we operate, initially 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. According to data compiled by the University of Oxford, the government-imposed lockdowns in the vast majority of our markets were among the most stringent in the world. As a result, many of our stores and distribution channels were forced to close temporarily affecting our gross sales, and a majority of our markets experienced very sharp reductions in mobility during 2020. During 2021 economic activity recovered in our markets, although the first half of the year saw temporary restrictions implemented in some countries and regions. However these restrictions had a less severe impact on economic activity and our business as compared to those implemented at the onset of the pandemic. Vaccinations were widely distributed in our markets and, by the end of 2021, vaccination rates were above 50% in Colombia, Costa Rica, El Salvador and Panama, and were below 30% in Guatemala.
In 2020, the measures implemented related to the pandemic, as well as the general uncertainty surrounding the dangers of COVID-19, produced a significant disruption in economic activity and had an
adverse impact on transportation, hospitality, tourism, entertainment and other industries. While many of these measures are no longer being implemented, further restrictions may be imposed in the future. In addition, many currencies globally experienced increased volatility. As an example, in our markets, the Colombian peso and the Paraguayan guaraní devalued by approximately 8% year-over-year in 2020. In 2021, most currencies were stable, except for the Colombia peso which devalued by approximately 14% during the year.
Despite restrictions imposed by governments and vaccination efforts, the virus has continued to spread in most of our markets. As a provider of essential services, we have prioritized the health and safety of our employees and customers by implementing new protocols, providing protective equipment and cleaning products, and disseminating information from the corresponding health authorities in each of our markets. These measures have had a negligible impact on our costs and allowed our customer-facing employees to continue to serve our customers safely and with confidence throughout the pandemic.
At the onset of the pandemic, governments in some countries mandated that companies such as ours avoid disconnecting clients for nonpayment, that we waive fees for late payments, and/or that we defer payments over an extended period of time, among other measures. When implemented, these measures had a very material negative impact on our collections, thus causing higher provisions for bad debt. While collections subsequently improved and returned to pre-COVID-19 levels in tandem with the implementation of lifeline services, governments may impose additional mandates that may once again have a negative impact on our collections.
Although these factors did not significantly impact our operating and financial performance in 2021, they negatively impacted our financial condition and results of operations in 2020 and may continue to cause a drag on our performance and financial health in the future.
a.Emerging Market Risks
Most of our operations are in emerging markets that may be subject to greater risks than more developed markets, including in some cases significant political, legal and economic risks.
Emerging market governments and judiciaries often exercise broad, unchecked discretion, and are susceptible to abuse and corruption and rapid reversal of political and economic policies on which we depend. Political and economic relations among the countries in which we operate are often complex and have resulted, and may in the future result, in conflicts, which could materially harm our business.
The economies of emerging markets are vulnerable to market downturns and economic slowdowns elsewhere in the world. Emerging markets are also subject to adverse global political events and geopolitical tensions, such as the recent outbreak of hostilities between Russia and Ukraine. Such events may result in sanctions, disruptions in global supply chains, military actions and macroeconomic instability, each of which may adversely affect the economies of emerging markets. As has happened in the past, financial problems or an increase in the perceived risks associated with investing in emerging economies could dampen foreign investment in these markets and materially adversely affect their economies, which may cause our business and results of operations to suffer.
Turnover of political leaders or parties in emerging markets as a result of a scheduled election upon the end of a term of service or in other circumstances may also affect the legal and regulatory regime in those markets to a greater extent than turnover in established countries. Some of the emerging markets in which we operate are susceptible to social unrest, which may lead to military conflict in some cases.
b.Strategy and strategic direction
We may not be able to successfully implement our strategic priorities.
Our strategic priorities include, among others, expansion of our high-speed data networks (4G, HFC and FTTH), facilitation of growth in our mobile data and cable segments, implementation of technology transformation projects to improve our operating performance and efficiency and the creation of legal entities to separate our Tigo Money and Towers businesses from our telecommunications service operations. There can be no assurance that our strategy will be successfully implemented and will not cause changes in our operational efficiencies or structure. In addition, the implementation of our strategic priorities could result in increased costs, conflicts with employees, local shareholders and other stakeholders, business interruptions and difficulty in recruiting and retaining key personnel.
Lack of sufficient information or poor quality of available information regarding our industry, operations or markets may lead to missed opportunities or inefficient capital allocation.
As the factors we consider in formulating our strategy change (including information, such as customer data insights or new markets into which we may consider entering), we face the risk of not having access to sufficient industry, operational or market data inputs to properly inform our decision-making or needing to rely on poor-quality information. There is also a risk that the data to which we have access will be analyzed improperly, if the relevant personnel lack appropriate experience, oversight, or relevant skill sets in data analysis, including through insufficient consideration of interrelationships of key variables such as market dynamics, trends, availability of cash and resources, agility, opportunities and risk factors affecting our business. If we are forced to make assumptions regarding key variables and are unable to consider alternatives to, and consequences of, strategic decisions on a fully informed basis, it may lead to missed opportunities or inefficient capital allocation that could have an adverse effect on our business, financial condition or results of operations.
We may not achieve the anticipated benefits of the acquisition of the remaining 45% equity interest in our Guatemala joint venture business.
On November 12, 2021, we signed and closed an agreement to acquire the remaining 45% equity interest in our Guatemala joint venture business from our local partner for $2.2 billion in cash. In November 2021, we obtained bridge financing to fund the acquisition, which we have refinanced in part with the issuance of new long-term debt and intend to refinance the remainder with the issuance of equity. We have also assumed indebtedness from our Guatemala joint venture business in connection with the acquisition. Our leverage and debt service requirements may make it more difficult for us to capitalize on changes in market conditions or other strategic opportunities. Furthermore, there can be no assurance that we will be able to refinance the remainder of the bridge loan with equity in a cost-effective manner. While we have taken, and will continue to take, steps to facilitate the growth of our operations in Guatemala and improve our operating performance and efficiency, our strategy may ultimately prove to be unsuccessful. If we are unable to generate sufficient cash flow from our operations in Guatemala and future borrowings are not available, we may not be able to pay our indebtedness or fund our other liquidity needs, which could have a material adverse effect on our business, financial condition and results of operations.
c.Industry structure, market position and competition
We face intense competition from other larger telecommunications and cable and broadband providers.
The markets in which we operate are highly competitive. Our main mobile, cable and broadband competitors include major international and regional telecommunication providers such as América Móvil, Telefónica and Liberty Latin America. Some of our competitors are state-owned entities. Many of our main competitors have substantially greater resources than we do in terms of access to capital. In some of our markets, our competitors may have access to more spectrum and provide greater or better area coverage, and they may face fewer regulatory burdens than we do.
We have a weaker market position in mobile services and face a challenging competitive environment in Colombia, our largest market.
Relative to our other markets, the mobile services sector in Colombia is characterized by having more competitors, including América Móvil and Telefónica, which are larger than us, and by having more stringent regulatory conditions. Relative to our other markets for mobile services, our competitive position is also weaker in Colombia, where we are the third largest mobile operator. Additionally, new competitors have been and may continue to be awarded mobile spectrum, including WOM, which entered the Colombian market in April 2021. Given the importance of Colombia to our results, if we are unable to sustain or improve
our position in the mobile services sector, this could have a material impact on our consolidated financial results.
Competition is driven by a number of factors, most notably price and increasingly customer experience.
Within our markets, operators compete for customers principally on the basis of price, promotions, services offered, advertising and brand image, quality and reliability of service, mobile coverage and overall customer experience. Price competition is especially significant on mobile services, which represented more than half of our revenue from continuing operations in 2021. Mobile voice, SMS and data are largely commoditized services, as the ability to differentiate these services among operators is limited. Competition has resulted in pricing pressure, reduced margins and profitability, increased customer churn, and in some markets, the loss of revenue and market share.
There may be more mobile operators than the market is able to sustain.
Additional licenses may be awarded in already competitive markets, and regulators may also encourage new entrants by offering them favorable conditions, such as holding spectrum auctions in which certain blocks of spectrum are reserved for new entrants, or by capping the amount of spectrum that existing players can acquire, as in Colombia's 2019 auction.
Entry by new competitors may have a significant disruptive effect on our markets.
New competitors may enter our markets with pricing or other product or service strategies, primarily designed to gain market share, that are significantly more competitive than our offers, leading to, for example, significant price competition and lower margins or increased churn.
In certain of our mobile markets, such as Colombia, our competitors may have a dominant market position.
Having a dominant market position may provide our competitors with various competitive advantages including from economies of scale, access to spectrum, the ability to significantly influence market dynamics and market regulation.
Our competitors may be able to provide better pay-TV services than we are able to provide.
Our pay-TV services compete with other pay-TV services that may offer a greater range of channels to a larger audience, reaching a wider area distribution (especially in rural areas) for a lower price than we charge for our pay-TV services. We also compete with satellite distribution of free-to-air television programming, which viewers can receive by purchasing a satellite dish and a set-top box without any physical cabling. Furthermore, our cable networks are subject to the risk of overbuild and our pay-TV content is subject to the possibility of wireless substitution.
Many of the mobile telecommunications markets in which we operate have high mobile penetration levels, inhibiting growth opportunities.
The markets in which we operate have mobile phone service penetration levels that typically exceed 100% of the population. Although there are some opportunities for further growth, our efforts to develop additional sources of revenue may not be successful. Therefore, high mobile penetration rates could constrain future growth and produce an intensification of pricing pressures on all of our mobile services, which could adversely affect our future profitability and return on investments.
We may not be able to achieve market acceptance of our MFS.
Although the use of mobile financial services and digital payments has increased throughout the world, there can be no assurance that this increase will result in the acceptance of our MFS across the markets in which we operate. Our MFS operations are heavily concentrated in Tanzania, and as of December 31, 2021, accounted for 70% of our total Tigo Money customers' base and 76% of our MFS revenue. As announced on April 19, 2021, we have agreed to sell our entire Tanzania operations to a consortium led by the Axian Group, including our MFS in Tanzania. While we seek to expand our MFS in our Latin American markets, we may be unable to achieve the required level of market acceptance in order for us to recover the investment costs involved in developing and launching such services.
The future market acceptance of our MFS depends on a variety of factors, including community trust in digital financial services and companies that are not traditional financial institutions, entrenched preferences in traditional payment methods, and the availability of alternative MFS that are more popular or widely accepted by the population.
d.Customer base and customer experience
A significant proportion of our mobile revenue is generated from prepaid customers and is short-term in nature.
Prepaid customers do not sign service contracts and are more likely than postpaid customers to switch mobile operators and take advantage of promotional offers by other operators. Many of our mobile customers also subscribe to short-term packages with lengths of one-day to one-week. As a result, we cannot be certain that prepaid customers or short-term data package customers will continue to use our services in the future. Prepaid customers represented 89% of our mobile customers as of December 31, 2021 and generated approximately 59% of our mobile service revenue and 32% of our total service revenue during 2021.
Transition to more subscription-based businesses creates new challenges.
Our transition toward an increasingly subscription-based revenue model has implications for our personnel, systems, and business procedures, as we must dedicate increasing levels of management attention and resources toward managing and mitigating risks related to accounts receivables and collections, as well as billing and customer care. If we are unable to implement and manage the information systems and to properly train our employees, we could experience elevated levels of customer churn and bad debt, which would negatively impact our financial results.
e.Political
Some of the countries in which we operate have a history of political instability.
Some of the countries in which we operate may be subject to greater political and economic risk than developed countries. Some of the countries in which we operate suffer from political instability, civil unrest, or war-like actions by anti-government insurgent groups. These problems may continue or worsen, potentially resulting in significant social unrest or civil war. For example, El Salvador and Honduras have some of the highest murder rates in the world due to violent crime, and Nicaragua, Bolivia and Colombia have recently experienced civil unrest.
Any political instability or hostilities in the markets in which we operate can hinder economic growth and reduce discretionary consumer spending on our services and may result in damage to our networks or prevent us from selling our products and services.
Current and future political or social instability may negatively affect our ability to conduct business.
We face a number of risks as a result of political and social instability in the countries in which we operate, ranging from the risk of network disruption, sometimes resulting from government requests to shut down our networks as well as forced and illegal abuse of our network by political forces, to the need to evacuate some or all of our key staff from certain countries, in which case there is no guarantee that we would be able to continue to operate our business as previously conducted in such countries. Any of these events would adversely affect our results of operations.
f.Legal and regulatory
The nature of legislation and rule of law in emerging markets may affect our ability to enforce our rights under licenses or contracts or defend ourselves against claims by third parties.
The nature of much of the legislation in emerging markets, the lack of consensus about the scope, content and pace of economic and political reform and the rapid evolution of the legal systems in emerging markets, place the enforceability and, possibly, the constitutionality of, laws and regulations in doubt and result in ambiguities, inconsistencies and anomalies. These factors could affect our ability to enforce our rights under our licenses or our contracts, or to defend our company against claims by other parties. For example, if we enter litigation proceedings with a third party in a country in which we operate, and within a legal system which may be less transparent and less robust in its judgment and rulings, we may face penalties or decrees that compel us to cease or partially cease the provision of certain of our services or the operation of our networks, or invalidate or suspend our licenses or rights therein.
New or proposed changes to laws or new interpretations of existing laws in the markets in which we operate may harm our business.
We are subject to a variety of national and local laws and regulations in the countries in which we do business. These laws and regulations apply to many aspects of our business. Violations of applicable laws or regulations could damage our reputation or result in regulatory or private actions with substantial penalties or damages. In addition, any significant changes in such laws or regulations or their interpretation, or the introduction of higher standards or more stringent laws or regulations, could have an adverse impact on our business, financial condition, results of operations and prospects. For example, in Colombia in 2017, the regulator introduced caps to wholesale rates on mobile services, which forced us to lower our prices for both voice and data services, and it also cut interconnection rates.
Developing legal systems in the countries in which we operate create a number of uncertainties for our businesses.
The legal systems in many of the countries in which we operate are less developed than those in more established markets. This creates uncertainties with respect to many of the legal and business decisions that we make, including, among others, potential for negative changes in laws, gaps and inconsistencies between the laws and regulatory structure, difficulties in enforcement, broad regulatory authority held by telecommunications regulators, and inconsistency and lack of transparency in the judicial interpretation of legislation and corruption in judicial or administrative processes or systems. We may not always have access to efficient avenues for appeal and may have to accept the decisions imposed upon us. For more information concerning the legal proceedings to which we are subject, see “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”
g.Macro-economic and currency
The economies of emerging markets, including those in which we operate, are vulnerable to market downturns and economic slowdowns elsewhere in the world.
Telecommunications in emerging markets in general and in our markets in particular, account for a significant part of gross domestic product (“GDP”) and disposable income. As such, any change in economic activity level may impact our business. Furthermore, as consumers in emerging markets have relatively lower levels of disposable income, the demand for our products and services is significantly exposed to the risk of economic slowdown.
As has happened in the past, financial problems or an increase in the perceived risks associated with investing in emerging economies could dampen foreign investments in these markets and materially adversely affect their economies. An economic downturn, a substantial slowdown in economic growth or deterioration in consumer spending could have an adverse effect on the level of demand for our products and services and our growth. We are particularly susceptible to any deterioration in the economic environment of the countries in which we have our largest operations, namely Colombia, Guatemala, Paraguay, Honduras, Panama and Bolivia.
Changes in economic, political and regulatory conditions in the United States or in U.S. laws and policies governing foreign trade and foreign relations could have an impact on the economies in which we operate.
Any decision taken by the U.S. government that has an impact on the Latin American economy, such as reducing commercial activity between the countries in which we operate and the United States, limiting immigration, increasing interest rates or slowing direct foreign investments, could adversely affect the disposable income of consumers. In addition, a slowdown in the U.S. economy may have an adverse impact on the level of U.S. dollar remittances that form a large part of the GDP of many of the countries in which we operate.
Fluctuations or devaluations in local currencies in the markets in which we operate against our U.S. dollar reporting as well as our ability to convert these local currencies into U.S. dollars to make payments, including on our indebtedness, could materially adversely affect our business, financial condition and results of operations.
A significant amount of our costs, expenditures and liabilities are denominated in U.S. dollars, including capital expenditures and borrowings. We mainly collect revenue from our customers in local currencies, and there may be limits to our ability to convert these local currencies into U.S. dollars. Local currency exchange rate fluctuations in relation to the U.S. dollar may have an adverse effect on our earnings, assets and cash flows. To the extent that our operations retain earnings or distribute dividends in local currencies, the amount of U.S. dollars ultimately received by MIC S.A. is also affected by currency fluctuations.
A significant amount of our debt and long-term financial commitments are denominated in U.S. dollars.
Where possible and where financially viable, we borrow in local currency to mitigate the risk of exposure to foreign currency exchange. Our ability to reduce our foreign currency exchange exposure may be limited by a lack of long-term financing in local currencies or derivative instruments in the currencies in which we operate. As such, there is a risk that we may not be able to finance local capital expenditure needs or reduce our foreign exchange exposure by borrowing in local currency. For more information, see “Item 11. Quantitative and Qualitative Disclosures About Risk—Foreign currency risk.”
Due to the lack of available financial instruments in many of the countries or currencies in which we operate, we may not be able to hedge against foreign currency exposures.
We had net foreign exchange losses of $43 million in fiscal 2021 compared to net foreign exchange losses of $69 million in fiscal 2020 and net foreign exchange losses of $32 million in fiscal 2019. At the
operational level we seek to match the currencies of our cash inflows and outflows, but while this practice reduces, it does not eliminate, our significant foreign exchange exposure to the U.S. dollar.
The governments of the countries in which our operations are located may impose foreign exchange controls that could restrict our ability to receive funds from the operations.
Substantially all our revenue is generated by our local operations, and MIC S.A. is reliant on its subsidiaries’ and joint ventures’ ability to transfer funds to it. None of the foreign exchange controls that exist in the countries in which our companies operate significantly restrict the ability of our operating companies to pay interest, dividends, technical service fees, and royalty fees or repay loans by exporting cash, instruments of credit or securities in foreign currencies. However, foreign exchange controls may be strengthened, or introduced, which could restrict MIC S.A.’s ability to receive funds.
In addition, in some countries it may be difficult to convert local currency into foreign currency due to limited liquidity in foreign exchange markets. These restrictions may constrain the frequency for possible upstreaming of cash from our subsidiaries to MIC S.A. in the future. These and any similar controls enacted in the future may cause delays in accumulating significant amounts of foreign currency, and increase foreign exchange risk, which could have an adverse effect on our results of operations.
We are exposed to the potential impact of any alteration to, or abolition of, foreign exchange which is “pegged” at a fixed rate against the U.S. dollar.
Any “unpegging,” particularly if the currency weakens against the U.S. dollar, could have an adverse effect on our business, financial condition or results of operations. Currently Bolivia operates a fixed peg to the U.S. dollar.
h.Taxation
Unpredictable tax systems give rise to significant uncertainties and risks that could complicate our tax strategy and business decisions.
The tax laws and regulations in the markets in which we operate are complex and subject to varying interpretations. The tax authorities in the markets in which we operate are often arbitrary in their interpretation of tax laws, as well as in their enforcement and tax collection activities. Our interpretations and application of the tax and regulations could differ from that of the relevant governmental taxing authority. Tax declarations are subject to review and investigation by a number of authorities, which are empowered to impose fines and penalties on taxpayers, and in some cases criminal penalties on company personnel. Tax audits may result in additional costs to our group if the relevant tax authorities conclude that entities of the group did not satisfy their tax obligations in any given year. Such audits may also impose additional burdens on our group by diverting the attention of management resources. The outcome of these audits could harm our business, financial condition, results of operations, cash flows or prospects . We are currently addressing tax disputes with the local tax authorities in several jurisdictions, further described under “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings—Tax disputes.”
Adverse decisions of tax authorities or changes in tax treaties, laws, rules or interpretations could have a material adverse effect on our business, results of operations, financial conditions or cash flows.
The organizational structure and business arrangements between the various legal entities in the group may give rise to taxation-related risks, including risks related to the pricing of services which might be challenged if not made on an arm’s-length basis and the taxation of shell entities.
Tax authorities could argue that some of the services provided among the various legal entities in the group are on terms more favorable than those that could be obtained from independent third parties and assess higher taxes or fines in respect of the services MIC S.A. provides. Additionally, tax legislation that targets shell entities, such as the proposal published by the Council of the European Union (the "Council") on December 22, 2021 to prevent the misuse of shell entities for tax purposes, may have an adverse impact on our business if it is adopted and deemed applicable to us. We are currently reviewing the Council's proposal, the impact of which is uncertain at this time.
i.Litigation and claims
Some of the litigation or claims that we face can be complex, costly, and highly disruptive to our business operations.
From time to time, in the ordinary course of our business, we are involved in legal proceedings. Some of these legal proceedings can be complex, costly, and highly disruptive to our business operations. Certain of these proceedings may be spurious in nature and may demand significant energy and attention from management and other key personnel. For example, in Tanzania in June 2016, we were served with a
complaint by a third party seeking to exert rights as a shareholder of MIC Tanzania Public Limited Company. While this claim was eventually dismissed, it absorbed a significant amount of management time and resulted in additional costs. The assessment of the outcome of legal proceedings, including our potential liability, if any, is a highly subjective process that requires judgments about future events that are not within our control. The amounts ultimately received or paid upon settlement or pursuant to final judgment, order or decree may differ materially from amounts accrued in our financial statements. In addition, litigation or similar proceedings could impose restraints on our current or future manner of doing business. For example, if we enter litigation proceedings with a regulator in a country in which we operate, we may face penalties or decrees that compel us to cease or partially cease the provision of certain of our services or the operation of our networks.
j.Business conduct
We may not be able to fully mitigate the risk of inappropriate conduct by our employees, business partners and counterparties.
Millicom’s employees interact with customers, contractors, suppliers and counterparties, and with each other, every day. All employees are expected to respect and abide by the Company's values and Code of Conduct, commonly referred to as the “Sangre Tigo” culture. While Millicom takes numerous steps to prevent and detect inappropriate conduct by employees, contractors and suppliers that could potentially harm the Company's reputation, customers, or investors, such behavior may not always be detected, deterred or prevented. The consequences of any failure by employees to act consistently with the “Sangre Tigo” expectations could include litigation, regulatory or other governmental investigations or enforcement actions.
We are subject to anti-corruption and anti-bribery laws.
We are subject to a number of anti-corruption laws in the countries in which we operate and are located, in addition to the Foreign Corrupt Practices Act (“FCPA”) in the United States and the Bribery Act in the United Kingdom. Our failure to comply with anti-corruption laws applicable to us could result in penalties, which could harm our reputation and harm our business, financial condition, results of operations, cash flows or prospects. The FCPA generally prohibits covered companies, their officers, directors and employees and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits. We operate in countries which pose elevated risks of corruption violations, and in certain of our markets, we have been and may continue to be subject to governmental investigations that include the telecommunications sector. If we are not in compliance with anti-corruption laws and other laws governing the conduct of business with government entities and/or officials (including local laws), we may be subject to criminal and civil penalties and other remedial measures. Investigations of any actual or alleged violations of such laws or policies related to us could harm our business, financial condition, results of operations, cash flows or prospects.
Our anti-corruption policies, procedures and internal controls may not be effective in complying with anti-corruption laws.
We regularly review and update our policies, procedures and internal controls designed to provide reasonable assurance that we, our employees, joint ventures, distributors and other intermediaries comply with the anti-corruption laws to which we are subject. For example, our business in Guatemala has retained external legal counsel to review its policies and procedures related to anti-corruption issues, including examining certain allegations of improper payments made several years ago. However, anti-corruption policies, procedures and internal controls are not always effective against this risk. We cannot assure you that such policies or procedures or internal controls work effectively at all times or protect us against liability under these or other laws for actions taken by our employees, joint ventures, distributors and other intermediaries with respect to our business or any businesses that we may acquire.
Our MFS service is complex and increases our exposure to fraud and money laundering.
Our MFS product has been developed through different distribution channels, and despite measures that we have taken or will take to adequately secure our payment systems, we remain susceptible to potentially illegal or improper uses of our payment services. Risks may include the use of our payment services in connection with fraudulent sales of goods or services, sales of prohibited or restricted products and money laundering.
Our policies and procedures may not be fully effective in identifying, monitoring and managing these risks. For example, we are not able to monitor the sources and uses of funds that flow through our MFS application, Tigo Money, in every case. As a result, we may be held liable for fraudulent transactions or transactions that violate trade sanctions or other legal or regulatory requirements, and an increase in negative publicity regarding our payment systems could harm our reputation and reduce consumer
confidence in our services. In addition, we may face legal actions or regulatory sanctions as a result of any such activity.
Our services also involve cash handling, which exposes us to the risk of money laundering. In certain of our markets, we must keep our customers’ MFS cash in local currency demand deposits in local banks and ensure customers’ access to MFS cash, exposing us to local banking risk.
Anti-money laundering laws are often complex. We endeavor to conform to the highest standards but cannot be certain that we will be able to fully meet all applicable legal and regulatory requirements at all times. Violations of anti-money laundering laws or other regulations applicable to our MFS offerings could expose us to monetary fines or other legal actions or regulatory sanctions, which could have a material adverse effect on our business, financial condition and results of operations.
We may incur significant costs from fraud, which could adversely affect us.
Our high profile and the nature of the products and services that we offer make us a target for fraud. Many of the markets in which we operate lack fully developed legal and regulatory frameworks and have low conviction rates for fraudulent activities, decreasing deterrence for such schemes. We have been in the past and may in the future be susceptible to fraudulent activity by our employees or third-party contractors despite having robust internal control systems in place across our operations, which could have a material adverse effect on our results of operations.
We also incur costs and revenue losses associated with the unauthorized or unintended use of our networks, including administrative and capital costs associated with the unpaid use of our networks as well as with detecting, monitoring and reducing incidences of fraud. Fraud also impacts interconnection costs, capacity costs, administrative costs and payments to other carriers for unbillable fraudulent roaming charges. In 2021, our most significant impact from fraudulent activity was caused by International Bypass whereby international calls intended for a Tigo subscriber were terminated through an unauthorized channel. Any continued or new fraudulent schemes could have an adverse effect on our business, financial condition and results of operations.
Our risk management and internal controls may not prevent or detect fraud, violations of law or other inappropriate conduct.
If any of our customers, suppliers, or other business partners receive or grant inappropriate benefits or use corrupt, fraudulent or other unfair business practices, we could be subject to legal sanctions, penalties and harm to our reputation. Given our international operations, group structure, and size, our internal controls, policies and our risk management practices may not be adequate in preventing, detecting or responding to any such incidents which could have a material negative impact on our reputation, business activities, financial position and results of operations.
We may be directly or indirectly affected by U.S. or other international sanctions laws, which may place restrictions on our ability to interact with business partners or government officials.
We operate in certain countries in which international sanctions may be imposed by the U.S., the U.K. or Europe, and we may be required to comply with such sanctions. Such sanctions may restrict our ability to implement our strategy or conduct our business in the manner in which we expect. For example, in response to the November 2021 presidential election in Nicaragua, the U.S., Canada and the U.K. announced sanctions against the Nicaraguan Public Ministry and various Nicaraguan officials, including the deputy director general and director general of TELCOR, the nation's principal telecommunications regulator. In addition, several Nicaraguan government officials and other key actors are currently included on the Specially Designated Nationals list of the U.S. Office of Foreign Assets Control, as well as the U.K. sanctions list. While it remains uncertain what impact current and future sanctions may have on our operations in Nicaragua and other markets, they may have a material adverse effect on our ability to maintain and expand our networks and business.
k.People, health and safety
Threats to the safety of our employees or contractors could affect our ability to provide our services.
Heightened states of danger may exist in certain of the countries in which we operate, including as a result of civil unrest, criminal activity, and the threat of natural or man-made disasters. Such events can pose significant risks to the health and safety of our employees and contractors and may impede or delay our ability to provide services to our customers or potential customers. In those locations, we may incur additional costs to maintain the safety of our personnel, customers, suppliers, and contractors. Despite the precautions, the safety of our personnel, customers, suppliers, and contractors in these locations may continue to be at risk.
Enforcement of standards of safety and the promotion of a culture of safety may not prevent the frequency or severity of health and safety incidents.
Although we implement and provide training on health and safety matters, particularly related to the risks of working on telecommunications towers or on TV poles, there is no guarantee that our employees or our contractors will comply with applicable safety standards. For example, in 2021, we did not suffer any employee fatalities or major losses to the Company, but there were unfortunately two fatalities in our contracted services. If we fail to implement these procedures or if the procedures we implement are ineffective, we may suffer the loss of, or injury, to our employees or contractors, as well as expose ourselves to possible litigation and reputational harm.
l.Brand and reputation
Failing to maintain our intellectual property rights and the reputation of our brands would adversely affect our business.
Our intellectual property rights, including our key trademarks and domain names, including our Tigo, UNE and Cable Onda brand names, which are well known in the markets in which we operate, are extremely important assets and contribute to our success in our markets. If we are unable to maintain the reputation of and value associated with them, we may not be able to successfully retain and attract customers. Furthermore, our reputation may be harmed if any of the risks described in this “Risk Factors” section materialize. Any damage to our reputation or to the value associated with our Tigo, UNE or Cable Onda brands could have a material adverse effect on our business, financial condition and results of operations.
Impairment of our intellectual property rights would adversely affect our business.
We rely upon a combination of trademark and copyright laws, database protections and contractual arrangements, where appropriate, to establish and protect our intellectual property rights. However, intellectual property rights are especially difficult to protect in many of the markets in which we operate. In these markets, the regulatory agencies charged to protect intellectual property rights are inadequately funded, legislation is underdeveloped, piracy is commonplace, and enforcement of court decisions is difficult. The diversion of our management's time and resources along with potentially significant expenses that could be involved in protecting our intellectual property rights in our markets, or losing any intellectual property rights, could materially adversely affect our business, financial condition and results of operations.
Failing to manage unauthorized access to our services and networks could adversely affect our business.
Our ability to increase or maintain our market share and revenue is partly dependent on the controlled access to our services and networks. Sophisticated piracy techniques are continuously evolving, and preventing unauthorized use of our services and networks is inherently difficult. Although we have taken and continue to take measures designed to prevent unauthorized access to our services and networks, any unauthorized use could harm our relationships with our content providers or result in a loss of revenue, which may adversely affect our business, financial condition and results of operations.
m.Workforce
A significant portion of our workforce is represented by labor unions, and we could incur additional costs or experience work stoppages as a result of the renegotiations of our labor contracts.
On average during 2021, approximately 17% of our employees (including 38% of our direct workforce in Colombia and 77% of our direct workforce in Panama) participated in collective employment agreements. While we have collective bargaining agreements in place, with subsequent negotiations and considering the minimum wage legislation in several of the countries where we operate, we could incur significant additional labor costs and/or experience work stoppages which could adversely affect our business operations. In addition, we cannot predict what level of success labor unions or other groups representing employees may have in further organizing our workforce or the potentially negative impact it would have on our operations. Furthermore, our strategic objectives may include divestitures of certain business lines, internal restructuring and other activities that impact employees. We cannot assure you that we will be able to maintain a good relationship with our labor unions and works council. Any deterioration in our relationship with our unions and works council could result in work stoppages, strikes or threats to take such an action, which could disrupt our business and operations materially and adversely affect the quality of our services and harm our reputation.
3.Risks related to Millicom’s size and structure and leadership
a.Size - capacity and limitations
The amount, structure and obligations connected with our debt could impair our liquidity and our ability to expand or finance our future operations.
As of December 31, 2021, our consolidated indebtedness excluding lease liabilities was $7,744 million, of which MIC S.A. incurred $4,020 million directly, and MIC S.A. guaranteed $300 million of indebtedness incurred by its subsidiaries. Including lease liabilities, our consolidated indebtedness was $8,911 million as of December 31, 2021. In addition, at December 31, 2021 our joint venture in Honduras, which is non-recourse to MIC S.A., had $279 million of debt and lease liabilities of $61 million.
We may incur additional debt in the future. Although certain of our outstanding debt instruments contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. The acquisition of additional debt could, among other things, require us to dedicate a substantial portion of our cash flow to payments on our debt, place us at a competitive disadvantage compared to competitors who might have less debt, restrict us from pursuing strategic acquisitions or reduce our ability to pay dividends or implement share buybacks and prevent us from complying with our dividend policy.
We have incurred and assumed, and expect to incur and assume, additional indebtedness in connection with recent acquisitions.
We funded our acquisitions in Panama and Nicaragua mainly by incurring additional indebtedness, including through the issuance of a $750 million 6.25% bond on March 25, 2019, and the issuance by our subsidiary Cable Onda S.A. ("Cable Onda") of a $600 million 4.5% bond in November 2019. Similarly, in November 2021, we obtained bridge financing for $2,150 million to fund the acquisition of the remaining 45% equity interest in our joint venture business in Guatemala. As of the date of issuance of these financial statements, a balance of $450 million remained unpaid under the initial $2,150 million bridge loan agreement. Finally, we intend to refinance a portion of the bridge loan with the issuance of new equity.
Our increased indebtedness following consummation of these or other acquisitions could have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions as well as reducing funds available for capital expenditures or acquisitions, and creating competitive disadvantages for us relative to other companies with lower indebtedness levels.
b.Portfolio of operations
Most of our operations are in emerging markets and may be subject to greater risks than similar businesses in more developed markets.
Investors in emerging markets should be aware that these markets are subject to greater risks than more developed markets, including in some cases significant political, legal and economic risks. Investors should fully consider the significance of the risks involved in investing in a company with significant operations in emerging markets and are urged to consult with their own legal, financial and tax advisors.
We may pursue acquisitions, investments or merger opportunities which may subject us to significant risks and there is no assurance that we will be successful or that we will derive the expected benefits from these transactions.
We may pursue acquisitions of, investments in or mergers with businesses, technologies, services and/or products that complement or expand our business. Some of these potential transactions could be significant relative to the size of our business and operations. Any such transaction would involve a number of risks and could present financial, managerial and operational challenges, including: diverting management attention from running our existing business or from other viable acquisition or investment opportunities; incurring significant transaction expenses; increased costs to integrate financial and operational reporting systems, technology, personnel, customer base and business practices of the businesses involved in any such transaction with our business; not being able to integrate our businesses in a timely fashion or at all; potential exposure to material liabilities not discovered in the due diligence process or as a result of any litigation arising in connection with any such transaction; and failure to retain key management and other critical employees. As an example, our joint venture in Ghana did not create the expected synergies and benefits that we anticipated.
Moreover, we may not be able to successfully complete acquisitions, in light of challenges such as strong competition from our competitors and other prospective acquirers who may have substantially greater
resources than we do in terms of access to capital and may be able to pay more than we can with respect to merger or acquisition opportunities, and regulatory approvals required.
Divestitures or restructuring of assets and businesses subject us to significant risks and may not realize expected benefits.
We may seek to divest or restructure existing operations and investments in ways that enhance the optionality for certain assets and facilitate the attraction of growth capital, such as our plans to create new organizational structures for our Towers and Tigo Money businesses. Any such divestiture or restructuring could involve a number of risks and could present financial, managerial and operational challenges including: diverting management attention from running our existing business or from pursuing other strategic opportunities; incurring significant transaction expenses; maintaining certain liabilities or obligations to indemnify the buyer of the divested business as part of the sale conditions; and the possibility of failing to properly manage the newly created entity or time the exit to achieve an optimal return.
Furthermore, the timing of divestitures and restructurings of assets and businesses may not result in optimal returns, and the amount and timing of proceeds or expected returns may be lower than our initial investment or the corresponding carrying value on our balance sheet. For example, we were unable to obtain any proceeds from the divestiture of our joint venture in Ghana.
Our ability to make significant decisions in certain of our operations may depend in part upon the consent of independent shareholders.
We have local shareholders in our operations in various markets, including subsidiaries that are fully controlled (e.g., in Colombia, Panama and Tanzania) as well as joint ventures with local entities in which we exercise joint control (e.g., in Honduras). In these operations, our ability to make significant strategic decisions or to receive dividends or other distributions may depend in part upon the consent of independent shareholders, and our operations may be negatively affected in the event of disagreements with or breaches by our partners.
Our operations could also be significantly affected if our partners and local shareholders seek to sell their interests to independent shareholders that may disagree with our strategy and certain significant decisions. For example, on May 25, 2021, our minority partner in Colombia, EPM, announced that it intends to pursue a potential sale of its stake in our Colombian operations. If approved by the Medellin town council, the sale process would begin, following the rules prescribed under Colombia’s Law 226 and as dictated by our shareholder agreement. If the sale of EPM’s interest in our Colombian operations is made to independent shareholders that oppose our strategic decisions and prevent us from achieving our financial, operating and governance targets, our business, financial condition and results of operations may be adversely affected.
Millicom's central functions provide essential support and services to our operating subsidiaries and joint ventures.
These services include, financing, procurement, technical and management services, business support services (including a shared services center in El Salvador and a multinational corporation headquarters (SEM) in Panama), digital transformation, customer experience, procurement, human resources, legal, information technology, marketing services and advisory services related to the construction, installation, operation, management and maintenance of its networks. If Millicom's central functions are unable to provide these services to our operating subsidiaries and joint ventures on a timely basis and at a level that meets our needs, our operating subsidiaries and joint ventures may be disrupted.
The majority of Millicom's operating subsidiaries and joint ventures operate under the Tigo trademark.
We take efforts to protect the Tigo trademark, but we may not always succeed in preventing others from using the trademark in countries in which we do not operate or from using similar trademarks, which could dilute the value of our trademark and result in brand confusion to consumers. The Tigo trademark could also be the subject of intellectual property infringement. Trademark protection is important because our trademark is what helps our customers differentiate our products and services from those of our competition, helps build brand loyalty, and represents our goodwill and reputation.
c.Talent acquisition and retention
We may be unable to obtain or retain adequate managerial and operational resources.
Our operating results depend, in significant part, upon the continued contributions and capacity of key senior management and technical personnel. Certain key employees possess substantial knowledge of our business and operations. We cannot assure you that we will be successful in retaining their services or that we would be successful in hiring and training suitable replacements without undue costs or delays. If we are unable to retain senior leadership to operate and grow our business, we may not be able to develop our
business at the pace or with the required level of sophistication that enables us to meet our strategic and financial objectives.
Competition for personnel in our markets and certain central functions is intense due to scarcity of qualified individuals.
Millicom has been working with its local teams to build and implement talent development plans and to identify high-performance individuals for future advancement or hiring, as the markets in which we operate have limited availability of talent with advanced skill sets in key areas such as the digital and technology fields. We have taken steps to reinforce our digital capabilities with an aggressive hiring plan to obtain the right personnel with the relevant competencies for the new businesses and services we launch. We cannot assure you, however, that we will be successful in these efforts.
d.Financing and cash flow generation
MIC S.A. is a holding company and is dependent on cash flow from its operating subsidiaries and joint ventures.
MIC S.A.’s primary assets consist of shares in its subsidiaries and joint ventures and cash in its bank accounts. MIC S.A. has no significant revenue generating operations of its own, and therefore its cash flow and ability to service its indebtedness and pay dividends to its shareholders will depend primarily on the operating performance and financial condition of its subsidiaries and joint ventures and its receipt of funds in the form of dividends or otherwise.
There are legal limits on dividends that some of MIC S.A.’s subsidiaries and joint ventures are permitted to pay. Further, some of our indebtedness imposes restrictions on dividends and other restricted payments, which are described under “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Financing.”
Our ability to generate cash depends on many factors beyond our control and we may need to resort to additional external financing.
Our ability to generate cash is dependent on our future operating and financial performance. This will be impacted by our ability to successfully implement our business strategy, as well as general economic, financial, competitive, regulatory, and technical elements and other factors beyond our control. If we cannot generate sufficient cash, we may, among other things, need to refinance all or a portion of our debt, obtain additional financing, delay capital expenditure or sell assets.
We require a significant amount of capital to operate and grow our business. We fund our capital needs in part through borrowings in the public and private credit markets. Adverse changes in the credit markets, including increases in interest rates, could increase our cost of borrowing and/or make it more difficult for us to obtain financing for our operations or refinance existing indebtedness. In addition, our borrowing costs can be affected by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by customary credit metrics. A decrease in these ratings would likely increase our cost of borrowing and/or make it more difficult for us to obtain financing. A severe disruption in the global financial markets could impact some of the financial institutions with which we do business, and such instability could also affect our access to financing.
In particular, periods of industry consolidation require businesses to raise debt and equity capital to remain competitive. An inability to access capital during such periods could have an adverse effect on our business, financial condition or results of operations.
The cash flow we generate is highly dependent on our operations in Guatemala.
Our operations in Guatemala have historically generated healthy cash flows. If the financial condition of our operations in Guatemala deteriorates, or if we fail to diversify our sources of cash flow, our liquidity could suffer, which could impact our capital allocation and limit our ability to reduce our leverage, reinvest in our business or remunerate our shareholders.
Our ability to pay dividends to our shareholders, consummate share repurchase programs or otherwise remunerate shareholders is subject to our distributable reserves and solvency requirements.
Any determination to pay dividends, adopt share repurchase programs or otherwise remunerate shareholders in the future will be at the discretion of our board of directors (as to interim dividends) and at the discretion of the shareholders at the annual general meeting (the "AGM") upon recommendation of the board of directors (as to annual dividends or share repurchases) and will depend upon our results of operations, financial condition, distributable reserves, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors and the shareholders at the AGM, respectively, deem relevant.
We are not required to pay dividends on our shares or otherwise remunerate shareholders and holders of our shares have no recourse if dividends are not declared. Our ability to pay dividends or otherwise remunerate shareholders may be further restricted by the terms of any of our existing and future debt or preferred securities. Additionally, because we are a holding company, our ability to pay dividends on our shares is limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us, including restrictions on our ability to repatriate funds and under the terms of the agreements governing our indebtedness.
We have adopted, and may in the future adopt, share repurchase programs under which we are authorized to repurchase our shares or shares represented by Swedish Depository Receipts ("SDRs"). However, there can be no assurance that any future share repurchase program will be fully consummated. The amount, timing and execution of any share repurchase program may fluctuate based on our priorities for the use of cash or as a result of changes in cash flows, tax laws, and the market price of our shares or SDRs. Any reduction or discontinuance by us of dividend payments or repurchases of our shares, including shares represented by SDRs, may cause the market price of our shares or SDRs to decline.
4.Risks related to share ownership, governance practices and registration with the SEC
a.Share price, trading volume and market volatility
The price of our common shares might fluctuate significantly, and you could lose all or part of your investment.
Volatility in the market price of our common shares may prevent you from being able to sell our common shares at or above the price at which you purchased such shares. The trading price of our common shares has been and may in the future be volatile and subject to wide price fluctuations in response to various factors, including:
•market conditions in the broader stock market in general, or in our industry in particular;
•actual or anticipated fluctuations in our financial and operating results;
•introduction of new products and services by us or our competitors;
•entry to new markets or exit from existing markets;
•issuance of new or changed securities analysts’ reports or recommendations;
•sales of large blocks of our shares;
•additions or departures of key personnel;
•regulatory developments; and
•litigation and governmental investigations or actions.
These and other factors may cause the market price and demand for our common shares to fluctuate substantially, which may limit or prevent investors from readily selling common shares and may otherwise negatively affect the liquidity of our common shares.
In addition, in the past, when the market price of a stock has been volatile, holders of that stock have often instituted securities class action litigation against the company that issued the stock. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.
An active trading market that will provide you with adequate liquidity may not develop.
As of December 31, 2021, approximately 91% of our issued and outstanding shares were in the form of SDRs listed on the NASDAQ exchange in Stockholm. We cannot predict the extent to which investors will convert SDRs into common shares or whether the relisting of our common shares on the Nasdaq Stock Market on January 9, 2019 will lead to the development of an active trading market in the U.S. or how liquid that market might become. If an active trading market does not develop in the U.S., you may have difficulty selling the common shares that you purchase, and the value of such shares might be materially impaired.
Future sales of our common shares, or the perception in the public markets that these sales may occur, may depress our share price and future sales of our common shares may be dilutive.
Sales of substantial amounts of our common shares in the public market, or the perception that these sales could occur, could adversely affect the price of our common shares and could impair our ability to raise capital through the sale of shares. In the future, we may issue our shares, among other reasons, if we need to raise capital or in connection with merger or acquisition activity. The amount of our common shares issued in connection with a capital raise or acquisition could constitute a material portion of our then-outstanding share capital. Sales of shares in the future may be at prices below prevailing market prices, thereby having a dilutive impact on existing holders and depressing the trading price of our common shares.
If securities or industry analysts in the United States do not publish research or reports or publish unfavorable research about our business, the price and trading volume of our common shares could decline.
The trading market for our common shares in the United States will depend in part on the research and reports that securities or industry analysts publish about us, our business or our industry. We may not have significant research coverage by securities and industry analysts in the United States. If no additional securities or industry analysts commence coverage of us, or if we fail to adequately engage with analysts or the investor community, the trading price for our shares could be negatively affected. In the event we obtain additional securities or industry analyst coverage in the United States, if one or more of the analysts who covers us downgrades our common shares, their price will likely decline. If one or more of these analysts, or those who currently cover us, ceases to cover us or fails to publish regular reports on us, interest in the purchase of our shares could decrease, which could cause the price or trading volume of our common shares to decline.
b.Legal and regulatory compliance and burden
The obligations associated with being a public company in the United States require significant resources and management attention.
As a public company in the United States, we incur legal, accounting and other expenses that we did not previously incur. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act, the listing requirements of the Nasdaq Stock Market and other applicable securities rules and regulations. The Exchange Act requires that we file annual and current reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting.
Furthermore, the need to establish and maintain the corporate infrastructure demanded of a U.S. public company may divert management’s attention from implementing our strategy. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems in order to meet our reporting obligations as a U.S. public company. However, the measures we take may not be sufficient to satisfy these obligations. In addition, compliance with these rules and regulations has increased our legal and financial compliance costs and has made some activities more time-consuming. For example, these rules and regulations make it more expensive for us to obtain director and officer liability insurance.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for U.S. public companies. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us.
We are a foreign private issuer and, as a result, are not subject to U.S. proxy rules but are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. issuer.
We report under the Exchange Act as a non-U.S. company with “foreign private issuer” status, as such term is defined in Rule 3b-4 under the Exchange Act. Because we qualify as a foreign private issuer under the Exchange Act and although we follow Luxembourg laws and regulations with regard to such matters, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. public companies, including:
(i)the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
(ii)the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
(iii)the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events.
Foreign private issuers are required to file their annual report on Form 20-F by 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material
information. As a result of the above, even though we are contractually obligated and intend to make interim reports available to our shareholders, copies of which we are required to furnish to the SEC on a Form 6-K, and even though we are required to file reports on Form 6-K disclosing whatever information we have made or are required to make public pursuant to Luxembourg law or distribute to our shareholders and that is material to our company, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.
If we fail to maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence in our company and the market price of our shares may be adversely affected.
We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act, adopted rules requiring every public company to include in its annual report a management report on such company’s internal control over financial reporting containing management’s assessment of the effectiveness of its internal control over financial reporting. In addition, an independent registered public accounting firm must attest to and report on the effectiveness of such company’s internal control over financial reporting except where the company is a non-accelerated filer. We currently are a large accelerated filer.
Our management has concluded that our internal control over financial reporting was effective as of December 31, 2021. See “Item 15. Controls and Procedures—A. Disclosure Controls and Procedures.” Our independent registered public accounting firm has issued an attestation report as of December 31, 2021. See “Item 15. Controls and Procedures—C. Attestation Report of Independent Registered Public Accounting Firm.” However, if we fail to maintain effective internal control over financial reporting in the future, our management and our independent registered public accounting firm may not be able to conclude that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. Furthermore, we have incurred and anticipate that we will continue to incur considerable costs, management time and other resources in an effort to continue to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As a foreign private issuer, we are not required to comply with the same periodic disclosure and current reporting requirements of the Exchange Act, and related rules and regulations, that apply to U.S. domestic issuers. Under Rule 3b-4 of the Exchange Act, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, we will make the next determination with respect to our foreign private issuer status based on information as of June 30, 2022.
In the future, we could lose our foreign private issuer status if, for example, a majority of our voting power were held by U.S. citizens or residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a domestic issuer may be significantly higher.
If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We will also be required to comply with U.S. federal proxy requirements, and our officers, directors and controlling shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. We may also be required to modify certain of our policies to comply with good governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.
c.Shareholder protection
MIC S.A. is incorporated in Luxembourg, and Luxembourg law differs from U.S. law and may afford less protection to holders of our shares.
The Company is incorporated under and subject to Luxembourg laws. Luxembourg laws may differ in some material respects from laws generally applicable to U.S. corporations and shareholders, including the
provisions relating to interested directors, mergers, sales, amalgamations and acquisitions, takeovers, shareholder lawsuits and indemnification of directors. Luxembourg laws governing the shares of Luxembourg companies may not be as extensive as those in effect in the United States, and Luxembourg law and regulations in respect of corporate governance matters might not be as protective of shareholders as state corporation laws in the United States. Therefore, our shareholders may have more difficulty in protecting their interests in connection with actions taken by our directors and officers or our principal shareholders than they would as shareholders of a corporation incorporated in the United States. For example, neither our articles of association, as amended and restated (the "Articles of Association") nor Luxembourg law provides for appraisal rights for dissenting shareholders in certain extraordinary corporate transactions that may otherwise be available to shareholders under certain U.S. state laws.
In addition, under Luxembourg law, by contrast to the laws generally applicable to U.S. corporations, the duties of directors of a company are in principle owed to the company only, rather than to its shareholders. It is possible that a company may have interests that are different from the interests of its shareholders. Shareholders of Luxembourg companies generally do not have rights to take action themselves against directors or officers of the company. Directors or officers of a Luxembourg company must, in exercising their powers and performing their duties, act in good faith and in the interests of the company as a whole and must exercise due care, skill and diligence.
Directors have a duty to disclose any personal interest in any contract or arrangement with the company in case such interest would constitute a conflict of interest. If any director has a direct or indirect financial interest in a matter which has to be considered by the board of directors which conflicts with the interests of the company, Luxembourg law provides that such director will not be entitled to take part in the relevant deliberations or exercise his or her vote with respect to the approval of such transaction. If the interest of such director does not conflict with the interests of the company, then the applicable director with such interest may participate in deliberations on, and vote on the approval of, that transaction. If a director of a Luxembourg company is found to have breached his or her duties to that company, he or she may be held personally liable to the company in respect of that breach of duty. A director may, in addition, be jointly and severally liable with other directors implicated in the same breach of duty.
The ability of investors to enforce civil liabilities under U.S. securities laws may be limited.
MIC S.A. is a Luxembourg public limited liability company (société anonyme) and some of its directors and executive officers are residents of countries other than the United States. Most of the Company’s assets and the assets of some of its directors and executive officers are located outside the United States. As a result, it may not be possible for investors in our securities to effect service of process within the United States upon such persons or the Company or to enforce in U.S. courts or outside the United States judgments obtained against such persons or the Company. In addition, it may be difficult for investors to enforce, in original actions brought in courts in jurisdictions located outside the United States, liabilities predicated upon the civil liability provisions of U.S. securities laws.
We have been advised by our Luxembourg counsel, Hogan Lovells (Luxembourg) LLP that the United States and Luxembourg do not have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a judgment for the payment of money rendered by a U.S. federal or state court will only be recognized and enforced against MIC S.A. by a court in Luxembourg without re-examination of the merits of the case if it is a final judgment which is not subject to appeal or any other means of contestation, and if it complies with the applicable enforcement procedure (exequatur) conditions. As set out in the relevant provisions of the Luxembourg New Code of Civil Procedure (Nouveau Code de Procédure Civile) and Luxembourg case law, these conditions are:
(i)the foreign court awarding the international judgment has jurisdiction to adjudicate the respective matter under applicable foreign rules of the forum, and such jurisdiction is recognized by Luxembourg private international law;
(ii)the foreign judgment is enforceable in the foreign jurisdiction;
(iii)the foreign court has applied the substantive law as designated by the Luxembourg conflict of laws rules, or, at least, the order must not contravene the principles underlying these rules (however, based on case law (T.A. Luxembourg, 10 January 2008, no 111736) as well as legal doctrine, it is not certain that this condition would still be required for an exequatur to be granted by a Luxembourg court);
(iv)the foreign court has acted in accordance with its own procedural laws;
(v)the judgment was granted following proceedings where the counterparty had the opportunity to appear, and if appeared, to present a defense; and
(vi)the foreign judgment does not contravene international public policy (ordre public international) as understood under the laws of Luxembourg.
d.Corporate governance practices
As a foreign private issuer and as permitted by the listing requirements of the Nasdaq, we may rely on certain home country governance practices rather than the Nasdaq corporate governance requirements.
As a foreign private issuer and in accordance with Nasdaq Listing Rule 5615(a)(3), we may comply with home country governance requirements and certain exemptions thereunder rather than complying with certain of the corporate governance requirements of Nasdaq. For more information regarding the Nasdaq corporate governance requirements in lieu of which we follow home country corporate governance practices, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Nasdaq corporate governance exemptions.”
Luxembourg law does not require that a majority of our board of directors consists of independent directors. While we currently have a board of directors that is independent of the Company (i.e., the board members are not members of management or employees of the Company), our board of directors may in the future include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we are not subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors regularly have scheduled meetings at which only independent directors are present.
Similarly, we have adopted a compensation committee, but Luxembourg law does not require that we adopt a compensation committee or that such committee be fully independent. As a result, our practice may vary from the requirements of Nasdaq Listing Rule 5605(d), which sets forth certain requirements as to the responsibilities, composition and independence of compensation committees. Luxembourg law does not require that we disclose information regarding third-party compensation of our directors or director nominees. As a result, our practice varies from the third-party compensation disclosure requirements of Nasdaq Listing Rule 5250(b)(3).
In addition, as permitted by home country practice and as included in our Articles of Association, our nomination committee is appointed by the major shareholders of MIC S.A. and is not a committee of the MIC S.A. board of directors. Our practice therefore may vary from the independent director oversight of director nominations requirements of Nasdaq Listing Rule 5605(e).
Furthermore, our Articles of Association do not provide any quorum requirement that is generally applicable to general meetings of our shareholders (other than in respect of general meetings convened for the first time in relation to amendments to the Articles of Association). This absence of a quorum requirement is in accordance with Luxembourg law and generally accepted business practice in Luxembourg. This practice differs from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock. In addition, we may opt out of shareholder approval requirements for the issuance of securities in connection with certain events such as the acquisition of stock or assets of another company, the establishment of or amendments to equity-based compensation plans for employees, a change of control of us and certain private placements. To this extent, our practice will vary from the requirements of Nasdaq Listing Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
The Company’s legal name is Millicom International Cellular S.A. ("MIC S.A." or "the Company"). The Company uses the Tigo brand in all of the countries in which we do business. MIC S.A. is a public limited liability company (société anonyme), organized and established under the laws of the Grand Duchy of Luxembourg on June 16, 1992. The Company’s address is: 2, Rue du Fort Bourbon, L-1249 Luxembourg, Grand Duchy of Luxembourg. The Company’s telephone number for the Head of Financial Reporting is: +352 27 759 018. The Company’s U.S. agent is: CT Corporation, 111 Eighth Avenue, 13th Floor, New York, New York 10011, United States.
MIC S.A. was formed in December 1990 when Kinnevik AB ("Kinnevik"), formerly named Industriförvaltnings AB Kinnevik, a company established in Sweden, and Millicom Incorporated, a corporation established in the United States, contributed their respective interests in international mobile joint ventures to form MIC S.A.
See “Item 4. Information on the Company—B. Business Overview” for historical information regarding the development of our principal business segments in our geographic markets. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital expenditures” for a description of our capital expenditures.
The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov. The Company’s website address is www.millicom.com. The information contained on, or that can be accessed through, the Company’s website is not part of, and is not incorporated into, this Annual Report.
B. Business Overview
Introduction
We are a leading provider of cable and mobile services dedicated to emerging markets. Through our main brands Tigo® and Tigo Business™, we provide a wide range of digital services in nine countries in Latin America and one country in Africa, including high-speed data, cable TV, direct-to-home satellite TV (“DTH” and when we refer to DTH together with cable TV, we use the term “pay-TV”), mobile voice, mobile data, SMS, MFS, fixed voice, and business solutions including value-added services (“VAS”). We provide services on both a business-to-consumer (“B2C”) and a business-to-business (“B2B”) basis, and we have used the Tigo brand in all our markets since 2004.
We offer the following principal categories of services:
•Mobile, including mobile data, mobile voice, and MFS to consumer, business and government customers;
•Cable and other fixed services, including broadband, pay-TV, content, and fixed voice services for residential (Home) customers, as well as voice, data and VAS and solutions to business and government customers.
In Latin America, our principal region, we provide both mobile and cable services in eight countries: Bolivia, Colombia, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Paraguay. In addition, we provide cable services in Costa Rica. In Africa, we provide mobile services in Tanzania. On April 19, 2021, we announced the signing of an agreement for the sale of our operations in Tanzania to a consortium led by Axian, the completion of which remains subject to regulatory approvals. In 2019, we completed the sale of our operations in Chad and in 2021, we completed the disposal of our Ghana joint venture with Bharti Airtel. These divestitures are part of a broader effort by us in recent years to improve our financial performance and better invest capital, including by selling underperforming businesses in our Africa segment, which has historically produced lower returns on capital than our Latin America segment.
We conduct our operations through local holding and operating entities in various countries, which are either our subsidiaries (in which we are the sole shareholder or the controlling shareholder) or joint ventures with our local partners. For further details, see note A to our consolidated financial statements. In this Annual Report, our description of our operations includes the operations of all of these subsidiaries and joint ventures.
As of December 31, 2021, we provided services to 53.3 million mobile customers, including 21.1 million 4G customers, which we define as customers who have a data plan and use a smartphone to access our 4G network. As of that date, we also had 4.7 million customer relationships with a subscription to at least one of our fixed services. This includes 4.0 million customer relationships on our HFC networks and 0.5 million DTH subscribers. The majority of the remaining customer relationships are served by our legacy copper network.
For the year ended December 31, 2021, our revenue was $4,617 million and our net profit was $542 million. We had approximately 21,000 employees located in Latin America and Africa, including our Honduras joint venture.
Our strategy
Underpinning our strategy is management’s assessment that penetration rates for both mobile and fixed broadband services in our markets are low relative to penetration rates in other markets globally, and that these have potential to increase over time. Based on our own subscriber data of mobile broadband penetration rates, as measured by the number of subscribers who use a smartphone to access mobile data services on 4G networks, were approximately 27% in Nicaragua, 43% in Guatemala , 47% in Honduras, 48% in Colombia,51% in El Salvador, 55% in Paraguay, 60% in Panama and 64% in Bolivia as of December 31, 2021. Based on our own customer data and market intelligence, fixed broadband penetration rates, as measured by the number of residential broadband customers as a percentage of households in the country, were approximately 61% in Costa Rica, 45% in Panama, 38% in El Salvador, 35% in Colombia, 31% in Bolivia, 30% in Paraguay, 25% in Guatemala, 24% in Nicaragua and 22% in Honduras as of December 31, 2021. Pay-TV penetration rates, as measured by the number of pay-TV customers, including DTH, as a percentage of households in the country, were approximately 49% in Costa Rica, 41% in Guatemala, 41% in Colombia, 40% in Panama, 39% in El Salvador, 36% in Paraguay, 33% in Honduras, 31% in Nicaragua and 22% in Bolivia as of December 31, 2021. Based on the expectation that mobile and fixed broadband penetration rates in our markets will gradually rise over time, management has defined an operational strategy based on the following six principal pillars.
Expand Broadband
We are moving quickly to meet the growing demand for high-speed data from residential and business customers alike in our Latin American markets. We are doing this by:
• Expanding our HFC and FTTH networks: We are rapidly deploying our fixed broadband networks, and we complement our organic network build-out with small, targeted acquisitions.
• Increasing our commercial efforts to fill the broadband networks: As we expand the networks, we also deploy commercial resources necessary to begin monetizing our investment by marketing our services to new potential customers. In addition, our fixed broadband networks allow us to sell additional services to existing customers that drive ARPU growth over time.
• Product innovation: We drive customer adoption by expanding our range of digital services and aggregating third-party content, as well as some exclusive local and international content, enabling us to differentiate ourselves from our competitors. For example, we have agreements with local soccer teams, leagues and sports channels in Bolivia, Costa Rica, El Salvador, Guatemala, Honduras, Paraguay and Panama to air matches on our pay-TV channels. We are committed to bringing the best content to our customers, and for that we partner with various players in the ecosystem, from studios to Over-the-Top providers (“OTTs”) and sports industry players.
Our cable network deployment is also critical to help prepare the company for convergence of fixed and mobile networks and services, a trend we expect will accelerate with the deployment of 5G technology in the future.
Monetize Mobile Data
Our mobile networks continue to experience rapid data traffic growth, and we are very focused on making sure that incremental traffic translates into additional revenues. Our mobile data monetization strategy is built around several key drivers:
• 4G/LTE network expansion: Our 4G networks enable us to deliver high volumes of data at faster speeds in a more cost-efficient manner than with 3G networks. As of December 31, 2021, our 4G networks covered approximately 78% of the population in our markets, a significant increase from coverage of approximately 65% as of December 31, 2018.
• Smartphone adoption: More data-capable smartphone devices, particularly 4G/LTE, with a strong device portfolio and strategy to enable our customers to use data services on the move.
• Stimulating data usage: More compelling data-centric products and services to encourage our consumers to consume more data, while maintaining price discipline.
Drive Convergence
Millicom has evolved from a traditional mobile operator to a provider of a comprehensive range of services through fixed line, mobile and MFS platforms.
Convergence allows us to leverage our existing tangible and intangible assets, such as our network, our brand, and our local talent and market knowledge, to capture business synergies, generate new revenue streams from existing customers, attract new customers and reduce overall churn. Our focus on convergence also reflects our expectation that future network deployments, such as 5G, will require significant fiber network capacity and capillarity, as well as the spectrum, radio and other components of today's mobile network.
Accelerate B2B
The expansion of our fixed broadband networks as well as the development of state-of-the-art data centers, analytics, cloud and cybersecurity services is also creating new opportunities for us to target business customers by offering a more complete suite of information and communications technology (“ICT”) services. As of December 31, 2021, we had a total of 13 data centers across our Latin America footprint, including 9 data centers which are certified according to international standards.
Our strategy is to selectively evolve our portfolio into ICT-managed services to avoid excessive fragmentation and operational risk, while building the Tigo Business brand and differentiating ourselves through our service model and frontline execution. We believe that the small and medium-size business (“SMB”) segment represents a particularly attractive opportunity for growth, as SMBs digitize their business and operations using digital communications, and implement cloud and data center solutions in line with what we see in more developed markets.
Go Digital
We are focusing on transforming and evolving our customer experience and operations through the digital innovation of products and channels to empower our customers to do everything digital first with the variety of offerings that is available in our digital ecosystem: Mi Tigo, Tigo Money, Mi Tienda, eCare, ONEtv, TigoSports and others.
Through Tigo ONEtv, our next-generation user experience platform, we provide an advanced pay-TV entertainment experience for our customers, with sophisticated personalization options and recommendations, seamless integration of content across linear and on-demand offerings, and robust multi-screen capabilities. We also provide a valuable digital user experience through our Mi Tigo App for prepaid, postpaid and home customers, and our Tigo Money app for mobile financial services. Our focus remains firmly set on not only driving the adoption and enjoyment of these digital channels by our customers, but also developing and empowering our customers with Mi Tienda and eCare to increase productivity and customer satisfaction through a user-friendly experience.
We are evolving our commercial distribution network to operate digitally, which we believe will improve both customer experience and operational efficiency. To enable a seamless and integrated experience across sales and care touchpoints, we are implementing a business transformation that interlinks user experience, digital innovation, business processes, and our back-end ICT systems.
Customer Centricity
We are committed to providing the best customer service and experience possible in all of our markets. We have placed customer experience at the center of our decision-making as we continue to innovate across business lines and countries. Our focus has been simplifying how customers interact with us by implementing integrated, digital-first customer service channels.
To ensure we continue to improve our service quality, and being mindful of evolving customer demands, we use a variety of tools including customer engagement, local and regional trends, and consumption patterns to identify and improve access channels.
We have also adopted and deployed a net promoter score (“NPS”) program, designed to strengthen our customer-centric culture, and NPS is one of the metrics used to measure management performance under our incentive compensation plan.
Our targets
Accelerate cash flow growth. To provide more flexibility in our operations and improve our ability to service our debt, we are targeting steady growth in our Organic Operating Cash Flow over the medium-term by generating consistent annual organic service revenue growth and having stable annual capital expenditure. Organic Operating Cash Flows is a non-IFRS measure defined as operating profit excluding impairment losses, depreciation and amortization and gains and losses on fixed asset disposals, less capital expenditures, not adjusted for the impact of changes in foreign exchange rates, perimeter and accounting.
Reduce net leverage. Based on our goal to increase Organic Operating Cash Flow over the medium-term, we have a related goal of reducing our net leverage ratio.
Expand the Company’s fixed broadband network. In connection with the rapid deployment of our broadband networks, our goal is to pass an additional three million homes over the next three years. We expect that a majority of these passings would occur in our FTTH networks, as we are actively working to accelerate the ongoing transition to FTTH services. In the medium term, our target is to pass approximately 20 million homes on our broadband networks. We also aim to add over one million customer relationship net additions in the next three years.
Create separate organizations for Towers and Tigo Money. Subject to regulatory and other necessary approvals, our goal is to re-organize the Company’s more than 10,000 cellular towers under a new organizational structure within the next two years. We also plan to create a new organizational structure for our Tigo Money business within the next two years. Our towers business and Tigo Money are strategic assets that are not core to our connectivity business, and we believe that this structural re-organization will facilitate the attraction of growth capital and enhance strategic optionality for these assets.
Set ambitious ESG standards. Our goal is to raise the bar on the company’s contribution on environmental, societal and governance matters. In particular, we have submitted for validation science-based targets in line with the Paris Climate Agreement and set a long-term goal of net zero emissions by or before 2050. As a proud agent of positive change in our markets, we have also set a target of gender parity by 2030, which includes all levels of our organization and upper management positions.
Implement share buybacks consistent with our net leverage reduction targets. We expect to implement a new share buyback plan that is consistent with the achievement of our net leverage ratio reduction targets, with buybacks currently expected to commence in 2023.
These goals, targets and plans are forward-looking statements subject to risks and uncertainties, including those discussed in “ Item 3. Key Information—D. Risk Factors.” Moreover, these goals, targets and plans assume a stable operating environment in the markets in which we operate and that we do not engage in any strategic transactions that could require us to revise our goals and targets or plans. Finally, there can be no guarantee that we achieve these goal or targets, or implement these plans, in the timeframes indicated or at all.
Our services
Our services are organized into two principal categories: Mobile and Cable and other fixed services. In addition, we sell telephone and other equipment, comprised mostly of mobile handsets.
Mobile
In our Mobile category, we provide mobile services, including mobile data, mobile voice, SMS and MFS, to consumers, business, and government. Mobile is the largest part of our business and generated 54% of consolidated service revenue (and 59% of our Latin America segment service revenue) for the year ended December 31, 2021 and 53% of our consolidated service revenue (and 60% of our Latin America segment service revenue) for the year ended December 31, 2020.
We provide Mobile services in every country where we operate, except Costa Rica. As of December 31, 2021, we had a total of 53.3 million Mobile customers (including 13.5 million in Africa).
Mobile data, mobile voice and SMS
We provide our mobile data, mobile voice and SMS services through 2G, 3G and 4G networks in all our mobile markets. 4G is the fourth generation of mobile technology, succeeding 3G, and it is based on Internet Protocol (IP) technology, as opposed to prior generations of mobile communications which were based on and supported circuit-switched telephone service. Our 4G networks enable us to offer services to our customers such as video calls and mobile broadband data with richer mobile content, such as live video streaming.
The mobile market has been evolving, with consumption shifting significantly in recent years from voice and SMS to data. Our ongoing deployment of 4G networks and industry planning for the future deployment of 5G further support this evolution to more data-centric usage.
We provide our mobile data, mobile voice and SMS services on both prepaid and postpaid bases. In prepaid, customers pay for service in advance through the purchase of limited-duration data packages, and they do not sign service contracts. Among various options that our customers can choose from, we offer packages that typically begin with a data allowance, and include a combination of voice minutes and SMS, with expiration dates varying in length from one or more days, up to a few weeks or months. In postpaid, customers pay recurring monthly fees for the right to consume up to a predetermined maximum amount of monthly data, voice usage and SMS. In most cases, new postpaid customers sign a service contract with a typical length of one year.
MFS
We provide a broad range of mobile financial services such as payments, money transfers, international remittances, savings, real-time loans and micro-insurance for critical needs through our MFS App, Tigo Money. Tigo Money allows our customers to send and receive money, without the need for a bank account. As of December 31, 2021, we provided MFS to 11.7 million Tigo and non-Tigo customers. 19.8% of our mobile customer handset base were Tigo Money users as of December 31, 2021. As of December 31, 2021, 70% of our total Tigo Money customers were in Tanzania (including Zantel). Tigo Money is a growing business in our markets. It complements our Mobile and Cable product offering and increases customer satisfaction and loyalty, increasing ARPU and reducing customer churn. We are currently in the process of separating our Tigo Money business from our core telecommunications service operations in order to facilitate the development of new financial and strategic partnerships aimed at accelerating Tigo Money's growth and enhancing its value creation potential.
Cable and other fixed services
In our Cable and other fixed services category, we provide fixed services, including broadband, fixed voice and pay-TV, to residential (Home) consumers and to government and business (B2B) customers. Cable and other fixed services generated 45% of our consolidated service revenue (and 40% of our Latin America segment revenue) for the year ended December 31, 2021 and 45% of our consolidated service revenue (and 39% of our Latin America segment service revenue) for the year ended December 31, 2020.
Home
Our fixed-service residential customers (a “customer relationship”) generate revenue for us by purchasing one or more of our three fixed services, pay-TV, fixed broadband, and fixed telephony. We refer to each service that a customer purchases as a revenue generating unit (“RGU”), such that a single customer relationship can have up to three RGUs in countries where we are permitted to sell all three services.
We provide Home services mainly over our HFC and FTTH networks, but we also offer pay-TV services via our DTH platform and broadband services using FWA and copper-based technologies in some markets. Although most of our customers currently choose to receive broadband speeds on average of 60 Gbps, the HFC networks we are rolling out are based on DOCSIS 3.0 and allow us to offer speeds of up to 400 Mbps on our current infrastructure, which gives us scope to significantly raise our customers’ broadband speeds over time. As we retire analog channels over time, our HFC network infrastructure allows us to offer faster speeds. We have rolled out DOCSIS 3.1 in some markets, which allows us to offer speeds of up to 1 Gbps. We have also begun to deploy FTTH in some markets as part of our greenfield fixed-network expansion, and we include FTTH network and customer metrics as a subset of our HFC network and customer metrics.
In Latin America, we provide Home services in every country where we operate. As of December 31, 2021, we had 4.9 million customer relationships, of which 4.1 million were connected to our HFC and FTTH networks, and we had 9.6 million RGUs, including 3.8 million broadband RGUs on our networks. We do not provide Home services in Africa.
We provide our Home services on a postpaid basis, with customers paying recurring monthly subscription fees. In most markets, we offer bundled fixed services, such as our triple-play offering of pay-TV, broadband internet and, where possible, fixed telephone. On average, our Home customers typically contract more than one fixed service from us. In
some markets, we also market our services on a convergent basis, bundling both fixed and mobile services, to a very small portion of our total customer base.
B2B fixed
We offer fixed-voice and data telecommunications services, managed services and cloud and security solutions to small, medium and large businesses and governmental entities. We offer B2B fixed services in all of the markets in which we operate, both in Latin America and in Africa.
We believe that B2B fixed provides a significant growth opportunity for Millicom driven by the changes in working habits and business models. These changes are creating additional growth opportunities through the adoption of cloud information technology, security and new software defined networks. We expect that the ongoing expansion of our fixed broadband networks in Latin America will help to make us more competitive and increase our share of the B2B fixed market over time. In addition, as we expand our fixed networks throughout our markets, we can better compete for large enterprise and government contracts that typically require a national presence, and we will be better placed to offer fixed, mobile and other value-added services, such as cloud-based services and data center capacity. We already see evidence of this in Colombia and Panama, where we have more extensive fixed networks than in our other markets, and where the proportion of revenue we generate from B2B fixed is significantly larger than in our other Latin American countries.
We have already deployed approximately 180,000 kilometers of fiber in our Latin American markets, and we are expanding our product portfolio to deliver more VAS and business solutions, such as cloud-based services and ICT managed services. In 2019, we inaugurated a new Tier 3 certified data center in Honduras, which further strengthened our ability to better serve SMBs and large enterprise customers that require robust infrastructure and redundancy to achieve their own operational efficiency goals and meet business continuity needs. We have also established partnerships in the area of hypercloud, virtualization and Internet of Things, to capture the growth in the adoption of these technologies and help our customers accelerate their digital transformations.
Our markets
Overview
The Millicom Group’s risks and rates of return for its operations are predominantly affected by operating in different geographical regions. We have businesses in two regions: Latin America and Africa, which constitute our two segments. Latin America segment figures include our Honduras joint venture as if it were 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. Latin America figures also include our operations in Guatemala. 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 them using the equity method of accounting and as a joint venture, along with our operations in Honduras. Prior to its disposal in October 2021, we excluded the Ghana joint venture from the Africa operational data because, unlike our other joint ventures, we did not consider it a strategic part of our Group. Financial data is presented either at a consolidated level or at a segmental level, as derived from our financial statements, including the notes thereto. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Our segments.”
• Latin America. The Latin American markets we serve are Bolivia, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Paraguay. We provide Mobile services in each of our Latin American markets, except for Costa Rica, and we provide Cable and other fixed services in each of our Latin American markets.
• Africa. The only African market we serve is Tanzania, in which we provide Mobile and B2B. We do not provide Cable and other fixed services in our African market.
Latin America
For the years ended December 31, 2021 and 2020, revenue generated by our Latin America segment was $6,220 million and $5,843 million, respectively.
We provide mobile services in eight countries in Latin America. As of December 31, 2021, we had a total of 44.9 million Mobile customers, a 7.5% increase from December 31, 2020 mainly due to new customers as we have recently upgraded our networks in several countries including Colombia, El Salvador, Panama and Nicaragua.
As of December 31, 2021, our Cable business had a network that passed 12.7 million homes and had 4.9 million customer relationships in Latin America, a 7.7% increase from December 31, 2020 mainly due to increased demand for broadband services.
An important recent trend in the Latin American telecommunications market has been the growth in fixed broadband penetration. We have significantly increased the coverage of our fixed networks largely in response to demand for high-speed fixed broadband services. As of December 31, 2021, our HFC and FTTH networks passed 12.4 million homes, a 4.4% increase from December 31, 2020 (11.9 million), and had 4.1 million customer relationships, an 11.1% increase from December 31, 2020.
The following chart shows the relative revenue generation of each country in our Latin America segment for 2021:
The Millicom Group’s Latin America Mobile, Broadband, and Pay-TV Operations(1)_______________
(1) The data presented here is based on subscriber numbers as of December 31, 2021 and reflects the Millicom Group’s experience and our investigation of market conditions. The number of market players in each country reflects only large national network operators and excludes smaller players, and Millicom's position is based on total market share by subscribers. The Millicom Group has minority partners in Colombia (50%), Honduras (33%), and Panama (20%).
Bolivia
We provide Mobile and Cable and other fixed services through Telefónica Celular de Bolivia S.A., which is wholly owned by the Millicom Group. We have operated in Bolivia since 1991.
Mobile: As of December 31, 2021, we served 4.1 million subscribers and were the second largest provider of Mobile services in Bolivia, as measured by total subscribers.
Cable and other fixed: As of December 31, 2021, we were the largest provider of broadband and pay-TV services in Bolivia, as measured by subscribers, and we had 676,000 customer relationships. We offer broadband services through HFC, and we provide pay-TV primarily through HFC and DTH in Bolivia.
Colombia
We provide Mobile and Cable and other fixed services in Colombia through UNE, in which we own a 50% plus one voting share interest and Colombia Móvil S.A., which is a wholly owned subsidiary of UNE. We have operated in Colombia through Colombia Móvil S.A. since 2006 and acquired our interest in UNE, with which we had previously co-owned Colombia Móvil S.A., via a merger in 2014. On May 25, 2021, our minority partner in Colombia, EPM, announced that it intends to pursue a potential sale of its stake in our Colombian operations. If approved by the Medellin town council, the sale process would begin, following the rules prescribed under Colombia's Law 226 and as dictated by our shareholder agreement.
Mobile: As of December 31, 2021, we served 11.3 million subscribers and were the third largest provider of Mobile services in Colombia, as measured by subscribers.
Cable and other fixed services: Tigo is one of the principal digital cable operators in Colombia. As of December 31, 2021, we were the second largest provider of pay-TV and broadband internet services in Colombia, as measured by subscribers, with 1.8 million customer relationships. We have been investing to expand the reach of our fixed network and to upgrade our copper network to HFC and FTTH. By extending the reach of our HFC and FTTH networks in areas historically served by our copper network, we can gradually migrate our copper customers onto these new networks, thus significantly enhancing the customer experience by expanding the range of products and services they can choose from, including the availability of faster broadband speeds. In Colombia, we also use DTH to provide pay-TV services to customers located outside of our HFC and FTTH network coverage area.
Costa Rica
We provide Cable and other fixed services in Costa Rica through Millicom Cable Costa Rica S.A. ("Millicom Costa Rica"), which is wholly owned by the Millicom Group. We have operated in Costa Rica since our acquisition of Amnet in 2008. Amnet and its predecessor companies began operating in Costa Rica in 1982, and the company was the first to provide pay-TV services in the country.
Cable and other fixed services: As of December 31, 2021, we had 249 thousand customer relationships and we were the second largest provider of pay-TV and the third largest provider of broadband internet services in Costa Rica, as measured by subscribers.
El Salvador
We provide Mobile and Cable and other fixed services in El Salvador through Telemóvil El Salvador, S.A. de C.V. (“Telemóvil”), which is wholly owned by the Millicom Group. We have operated in El Salvador since 1993.
Mobile: As of December 31, 2021, we served 2.9 million subscribers and were the largest provider of Mobile services in El Salvador as measured by subscribers.
Cable and other fixed services: Telemóvil is a leading cable operator in El Salvador. As of December 31, 2021, we were the second largest provider of pay-TV and the second largest provider of broadband internet services, as measured by subscribers, with a total of 288,000 customer relationships.
Guatemala
We provide Mobile and Cable and other fixed services in Guatemala, principally through Comunicaciones Celulares S.A. On November 12, 2021, we signed and closed an agreement to acquire the remaining 45% equity interest in Comcel and the other entities that operate our Guatemala business from our local partner. As a result, Millicom owns a 100% equity interest in the entities that operate our Guatemala business and fully consolidates them since that date. See note
A.1.2. to our audited consolidated financial statements for additional details regarding this acquisition and the accounting treatment thereof. We have operated in Guatemala since 1990.
Mobile: As of December 31, 2021, we provided Mobile services to 11.8 million customers and were the largest provider of mobile services in Guatemala, as measured by subscribers.
Cable and other fixed services: As of December 31, 2021, we were the largest provider of pay-TV and broadband internet services in Guatemala, as measured by subscribers, and we served 675,000 customer relationships with both HFC network and DTH services.
Honduras
We provide Mobile and Cable and other fixed services in Honduras through Telefónica Celular S.A. de C.V. (“Celtel”), a joint venture in which the Millicom Group holds a 66.67% equity interest. The remaining 33.33% of Celtel is owned by our local partner. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results— Guatemala and Honduras joint ventures” for details regarding the accounting treatment of our Honduras operations. We have operated in Honduras since 1996.
Mobile: As of December 31, 2021, we served 5.1 million Mobile subscribers, and we were the largest provider of Mobile services, as measured by subscribers.
Cable and other fixed services: As of December 31, 2021, we were the largest provider of pay-TV and broadband internet services, as measured by subscribers, with 188,000 customer relationships. We offer triple-play services (cable TV, internet and fixed telephone) using our HFC network in Honduras, and we also offer DTH, expanding the reach of our pay-TV offering to areas not covered by our HFC network. We continue to invest to expand and upgrade the capacity of our HFC network in Honduras.
Nicaragua
In 2019, we purchased Telefonía Celular de Nicaragua, S.A., the leading provider of Mobile services in the country, based on the number of subscribers. As of December 31, 2021, we served 3.8 million mobile subscribers.
Prior to 2019, we had a very small presence in Nicaragua, where we provided mostly B2B fixed services. Since 2018 we also provide Cable services to a small but rapidly growing customer base, and we are the third largest provider of pay-TV and the second largest provider of broadband services, as measured by subscribers.
Panama
We provide Mobile and Cable and other fixed services in Panama through Cable Onda, which is 80% owned by the Millicom Group with the remaining 20% owned by our local partners. We have operated in Panama since our acquisition of Cable Onda in December 2018. Cable Onda and its predecessor companies began operating in Panama in 1982, and the company was the first to provide pay-TV services in the country. In 2019, our Cable Onda subsidiary acquired Grupo de Comunicaciones Digitales S.A. (formerly Telefónica Móviles Panamá, S.A.) and started to provide Mobile services.
Mobile: As of December 31, 2021, we had 2.1 million Mobile subscribers, and we were the largest provider of Mobile services in Panama, as measured by total mobile subscribers.
Cable and other fixed services: As of December 31, 2021, we had 485,000 customer relationships and we were the largest provider of pay-TV and the largest provider of broadband internet services in Panama, as measured by subscribers.
Paraguay
We provide Mobile and Cable and other fixed services in Paraguay through various subsidiaries which are all wholly owned by the Millicom Group. Our largest subsidiary in Paraguay is Telefónica Celular del Paraguay S.A. ("Telecel"). We have operated in Paraguay since 1992.
Mobile: As of December 31, 2021, we had 3.9 million Mobile subscribers, and we were the largest provider of Mobile services in Paraguay, as measured by total mobile subscribers.
Cable and other fixed services: We are the largest provider of pay-TV and broadband internet services in Paraguay as measured by subscribers. As of December 31, 2021, we had 495,000 customer relationships with our HFC network, DTH, and, to a much lesser extent, other technologies. We offer pay-TV services primarily using our HFC network, and we use our DTH license to offer pay-TV in areas not reached by our HFC network. We offer residential broadband internet services mostly using our HFC network, but we also employ fixed wireless technology to provide service beyond the reach of our HFC network. We have exclusive rights to broadcast Paraguay’s national league championship games through 2023, and we have exclusive sponsorship rights in telecommunications for the Paraguayan National Soccer Team through 2023.
Africa
For the year ended December 31, 2021, the revenue generated by our Africa segment, which consists of our operations in Tanzania, was $356.6 million. For the year ended December 31, 2020, the revenue generated by our Africa segment was $366.5 million.
As of December 31, 2021, we had 13.5 million Mobile customers in Africa.
Tanzania
We provide mostly Mobile services in Tanzania primarily through MIC Tanzania plc ("Tigo Tanzania"), a 98.5% owned subsidiary of the Millicom Group. We have operated in Tanzania since 1994.
On October 22, 2015, we acquired 85% of Zanzibar Telecommunications Ltd ("Zantel"), a telecommunications provider operating mainly in Zanzibar, a semi-autonomous region of Tanzania. In 2019, we received approval to combine Tigo Tanzania and Zantel whereby Tigo Tanzania acquired 15% of the remaining shares in Zantel for consideration representing 1.5% of its own share capital. As a result, the Group's ownership in Tigo Tanzania reduced from 100% to 98.5%, and the Group's ownership in Zantel is 98.5% (indirectly).
The Tanzanian government has implemented 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. We are currently planning for the IPO of our Tanzanian operation pursuant to the legislation. We have filed a draft prospectus with the Tanzania Capital Market and Securities Authority and the Regulator has since requested that we retain an underwriter to ensure the success of the IPO. Together with its investment bank advisers, we are seeking an underwriter active in the Tanzanian and Eastern African markets, a process currently underway. The Group reached an agreement with the Tanzanian government that such public offering must take place before December 31, 2025 at the latest. There can be no guarantee if or when such IPO may occur, or the ownership share of our Tanzanian operation that we may sell in the IPO.
Mobile: As of December 31, 2021, Tigo Tanzania had 13.5 million subscribers, including Zantel, and we were the second largest mobile provider in Tanzania, as measured by subscribers.
Regulation
The licensing, construction, ownership and operation of cable TV and mobile telecommunications networks and the grant, maintenance and renewal of cable TV and mobile telecommunications licenses, as well as radio frequency allocations and interconnection arrangements, are regulated by different governmental authorities in each of the markets that Millicom serves. The regulatory regimes in the markets in which Millicom operates are less developed than in other countries such as the United States and countries in the European Union, and can therefore change quickly. See “Item 3. Key Information—D. Risk Factors—2. Risks related to Millicom's business in the markets in which it operates—F. Legal and regulatory—Developing legal systems in the countries in which we operate create a number of uncertainties for our businesses.”
Typically, Millicom’s cable and mobile operations are regulated by the government (e.g., a ministry of communications), an independent regulatory body or a combination of both. In all of the markets in which Millicom operates, there are ongoing discussions and consultation processes involving other operators and the governing authorities regarding issues such as mobile termination rates and other interconnection rates, universal service obligations, interconnection obligations, spectrum allocations, universal service funds and other industry levies and number portability. This list is not exhaustive; such ongoing discussions are a typical part of operating in a regulated environment.
Changes in regulation can sometimes impose new burdens on the telecommunications industry and have a material impact on our business and on our financial results. For example, regulators in our markets periodically require that we reduce the interconnection fees that we charge other telecom operators to terminate voice traffic on our network. At times, such measures can have a material adverse effect on our overall results of operation. For example, in Honduras, beginning in January 2019, mobile interconnection charges were reduced by 25%. Also in 2019, new regulation enacted in El Salvador regarding the rollover of voice and data traffic affected the Company's revenues. In 2020, in light of the COVID-19 pandemic, governments in several of our markets prohibited the disconnection of customers with past due accounts for an extended period, which impacted our revenues and collections.
The mobile services we provide require the use of spectrum, for which we have various licenses in each country where we provide mobile services. Spectrum licenses have expiration dates that typically range from 10 to 20 years. Historically, we have been able to renew our licenses upon expiration by agreeing to pay additional fees. We generally expect to continue to renew most of our current licenses as they expire, and we expect to acquire new spectrum licenses as they become available in the future.
The table below summarizes our most important current spectrum holdings by country for the Latin America region:
| | | | | | | | | | | | | | | | | | | | |
Country | | Spectrum | | Blocks | | Expiration date |
Bolivia | | 700MHz | | 2x12MHz | | 2028 |
Bolivia | | 850MHz | | 2x12.5MHz | | 2030 |
Bolivia | | AWS | | 2x15MHz | | 2028 |
Bolivia | | 1900MHz | | 2x10MHz | | 2028 |
Bolivia | | 27GHz | | 575Mhz | | 2031 |
Colombia | | 700MHz | | 2x20MHz | | 2040 |
Colombia | | AWS | | 2x15MHz | | 2023 |
Colombia | | 1900MHz | | 2x5MHz | | 2029 |
Colombia | | 1900MHz | | 2x20MHz | | 2023 |
El Salvador | | 850MHz | | 2x12.5MHz | | 2038 |
El Salvador | | AWS | | 2x25MHz | | 2040 |
El Salvador | | 1900MHz | | 2x5MHz | | 2041 |
El Salvador | | 1900MHz | | 2x5MHz | | 2028 |
Guatemala | | 850MHz | | 2x24MHz | | 2032 |
Guatemala | | 700MHz | | 2x5MHz | | 2033 |
Guatemala | | 700MHz | | 1x20MHz | | 2033 |
Guatemala | | 2600MHz | | 2x10MHz | | 2032 |
Guatemala | | 2600MHz | | 1x25MHz | | 2033 |
Guatemala | | 2600MHz | | 1x3.3MHz | | 2034 |
Guatemala | | 3500MHz | | 1x75MHz | | 2033 |
Guatemala | | 3500MHz | | 1x50MHz | | 2033 |
Honduras | | 850MHz | | 2x25MHz | | 2028 |
Honduras | | AWS | | 2x20MHz | | 2028 |
Nicaragua | | 700MHz | | 2x20MHz | | 2033 |
Nicaragua | | 850MHz | | 2x12.5MHz | | 2033 |
Nicaragua | | 1900MHz | | 2x30MHz | | 2033 |
Nicaragua | | AWS | | 2x20MHz | | 2033 |
Panama | | 700MHz | | 2x10MHz | | 2036 |
Panama | | 850MHz | | 2x12.5MHz | | 2036 |
Panama | | 1900MHz | | 2x10MHz | | 2036 |
Paraguay | | 850MHz | | 2x12.5MHz | | 2026 |
Paraguay | | 700MHz | | 2x15MHz | | 2023 |
Paraguay | | AWS | | 2x15Mz | | 2026 |
Paraguay | | 1900MHz | | 2x15MHz | | 2022 |
Paraguay | | 3500MHz | | 2x50MHz | | 2024 |
| | | | | | |
Below, we provide further regulatory details in respect of certain of our countries of operation in Latin America.
Bolivia: We hold a license to provide telecommunication services in Bolivia until 2051, mobile service authorization and spectrum licenses until 2030, and cable, VOIP and internet authorizations until 2028.
Colombia: Colombia Móvil has three separate nationwide spectrum licenses in the 1900 MHz band. In June 2013, Colombia Móvil, acquired spectrum in the AWS (1700/2100 MHz) band, which we use to offer 4G services. In order to reduce the cost and accelerate the deployment of the 4G network, we entered into a network sharing agreement with our competitor, Telefónica Colombia. Colombia Móvil also has an indefinite license (Habilitación General) that allows the company to offer several nationwide telecommunication services. In August 2019, the President of Colombia sanctioned the Law of Modernization of the Information Technology and Communications Sector which, among other changes, changed the duration of spectrum permits from 10 to 20 years. The Colombian government auctioned 700 MHz spectrum in 2020, and we obtained 2x20 MHz in this band, which was key for our business to compete effectively in the market. In 2023, our AWS and 1900 MHz spectrum licenses expire, and we and the broader industry are jointly discussing renewal terms with the government. In 2019, our cable TV license was successfully migrated to the indefinite license (Habilitación General) to provide telecommunication services in Colombia, in accordance with the new law.
Costa Rica: We hold a general license to provide telecommunication services which expires in 2024, and a spectrum permit to download content for cable TV services which expires in 2029.
El Salvador: In 2017 and 2018, Telemóvil successfully renewed all of its spectrum licenses. In December 2019, the regulator completed an auction for AWS spectrum in which we acquired 5 blocks totaling 2x25MHz of bandwidth.
Guatemala: Comcel operates a nationwide mobile network, and it holds spectrum licenses that begin to expire in 2032. In recent years, the regulator has discussed the possibility of auctioning additional spectrum and the government recently announced its intent to move forward with an auction in the 700MHz band during 2021, but specific plans have not yet been announced.
Honduras: Celtel has spectrum licenses in the 850 MHz and AWS bands, which expire in 2028. The Honduran government is planning an auction of multiband frequency spectrum in the 700 MHz and 3,500 MHz bands. The auction has been delayed several times since its approval in 2016, most recently due to the COVID-19 pandemic and now as result of the change of authorities given the introduction of a new government. The terms and conditions are still under review, but the auction could still take place during the first half of 2022.
Panama: We hold six telephone licenses that expire in 2022, two cable TV licenses that expire in 2024, a radio license that expires in 2025 and two commercial data transmission licenses and an Internet for public access license that expire in 2038. We own 2x32.5 MHz in line with the rest of market competitors in 700MHz, 850MHz and 1900MHz bands. During the onset of the COVID-19 pandemic, temporary spectrum licenses were assigned at no cost for all mobile operators. These were recently extended until April 2022. We have formally requested a price definition from the National Public Services Authority ("AESP") for the AWS band in order to acquire the spectrum and continue operating without any impact for our customers.
Paraguay: We own licenses in four bands of spectrum in Paraguay to provide mobile services, and these give us access to low, mid, and high frequencies, which provide an optimal mix to allow us to offer high-quality network coverage and give us the ability to increase network capacity to meet growing traffic demand needs. We also own spectrum in the 3.5GHz band to provide FWA services.
Below, we provide further regulatory details in respect of our operations in Africa.
Tanzania: Millicom Tanzania has licenses for national and international network facilities services that expire in 2032 and 2035, national and international network services licenses that expire in 2032 and 2035, respectively, and licenses for national and international application services that expire in 2022 and 2030, respectively. In 2019, Millicom Tanzania purchased the right to use 2x10 MHz of spectrum in the 800 MHz band for a period of 15 years, and this is currently being used to offer 4G services. Zantel has licenses for national and international network facilities and national and international network services that expire in 2031 and national and international application licenses that expire in 2026. Zantel also has a radio frequency spectrum license authorizing the use of 900, 1800 and 2100 spectrum that expires in 2031. Following the acquisition of Zantel by Millicom Tanzania, an application was made to merge the licenses so they are co-terminus. To this end, a unified license has been recently secured.
Trademarks and licenses
We own or have rights to some registered trademarks in our business, including Tigo®, Tigo Business®, Tigo Sports®, Mi Tigo®, Tigo Shop®, Tigo Money®, Tigo OneTv ®, Cable Onda®, Zantel®, Millicom® and The Digital Lifestyle®, among others. Under a number of trademark license agreements and letters of consent, certain operating subsidiaries are authorized to use the Tigo and Millicom trademarks under the applicable terms and conditions.
C. Organizational Structure
The parent company, Millicom International Cellular S.A. ("MIC S.A."), is a Luxembourg public limited liability company (société anonyme). The following table identifies MIC S.A.’s main subsidiaries as of December 31, 2021:
| | | | | | | | | | | |
Entity | Country | Activity | Ownership Interest* (%) |
Latin America | | | |
Telemóvil El Salvador S.A. de C.V. | El Salvador | Mobile, MFS, Cable, DTH | 100 | |
Millicom Cable Costa Rica S.A. | Costa Rica | Cable, DTH | 100 | |
Telefónica Celular de Bolivia S.A. | Bolivia | Mobile, DTH, MFS, Cable | 100 | |
Telefónica Celular del Paraguay S.A. | Paraguay | Mobile, MFS, Cable, Pay-TV | 100 | |
Cable Onda S.A. | Panama | Cable, Pay-TV, Internet, DTH, Fixed-line | 80 | |
Grupo de Comunicaciones Digitales S.A. (formerly Telefónica Móviles Panamá, S.A.) | Panama | Mobile | 80 | |
Telefonía Celular de Nicaragua, S.A. | Nicaragua | Mobile | 100 | |
Colombia Móvil S.A. E.S.P. | Colombia | Mobile | 50-1 share |
UNE EPM Telecomunicaciones S.A. | Colombia | Fixed-line, Internet, Pay-TV, Mobile | 50-1 share |
Edatel S.A. E.S.P. | Colombia | Fixed-line, Internet, Pay-TV, Cable | 50-1 share |
Comunicaciones Celulares S.A. | Guatemala | Mobile, MFS | 100 | |
Navega.com S.A. | Guatemala | Cable, DTH | 100 | |
Africa | | | |
MIC Tanzania Public Limited Company | Tanzania | Mobile, MFS | 98.5 | |
Zanzibar Telecommunications Limited | Tanzania | Mobile, MFS | 98.5 | |
Unallocated | | | |
Millicom International Operations S.A. | Luxembourg | Holding Company | 100 | |
Millicom International Operations B.V. | Netherlands | Holding Company | 100 | |
Millicom LIH S.A. | Luxembourg | Holding Company | 100 | |
MIC Latin America B.V. | Netherlands | Holding Company | 100 | |
Millicom Africa B.V. | Netherlands | Holding Company | 100 | |
Millicom Holding B.V. | Netherlands | Holding Company | 100 | |
Millicom International Services LLC | USA | Services Company | 100 | |
Millicom Services UK Ltd | UK | Services Company | 100 | |
Millicom Spain S.L. | Spain | Holding Company | 100 | |
* Also reflects the voting interest, except in Colombia where voting interest is 50% + 1 share for each of the three entities. |
In addition, we provide services in Honduras through Celtel, a joint venture in which MIC S.A. indirectly holds a 66.67% equity interest. We entered into our joint venture in Honduras at the inception of this business in the 1990s. At that time, Millicom had limited sources of capital and was investing heavily to deploy mobile operations in many countries around the world; this partner provided local market expertise and reduced Millicom’s overall capital needs. Despite the fact that Millicom owns more than 50% of the shares of this entity and has the right to nominate a majority of the directors, all decisions taken by the board or the shareholders in Honduras must be taken by a super-majority vote. This effectively gives either shareholder the ability to veto any decision and therefore neither shareholder has sole control over either entity.
D. Property, Plant and Equipment
Overview
We own, or have the right to access and use through long-term leases, telecommunications sites and related infrastructure and equipment in all of our markets. In addition, we own, or have the right to access and use through long-term finance leases, tower space, warehouses, office buildings and related telecommunications facilities in all of our markets. We are also party to several site sharing agreements whereby we share our owned telecommunications sites and related infrastructure and equipment, or lease such property from our counterparties in an effort to maximize the use of telecommunications sites globally. Our leased properties are owned by private individuals, corporations and sovereign states.
Assets used for the provision of cable TV and mobile telephone services include, without limitation:
• switching, transmission and receiving equipment;
• connecting lines (cables, wires, poles and other support structures, conduits and similar items);
• diesel generator sets and air conditioners;
• real property and infrastructure, including telecommunications towers, office buildings and warehouses;
• easements and other rights to use or access real property;
• access roads; and
• other miscellaneous assets (work equipment, furniture, etc.).
Tower infrastructure
In some of our markets, we have determined that owning passive infrastructure, such as mobile telecommunications towers, no longer confers a competitive advantage. As a result, we have completed a number of sale and lease-back transactions involving some of our tower assets in recent years. These transactions have allowed us to focus our capital investment on other fixed assets, such as network equipment, thereby increasing our network coverage, capacity and the overall quality of our service, while also improving our return on invested capital.
We continue to own a significant number of towers in some of our markets, especially in Central America, and we continuously assess the merits of entering into new sale and lease-back agreements, based in part on the competitive dynamics in our markets, but also on demand and investment appetite by tower companies. Our most recent lease-back agreements typically have had (i) an initial 12-year term, with a right for us to renew for up to 10 or 20 years, and (ii) rent denominated and payable in local currency. In 2017 and 2018, the Group announced agreements to sell and leaseback wireless communications towers in Paraguay, Colombia and El Salvador. Total gain on sale recognized in 2021 was nil (2020: nil, 2019: $5 million) and cash received from these sales in 2021 was nil (2020: nil, 2019: $22 million). There were no sale and leaseback transactions in 2021.
We are currently in the process of creating one or more legal entities to separate our towers, and possibly other infrastructure assets such as data centers and fiber optic networks, from our core telecom service operations, with the goal of optimizing both the utilization and capital structure for these fixed assets. In the future, we may choose to sell a minority equity interest or pursue a complete divestiture of these assets.
For additional information, see note E.3. to our audited consolidated financial statements included elsewhere in this Annual Report.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the years ended December 31, 2021, 2020 and 2019, and the notes thereto, included elsewhere in this Annual Report.
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of events may differ materially from those expressed or implied in such forward-looking statements as a result of various factors, including those set forth in “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors.”
A. Operating Results
Factors affecting our results of operations
Our performance and results of operations have been and will continue to be affected by a number of factors and trends, including principally:
• Macro and socio-demographic factors. These affect demand for and affordability of our services and include consumer confidence and expansion of the middle class, as well as foreign currency exchange rate volatility and inflation which can impact our cost structure and profitability. Growth in GDP per capita and expansion of the middle class make our services affordable to a larger pool of consumers. The emerging markets we serve tend to have younger populations and faster household formation, and typically have more children per family, than developed markets, driving demand for our residential services, such as broadband internet and pay-TV. Digitalization of societies leads to more devices connected per household and more data needs. Exposure to inflationary pressures and foreign currency exchange volatility may negatively impact our profitability or make our services more expensive for our customers; in this respect see “Item 11. Quantitative and Qualitative Disclosures About Risk—Foreign currency risk.”
• Competitive intensity, which largely reflects the number of market participants and the financial strength of each. Competitive intensity varies over time and from market to market. Markets tend to be more price competitive and less profitable for us when there are more market participants, and thus any future increase in the number of market participants in any of our markets would likely have a negative effect on our business.
• Changes in regulation. Our business is highly dependent on a variety of licenses granted by regulators in the countries where we operate. Any changes in how regulators award and renew these licenses could impact our business. In particular, our mobile services business requires access to licensed spectrum, and we expect our business and the mobile industry in general will require more spectrum in the future to meet future mobile data traffic needs. In addition, regulators can impose certain constraints and obligations that can have an impact on how we operate the business and on our profitability.
• Technological change. Our business relies on technology that continues to evolve rapidly, forcing us to adapt and deploy new innovations that can impact our investment needs and our cost structure, as well as create new revenue opportunities. This is true for both our mobile and fixed services. With respect to our mobile services, while we are still deploying 4G networks, the industry is already well advanced in planning for the future deployment of 5G, which we expect will drive continued demand for data in the future. With respect to our fixed services, the cable infrastructure we are deploying, largely based on the DOCSIS 3.0 standard, continues to evolve, and we are deploying alternatives such as DOCSIS 3.1 and FTTH in certain markets. Over time, 5G and other mobile technologies may also be considered as viable alternatives for fixed services. In the meantime, an important recent trend in the Latin American telecommunications market has been the growth in fixed broadband penetration. We have significantly increased the coverage of our HFC network largely in response to demand for high-speed fixed broadband services. Technological change is also impacting the capabilities of the equipment our customers use, such as mobile handsets and set-top boxes, and potential change in this area may impact demand for our services in the future.
• Changes in consumer behavior and needs. In recent years, consumption of mobile services has shifted from voice and SMS to data services due largely to changes in consumer patterns, including for example the adoption and growth of social media, made possible by new smartphones on 4G networks capable of high quality live video streaming.
• Political changes. The countries where we operate are characterized as having a high degree of political uncertainty, and electoral cycles can sometimes impact business investment, consumer confidence, and broader economic activity as well as inflation and foreign exchange rates. Moreover, changes in government can sometimes produce significant changes in taxation and regulation of the telecommunications industry that can have a material impact on our business and financial results.
•COVID-19. On March 11, 2020, the World Health Organization declared the coronavirus outbreak a pandemic. Most countries globally, including a majority of the countries where we operate, 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 during 2020. According to data compiled by the University of Oxford, the government-imposed lockdowns in the vast majority of our markets were among the most stringent in the world. As a result, many of our stores and distribution channels were forced to close temporarily and a majority of our markets experienced very sharp reductions in mobility during 2020. These lockdowns immediately impacted our prepaid mobile business, which suffered a sharp decline, followed by a rapid recovery as the lockdowns eased. In our subscription businesses, the revenue erosion was more gradual than in mobile prepaid, and the recovery has also been more gradual. Finally, revenue from our B2B services has eroded gradually since the onset of the pandemic, as many small and mid-sized businesses struggle to cope with the health and economic crisis. During 2021, economic activity recovered gradually in our markets, and remittances from the U.S. to Central America sustained very strong double-digit growth. Our markets began vaccinating, and vaccination rates were above 50% in Colombia, Costa Rica, El Salvador and Panama, while they remained below 30% in Guatemala.
Additional factors and trends affecting our performance and the results of operations are set out in "Item 3. Key Information—D. Risk Factors."
Factors affecting comparability of prior periods
Acquisitions
On February 20, 2019, we announced the agreement with Telefónica, S.A. to acquire the entire share capital of Telefónica Móviles Panamá, S.A., Telefónica de Costa Rica TC, S.A. (and its wholly owned subsidiary, Telefónica Gestión de Infraestructura y Sistemas de Costa Rica, S.A.) and Telefonía Celular de Nicaragua, S.A. (together, “Telefónica CAM”) for a combined enterprise value of $1,650 million (the “Panama and Nicaragua Acquisitions”) payable in cash.
On May 16, 2019, we acquired 100% of Telefonía Celular de Nicaragua, S.A., the number one mobile operator in Nicaragua, adding to our existing cable operations. Since the closing date, we have controlled and therefore fully consolidated Telefonía Celular de Nicaragua, S.A. For the year ended December 31, 2019, Telefonía Celular de Nicaragua, S.A. contributed $144 million of revenue and a net profit of $5 million.
On August 29, 2019, we acquired 100% of Grupo de Comunicaciones Digitales S.A. (formerly Telefónica Móviles Panamá, S.A.), the leading mobile operator in Panama. The acquisition was made through Millicom's subsidiary, Cable Onda, the leading cable operator in the country. Since the closing date, we have controlled and therefore fully consolidated Grupo de Comunicaciones Digitales S.A., with a 20% non-controlling interest. For the year ended December 31, 2019, Telefónica Móviles Panamá, S.A. contributed $80 million of revenue and a net profit of $6 million.
On May 2, 2020, Millicom announced that it had terminated the share purchase agreement in relation to the acquisition of the entire capital of Telefónica de Costa Rica TC, S.A. The aggregate purchase price for the Panama and Nicaragua Acquisitions was therefore $1.08 billion, which has been subject to purchase price adjustments. For additional information, see notes G.3.1. and A.1.2. to our audited consolidated financial statements included elsewhere in this Annual Report.
On November 12, 2021, Millicom signed and closed an agreement to acquire the remaining 45% equity interest in its joint venture business in Guatemala (“Tigo Guatemala”) from our local partner for $2.2 billion in cash. As a result, Millicom owns a 100% equity interest in Tigo Guatemala. See note A.1.2. to our audited consolidated financial statements for additional details regarding this acquisition and the accounting treatment thereof.
In the years ended December 31, 2021 and 2020, the Group also completed certain other minor additional acquisitions.
Discontinued operations
Chad
On March 14, 2019, Millicom announced that it had signed an agreement for the sale of its entire operations in Chad to Maroc Telecom. The transaction was completed on June 27, 2019.
Ghana
On March 3, 2017, we and Bharti Airtel Limited (“Airtel”) announced that we had entered into an agreement for MIC S.A.’s subsidiary Tigo Ghana Limited and Airtel’s subsidiary Airtel Ghana Limited to combine their operations in Ghana. As per the agreement, we and Airtel had equal ownership and governance rights in the combined entity ("AirtelTigo"). Necessary regulatory approvals were received in September 2017, and the merger was completed on October 12, 2017. On April 19, 2021, we announced that we had signed a definitive agreement to sell our ownership in AirtelTigo to the Government of Ghana, and the sale was subsequently completed on October 13, 2021.
Guatemala and Honduras joint ventures
Though we hold a majority ownership interest in the entities that own the Honduras joint venture, the board of directors is composed of equal numbers of directors from Millicom and from our respective partners, and the shareholders’ agreements for each entity require unanimous board approval for key decisions relating to the activities of these entities. As such, we have determined that neither party controls the entities, and we therefore account for our investments in these entities as equity method investments.
Prior to November 12, 2021, we held a majority interest in the entities that conducted the Guatemala joint venture and accounted for our investments in these entities as equity method investments, as neither we nor our partners controlled the entities. As a result of the acquisition of the remaining 45% equity interest in our operations in Guatemala on November 12, 2021, we have consolidated Tigo Guatemala in our audited consolidated financial statements since November 12, 2021.
We report our share of the net income of these joint ventures in our consolidated statement of income under the caption “Share of profit in joint ventures.” The share of the net income of the Guatemala joint venture is reflected in this caption up until November 12, 2021. On and after November 12, 2021, the Guatemala operations are consolidated within our audited consolidated statement of income.
For additional details on the Guatemala and Honduras joint ventures, see note A.2. to our audited consolidated financial statements.
Our segments
Our 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 are predominantly affected by operating in different geographical regions. The Millicom Group has businesses in two main regions, Latin America and Africa, which constitute our two segments. Latam figures include our Honduras joint venture as if it were 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. Latam figures also include our operations in Guatemala. 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 them using the equity method of accounting and as a joint venture, along with our operations in Honduras. Prior to its disposal in October 2021, we excluded the Ghana joint venture from the Africa operational data because, unlike our other joint ventures, we did not consider it a strategic part of our Group. Financial data is presented either at a consolidated level or at a segmental level, as derived from our financial statements, including the notes thereto.
Our customer base
We generate revenue mainly from the mobile and cable and other fixed services that we provide and, to a lesser extent, from the sale of telephone and other equipment. For a description of our services, see “Item 4. Information on the Company—B. Business Overview—Our services.” Our results of operations are therefore dependent on both the size of our customer base and on the amount that customers spend on our services.
We measure the amount that customers spend on our services using a telecommunications industry metric known as ARPU, or average revenue per user per month. We define ARPU for our Mobile customers as (x) the total mobile and mobile financial services revenue (excluding revenue earned from tower rentals, call centers, data and mobile virtual network operators, visitor roaming, national third parties roaming and mobile telephone equipment sales revenue) for the period, divided by (y) the average number of Mobile subscribers for the period, divided by (z) the number of months in the period. We define ARPU for our Home customers in our Latin America segment as (x) the total Home revenue (excluding equipment sales, TV advertising and equipment rental) for the period, divided by (y) the average number of customer relationships for the period, divided by (z) the number of months in the period. ARPU is not
subject to a standard industry definition and our definition of ARPU may be different from that of other industry participants.
We provide certain customer data below that we believe will assist investors in understanding our performance and to which we refer later in this section in discussing our results of operations.
Mobile customers by segment
| | | | | | | | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 | | 2019 |
| (in thousands, except where noted) |
Latin America | 44,881 | | | 41,734 | | | 39,846 | |
of which are 4G customers | 21,447 | | | 18,243 | | | 15,398 | |
Mobile customer ARPU (in U.S. dollars) | $ | 6.4 | | | $ | 6.7 | | | $ | 7.3 | |
Africa | 13,547 | | | 13,111 | | | 12,686 | |
of which are 4G customers | 2,051 | | | 1,447 | | | 865 | |
Mobile customer ARPU (in U.S. dollars) | $ | 2.1 | | | $ | 2.3 | | | $ | 2.5 | |
Mobile customers by country in our Latin America segment
| | | | | | | | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 | | 2019 |
| (in thousands) |
Bolivia | 4,119 | | | 3,920 | | | 3,716 | |
Colombia | 11,271 | | | 10,025 | | | 9,421 | |
El Salvador | 2,919 | | | 2,685 | | | 2,564 | |
Guatemala | 11,754 | | | 11,416 | | | 10,817 | |
Honduras | 5,079 | | | 4,620 | | | 4,639 | |
Nicaragua | 3,757 | | | 3,493 | | | 3,427 | |
Panama | 2,095 | | | 1,957 | | | 1,766 | |
Paraguay | 3,887 | | | 3,618 | | | 3,496 | |
Mobile customers by country in our Africa segment
| | | | | | | | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 | | 2019 |
| (in thousands) |
Tanzania (incl. Zantel) | 13,547 | | | 13,111 | | | 12,686 | |
Home customers in our Latin America segment
| | | | | | | | | | | | | | | | | |
| As of December 31, |
2021 | | 2020 | | 2019 |
(in thousands, except where noted) |
Total homes passed | 12,686 | | | 12,229 | | | 11,842 | |
Total customer relationships | 4,893 | | | 4,545 | | | 4,341 | |
HFC homes passed | 12,413 | | | 11,888 | | | 11,460 | |
HFC customer relationships | 4,148 | | | 3,733 | | | 3,456 | |
HFC RGUs | 8,665 | | | 7,602 | | | 6,948 | |
HFC broadband internet RGUs | 3,790 | | | 3,356 | | | 2,994 | |
| | | | | |
Home ARPU (in U.S. dollars) | $ | 28.4 | | | $ | 27.9 | | | $ | 29.3 | |
Results of operations
We have based the following discussion on our consolidated financial statements included elsewhere in this Annual Report. You should read it along with these financial statements, and it is qualified in its entirety by reference to them. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Factors affecting comparability of prior periods.”
Consolidated results of operations for the years ended December 31, 2021 and 2020
The following table sets forth certain consolidated statement of income data for the periods indicated:
| | | | | | | | | | | | | | | | | |
| Year ended December 31, | | Percentage Change |
| 2021(i) | | 2020 | | |
| (U.S. dollars in millions, except percentages) |
Revenue | 4,617 | | | 4,171 | | | 10.7 | % |
Cost of sales | (1,302) | | | (1,171) | | | 11.1 | % |
Gross profit | 3,316 | | | 3,000 | | | 10.5 | % |
Operating expenses | (1,677) | | | (1,505) | | | 11.4 | % |
Depreciation | (878) | | | (890) | | | (1.4) | % |
Amortization | (318) | | | (318) | | | 0.1 | % |
Share of profit in joint ventures | 210 | | | 171 | | | 22.6 | % |
Other operating income (expenses), net | 6 | | | (12) | | | NM |
Operating profit | 659 | | | 446 | | | 47.5 | % |
Interest and other financial expenses | (531) | | | (624) | | | (15.0) | % |
Interest and other financial income | 23 | | | 13 | | | 74.5 | % |
Revaluation of previously held interests | 670 | | | — | | | NM |
Other non-operating (expenses) income, net | (50) | | | (106) | | | (52.8) | % |
Loss from other joint ventures and associates, net | (39) | | | (1) | | | NM |
Profit (loss) before taxes from continuing operations | 732 | | | (271) | | | NM |
Charge for taxes, net | (189) | | | (102) | | | 85.7 | % |
Profit (loss) for the year from continuing operations | 543 | | | (373) | | | NM |
Profit (loss) for the year from discontinued operations, net of tax | — | | | (12) | | | NM |
Net profit (loss) for the year | 542 | | | (385) | | | NM |
(i) 2021 figures include the impact of our acquisition of the remaining 45% shareholding in our operations in Guatemala (approximately 1.5 months of statement of income data as from November 12, 2021).
Revenue
Revenue increased by 10.7% for the year ended December 31, 2021 to $4,617 million from $4,171 million for the year ended December 31, 2020. The increase is largely due to strong operational results in all business lines and countries, compared to relatively weak performance in the year ended December 31, 2020, at the onset of the pandemic, as well as additional revenue due to the consolidation of our Guatemala operations in November 2021.
Colombia represented 31%, El Salvador, Bolivia, Paraguay and Panama each represented between 9% and 14%, and Costa Rica, Guatemala and Nicaragua represented less than 9% of our consolidated revenue in each of the years ended December 31, 2021 and 2020. Colombia experienced the highest relative increase in revenues of $68 million, or an increase of 5.1%, as a result of strong performance in the mobile and home businesses during 2021. Revenue in El Salvador increased $58 million, or an increase of 14.9%, due to strong prepaid mobile results stemming from recent network investments. Revenue increased by 6.7% in Bolivia and 2.0% in Paraguay due to increased commercial activity as mobility returned to the country. Revenue in Nicaragua increased by 8.1% due to growth in the mobile business. Costa Rica revenue grew 0.9%, as a result of changes in football programming rights affecting our pay-TV business.
Cost of sales
Cost of sales increased by 11.1% for the year ended December 31, 2021 to $1,302 million from $1,171 million for the year ended December 31, 2020. The increase was mainly due to higher costs related to increased activity levels, as well as the consolidation of our operations in Guatemala as of November 12, 2021, which was partly offset by the benefit of a lower provision for bad debt for the year ended December 31, 2021 compared to December 31, 2020.
Operating expenses
Operating expenses increased by 11.4% for the year ended December 31, 2021 to $1,677 million from $1,505 million for the year ended December 31, 2020. The increase was mainly due to increased sales and marketing costs to support robust customer growth in the year ended December 31, 2021, as well as the consolidation of our operations in Guatemala as of November 12, 2021, as compared to the year ended December 31, 2020 when strict lockdowns significantly curtailed commercial activity.
Depreciation
Depreciation decreased by 1.4% for the year ended December 31, 2021 to $878 million from $890 million for the year ended December 31, 2020. The decrease was mainly due to network modernization activities which accelerated the depreciation of older infrastructure in 2020, despite the additional depreciation due to the consolidation of our operations in Guatemala as of November 12, 2021.
Amortization
Amortization was stable, increasing 0.1% for the year ended December 31, 2021 to $318 million from $318 million for the year ended December 31, 2020. In 2020, our amortization expense was higher than our usual run-rate as we transitioned our old B2B brand in Panama to Tigo Business. In 2021, this line was again impacted by our decision to transition the Cable Onda brand to Tigo in Panama which took effect in April 2021 and by the consolidation of our operations in Guatemala as of November 12, 2021.
Share of profit in joint ventures
Share of profit in joint ventures increased by 22.6% for the year ended December 31, 2021 to $210 million from $171 million for the year ended December 31, 2020. The increase was mainly due to strong operational performance and lower financing costs stemming from the reduction in debt in Guatemala prior to the acquisition, offset by the consolidation of our operations in Guatemala as of November 12, 2021.
Other operating income (expenses), net
Other operating income (expenses), net, increased by $18 million for the year ended December 31, 2021 to an income of $6 million from an expense of $12 million for the year ended December 31, 2020. The increase was mainly due to a gain from an earn-out offset by losses from a disposal in our equity investment in Helios Towers for the year ended December 31, 2021 compared to expenses related to the impairment of a loan to our prior operations in Ghana offset by gains from disposal in equity investments in Helios Towers and Jumia for the year ended December 31, 2020.
Interest and other financial expenses
Interest and other financial expenses decreased by 15.0% for the year ended December 31, 2021 to $531 million from $624 million for the year ended December 31, 2020. The decrease was mainly due to lower average debt levels, following repayment activity over the last year.
Interest and other financial income
Interest and other financial income increased by 74.5% for the year ended December 31, 2021 to $23 million from $13 million for the year ended December 31, 2020. The increase was mainly due to a gain from the exchange of the 6.625% Senior Notes due 2026 for newly issued 4.500% Senior Notes due 2031.
Other non-operating (expenses) income, net
Other non-operating expenses decreased by $56 million for the year ended December 31, 2021 to an expense of $50 million from an expense of $106 million for the year ended December 31, 2020. The decrease was mainly due to the revaluation charge of the put-option liability in Panama for $26 million and losses on foreign exchange, which was partially offset by the mark-to-market revaluation of Helios Towers for an $18 million gain for the year ended December 31, 2021 compared to the mark-to-market revaluation of Jumia and Helios Towers for a $63 million loss and losses on foreign exchange for the year ended December 31, 2020.
Revaluation of previously held interest
As a result of the acquisition of the remaining 45% shareholding in Guatemala, the Group had to revalue its 55% previously held investment at the fair value implied by the transaction. This resulted in the recognition of a gain of $670 million with a corresponding increase in goodwill.
Loss from other joint ventures and associates, net
Loss from other joint ventures and associates, net increased by $39 million for the year ended December 31, 2021 to a loss of $39 million from a loss of $1 million for the year ended December 31, 2020. The increase is due to the exit financing of AirtelTigo Ghana for $38 million.
Charges for taxes, net
Charges for taxes, net increased by 85.7% for the year ended December 31, 2021 to $189 million from $102 million for the year ended December 31, 2020. The increase was mainly due to the consolidation of our operations in Guatemala as of November 12, 2021 and higher profitability in the operations of the Group. This also includes the net effect of the recognition and derecognition of certain deferred tax assets in UNE and Colombia Móvil, respectively.
The main components of charges for taxes, net are the income tax generated by most of the operations in our Latin America segment and the withholding tax we pay when cash is repatriated from our local operations. We also have net losses mainly in our corporate entities that reduce our profit before taxes and for which no deferred tax asset is recognized due to the history of losses in such entities. As a result, our effective tax rate is generally above our average statutory tax rate. Moreover, due to the jurisdictional differences and mix, we do not have the opportunity to offset tax expense with accumulated tax loss carry-forwards.
Net profit (loss) for the year
Net profit (loss) for the year increased by $927 million for the year ended December 31, 2021 to a profit of $542 million from a loss of $385 million for the year ended December 31, 2020. Profit (loss) for the year from continuing operations increased by $915 million for the year ended December 31, 2021 to a profit of $543 million from a loss of $373 million for the year ended December 31, 2020 for the reasons stated above. Net loss for the year from discontinued operations, net of tax decreased by $12 million for the year ended December 31, 2021 to nil as compared to a loss of $12 million for the year ended December 31, 2020.
Segment results of operations for the years ended December 31, 2021 and 2020
Our Latam figures include our Honduras joint venture as if it were fully consolidated, as this reflects the way management reviews and uses internally reported information to make decisions. Latam figures also include our operations in Guatemala. 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 them using the equity method of accounting and as a joint venture, along with our operations in Honduras. See note A.1.2. to our audited consolidated financial statements for additional details regarding this acquisition and the accounting treatment thereof. Prior to its disposal in October 2021, we excluded the Ghana joint venture from the Africa operational data because, unlike our other joint ventures, we did not consider it a strategic part of our Group. See “—Our segments” above.
Millicom allocates corporate costs to each segment based on their contribution to underlying revenue. Only non-recurring costs remain unallocated.
The following table sets forth certain segment data, which has been extracted from note B.3. to our audited consolidated financial statements, where segment data is reconciled to consolidated data, for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, | | | | |
| 2021 | | 2020 | | Percentage Change |
| Latin America | | Africa | | Latin America | | Africa | | Latin America | | Africa |
| (U.S. dollars in millions, except percentages) |
Mobile revenue | 3,372 | | | 347 | | | 3,220 | | | 357 | | | 4.7% | | (2.9)% |
Cable and other fixed services revenue | 2,275 | | | 9 | | | 2,097 | | | 8 | | | 8.5% | | 10.2% |
Other revenue | 70 | | | — | | | 60 | | | 1 | | | 16.4% | | (38.3)% |
Service revenue | 5,716 | | | 357 | | | 5,377 | | | 366 | | | 6.3% | | (2.7)% |
Telephone and equipment revenue | 503 | | | — | | | 466 | | | — | | | 8.0% | | NM |
Revenue | 6,220 | | | 357 | | | 5,843 | | | 366 | | | 6.4% | | (2.7)% |
Operating profit | 1,001 | | | 29 | | | 803 | | | 36 | | | 24.7% | | (19.4)% |
Add back: | | | | | | | | | | | |
Depreciation and amortization | 1,504 | | | 83 | | | 1,561 | | | 89 | | | (3.7)% | | (7.0)% |
Other operating income (expenses), net | (8) | | | (1) | | | (5) | | | — | | | 62.5% | | NM |
EBITDA | 2,498 | | | 111 | | | 2,360 | | | 125 | | | 5.9% | | (11.0)% |
The following table sets forth revenue from continuing operations by country for certain of the countries in our Latin America segment (i):
| | | | | | | | | | | | | | | | | |
| December 31 | | Percentage Change |
| 2021 | | 2020 | |
| (U.S. dollars in millions, except percentages) |
Colombia | 1,414 | | | 1,346 | | | 5.1% |
Guatemala | 1,601 | | | 1,503 | | | 6.5% |
Panama | 633 | | | 585 | | | 8.2% |
Paraguay | 555 | | | 544 | | | 2.0% |
Honduras | 589 | | | 552 | | | 6.7% |
Bolivia | 623 | | | 584 | | | 6.7% |
El Salvador | 447 | | | 389 | | | 14.9% |
_____________
(i) The revenue figures above are shown before intercompany eliminations.
Segment revenue
Revenue of our Latin America segment increased by 6.4% for the year ended December 31, 2021 to $6,220 million from $5,843 million for the year ended December 31, 2020. The increase was mainly due to strong operational results in all business lines and countries, compared to relatively weak performance in the year ended December 31, 2020, at the onset of the pandemic. The main drivers of growth were in our Home businesses, where we saw increased demand for our broadband services, and in our mobile business, which benefited from increased commercial activity as mobility returned to our markets during the year. The countries that drove revenue growth during 2021 were Colombia, where recent investments in our mobile network and improved mobility helped drive mobile and home growth, and El Salvador, where investments in our network supported growth in our mobile businesses.
Revenue of our Africa segment decreased by 2.7% for the year ended December 31, 2021 to $357 million from $366 million for the year ended December 31, 2020. The decrease was due to a reduction in customer usage of mobile financial services in the second half of the year due to a new government levy imposed on many mobile money transactions, partially offset by improved activity compared to the year ended December 31, 2020, which was impacted by COVID-19.
Segment operating profit
Operating profit of our Latin America segment increased by 24.7% for the year ended December 31, 2021 to $1,001 million from $803 million for the year ended December 31, 2020. The increase was mainly due to increased commercial activity that benefited our revenue but resulted in higher costs during the year related to increased activity levels, which was partially offset by a lower provision for bad debt for the year ended December 31, 2021 compared to December 31, 2020. The increase was also due to a decrease in depreciation caused by network modernization activities that accelerated the depreciation of older infrastructure in 2020.
Operating profit of our Africa segment decreased by 19.4% for the year ended December 31, 2021 to $29 million from a profit of $36 million for the year ended December 31, 2020. The decrease was mainly due to higher costs associated with an increase in commercial activity compared to the year ended December 31, 2020, which was impacted by COVID-19.
Segment EBITDA
Segment EBITDA is segment operating profit excluding, depreciation and amortization and other operating income (expenses), net which includes impairment losses and gains/losses on the disposal of fixed assets attributable to the segment. Segment EBITDA is used by the management to monitor the segmental performance and for capital management and is further detailed in note B.3. Segment Information in the audited consolidated financial statements.
Segment EBITDA of our Latin America segment increased by 5.9% for the year ended December 31, 2021 to $2,498 million from $2,360 million for the year ended December 31, 2020. The increase was mainly due to increased commercial activity, which was partly offset by an increase in sales and marketing expenses. The countries that most contributed to the increase in EBITDA were Guatemala and El Salvador, both driven by strong performance in all business units, and Panama, driven by strong results in consumer Mobile and Home business units. Using the same definition used for organic growth for service revenue and revenue in the section “Other financial data,” having added the 0.2% percentage points impact of foreign currency fluctuations between the periods and added the 0.6% percentage points of other impacts resulting from the net effect of small differences that result from calculating organic growth using different baselines for each period, EBITDA of our Latin America segment would have increased by 6.7%.
Segment EBITDA of our Africa segment decreased by 11.0% for the year ended December 31, 2021 to $111 million from $125 million for the year ended December 31, 2020. The decrease was mainly due to higher costs related to an increase in commercial activity compared to the year ended December 31, 2020, which was impacted by COVID-19.
Consolidated results of operations for the years ended December 31, 2020 and 2019
The following table sets forth certain consolidated statement of income data for the periods indicated:
| | | | | | | | | | | | | | | | | |
| December 31 | | Percentage Change |
| 2020 | | 2019 | |
| (U.S. dollars in millions, except percentages) |
Revenue | 4,171 | | | 4,336 | | | (3.8)% |
Cost of sales | (1,171) | | | (1,201) | | | (2.5)% |
Gross profit | 3,000 | | | 3,135 | | | (4.3)% |
Operating expenses | (1,505) | | | (1,604) | | | (6.2)% |
Depreciation | (890) | | | (825) | | | 7.9% |
Amortization | (318) | | | (275) | | | 15.6% |
Share of profit in joint ventures | 171 | | | 179 | | | (4.4)% |
Other operating income (expenses), net | (12) | | | (34) | | | (65.8)% |
Operating profit | 446 | | | 575 | | | (22.4)% |
Interest and other financial expenses | (624) | | | (564) | | | 10.8% |
Interest and other financial income | 13 | | | 20 | | | (31.3)% |
Other non operation income/expenses | (106) | | | 227 | | | NM |
Profit (loss) from other joint ventures and associates, net | (1) | | | (40) | | | (98.5)% |
Profit (loss) before taxes from continuing operations | (271) | | | 218 | | | NM |
Tax (charge) credit, net | (102) | | | (120) | | | (15.5)% |
Profit (loss) from continuing operations | (373) | | | 97 | | | NM |
Profit (loss) from discontinued operations, net of tax | (12) | | | 57 | | | NM |
Net profit (loss) for the period | (385) | | | 154 | | | NM |
_______________
Revenue
Revenue decreased by 3.8% for the year ended December 31, 2020 to $4,171 million from $4,336 million for the year ended December 31, 2019. The decrease in revenue was primarily due to lower commercial activity as a result of the COVID-19 pandemic, weaker currencies in some of our markets, and was partially offset by the full-year contribution of the mobile acquisitions in Nicaragua and Panama, which were acquired in May of 2019 and August of 2019, respectively.
Colombia represented over 32%, Paraguay, Bolivia and Panama each represented between 13% and 14%, and no other country represented more than 10% of our consolidated revenue in 2020 and 2019. Panama experienced the highest relative increase in revenues of $110 million, as a result of the acquisition of the mobile business in August of 2019. Revenue in Nicaragua increased by $63 million due to the acquisition of the mobile business in May of 2019. Revenue in El Salvador increased by 0.6% due to strong prepaid mobile results in the fourth quarter of 2020. Revenue declined by 8.6% in Bolivia due to lower commercial activity as a result of the lockdowns in the country. Revenue decreased by 10.8% in Paraguay and by 12.2% in Colombia due to lower commercial activity as a result of the lockdowns in those markets as well as due to a weaker average FX rate for the Paraguayan guaraní and the Colombian peso.
Cost of sales
Cost of sales decreased by 2.5% for the year ended December 31, 2020 to $1,171 million from $1,201 million for the year ended December 31, 2019. The decrease was commensurate with the decline in revenue.
Operating expenses
Operating expenses decreased by 6.2% for the year ended December 31, 2020 to $1,505 million from $1,604 million for the year ended December 31, 2019. The decrease was mainly due the decline in revenue as well as cost saving initiatives implemented to mitigate the impact of COVID-19 on our financial performance.
Depreciation
Depreciation increased by 7.9% for the year ended December 31, 2020 to $890 million from $825 million for the year ended December 31, 2019. The increase was mainly due to the full-year consolidation of our operations in Panama and Nicaragua.
Amortization
Amortization increased by 15.6% for the year ended December 31, 2020 to $318 million from $275 million for the year ended December 31, 2019. The increase was mainly related to the full-year contribution of our acquisitions in Panama and Nicaragua, accelerated amortization of some brands in the Cable Onda acquisition in Panama, and our spectrum purchase in Colombia.
Share of profit in joint ventures
Share of profit in joint ventures decreased by 4.4% for the year ended December 31, 2020 to $171 million from $179 million for the year ended December 31, 2019. The decrease was mainly due to a decline in the net profits generated in both Guatemala and Honduras. In Guatemala, the decrease in net profits came mostly from a one-time charge related to the redemption of Comcel's 6.875% Senior Notes due 2024, and increased tax provision in the year ended December 31, 2020. In Honduras, the decrease in net profit in the year ended December 31, 2020 was mainly due to the impact of the COVID-19 pandemic on revenue.
Other operating income (expenses), net
Other operating income (expenses), net decreased by $23 million for the year ended December 31, 2020 to an expense of $12 million from an expense of $34 million for the year ended December 31, 2019. The expense for the year ended December 31, 2020 reflects the impairment of a loan to a joint venture offset by gains from disposal in equity investments.
Interest and other financial expenses
Interest and other financial expenses increased by 10.8% for the year ended December 31, 2020 to $624 million from $564 million for the year ended December 31, 2019. The increase was mainly due to accrued interest on spectrum purchased in Colombia in December 2019 as well as bond redemption fees related to a MIC S.A. bond.
Interest and other financial income
Interest and other financial income decreased by 31.3% for the year ended December 31, 2020 to $13 million from $20 million for the year ended December 31, 2019. The decrease was mainly due to lower average cash and cash equivalents balances during 2020 as compared to 2019.
Other non-operating (expenses) income, net
Other non-operating (expenses) income, net decreased by $333 million for the year ended December 31, 2020 to an expense of $106 million from an income of $227 million for the year ended December 31, 2019. The expense for the year ended December 31, 2020, was mainly due to foreign exchange losses and the mark to market of our equity investments in Jumia and Helios Towers, while the income for the year ended December 31, 2019 was mainly due to a gain from the disposal on Jumia and Helios Towers.
Loss from other joint ventures and associates, net
Loss from other joint ventures and associates, net decreased by 98.5% for the year ended December 31, 2020 to a loss of $1 million from a loss of $40 million for the year ended December 31, 2019. For the year ended December 31, 2020 the loss was mostly related to our results in Ghana. For the year ended December 31, 2019, the loss was mainly due to the de-recognition of Jumia as investment in associates.
Charges for taxes, net
Charges for taxes, net decreased by 15.5% for the year ended December 31, 2020 to $102 million from $120 million for the year ended December 31, 2019. The decrease was mainly due to lower profitability and higher deferred tax credit as of December 31, 2020 compared to December 31, 2019.
The main components of charges for taxes, net are the income tax generated by most of the operations in our Latin America segment and the withholding tax we pay when cash is repatriated from our local operations. We also have net losses mainly in our corporate entities that reduce our profit before taxes and for which no deferred tax asset is recognized due to the history of losses in such entities. As a result, our effective tax rate is generally above our
average statutory tax rate. Moreover, due to the jurisdictional differences and mix, we do not have the opportunity to offset tax expense with accumulated tax loss carry-forwards.
Net profit (loss) for the year
Net profit (loss) for the year decreased by $539 million for the year ended December 31, 2020 to a net loss of $385 million from a net profit of $154 million for the year ended December 31, 2019. Profit (loss) for the year from continuing operations decreased by $470 million for the year ended December 31, 2020 to a loss of $373 million from a profit of $97 million for the year ended December 31, 2019 for the reasons stated above. Profit (loss) for the year from discontinued operations, net of tax decreased by $69 million for the year ended December 31, 2020 to a loss of $12 million from a profit of $57 million for the year ended December 31, 2019 reflecting adjustments to the sales of Chad and Senegal.
Segment results of operations for the years ended December 31, 2020 and 2019
For the periods presented, our Latin America segment includes the Guatemala and Honduras joint ventures as if they were fully consolidated, as this reflects the way our management reviews and uses internally reported information to make decisions about operating matters. Prior to its disposal in October 2021, our Africa segment did not include our joint venture in Ghana because our management did not consider it a strategic part of our Group. See “—Our segments” above.
As from January 1, 2020, Millicom is allocating corporate costs to each segment based on their contribution to underlying revenue, and only non-recurring costs, such as the M&A-related fees incurred in 2019, will remain unallocated going forward. This change in presentation has no impact on Group EBITDA. In order to facilitate comparisons of December 31, 2021 figures with prior periods, comparative figures have been re-presented to conform with this new segment EBITDA reporting.
The following table sets forth certain segment data, which has been extracted from note B.3. to our audited consolidated financial statements, where segment data is reconciled to consolidated data, for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31 | | | | |
| 2020 | | 2019 | | Percentage Change |
| Latin America | | Africa | | Latin America | | Africa | | Latin America | | Africa |
| (U.S. dollars in millions, except percentages) |
Mobile revenue | 3,220 | | | 357 | | | 3,258 | | | 372 | | | (1.1)% | | (4.0)% |
Cable and other fixed services revenue | 2,097 | | | 8 | | | 2,197 | | | 9 | | | (4.5)% | | (5.7)% |
Other revenue | 60 | | | 1 | | | 60 | | | 1 | | | (0.5)% | | 34.1% |
Service revenue | 5,377 | | | 366 | | | 5,514 | | | 382 | | | (2.5)% | | (4.0)% |
Telephone and equipment revenue | 466 | | | — | | | 449 | | | — | | | 3.7% | | NM |
Revenue | 5,843 | | | 366 | | | 5,964 | | | 382 | | | (2.0)% | | (4.0)% |
Operating profit (loss) | 803 | | | 36 | | | 980 | | | 19 | | | (18.1)% | | 87.0% |
Add back: | | | | | | | | | | | |
Depreciation and amortization | 1,561 | | | 89 | | | 1,435 | | | 99 | | | 8.8% | | (10.4)% |
Other operating income (expenses), net | (5) | | | — | | | 2 | | | (2) | | | NM | | (93.5)% |
EBITDA | 2,360 | | | 125 | | | 2,418 | | | 117 | | | (2.4)% | | 6.9% |
The following table sets forth revenue from continuing operations by country for certain of the countries in our Latin America segment:
| | | | | | | | | | | | | | | | | |
| December 31 | | Percentage Change |
| 2020 | | 2019 | |
| (U.S. dollars in millions, except percentages) |
Colombia | 1,346 | | | 1,532 | | | (12.2)% |
Guatemala | 1,503 | | | 1,434 | | | 4.8% |
Panama | 585 | | | 475 | | | 23.3% |
Paraguay | 544 | | | 610 | | | (10.8)% |
Honduras | 552 | | | 594 | | | (7.0)% |
Bolivia | 584 | | | 639 | | | (8.6)% |
El Salvador | 389 | | | 387 | | | 0.6% |
Segment revenue
Revenue of our Latin America segment decreased by 2.0% for the year ended December 31, 2020 to $5,843 million from $5,964 million for the year ended December 31, 2019. The decrease in revenue was due to a decrease in our service revenue. The decrease in our service revenue was due to lower commercial activity as a result of the COVID-19 pandemic, as well as a negative impact from weaker foreign exchange rates in some of the countries where we operate including Colombia and Paraguay, offset by the full-year contribution of our mobile assets in Nicaragua and Panama, which were acquired during 2019.
Following the disposal of our Chad operations during 2019, our Africa segment operations now consist of Tanzania, including Zantel. Revenue of our Africa segment decreased by 4.1% for the year ended December 31, 2020 to $366 million from $382 million for the year ended December 31, 2019. The decrease was mainly due to the impact of lower commercial activity as a result of the COVID-19 pandemic.
Segment operating profit
Operating profit of our Latin America segment decreased by 18.1% for the year ended December 31, 2020 to $803 million from $980 million for the year ended December 31, 2019. The decrease was primarily attributable to (i) revenue decline, (ii) increased depreciation and amortization impacted by the full-year consolidation of our acquisitions in Nicaragua and Panama, (iii) accelerated amortization of a brand from our cable purchase in Panama and our spectrum purchase in Colombia and (iv) fees related to the Comcel bond redemption in Guatemala.
Operating profit of our Africa segment increased by 87.0% for the year ended December 31, 2020 to $36 million from $19 million for the year ended December 31, 2019. The increase was mainly due to a $21 million fine that impacted operating profit as of December 31, 2019.
Segment EBITDA
Segment EBITDA is segment operating profit excluding, depreciation and amortization and other operating income (expenses), net which includes impairment losses and gains/losses on the disposal of fixed assets attributable to the segment. Segment EBITDA is used by management to monitor the segmental performance and for capital management and is further detailed in note B.3. to our audited consolidated financial statements.
EBITDA of our Latin America segment decreased by 2.4% for the year ended December 31, 2020 to $2,360 million from $2,418 million for the year ended December 31, 2019. The decrease was attributable to lower commercial activity during the year. Using the same definition used for organic growth for service revenue and revenue in the section “Other financial data”, having deducted the 3.8% positive impact of the Panama and Nicaragua Acquisitions, added the 3.5% negative impact of foreign currency fluctuations between the periods, and deducted 1.0% of other impacts resulting from the net effect of small differences that result from calculating organic growth using different baselines for each period, EBITDA of our Latin America segment would have declined by 3.7%
EBITDA of our Africa segment increased by 6.9% for the year ended December 31, 2020 to $125 million from $117 million for the year ended December 31, 2019.
Other financial data
| | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
Consolidated: | | | |
Net cash provided by operating activities | 956 | | 821 |
Net cash used in investing activities | (2,703) | | (495) |
Net cash provided by (used in) financing activities | 1,777 | | (598) |
Operating free cash flow(1) | 619 | | 657 |
Free cash flow(1) | 128 | | 106 |
Equity free cash flow(1) | 135 | | 172 |
Equity free cash flow after leases(1) | (2) | | 56 |
Latin America segment: | | | |
Service revenue | 5,716 | | 5,377 |
Telephone and equipment revenue | 503 | | 466 |
Revenue | 6,220 | | 5,843 |
Revenue growth | 6.4% | | (2.0)% |
Revenue organic growth(2) | 6.9% | | (2.1)% |
Service revenue growth | 6.3% | | (2.5)% |
Service revenue organic growth(2) | 6.7% | | (2.5)% |
(1) Free Cash Flow Measures
Operating free cash flow
Operating free cash flow is a non-IFRS measure and is not a uniformly or legally defined financial measure. Operating free cash flow is not a substitute for IFRS measures in assessing our overall financial performance. Because Operating free cash flow is not determined in accordance with IFRS, and is susceptible to varying calculations, Operating free cash flow may not be comparable to other similarly titled measures presented by other companies. Operating free cash flow is included in this report because it is used by our management, and we believe may be useful to investors, to evaluate our core operational cash flow performance from period to period, as reflected in the adjustments in the reconciliation table below. Operating free cash flow has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for an analysis of our results as reported under IFRS.
Free cash flow
Free cash flow is a non-IFRS measure and is not a uniformly or legally defined financial measure. Free cash flow is not a substitute for IFRS measures in assessing our overall financial performance. Because Free cash flow is not determined in accordance with IFRS, and is susceptible to varying calculations, Free cash flow may not be comparable to other similarly titled measures presented by other companies. Free cash flow is included in this report because it is used by our management, and we believe may be useful to investors, to evaluate our cash flow performance from period to period as it reflects the operating free cash flow generated as described above after net finance charges paid. Free cash flow has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for an analysis of our results as reported under IFRS.
Equity free cash flow
Equity free cash flow is a non-IFRS measure and is not a uniformly or legally defined financial measure. Equity free cash flow is not a substitute for IFRS measures in assessing our overall financial performance. Because Equity free cash flow is not determined in accordance with IFRS, and is susceptible to varying calculations, Equity free cash flow may not be comparable to other similarly titled measures presented by other companies. Equity free cash flow is included in this report because it is used by our management, and we believe may be useful to investors, to evaluate our cash flow performance from period to period as it reflects our non–IFRS Free cash flow as described above with the addition of
dividends or advances received from our joint venture operations (namely Guatemala and Honduras) and the deduction dividends paid to non–controlling interests. Equity free cash flow has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for an analysis of our results as reported under IFRS.
Equity free cash flow after leases
Equity free cash flow after leases is a non-IFRS measure and is not a uniformly or legally defined financial measure. Equity free cash flow after leases is not a substitute for IFRS measures in assessing our overall financial performance. Because Equity free cash flow after leases is not determined in accordance with IFRS, and is susceptible to varying calculations, Equity free cash flow after leases may not be comparable to other similarly titled measures presented by other companies. Equity free cash flow after leases is included in this report because it is used by our management, and we believe may be useful to investors, to evaluate our cash flow performance from period to period as it reflects our non–IFRS Equity free cash flow as described above with the deduction of lease principal repayments. Equity free cash flow after leases has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for an analysis of our results as reported under IFRS.
The following table shows a reconciliation from Net cash provided by operating activities to Operating free cash flow, Free cash flow, Equity free cash flow, and Equity free cash flow after leases for the Millicom Group:
| | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
Net cash provided by operating activities | 956 | | 821 |
Purchase of property, plant and equipment | (740) | | (622) |
Proceeds from sale of property, plant and equipment | 11 | | 9 |
| | | |
Purchase of intangible assets | (135) | | (202) |
Proceeds from sale of intangible assets | — | | — |
Purchase of spectrum and licenses | 37 | | 101 |
Finance charges paid, net | 491 | | 551 |
Operating free cash flow | 619 | | 657 |
Interest (paid), net | (491) | | (551) |
Free cash flow | 128 | | 106 |
Dividends received from joint ventures | 13 | | 71 |
Dividends paid to non-controlling interests | (6) | | (5) |
Equity free cash flow | 135 | | 172 |
Lease principal repayments | (137) | | (116) |
Equity free cash flow after leases | (2) | | 56 |
(2) Revenue and Service Revenue Organic Growth
Revenue Organic Growth and Service Revenue Organic Growth are non-IFRS measures and are not uniformly or legally defined financial measures. Revenue Organic Growth and Service Revenue Organic Growth are not substitutes for IFRS measures in assessing our overall operating performance. Because Revenue Organic Growth and Service Revenue Organic Growth are not determined in accordance with IFRS, and are susceptible to varying calculations, Revenue Organic Growth and Service Revenue Organic Growth may not be comparable to other similarly titled measures presented by other companies.
Revenue Organic Growth and Service Revenue Organic Growth are included in this report because our management uses these measures to evaluate our core revenue generating performance from period to period, having eliminated (1) the impact of revenue from businesses acquired during the most recent period (such as Telefónica Móviles Panamá, S.A. and Telefonía Celular de Nicaragua, S.A. in 2019) and the contribution to revenue of businesses disposed of (such as Rwanda, Senegal in 2018 and Chad in 2019) during either period (“change in perimeter”), (2) currency fluctuations, and (3) other, which captures the net effect of small differences that result from calculating organic growth using different baselines for each period.
To eliminate the impact of currency fluctuations, we use recent U.S. dollar exchange rate data for the local non-U.S.-dollar currencies of the markets in which we operate to determine an estimated, or budgeted, exchange rate for such currencies. Revenues and service revenues in non-U.S.-dollar currencies from both the more recent period and the
corresponding period of the prior year are then translated into U.S. dollars at the same budgeted exchange rates. Revenue Organic Growth and Service Revenue Organic Growth have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for an analysis of our results as reported under IFRS.
The following table shows a reconciliation from reported growth on an IFRS basis to organic growth for revenue and service revenue for the Latin America segment:
| | | | | | | | | | | | | | | | | | | | | | | |
| Revenue | | Service Revenue |
| As of and for the year ended December 31, |
| 2021 | | 2020 | | 2021 | | 2020 |
Current period | 6,220 | | 5,843 | | 5,716 | | 5,377 |
Prior year period | 5,843 | | 5,964 | | 5,377 | | 5,514 |
Reported Growth | 6.4% | | (2.0)% | | 6.3% | | (2.5)% |
| | | | | | | |
Change in perimeter impact(i) | —% | | (3.9)% | | —% | | (4.0)% |
Foreign exchange impact(ii) | 0.3% | | 3.8% | | 0.3% | | 3.9% |
Other(iii) | 0.1% | | —% | | 0.1% | | 0.1% |
Organic Growth | 6.9% | | (2.1)% | | 6.7% | | (2.5)% |
i.The following change in perimeter impacts was eliminated to calculate revenue organic growth: a positive $235 million revenue impact in the year ended December 31, 2020 due to revenue generated by Telefonía Celular de Nicaragua, S.A., which was consolidated as of May 16, 2019, and Grupo de Comunicaciones Digitales S.A. (formerly Telefónica Móviles Panamá, S.A.), which we consolidated as of August 29, 2019. The following change in perimeter impacts was eliminated to calculate Service Revenue Organic Growth: a positive $218 million service revenue impact in the year ended December 31, 2020 due to service revenue generated by Telefonía Celular de Nicaragua, S.A., which was consolidated as of May 16, 2019, and Grupo de Comunicaciones Digitales S.A. (formerly Telefónica Móviles Panamá, S.A.), which we consolidated as of August 29, 2019.
ii.The following foreign exchange fluctuation impacts were eliminated to calculate revenue organic growth: a negative $18 million revenue impact in the year ended December 31, 2021, and a negative $226 million revenue impact in the year ended December 31, 2020. The following foreign exchange fluctuation impacts were eliminated to calculate Service Revenue Organic Growth: a negative $16 million service revenue impact in the year ended December 31, 2021, and a negative $212 million service revenue impact in the year ended December 31, 2020.
iii.The following other impacts related to re-basing all periods to the budget FX rates of the current year were eliminated to calculate revenue organic growth: a negative $8 million revenue impact in the year ended December 31, 2021, and a negative $3 million revenue impact in the year ended December 31, 2020. The following other impacts related to changes for comparative purposes were eliminated to calculate Service Revenue Organic Growth: a negative $7 million service revenue impact in the year ended December 31, 2021, and a negative $3 million service revenue impact in the year ended December 31, 2020.
Critical accounting policies
The preparation of our financial statements requires management to use judgment in applying accounting policies. 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 revenue and expenses during the reporting period. These estimates are based on management’s best knowledge of current events, actions and best estimates as of a specified date, and 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 financial statements are described in “Introduction— Judgments and critical estimates” in the notes to our audited consolidated financial statements, and in the notes referenced therein.
For a description of new or amended IFRS accounting standards to which we are subject, see “Introduction— New and amended IFRS accounting standards” in the notes to our audited consolidated financial statements.
B. Liquidity and Capital Resources
Overview
The Millicom Group’s sources of funds are cash from operations, internal and external financing as well as proceeds from the disposal of assets. The Millicom Group finances its operations centrally at the MIC S.A. level or alternatively, where it deems it more cost effective to do so, at the operational level.
In particular, we seek to finance the costs of deploying and expanding our fixed and mobile networks mainly at the operating level on a country-by-country basis, utilizing credit facilities provided by banks and finance leases, obtaining financing from the debt capital markets, and seeking funding from export credit agencies and development financial institutions such as the Inter-American Development Bank and the International Finance Corporation.
If we decide to acquire other businesses, we expect to fund these acquisitions from cash resources, borrowings under existing credit facilities, through new borrowings, including under new credit facilities or issuances of debt securities, and, if necessary, we may issue equity to raise funds.
As of December 31, 2021, $260 million of the Millicom Group’s cash and cash equivalents balance was at the holdings level and a further $635 million was at the operating subsidiaries level. As of December 31, 2020 and 2019, respectively, $305 million and $696 million of the Millicom Group’s cash and cash equivalents balance was at the holdings level and a further $570 million and $468 million was at the operating subsidiaries level.
If funds at the foreign operating subsidiaries level are repatriated, taxes on each type of repatriation and each country would need to be accrued and paid, where applicable.
As of December 31, 2021 and December 31, 2020, our total consolidated indebtedness excluding lease liabilities was $7,744 million and $5,691 million, respectively. As of December 31, 2019 our total consolidated outstanding debt and other financing was $5,972 million.
We believe that our available cash and cash equivalents, borrowings and funds from our operating subsidiaries will be sufficient to meet our projected operating and capital expenditure requirements for at least the next 12 months.
Cash repatriation
Progressive improvement in operating and financial performance of our operations has enabled the repatriation of excess cash to MIC S.A. This is accomplished through a combination of dividends, fees and shareholder loan repayments.
The following table sets forth cash repatriated to MIC S.A. from our subsidiaries and joint ventures for the periods presented:
| | | | | | | | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 | | 2019 |
| (U.S. dollars in millions) |
Subsidiaries | 556 | | | 392 | | | 346 | |
Joint ventures | 49 | | | 98 | | | 261 | |
Total | 605 | | | 490 | | | 606 | |
In each case, the repatriated cash was principally used to cover corporate center expenses, service corporate debt, pay corporate center taxes and pay the group dividend.
Some of our operating subsidiaries and joint ventures have covenants on debt outstanding that impose restrictions on their ability to upstream cash to MIC S.A. As a result of these restrictions, significant cash or cash equivalent balances may be held from time to time at our operating subsidiaries and joint ventures.
Cash flows
Set forth below is a comparative discussion of our cash flows, which includes cash flows from discontinued operations.
Years ended December 31, 2021 and 2020
For the year ended December 31, 2021, cash provided by operating activities was $956 million, compared to $821 million for the year ended December 31, 2020. The increase is mainly due to lower working capital during the year ended December 31, 2021 compared to the year ended December 31, 2020.
Cash used in investing activities was $2,703 million for the year ended December 31, 2021, compared to $495 million for the year ended December 31, 2020. In the year ended December 31, 2021, Millicom used $2,000 million in the acquisition of subsidiaries, $740 million to purchase property, plant and equipment and $135 million to purchase intangible assets and licenses, and these items were partially offset by proceeds of $13 million in dividends from joint ventures, $30 million from the disposal of subsidiaries, $163 million from the disposal of equity investments and $11 million from the sale of property, plant and equipment such as towers. Cash used in investing activities was $495 million for the year ended December 31, 2020. In the year ended December 31, 2020, Millicom used $10 million in the acquisition of subsidiaries, net of cash acquired (mobile operations in Panama and Nicaragua), $622 million to purchase property, plant and equipment and $202 million to purchase intangible assets and licenses, and these items were partially offset by proceeds of $71 million in dividends from joint ventures, $10 million from the disposal of subsidiaries, $197 million from disposal of equity investments and $9 million from the sale of property, plant and equipment such as towers.
Cash provided by financing activities was $1,777 million for the year ended December 31, 2021, compared to cash used by financing activities of $598 million for the year ended December 31, 2020. In the year ended December 31, 2021, we paid no dividends, used $50 million for share repurchases, and repaid debt of $1,335 million and lease capital of $137 million while raising funds of $3,113 million through new financing. In the year ended December 31, 2020, we paid no dividends and repaid debt of $1,744 million and lease capital of $116 million while raising funds of $1,470 million through new financings.
Years ended December 31, 2020 and 2019
For the year ended December 31, 2020, cash provided by operating activities was $821 million, compared to $801 million for the year ended December 31, 2019. The increase is mainly due to lower working capital during the year ended December 31, 2020 compared to the year ended December 31, 2019
Cash used in investing activities was $495 million for the year ended December 31, 2020, compared to $1,502 million for the year ended December 31, 2019. In the year ended December 31, 2020, Millicom used $10 million in the acquisition of subsidiaries, $622 million to purchase property, plant and equipment and $202 million to purchase intangible assets and licenses, and these items were partially offset by proceeds of $71 million in dividends from joint ventures, $10 million from the disposal of subsidiaries, $197 million from the disposal of equity investments and $9 million from the sale of property, plant and equipment such as towers. Cash used in investing activities was $1,502 million for the year ended December 31, 2019. In the year ended December 31, 2019, Millicom used $1,014 million in the acquisition of subsidiaries, net of cash acquired (mobile operations in Panama and Nicaragua), $736 million to purchase property, plant and equipment and $171 million to purchase intangible assets and licenses. These items were partially offset by proceeds of $237 million in dividends from joint ventures, $111 million from the disposal of subsidiaries (mainly Chad), $25 million from the disposal of equity investments and $24 million from the sale of property, plant and equipment such as towers.
Cash used in financing activities was $598 million for the year ended December 31, 2020, compared to cash provided by financing activities of $1,355 million for the year ended December 31, 2019. In the year ended December 31, 2020, we paid no dividend, used $10 million for share repurchases, and repaid debt of $1,744 million and lease capital of $116 million while raising funds of $1,470 million through new financing. In the year ended December 31, 2019, we paid $268 million to shareholders in dividends (ordinary dividend of $2.64 per share) and repaid debt of $1,157 million and lease capital of $107 million while raising funds of $2,900 million through new financing.
Capital expenditures
Historical capital expenditures
Our capital expenditures of property, plant and equipment, licenses and other intangibles on a consolidated basis and by operating segment, including accruals for such additions at the end of the periods, for the years ended December 31, 2021, 2020, and 2019 are set out in the table below. Our capital expenditure mainly relates to the growth of the 4G network, the rollout of the HFC network, connection of new homes, IT investments and spectrum.
| | | | | | | | | | | | | | | | | |
| December 31 |
| 2021 | | 2020 | | 2019 |
| (U.S. dollars in millions) |
Additions to property, plant and equipment | 787 | | | 649 | | | 719 | |
Additions to licenses and other intangibles | 164 | | | 520 | | | 202 | |
Total consolidated additions | 951 | | | 1,169 | | | 921 | |
Latin America segment total additions (including Guatemala and Honduras) | 1,161 | | | 1,445 | | | 1,119 | |
Africa segment total additions | 41 | | | 41 | | | 54 | |
Capital expenditure commitments
As of December 31, 2021, we had commitments to purchase network equipment, land and buildings and other fixed assets with a value of $761 million from a number of suppliers, of which $428 million was within one year and $333 million more than one year. Out of these commitments, $41 million relate to the Company’s share in joint ventures ($41 million within one year). We expect to meet these commitments from our current cash balance and from cash generated from our operations.
Financing
We seek to finance our operations on a country-by-country basis when we determine it to be more cost and risk effective. As local financial markets become more developed, we have been able to finance increasingly at the level of our operations in local currency and on a non-recourse basis to MIC S.A. As of December 31, 2021, 48% ($3,724 million) of our total consolidated debt excluding lease liabilities of $7,744 million was at the operational level (excluding our Honduras joint venture) and non-recourse to MIC S.A., and 38% of this debt was denominated in local currency. In addition, as of December 31, 2021 our joint venture in Honduras had $279 million of debt excluding lease liabilities which was non-recourse to MIC S.A., and our operations in Guatemala were fully consolidated.
Consolidated indebtedness
Millicom’s total consolidated debt excluding lease liabilities as of December 31, 2021 was $7,744 million (December 31, 2020: $5,691 million) and our total consolidated net debt (representing total consolidated debt after deduction of cash, cash equivalents, and pledged deposits) was $6,814 million (December 31, 2020: $4,816 million).
Including lease liabilities, Millicom's total consolidated financial obligations as of December 31, 2021 were $8,911 million (December 31, 2020: $6,711 million) and our total consolidated net financial obligations (representing total consolidated financial obligations after deduction of cash, cash equivalents, and pledged deposits) were $7,981 million (December 31, 2020: $5,837 million).
See note C.6. to our audited consolidated financial statements included elsewhere in this Annual Report for a reconciliation of total consolidated debt (and financial obligations) to total consolidated net debt (and financial obligations). Our consolidated interest and other financial expenses for the year ended December 31, 2021 were $531 million and for the years ended December 31, 2020 and 2019 were $624 million and $564 million, respectively.]
Millicom's lease liabilities as of December 31, 2021 were $1,167 million. 98% of our consolidated lease liabilities or $1,148 million, was at operational level (excluding our joint venture in Honduras) and non-recourse to MIC S.A.
The following table sets forth our consolidated debt and financing by entity or operational entity location for the periods indicated:
| | | | | | | | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 | | 2019 |
| (US$ millions) |
MIC S.A. (Luxembourg) | 4,020 | | | 2,504 | | | 2,773 | |
Latin America: | | | | | |
Guatemala (i) | 605 | | | — | | | — | |
Colombia | 802 | | | 803 | | | 827 | |
Paraguay | 751 | | | 738 | | | 502 | |
Bolivia | 310 | | | 337 | | | 350 | |
El Salvador | 100 | | | 118 | | | 268 | |
Costa Rica | 121 | | | 119 | | | 148 | |
Panama | 846 | | | 869 | | | 918 | |
Africa: | | | | | |
Tanzania | 189 | | | 203 | | | 186 | |
Total debt and financing | 7,744 | | | 5,691 | | | 5,972 | |
(i) Fully consolidated as a subsidiary from November 12, 2021. Debt and financing at the Guatemala joint venture at December 31, 2020 and 2019 was $413 million and $929 million, respectively. In 2020, our Guatemala joint venture redeemed $800 million aggregate principal amount of its 6.875% Senior Notes due 2024, funding this prepayment with a mix of cash, new local currency bank loans totaling approximately $284 million, and shareholder loans.
For a more detailed description of our outstanding financial obligations, including our credit facilities and outstanding bond or note issuances, see note C.3. to our audited consolidated financial statements.
Our financing facilities at the MIC S.A. level are subject to a number of financial covenants including net leverage and interest coverage requirements. In addition, certain financings at the MIC S.A. level contain restrictions on sale of businesses or significant assets within the businesses.
Our financing facilities at the operational level are subject to a number of financial covenants including requirements with respect to net leverage, debt service coverage, debt to earnings and cash levels. In addition, certain financings at the operational level contain restrictions on sale of businesses or significant assets within the businesses.
Indebtedness of joint ventures
With respect to the Honduras joint venture, total debt excluding lease liabilities as of December 31, 2021 was $279 million. As of December 31, 2021, our joint venture in Honduras had lease liabilities of $61 million. The total net debt (representing total debt after deduction of cash, cash equivalents, and pledged deposits) was $301 million. Annual interest expense for the Honduras joint venture for the years ended December 31, 2021, 2020 and 2019 was $34 million, $24 million and $37 million, respectively.
The following table sets forth the debt and financing of the Honduras joint venture for the periods indicated:
| | | | | | | | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 | | 2019 |
| (US$ millions) |
Honduras | 340 | | | 337 | | | 353 | |
The financing facilities of the Honduras joint venture are subject to a number of financial covenants such as net leverage requirements. In addition, certain of their financings contain restrictions on sale of businesses or significant assets within the businesses.
With respect to our operations in Guatemala (former joint venture, see note A.1.2. to our audited consolidated financial statements) interest expense for the period ended November 12, 2021, and the years ended December 31, 2020 and December 31, 2019 was $52 million, $114 million and $90 million, respectively.
Off-Balance Sheet Arrangements
As of December 31, 2021, the Millicom Group’s share of total debt and financing secured by either pledged assets, pledged deposits issued to cover letters of credit, or guarantees issued was $300 million. Assets pledged by the Millicom Group for these debts and financings amounted to $35 million as of December 31, 2021. The table below details the maximum exposure under these guarantees and their remaining terms, as of December 31, 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | Less than 1 year | | 1-3 years | | 3-5 years | | |
| (US$ millions) |
Theoretical maximum exposure | 300 | | | 71 | | | 6 | | | 223 | | | |
Tabular Disclosure of Contractual Obligations
The Millicom Group has various contractual obligations to make future payments, including debt agreements and payables for license fees and lease obligations.
The following table summarizes our obligations under these contracts due by period as of December 31, 2021.
| | | | | | | | | | | | | | | | | | | | | | | |
| Total | | Less than 1 year | | 1–5 years | | After 5 years |
| | (US$ millions) | | |
Debt and financing (after unamortized financing fees) | 7,744 | | | 1,840 | | | 2,294 | | | 3,610 | |
Future interest commitments on debt and financing(1) | 1,524 | | | 340 | | | 1,086 | | | 98 | |
Lease liabilities | 1,167 | | | 171 | | | 591 | | | 404 | |
Future interest commitments on leases | 704 | | | 144 | | | 380 | | | 179 | |
Capital expenditure | 761 | | | 428 | | | 333 | | | — | |
Total | 11,900 | | | 2,924 | | | 4,685 | | | 4,291 | |
(1) Future interest commitments on our floating rate debt are calculated using the rates in effect for the floating rate debt as of December 31, 2021.
C. Research and Development, Patents and Licenses, etc.
We do not engage in research and development activities, and we do not own any patents.
D. Trend Information
For a discussion of trend information, see “—A. Operating Results—Factors affecting our results of operations.” and “—A. Operating Results—Factors affecting comparability of prior periods."
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
Directors
The following table sets forth information of each member of the Company’s Board of Directors as of the date of this filing:
| | | | | | | | | | | | | | |
Name | | Position | | Year First Elected |
Mr. José Antonio Ríos García (1) | | Chairman | | 2017 |
Ms. Pernille Erenbjerg | | Deputy Chair | | 2019 |
Mr. Odilon Almeida | | Member | | 2015 |
Mr. Bruce Churchill | | Member | | 2021 |
Ms. Sonia Dulá | | Member | | 2021 |
Mr. Lars-Johan Jarnheimer | | Member | | 2021 |
Ms. Mercedes Johnson | | Member | | 2019 |
Mr. Mauricio Ramos | | Member | | 2020 |
Mr. James Thompson | | Member | | 2019 |
(1) First appointed as Chairman in January 2019.
Biographical information of each member of the Company’s Board of Directors is set forth below.
Mr. José Antonio Ríos García, Non-executive Director and Chairman of the Board. Mr. José Antonio Ríos García was re-elected to the Board in May 2021 and was first appointed as Chairman of the Board on January 7, 2019. Mr. Ríos, born in 1945, is a proven global business executive with over 30 years of sustained leadership at key multinational companies such as Millicom, Global Crossing (Lumen Technologies), Telefónica S.A., Hughes Electronics, DirecTV and the Cisneros Group of Companies. Until September 2020, he was the Chairman and CEO of Celistics Holdings, a leading mobile payment platform and cellular top-up distribution business, providing intelligent solutions for the consumer electronic technology industry across Latin America. Prior to joining Celistics, Mr. Ríos was the founding President and CEO of DirecTV Latin America (GLA), and the International President of Global Crossing, the telecommunications company later acquired by Level 3 Communications, and then merged with Lumen Technologies. Mr. Ríos holds an Industrial Engineering degree from the Universidad Católica Andrés Bello, Caracas, Venezuela.
Ms. Pernille Erenbjerg, Non-executive Director, Deputy Chair of the Board, and Chair of the Compensation Committee . Ms. Pernille Erenbjerg was re-elected to the Board in May 2021. Ms. Erenbjerg, born in 1967, is formerly the President and Group Chief Executive Officer of TDC, the leading provider of integrated communications and entertainment solutions in Denmark and Norway. Previously, Ms. Erenbjerg served as TDC’s Chief Financial Officer and as Executive Vice President of Corporate Finance and also served on the Board and Audit Committee of Nordea, the largest financial services group in the Nordic region. Prior to joining TDC in 2003, Ms. Erenbjerg worked for 16 years in the auditing industry, finishing in 2003 as an equity partner in Deloitte. Currently, Ms Erenbjerg is also a Board member of Genmab, the Danish international biotechnology company. Ms. Erenbjerg holds an M.Sc. in Business Economics and Auditing from Copenhagen Business School.
Mr. Odilon Almeida, Non-executive Director, Chairman of the Compliance and Business Conduct Committee. Mr. Odilon Almeida was re-elected to the Board in May 2021. Mr. Almeida, born in 1961, is a senior global leader in the financial, fin-tech, telecom, and consumer goods sectors. He is the President and CEO of ACI Worldwide Inc., a global leader in electronic payment systems, where he also serves as an Executive Director. Previously, he was President of Western Union Global Money Transfer, and Operating Partner at Advent International, one of the world’s largest private equity funds. He also held various roles including BankBoston (now Bank of America), The Coca-Cola Company and Colgate-Palmolive. Mr. Almeida holds a Bachelor of Civil Engineering degree from the Maua Engineering School in São Paulo, Brazil, a Bachelor of Business Administration degree from the University of São Paulo and an M.B.A. with specialization in Marketing from the Getulio Vargas Foundation, São Paulo. He advanced his education with executive studies at IMD Lausanne, The Wharton School, and Harvard Business School.
Mr. Bruce Churchill, Non-executive Director, Member of the Audit Committee. Mr. Churchill was elected to the Board in May 2021. Mr. Churchill was born in 1957 and also serves on the Board of Wyndham Hotels and Resorts. Previously, he was the President of DIRECTV Latin America LLC from 2004 to 2015 and served as Chief Financial Officer of DIRECTV from January 2004 to March 2005. Prior to joining DIRECTV, he served as President and Chief Operating Officer of STAR TV. He also served as a Non-Executive Director on the Board of Computer Sciences Corp from 2014 to 2017. Mr. Churchill has over 30-years of operational and strategy experience in the media industry, the latter part of which was gained from senior management roles in Latin America. Mr. Churchill holds an M.B.A. from Harvard Business School and a B.A. in American Studies from Stanford University.
Ms. Sonia Dulá, Non-executive Director, Member of the Audit Committee and Compliance and Business Conduct Committee. Ms. Dulá was elected to the Board in May 2021. She was born in 1961 and currently serves as an independent director on the boards of Hemisphere Media, Acciona S.A. and Huntsman Corporation. Previously she served as Vice Chairman, Latin America at Bank of America Merrill Lynch, and formerly as Head of Wealth Management, and Head of Corporate and Investment Banking. She has held many executive management positions during her career, including with Grupo Latino de Radio, Internet Group of Brasil, and Telemundo Studios Mexico. She began her career as an investment banker at Goldman Sachs, rising to leadership positions. Ms. Dulá holds an M.B.A. from the Stanford Graduate School of Business, and a B.A. in Economics, Magna Cum Laude, from Harvard University.
Mr. Lars-Johan Jarnheimer , Non-executive Director, member of the Compensation Committee. Mr. Jarnheimer was elected to the Board of Millicom in May 2021. He was born in 1960 and currently serves as Chairman of the Board of Telia Company, a telecommunications group with presence in Nordic and eastern European countries, Chairman of the Board of INGKA Holding B.V. (Ikea), and Chairman of Egmont, a Nordic leading media company, among others. He has extensive experience in various boards of Scandinavian companies, as well as having held CEO and managing director positions in the telecommunications and media industries, including at Tele 2 and Comviq GSM. Mr. Jarnheimer holds a B.Sc. in Business Administration and Economics from Lund and Växjö University.
Ms. Mercedes Johnson, Non-executive Director and Chair of the Audit Committee and member of the Compliance and Business Conduct Committee. Ms. Johnson was re-elected to the Board in May 2021. Ms. Johnson, born in 1954, also serves on the Board of Directors of three other NASDAQ or NYSE listed technology companies - Synopsys, a provider of solutions for designing and verifying advanced silicon chips, Teradyne, a developer and supplier of automated semiconductor test equipment and Analog Devices, a multinational semiconductor company specializing in data conversion, signal processing and power management technology. During her executive career, Ms. Johnson held positions such as Chief Financial Officer of Avago Technologies (now Broadcom) and Chief Financial Officer of LAM Research Corporation. Ms. Johnson holds a degree in Accounting from the University of Buenos Aires.
Mr. Mauricio Ramos, Executive Director and Chief Executive Officer. Mr. Mauricio Ramos, born in 1968, joined Millicom in April 2015 as CEO and was re-elected as an Executive Director in May 2021. Before joining Millicom, he was President of Liberty Global’s Latin American division, a position he held from 2006 until February 2015. During his career at Liberty Global, Mr. Ramos held several leadership roles, including positions as Chairman and CEO of VTR in Chile and President of Liberty Puerto Rico. Mr. Ramos is also a member of the Board of Directors of Charter Communications (US). Currently, Mr. Ramos also serves as (i) a Member of the Board of Directors of Charter Communications (US), (ii) Chair of the Digital Communications Industry Community (World Economic Forum), (iii) Chair of the US Chamber’s US-Colombia Business Council (USCBC), and (iv) Commissioner at the Broadband Commission for Sustainable Development. He received a degree in Economics, a degree in Law, and a postgraduate degree in Financial Law from Universidad de los Andes in Bogota.
Mr. James Thompson, Non-executive Director, Member of the Audit Committee and of the Compensation Committee. Mr. Thompson was re-elected to the Board in May 2021. Mr. Thompson, born in 1961, is a private investor of Kingfisher
Single Family Office. He is also a non-executive Director of C&C Group plc and serves on its audit committee. Previously, he was a Managing Principal at Southeastern Asset Management. Between 2001 and 2006, he opened and managed Southeastern Asset Management’s London research office. Mr. Thompson holds an MBA from the Darden School at the University of Virginia, and a Bachelor’s degree in Business Administration from the University of North Carolina.
| | | | | | | | | | | | | | |
Board Diversity Matrix (As of December 31, 2021) |
| | | | |
Country of Principal Executive Offices “Home Country”: | Luxembourg |
Foreign Private Issuer | Yes |
Disclosure Prohibited Under Home Country Law | No |
Total Number of Directors | 9 |
| Female | Male | Non-Binary | Did Not Disclose Gender |
| | | | |
Part I: Gender Identity |
Directors | 3 | 6 | 0 | 0 |
| | | | |
Part II: Demographic Background |
Underrepresented Individual in Home Country Jurisdiction | 6 |
LGBTQ+ | 0 |
Did Not Disclose Demographic Background | 0 |
| | | | |
Members of the Executive Team
The following table lists the names and positions of the members of our Executive Team.
| | | | | | | | |
Name | | Position |
Mr. Mauricio Ramos | | Executive Director and Chief Executive Officer |
Mr. Tim Pennington | | Senior Executive Vice President, Chief Financial Officer |
Mr. Sheldon Bruha | | Senior Executive Vice President, Incoming Chief Financial Officer |
Ms. Susy Bobenrieth | | Executive Vice President, Chief Human Resources Officer |
Mr. Salvador Escalón | | Executive Vice President, Chief Legal and Compliance Officer |
Mr. Esteban Iriarte | | Executive Vice President, Chief Operating Officer, Latin America |
Mr. Karim Lesina | | Executive Vice President, Chief External Affairs Officer |
Mr. Xavier Rocoplan | | Executive Vice President, Chief Technology and Information Officer |
Biographical information of the members of our Executive Team is set forth below.
Mr. Tim Pennington, Senior Executive Vice President, Chief Financial Officer. Mr. Tim Pennington, born in 1960, joined Millicom in June 2014 as Senior Executive Vice President, Chief Financial Officer. He also currently serves as a non-executive director of Euromoney Institutional Investor plc. Previously, he was the Chief Financial Officer at Cable & Wireless Communications plc, Group Finance Director for Cable & Wireless plc and, prior to that, CFO of Hutchison Telecommunications International Ltd, based in Hong Kong. Mr. Pennington was also Finance Director of Hutchison 3G (UK), Hutchison Whampoa’s British mobile business. He also has corporate finance experience, firstly as a Director at Samuel Montagu & Co. Limited, and then as Managing Director of HSBC Investment Bank within its Corporate Finance and Advisory Department. He has a B.A. (Honours) in Economics and Social Studies from the University of Manchester. He will be stepping down from his role of Chief Financial Officer on April 1, 2022.
On April 1, 2022, Mr. Sheldon Bruha will assume the role of Chief Financial Officer. He will succeed Mr. Pennington as Millicom’s Chief Financial Officer following an orderly transition of duties through December 31, 2022. Mr. Bruha’s biographical information is set forth below.
Mr. Sheldon Bruha, Executive Vice President, Incoming Chief Financial Officer. Mr. Bruha, born in 1967, joined Millicom in January 2022 as Executive Vice President, Incoming Chief Financial Officer. Prior to joining Millicom, he was the Chief Financial Officer at Frontier Communications, one of the largest fixed-line communication providers in the United States, where he successfully helped navigate the business through its financial restructuring. Prior to joining Frontier, he held several senior financial leadership roles at Cable & Wireless plc, including head of corporate
development, where he led the strategic transformation and re-shaping of the company prior to its sale to Liberty Latin America. He also held senior financial leadership roles at CDI Corp. Mr. Bruha started his career at Lehman Brothers and held senior investment banking positions in its New York and London offices, focusing on the telecommunications industry. He has a a Bachelor of Science (Honors) degree in Business Administration from Washington University.
Ms. Susy Bobenrieth, Executive Vice President, Chief Human Resources Officer. Ms. Susy Bobenrieth, a global Human Resource professional, born in 1965, joined Millicom in October 2017 with over 25 years of experience in major multi-national companies that include Nike Inc., American President Lines and IBM. As an ex-Nike Executive, she has extensive international knowledge and proven results in leading large scale organizational transformations, driving talent management agenda and leading teams. She is passionate about building great businesses and winning with high performing teams. Ms. Bobenrieth has deep international experience having lived and worked in Mexico, USA, Brazil, Netherlands, and Spain. She received a degree from the University of Maryland, University College in 1989.
Mr. Salvador Escalón, Executive Vice President, Chief Legal and Compliance Officer. Mr. Salvador Escalón, born in 1975, was appointed as Millicom’s General Counsel in March 2013, became Executive Vice President in July 2015, and became Chief Legal and Compliance Officer in 2020. Mr. Escalón leads Millicom’s Legal, Ethics and Compliance team and advises the Board of Directors and senior management on legal, compliance, and governance matters. He joined Millicom as Associate General Counsel Latin America in April 2010. From January 2006 to March 2010, Mr. Escalón was Senior Counsel at Chevron Corporation, with responsibility for legal matters relating to Chevron’s downstream operations in Latin America. Previously, he was in private practice at the law firms Skadden, Morgan Lewis and Akerman. Mr. Escalón has a J.D. from Columbia Law School and a B.B.A. in Finance and International Business from Florida International University.
Mr. Esteban Iriarte, Executive Vice President, Chief Operating Officer, Latin America. Mr. Esteban Iriarte, born in 1972, was appointed as Executive Vice President, Chief Operating Officer (COO), Latin America in August 2016. Previously, Mr. Iriarte was General Manager of Millicom’s Colombian businesses where, in 2014, he led the merger and integration of Tigo and the fixed-line company UNE. Prior to leading Tigo Colombia, Mr. Iriarte was head of Millicom’s regional Home and B2B divisions. From 2009 to 2011, he was CEO of Amnet, a leading service provider in Central America for broadband, cable TV, fixed line and data services that was bought by Millicom in 2008. In 2016 Mr. Iriarte joined the board of Sura Asset Management. Sura is one of Latin America’s biggest financial groups. Mr. Iriarte received a degree in Business Administration from the Pontificia Universidad Católica Argentina “Santa María de los Buenos Aires," and an M.B.A. from the Universidad Austral in Buenos Aires.
Mr. Karim Lesina, Executive Vice President, Chief External Affairs Officer. Mr. Karim Lesina, born in 1975, joined Millicom in November 2020. Before joining Millicom, between 2007 and 2020, Mr. Lesina held among others the position of Senior Vice President, International External and Regulatory Affairs at AT&T, directing the internal international and regulatory affairs teams, as well as the external and regulatory affairs teams across four international affiliates: Turner, Warner Media, AT&T Latin America and DirecTV. Prior to his term at AT&T, from 2005 to 2007, Mr. Lesina worked in the corporate affairs team at Intel as the Government Affairs Manager for Europe, Africa and the Middle East. Mr. Lesina began his career at multinational public relations and communications firms. Born in Dakar (Senegal) Mr. Lesina is an Italian-Tunisian national and has a master’s degree in Economics of Development from the Catholic University of Louvain-la-Neuve.
Mr. Xavier Rocoplan, Executive Vice President, Chief Technology and Information Officer. Mr. Xavier Rocoplan, born in 1974, started working with Millicom in 2000 and joined the Executive Team as Chief Technology and IT Officer in December 2012. Mr. Rocoplan is currently heading all mobile and fixed network and IT activities across the Group as well as all Procurement & Supply Chain. Mr. Rocoplan first joined Millicom in 2000 as CTO in Vietnam and subsequently for South East Asia. In 2004, he was appointed CEO of Millicom’s subsidiary in Pakistan (Paktel), a role he held until mid-2007. During this time, Mr. Rocoplan launched Paktel’s GSM operation and led the process that was concluded with the disposal of the business in 2007. He was then appointed as head of Corporate Business Development, where he managed the disposal of various Millicom operations (e.g. Asia), the monetization of Millicom infrastructure assets (towers) as well as numerous spectrum acquisitions and license renewal processes in Africa and in Latin America. Mr. Rocoplan holds master's degrees in engineering from Ecole Nationale Supérieure des Télécommunications de Paris and in economics from Université Paris IX Dauphine.
B. Compensation
For the financial year ended December 31, 2021, the total compensation paid to MIC S.A.’s directors was $1.6 million and to the CEO and CFO the total cash compensation plus benefits (excluding pension) was $5.2 million. The total amounts set aside or accrued by Millicom to provide pension, retirement or similar benefits for the directors, CEO and CFO was $0.4 million.
The Company provides information on the individual compensation of its directors and certain members of its executive management in its annual report filed with the Registre de Commerce et des Sociétés (Luxembourg Trade and Companies Register), the Société de la Bourse de Luxembourg S.A. (Luxembourg Stock Exchange) and the Commission de Surveillance du Secteur Financier (CSSF). As that annual report is made publicly available, the relevant individual compensation information it contains for directors and executive management is included below.
Remuneration of Directors
The remuneration of the non-executive members of the Board of Directors comprises an annual fee and shares of MIC S.A. Director remuneration is proposed by the Nomination Committee and approved by the shareholders at the AGM or other shareholders’ meetings.
At the AGM held on May 4, 2021, MIC S.A.’s shareholders approved the compensation for the eight non-executive directors expected to serve from that date until the 2022 AGM consisting of two components: (i) cash-based compensation and (ii) share-based compensation. The share-based compensation is in the form of fully paid-up shares of MIC S.A. Such shares are provided from the Company’s treasury shares or alternatively issued within MIC S.A.’s authorized share capital exclusively in exchange for the allocation from the premium reserve (i.e., for nil consideration from the relevant directors), in each case divided by the average Millicom closing share price on the Nasdaq in the US for the three-month period ending April 30, 2021, or US$38.41 per share, provided that shares shall not be issued below the par value.
In respect of directors who do not serve an entire term from the 2020 AGM until the 2021 AGM, the fee-based and the share-based compensation is pro-rated pro rata temporis.
Director remuneration for the year ended December 31, 2021 is set forth in the following table.
| | | | | | | | |
Board and committees | | Remuneration 2021 (1) |
| | (USD '000) |
Non-Executive Directors | | |
| | |
Mr. José Antonio Ríos García | | 300 | |
Ms. Pernille Erenbjerg | | 250 | |
Mr. Odilon Almeida | | 175 | |
Mr. Bruce Churchill | | 173 | |
Ms. Sonia Dulá | | 185 | |
Mr. Lars-Johan Jarnheimer | | 163 | |
Ms. Mercedes Johnson | | 208 | |
Mr. James Thompson | | 185 | |
| | |
Total | | 1,638 | |
(1) Remuneration covers the period from May 4, 2021 to the date of the AGM in May 2022 as resolved at the shareholder meeting on May 4, 2021. Share-based compensation for the period from May 4, 2021 to May 2022 was calculated by dividing the approved remuneration by the average Millicom closing share price on the Nasdaq in the US for the three-month period ending April 30, 2021 and represented a total of 24,737 shares. Total remuneration for the period from May 4, 2021 to May 2022 after deduction of applicable withholding tax at source comprised 73% in shares and 27% in cash.
Remuneration of Executive Management
1.Compensation Committee’s Report
This report describes the remuneration philosophy, and related policy and guidelines, as well as the governance structures and processes in place. It also sets out the remuneration of Directors, as well as compensation of global senior management for the current and prior financial reporting years.
1.1 Role of the Compensation Committee
The Compensation Committee monitors and evaluates (i) programs for variable remuneration to senior management, including both ongoing programs and those that have ended during the year; (ii) the application of the guidelines for remuneration to the Board and senior management established at the shareholders' meeting; and (iii) the current remuneration structures and levels in the Company. The Compensation Committee makes recommendations to the Board regarding the compensation of the CEO and his direct reports; approves all equity plans and grants; and manages Executive Team succession planning. Final approval of the CEO remuneration requires Board approval.
The evaluation of the CEO is conducted by the Compensation Committee. The evaluation criteria and the results of the evaluation are then discussed by the Chairman with the entire Board. In 2021, the Board concluded that the CEO provided exceptional leadership in helping the Company take advantage of the recovery market opportunity and exceeding all financial and operational targets for the year. In evaluating his performance, the Board took into account the manner in which he rapidly refocused the business from revenue growth to protecting customers, employees and cash flow. Together with meeting the financial targets discussed below, the CEO received $2,164,230 in cash and $2,164,230 granted in deferred shares that vest over three years for the Company's 2021 performance. The Chairman of the Board conveyed the results of the review and evaluation to the CEO. The Senior Management Remuneration Policy was approved by the shareholders at the AGM in May 2021, and will be presented for approval at the AGM to be held in May 2022.
1.2 Compensation Committee Charter
The Group’s Compensation Committee Charter can be found on our website under the Board Committees section and covers overall purpose/objectives, committee membership, committee authority, and responsibility, and the committee’s performance evaluation.
1.3 Compensation Committee Membership and Attendance 2021
| | | | | | | | | | | | | | |
Committee | Position | First Appointment | Meeting Attendance | % |
Ms. Pernille Erenbjerg | Chairman | January-19 | 5 of 5 | 100 |
Mr. Lars-Johan Jarnheimer | Member | May-21 | 3 of 3 | 100 |
Mr. James Thompson | Member | January-19 | 5 of 5 | 100 |
Attendance | | | 13 of 13 | 100 |
Mr. Lars-Åke Norling | Former Member | May-19 | 2 of 2 | 100 |
Overall Attendance | 15 of 15 | 100 |
In addition, the Chairman of the Board, Mr. José Antonio Ríos García, attended all of the regularly scheduled meetings of the Compensation Committee.
1.4 Areas Covered in 2021
The Compensation Committee met five times in 2021 and was primarily focused on reward and management motivation and retention in the face of the unprecedented operating environment.
| | | | | |
Topic | Commentary |
Bonus (STI) and performance reports | Reviewed and approved the Global Senior Management Team's 2020 performance reports and individual Executive Team payouts for STI/LTI (cash /equity). |
| Reviewed and approved 2021 short-term variable compensation targets. |
| |
Compensation review | Approved all payments for Executive Team members. |
| Reviewed executive remuneration and governance trends and developments. |
| | | | | |
| Reviewed and approved the peer group for the Executive Team benchmarking. |
| Approved changes to CEO and Executive Team compensation elements based on market competitiveness. |
| |
Share-based incentive plans | Approved the 2018 LTI (PSP) vesting. |
| Reviewed and approved all equity grants. |
| Reviewed and approved the 2021 share units plan (DSP and PSP) rules. |
| Reviewed and approved the 2021 long-term variable compensation targets. |
| Approved the one-off Market Stock Units (MSU) long-term incentive plan for a selected group of employees. |
| Reviewed the replenishment of the treasury share balance reserved for share-based incentive plans. |
| Reviewed share ownership guidelines and the compliance of each covered employee. |
| Reviewed performance and projections of outstanding LTI plans (2019, 2020 and 2021). |
| Reviewed equity plans participant turnover. |
| |
Global reward strategy and executive remuneration review | Reviewed remuneration/C&B philosophy and strategy. |
| |
Variable pay design | Discussed and approved STI and LTI design for 2022. |
| Reviewed and approved STI and LTI performance measures for 2022. |
| |
Other | Reviewed and approved exceptional items, new hire equity grants, etc. |
| Reviewed Executive Team’s severance payouts in a change of control. |
| Reviewed and discussed results of 2022 "Say on Pay." |
| Reviewed changes to the Swedish Corporate Governance Code. |
| |
Compensation Committee governance | Reviewed and approved the Compensation Committee annual meeting cycle and calendar. |
| Reviewed the Compensation Committee Charter. |
| Updated Executive Compensation dashboard. |
| Reviewed and approved the use of an external compensation consultant. |
2. Our Compensation Philosophy and Core Principles
The philosophy, guidelines, objectives, and policy applicable to remuneration of the Global Senior Management Team were approved by the shareholders (item 22) of the AGM held on May 4, 2021.
2.1 Core Principles
The Compensation Committee worked using the following objectives for the Global Senior Management Team's compensation.
| | | | | |
What we strive for | What it means |
Competitive and fair | Levels of pay and benefits to attract and retain the right people. |
Drive the right behaviors | Reward policy and practices that drive behaviors supporting our Company strategy and business objectives. |
Shareholder alignment | Variable compensation plans that support a culture of entrepreneurship and performance, and incorporate both short-term and longer-term financial and operational metrics strongly correlated to the creation of shareholder wealth. Long-term incentives are designed to maintain sustained commitment and ensure the interests of our Global Senior Management Team are aligned with those of our shareholders. |
Pay for performance | Total reward structured around pay in line with performance, providing the opportunity to reward strong corporate and individual performance. A significant proportion of top management's compensation is variable (at risk) and based on measures of personal and Company performance directly attributable to short-term and longer-term value creation. |
Transparency | Millicom is committed to expanding external transparency, including disclosure around pay for performance, links to value creation etc. We are also investing in HR information systems to facilitate measurement and internal communications related to incentive composition including performance metrics, pay equity, goal setting, and pay-for-performance relationships. |
Market competitive and representative remuneration | Compensation is designed to be market competitive and representative of the seniority and importance of roles, responsibilities and geographical locations of individuals (with the majority of the Global Senior Management Team roles located in the U.S.) |
Retention of key talent | Variable compensation plans include a significant portion of share based compensation, the payout of which is conditional on future employment with the Company for three-year rolling periods, starting on the grant date. |
Executive management to be "invested" | The Global Senior Management Team, through Millicom’s share ownership guidelines, is required to reach and maintain a significant level of personal ownership of Millicom shares. |
To drive the right behaviors and ensure expectations are aligned, we communicate clearly to our employees what we do and do not do when it comes to compensation. A summary is set out in the table below:
| | | | | |
What we do | What we don't do |
Align pay and performance. | Create special executive prerequisites. |
Designate a substantial majority of executive pay as at risk, based on a mix of absolute and relative financial and share price performance metrics. | Hedge Company stock by executives. |
Impose limits on maximum incentive payouts. | Provide dividends or dividend equivalents on unearned PSUs or RSUs. |
Engage in a rigorous target-setting process for incentive metrics. | Offer tax gross-ups related to change in control. |
Set our STI threshold to pay only at 95% and higher levels of performance. | |
Maintain robust share ownership guidelines for our top 50 executives. | |
Provide “double-trigger” change in control provisions in equity awards. | |
Maintain clawback policies that apply to our performance-based incentive plans. | |
Retain an independent compensation consultant | |
2.2 Elements of Executive Pay
Compensation for the Global Senior Management Team in 2021 comprised a base salary, a short-term incentive (”STI”) plan and a long-term incentive (“LTI”) plan, together with pension contributions and other benefits (e.g. healthcare).
Salary
| | | | | | | | |
Pay element | Purpose | Maximum opportunity |
Purpose and link to strategy | Designed to be market competitive to attract and retain talent | No absolute maximum has been set for Executive Team salaries. The committee considers increases on a case-by-case basis based on peer comparison. Pay increases usually reflect a combination of roles and responsibilities, local market conditions and individual performance. |
Operational execution | Paid monthly in cash in U.S. dollars or the home currency of the executive | The Compensation Committee aims to set salaries for the Executive Team at the median of the peer group. |
Reviewed by the Compensation Committee every March |
|
| | | | | | | | |
STI | | |
Pay element | Purpose | Payout opportunity |
Purpose and link to strategy | The STI links reward to key business targets (70%) and individual contribution (30%) | With less than 95% achievement of business targets the award falls to 0%. The threshold achievement is 95% of the target, resulting in a payout of 80%. The opportunity is 200% for the achievement of 104% for service revenue, 106% for EBITDA and 107% for OFCFaL |
The STI aligns with shareholders’ interests through the provision of 50% of the payment delivered in share units deferred over three years (DSP) for the senior leadership team. The DSP is awarded upon achieving the performance targets, with 30% paid after one year, 30% after the second year and 40% after the third year of the grant date. | The target achievement for: CEO – 200% CFO – 150% |
These plans help incentivize and motivate leadership to execute strategic plans in operational decision-making and achieve short-term performance goals, impacting Company performance and enhancing its value. | Maximum achievement: CEO – 400% CFO – 300% |
The financial and operational targets are; | |
•Service revenue | 20% |
•EBITDA | 20% |
•Operating free cash flow after leases (OFCFaL) | 20% |
•Transactional Net Promoter Score (tNPS) 2021 GATEWAY: All Operations to have implemented a robust and stable Relational NPS measurement platform by year end (in addition to the achievement of tNPS targets). At individual level (Operations) if gateway is not reached there will be no payout on the NPS component, regardless of tNPS achievement. For Corporate if any one of the Operations fails to meet the gateway, there will be no payout on the NPS component, | 10% |
•Personal performance | 30% |
Benchmarking | Our STI is a key component of the Millicom Group culture. We benchmark to peer companies within the U.S. and Latin America | Each year the Compensation Committee determines the annual STI opportunity for the Executive Team. |
| | | | | | | | |
LTI | | |
Pay element | Purpose | Payout opportunity |
Purpose and link to strategy | The LTI links an important part of overall Global Senior Management Team compensation with the interests of our shareholders | For financial metrics, achieving less than 80% of the target results in a payout of 0%. In the event the Company achieves between 80% and 120% of the target, the corresponding portion of the grant will be adjusted in linear pro rata of the achievement starting at a payout of 0% at an achievement of 80%, up to a maximum value of 200% if the target achievement is 120% or higher. For TSR, no award is granted for performance below the peer group median. If the Company achieves a TSR performance at the median or above of a pre-determined peer, the grant will be adjusted in linear pro rata of the achievement starting at payout of 100% up to a maximum value of 200% for a target achievement of 120% or higher.
For the 2021 LTI, we granted 35% of the respective amount for each eligible employee as time vested RSUs. Because of their lower volatility, RSUs help strengthen the retention component in the LTI plan, and cushion exogenous impacts such as the COVID pandemic. |
This plan aligns the Global Senior Management Team's longer-term incentives with the longer-term interests of shareholders, encouraging long-term value creation and retention. | |
Millicom emphasizes the One Team mentality by maintaining unified goals and objectives in the long-term incentive program for the Global Senior Management Team with the purpose of driving the successful achievement of three-year performance goals designed to enhance long-term value of the Company | |
| | | | | | | | |
Operational execution | The LTI is a performance-based share units plan (PSP) whereby awarded share units fully vest at the end of a three-year period, subject to achievement against performance measures and fulfillment of conditions. | The target achievement (including the RSU element) for: CEO - 480% CFO - 175% |
LTI payouts are typically in share units and based on company three-year cash flow and revenue targets approved by the Compensation Committee and the Board, in addition to shareholder return. |
Performance share units plan (PSP) and RSU component | The maximum achievement (including the RSU element) for: CEO – 792% CFO – 288%
|
The PSP component is comprised of:
•Service revenue: 15% •OFCFaL (operating free cash flow): 30%* •Relative TSR: 20% •Time Vested RSUs: 35%
The PSP and RSU component pays out/is settled in shares at the end of three years. | |
*Since the 2021 LTI we use OCFaL (operating cash flow after leases) in lieu of OFCFaL (operating free cash flow after leases) and include a portion of the grant as RSUs following U.S. market practice. These will also vest at the end of the corresponding three-year period. | |
Market Stock Units (MSU) is a special one time stock-based performance plan to be settled in cash. The plan offers pro-rata vesting in two tranches (50% in June 2022 and 50% in June 2023), payable one year after vesting subject to continuous employment. The number of MSUs is determined on the basis of a share price at inception of $43.09 for Tranche 2022 (10%) and $47.00 for Tranche 2023 (20%). The awards are payable only after an additional 12-month employment period post vesting. | At the vesting date, the value of the MSU is determined by the 30-trading day average share price ending on June 30, 2022 for Tranche 2022, and the 30-trading day average share price ending on June 30, 2023 for Tranche 2023. For each tranche, the payment is made in cash 12 months after the respective dates, subject to continuous employment. For every participant, payment is capped at 150% of their Target MSU Award Value set up for each tranche.
Participants of the MSU plan were required to forfeit their awards under LTI 2019 and LTI 2020 in respect of the financial targets (service revenue growth and operating cash flow), provided that the TSR component continues to be active for these schemes. |
| | | | | | | | |
Benchmarking | Our LTI is a key component of the Millicom Group culture. | Each year the Compensation Committee determines the annual LTI opportunity for the Executive Team. |
For executives we benchmark to peer companies within the U.S. |
In addition, the Board uses retention schemes to ensure continued retention of key individuals during periods of uncertainty.
2.3 Other Employment Terms and Conditions
Notice of termination: If the employment of a member of Millicom’s Executive Team is terminated, a notice period of up to 12 months potentially applies. The Board regularly reviews best practices in executive compensation and governance and revises policies and practices when appropriate. Millicom’s change in control agreements for eligible executives include "double-trigger" provisions, which require an involuntary termination (in addition to change in control) for accelerated vesting of awards.
Deviations from the policy and guidelines: In special circumstances, the Board may deviate from the above policy and guidelines; for example, providing additional variable remuneration in the case of exceptional performance.
2.4 Other Executive Compensation Policies
Millicom's clawback policy requires its Board of Directors’ Compensation Committee to seek recovery of incentive compensation awarded or paid to those officers covered under the policy, in the event the committee finds the restatement of Millicom’s audited and published financial statements results in compensation in excess of what would have been paid based on the restated operating and financial performance.
In addition, the Company’s insider trading policy prohibits any hedging or speculative transactions in the Company’s shares, including the use of options and other derivatives. It also prohibits directors and employees from selling the Company’s stock short.
3. Key Developments for 2021
During 2021, we were attentive to the ongoing impact of the COVID-19 pandemic and continued focusing on protecting the health of employees, customers and partners. We worked on several health and safety initiatives including providing vaccinations to our employees; structuring return-to-office schemes that prioritize health and safety (such as hybrid approaches); delaying office re-openings where vaccines were not widely available; and other cautionary measures.
As mentioned in the previous Annual Report, the committee did not change any of the performance measures or targets for any of the in-flight incentive plans, STI or LTI.
For the 2021 STI / LTI plans, we established targets from the beginning of the year, although forecasting due to the pandemic was still challenging, and did not make any adjustments during the year.
The committee geared the design of those plans to motivate our management teams in the hardest hit countries to seize such opportunities and kick back into growth by incentivizing our employees to strive for excellence. This design has been quite successful, as it has helped substantially improve our financial KPIs.
Since the start of the COVID-19 pandemic, we have not implemented any restructuring programs, and we chose not to furlough or implement redundancies, helping us retain approximately 93% of key talent during this period.
3.1 Key Elements of 2021 CEO and CFO Pay
In 2021, the key elements of the CEO and CFO compensation, in line with the remuneration policy, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Salary (USD) * | Short-Term Incentive | Long-Term Incentive | Pension | Benefits | MSU Plan |
Mauricio Ramos (CEO) | $1,189,187 | 200% of Base Salary delivered: | 50% in Cash Bonus | PSP award of 480% of salary with 3-year cliff vesting (35% delivered in time vested shares and the remaining portion based on performance shares) | 15% of salary | Private healthcare | Each of the two tranches have a target payment opportunity of USD 4 Million |
50% in Share Units over 3 years vesting 30%/30%/40% | Life insurance |
Performance Measures: | 60% Financial | Car Allowance |
10% Customer | |
30% Personal | |
Tim Pennington (CFO)** | $709,949 | 150% of Base Salary delivered: | 50% in Cash Bonus | PSP award of 175% of salary with 3-year cliff vesting (35% delivered in time vested shares and the remaining portion based on performance shares) | 15% of salary | Private healthcare | Each of the two trances have a target payment opportunity of USD 800K |
50% in Share Units over 3 years vesting 30%/30%/40% | Life insurance |
Performance Measures: | 60% Financial | Car Allowance |
10% Customer | |
30% Personal | |
*CEO / CFO Salary as of December 31, 2021
**CFO Compensation paid in Pounds GBP and for purposes of this report converted to USD using December Closing Forex (0.7392 GBP/USD)
3.2 Summary of Total CEO/CFO Compensation
The compensation for the CEO and CFO is summarized in the table below:
| | | | | | | | | | | | | | |
| Mauricio Ramos (CEO) | Tim Pennington (CFO)* |
In USD | 2021 | 2020 | 2021 | 2020 |
Base Salary | 1,185,140 | | 1,173,000 | | 707,532 | | 669,757 | |
Fringe Benefits** | 87,551 | | 82,225 | | 46,362 | | 37,600 | |
Pension Expense | 284,243 | | 284,520 | | 106,130 | | 100,464 | |
Total Fixed | 1,556,934 | | 1,539,745 | | 860,024 | | 807,821 | |
Annual Bonus*** | 2,164,320 | | 1,301,131 | | 969,079 | | 508,896 | |
Deferred Share Units*** | 2,164,320 | | 1,301,131 | | 969,079 | | 508,896 | |
LTIP**** | 5,630,400 | | 5,630,400 | | 1,237,889 | | 1,200,964 | |
Total Annual Variable | 9,959,040 | | 8,232,662 | | 3,176,047 | | 2,218,756 | |
Annual Compensation | 11,515,974 | | 9,772,407 | | 4,036,071 | | 3,026,577 | |
MSU Plan***** | 8,000,000 | | — | | 1,600,000 | | — | |
Total 2021 Compensation | 19,515,974 | | 9,772,407 | | 5,636,071 | | 3,026,577 | |
% Annual Fixed | 13.52% | 15.76% | 21.31% | 26.69% |
% Annual Variable | 86.48% | 84.24% | 78.69% | 73.31% |
*CFO compensation is paid in GBP and for the purposes of this report converted to USD using December Closing Forex for each period.
**Fringe Benefits include car allowance, life and disability insurance medical and dental Insurance.
***The sum of the annual bonus and deferred share units is the total for the short-term incentive award for the performance period. 2021 STI is to be paid and granted in Q1 2022.
****LTIP is performance share units granted in 2021. Calculated based on the average Millicom closing share price on the Nasdaq in the US for the three-month period ending December 31, 2021.
*****MSU plan: Our stock-based MSU performance plan is settled in cash. Pro-rata vesting occurs in two tranches (50% in June 2022, and 50% in June 2023), payable one year after vesting subject to continuous employment. The number of MSUs is determined on the basis of a share price at inception of $43.09 for Tranche 2022 (10%) and $47.00 for Tranche 2023 (20%). The awards are payable only after an additional 12-month employment period post vesting.
Excluding the MSU, the CEO's reported pay increased from $9.8 million to $11.5 million, a 17.3% increase that reflected the significantly improved financial performance compared to the more depressed 2020. The MSU was added as an additional incentive to improve the share prices over two years. At target, the scheme could pay the CEO $8 million, for achieving a share price of $43.09 by July 2022 and $47.00 by July 2023. The mark to market total value of the MSU for the CEO is approximately $3 million based on 2021 closing share price. The MSU is settled in cash.
Realized Pay Supplemental Table:
| | | | | | | | |
| Mauricio Ramos (CEO) |
In USD | 2021 | 2020 |
Base Salary | 1,185,140 | 1,173,000 |
Car Allowance | 15,000 | 15,000 |
Pension Expense | 284,243 | 284,520 |
Total Fixed | 1,484,383 | 1,472,520 |
Annual Bonus Paid* | 1,301,131 | 1,427,497 |
Deferred Share Units Vested** | 930,836 | 932,141 |
LTIP Vested*** | 1,457,988 | 1,553,984 |
Total Variable Paid | 3,689,955 | 3,913,622 |
Total Realized Paid | 5,174,339 | 5,386,143 |
% Fixed | 28.69% | 27.33% |
% Variable | 71.31% | 72.66% |
*Annual bonus paid is the cash portion for the short-term incentive award for the performance period in that calendar year (the 2021 column displays the amount paid in Q1 2021 from 2020 performance).**Deferred share units vested are the shares vested from the pro-rata vesting of the three years prior (the 2021 column displays the amount vested in Q1 2021: 30% from 2020 grant, 30% from 2019 grant and 40% from 2018 grant.
***LTIP vested are the shares vested from the cliff vesting of the LTI granted three years prior (the 2021 column, displays the amount vested in Q1 2021 from 2018 grant.
The total short-term award for the CEO, CFO and other senior leadership team is split 50% in cash and 50% in share units deferred over a three-year period (DSP). The compensation for the CEO and CFO is heavily weighted to variable compensation in the form of share units vesting over a three-year period. As a result, total compensation as shown in the previous table may differ significantly relative to the actual realized compensation in any given year. The table below compares CEO total compensation to his actual realized compensation in the last three years.
2021 CEO Compensation
3.3 Performance on STI 2021
As in previous years, the annual bonus is determined by a mixture of business performance and individual performance factors. The business performance factors included measures of service revenue, earnings before interest, tax, depreciation and amortization (EBITDA), operating free cash flow after leases (OFCFaL) and a customer satisfaction metric based on Net Promoter Score achievement. For this year's plan, we started to migrate from a transactional NPS to a relational NPS metric. Thus, we included a gateway decision to ensure that payment on the transactional NPS component only takes place if the preparedness for the relational NPS was reached before year's end. The use and
relative weighting of financial performance target measures under the variable compensation rules are equal for all employees regardless of seniority or area of operation. This includes the CEO and the senior leadership team.
For the CEO and senior leadership team, a portion of the STI is paid in the form of deferred share units with a three-year pro-rated vesting, strengthening our pay for performance and retention incentives.
For the CEO and other eligible DSP participants, the issuance of share units under the DSP is subject to shareholder approval at Millicom’s AGM of shareholders. For employees not participating in the DSP, or to the extent that the DSP is not approved by the AGM, the STI will be implemented as a cash-only bonus program.
Under the 2021 STI, 2022 DSP share units are granted in Q1 2022 and will vest (generally subject to the participant still being employed by the Millicom group) 30% in Q1 2023, 30% in Q1 2024 and 40% in Q1 2025. The vesting schedule is unchanged from the 2021 DSP.
3.4 Share Incentive Plans
Millicom has two types of plans, a DSP (STI) and a PSP (LTI). As part of the STI, the senior leadership team receives part of their payout in the form of deferred share units (DSP). Every year, a group of key employees are selected to receive a grant of deferred share units (DSP). For the LTI, the Global Senior Management Team also participates in a performance share plan (PSP). The different plans are further detailed below.
Deferred share plan (issued from 2015 to 2018)
For this deferred awards plan, participants are granted share units based on past performance, with 16.5% of the share units vesting on January 1 of each of year one and two, and the remaining 67% on January 1 of year three. Vesting is conditional upon the participant remaining employed with MIC S.A. at each vesting date. Grants were made under the deferred awards plans in 2015, 2016, 2017 and 2018 based, respectively, on financial results for the years ended December 31, 2014, 2015, 2016 and 2017.
Deferred share plan (issued from 2019 to 2022)
For this deferred awards plan, participants are granted share units based on past performance, with 30% of the share units vesting on January 1 of each of year one and two, and the remaining 40% on January 1 of year three. Vesting is generally conditional upon the participant remaining employed with MIC S.A. at each vesting date. Grants were made under the deferred awards plans in 2019, 2020 and 2021 based, respectively, on financial results for the years ended December 31, 2018, 2019, 2020 and 2021.
We expect that grants will be made under the DSP in 2022 based on financial results for the year ended December 31, 2021.
3.4.1 LTI (PSP)
Eligibility for participation in the LTI is limited to members of MIC S.A.’s Global Executive Management Team, which is defined by MIC S.A.’s internal role grading structure and consists of the CEO, EVPs, VPs and GMs. During 2021, 41 individuals were included in this group, including certain employees of the Honduras joint venture and our operations in Guatemala (formerly a joint venture). The 2021 LTI is a Performance Share Plan (PSP). Share units granted will vest 100% at the end of a three-year period, subject to performance conditions.
3.4.2 Award LTI 2021
A new plan was issued in 2021 in accordance with the remuneration policy guidelines designed to drive shareholder value through a focus on service revenue growth, cash flow generation and relative total shareholder return against a relevant peer group. The PSP 2021 plan was approved by shareholders at the 2021 AGM:
| | | | | | | | | | | |
Metric | Weighting | Performance target | Performance measure |
Service revenue | 15 | % | Target growth | A specific 3-year Cumulative Growth target |
OFCF | 30 | % | Target growth | A specific 3-year Cumulative Growth target |
TSR | 20 | % | The Company TSR relative to a peer group between 2021 and 2023 | At median - target payout; below median - nil; 20% above median - max |
Time Vested RSUs | 35 | % | | |
The peer group for the PSP 2021 is: América Móvil, TIM Brazil, TEF Brazil, Entel Chile, Lilac, Telecom Argentina, Grupo Televisa, Megacable.
For the CEO and CFO the award of LTI 2021 is summarized below;
| | | | | | | | | | | | | | | | | |
Name | Type of award | Basis of award | Face value of award | Number of share units granted | End of performance period |
Mauricio Ramos (CEO) | PSU - 3 years | 480% of salary (35% in time vested shares) | $ | 5,630,400 | | 159,941 | | December 2023 |
| Cliff Vesting | | | | |
Tim Pennington (CFO) | PSU - 3 years | 175% of salary (35% in time vested shares) | $ | 1,237,889 | | 35,164 | | December 2023 |
| Cliff Vesting | | | | |
3.4.3 MSU Grant 2021
For the CEO and CFO, the 2021 MSU award is summarized below;
| | | | | | | | | | | | | | | | | |
Name | Type of award | Basis of award | Face value of award (USD) | End of performance period | Payout date |
Mauricio Ramos (CEO) | MSU – Tranche 1 payout June 2023 | Target payout if share price reaches $43.09 by July 2022 | $ 4,000,000 | July 2022 | July 2023 |
| MSU – Tranche 2 payout June 2024 | Target payout if share price reaches $47.00 by July 2023 | $ 4,000,000 | July 2023 | July 2024 |
Tim Pennington (CFO) | MSU – Tranche 1 payout June 2023 | Target payout if share price reaches $43.09 by July 2022 | $ 800,000 | July 2022 | July 2023 |
| MSU – Tranche 2 payout June 2024 | Target payout if share price reaches $47.00 by July 2023 | $ 800,000 | July 2023 | July 2024 |
As noted above, the Board believed it was necessary to introduce an additional one-off performance vested equity plan to incentivize senior management to improve the share price. The Retention Plan has been awarded to a selected group of executives, including the CEO and CFO. The plan is based on Market Stock Units (MSU) and is a performance-
based scheme where the outcome is dependent on the share price at the time of vesting. The MSU is settle in cash. We have been able to retain 97% of all executives made eligible under this plan.
4. Remuneration Approach for 2022
For 2022, the Board has proposed continuing with a consistent framework of STI and LTI with a few changes explained below. We have removed the RSU component from the LTI, thus reducing the LTI opportunity for 2022 and made a corresponding increase in the share component of the STI, where the grant amounts are driven by annual performance but still provide a retention element through three-year pro-rata vesting (30%, 30%, 40%).
For the CEO, the at target and maximum remuneration for 2022 is set out below*:
*CEO earning opportunity 2022 target analysis (excludes MSU)
At target, CEO compensation is paid 71% in share units and 84% in variable compensation. At maximum, CEO compensation is paid 78% in share units and 91% in variable compensation.
4.1 Summary of Key Changes for 2022
We made two small changes to the 2022 remuneration plans, with a continued focus on pay for performance and incentivizing the retention of key talent.
For the 2022 STI, we will fully transition our NPS metric, from a transactional focus to a relational approach. We believe this will be a more stringent way to measure our strategic intent to deliver the best customer experience.
For the LTI 2022, the structure of the award remains consistent with 2021, with only one change. As the business context is stabilizing and per feedback from our key shareholders, we reverted to 100% performance shares for our LTI plan. We made a corresponding increase in the share component of the STI, where the grant amounts are driven by annual performance but still provide a retention element through three-year pro-rata vesting (30%, 30%, 40%).
5. Sundry
5.1 Summary of Outstanding Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Opening Balance | During the Year | | Closing Balance |
Name | Plan Type | Award Details - Plan Name | Performance Period | Award Grant Date | Vesting Date | Award Share Price in USD | Outstanding Balance as of Dec. 2020 | Share Units Granted in 2021 | Shares Vested in 2021 | Forfeited in 2021 | Outstanding Balance as of Dec. 2021 |
Mauricio Ramos (CEO) | Deferred Share Plan | 2018 DSP | 2017 | 1/1/2018 | 1/1/2021 | $ | 66.11 | | 7,161 | | — | | 7,161 | | — | | — | |
2019 DSP | 2018 | 1/1/2019 | 1/1/2022 | $ | 59.65 | | 17,508 | | — | | 7,504 | | — | | 10,004 | |
2020 DSP | 2019 | 1/1/2020 | 1/1/2023 | $ | 45.86 | | 31,126 | | — | | 9,338 | | — | | 21,788 | |
2021 DSP | 2020 | 1/1/2021 | 1/1/2024 | $ | 35.20 | | — | | 36,963 | | — | | — | | 36,963 | |
Performance Share Plan | 2018 PSP | 2018-2021 | 3/1/2018 | 3/1/2021 | $ | 66.11 | | 69,576 | | — | | 38,942 | | 30,634 | | — | |
2019 PSP | 2019-2022 | 3/1/2019 | 1/1/2022 | $ | 59.65 | | 77,111 | | — | | — | | 57,833 | | 19,278 | |
2020 PSP | 2020-2023 | 3/1/2020 | 1/1/2023 | $ | 45.86 | | 122,768 | | — | | — | | 92,076 | | 30,692 | |
2021 PSP | 2021-2024 | 1/1/2021 | 1/1/2024 | $ | 35.20 | | — | | 159,941 | | — | | — | | 159,941 | |
TOTAL Mauricio Ramos (CEO) | | | | | | | 325,250 | | 196,904 | | 62,945 | | 180,543 | | 278,666 | |
Tim Pennington (CFO) | Deferred Share Plan | 2018 DSP | 2017 | 1/1/2018 | 1/1/2021 | $ | 66.11 | | 4,711 | | — | | 4,711 | | — | | — | |
2019 DSP | 2018 | 1/1/2019 | 1/1/2022 | $ | 59.65 | | 6,537 | | — | | 2,801 | | — | | 3,736 | |
2020 DSP | 2019 | 1/1/2020 | 1/1/2023 | $ | 45.86 | | 13,657 | | — | | 4,097 | | — | | 9,560 | |
2021 DSP | 2020 | 1/1/2021 | 1/1/2024 | $ | 35.20 | | — | | 14,457 | | — | | — | | 14,457 | |
Performance Share Plan | 2018 PSP | 2018-2021 | 3/1/2018 | 3/1/2021 | $ | 66.11 | | 17,890 | | — | | 10,013 | | 7,877 | | — | |
2019 PSP | 2019-2022 | 3/1/2019 | 1/1/2022 | $ | 59.65 | | 18,992 | | — | | — | | 14,244 | | 4,748 | |
2020 PSP | 2020-2023 | 3/1/2020 | 1/1/2023 | $ | 45.86 | | 26,186 | | — | | — | | 19,640 | | 6,546 | |
2021 PSP | 2021-2024 | 1/1/2021 | 1/1/2024 | $ | 35.20 | | — | | 35,164 | | — | | — | | 35,164 | |
TOTAL Tim Pennington (CFO) | | | | | | | 87,973 | | 49,621 | | 21,622 | | 41,761 | | 74,211 | |
5.2 Summary of Shares Owned vs Target
Millicom’s share ownership policy sets out the Compensation Committee’s requirements for the Global Senior Management Team to retain and hold a personal holding of common shares in the Company to align their interests
with those of our shareholders. All share plan participants in the Global Senior Management Team are required to own Millicom shares to a value of a percentage of their respective base salary as of January 1 of each calendar year.
For that purpose, we continue to uphold our share ownership requirements for our top 50 roles:
| | | | | |
Global Senior Management Level | % of Annual Base Pay |
CEO | 400 |
CFO | 200 |
EVPs | 100 |
General Managers and VPs | 50 |
For the CEO and CFO:
| | | | | | | | | | | | | | | | | | | | |
| Awarded unvested subject to performance conditions | Awarded unvested not subject to performance conditions | Shares required to be held as % salary | Number of shares required to be held | Number of beneficially owned shares | Shareholding requirement met |
Mauricio Ramos (CEO) | 209,911 | | 68,755 | | 400 | % | 133,285 | | 232,562 | | Yes |
Tim Pennington (CFO) | 46,458 | | 27,753 | | 200 | % | 40,188 | | 70,095 | | Yes |
Unless this requirement is met each year, no vested Millicom shares can be sold by the individual.
5.3 Details of Share Purchase and Sale Activity
During 2021, neither the CEO nor the CFO purchased nor sold any Millicom shares.
5.4 Board Compensation
Governance of Director Remuneration
Decisions on annual remuneration of directors (“tantièmes”) are reserved by the Articles of Association to the general meeting of shareholders. Directors are prevented from voting on their own compensation. In accordance with resolution 17 of the AGM on May 4, 2021, the Nomination Committee of Millicom was instructed to propose Director remuneration for the period from the date of the 2021 AGM to the date of the AGM in 2022.
2021 Director Remuneration
During early 2021, in proposing Director Remuneration, the Nomination Committee, received input from an external compensation advisor, including market and peer benchmarking, and considered the frequency of meetings and complexity of Millicom’s business and governance structures. After consideration of these and other relevant aspects, the Nomination Committee proposed to keep the structure and amount of remuneration for each role for the non-executive directors the same as the prior year.
a)Non-Executive Director Remuneration
Remuneration of the non-executive directors comprises an annual fee and shares denominated in U.S. dollars. The remuneration is 100% fixed. Non-executive directors do not receive any fringe benefits, pensions or any form of variable remuneration. No remuneration was paid to any of the non-executive directors in 2021 or 2020 from any other undertakings within the Millicom Group.
b)Executive Director Remuneration
Executive Directors do not receive any remuneration in their capacity as Directors.
Approval of 2021 Director Remuneration
The Nomination Committee’s proposal for Director remuneration was approved at the AGM on May 4, 2021.
| | | | | | | | | | | | | | |
Name of Director | Year (i) | Cash-based fee ($000's) | Share-based fee (ii) ($000's) | Total ($000's) |
| | | | |
Mr. José Antonío Rios García | 2021 | 100 | 200 | 300 |
Chair of the Board | 2020 | 100 | 200 | 300 |
Ms. Pernille Erenbjerg | 2021 | 100 | 150 | 250 |
Deputy Chair of the Board Chair of the Compensation Committee | 2020 | 122.5 | 150 | 272.5 |
Mr. Odilon Almeida | 2021 | 75 | 100 | 175 |
Chair of the Compliance and Business Conduct | 2020 | 75 | 100 | 175 |
Mr. Bruce Churchill A, | 2021 | 72.5 | 100 | 172.5 |
Ms. Sonia Dulá A, CBE | 2021 | 85 | 100 | 185 |
Ms. Mercedes Johnson A, CBE | 2021 | 107.5 | 100 | 207.5 |
Chair of the Audit Committee | 2020 | 85 | 100 | 185 |
Mr. Lars-Johan Jarnheimer C | 2021 | 62.5 | 100 | 162.5 |
Mr. James Thompson A, C | 2021 | 85 | 100 | 185 |
| 2020 | 85 | 100 | 185 |
Former Directors | | | | |
Mr. Tomas Eliasson (until May 2021) | 2020 | 95 | 100 | 195 |
Mr. Lars-Åke Norling C, CBE (until May 2021) | 2020 | 75 | 100 | 175 |
Total | 2021 (iii) | 687.5 | 950 | 1,637.50 |
| 2020 | 637.5 | 850 | 1,487.00 |
(i) Remuneration covers the period from May 4, 2021 to the date of the AGM in May 2022 as resolved at the shareholder meeting on May 4, 2021 (2020: for the period from June 25, 2020 to May 4, 2021).
(ii) Share based compensation for the period from May 4, 2021 to May 2022 was based on the average market value of Millicom shares for the three-month period ended April 30, 2021 and represented a total of 24,737 shares (2020: 32,358 shares based on the market value of Millicom shares on July 2, 2020).
A Member of Audit Committee
C Member Compensation Committee
CBE Member Compliance and Business Ethics Committee
(iii) Total remuneration for the period from May 4, 2021 to May 2022 after deduction of applicable withholding tax at source comprised 73% in shares and 27% in cash (2020: 71% in shares and 29% in cash).
5.5 2021 AGM vote
| | | | | | | | | | | | | | | | | | | | |
| Votes For | % | Votes Against | % | Abstentions | % |
Director Remuneration | 47,398,168 | | 97.05 | % | 55,994 | | 0.11 | % | 1,384,841 | | 2.84 | % |
Senior Management Remuneration Guidelines and Policy | 38,482,068 | | 78.79 | % | 8,894,385 | | 18.21 | % | 1,462,550 | | 2.99 | % |
C. Board Practices
Nomination Committee. MIC S.A. has a Nomination Committee which is appointed by the major shareholders of MIC S.A. It is not a committee of the MIC S.A. Board. The Nomination Committee’s role is to propose decisions to the shareholders’ meeting in a manner which promotes the common interests of all shareholders. The Nomination Committee has a term of office commencing at the time of its formation each year and ending when a new Nomination Committee is formed. Nomination Committee proposals to the AGM include:
• The number of members of the Board of Directors, the candidates to be elected or re-elected as Directors of the Board and Chairman of the Board and their remuneration;
• Appointment and remuneration of the external auditor;
• Proposal of the Chairman of the AGM; and
• The procedure for the appointment of the Nomination Committee.
Under the terms of the Procedure on Appointment of the Nomination Committee and Determination of the Committee, the Nomination Committee consists of at least three members, appointed by the largest shareholders of Millicom who wish to assert the right to appoint a member. In accordance with the resolution of the 2021 AGM, in consultation with the largest shareholders as of the last business day of June 2021, the current Nomination Committee was formed during November 2021. The members of the Nomination Committee are Mr. John Hernander, appointed by Nordea Investment Funds; Mr. Jan Andersson, appointed by Swedbank Roburt; Mr. Peter Guve, appointed by AMF Pensionsförsäkring AB; and Mr. Staley Cates appointed by Southeastern Asset Management, as well as Mr. José Antonio Ríos García as Chairman of the Board of Millicom. The Nomination Committee appointed Mr. John Hernander as Chairman at their first meeting.
MIC S.A.’s Articles of Association provide that the Board of Directors must comprise at least six members. The members of the Board of Directors are elected at the AGM which, as required by MIC S.A.’s Articles of Association and the Luxembourg law of August 10, 1915 on Commercial Companies (as amended), must be held within six months of the end of the fiscal year. At the AGM held on May 4, 2021, the number of MIC S.A.’s directors was set at nine and the current directors and the Chairman were elected until the time of the next AGM. The next AGM is scheduled to be held on May 4, 2022.
MIC S.A.’s Board of Directors has developed, and continuously evaluates, work procedures in line with the corporate governance rules of the Swedish Code of Corporate Governance (the “Swedish Code”) applicable to listed companies. MIC S.A. is subject to the Swedish Code as a company with its shares listed on the Nasdaq Stockholm, where they trade in the form of SDRs. From January 9, 2019, MIC S.A. is subject to the listing rules of the Nasdaq Stock Market in the US where its shares are traded.
MIC S.A.’s Board of Directors is responsible for Millicom’s strategy, financial objectives and operating plans and for oversight of governance. The Board of Directors also plans for management succession of the CEO and reviews plans for other senior management positions.
The Board of Directors selects the CEO, who is charged with the daily management of the Company and its business. The CEO is responsible for recruiting, and the Chairman of the Board of Directors is responsible for approving, the senior management of the Company. The Board reviews and approves plans for key senior management positions, and the Board supervises, supports and empowers the Executive Committee and monitors its performance. In addition to corporate law rules applicable in Luxembourg, the Swedish Code sets out that the division of work between the Board and the CEO is primarily set out in “The Rules of Procedure and Instruction to the CEO."
The Board conducts an annual performance review process, wherein each Board member’s personal performance is also reviewed. The review process involves an assessment of the Board’s and its committees’ actions and activities during the year against the Board’s mandate as determined in the Board Charter (and those of its various committees). MIC S.A.’s Board of Directors also evaluates the performance of the CEO annually.
The work conducted by MIC S.A.’s Board of Directors is supported by the following committees:
• the Audit Committee;
• the Compensation Committee; and
• the Compliance and Business Conduct Committee.
The Board and each of its Committees have written approved charters which set out the objectives, limits of authority, organization and roles and responsibilities of the Board and its Committees.
Audit Committee. MIC S.A.’s Board of Directors has delegated to the Audit Committee, as reflected in its charter, the responsibilities for oversight of the robustness, integrity and effectiveness of financial reporting, risk management, internal controls, internal audit, the external audit process, as well as compliance with related laws and regulations. The Audit Committee focuses particularly on compliance with financial requirements, accounting standards and judgments, appointment and independence of the external auditors, transactions with related parties (including major shareholders), the effectiveness of the internal audit function, the Millicom Group’s approach to risk management and ensuring that an efficient and effective system of internal controls is in place. Ultimate responsibility for reviewing and approving MIC S.A.’s Annual Report and Accounts remains with the Board. The members of the Audit Committee are Ms. Johnson (Chair and financial expert), Mr. Churchill, Ms. Dulá and Mr. Thompson.
Compensation Committee. Pursuant to its charter, the Compensation Committee reviews and makes recommendations to the Board of Directors regarding the compensation of the CEO and the other senior managers as well as management succession planning. The evaluation of the CEO is conducted by the Compensation Committee. The evaluation criteria and the results of the evaluation are then discussed by the Compensation Committee Chairman with the entire Board. The members of the Compensation Committee are Ms. Erenbjerg (Chair), Mr. Jarnheimer and Mr. Thompson.
The Board, based on guidelines by the Compensation Committee, proposes the remuneration of senior management. Remuneration of the CEO requires Board approval. The guidelines for remuneration of senior management, including STI and LTI, and the share-based incentive plans for Millicom’s employees are approved by the shareholders at the AGM.
Compliance and Business Conduct Committee. MIC S.A.’s Compliance and Business Conduct Committee oversees and makes recommendations to the Board regarding Millicom Group’s compliance programs and standards of business conduct, as well as its information security program. More specifically, the Compliance and Business Conduct Committee:
• monitors the Millicom Group’s compliance program, including the activities performed by the compliance team and its interaction with the rest of the organization;
• monitors the results of investigations resulting from cases brought through the Millicom Group’s ethics line or otherwise;
• oversees allocation of resources and personnel to the compliance area;
• assesses the Millicom Group’s performance in the compliance area;
• ensures that the Millicom Group maintains proper standards of business conduct;
• provides oversight and direction on information security risk management, including cybersecurity and related threats;
• ensures that the Company allocates the proper level of resources to information security and cybersecurity;
•monitors results and remediation of findings from audit and assurance activities related to the Company’s information security program; and
•ensures that material information security and cybersecurity issues affecting the Company’s internal control environment are communicated to the Audit Committee of the Company.
The members of the Compliance and Business Conduct Committee are Mr. Almeida (Chairman), Ms. Johnson and Ms. Dulá.
Code of Conduct. The Millicom Group’s Code of Conduct is adopted and approved by the Board of Directors. All directors, officers and employees must sign a statement acknowledging that they have read, understood and will comply with the Code of Conduct. Furthermore, all of our directors, officers and employees must complete an annual training on the Code of Conduct.
Directors’ Service Agreements. None of MIC S.A.’s current directors have entered into service agreements with the Millicom Group or any of its subsidiaries providing for benefits upon termination of their respective directorships.
Nasdaq corporate governance exemptions
As a foreign private issuer incorporated in Luxembourg with its principal listing on the Nasdaq Stockholm, Millicom follows the laws of the Grand Duchy of Luxembourg, its “home country” for corporate governance practices, in lieu of the provisions of the Nasdaq Stock Market’s Marketplace Rule 5600 series that apply to the constitution of a quorum for any meeting of shareholders, the composition and independence requirements of the Nominations Committee and the Compensation Committee and the requirement to have regularly scheduled meetings at which only independent directors are present. The Nasdaq Stock Market’s rules provide for a quorum of no less than 331/3% of Millicom’s outstanding shares. However, Millicom’s Articles of Association provide that no quorum is required. The Nasdaq Stock Market’s rules provide for the involvement of independent directors in the selection of director nominees. However, Millicom relies on its home country practices, in lieu of this requirement, which permit its director nominations committee to be comprised of shareholder representatives. See “Item 6. Directors, Senior Management and Employees—C. Board Practices—Nomination Committee.” The Nasdaq Stock Market’s rules require each Compensation Committee member to be an independent director for purposes of the Nasdaq Stock Market’s Marketplace Rule 5605(d)(2). However, to preserve greater flexibility in who may be appointed to the Compensation Committee, Millicom will be relying on its home country practices, in lieu of this requirement, which do not require the Compensation Committee to be comprised solely of directors who qualify as independent for such purposes. The Nasdaq Stock Market’s rules require listed companies to have regularly scheduled meetings at which only independent directors are present. However, Millicom follows its home country practices instead, which do not impose such a requirement.
D. Employees
On average, the Millicom Group had approximately 20,687 employees in 2021, 21,419 employees in 2020 and 22,375 employees in 2019. Management believes that relations with the employees are good. Some of our employees belong to a union and approximately 17% of our employees participated in collective agreements on average during 2021. The temporary employees of the Company corresponded to 5% of the average total number of employees in 2021.
E. Share Ownership
The table below sets forth information regarding the beneficial ownership of our common shares as of January 1, 2022, by our directors and senior management. For purposes of this table, a person is deemed to have “beneficial ownership” of any shares as of a given date which such person has the right to acquire within 60 days after such date. For purposes of computing the percentage of outstanding shares held by each person, or group of persons, named above on a given date, any security which such person or persons has the right to acquire within 60 days after such date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Except as otherwise indicated, the holders listed below have sole voting and investment power with respect to all shares beneficially owned by them. They have the same voting rights as all other holders of common shares.
| | | | | | | | | | | | | | |
Shareholder | | Common Shares | | Percentage of Common Shares |
Mr. José Antonio Ríos García, Chairman of the Board of Directors | | 18,634 | | | — | % |
Ms. Pernille Erenbjerg, Deputy Chair | | 12,936 | | | — | % |
Mr. Odilon Almeida, Director | | 11,497 | | | — | % |
Mr. Bruce Churchill, Director | | 2,604 | | | — | % |
Ms. Sonia Dulá, Director | | 2,604 | | | — | % |
Mr. Lars-Johan Jarnheimer, Director | | 7,656 | | | — | % |
Ms. Mercedes Johnson, Director | | 8,159 | | | — | % |
Mr. James Thompson, Director | | 15,566 | | | — | % |
Mr. Mauricio Ramos, Executive Director and Chief Executive Officer | | 232,562 | | | — | % |
Mr. Tim Pennington, Senior Executive Vice President, Chief Financial Officer | | 70,095 | | | — | % |
Mr. Esteban Iriarte, Executive Vice President, Chief Operating Officer, Latin America | | 45,679 | | | — | % |
Mr. Xavier Rocoplan, Executive Vice President. Chief Technology and Information Officer | | 51,506 | | | — | % |
Mr. Karim Lesina, Executive Vice President, Chief External Affairs Officer | | — | | | — | % |
Mr. Salvador Escalón, Executive Vice President, Chief Legal and Compliance Officer | | 49,591 | | | — | % |
Ms. Susy Bobenrieth, Executive Vice President, Chief Human Resources Officer | | 4,536 | | | — | % |
Directors and members of the Executive Team as a group | | 533,625* | | — | % |
* less than 1%
None of the members of the Company’s Board of Directors owns any options to purchase common shares of the Company. The Company’s senior management and other key personnel do not own options or rights to purchase common shares under the share-based incentive plans. For more information, see “—B. Compensation.”
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
To the extent known to the Company, it is neither directly nor indirectly owned or controlled by another corporation, any government, or any other person. In addition, there are no arrangements, known to the Company, the operation of which may result in a change in its control in the future.
The table below sets out beneficial ownership of our common shares (directly or through SDRs), par value $1.50 each, by each person who beneficially owns more than 5% of our common shares at December 31, 2021.
| | | | | | | | | | | | | | |
Name of Shareholder | | Common Shares | | Percentage of Share Capital |
Swedbank Robur Fonder AB (1) | | 7,157,892 | | | 7.0 | % |
Southeastern Asset Management, Inc. (2) | | 6,836,957 | | | 6.7 | % |
Dodge & Cox (3) | | 5,182,144 | | | 5.1 | % |
(1) As of December 31, 2021, Swedbank Robur Fonder AB held 7,157,892 of our common shares (7.0% of common shares then outstanding). As of December 31, 2020, Swedbank Robur Fonder AB held 9,954,857 of our common shares (9.8% of common shares outstanding). As of December 31, 2019, Swedbank Robur Fonder AB held 5,276,526 of our common shares (5.2% of common shares then outstanding).
(2) As of December 31, 2021, Southeastern Asset Management, Inc. held 6,836,957 of our common shares (6.7% of common shares then outstanding).
(3) As of December 31, 2021, Dodge & Cox held 5,182,144 of our common shares (5.1% of common shares then outstanding). As of December 31, 2020, Dodge & Cox held 4,856,615 of our common shares (4.8% of common shares outstanding). As of December 31, 2019, Dodge & Cox held 9,380,493 of our common shares (9.2% of common shares then outstanding).
Except as otherwise indicated, the holders listed above (“holders”) have sole voting and investment power with respect to all shares beneficially owned by them. The holders have the same voting rights as all other holders of MIC S.A. common shares. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of a given date which such person or group of persons has the right to acquire within 60 days after such date. For purposes of computing the percentage of outstanding shares held by the holders on a given date, any security which such holder has the right to acquire within 60 days after such date (including shares which may be acquired upon exercise of vested portions of share options) is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
Based upon the SDR ownership reported by Euroclear Sweden AB, as of December 31, 2021 there were 122 SDR holders in the United States holding 18,918,709 SDRs (representing 18.6% of the outstanding share capital as of such date). According to the records held by Broadridge Corporate Issuer Solutions Inc. reported as of December 31, 2021, there were 79 shareholders in the United States holding 7,599,833 common shares (representing 7.5% of the outstanding share capital as of such date).
However, these figures may not be an accurate representation of the number of beneficial holders nor their actual location because most of the common shares and SDRs were held for the account of brokers or other nominees.
B. Related Party Transactions
The disclosure as to related party transactions in our audited consolidated financial statements is in some respects broader than that required by Form 20-F. As required by Form 20-F, “related parties” includes enterprises that control, are controlled by or are under common control with MIC S.A., associates, individuals owning directly or indirectly an interest in the voting power of the Company that gives them significant influence over MIC S.A., close family members of such persons, key management personnel (including directors and senior management) and any enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by certain of the persons listed above. For the purposes of note G.5. to our audited consolidated financial statements, related parties also includes the entities described below, which is beyond the scope of the Form 20-F definition. Nonetheless, for purposes of consistency of presentation, we use the broader definition of related parties used in our audited consolidated financial statements for purposes of this Item 7.B.
The Company conducts transactions with certain related parties on normal commercial terms and conditions. Below are the Millicom Group’s significant related parties:
Kinnevik AB (Kinnevik) and subsidiaries, Millicom’s previous principal shareholder until November 14, 2019, date on which Millicom SDRs were paid out to the shareholders of Kinnevik. See "Introduction" note and note G.5. to our audited consolidated financial statements for additional details.
Helios Towers Africa Ltd (HTA), in which Millicom held a direct or indirect equity interest until October 15, 2019, date on which Millicom lost significant influence on HTA and started accounting for its investments at fair value under IFRS 9, until its final disposal. See note C.7.3. to our audited consolidated financial statements for additional details.
EPM and subsidiaries (EPM), the non-controlling shareholder in our Colombian operations.
Miffin Associates Corp and subsidiaries (Miffin), our joint venture partner in Guatemala until November 12, 2021, date on which Millicom signed and closed an agreement to acquire the remaining 45% equity interest in our joint venture business in Guatemala from Miffin.
Cable Onda partners and subsidiaries, the non-controlling shareholders in our Panama operations.
Kinnevik
Kinnevik is a Swedish company with interests in the telecommunications, media, publishing, paper and financial services industries. For most of 2019, Kinnevik was Millicom's largest shareholder and the beneficial owner of approximately 37.2% of MIC S.A.’s share capital. However, as from November 2019, Kinnevik no longer owns any beneficial interest in Millicom.
During 2019, the Company purchased services from Kinnevik subsidiaries including fraud detection, procurement and professional services. Transactions and balances with Kinnevik Group companies are disclosed under Other in the tables below.
Helios Towers
Millicom sold its tower assets and leased back a portion of space on the towers in several African countries and contracted for related operation and management services with Helios Towers Africa Ltd ("HTA"). The Millicom Group has future lease commitments in respect of the tower companies. Millicom’s investments in HTA have been listed during 2019, and Millicom resigned from its board of directors' positions, thereby terminating its significant influence on HTA.
Empresas Públicas de Medellín (EPM)
EPM is a state-owned, industrial and commercial enterprise, owned by the municipality of Medellin, and provides electricity, gas, water, sanitation, and telecommunications. EPM owns 50% of our operations in Colombia.
Miffin Associates Corp (Miffin)
The Millicom Group purchases and sells products and services from Miffin Group. Transactions with Miffin represent recurring commercial operations, such as purchase of handsets and sale of airtime.
Cable Onda Partners
Our partners in Panama are the non-controlling shareholders of Cable Onda and own 20% of the company, and indirectly 20% of Grupo de Comunicaciones Digitales S.A. (formerly Telefónica Móviles Panamá, S.A.), which was acquired by Cable Onda in August 2019. Additionally, they also hold interests in several entities which have purchasing and selling recurring commercial operations with Cable Onda (such as the sale of content costs, delivery of broadband services, etc.).
The Company had the following expenses and income and gains from transactions with related parties for the periods indicated:
| | | | | | | | | | | | | | | | | |
| Year ended December 31 |
Expenses from transactions with related parties | 2021 | | 2020 | | 2019 |
| (US$ millions) |
Purchases of goods and services from Miffin (i) | (165) | | | (216) | | | (214) | |
Purchases of goods and services from EPM | (39) | | | (37) | | | (42) | |
Lease of towers and related services from HTA(ii) | — | | | — | | | (146) | |
Other expenses | (18) | | | (57) | | | (10) | |
Total | (221) | | | (310) | | | (412) | |
(i) Miffin entities are not considered as related parties since November 12, 2021 (see note A.1.2. to our audited consolidated financial statements).
(ii) HTA ceased to be a related party on October 15, 2019.
| | | | | | | | | | | | | | | | | |
| Year ended December 31 |
Income and gains from transactions with related parties | 2021 | | 2020 | | 2019 |
| (US$ millions) |
Sale of goods and services to Miffin (i) | 299 | | | 327 | | | 306 | |
Sale of goods and services to EPM | 14 | | | 15 | | | 13 | |
Other revenue | 2 | | | 2 | | | 3 | |
Total | 314 | | | 343 | | | 322 | |
(i) Miffin entities are not considered as related parties since November 12, 2021 (see note A.1.2. to our audited consolidated financial statements).
As at December 31, the Company had the following balances with related parties:
| | | | | | | | | | | |
| 2021 | | 2020 |
| (US$ millions) |
Liabilities | | | |
Payables to Guatemala joint venture (i) | — | | | 231 | |
Payables to Honduras joint venture (ii) | 69 | | | 103 | |
Payables to EPM | 15 | | | 20 | |
Payables to Panama non-controlling interests | 1 | | | 1 | |
Other accounts payable | 2 | | | 1 | |
Total | 87 | | | 356 | |
(i) Since November 12, 2021, Tigo Guatemala is accounted for as a subsidiary and intercompany transactions are eliminated on consolidation (see note A.1.2. to our audited consolidated financial statements).
(ii) Mainly advances for dividends expected to be declared in 2022.
| | | | | | | | | | | |
| 2021 | | 2020 |
| (US$ millions) |
Assets | | | |
Receivables from EPM | 2 | | | 3 | |
Receivables from Guatemala joint venture (i) | — | | | 206 | |
Receivables from Honduras joint venture (ii) | 62 | | | 84 | |
Receivables from Panama non-controlling interests | 1 | | | 1 | |
Other accounts receivable | 5 | | | 5 | |
Total | 70 | | | 299 | |
(i) In 2021 and prior to the acquisition of the remaining 45% shareholding, our former joint venture in Guatemala repaid the entire $193 million Millicom shareholder loan granted in October 2020 and originally repayable by January 13, 2022, at the latest.
(ii) In November 2020, our operations in Honduras completed a shareholding restructuring whereby Telefónica Celular S.A. acquired the shares of Navega S.A. de C.V. from its existing shareholders. The sale consideration will be payable in several installments with a final settlement in November 2023. As of December 31, 2021, $24 million out of a total receivable of $53 million is due after more than one year and therefore disclosed in non-current assets. During 2021, our operations in Honduras repaid $30 million to Millicom.
C. Interests of Experts and Counsel
Not applicable to Annual Report filing.
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Financial Statements
Consolidated financial statements are set forth under “Item 18. Financial Statements.”
Legal Proceedings
General litigation
In the ordinary course of business, Millicom is a party to various litigation or arbitration matters in each jurisdiction in which we operate. The principal categories of litigation to which we are subject include the following:
• commercial claims, which include claims from third-party dealers, suppliers and customers alleging breaches or improper terminations of commercial agreements, or the charging of fees not in compliance with applicable law;
• regulatory claims, which consist primarily of consumer claims, as well as complaints regarding the locations of antennae and other equipment; and
• labor and employment claims, including claims for wrongful termination and unpaid severance or other benefits.
By category of litigation, commercial claims account for a majority of the litigation matters to which we are party by both number of cases and total potential exposure based on the amount claimed.
By geography, litigation matters in Colombia represent a majority of the litigation matters to which we are party by both number of cases and total potential exposure. This is due to the size of our operations in Colombia, the comparatively high general prevalence of litigation there, and consumer protection and quality of service regulations which facilitate claims against telecommunications companies.
For additional details, see note G.3.1. to our audited consolidated financial statements.
Tax disputes
In addition to the litigation matters describe above, we have ongoing tax claims and disputes in most of our markets. Generally, these disputes relate to differences with the tax authorities following their completion of audits for prior tax years dating back to 2007 or challenges by the tax authorities to our interpretation of tax regulations. Examples of these challenges and disputes relate to issues such as the following:
• the applicability, deductibility or reporting of VAT or sales tax in Honduras, Costa Rica and Tanzania;
• withholding tax payable on commissions, services fees and finance leases in Bolivia, El Salvador, Guatemala, Honduras, Paraguay and Tanzania;
• the application of stamp tax on dividend payments in Guatemala;
• the deductibility of expenses and interest on shareholder loans and other debt instruments in El Salvador and Tanzania;
• the deductibility of management, royalty and service fees paid to MIC S.A. by our operations in Bolivia, Costa Rica, El Salvador, Honduras and Tanzania;
• deductibility of commissions and discounts on handsets in Honduras;
• the deductibility of expenses for depreciation and amortization in Colombia, Guatemala and Paraguay;
•the application of the territoriality principle in the determination of the taxable base of municipal taxes in Colombia and Nicaragua; and
•the application of withholding taxes on dividends in Nicaragua.
In many instances, the tax authorities seek to impose substantial penalties and interest charges while the disputed amounts remain unpaid, as we seek resolution through negotiations or court proceedings, resulting in significantly higher total claims than we expect the tax authorities will receive once the matter has been finally resolved. We work with the local tax authorities to substantiate claims or negotiate settlement amounts to close an audit, except in those instances where we are challenging or appealing the tax authorities’ claims.
For additional details, see note G.3.2. to our audited consolidated financial statements.
Dividend and Share Buyback Program(s)
Holders of MIC S.A. common shares (and SDRs) are entitled to receive dividends proportionately when, as and if declared by the Company’s Board of Directors and approved by shareholders at the AGM, subject to Luxembourg legal reserve requirements, as well as restrictions in the agreements governing our indebtedness.
On May 4, 2021, the AGM of shareholders of Millicom resolved to authorize (the "Authorization") the Board of Directors of Millicom to adopt a share repurchase plan. On July 29, 2021, Millicom announced that the Board decided to initiate a share repurchase program based on the Authorization. On December 17, 2021, Millicom announced the ending of the repurchase program, as it works towards a rights offering that is planned for the first half of 2022. Under the repurchase program, Millicom acquired 1,369,284 shares.
In 2020, with the aim of preserving liquidity and financial flexibility, the Company's Board of Directors determined that no dividend be paid, and recommended that profit for the 2019 year be allocated to unappropriated net profit carried forward. This proposal was approved by shareholders at the AGM. During the period from February 28, 2020 to April 3, 2020, Millicom repurchased an aggregate amount of 350,000 shares (in the form of Swedish Depository Receipts) under the share repurchase plan approved at the 2019 AGM. No shares have been repurchased under the share repurchase plan approved at the 2020 AGM.
On May 2, 2019, a dividend distribution of $2.64 per share (or $267,571,480 in the aggregate) from MIC S.A.'s profit or loss brought forward account at December 31, 2018, was approved by the shareholders at the AGM to be distributed in two equal installments, one of which was paid on May 10, 2019 and the other of which was paid on November 12, 2019. During 2019, no shares were repurchased.
B. Significant Changes
No significant changes have occurred other than as described in this Annual Report since the date of our most recent audited financial statements.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
The principal trading market of MIC S.A.’s shares is currently Nasdaq Stockholm, where MIC S.A.’s shares are listed and trade in the form of SDRs. Each SDR represents one share. MIC S.A. does not intend to list its SDRs on any national securities exchange in the United States.
Since January 9, 2019, MIC S.A.’s common shares have been listed on the Nasdaq Stock Market’s Global Select Market (the “Nasdaq Global Select Market”) in the United States. MIC S.A.’s common shares had previously been listed on the Nasdaq Global Select Market until May 27, 2011.
B. Plan of Distribution
Not applicable to Annual Report filing.
C. Markets
The SDRs are listed on the main market of Nasdaq Stockholm under the symbol “TIGO SDB (formerly "MIC_SDB”). Nasdaq Stockholm is a regulated market in accordance with the Swedish Securities Market Act and is subject to regulation and supervision by the Swedish Financial Supervisory Authority. The Swedish Securities Market Act provides for the regulation and supervision of the Swedish securities markets and market participants, and the Swedish Financial Supervisory Authority implements such regulation and supervision.
MIC S.A.’s common shares are listed on the Nasdaq Global Select Market in the United States under the symbol “TIGO.”
D. Selling Shareholders
Not applicable to Annual Report filing.
E. Dilution
Not applicable to Annual Report filing.
F. Expenses of the Issue
Not applicable to Annual Report filing.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
As of December 31, 2021, the Company’s authorized share capital comprised 133,333,200 common shares, of which 101,739,217 common shares were issued, fully paid and outstanding. The common shares have a par value of $1.50 per share. On February 28, 2022, the extraordinary general meeting of shareholders of Millicom resolved to authorize the Board of Directors of Millicom to increase the authorized share capital of the Company from $199,999,800 divided into 133,333,200 shares, with a par value of $1.50 per share, to $300,000,000 divided into 200,000,000 shares, with a par value of $1.50 per share. We have not issued any new shares in the last three years, except shares held in treasury that were used throughout this period to settle share grants to employees.
As of December 31, 2021, the Company held 1,538,256 common shares in treasury at a nominal value of $1.50 per share. These shares are held for purposes of the Company’s long-term incentive programs. Shares held in treasury are not included in the number of shares outstanding and voting rights attached to shares held in treasury are suspended by law. On May 4, 2021, the AGM of shareholders of Millicom resolved to authorize the Board of Directors of Millicom to adopt a share repurchase plan. On July 29, 2021, Millicom announced that the Board decided to initiate a share repurchase program based on the Authorization, which was subsequently terminated on December 17, 2021. As a result of the share repurchase program, Millicom repurchased 1,369,284 common shares during 2021.
As of December 31, 2021, there were 1,421,856 total unvested shares granted under the Company’s long-term incentive programs, as described in “Item 6. Directors, Senior Management and Employees—B. Compensation.” As of such date, no options to acquire our shares were outstanding.
B. Memorandum and Articles of Association
Articles of Association
Registration and Object
Millicom International Cellular S.A. is a public limited liability company (société anonyme) governed by the Luxembourg law of August 10, 1915 on Commercial Companies (as amended), incorporated on June 16, 1992, and registered with the Luxembourg Trade and Companies’ Register (Registre du Commerce et des Sociétés de Luxembourg) under number B 40.630.
The Articles of Association of MIC S.A. define its purpose inter alia as follows: “... to engage in all transactions pertaining directly or indirectly to the acquisition and holding of participating interests, in any form whatsoever, in any Luxembourg or foreign business enterprise, including but not limited to, the administration, management, control and development of any such enterprise. At the extraordinary general meeting of shareholders held on January 7, 2019, the shareholders approved an amendment to article 7 of the Articles of Association to stipulate that the Nomination Committee rules and procedures of the Swedish Code of Corporate Governance will apply to the election of directors to MIC S.A.'s Board of Directors. On February 28, 2022, the shareholders approved an amendment to article 5, paragraphs 1 and 4 of the Articles of Association to reflect the authorized share capital increase, as described in the above section of this form. The valid Articles of Association are filed herewith as Exhibit 1.1.
Directors
Restrictions on Voting
If a director has a personal material interest in a proposal, arrangement or contract to be decided by MIC S.A., the Articles of Association provide that the validity of the decision of MIC S.A. is not affected by a conflict of interest existing with respect to a director. However, any such personal interest must be disclosed to the Board of Directors ahead of the vote and the relevant director shall abstain from considering and voting on the relevant issue. Such conflict of interest must be reported to the next general meeting of shareholders.
Compensation and Nomination
The decision on annual remuneration of directors is reserved by the Articles of Association to the general meeting of shareholders. Directors are therefore prevented from voting on their own compensation. However, directors may vote on the number of shares they own, including the shares allotted under any share-based compensation scheme.
The Nomination Committee makes recommendations for the election of directors to the AGM. At the AGM, shareholders may vote for or against the directors proposed or may abstain. The Nomination Committee reviews and recommends the directors’ fees which are approved by the shareholders at the AGM.
In proposing persons to be elected as directors at the AGM, the Company must comply with the nomination committee rules of the Swedish Code of Corporate Governance, so long as such compliance does not conflict with applicable mandatory law or regulation or the mandatory rules of any stock exchange on which the Company's shares are listed. In the event that the Company does not comply with the nomination committee rules of the Swedish Code of Corporate Governance and a committee of the Board of Directors is established to propose persons to be elected as directors at the AGM, any Shareholder holding at least 20% of the issued and outstanding shares of the Company, excluding treasury shares, has the right to designate: (1) one of the then-serving directors to be a member of such committee, so long as such designation and the director so designated meet the requirements of any applicable mandatory law or regulation or the mandatory rules of any stock exchange on which the Company's shares are listed, and (2) one person, who may or may not be a director, to attend any meeting of such committee as an observer, without the right to vote at such meeting, so long as such attendance does not conflict with applicable mandatory law or regulation or the mandatory rules of any stock exchange on which the Company's shares are listed. Any designation made pursuant to this provision lapses upon such designating Shareholder holding less than 20% of the issued and outstanding shares of the Company, excluding treasury shares.
Borrowing Powers
The Board of Directors generally has unrestricted borrowing powers on behalf of and for the benefit of MIC S.A.
Age Limit
There is no age limit for being a director of MIC S.A. Directors could be elected for a maximum period of six years, but the Company has followed the practice of electing them annually at the AGM.
Share Ownership Requirements
Directors need not be shareholders in MIC S.A.
Shares
Rights Attached to the Shares
MIC S.A. has only one class of shares, common shares, and each share entitles its holder to:
• one vote at the general meeting of shareholders,
• receive dividends when such distributions are decided, and
• share in any surplus left after the payment of all the creditors in the event of liquidation. There is a preferential subscription right pursuant to Luxembourg corporate law under any share or rights issue for cash, unless the Board of Directors, within the limits specified in the Articles of Association, or an extraordinary general meeting of shareholders, as the case may be, restricts the exercise thereof.
Redemption of Shares
The Articles of Association provide for the possibility and set out the terms for the repurchase by MIC S.A. of its own shares, which repurchase must be approved in accordance with applicable law and the rules of any exchange on which MIC S.A.’s shares are listed. A share repurchase plan was approved at our 2021 AGM authorizing the Board of Directors, at any time between May 4, 2021 and the date of the 2022 AGM, provided the required levels of distributable reserves are met by MIC S.A. at that time, either directly or through a subsidiary or a third party, to engage in a share repurchase plan of MIC S.A.’s common shares to be carried out for all purposes allowed or which would become authorized by the laws and regulations in force, and in particular the Luxembourg law of August 10, 1915 on commercial companies, as amended (the “Share Repurchase Plan”) by using its available cash reserves.
The maximum number of Shares that may be acquired between May 4, 2021 and the date of the 2022 AGM may not exceed five per cent (5%) of Millicom's outstanding share capital as of December 31, 2020.
For Shares repurchased on a regulated market where the shares are traded, the price per Share shall be within the registered interval for the share price prevailing at any time (the so called spread), that is, the interval between the highest buying rate and the lowest selling rate of the Shares on the market on which the purchases are made. For any other Shares repurchased, the price per share may not exceed 110% of the most recent closing trading price of the
Shares on the Nasdaq Stock Market in the U.S., provided that the minimum repurchase price is above SEK 50 (or USD equivalent).
The Share Repurchase Plan may not have the effect of reducing Millicom's net assets and reserves under the limit required by the 1915 Law or the Articles of Association of the Company. Only fully paid-up Shares may be included in repurchase transactions made under the Share Repurchase Plan.
Sinking Funds
MIC S.A. shares are not subject to any sinking fund.
Liability for Further Capital Calls
All of the issued shares in MIC S.A.’s capital are fully paid up. Accordingly, none of MIC S.A.’s shareholders are liable for further capital calls.
Principal Shareholder Restrictions
There are no provisions in the Articles of Association that discriminate against any existing or prospective holder of MIC S.A.’s shares as a result of such shareholder owning a substantial number of shares.
Changes to Shareholder’s Rights
In order to change the rights attached to the shares of MIC S.A., an extraordinary general meeting of shareholders must be duly convened and held before a Luxembourg notary, as under Luxembourg law such change requires an amendment of the Articles of Association. A quorum of presence of at least 50% of the shares present or represented is required at a meeting held after the first convening notice. If such quorum is not met after the first convening notice, there is no quorum of presence requirement at the meeting held after the second convening notice. Any decision must be taken by a majority of two thirds of the votes cast at the general meeting. Any change to the obligations attached to shares may be adopted only with the unanimous consent of all shareholders.
Shareholders’ Meetings
General meetings of shareholders are convened by convening notice published in the Luxembourg Official Gazette (Journal des Publications, Recueil Electronique des Sociétés et Associations), in a Luxembourg newspaper, in short version in the Swedish newspaper SvD, as a press release and on the Millicom website. According to article 18 of the Articles of Association of MIC S.A., the Board of Directors determines in the convening notice the formalities to be observed by each shareholder for admission to the AGM. An AGM must be convened every year within six months of the end of the financial year, at the registered office of the Company or any other place in Luxembourg as may be specified in the convening notice. Other meetings can be convened as necessary.
Limitation on Securities Ownership
There are no limitations imposed under Luxembourg law or the Articles of Association on the rights of non-resident or foreign entities to own shares of the Company or to hold or exercise voting rights on shares of the Company.
Change of Control
There are no provisions in the Articles of Association of the Company that would have the effect of delaying, deferring or preventing a change in control of MIC S.A. and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company, or any of its subsidiaries.
Luxembourg laws impose the mandatory disclosure of an important participation in Millicom and any change in such participation.
Disclosure of Shareholder Ownership
As required by the Luxembourg law on transparency obligations of January 11, 2008, as amended (the “Transparency Law”), a shareholder who acquires or disposes of shares, including depositary receipts representing shares in the Company’s capital must notify the Company and the Commission de Surveillance du Secteur Financier of the proportion of shares held by the relevant person as a result of the acquisition or disposal, where that proportion reaches, exceeds or falls below the thresholds referred to in the Transparency Law. As per the Transparency Law, the above also applies to the mere entitlement to acquire or to dispose of, or to exercise, voting rights in any of the cases referred to in the Transparency Law.
C. Material Contracts
Bridge Loan Agreement
On November 10, 2021, MIC S.A. entered into a $2.15 billion bridge loan to fund the acquisition of the remaining 45% equity interest in its Guatemala joint venture business. The bridge loan matures on May 10, 2022, with an option to extend for one six-month period. The loan is governed by the bridge loan agreement, dated November 10, 2021, among Millicom International Cellular S.A., the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. The bridge loan agreement is included as Exhibit [4.7] to this Annual Report.
Stock Purchase Agreement
On November 11, 2021, the Company entered into an agreement to acquire the remaining 45% equity interest in its Guatemala joint venture business for $2.2 billion in cash. The acquisition was made pursuant to a stock purchase agreement, dated November 11, 2021, among Millicom International II N.V. and Shai Holding S.A., as buyers, and Miffin Associates Corp., as the seller. The stock purchase agreement is included as Exhibit [4.8] to this Annual Report.
4.500% Senior Notes
On October 19, 2020, MIC S.A. issued $500 million 4.500% senior notes that mature on April 27, 2031 (the “Original 4.500% Notes”). The notes were issued pursuant to the indenture for the $500 million 4.500% Senior Notes due 2031, dated October 27, 2020, between Millicom International Cellular S.A., Citibank, N.A., London Branch and Citigroup Global Markets Europe AG. The indenture is included as Exhibit [4.5] to this Annual Report (the “2020 Indenture”). In addition, on September 24, 2021, MIC S.A. issued $308 million of additional notes of the same series pursuant to the 2020 Indenture, which are treated as a single class with the Original 4.500% Notes.
Revolving Credit Facility
MIC S.A. has a $600 million revolving credit facility that matures on October 15, 2025, with an option to extend for two one-year periods. The facility is governed by the revolving credit agreement, dated October 15, 2020, among Millicom International Cellular S.A., the lenders from time to time party thereto, and the Bank of Nova Scotia. The revolving credit agreement is included as Exhibit [4.2] to this Annual Report.
2028 5.125% Senior Notes
On September 20, 2017, MIC S.A. issued a $500 million 5.125% fixed interest rate bond that matures on January 15, 2028. The bond was issued pursuant to the amended and restated indenture for the $500 million 5.125% Senior Notes due 2028, dated May 30, 2018, between Millicom International Cellular S.A., Citibank, N.A., London Branch and Citigroup Global Markets Deutschland AG. The amended and restated indenture is included as Exhibit [4.1] to this Annual Report.
6.625% Senior Notes
On October 16, 2018, to help finance the Cable Onda Acquisition, MIC S.A. issued $500 million aggregate principal amount of its 6.625% fixed interest rate notes that mature on October 15, 2026. The notes were issued pursuant to the indenture for the $500 million 6.625% Senior Notes due 2026, dated October 16, 2018, between Millicom International Cellular S.A., Citibank, N.A., London Branch and Citigroup Global Markets Europe AG. The indenture is included as Exhibit [4.6] to this Annual Report.
Stock Purchase Agreements for Telefónica CAM
On February 20, 2019, MIC S.A., Telefónica Centroamérica Inversiones, S.L. (“Telefónica Centroamérica”) and Telefónica, S.A. (“Telefónica”) entered into a share purchase agreement pursuant to which, subject to the terms and conditions contained therein, MIC S.A. agreed to purchase 100% of the shares of Telefónica Móviles Panamá, S.A., from Telefónica Centroamérica (the “Panama Acquisition”).
On February 20, 2019, MIC S.A., Telefónica Centroamérica and Telefónica entered into a share purchase agreement pursuant to which, subject to the terms and conditions contained therein, Millicom agreed to purchase 100% of the shares of Telefónica de Costa Rica TC, S.A., from Telefónica (the “Costa Rica Acquisition”). On May 2, 2020, MIC S.A. terminated the Costa Rica Acquisition share purchase agreement. As a result of such termination, Telefónica filed a complaint against Millicom followed by an amended complaint, which seeks unspecified damages, costs, and fees. Millicom believes the complaint is without merit and is vigorously defending against it on the basis that Millicom was entitled to terminate the Costa Rica Acquisition, since the required closing conditions were not met by the contractual due date.
On February 20, 2019, MIC S.A., Telefónica Centroamérica and Telefónica entered into a share purchase agreement pursuant to which, subject to the terms and conditions contained therein, Millicom agreed to purchase 100% of the shares of Telefonía Celular de Nicaragua, S.A., a company incorporated under the laws of Nicaragua, from Telefónica Centroamérica (the “Nicaragua Acquisition,” and together with the Panama Acquisition and the Costa Rica Acquisition, the “Telefónica CAM Acquisitions”).
6.250% Senior Notes
On March 25, 2019, to help finance the Telefónica CAM Acquisitions, MIC S.A. issued $750 million aggregate principal amount of its 6.250% Senior Notes due 2029. The notes were issued pursuant to the indenture for the $750 million 6.250% Senior Notes due 2029, dated March 25, 2019, between Millicom International Cellular S.A., Citibank, N.A., London Branch and Citigroup Global Markets Europe AG. The indenture is included as Exhibit [4.3] to this Annual Report.
5.875% Senior Notes
On April 5, 2019, the Company’s subsidiary Telefónica Celular del Paraguay S.A. issued $300 million aggregate principal amount of 5.875% Senior Notes due 2027 (the “Original 5.875% Notes”). The notes were issued pursuant to the indenture for the $300 million 5.875% Senior Notes due 2027, dated April 5, 2019, between Telefónica Celular del Paraguay S.A., Citibank, N.A. and Banque Internationale à Luxembourg SA (the “ 2027 Indenture”). The 2027 Indenture is included as Exhibit [4.11] to this Annual Report. In addition, on January 28, 2020, Telefónica Celular del Paraguay S.A. issued $250 million of additional notes of the same series pursuant to the first supplemental indenture to the 2027 Indenture, which are treated as a single class with the Original 5.875% Notes. The first supplemental indenture is included as Exhibit [4.9] to this Annual Report.
2030 4.500% Senior Notes
On October 28, 2019, the Company’s subsidiary Cable Onda, S.A. issued $600 million aggregate principal amount of 4.500% Senior Notes due 2030. The notes were issued pursuant to the indenture for the $600 million 4.500% Senior Notes due 2030, dated October 28, 2019, among Cable Onda, S.A., Citibank, N.A. and Banque Internationale à Luxembourg SA. The indenture is included as Exhibit [4.11] to this Annual Report.
2032 5.125% Senior Notes
On February 3, 2022, Walkers Fiduciary Limited, the trustee of CT Trust, issued $900 million aggregate principal amount of 5.125% Senior Notes due 2032. The notes are guaranteed by the Company’s subsidiaries in Guatemala and were issued pursuant to the Indenture for the 5.125% Senior Notes due 2032, dated February 3, 2022, among Walkers Fiduciary Limited, the guarantors named therein, and the Bank of New York Mellon. The indenture is included as Exhibit [4.12] to this Annual Report.
2024 Floating-Rate Senior Unsecured Sustainability Bond
On May 15, 2019, MIC S.A. completed its offering of a SEK 2 billion (approximately $208 million) floating-rate senior unsecured sustainability bond due 2024, which is included as Exhibit [4.4] to this Annual Report.
2027 Floating-Rate Senior Unsecured Sustainability Bond
On January 13, 2022, MIC S.A. completed its offering of a SEK 2.25 billion (approximately $252 million) floating-rate senior unsecured sustainability bond due 2027, which is included as Exhibit [4.13] to this Annual Report.
D. Exchange Controls
There are no governmental laws, decrees, regulations or other legislation of Luxembourg that may affect:
• the import or export of capital including the availability of cash and cash equivalents for use by the Millicom Group, or
• the remittance of dividends, interests or other payments to non-resident holders of MIC S.A.’s securities other than those deriving from the U.S.-Luxembourg double taxation treaty.
E. Taxation
Luxembourg Tax Considerations
The following information is of a general nature only on certain tax considerations effective in Luxembourg in relation to holders of shares in respect of the ownership and disposition of shares in MIC S.A., and does not purport to be a comprehensive description of all of the tax considerations that might be relevant to an investment decision in such company. It is included herein solely for preliminary information purposes and is not intended to be, nor should it be construed to be, legal or tax advice. The information contained herein is based on the laws presently in force in Luxembourg on the date hereof, and thus subject to any change in law that may take effect after such date. Shareholders in MIC S.A. should therefore consult their own professional advisers as to the effects of state, local or foreign laws, including Luxembourg tax law, to which they may be subject.
Please be aware that the residence concept used under the respective headings below applies for Luxembourg income tax assessment purposes only. Any reference in the present section to a tax, duty, levy, impost or other charge or withholding of a similar nature, or to any other concepts, refers to Luxembourg tax law or concepts only. Further, any reference to a resident corporate shareholder/taxpayer includes non-resident corporate shareholders/taxpayers carrying out business activities through a permanent establishment, a permanent representative or a fixed place of business in Luxembourg to which assets would be attributable. Also, please note that a reference to Luxembourg income tax encompasses corporate income tax (impôt sur le revenu des collectivités), municipal business tax (impôt commercial communal), a solidarity surcharge (contribution au fonds pour l’emploi), as well as personal income tax (impôt sur le revenu) generally. Corporate shareholders may further be subject to net wealth tax (impôts sur la fortune), as well as other duties, levies or taxes. Corporate income tax, municipal business tax, as well as the solidarity surcharge invariably apply to most corporate taxpayers resident in Luxembourg for tax purposes. Individual taxpayers are generally subject to personal income tax and the solidarity surcharge. Under certain circumstances, where an individual taxpayer acts in the course of the management of a professional or business undertaking, municipal business tax may apply as well.
(a) Luxembourg withholding tax on dividends paid on MIC S.A. shares
Dividends distributed by MIC S.A. will in principle be subject to Luxembourg withholding tax at the rate of 15%.
Luxembourg resident corporate holders
No dividend withholding should apply on dividends paid by MIC S.A. to (i) a Luxembourg resident company if the conditions of Article 147 of the Luxembourg income tax law (“LITL”) are met, meaning that the Luxembourg residence corporate holder should be a collective entity covered by article 2 of the EU Parent Subsidiary (Council Directive 2011/96/EU of 30 November 2011), (ii) a fully taxable (capital) company not listed in the appendix to article 166 LITL, paragraph 10, (iii) the Luxembourg State, a Luxembourg commune or a Luxembourg syndicate of communes or an undertaking of a Luxembourg public body or to a Luxembourg permanent establishment of a collective entity under (i), (ii) or (iii)), holding shares which meets the qualifying participation test (10% of the share capital or acquisition price of the shares of at least € 1.2 million held or committed to be held for a minimum of 12 months).
Luxembourg resident individual holders
Luxembourg withholding tax on dividends paid by MIC S.A. to a Luxembourg resident individual holder may entitle such holder to a tax credit for the tax withheld.
Non-Luxembourg resident holders
Non-Luxembourg resident shareholders of MIC S.A. should benefit from a withholding tax exemption if the conditions of Article 147 LITL are met, meaning a 10% shareholding or share acquisition price of € 1.2 million held or committed to be held for 12 consecutive months , and that the non-Luxembourg resident should either be (i) an entity which fall within the scope of Article 2 of the European Council Directive 2011/96/EU, as amended (the “Parent-Subsidiary Directive”) and which are not excluded to benefit from this directive under its mandatory general anti-avoidance rule as implemented in Luxembourg, (ii) a corporate holder subject to a tax comparable to Luxembourg corporate income tax and which are resident in a country having concluded a double tax treaty with Luxembourg (such as the United States), (iii) a corporate holder subject to a tax comparable to Luxembourg corporate income tax resident in a State member of the European Economic Area other than a Member State of the EU (or to a Luxembourg permanent establishment of such company) or (iv) a corporate holder resident in Switzerland subject to corporate income tax in Switzerland without benefiting from a tax exemption.
Non-Luxembourg resident holders which do not fall within the scope of Article 147 LITL withholding tax exemption but resident in a State with which Luxembourg has concluded a double tax treaty may claim a reduced withholding tax under the conditions set forth in the relevant double tax treaty.
In the case the non-Luxembourg resident holder fulfills the requirements to benefit from a withholding tax exemption or is entitled to a reduced withholding tax under an applicable double tax treaty but has been subject to this 15% withholding tax, it may claim a refund from the Luxembourg tax administration.
(b) Luxembourg income tax on dividends and capital gains received from MIC S.A. shares
Fully taxable resident corporate shareholders
For resident corporate taxpayers, dividends (and other payments) derived from shares held in a company and capital gains realized on the sale of shares in a company are, in principle, fully taxable and thus subject to a combined corporate income tax rate of 24.94% (for resident corporate taxpayers established in Luxembourg City and having a tax base exceeding EUR 200,000), except that, as described in further detail below, (i) dividends can benefit either from a full exemption if the conditions of article 166 LITL are met or from a 50% exemption if the conditions of Article 115 (15a) LITL are met, and (ii) capital gains realized by resident corporate shareholders are fully exempt if the conditions of the Grand Ducal Decree of December 21, 2002, (as amended) are fulfilled.
Under the Luxembourg participation exemption on dividends as implemented by Article 166 LITL, dividends derived from shares may be exempt from income tax at the level of the resident corporate shareholder if cumulatively, (i) the shareholder is either (a) a fully taxable resident collective entity taking one of the forms listed in the appendix to paragraph 10 of Article 166 LITL, (b) a fully taxable resident corporation not listed in the appendix to paragraph 10 of Article 166 LITL, (c) a permanent establishment of a collective entity referred to in Article 2 of the Parent-Subsidiary Directive, (d) a permanent establishment of a corporation resident in a State with which the Grand Duchy of Luxembourg has signed an agreement in an attempt to avoid double taxation, or (e) a permanent establishment of a corporation or a cooperative society resident in a State party to the European Economic Area Agreement other than a Member State of the European Union, (ii) the subsidiary is either (a) a collective entity referred to in Article 2 of the Parent-Subsidiary Directive, (b) a fully taxable resident corporation not listed in the appendix to paragraph (10) of Article 166 LITL, or (c) a non-resident corporation fully subject to a tax corresponding to the Luxembourg corporate income tax, and (iii) the shareholder has held or commits itself to hold, for an uninterrupted period of at least 12 months , a participation representing at least 10% in the share capital of the subsidiary or an acquisition price of at least €1.2 million. Liquidation proceeds are deemed to be a received dividend and may be exempt under the same conditions. The participation through an entity that is transparent for Luxembourg income tax purposes is to be considered as direct participation in proportion to the amount held in the net assets invested in that tax transparent entity.
The Luxembourg participation exemption regime may be denied if the income is (i) deductible in the other EU Member State paying such income or (ii) paid as part of an arrangement or a series of arrangements that, having been put into place with the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of the Parent-Subsidiary Directive, is not genuine having regard to all relevant facts and circumstances. For the purposes of this anti-avoidance rule, an arrangement, which may comprise several steps or parts, or a series of arrangements, is considered as not genuine to the extent that it is not put into place for valid commercial reasons that reflect economic reality.
Expenses, including interest expenses and impairments, in direct economic relation with the shareholding held by a resident corporate shareholder should not be deductible for income tax purposes up to the amount of any exempt dividend derived during the same financial year. Expenses exceeding the amount of the exempt dividend received from such shareholding during the same financial year should remain deductible for income tax purposes.
If the conditions of the Luxembourg participation exemption, as described above, are not met, 50% of the gross amount of dividends may be exempt from corporate income tax in accordance with Article 115 (15a) LITL if such dividends are received from (i) a fully taxable corporation resident in Luxembourg, (ii) a corporation (a) resident in a State with which the Grand Duchy of Luxembourg has signed an agreement in an attempt to avoid double taxation, and (b) fully subject to a tax corresponding to the Luxembourg corporate income tax, or (iii) a company resident in a Member State of the European Union and referred to in Article 2 of the Parent-Subsidiary Directive.
Capital gains realized on shares by resident corporate shareholders may be exempt from corporate income tax if the conditions mentioned above under the Luxembourg participation exemption on dividends are met, except that the acquisition price must be of at least €6 million instead of €1.2 million. The participation through an entity that is transparent for Luxembourg income tax purposes is to be considered as direct participation in proportion to the amount held in the net assets invested in that tax transparent entity. Taxable gains are determined as being the difference between the price for which the shares have been disposed of and the lower of their cost or book value.
Capital gains realized upon the disposal of shares should remain taxable for an amount corresponding to the sum of the expenses related to the shareholding and impairments recorded on the shareholding that reduced the taxable basis of the resident corporate shareholder in the year of disposal or in previous financial years.
Resident corporate shareholders with a special tax regime
A resident corporate shareholder that is governed by the law of May 11, 2007, on Family Estate Management Companies (as amended) or by the Law of February 13, 2007, on Specialized Investment Funds (as amended) or by the Law of December 17, 2010, on Undertakings for Collective Investment (as amended) or by the law of July 23, 2016, on Reserved Alternative Investment Funds not having the exclusive purpose of investing in risk capital, is not subject to Luxembourg income tax; thus, neither dividends (and other payments) derived from shares held in a company nor capital gains realized on the sale or disposal, in any form whatsoever, of shares in a company, are taxable at the level of such resident corporate shareholders.
Resident individual shareholders
For resident individual shareholders, dividends derived from shares and capital gains realized on the sale of shares are, in principle, subject to income tax at the progressive ordinary rate (with a current effective marginal rate of up to 42%). Such income tax rate is increased by 7% for income not exceeding €150,000 for single taxpayers and €300,000 for couples taxed jointly, and by 9% for income above these amounts. In addition, a 1.4% dependence insurance contribution is due.
50% of the gross amount of dividends derived from shares may however be exempt from income tax, if the conditions laid down under Article 115 (15a) LITL, as described above, are complied with. In addition, a total lump-sum of €1,500 (which is doubled for taxpayers who are jointly taxable) is deductible from the total of dividends received during the tax year in order to determine the total taxable amount of investment income of the taxpayer.
Capital gains realized on the disposal of the shares by resident individual shareholders who act in the course of the management of their private wealth, will in principle only be taxable if said capital gains qualify either as speculative gains or as gains on a substantial participation. A disposal may include a sale, an exchange, a contribution or any other kind of alienation of shares. Capital gains are deemed to be speculative if the shares are disposed within six months after their acquisition or if their disposal precedes their acquisition. Speculative gains realized during the year that are equal to, or are greater than, €500 are subject to income tax at ordinary rates. A participation is deemed to be substantial where a resident individual shareholder holds, either alone or together with his spouse, his partner or minor children, directly or indirectly, at any time within the 5 years preceding the disposal, more than 10% of share capital of a collective entity. A shareholder is also deemed to alienate a substantial participation if such participation (i) has been acquired free of charge, within the 5 years preceding the transfer, and (ii) was constituting a substantial participation in the hands of the alienator (or the alienators in case of successive transfers free of charge within the same 5-year period). Capital gains realized on a substantial participation more than six months after the acquisition thereof may benefit from an allowance of up to €50,000 granted for a ten-year period (which is doubled for taxpayers who are jointly taxable). They are subject to income tax according to the half-global rate method (i.e., the average rate applicable to the total income is calculated according to progressive income tax rates and half of the average rate is applied to the capital gains realized on the substantial participation).
Capital gains realized on the disposal of the Company’s shares by resident individual shareholders, who act in the course of their professional or business activity, are subject to income tax at ordinary rates. Taxable gains are determined as being the difference between the price for which the shares have been disposed of and the lower of their cost or book value.
Non-resident shareholders
Non-resident shareholders (either individual or corporate) owning a non-substantial shareholding are exempt from capital gains taxes. Non-resident shareholders owning a substantial shareholding (more than 10% of share capital of a collective entity) are taxable in Luxembourg on a capital gain realized upon the disposal if at the date of the disposal the shareholding has been owned for not more than six months, unless the non-resident shareholder is resident in a treaty country and the treaty allocates the taxation right for the capital gain to the country of residence. In this latter case, no capital gains tax will be due by non-resident shareholder. Capital gains realized on the disposal of shares by non-resident shareholders that have been owned for more than 6 months are exempt from Luxembourg income tax.
(c) Other Taxes
Net wealth tax
Whilst non-resident corporate taxpayers may only be subject to net wealth tax on the net assets attributable to a permanent establishment located in Luxembourg or on real estate assets located in Luxembourg, resident corporate taxpayers are in principle subject to net wealth tax at the rate of 0.5% for net wealth up to €500 million and at 0.05% for net wealth exceeding this threshold, unless a double tax treaty provides for an exemption or the asset may benefit from the Luxembourg participation exemption regime. Net worth is referred to as the unitary value (valeur unitaire), as
determined at January 1 of each year. The unitary value is basically calculated as the difference between (a) assets estimated at their fair market value and (b) liabilities vis-à-vis third parties, unless one of the exceptions mentioned below are satisfied.
A resident corporate shareholder will be subject to net wealth tax on shares, except if (i) the shareholder is a securitization company governed by the Law of March 22, 2004, on Securitization (as amended) or an investment company in risk capital governed by the Law of June 15, 2004, on Venture Capital Vehicles (as amended) or a specialized investment fund governed by the Law of February 13, 2007, on Specialized Investment Funds (as amended) or a family wealth management company governed by the Law of May 11, 2007, on Family Estate Management Companies (as amended) or an undertaking for collective investment governed by the Law of December 17, 2010, on Undertakings for Collective Investment (as amended) or a pension-saving company as well as a pension-saving association, both governed by the Law of July 13, 2005 (as amended), or a reserved alternative investment fund governed by the law of July 23, 2016, or (ii) if the conditions mentioned above for the participation exemption regime on dividend income are met at the end of the previous year (except that no minimum holding period is required).
A resident corporate shareholder may further be subject to either a minimum net wealth tax of €4,815 or to a progressive minimum net wealth tax from €535 to €32,100, which depends on the total assets on their balance sheet. The minimum net wealth tax of €4,815 will be applicable for a resident corporate shareholder, which has a minimum of 90% of fixed financial assets, transferable securities and cash at bank on its balance sheet, except if its accumulated fixed financial assets do in addition not exceed €350,000, in which case it may benefit from a minimum net wealth tax of €535. Items (e.g., real estate properties or assets allocated to a permanent establishment) located in a treaty country, where the latter has the exclusive tax right, are not considered for the calculation of the 90% threshold.
Despite the above mentioned exceptions, the minimum net wealth tax also applies if the resident corporate shareholder is a securitization company governed by the Law of March 22, 2004, on Securitization (as amended) or an investment company in risk capital governed by the Law of June 15, 2004, on Venture Capital Vehicles (as amended) or a pension-saving company as well as a pension-saving association, both governed by the Law of July 13, 2005 (as amended), or a reserved alternative investment fund having the exclusive purpose of investing in risk capital governed by the law of July 23, 2016.
The net wealth tax charge for a given year can be avoided or reduced if a specific reserve, equal to five times the net wealth tax to save, is created before the end of the subsequent tax year and maintained during the five following tax years. The net wealth tax reduction corresponds to one fifth of the reserve created, except that the maximum net wealth tax to be saved is limited to the corporate income tax amount due for the same tax year, including the employment fund surcharge, but before imputation of available tax credits.
Inheritance tax
Where a shareholder is a resident of Luxembourg for tax purposes at the time of his/her death, shares are included in his/her taxable estate for inheritance tax assessment purposes.
Gift tax
Gift tax may be due on a gift or donation of shares if recorded in a Luxembourg notarial deed or otherwise recorded in Luxembourg.
Registration taxes and stamp duties
In principle, neither the issuance of shares nor the disposal of shares is subject to Luxembourg registration tax or stamp duty.
However, a registration duty may be due (i) in the case where the deed acknowledging the issuance/disposal of shares is either attached (annexé) to a deed subject to a mandatory registration in Luxembourg (e.g., public deed) or lodged with a notary’s records (deposé au rang des minutes d’un notaire), or (ii) in case of a registration of such deed on a voluntary basis.
Material U.S. Federal Income Tax Considerations
The following is a description of material U.S. federal income tax consequences to the U.S. Holders described below of owning and disposing of our common shares. It does not describe all tax considerations that may be relevant to a particular person’s decision to hold common shares. This discussion applies only to a U.S. Holder that holds common shares as capital assets for U.S. federal income tax purposes. In addition, it does not describe all of the U.S. federal income tax consequences that may be relevant in light of the U.S. Holder’s particular circumstances, including alternative minimum tax consequences, the potential application of the provisions of the Internal Revenue Code of
1986, as amended (the “Code”) known as the Medicare contribution tax and tax consequences applicable to U.S. Holders subject to special rules, such as:
• certain financial institutions;
• dealers or traders in securities that use a mark-to-market method of tax accounting;
• persons holding common shares as part of a hedging transaction, straddle, wash sale, conversion transaction or other integrated transaction or persons entering into a constructive sale with respect to the common shares;
• persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
• entities classified as partnerships for U.S. federal income tax purposes;
• tax-exempt entities, “individual retirement accounts” or “Roth IRAs”;
• persons that own or are deemed to own ten percent or more of our shares, by vote or value;
• persons who acquired our common shares pursuant to the exercise of an employee stock option or otherwise as compensation; or
• persons holding common shares in connection with a trade or business conducted outside of the United States.
If an entity that is classified as a partnership for U.S. federal income tax purposes owns common shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships owning common shares and partners in such partnerships should consult their tax advisers as to the particular U.S. federal income tax consequences of owning and disposing of the common shares.
This discussion is based on the Code, administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, and the income tax treaty between Luxembourg and the United States (the “Treaty”) all as of the date hereof, any of which is subject to change or differing interpretations, possibly with retroactive effect.
A “U.S. Holder” is a person who, for U.S. federal income tax purposes, is a beneficial owner of our common shares and is:
• an individual who is a citizen or resident of the United States;
• a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or
• an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
This discussion does not address the effects of any state, local or non-U.S. tax laws, or any U.S. federal taxes other than income taxes (such as U.S. federal estate or gift tax consequences). U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of our common shares in their particular circumstances.
Except as described below, this discussion assumes that we are not, and will not become, a passive foreign investment company (a “PFIC”) for any taxable year.
Taxation of Distributions
Distributions paid on common shares, other than certain pro rata distributions of common shares, will generally be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, we expect that distributions generally will be reported to U.S. Holders as dividends. Subject to applicable limitations, dividends paid to certain non-corporate U.S. Holders may be taxable at the favorable tax rate applicable to “qualified dividend income.” U.S. Holders should consult their tax advisers regarding the availability of the favorable tax rate on dividends in their particular circumstances.
Dividends will not be eligible for the dividends received deduction generally available to U.S. corporations under the Code. Dividends will be included in a U.S. Holder’s income on the date of receipt. The amount of any dividend income paid in euros will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date of actual or constructive receipt, regardless of whether the payment is in fact converted into U.S. dollars at that time. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt.
Dividends will be foreign-source and will include any amount withheld by us in respect of Luxembourg income taxes. Subject to applicable limitations, some of which vary depending upon the U.S. Holder’s particular circumstances, non-refundable Luxembourg income taxes withheld from dividends at a rate not exceeding any applicable rate provided by the Treaty will be creditable against the U.S. Holder’s U.S. federal income tax liability. The rules governing foreign tax credits are complex and U.S. Holders should consult their tax advisers regarding the creditability of foreign taxes in their particular circumstances. In lieu of claiming a foreign tax credit, U.S. Holders may, at their election, deduct foreign taxes, including any Luxembourg income tax, in computing their taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year.
Sale or Other Disposition of Common Shares
For U.S. federal income tax purposes, gain or loss realized on the sale or other disposition of common shares will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held the common shares for more than one year. The amount of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the common shares disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. This gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to limitations.
Passive Foreign Investment Company Rules
We believe that we were not a “passive foreign investment company” (a “PFIC”) for U.S. federal income tax purposes for our taxable year ending December 31, 2021. However, our PFIC status for any taxable year is an annual determination that depends on the composition of our income and assets and the market value of our assets, which may change from time to time. In addition, if we expand our lending activities in the future in any significant fashion, our risk of becoming a PFIC will increase. Accordingly, there can be no assurance that we will not be a PFIC for any taxable year. If we are a PFIC for any year during which a U.S. Holder holds common shares, we generally will continue to be treated as a PFIC with respect to that U.S. Holder for all succeeding years during which the U.S. Holder holds common shares, even if we cease to meet the threshold requirements for PFIC status.
If we are a PFIC for any taxable year during which a U.S. Holder holds common shares, gain recognized by a U.S. Holder on a sale or other disposition (including certain pledges) of the common shares will be allocated ratably over the U.S. Holder’s holding period for the common shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC will be taxed as ordinary income. The amount allocated to each other taxable year will be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge will be imposed on the resulting tax liability for each such year. Further, to the extent that any distributions received by a U.S. Holder on its common shares in a taxable year exceed 125% of the average of the annual distributions on the common shares received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, such distributions will be subject to taxation in the same manner. If we were a PFIC, certain elections (such as mark-to-market election) may be available that would result in alternative tax consequences of owning and disposing of the common shares.
In addition, if we are a PFIC or, with respect to a particular U.S. Holder, are treated as a PFIC for the taxable year in which we pay a dividend or for the prior taxable year, the preferential dividend rate discussed above with respect to dividends paid to certain non-corporate U.S. Holders will not apply.
If a U.S. Holder owns common shares during any year in which we are a PFIC, the U.S. Holder generally must file annual reports on an IRS Form 8621 (or any successor form) with respect to us, generally with the U.S. Holder’s federal income tax return for that year.
U.S. Holders should consult their tax advisers concerning the potential application of the PFIC rules.
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding,
unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.
The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.
Certain U.S. Holders who are individuals or specified entities may be required to report information on their U.S. federal income tax returns relating to their ownership of our common shares, subject to certain exceptions (including an exception for common shares held in a financial account, in which case the account may be reportable if maintained by a non-U.S. financial institution).
U.S. Holders should consult their tax advisers regarding their reporting obligations with respect to their ownership and disposition of common shares.
F. Dividends and Paying Agents
Not applicable to Annual Report filing.
G. Statement by Experts
Not applicable to Annual Report filing.
H. Documents on Display
We are subject to the reporting and other informational requirements of the Exchange Act, except that as a foreign private issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act, nor are we subject to the same requirements to file periodic reports and financial statements as U.S. companies whose securities are registered under the Exchange Act. In accordance with these statutory requirements, we file or furnish reports and other information with the SEC, which you may inspect and copy at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at www.sec.gov that contains reports and other information about issuers, like us, that file electronically with the SEC.
I. Subsidiary Information
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK
Financial risk management
Millicom regularly performs risk management assessments and reviews to identify its major risks and to take the necessary steps to mitigate such risks. The principal market risks to which we are exposed are interest rate risk, foreign currency exchange risk and non-repatriation. Each year Millicom Group Treasury revisits and presents to the Audit Committee updated Treasury and Financial Risks Management policies ("Group Treasury and Hedging Policy"). The Millicom Group analyzes each of these financial risks individually as well as on an interconnected basis and defines and implements strategies to manage the economic impact on the Millicom Group’s performance in line with its Group Treasury and Hedging Policy. This policy was last reviewed in late 2021.
As part of the annual review of the above mentioned risks, the Millicom Group targets a strategy with respect to the use of derivatives and natural hedging instruments ranging from raising debt in local currency (where the Company targets to reach 40% of debt in local currency over the medium term) to maintaining a 75/25% mix between fixed and floating rate debt or agreeing to cover up to six months forward of operating costs and capex denominated in non-functional currencies through a rolling and layering strategy. Millicom’s risk management strategies may include the use of derivatives to the extent a market would exist in the jurisdictions where the Millicom Group operates. Millicom’s policy prohibits the use of such derivatives in the context of speculative trading.
On December 31, 2021 and 2020, the fair value of derivatives held by the Millicom Group may be summarized as follows:
| | | | | | | | | | | |
| 2021 | | 2020 |
| (US$ millions) |
| | | |
Derivatives | | | |
Cash flow hedge derivatives - asset | 21 | | | 28 | |
Cash flow hedge derivatives - liability | (1) | | | (16) | |
Net derivative asset (liability) | 20 | | | 12 | |
Interest rate risk
Debt and financing issued at floating interest rates expose the Millicom Group to cash flow interest rate risk. Debt and financing issued at fixed rates expose the Millicom Group to fair value interest rate risk. The Millicom Group’s exposure to risk of changes in market interest rates relate to both of the above. To manage this risk, the Millicom Group’s policy is to maintain a combination of fixed and floating rate debt with a target that more than 75% of the debt be at fixed rates. The Millicom Group actively monitors borrowings against this target. The target mix between fixed and floating rate debt is reviewed periodically. The purpose of Millicom’s policy is to achieve an optimal balance between cost of funding and volatility of financial results, while taking into account market conditions as well as our overall business strategy. At December 31, 2021, approximately 64% of the Millicom Group’s borrowings are at a fixed rate of interest or for which variable rates have been swapped for fixed rates with interest rate swaps (2020: 84%). See note C.3.2. to our audited consolidated financial statements for further details on the bridge financing related to the acquisition of Tigo Guatemala and note I on its updated outstanding amount.
The table below summarizes, as at December 31, 2021, our fixed rate debt and floating rate debt:
| | | | | | | | | | | | | | | | | | | | | | | |
| Amounts due within |
| 1 year | 1–2 years | 2–3 years | 3–4 years | 4–5 years | >5 years | Total |
| (US$ millions) |
Financing at December 31, 2021 | | | | | | | |
Fixed rate financing | 91 | | 151 | | 460 | | 662 | | 372 | | 3,219 | | 4,956 | |
Weighted average nominal interest rate | 5.32 | % | 5.04 | % | 5.44 | % | 5.69 | % | 5.29 | % | 5.27 | % | 5.34 | % |
Floating rate financing | 1,750 | | 55 | | 26 | | 181 | | 386 | | 391 | | 2,789 | |
Weighted average nominal interest rate | 1.75 | % | 8.55 | % | 6.08 | % | 6.48 | % | 4.95 | % | 5.94 | % | 5.94 | % |
Total | 1,840 | | 206 | | 487 | | 843 | | 758 | | 3,610 | | 7,744 | |
Weighted average nominal interest rate | 1.93 | % | 5.97 | % | 5.47 | % | 5.86 | % | 5.11 | % | 5.34 | % | 5.55 | % |
The table below summarizes, as at December 31, 2020, our fixed rate debt and floating rate debt:
| | | | | | | | | | | | | | | | | | | | | | | |
| Amounts due within |
| 1 year | 1–2 years | 2–3 years | 3–4 years | 4–5 years | >5 years | Total |
| (US$ millions) |
Financing at December 31, 2020 | | | | | | | |
Fixed rate financing | 80 | | 90 | | 268 | | 561 | | 269 | | 3,498 | | 4,766 | |
Weighted average nominal interest rate | 5.81 | % | 5.62 | % | 7.69 | % | 5.44 | % | 5.54 | % | 5.56 | % | 5.67 | % |
Floating rate financing | 33 | | 17 | | 171 | | 250 | | 197 | | 256 | | 926 | |
Weighted average nominal interest rate | 1.89 | % | 1.28 | % | 2.76 | % | 1.27 | % | 4.49 | % | 0.40 | % | 0.91 | % |
Total | 113 | | 107 | | 439 | | 811 | | 467 | | 3,755 | | 5,691 | |
Weighted average nominal interest rate | 4.65 | % | 4.95 | % | 5.76 | % | 4.15 | % | 5.09 | % | 5.21 | % | 4.90 | % |
A 100 basis point fall or rise in market interest rates for all currencies in which the Group had borrowings at December 31, 2021 would increase or reduce profit before tax from continuing operations for the year by approximately US$28 million (2020: US$9 million).
From time to time, Millicom enters into currency and interest rate swap contracts to manage its exposure to fluctuations in interest rates and currency fluctuations in accordance with its Financial Risk Management policy. Details of these arrangements are provided below.
Interest rate and currency swaps on SEK denominated debt
The swaps on the previous SEK bond were accounted for as a cash flow hedge as the timing and amounts of the cash flows under the swap agreements matched the cash flows under the SEK bond. Fluctuations were recorded through other comprehensive income in our financial statements. They matured in April 2018 and were settled against a cash payment of $63 million.
In May 2019, MIC S.A. entered into swap contracts in order to hedge the foreign currency and interest rate risks in relation to the issuance of the SEK 2 billion (approximately $208 million) senior unsecured sustainability bond. 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 date is May 2024. The hedging relationship is highly effective and related fluctuations are recorded through other comprehensive income. At December 31, 2021, the fair values of the swaps amount to an asset of $6 million.
Interest rate and currency swaps in Costa Rica, Colombia and interest rate swaps in El Salvador
Colombia, El Salvador and Costa Rica 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 December 31, 2021, the fair value of El Salvador amount to a liability of $1 million (December 31, 2020: a liability of $3 million) and the fair value of Colombia swaps amount to an asset of $15 million (December 31, 2020: a liability of $7 million). Costa Rica swaps have been settled as a result of the redemption of the USD facility (see note D.1.2) resulting in a loss of $1.6 million recorded under "Other non-operating (expenses) income, net" (December 31, 2020: liability of $5 million and an asset of $1 million).
Other Interest rate and currency swaps
No other financial instruments have a significant fair value at December 31, 2021.
Foreign currency risk
The Millicom Group is exposed to foreign exchange risk arising from various currency exposures in the countries in which it operates. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. In the years ended December 31, 2021, 2020 and 2019, foreign currency exchange rate fluctuations resulted in a loss of $43 million, $69 million and $32 million, respectively.
Millicom seeks to reduce its foreign currency exposure through a policy of matching, as far as possible, assets and liabilities denominated in foreign currencies, or entering into agreements that limit the risk of exposure to currency fluctuations against the U.S. dollar reporting currency. In some cases, Millicom may also borrow in U.S. dollars where it is either commercially more advantageous for joint ventures and subsidiaries to incur debt obligations in U.S. dollars or where U.S. dollar denominated borrowing is the only funding source available to a joint venture or subsidiary. In these circumstances, Millicom accepts the remaining currency risk associated with financing its joint ventures and subsidiaries, principally because of the relatively high cost of forward cover, when available, in the currencies in which the Millicom Group operates.
The following table summarizes debt denominated in U.S. dollars and other currencies at December 31, 2021 and 2020.
| | | | | | | | | | | |
| 2021 | | 2020 |
| (US$ millions) |
December 31 | | | |
Debt denominated in U.S. dollars | 4,827 | | | 3,384 | |
Debt denominated in currencies of the following countries: | | | |
Guatemala | 605 | | | na |
Colombia | 699 | | | 614 | |
Tanzania | 38 | | | 40 | |
Bolivia | 310 | | | 337 | |
Paraguay | 195 | | | 180 | |
El Salvador(i) | 99 | | | 118 | |
Panama(i) | 846 | | | 869 | |
Luxembourg (SEK denominated) | 36 | | | 41 | |
Costa Rica | 88 | | | 107 | |
| | | |
Total debt denominated in other currencies | 2,917 | | | 2,307 | |
Total debt | 7,744 | | | 5,691 | |
(i) El Salvador's official unit of currency is the U.S. dollar, while Panama uses the U.S. dollar as legal tender. Our local debt in both countries is therefore denominated in U.S. dollars but presented as local currency (LCY).
At December 31, 2021, if the U.S. dollar had weakened/strengthened by 10% against the other functional currencies of our operations and all other variables held constant, then profit before tax from continuing operations would have increased/decreased by $38 million (2020: $45 million). This increase/decrease in profit before tax would have mainly been as a result of the conversion of the USD-denominated net debts in our operations with functional currencies other than the U.S. dollar.
Non-repatriation risk
Millicom’s operating subsidiaries and joint ventures generate most of the revenue of the Millicom Group and in the currency of the countries in which they operate. Millicom is therefore dependent on the ability of its subsidiaries and joint venture operations to transfer funds to the Company.
Although foreign exchange controls exist in some of the countries in which Millicom Group companies operate, none of these controls currently significantly restricts the ability of these operations to pay interest, dividends, technical service fees, royalties or repay loans by exporting cash, instruments of credit or securities in foreign currencies. However, existing foreign exchange controls may be strengthened in countries where the Millicom Group operates, or foreign exchange controls may be introduced in countries where the Millicom Group operates that do not currently impose such restrictions. If such events were to occur, the Company’s ability to receive funds from the operations could be subsequently restricted, which would impact the Company’s ability to make payments on its interest and loans and, or pay dividends to its shareholders. As a policy, all operations which do not face restrictions to deposit funds offshore and in hard currencies should do so for the surplus cash generated on a weekly basis. The Company and its subsidiaries make use of notional and physical cash pooling arrangements in hard currencies to the extent permitted.
In addition, in some countries it may be difficult to convert large amounts of local currency into foreign currency because of limited foreign exchange markets. The practical effects of this may be time delays in accumulating significant amounts of foreign currency and exchange risk, which could have an adverse effect on the Millicom Group. This is a relatively rare case for the countries in which the Millicom Group operates.
Lastly, repatriation most often gives rise to taxation, which is evidenced in the amount of taxes paid by the Millicom Group relative to the Corporate Income Tax reported in its statement of income.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable to Annual Report filing.
B. Warrants and Rights
Not applicable to Annual Report filing.
C. Other Securities
Not applicable to Annual Report filing.
D. American Depositary Shares
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
A. Defaults
Not applicable.
B. Arrears and Delinquencies
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
As of December 31, 2021, MIC S.A., under the supervision and with the participation of the Millicom Group’s management, including the Company’s Chief Executive Officer and the Chief Financial Officer, performed an evaluation of the effectiveness of the Millicom Group’s disclosure controls and procedures. The Millicom Group’s disclosure controls and procedures are designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Millicom Group’s management to allow timely decisions regarding required disclosures. The Millicom Group’s management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature can provide only reasonable assurance regarding management’s control objectives.
Based on this evaluation, the Company’s Chief Executive Officer and the Chief Financial Officer concluded that as of December 31, 2021, the Millicom Group’s disclosure controls and procedures are effective at the reasonable assurance level for recording, processing, summarizing and reporting the information the Company is required to disclose in the reports it files under the Exchange Act within the time periods specified in the SEC's rules and forms.
B. Management’s Annual Report on Internal Control over Financial Reporting
The Millicom Group’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting as well as the preparation of consolidated financial statements for external reporting purposes in accordance with IFRS as issued by the International Accounting Standards Boards.
The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of consolidated financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can provide only reasonable assurance with respect to consolidated financial statements preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
The Company’s management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
As permitted by the SEC, the Company's management has elected to exclude an assessment of the internal controls over financial reporting of the subsidiaries that formerly comprised the Company's Guatemala joint venture business because the Company acquired the remaining 45% equity interest in such entities on November 12, 2021. The assets of the Guatemala subsidiaries constituted 35.3% of the Company's consolidated total assets as of December 31, 2021 and 4.8% of the Company's total revenue for the year ended December 31, 2021.
Based on its assessment, management believes that, as of December 31, 2021, the Company’s internal control over financial reporting is effective based on those criteria.
The Company’s internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young S.A., the Company’s external independent registered public accounting firm, as stated in its report which follows.
C. Attestation Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Millicom International Cellular S.A.
Opinion on Internal Control Over Financial Reporting
We have audited Millicom International Cellular S.A.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Millicom International Cellular S.A. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2021 consolidated financial statements of the Company and our report dated March 1, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young
Société anonyme
Cabinet de révision agréé
Luxembourg,
Grand Duchy of Luxembourg
March 1, 2022
D. Changes in Internal Control over Financial Reporting
In November 2021, the Company acquired the remaining 45% equity interest in its joint venture businesses in Guatemala. The Company is engaged in refining and harmonizing the internal controls and processes of the Guatemala businesses with those of the Company. Except for the foregoing, there has been no change in the Company's internal control over financial reporting during 2021 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 16. [RESERVED]
Item 16A. Audit Committee Financial Expert
MIC S.A.’s Audit Committee is chaired by Ms. Johnson, and includes Mr. Churchill, Ms. Dulá and Mr. Thompson. MIC S.A.’s Board of Directors has determined that each of Ms. Johnson, Mr. Churchill, Ms. Dulá and Mr. Thompson have the professional experience and knowledge to qualify as “audit committee financial experts” as defined by SEC rules. MIC S.A.’s Board has also determined that each of Ms. Johnson, Mr. Churchill, Ms. Dulá and Mr. Thompson are independent within the meaning of the independence requirements contemplated by Rule 10A-3 under the Exchange Act and the applicable Nasdaq listing rules.
Item 16B. Code of Ethics
Millicom has a Code of Conduct that applies to all employees, contracted staff and management. In May 2019, the Code of Conduct was amended to specify in greater detail our responsibility to regulators and shareholders, and clarify the duty of our employees to report concerns regarding accounting, internal controls, or auditing issues. In the year ended December 31, 2021, Millicom did not waive compliance with its Code of Conduct by its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Conduct is available at https://www.millicom.com/our-responsibility/compliance/millicom-code-of-conduct/.
Item 16C. Principal Accountant Fees and Services
The following table summarizes the aggregate amounts paid to Millicom’s auditors for the years ended December 31, 2021 and 2020.
| | | | | | | | | | | |
| 2021 | | 2020 |
| (US$ millions) |
Audit fees | 5.2 | | | 5.8 | |
Audit related fees | 1.4 | | | 0.5 | |
Tax fees | 0.1 | | | 0.1 | |
Other fees | 0.4 | | | 0.1 | |
Total | 7.1 | | | 6.4 | |
Audit related services consist principally of consultations related to financial accounting and reporting standards, including the issuance of comfort letters for debt and bonds. Tax services consist principally of tax advisory services and tax compliance services. All other fees are for services not included in the other categories. 100% of the audit related, tax and other fees for 2021 and 2020 were approved by the audit committee.
Audit Committee Pre-approval Policies
The policies and procedures provide that requests for categories of non-audit services by Millicom’s auditors that have been pre-approved by the Audit Committee must be approved by management and subsequently reported to the Audit Committee on at least a quarterly basis, subject to a maximum annual and individual project cap. Other permitted services not listed in the pre-approved services list ratified by the Audit Committee must be pre-approved by the Audit Committee’s Chairman in between the regularly scheduled meetings and subsequently approved by the Audit Committee in full (during scheduled meetings), regardless of the level of fees.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information about purchases by us and our affiliated purchasers during the fiscal year ended December 31, 2021 of equity securities that are registered pursuant to Section 12 of the Exchange Act.
| | | | | | | | | | | | | | |
Period | (a)Total Number of Shares Purchased(1) | (b)Average Price Paid per Share(2) | (c)Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d)Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(3) |
08/02/21 – 08/31/21 | 386,538 | | 38.5 | 386,538 | | 4,613,462 |
09/01/21 – 09/30/21 | 448,436 | | 36.2 | 448,436 | | 4,165,026 |
10/01/21 – 10/31/21 | 417,020 | | 35.9 | 417,020 | | 3,748,006 |
11/01/21 – 11/30/21 | 117,290 | | 33.8 | 117,290 | | 3,630,716 |
Total | 1,369,284 | N/A | 1,369,284 | Nil (3) |
(1) Amounts expressed in SDRs
(2) Amounts expressed in USD
(3) On July 29, 2021, we announced a share repurchase program for the period between August 2, 2021 and the date of Millicom's 2022 AGM. Under the program, the maximum number of Swedish Depository Receipts (SDRs) representing the Company's ordinary shares authorized to be repurchased was the lower of SEK 870 million (approximately USD 100 million) in aggregate purchase price, or 5,000,000 SDRs. On December 17, 2021, we announced the end of the share repurchase program, after purchasing a total of 1,369,284 shares.
Item 16F. Change in Registrant’s Certifying Accountant
Not applicable.
Item 16G. Corporate Governance
As a foreign private issuer incorporated in Luxembourg with its principal stock exchange listing on Nasdaq Stockholm, Millicom follows its “home country” corporate governance practices and the laws of the Grand Duchy of Luxembourg, in lieu of the provisions of the Nasdaq Stock Market’s Marketplace Rule 5600 series that apply to the constitution of a quorum for any meeting of shareholders, the composition and independence requirements of the Nomination Committee and the Compensation Committee and the requirement to have regularly scheduled meetings at which only independent directors are present. The Nasdaq Stock Market’s rules provide for a quorum of no less than 33⅓% of Millicom’s outstanding shares. However, Millicom’s Articles of Association do not require a quorum. The Nasdaq Stock Market’s rules provide for the involvement of independent directors in the selection of director nominees. However, Millicom relies on its home country practices, in lieu of this requirement, which permit its director nominations committee to be comprised of shareholder representatives. The Nasdaq Stock Market’s rules require each Compensation Committee member to be an independent director for purposes of the Nasdaq Stock Market’s Marketplace Rule 5605(d)(2). However, to preserve greater flexibility in who may be appointed to the Compensation Committee, Millicom relies on its home country practices, in lieu of this requirement, which do not require the Compensation Committee to be comprised solely of directors who qualify as independent for such purposes. The Nasdaq Stock Market’s rules require listed companies to have regularly scheduled meetings at which only independent directors are present. However, Millicom follows its home country practices which do not impose such a requirement.
Item 16H. Mine Safety Disclosure
Not applicable.
PART III
ITEM 17. FINANCIAL STATEMENTS
We have responded to Item 18 in lieu of this item.
ITEM 18. FINANCIAL STATEMENTS
Financial Statements are filed as part of this Annual Report, see page F-1.
ITEM 19. EXHIBITS
| | | | | |
| Amended and Restated Articles of Association of Millicom International Cellular S.A. |
| Description of Share Capital |
| Amended and Restated Indenture for the $500,000,000 5.125% Senior Notes due 2028 between Millicom International Cellular S.A., Citibank, N.A., London Branch and Citigroup Global Markets Deutschland AG dated May 30, 2018 (incorporated herein by reference to Exhibit 4.2. to the Company’s Registration Statement on Form 20-F, filed with the SEC on December 13, 2018) |
| Revolving Credit Agreement, among Millicom International Cellular S.A., the lenders from time to time party thereto, and the Bank of Nova Scotia dated October 15, 2020 (incorporated herein by reference to Exhibit 4.2 to the Company’s Annual Report on Form 20-F, filed with the SEC on March 10, 2021) |
| Indenture for the $750,000,000 6.250% Senior Notes due 2029 between Millicom International Cellular S.A., Citibank, N.A., London Branch and Citigroup Global Markets Europe AG dated March 25, 2019 (incorporated herein by reference to Exhibit 4.6 to the Company’s Annual Report on Form 20-F, filed with the SEC on February 28, 2020)
|
| Terms and Conditions for Millicom International Cellular S.A.’s SEK 2 Billion Floating-Rate Senior Unsecured Sustainability Bond due 2024 (incorporated herein by reference to Exhibit 4.9 to the Company’s Annual Report on Form 20-F, filed with the SEC on February 28, 2020) |
| Indenture for the $500,000,000 4.500% Senior Notes due 2031 between Millicom International Cellular S.A., Citibank, N.A., London Branch and Citigroup Global Markets Europe AG dated October 27, 2020 (incorporated herein by reference to Exhibit 4.7 to the Company’s Annual Report on Form 20-F, filed with the SEC on March 10, 2021)
|
| Indenture for the $500,000,000 6.625% Senior Notes due 2026 between Millicom International Cellular S.A., Citibank, N.A., London Branch and Citigroup Global Markets Europe AG dated October 16, 2018 (incorporated herein by reference to Exhibit 4.6 to the Company’s Registration Statement on Form 20-F, filed with the SEC on December 13, 2018) |
| Bridge Loan Agreement among Millicom International Cellular S.A., the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A. dated November 10, 2021 |
| Stock Purchase Agreement among Millicom International II N.V. and Shai Holding S.A., as buyers, and Miffin Associates Corp., as seller, dated November 11, 2021 |
| Indenture for the $300,000,000 5.875% Senior Notes due 2027 between Telefónica Celular del Paraguay S.A., Citibank, N.A. and Banque Internationale à Luxembourg SA dated April 5, 2019 |
| First Supplemental Indenture for the $250,000,000 5.875% Senior Notes due 2027 between Telefónica Celular del Paraguay S.A., Citibank, N.A. and Banque Internationale à Luxembourg SA dated January 28, 2020 |
| Indenture for the $600,000,000 4.500% Senior Notes due 2030 among Cable Onda, S.A., Citibank, N.A. and Banque Internationale à Luxembourg SA. Dated October 28, 2019 |
| Indenture for the $900,000,000 5.125% Senior Notes due 2032 among Walkers Fiduciary Limited, CT Trust, the guarantors named therein and the Bank of New York Mellon dated February 3, 2022 |
| Terms and Conditions for Millicom International Cellular S.A.’s SEK 2.25 Billion Floating-Rate Senior Unsecured Sustainability Bond due 2027 |
| Amendment No. 1 to the Custodian Agreement, between Millicom International Cellular S.A. and Skandinaviska Enskilda Banken AB, as depository and custodian, dated as of June 11, 2020 |
| Amendment No. 2 to the Custodian Agreement, between Millicom International Cellular S.A. and Skandinaviska Enskilda Banken AB, as depository and custodian, dated as of February [], 2022 |
| General Terms & Conditions for Swedish Depository Receipts, dated as of January 2012 |
| List of significant subsidiaries |
| | | | | |
| Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
| Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
| Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
| Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
| Consent of Ernst & Young S.A. |
101.INS
| Inline XBRL Instance Document |
101.SCH
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
0.0 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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______________________
* Filed herewith
** Furnished herewith
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
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| MILLICOM INTERNATIONAL CELLULAR S.A. |
Date: | March 1, 2022 | By: | /s/ Tim Pennington |
| | | Name: Tim Pennington |
| | | Title: Senior Executive Vice President, Chief Financial Officer |
| |
| | By: | /s/ Mauricio Ramos |
| | | Name: Mauricio Ramos |
| | | Title: Executive Director and Chief Executive Officer |
INDEX TO FINANCIAL STATEMENTS
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Audited Consolidated Financial Statements of Millicom International Cellular S.A. at December 31, 2021 and 2020 and for the Years Ended December 31, 2021, 2020 and 2019 | |
Report of independent registered public accounting firm | |
Consolidated statement of income for the years ended December 31, 2021, 2020 and 2019 | |
Consolidated statement of comprehensive income for the years ended December 31, 2021, 2020 and 2019 | |
Consolidated statement of financial position at December 31, 2021 and 2020 | |
Consolidated statement of cash flows for the years ended December 31, 2021, 2020 and 2019 | |
Consolidated statement of changes in equity for the years ended December 31, 2021, 2020 and 2019 | |
Notes to the audited consolidated financial statements | |
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Millicom International Cellular S.A.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Millicom International Cellular S.A. (the “Group“) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Group's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on the Group’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Impairment testing of Goodwill
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Description of the Matter | As of December 31, 2021, the Group’s goodwill balance was USD 4,884 million. As described in Note E.1.5 of the consolidated financial statements, goodwill from cash-generating units (CGUs) is tested at least each year and more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
Auditing management’s goodwill impairment testing involved complex management and auditor judgment due to the significant assumptions used to determine the recoverable values of each of the Group’s CGUs. For example, the recoverable values based on value-in-use, determined using the method of discounted cash flows, were sensitive to significant assumptions, such as the projected EBITDA margin, CAPEX intensity (defined as CAPEX divided by total revenues), perpetual growth rates and weighted average cost of capital. These are affected by expectations about future market or economic conditions which are uncertain. |
How We Addressed the Matter in Our Audit | Our audit procedures included, among others, obtaining an understanding of and evaluating the design and testing the operating effectiveness of the Group’s controls over its impairment testing. For example, we tested controls over management’s evaluation of the significant assumptions used in the discounted cash flows to develop the recoverable values of each of the Group’s CGUs. Our audit procedures also included inspecting the business plans used in the impairment analysis, comparing the plans to those used in other areas of the audit and evaluating the methodology used. We involved our valuation specialists to assist with our audit procedures to test the discounted cash flows and management’s valuation methodologies and assumptions. For example, our valuation specialists assisted us in comparing the significant assumptions listed above with publicly available information and external market data, and in evaluating management’s sensitivity analysis. We also assessed the completeness and accuracy of the underlying data through our inspection of and comparison to historical information. We evaluated the adequacy of the related disclosures. |
Uncertain tax positions
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Description of the Matter | As described in Note G.3.2 of the consolidated financial statements, the Group operates in developing countries where the tax systems, regulations and enforcement processes have varying stages of development creating uncertainty regarding the application of the tax law and interpretation of tax treatments. The Group is also subject to regular tax audits in the countries where it operates. When there is uncertainty over whether the taxation authority will accept a specific tax treatment under the local tax law, that tax treatment is therefore uncertain. The resolution of tax positions taken by the Group, through negotiations with relevant tax authorities or through litigation, can take several years to complete and, in some cases, it is difficult to predict the outcome. At December 31, 2021, the tax risks exposure of the Group's subsidiaries is estimated at USD 343 million, for which provisions of USD 69 million have been recorded in tax liabilities. The Group's share of tax exposure and provisions in its joint ventures amounts to USD 68 million and USD 3 million, respectively.
Auditing management’s analysis of the Group’s uncertain tax positions and the related uncertain tax positions was especially challenging because the analysis is complex and involves significant management and auditor judgment and estimation. Each tax position involves unique facts and circumstances that must be evaluated, and there may be many uncertainties around initial recognition and de-recognition of tax positions, including regulatory changes, litigation and examination. |
How We Addressed the Matter in Our Audit | Our audit procedures included, among others, obtaining an understanding of and evaluating the design and testing the operating effectiveness of the Group’s controls relating to uncertain tax positions. For example, we tested controls over management’s identification of uncertain tax positions and its application of the recognition and measurement principles, including management’s review of the inputs and calculations of uncertain tax positions. Our audit procedures included, among others, evaluating the assumptions the Group used to develop its uncertain tax positions and related unrecognized tax positions by jurisdiction. For example, we compared the estimated liabilities for unrecognized tax positions to similar positions in prior periods and assessed management’s consideration of current tax treatments and litigation and trends in similar positions challenged by tax authorities. We also assessed the historical accuracy of management’s estimates of its unrecognized tax positions by comparing the estimates with the resolution of those positions. In addition, we involved our tax professionals to assist us in evaluating the application of relevant tax laws and the Group’s interpretation of such laws in its recognition determination. We also tested the completeness and accuracy of the underlying data used by the Group to calculate its uncertain tax positions. We evaluated the adequacy of the Group’s disclosures. |
Accounting for business combination
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Description of the Matter | As described in Note A.1.2 to the consolidated financial statements, the Group acquired control over the remaining 45% equity interests in its former joint venture in Guatemala (“Tigo Guatemala”) as of November 12, 2021 for USD 2.2 billion. Since this date, the Group fully consolidates Tigo Guatemala. The acquisition was accounted for under the purchase method of accounting. Millicom is currently determining the fair values of Tigo Guatemala’s identifiable assets and liabilities, and the purchase accounting is still provisional as of December 31, 2021.
Auditing the Company’s accounting for its acquisition of Tigo Guatemala was complex due to the overall significance of the acquisition and the estimation uncertainty in determining the provisional values and the related disclosures to be included in the consolidated financial statements as of December 31, 2021. For instance, the Company estimated the provisional values based on the current carrying values of intangibles as identified at the date of the deconsolidation of Tigo Guatemala and the commencement of the accounting for the investment under the equity method in a prior year. |
How We Addressed the Matter in Our Audit | Our audit procedures included, among others, obtaining an understanding of and evaluating the design and testing the operating effectiveness of the Group’s controls over its accounting for business combinations. For example, we tested controls over management’s evaluation of the purchase contract for terms and conditions that would impact the accounting and the identification, recognition and measurement of the property, plant and equipment and the intangible assets, including the controls over the determination of the significant assumptions used to develop estimates of fair value. Our audit procedures included, among others, inspecting the purchase contract and evaluating the terms and conditions and management’s accounting for such terms and conditions in its purchase accounting. We tested the Company’s underlying data used by the Group to determine the provisional numbers based on the current carrying values of intangibles as identified at the date of the deconsolidation of Tigo Guatemala and the commencement of the accounting for the investment under the equity method. We evaluated the adequacy of the Group’s disclosures. |
/s/ Ernst & Young
Société anonyme
Cabinet de révision agréé
We have served as the Group’s auditor since 2012.
PCAOB ID 1367
Luxembourg, Grand Duchy of Luxembourg
March 1, 2022
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Consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 | |
Consolidated statement of income for the years ended December 31, 2021, 2020 and 2019
| | | | | | | | | | | | | | |
| Notes | 2021(i) | 2020 | 2019 |
| | (US$ millions) |
Revenue | B.1. | 4,617 | 4,171 | 4,336 |
Cost of sales | B.2. | (1,302) | (1,171) | (1,201) |
Gross profit | | 3,316 | 3,000 | 3,135 |
Operating expenses | B.2. | (1,677) | (1,505) | (1,604) |
Depreciation | E.2.2., E.3. | (878) | (890) | (825) |
Amortization | E.1.3. | (318) | (318) | (275) |
Share of profit in joint ventures | A.2. | 210 | 171 | 179 |
Other operating income (expenses), net | B.2. | 6 | (12) | (34) |
Operating profit | B.3. | 659 | 446 | 575 |
Interest and other financial expenses | C.3.3., E.3. | (531) | (624) | (564) |
Interest and other financial income | C.3.1. | 23 | 13 | 20 |
Revaluation of previously held interests in Guatemala | A.1.2. | 670 | — | — |
Other non-operating (expenses) income, net | B.5., C.7.3. | (50) | (106) | 227 |
Profit (loss) from other joint ventures and associates, net | A.3. | (39) | (1) | (40) |
Profit (loss) before taxes from continuing operations | | 732 | (271) | 218 |
Tax (charge) credit, net | B.6. | (189) | (102) | (120) |
Profit (loss) from continuing operations | | 543 | (373) | 97 |
Profit (loss) from discontinued operations, net of tax | E.4.2. | — | (12) | 57 |
Net profit (loss) for the period | | 542 | (385) | 154 |
Attributable to: | | | | |
Owners of the Company | | 590 | (344) | 149 |
Non-controlling interests | A.1.4. | (48) | (41) | 5 |
Earnings (loss) per common share for profit (loss) attributable to the owners of the Company | | | | |
Basic and diluted (US$ per common share) (ii) | | | | |
— from continuing operations | | 5.84 | (3.28) | 0.92 |
— from discontinued operations | | — | (0.12) | 0.56 |
— Total | B.7. | 5.84 | (3.40) | 1.48 |
(i) Tigo Guatemala is fully consolidated since the acquisition of the remaining 45% shareholding on November 12, 2021. See note A.1.2. for further details. As a result, numbers might not be directly comparable with previous years' figures.
(ii) There are no dilutive potential ordinary shares.
The accompanying notes are an integral part of these consolidated financial statements.
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Consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 | |
Consolidated statement of comprehensive income for the years ended December 31, 2021, 2020 and 2019
| | | | | | | | | | | |
| 2021 (i) | 2020 | 2019 |
| (US$ millions) |
Net profit (loss) for the year | 542 | (385) | 154 |
Other comprehensive income (to be reclassified to statement of income in subsequent periods), net of tax: | | | |
Exchange differences on translating foreign operations | (52) | (19) | (4) |
Change in value of cash flow hedges, net of tax effects | 18 | (1) | (16) |
Other comprehensive income (not to be reclassified to the statement of income in subsequent periods), net of tax: | | | |
Remeasurements of post-employment benefit obligations, net of tax effects | 1 | (2) | — |
Total comprehensive income (loss) for the period | 509 | (407) | 133 |
Attributable to: | | | |
Owners of the Company | 565 | (360) | 131 |
Non-controlling interests | (57) | (48) | 3 |
Total comprehensive income for the period arises from: | | | |
Continuing operations | 509 | (395) | 76 |
Discontinued operations | — | (12) | 57 |
(i) Tigo Guatemala is fully consolidated since the acquisition of the remaining 45% shareholding on November 12, 2021. See note A.1.2. for further details. As a result, numbers might not be directly comparable with previous years' figures.
The accompanying notes are an integral part of these consolidated financial statements.
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Consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 | |
Consolidated statement of financial position at December 31, 2021 and 2020
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| Notes | December 31, 2021(i) | December 31, 2020 |
| | (US$ millions) |
ASSETS | | | |
NON-CURRENT ASSETS | | | |
Intangible assets, net | E.1. | 7,721 | 3,403 |
Property, plant and equipment, net | E.2. | 3,198 | 2,755 |
Right of use assets | E.3. | 1,008 | 895 |
Investments in joint ventures | A.2. | 596 | 2,642 |
Investments in associates | A.3. | 22 | 24 |
Contract costs, net | F.5. | 8 | 5 |
Deferred tax assets | B.6. | 180 | 197 |
Derivative financial instruments | D.1.2. | 21 | 27 |
Amounts due from non-controlling interests, associates and joint ventures | G.5. | 24 | 90 |
Other non-current assets | | 74 | 77 |
TOTAL NON-CURRENT ASSETS | | 12,852 | 10,114 |
| | | |
CURRENT ASSETS | | | |
Inventories | F.2. | 63 | 37 |
Trade receivables, net | F.1. | 405 | 351 |
Contract assets, net | F.5. | 69 | 31 |
Amounts due from non-controlling interests, associates and joint ventures | G.5. | 42 | 206 |
Prepayments and accrued income | | 168 | 149 |
Current income tax assets | | 104 | 96 |
Supplier advances for capital expenditure | | 35 | 21 |
Equity investments | C.7.3. | — | 160 |
Other current assets | | 302 | 181 |
Restricted cash | C.5. | 203 | 199 |
Cash and cash equivalents | C.5. | 895 | 875 |
TOTAL CURRENT ASSETS | | 2,286 | 2,307 |
Assets held for sale | E.4.2. | — | 1 |
TOTAL ASSETS | | 15,139 | 12,422 |
(i) The assets and liabilities of Tigo Guatemala are fully consolidated since the acquisition of the remaining 45% shareholding on November 12, 2021. See note A.1.2. for further details. As a result, numbers might not be directly comparable with previous years' figures.
The accompanying notes are an integral part of these consolidated financial statements.
| | | | | |
Consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 | |
Consolidated statement of financial position at December 31, 2021 and 2020
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| Notes | December 31, 2021 (i) | December 31, 2020 |
| | (US$ millions) |
EQUITY AND LIABILITIES | | | |
EQUITY | | | |
Share capital and premium | C.1. | 628 | 630 |
Treasury shares | | (60) | (30) |
Other reserves | C.1. | (594) | (562) |
Retained profits | | 2,019 | 2,365 |
Net profit (loss) for the year attributable to equity holders | | 590 | (344) |
Equity attributable to owners of the Company | | 2,583 | 2,059 |
Non-controlling interests | A.1.4. | 157 | 215 |
TOTAL EQUITY | | 2,740 | 2,274 |
| | | |
LIABILITIES | | | |
NON-CURRENT LIABILITIES | | | |
Debt and financing | C.3. | 5,904 | 5,578 |
Lease liabilities | C.4. | 996 | 897 |
Derivative financial instruments | D.1.2. | 1 | 14 |
Amounts due to non-controlling interests, associates and joint ventures | G.5. | — | 29 |
Payables and accruals for capital expenditure | E.1. | 435 | 485 |
Provisions and other non-current liabilities | F.4.2. | 364 | 328 |
Deferred tax liabilities | B.6. | 214 | 209 |
TOTAL NON-CURRENT LIABILITIES | | 7,914 | 7,540 |
| | | |
CURRENT LIABILITIES | | | |
Debt and financing | C.3. | 1,840 | 113 |
Lease liabilities | C.4. | 171 | 123 |
Put option liability | C.7.4. | 290 | 262 |
Derivative financial instruments | D.1.2. | — | 1 |
Payables and accruals for capital expenditure | | 452 | 345 |
Other trade payables | | 347 | 334 |
Amounts due to non-controlling interests, associates and joint ventures | G.5. | 74 | 311 |
Accrued interest and other expenses | | 539 | 445 |
Current income tax liabilities | | 128 | 71 |
Contract liabilities | F.5. | 97 | 90 |
| | | |
Provisions and other current liabilities | F.4.1. | 546 | 511 |
TOTAL CURRENT LIABILITIES | | 4,485 | 2,608 |
Liabilities directly associated with assets held for sale | E.4.2. | — | — |
TOTAL LIABILITIES | | 12,399 | 10,148 |
TOTAL EQUITY AND LIABILITIES | | 15,139 | 12,422 |
(i) The assets and liabilities of Tigo Guatemala are fully consolidated since the acquisition of the remaining 45% shareholding on November 12, 2021. See note A.1.2. for further details. As a result, numbers might not be directly comparable with previous years' figures.
The accompanying notes are an integral part of these consolidated financial statements.
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Consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 | |
Consolidated statement of cash flows for the years ended December 31, 2021, 2020 and 2019
| | | | | | | | | | | | | | |
| Notes | 2021(i) | 2020 | 2019 |
| | (US$ millions) |
Cash flows from operating activities (including discontinued operations) | | | | |
Profit (loss) before taxes from continuing operations | | 732 | (271) | 218 |
Profit (loss) before taxes from discontinued operations | E.4.2. | — | (12) | 59 |
Profit (loss) before taxes | | 731 | (283) | 276 |
Adjustments to reconcile to net cash: | | | | |
Interest expense on leases | | 131 | 156 | 157 |
Interest expense on debt and other financing | | 400 | 468 | 408 |
Interest and other financial income | | (23) | (13) | (20) |
Adjustments for non-cash items: | | | | |
Depreciation and amortization | | 1,196 | 1,208 | 1,111 |
Share of net profit in joint ventures | A.2. | (210) | (171) | (179) |
(Gain) loss on disposal and impairment of assets, net | B.2., E.4.2. | (6) | 20 | (40) |
Share-based compensation | C.1. | 17 | 24 | 30 |
Revaluation of previously held interest in Guatemala | A.1.2. | (670) | — | — |
Loss from other joint ventures and associates, net | A.3. | 39 | 1 | 40 |
Other non-cash non-operating (income) expenses, net | B.5. | 50 | 106 | (227) |
Changes in working capital: | | | | |
Decrease (increase) in trade receivables, prepayments and other current assets, net | | (93) | (43) | (119) |
Decrease (increase) in inventories | | 9 | (6) | 11 |
Increase (decrease) in trade and other payables, net | | 6 | 40 | (61) |
Increase (decrease) in contract assets, liabilities and costs, net | | (5) | 8 | (2) |
Total changes in working capital | | (81) | (2) | (172) |
Interest paid on leases | | (140) | (151) | (141) |
Interest paid on debt and other financing | | (355) | (411) | (344) |
Interest received | | 4 | 11 | 15 |
Taxes paid | | (127) | (142) | (114) |
Net cash provided by operating activities | | 956 | 821 | 801 |
Cash flows from (used in) investing activities (including discontinued operations): | | | | |
Acquisition of subsidiaries, joint ventures and associates, net of cash acquired | A.1. | (2,000) | 10 | (1,014) |
Financing exit from the Ghana joint venture | A.2.2. | (37) | — | — |
Net proceeds from disposal of subsidiaries and associates, net of cash disposed | | 30 | 10 | 111 |
| | | | |
Purchase of intangible assets and licenses | E.1.4. | (135) | (202) | (171) |
| | | | |
Purchase of property, plant and equipment | E.2.3. | (740) | (622) | (736) |
Proceeds from sale of property, plant and equipment | E.3. | 11 | 9 | 24 |
Proceeds from disposal of equity investments, net of costs | | 163 | 197 | 25 |
Dividends and dividend advances received from joint ventures | A.2.2. | 13 | 71 | 237 |
| | | | |
Transfer to pledge deposits | C.5.3. | (33) | — | — |
Cash (used in) provided by other investing activities, net | D.1.2. | 26 | 32 | 20 |
Net cash used in investing activities | | (2,703) | (495) | (1,502) |
| | | | |
| | | | |
| | | | |
| | | | |
Cash flows from financing activities (including discontinued operations): | | | | |
| | | | | |
Consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 | |
| | | | | | | | | | | | | | |
| Notes | 2021(i) | 2020 | 2019 |
Proceeds from debt and other financing | C.6. | 3,113 | 1,470 | 2,900 |
Repayment of debt and other financing | C.6. | (1,335) | (1,744) | (1,157) |
Loan repayment from (advanced to) joint venture | G.5. | 193 | (193) | — |
Lease capital repayment | C.6. | (137) | (116) | (107) |
Advances and dividends paid to non-controlling interests | A.1./A.2. | (6) | (5) | (13) |
Share repurchase program | | (50) | (10) | — |
Dividends paid to owners of the Company | C.2. | — | 0 | (268) |
Net cash provided by (used in) financing activities | | 1,777 | (598) | 1,355 |
Exchange impact on cash and cash equivalents, net | | (10) | (17) | (8) |
Net (decrease) increase in cash and cash equivalents | | 20 | (289) | 645 |
Cash and cash equivalents at the beginning of the year | | 875 | 1,164 | 528 |
Effect of cash in disposal group held for sale | E.4.2. | — | 0 | (9) |
Cash and cash equivalents at the end of the year | | 895 | 875 | 1,164 |
(i) The cash flows of Tigo Guatemala are fully consolidated since the acquisition of the remaining 45% shareholding on November 12, 2021. See note A.1.2. for further details. As a result, numbers might not be directly comparable with previous years' figures.
The accompanying notes are an integral part of these consolidated financial statements.
| | | | | |
Consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 | |
Consolidated statement of changes in equity for the years ended December 31, 2021, 2020 and 2019
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| Number of shares (000’s) | Number of shares held by the Group (000’s) | Share capital(i) | Share premium (i) | Treasury shares | Retained profits(ii) | Other reserves (iii) | Total | Non- controlling interests | Total equity |
| (US$ millions) | | |
Balance on January 1, 2019 | 101,739 | (914) | 153 | 482 | (81) | 2,525 | (538) | 2,542 | 251 | 2,792 |
Total comprehensive income for the period | — | — | — | — | — | 149 | (19) | 131 | 3 | 133 |
Dividends (iv) | — | — | — | — | — | (267) | — | (267) | — | (267) |
Dividends to non controlling interests | — | — | — | — | — | — | — | — | (1) | (1) |
Purchase of treasury shares (vii) | — | (132) | — | — | (12) | 4 | — | (8) | — | (8) |
Share based compensation (v) | — | — | — | — | — | — | 29 | 29 | 1 | 30 |
Issuance of shares under share-based payment schemes | — | 465 | — | (2) | 41 | (12) | (25) | 1 | — | 1 |
Effect of restructuring in Tanzania (vi) | — | — | — | — | — | (27) | 9 | (18) | 18 | — |
Balance on December 31, 2019 | 101,739 | (581) | 153 | 480 | (51) | 2,372 | (544) | 2,409 | 271 | 2,680 |
Total comprehensive income for the year | — | — | — | — | — | (344) | (15) | (360) | (48) | (407) |
Dividends (iv) | — | — | — | — | — | — | — | — | — | — |
Dividends to non controlling interest | — | — | — | — | — | — | — | — | (8) | (8) |
Purchase of treasury shares | — | (467) | — | — | (19) | 3 | — | (16) | — | (16) |
Share based compensation (v) | — | — | — | — | — | — | 24 | 24 | — | 24 |
Issuance of shares under share-based payment schemes | — | 521 | — | (2) | 40 | (11) | (26) | 1 | — | 1 |
Balance on December 31, 2020 | 101,739 | (526) | 153 | 478 | (30) | 2,020 | (562) | 2,059 | 215 | 2,274 |
Total comprehensive income for the year | — | — | — | — | — | 590 | (25) | 565 | (57) | 509 |
Dividends (iv) | — | — | — | — | — | — | — | — | — | — |
Dividends to non controlling interests | — | — | — | — | — | — | — | — | (3) | (3) |
Purchase of treasury shares(vii) | — | (1,471) | — | — | (56) | 2 | — | (54) | — | (54) |
Share based compensation(v) | — | | — | — | — | — | 18 | 18 | 1 | 19 |
Issuance of shares under share-based payment schemes | — | 459 | — | (2) | 26 | 2 | (25) | 1 | — | 1 |
Change in scope of consolidation (viii) | — | — | — | — | — | (5) | — | (5) | — | (5) |
Balance on December 31, 2021 | 101,739 | (1,538) | 153 | 476 | (60) | 2,609 | (594) | 2,583 | 157 | 2,740 |
(i)Share capital and share premium – see note C.1.
(ii)Retained profits – includes profit for the year attributable to equity holders, of which $486 million (2020: $310 million; 2019: $306 million) are not distributable to equity holders.
(iii)Other reserves – see note C.1.
| | | | | |
Consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 | |
(iv)Dividends – see note C.2.
(v)Share-based compensation – see note C.1.
(vi)Effect of the restructuring in Tanzania A.1.2.
(vii)During the year ended December 31, 2021, Millicom repurchased 1,369,284 shares (2020: 350,000 shares), for a total amount of $50 million (2020: 10 million, 2019: nil) and withheld approximately 102,000 shares (2020: 117,000) for settlement of tax obligations on behalf of employees under share-based compensation plans.
(viii)Cloud 2 Nube S.A. was a subsidiary owned by the Group at 55% and already fully consolidated as Millicom had control over it. As a result, in accordance with IFRS 10, the acquisition of the remaining 45% in Cloud 2 Nube S.A. has been treated as an equity transaction and non-controlling interests amounting to less than $1 million were transferred to the Group's equity against a purchase consideration of $5 million.
The accompanying notes are an integral part of these consolidated financial statements.
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Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Introduction
Corporate Information
Millicom International Cellular S.A. (the “Company” or “MIC S.A.”), a Luxembourg Société Anonyme, and its subsidiaries, joint ventures and associates (the “Group” or “Millicom”) is an international telecommunications and media group providing digital lifestyle services in emerging markets, through mobile and fixed telephony, cable, broadband, Pay-TV in Latin America (Latam) and Africa.
The Company’s shares are traded as Swedish Depositary Receipts on the Stockholm stock exchange under the symbol TIGO_SDB (formerly MIC SDB) and, since January 9, 2019, on the Nasdaq Stock Market in the U.S. under the ticker symbol TIGO. The Company has its registered office at 2, Rue du Fort Bourbon, L-1249 Luxembourg, Grand Duchy of Luxembourg and is registered with the Luxembourg Register of Commerce under the number RCS B 40 630.
On November 14, 2019, Millicom's historical principal shareholder, Kinnevik AB, distributed its entire (approximately 37% of Millicom's outstanding shares) shareholding in Millicom to its own shareholders through a share redemption plan. Since that date, Kinnevik is no longer a related party or shareholder in Millicom.
On February 25, 2022, the Board of Directors authorized these consolidated financial statements for issuance.
Business activities
Millicom operates its mobile businesses in Latin America (Bolivia, Colombia, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Paraguay), and in Africa (Tanzania).
Millicom operates various cable and fixed line businesses in Latin America (Bolivia, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Paraguay). Millicom also provides direct to home satellite service in most of its Latam countries.
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"). As a result, Millicom owns 100% equity interest in Tigo Guatemala and fully consolidates it since that date. As a result, the statements of income, cash flows and financial position in these consolidated financial statements might not be directly comparable with previous years' figures.
When preparing and disclosing its segment information, the Group includes Honduras and Guatemala in the Latin America (Latam) segment figures as if they are fully consolidated by the Group, as this reflects the way management reviews and uses internally reported information to make decisions (see note B.3. Segmental information). The Tigo Guatemala acquisition has no impact on the way we present our Latin America segment because it included our Guatemala joint venture as if it was already fully consolidated.
Millicom also provides Mobile Financial Services (MFS) and holds small minority investments in other businesses such as micro-insurance (Milvik).
COVID-19 - Qualitative and quantitative assessment on business activities, financial situation and economic performance
Impact on our markets and business
During 2021, economic activity recovered in our markets as most countries eased the lockdowns implemented at the beginning of the pandemic, and remittances from the U.S. to Central America sustained double-digit growth year-on-year. Meanwhile, vaccination rates were above 50% in Colombia, Costa Rica, El Salvador and Panama and were below 30% in Guatemala. Some countries experienced spikes in the number of COVID cases during the last semester, but governments generally refrained from imposing strict lockdowns, choosing instead to use curfews or voluntary quarantine programs, which had a negligible effect on commercial activity.
As of December 31, 2021, and for the year ended December 31, 2021, management did not identify any significant adverse accounting effects as a result of the pandemic.
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Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
IFRS Consolidated Financial Statements
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the IASB (IFRS). They are also compliant with International Financial Reporting Standards as adopted by the European Union. This is in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council of July 19, 2002, on the application of international accounting standards for listed companies domiciled in the European Union.
The financial statements have been prepared on an historical cost basis, except for certain items including derivative financial instruments (measured at fair value) and financial instruments that contain obligations to purchase own equity instruments (measured at the present value of the redemption price).
This section contains the Group’s significant accounting policies that relate to the financial statements as a whole. Significant accounting policies specific to one note are included within that note. Accounting policies relating to non-material items are not included in these financial statements.
Consolidation
The consolidated financial statements of the Group comprise the financial statements of the Company and its subsidiaries as of December 31 of each year. The financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies.
All intra-group balances, transactions, income and expenses, and profits and losses resulting from intra-group transactions are eliminated.
Foreign currency
Financial information in these financial statements are shown in the US dollar presentation currency of the Group and rounded to the nearest million (US$ million) except where otherwise indicated. The financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which each entity operates (the functional currency). The functional currency of each subsidiary, joint venture and associate reflects the economic substance of the underlying events and circumstances of these entities. Except for El Salvador where the functional currency is US dollar, the functional currency in other countries is the local currency.
The results and financial position of all Group entities (none of which operate in an economy with a hyperinflationary environment) with functional currency other than the US dollar presentation currency are translated into the presentation currency as follows:
(i) Assets and liabilities are translated at the closing rate on the date of the statement of financial position;
(ii) Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
(iii) All resulting exchange differences are recognized as a separate component of equity (currency translation reserve), in the caption “Other reserves”.
On consolidation, exchange differences arising from the translation of net investments in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are recorded in equity. When the Group disposes of or loses control or significant influence over a foreign operation, exchange differences that were recorded in equity are recognized in the consolidated statement of income as part of gain or loss on sale or loss of control and/or significant influence.
Goodwill and fair value adjustments arising on acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
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Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
The following table presents functional currency translation rates for the Group’s locations to the US dollar on December 31, 2021, 2020 and 2019 and the average rates for the years ended December 31, 2021, 2020 and 2019.
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Exchange Rates to the US Dollar | Functional Currency | 2021 Year-end Rate | 2020 Year-end Rate | Change % | 2021 Average Rate | 2020 Average Rate | Change % | 2019 Average Rate |
Bolivia | Boliviano (BOB) | 6.91 | | 6.91 | | — | % | 6.91 | | 6.91 | | — | % | 6.91 | |
Colombia | Peso (COP) | 3,981 | | 3,433 | | (13.8) | % | 3,756 | | 3,695 | | (1.6) | % | 3,296 | |
Costa Rica | Costa Rican Colon (CRC) | 645 | | 617 | | (4.3) | % | 625 | | 590 | | (5.6) | % | 588 | |
El Salvador | US dollar | n/a | n/a | n/a | n/a | n/a | n/a | n/a |
Ghana | Cedi (GHS) | 6.18 | | 5.87 | | (5.1) | % | 5.94 | | 5.75 | | (3.2) | % | 5.33 | |
Guatemala | Quetzal (GTQ) | 7.72 | | 7.79 | | 1.0 | % | 7.74 | | 7.73 | | (0.1) | % | 7.71 | |
Honduras | Lempira (HNL) | 24.43 | | 24.20 | | (1.0) | % | 24.12 | | 24.65 | | 2.2 | % | 24.59 | |
Luxembourg | Euro (EUR) | 0.88 | | 0.82 | | (6.9) | % | 0.85 | | 0.87 | | 3.4 | % | 0.89 | |
Nicaragua | Cordoba (NIO) | 35.52 | | 34.82 | | (2.0) | % | 35.17 | | 34.34 | | (2.4) | % | 33.12 | |
Panama | Balboa (B/.) (i) | n/a | n/a | n/a | n/a | n/a | n/a | n/a |
Paraguay | Guarani (PYG) | 6,886 | | 6,900 | | 0.2 | % | 6,790 | | 6,758 | | (0.5) | % | 6,232 | |
Sweden | Krona (SEK) | 9.05 | | 8.23 | | (9.1) | % | 8.59 | | 9.16 | | 6.6 | % | 9.43 | |
Tanzania | Shilling (TZS) | 2,305 | | 2,319 | | 0.6 | % | 2,313 | | 2,312 | | — | % | 2,304 | |
United Kingdom | Pound (GBP) | 0.74 | | 0.73 | | (1.0) | % | 0.73 | | 0.77 | | 6.2 | % | 0.78 | |
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(i) the balboa is tied to the United States dollar at an exchange rate of 1:1.
New and amended IFRS accounting standards
The following new or amended 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.
•Amendment to IFRS 16, 'Leases' - COVID 19 Rent Concessions - effective for annual periods starting on June 1, 2020. While the Group has implemented this amendment already in 2020, the IASB (in March 2021) extended its initial application beyond June 30, 2021, by one additional year.
•Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest Rate Benchmark Reform - Phase 2 - effective for annual periods starting on January 1, 2021. The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate.
Main reliefs provided by the Phase 2 amendments relate to:
•Changes to contractual cash flows: That is, when changing the basis for determining contractual cash flows for financial assets and liabilities required by the reform this will not result in an immediate gain or loss in the income statement but in an update of the effective interest rate (or an update in the discount rate to remeasure the lease liability as a result of the IBOR reform), and;
•Hedge accounting: That is, allowing hedge relationships that are directly affected by the reform to continue, though additional ineffectiveness might need to be recorded.
The Group has inventoried financial assets or liabilities (including lease liabilities), as well as hedging instruments, with IBOR features and concluded that it was not significantly exposed to this reform.
The following changes to standards not yet effective are not expected to materially affect the Group:
•Amendments effective for annual periods starting on January 1, 2022:
•IFRS 3 'Business Combinations' - Reference to Conceptual Framework.
•IAS 16 'Property, Plant and Equipment' - Proceeds before intended use.
•IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' - Cost of fulfilling a contract.
•Annual improvements to IFRS Standards 2018-2020, affecting IFRS 1, IFRS 9, IFRS 16 and IAS 41.
•Amendments effective for annual periods starting on January 1, 2023:
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Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
•Amendments to IAS 1, 'Presentation of Financial Statements' : These amendments clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. The amendments also clarify what IAS 1 means when it refers to the ‘settlement’ of a liability. The IASB also issued 'Disclosure of Accounting Policies' with amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial statements (not yet endorsed by the EU).
•IFRS 17, ‘Insurance contracts’
•Amendments to IFRS 17, ‘Insurance contracts’(not yet endorsed by the EU).
•IAS 8, 'Accounting Policies, Changes in Accounting Estimates and Errors' - Definition of accounting estimates (not yet endorsed by the EU).
The following changes to standards are effective for annual periods starting on January 1, 2023 (not yet endorsed by the EU) and their potential impact on the Group consolidated financial statements is currently being assessed by Management:
•Amendments to IAS 12, 'Income Taxes: Deferred tax related to Assets and liabilities arising from a Single Transaction' - These amendments clarify that the initial recognition exception does not apply to the initial recognition of leases and decommissioning obligations. These amendments apply prospectively to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, an entity should apply the amendments for the first time by recognising deferred tax for all temporary differences related to leases and decommissioning obligations at the beginning of the earliest comparative period presented.
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Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Judgments and critical estimates
The preparation of IFRS financial statements requires management to use judgment in applying accounting policies. 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 revenue and expenses during the reporting period. These estimates are based on management's best knowledge of current events, actions and best estimates as of a specified date, and 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 financial statements are disclosed in each note and are summarized below:
Judgments
Management apply judgment in accounting treatment and accounting policies in preparation of these financial statements. In particular, a significant level of judgment is applied regarding the following items:
• Acquisitions – measurement at fair value of existing and newly identified assets, including the measurement of property, plant and equipment and intangible assets (e.g. particularly the customer lists being sensitive to significant assumptions as disclosed in note A.1.2.), liabilities, contingent liabilities and remaining goodwill; the assessment of useful lives (see notes A.1.2., E.1.1., E.1.5., E.2.1.);
• Impairment testing – key assumptions related to future business performance, perpetual growth rates and discount rates (see notes E.1.2., E.1.6., E.2.2.);
• Revenue recognition – whether or not the Group acts as principal or as an agent, when there is one or several performance obligations and the determination of stand-alone selling prices (see note B.1.1.);
• Contingent liabilities – whether or not a provision should be recorded for any potential liabilities (see note G.3.);
• Leases – In determining the lease term, including the assessment of whether the exercise of extension or termination options is reasonably certain and the corresponding impact on the selected lease term (see note E.3.);
• Control – whether Millicom, through voting rights and potential voting rights attached to shares held, or by way of shareholders’ agreements or other factors, has the ability to direct the relevant activities of the subsidiaries it consolidates, or jointly direct the relevant activities of its joint ventures (see notes A.1., A.2.);
• Discontinued operations and assets held for sale – definition, classification and presentation (see notes A.4., E.4.1.) as well as measurement of potential provisions related to indemnities;
• Deferred tax assets – recognition based on likely timing and level of future taxable profits together with future tax planning strategies (see notes B.6.3.and G.3.2.);
• Defined benefit obligations – key assumptions related to life expectancies, salary increases and leaving rates, mainly related to UNE Colombia (see note B.4.3.).
Estimates
Estimates are based on historical experience and other factors, including reasonable expectations of future events, including the effects of the COVID-19 pandemic. These factors are reviewed in preparation of the financial statements although, due to inherent uncertainties in the evaluation process, actual results may differ from original estimates. Estimates are subject to change as new information becomes available and may significantly affect future operating results. Significant estimates have been applied in respect of the following items:
• Accounting for property, plant and equipment, and intangible assets in determining fair values at acquisition dates, particularly for assets acquired in business combinations and sale and leaseback transactions (see notes A.1.and E.2.1.);
• Useful lives of property, plant and equipment and intangible assets (see notes E.1.1., E.2.1.);
• Provisions, in particular provisions for asset retirement obligations, legal and tax risks (see note F.4.);
• Tax liabilities, in particular in respect of uncertainty over income tax treatments (see note F.4.);
• Revenue recognition (see note B.1.1.);
• Impairment testing including weighted average cost of capital ("WACC"), EBITDA margins, Capex intensity and long term growth rates (see note E.1.6.);
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Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
• For leases, estimates in determining the incremental borrowing rate for discounting the lease payments in case interest rate implicit in the lease cannot be determined (see note E.3. );
• Estimates for defined benefit obligations (see note B.4.2.);
• Accounting for share-based compensation in particular estimates of forfeitures and future performance criteria (see notes B.4.1., B.4.3.).
A. The Millicom Group
The Group comprises a number of holding companies, operating subsidiaries and joint ventures with various combinations of mobile, fixed-line telephony, cable and wireless Pay TV, Broadband Internet and Mobile Financial Services (MFS) businesses. The Group also holds other small minority investments in other businesses such as micro-insurance (Milvik).
A.1. Subsidiaries
Subsidiaries are all entities which Millicom controls. Millicom controls an entity when it is exposed to, or has rights to variable returns from its investment in the entity, and has the ability to affect those returns through its power over the subsidiary. Millicom has power over an entity when it has existing rights that give it the current ability to direct the relevant activities, i.e. the activities that significantly affect the entity’s returns. Generally, control accompanies a shareholding of more than half of the voting rights although certain other factors (including contractual arrangements with other shareholders, voting and potential voting rights) are considered when assessing whether Millicom controls an entity. For example, although Millicom holds less than 50 % of the shares in its Colombian businesses, it holds more than 50 % of shares with voting rights. The contrary may also be true (e.g. Honduras where we own 66.7% of the shares but there is a super majority requirement at the board for decisions about the relevant activities of the operation). Our main subsidiaries are as follows:
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Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
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Entity | Country | Activity | December 31, 2021 % holding | December 31, 2020 % holding | December 31, 2019 % holding |
Latin America | | | In % | In % | In % |
Telemovil El Salvador S.A. de C.V. | El Salvador | Mobile, MFS, Cable, DTH | 100 | 100 | 100 |
Millicom Cable Costa Rica S.A. | Costa Rica | Cable, DTH | 100 | 100 | 100 |
Telefonica Celular de Bolivia S.A. | Bolivia | Mobile, DTH, MFS, Cable | 100 | 100 | 100 |
Telefonica Celular del Paraguay S.A. | Paraguay | Mobile, MFS, Cable, Pay-TV | 100 | 100 | 100 |
Cable Onda S.A (i). | Panama | Cable, Pay-TV, Internet, DTH, Fixed-line | 80 | 80 | 80 |
Grupo de Comunicaciones Digitales, S.A. (formerly Telefonica Moviles Panama, S.A.)(ii) | Panama | Mobile | 80 | 80 | 80 |
Telefonia Celular de Nicaragua S.A. (ii) | Nicaragua | Mobile | 100 | 100 | 100 |
Colombia Móvil S.A. E.S.P. (iii) | Colombia | Mobile | 50-1 share | 50-1 share | 50-1 share |
UNE EPM Telecomunicaciones S.A.(iii) | Colombia | Fixed-line, Internet, Pay-TV, Mobile | 50-1 share | 50-1 share | 50-1 share |
Edatel S.A. E.S.P. (iii) | Colombia | Fixed-line, Internet, Pay-TV, Cable | 50-1 share | 50-1 share | 50-1 share |
Comunicaciones Celulares S.A. (iv) (v) | Guatemala | Mobile, MFS | 100 | 55 | 55 |
Navega.com S.A. (iv) (v) | Guatemala | Cable, DTH | 100 | 55 | 55 |
Africa | | | | | |
MIC Tanzania Public Limited Company | Tanzania | Mobile, MFS | 98.5 | 98.5 | 98.5 |
Zanzibar Telecom Limited | Tanzania | Mobile, MFS | 98.5 | 98.5 | 98.5 |
Unallocated | | | | | |
Millicom International Operations S.A. | Luxembourg | Holding Company | 100 | 100 | 100 |
Millicom International Operations B.V. | Netherlands | Holding Company | 100 | 100 | 100 |
Millicom LIH S.A. | Luxembourg | Holding Company | 100 | 100 | 100 |
MIC Latin America B.V. | Netherlands | Holding Company | 100 | 100 | 100 |
Millicom Africa B.V. | Netherlands | Holding Company | 100 | 100 | 100 |
Millicom Holding B.V. | Netherlands | Holding Company | 100 | 100 | 100 |
Millicom International Services LLC | USA | Services Company | 100 | 100 | 100 |
Millicom Services UK Ltd | UK | Services Company | 100 | 100 | 100 |
Millicom Spain S.L. | Spain | Holding Company | 100 | 100 | 100 |
(i) Acquisition completed on December 13, 2018. Cable Onda S.A. is fully consolidated as Millicom has the majority of voting shares to direct the relevant activities. See note A.1.2..
(ii) Companies acquired during 2019. See note A.1.2..
(iii) Fully consolidated as Millicom has the majority of voting shares to direct the relevant activities.
(iv) Acquisition completed on November 12, 2021(see Note A.1.2.). Millicom now owns 100% equity interest in Tigo Guatemala compared to 55% before the transaction. While Millicom owned more than 50% of the shares in these entities and had the right to nominate a majority of the directors of each of these entities, key decisions over the relevant activities were taken by a super majority vote. This effectively gave either shareholder the ability to veto any decision and therefore neither shareholder had sole control over the entity. Therefore, the operations of these joint ventures were accounted for under the equity method. See note A.2.1..
(v) Tigo Guatemala is made up of the 2 entities in the table above, but also by the following less material entities: Comunicaciones Corporativas S.A. (“COMCORP”), Servicios Innovadores de Comunicación y Entretenimiento S.A. (“SICESA”), Distribuidora de Comunicaciones de Occidente S.A. (“COOCSA”), Distribuidora de Comunicaciones de Oriente S.A. (“COORSA”), Distribuidora Internacional de Comunicaciones S.A. (“INTERNACOM”), Servicios Especializados en Telecomunicaciones S.A. (“SESTEL”), Distribuidora Central de Comunicaciones, S.A. (“COCENSA”) and Cloud 2 Nube S.A. ("C2N").
A.1.1. Accounting for subsidiaries and non-controlling interests
Subsidiaries are fully consolidated from the date on which control is transferred to Millicom. If facts and circumstances indicate that there are changes to one or more of the elements of control, a reassessment is performed to determine if control still exists. Subsidiaries are de-consolidated from the date that control ceases. Transactions with non-controlling interests are accounted for as
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Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
transactions with equity owners of the Group. Gains or losses on disposals of non-controlling interests are recorded in equity. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is also recorded in equity.
A.1.2. Acquisition of subsidiaries and changes in non-controlling interests in subsidiaries
Scope changes 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 has been financed through a bridge facility (see note C.3).
Millicom is currently determining the fair value of Tigo Guatemala identifiable assets and liabilities, however, this purchase accounting is still provisional at December 31, 2021, particularly in respect of the evaluation of the tangible, intangible assets, right of use assets and lease liabilities. For the purpose of the valuation of the intangible assets (excluding goodwill), the provisional numbers are based on the current carrying values of intangibles as identified at the date of the deconsolidation of Tigo Guatemala and the commencement of the accounting for the investment under the equity method. Out of these intangibles (excluding goodwill), the brand is currently recorded at $848 million and is expected to have an indefinite useful live (see note E.1).
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At acquisition date - November 12, 2021 | Provisional fair values (100%) ($ millions) | | |
Intangible assets (excluding goodwill) | 1,294 | | |
Property, plant and equipment | 547 | | |
Right of use assets | 189 | | |
Other non-current assets | 5 | | |
Current assets (excluding cash) | 245 | | |
Trade receivables | 42 | | |
Cash and cash equivalents | 199 | | |
Total assets acquired | 2,521 | | |
Lease liabilities | 205 | | |
Other debt and financing | 417 | | |
Other liabilities | 280 | | |
Total liabilities assumed | 901 | | |
Fair value of assets acquired and liabilities assumed, net - A | 1,620 | | |
Purchase consideration (45%) - B | 2,195 | | |
Implied fair value (100% of business) - C | 4,877 | | |
Carrying value of our investment in joint venture at acquisition date - D | 2,013 | | |
Goodwill arising on change of control - B+D-A=E | 2,588 | | |
Revaluation of previously held interests - C-B-D=F (i) | 670 | | |
Total provisional goodwill - E+F=G | 3,258 | | |
(i) The acquisition has been determined as a business combination achieved in stages, requiring Millicom to remeasure its 55% previously held equity investment in Tigo Guatemala at its acquisition date fair value ($2,683 million); the resulting gain has been recognized in the statement of income under the line "Revaluation of previously held interests" and is included in the goodwill calculation (see above).
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 a net profit of $43 million 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.
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Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Scope changes 2020
There were no material acquisitions in 2020.
Scope changes 2019
1. Telefónica CAM Acquisitions
On February 20, 2019, MIC S.A., Telefónica Centroamérica and Telefónica, S.A. entered into 3 separate share purchase agreements (the “Telefónica CAM Acquisitions”) pursuant to which, subject to the terms and conditions contained therein, Millicom agreed to purchase 100% of the shares of Telefónica Móviles Panamá, S.A., a company incorporated under the laws of Panama, from Telefónica Centroamérica (the “Panama Acquisition”), 100% of the shares of Telefónica de Costa Rica TC, S.A., a company incorporated under the laws of Costa Rica, from Telefónica (the “Costa Rica Acquisition”) and 100% of the shares of Telefonía Celular de Nicaragua, S.A., a company incorporated under the laws of Nicaragua, from Telefónica Centroamérica (the “Nicaragua Acquisition”). While Millicom completed both acquisitions in Nicaragua and Panama, it announced on May 2, 2020 that it had terminated the Share Purchase Agreement in relation to the Costa Rica Acquisition (see note G.3.1.). The aggregate purchase price for the Telefónica Panama and Nicaragua Acquisitions was $1.08 billion, which has been subject to purchase price adjustments - see below.
Acquisition related costs for Nicaragua and Panama acquisitions included in the statement of income under operating expenses were approximately $16 million for the year 2019.
The impact of the finalization of Nicaragua and Panama's purchase accounting on the 2019 Group statement of income is immaterial and, therefore, no adjustments were made on comparative figures in that respect.
Further details of Nicaragua and Panama acquisitions are provided below.
a) Nicaragua Acquisition
This transaction closed on May 16, 2019 after receipt of the necessary approvals and, since that date, Millicom holds all voting rights into Telefonía Celular de Nicaragua, S.A. ("Nicaragua") and controls it. On the same day, Millicom paid an original cash consideration of $437 million, which was adjusted to $430 million as of December 31, 2019 and finally adjusted to $426 million in 2020. For the purchase accounting, Millicom determined the final fair values of Nicaragua's identifiable assets and liabilities based on transaction and relative fair values. The purchase accounting was finalized by May 16, 2020 and has not materially changed since December 31, 2019, with the exception of the final price adjustment.
The goodwill is currently not tax deductible, and is attributable to expected synergies and convergence with our legacy fixed business in the country, as well as to the fair value of the assembled work force. For convenience purposes, the acquisition date was set on May 1, 2019 as there were no material transactions from this date to May 16, 2019. From May 1, 2019 to December 31, 2019, Nicaragua contributed $144 million of revenue and a net profit of $5 million to the Group. If the acquisition had occurred on January 1, 2019 incremental revenue for the Group for the twelve-month period ended December 31, 2019 would have been $219 million and incremental net loss for that period would have been $16 million, including amortization of assets not previously recognized of $12 million (net of tax).
Key assumptions used in fixed assets valuation
The following valuation methods and key estimates were used for the valuation of the main classes of fixed assets:
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Major class of assets | Valuation method | Key assumption 1 | Key assumption 2 | Key assumption 3 |
Spectrum | Market approach - Market comparable transactions | Discount rate : 14% | Terminal growth rate: 2.5% | Estimated duration: 14 years |
Customer lists | Income approach - Multi-Period Excess Earnings Method | Discount rate: 14-15% | Monthly Churn rate: From 1.2% for B2B to 2.9% for B2C | EBITDA margin: ~ 36% to 41% |
Land and buildings | Market approach | Economic useful life (range): 10-30 years | Price per square meter: from $2 to $57 | N/A |
Core network | Cost approach | Economic useful life (range): 5-27 years | Remaining useful life (minimum) : 1.7 years | N/A |
b) Panama Acquisition
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Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
This transaction closed on August 29, 2019 after receipt of the necessary approvals and, since that date, Cable Onda, which is 80% owned by Millicom, holds all voting rights in Grupo de Comunicaciones Digitales, S.A., formerly Telefónica Móviles Panamá, S.A. ("Panama") and controls it. On the same day, Cable Onda paid an original cash consideration of $594 million to acquire 100% of the shares of Panama, finally adjusted to $587 million during Q3 2020. No non-controlling interests are recognized at acquisition date as Cable Onda acquired 100% of the shares of Panama. However, non-controlling interests are recognized on Panama's results from the date of acquisition.
For the purchase accounting, Millicom determined the fair value of Panama's identifiable assets and liabilities based on transaction and relative fair values. During 2020, the Group completed the policy alignment and evaluation in respect of the right-of-use assets and lease liabilities, the property plant and equipment, as well as their related effect on the final valuation of the other fixed assets.
The goodwill is currently not tax deductible and is attributable to expected synergies and convergence with Cable Onda, as well as to the fair value of the assembled work force. For convenience purposes, the acquisition date was set on September 1, 2019. From September 1, 2019 to December 31, 2019, Panama contributed $80 million of revenue and a net profit of $6 million to the Group. If Panama had been acquired on January 1, 2019 incremental revenue for the Group for the twelve-month period ended December 31, 2019 would have been $158 million and incremental net profit for that period would have been $1 million, including amortization of assets not previously recognized of $3 million (net of tax).
As mentioned above, the impact of the finalization of Panama's purchase accounting on the 2019 Group statement of income was immaterial and, therefore, no adjustments were made on comparative figures in that respect.
Key assumptions used in fixed assets valuation
The following valuation methods and key estimates were used for the valuation of the main classes of fixed assets:
| | | | | | | | | | | | | | |
Major class of assets | Valuation method | Key assumption 1 | Key assumption 2 | Key assumption 3 |
Customer lists | Income approach - Multi-Period Excess Earnings Method | Discount rate: 9.8-10.8% | Monthly Churn rate: ~3.8% in average | EBITDA margin: ~ 41.5% |
Property, plant and equipment | Cost approach | Economic useful life (range): 3-27 years | Remaining useful life (minimum): 3-27 years | N/A |
2. Tanzania restructuring
In October 2019, with the view of listing the shares of MIC Tanzania Public Limited Company ('MIC Tanzania') on the local stock exchange (see note H.), Millicom completed the restructuring of its investments in different operations in the country. Mainly, MIC Tanzania acquired all the shares of Zantel, which was partially held by the Government of Zanzibar (15%). In exchange of the contribution of its 15% shares in Zantel to MIC Tanzania, the Government of Zanzibar received 1.5% of newly issued shares in MIC Tanzania. This restructuring did not result in the Group losing control in Zantel nor MIC Tanzania, and has therefore been recognized as an equity transaction. As a consequence, the Group owners’ equity decreased by a net amount of $18 million as a result of the derecognition of the 15% non-controlling interests in Zantel and the recognition of 1.5% non-controlling interests in MIC Tanzania.
3. Others
During the year ended December 31, 2019, the Group also completed minor additional acquisitions and scope changes.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
A.1.3. Disposal of subsidiaries and decreases in non-controlling interests of subsidiaries
Chad
On June 26, 2019, the Group completed the disposal of its operations in Chad for a cash consideration of $110 million. In August 2020, the Group and the buyer of our operations in Chad agreed on a final price adjustment of $8 million in favor of the buyer. This price adjustment had been disbursed in September 2020 and recorded under the results from discontinued operations in the Group's statement of income. In accordance with Group practices, the Chad operation had been classified as assets held for sale and discontinued operations as from June 5, 2019 and comparative periods restated. On June 26, 2019, Chad was deconsolidated and a gain on disposal of $77 million was recognized (see also note E.4.).
Rwanda
On December 19, 2017, Millicom announced that it had signed an agreement for the sale of its Rwanda operations to subsidiaries of Bharti Airtel Limited for a final cash consideration of $51 million, including a deferred cash payment for an amount of $18 million, which has been finally settled in January 2020. The sale was completed on January 31, 2018. On that day, Millicom's operations in Rwanda have been deconsolidated and no material loss on disposal was recognized. However, a loss of $32 million was recognized in 2019 corresponding to the recycling of foreign currency exchange losses accumulated in equity since the creation of the local operation. This loss had been recognized under ‘Profit (loss) for the 2019 year from discontinued operations, net of tax’.
Other disposals
For the years ended December 31, 2021, 2020 and 2019, Millicom did not dispose of any other significant investments.
A.1.4. Summarized financial information relating to significant subsidiaries with non-controlling interests
At December 31, 2021 and 2020, Millicom’s subsidiaries with material non-controlling interests were the Group’s operations in Colombia and Panama.
Statement of Financial Position – non-controlling interests
| | | | | | | | |
| December 31, |
| 2021 | 2020 |
| (US$ millions) |
Colombia | 83 | 133 |
Panama | 74 | 81 |
Others | — | 1 |
Total | 157 | 215 |
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Profit (loss) attributable to non-controlling interests
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Colombia | (40) | (23) | 11 |
Panama | (7) | (18) | (6) |
Others | (1) | — | — |
Total | (48) | (41) | 5 |
The summarized financial information for material non-controlling interests in our operations in Colombia and Panama is provided below. This information is based on amounts before inter-company eliminations.
Colombia
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Revenue | 1,414 | 1,346 | 1,532 |
Total operating expenses | (509) | (470) | (543) |
Operating profit | 100 | 129 | 164 |
Net (loss) for the year | (80) | (46) | 23 |
50% non-controlling interest in net (loss) | (40) | (23) | 11 |
Total assets (excluding goodwill) | 2,336 | 2,589 | 2,256 |
Total liabilities | 2,158 | 2,303 | 1,891 |
Net assets | 178 | 286 | 365 |
50% non-controlling interest in net assets | 89 | 143 | 183 |
Consolidation adjustments | (6) | (10) | (13) |
Total non-controlling interest | 83 | 133 | 170 |
Dividends and advances paid to non-controlling interest | (5) | (4) | (12) |
Net cash from operating activities | 272 | 370 | 363 |
Net cash from (used in) investing activities | (295) | (311) | (260) |
Net cash from (used in) financing activities | 30 | (47) | (67) |
Exchange impact on cash and cash equivalents, net | (10) | (15) | 0 |
Net increase (decrease) in cash and cash equivalents | (2) | (3) | 36 |
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Panama
| | | | | | | | | | | |
| 2021 | 2020 | 2019 (i) |
| (US$ millions) |
Revenue | 633 | 585 | 475 |
Total operating expenses | (207) | (197) | (148) |
Operating profit | 7 | (60) | (15) |
Net (loss) for the year | (37) | (89) | (31) |
20% non-controlling interest in net (loss) | (7) | (18) | (6) |
Total assets (excluding Millicom's goodwill in Cable Onda) | 1,717 | 1,734 | 1,905 |
Total liabilities | 1,347 | 1,327 | 1,411 |
Net assets | 371 | 407 | 494 |
20% non-controlling interest in net assets | 74 | 81 | 99 |
| | | |
Total non-controlling interest | 74 | 81 | 99 |
| | | |
Net cash from operating activities | 179 | 193 | 167 |
Net cash from (used in) investing activities | (118) | (100) | (693) |
Net cash from (used in) financing activities | (43) | (69) | 580 |
| | | |
Net increase in cash and cash equivalents | 17 | 24 | 54 |
(i) In 2019, Cable Onda acquired Telefónica Panama for $587 million (note A.1.2.), financed by issuing a $600 million Senior Notes due 2030 (note C.3.1.) The 2019 figures include the full year results and cash flows of Cable Onda, as well as 4 months of Telefónica Panama which was consolidated from September 1, 2019.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
A.2. 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 December 31, 2021, the equity accounted net assets of our joint venture in Honduras totaled $406 million (December 31, 2020: Honduras: $422 million; Guatemala: $2,649 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 reserves, $3 million (December 31, 2020: $153 million) represent statutory reserves that are unavailable to be distributed to the Group. During the year ended December 31, 2021, Millicom's joint venture in Honduras did not pay any dividend or dividend advances to the Company while Guatemala paid $13 million during the period from January 1, 2021 until November 12, 2021 (December 31, 2020: Honduras: $24 million; Guatemala: $47 million).
Our main joint ventures are as follows:
| | | | | | | | | | | | | | |
Entity | Country | Activity | December 31, 2021 % holding | December 31, 2020 % holding |
Telefonica Celular S.A. (i) | Honduras | Mobile, MFS | 66.7 | 66.7 |
Navega S.A. de CV (i) | Honduras | Cable | 66.7 | 66.7 |
Comunicaciones Celulares S.A. (ii) | Guatemala | Mobile, MFS | na | 55 |
Navega.com S.A. (ii) | Guatemala | Cable, DTH | na | 55 |
Bharti Airtel Ghana Holdings B.V. (iii) | Ghana | Mobile, MFS | 50 | 50 |
(i)Millicom owns more than 50% of the shares in these entities and has the right to nominate a majority of the directors of each of these entities. However, key decisions over the relevant activities must be taken by a super majority vote. This effectively gives either shareholder the ability to veto any decision and therefore neither shareholder has sole control over the entity. Therefore, the operations of these joint ventures are accounted for under the equity method.
(ii)On November 12, 2021 Millicom signed and closed an agreement to acquire the remaining 45% equity interest in its joint venture business in Guatemala (collectively, "Tigo Guatemala"). As a result, Millicom owns 100% equity interest in Tigo Guatemala and fully consolidates it since that date. Until November 12, 2021, Millicom owned more than 50% of the shares in these entities and had the right to nominate a majority of the directors of each of these entities. However, key decisions over the relevant activities were taken by a super majority vote. This effectively gave either shareholder the ability to veto any decision and therefore neither shareholder had sole control over the entity. Therefore, the operations of these joint ventures were accounted for under the equity method prior to the acquisition.
(iii)On October 13, 2021, Millicom, along with its joint venture partner Bharti Airtel Limited, closed the disposal of AirtelTigo Ghana to the Government of Ghana (a subsidiary of Bharti Airtel Limited). Millicom still owns 50% of Bharti Airtel Ghana Holdings B.V.
The carrying values of Millicom’s investments in joint ventures were as follows:
Carrying value of investments in joint ventures at December 31
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Honduras operations (i) | 596 | 610 |
Guatemala operations (i) | — | 2,031 |
AirtelTigo Ghana operations | — | — |
Total | 596 | 2,642 |
(i) Includes all the companies under the Honduras and Guatemala groups (for Guatemala, until acquisition date - See Note A.2.1.).
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
The table below summarizes the movements for the year in respect of the Group’s joint ventures carrying values:
| | | | | | | | | | | | |
| Guatemala(i) | Honduras (i) | Ghana(ii) | |
| (US$ millions) | |
Opening balance at January 1, 2020 | 2,089 | | 708 | | — | | |
Disposal of the Group's investment in Navega to Celtel (iii) | — | | (83) | | — | | |
Results for the year | 144 | | 27 | | — | | |
Dividends declared during the year | (199) | | (55) | | — | | |
Currency exchange differences | (3) | | 13 | | — | | |
Closing balance at December 31, 2020 | 2,031 | | 610 | | — | | |
Capital increase | — | | — | | 38 | | |
Results for the year | 183 | | 27 | | (38) | | |
Utilization of past recognized losses | — | | — | | — | | |
Dividends declared during the year | (201) | | (34) | | — | | |
Currency exchange differences | — | | (7) | | — | | |
Change in consolidation scope | (2,013) | | — | | — | | |
Closing balance at December 31, 2021 | — | | 596 | | — | | |
(i) Share of profit is recognized under ‘Share of profit joint ventures’ in the statement of income for the year ended December 31, 2021 for Honduras and for the period from January 1, 2021 until November 12, 2021 for Guatemala (see note A.1.2.)
(ii) Share of profit (loss) is recognized under ‘Income (loss) from other joint ventures and associates, net’ in the statement of income.
(iii) See note G.5.
(iv) On October 13, 2021, Millicom, along with its joint venture partner Bharti Airtel Limited, closed the disposal of AirtelTigo Ghana to the Government of Ghana. As part of the closing conditions, each partner committed and paid $37.5 million for the reimbursement of certain local bank facilities which has been provided for during the first-nine months in the statement of income under the line "Profit (loss) from other joint ventures and associates, net
At December 31, 2021 and 2020 the Group had not incurred obligations, nor made payments on behalf of the Honduras or Ghana operations.
A.2.1. Accounting for joint ventures
Joint ventures are accounted for using the equity method of accounting and are initially recognized at cost (calculated at fair value if it was a subsidiary of the Group before becoming a joint venture). The Group’s investments in joint ventures include goodwill (net of any accumulated impairment loss) on acquisition.
The Group’s share of post-acquisition profits or losses of joint ventures is recognized in the consolidated statement of income and its share of post-acquisition movements in reserves is recognized in reserves. Cumulative post-acquisition movements are adjusted against the carrying amount of the investments. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, including any other unsecured receivables, the Group does not recognize further losses, unless the Group has incurred obligations or made payments on behalf of the joint ventures.
Gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments in joint ventures are recognized in the statement of income.
After application of the equity method, including recognizing the joint ventures’ losses, the Group applies IFRS 9 to determine whether it is necessary to recognize any additional impairment loss with respect to its net investment in the joint venture.
A.2.2. Material joint ventures – Guatemala, Honduras and Ghana operations
Summarized financial information for the years ended December 31, 2021, 2020 and 2019 of the Guatemala (until acquisition), Honduras and Ghana (until disposal) operations is as follows. This information is based on amounts before inter-company eliminations.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Honduras
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Revenue | 589 | | 552 | | 594 | |
Depreciation and amortization | (124) | | (132) | | (132) | |
Operating profit | 99 | | 77 | | 102 | |
Financial income (expenses), net | (34) | | (24) | | (37) | |
Profit before taxes | 62 | | 58 | | 60 | |
Charge for taxes, net | (22) | | (19) | | (21) | |
Profit for the year | 40 | | 39 | | 39 | |
Net profit for the year attributable to Millicom | 27 | | 27 | | 27 | |
Dividends and advances paid to Millicom | — | | 24 | | 28 | |
Total non-current assets (excluding goodwill) | 473 | | 461 | | 516 | |
Total non-current liabilities | 362 | | 533 | | 469 | |
Total current assets | 176 | | 300 | | 312 | |
Total current liabilities | 305 | | 236 | | 183 | |
Total net assets | (18) | | (8) | | 176 | |
Group's share in % | 66.7 | % | 66.7 | % | 66.7 | % |
Group's share in USD millions | (12) | | (5) | | 117 | |
Goodwill and consolidation adjustments | 608 | | 615 | | 591 | |
Carrying value of investment in joint venture | 596 | | 610 | | 708 | |
| | | |
Cash and cash equivalents | 39 | | 60 | | 40 | |
Debt and financing – non-current | 267 | | 390 | | 384 | |
Debt and financing – current | 73 | | 10 | | 39 | |
Net cash from operating activities | 166 | | 151 | | 169 | |
Net cash from (used in) investing activities | (89) | | (145) | | (77) | |
Net cash from (used in) financing activities | (98) | | 14 | | (77) | |
Net (decrease) increase in cash and cash equivalents | (21) | | 20 | | 15 | |
Honduras financing
On September 19, 2019, Telefónica Celular, S.A. de C.V. entered into a new credit agreement with Banco Industrial S.A. and Banco Pais S.A for an amount up to $185 million, in tranches of $100 million, $60 million and $25 million. The Loan Agreement has a 10-year maturity and an interest rate of LIBOR plus 3.80% per annum, subject to a floor of minimum 5.25%. The new credit agreement has been used to consolidate the portion of a syndicated $250 million facility with Scotiabank dated March 27, 2015, and $90 million credit agreement with Banco Industrial S.A. dated March 20, 2018.
On September 19, 2019, Navega S.A. de C.V., entered into a new facility agreement with Banco Industrial S.A. for an amount of $20 million and a duration of 10 years. The new agreement bears an annual interest of LIBOR plus 3.80% , subject to a floor of 5.25%. and will be used to refinance the portion corresponding to it as borrower under the $250 million facility with Scotiabank dated March 27, 2015.
On June 1, 2020, Telefónica Celular, S.A. de C.V. executed a $32 million bank loan agreement in equivalent amount in local currency for a 10-year term.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Guatemala
| | | | | | | | | | | |
| 2021(ii) | 2020 (i) | 2019 |
| (US$ millions) |
Revenue | 1,379 | | 1,503 | | 1,434 | |
Depreciation and amortization | (282) | | (323) | | (313) | |
Operating profit | 462 | | 452 | | 429 | |
Financial income (expenses), net (i) | (40) | | (95) | | (66) | |
Profit before taxes | 432 | | 347 | | 356 | |
Charge for taxes, net | (99) | | (83) | | (79) | |
Profit for the year | 333 | | 264 | | 277 | |
Net profit for the year attributable to Millicom | 183 | | 144 | | 152 | |
Dividends and advances paid to Millicom | 13 | | 47 | | 209 | |
Total non-current assets (excluding goodwill) | N/A | 2,195 | | 2,517 | |
Total non-current liabilities | N/A | 751 | | 1,216 | |
Total current assets | N/A | 742 | | 717 | |
Total current liabilities | N/A | 523 | | 251 | |
Total net assets | N/A | 1,662 | | 1,767 | |
Group's share in % | N/A | 55 | % | 55 | % |
Group's share in USD millions | N/A | 914 | | 972 | |
Goodwill and consolidation adjustments | N/A | 1,117 | | 1,117 | |
Carrying value of investment in joint venture | N/A | 2,031 | | 2,089 | |
| | | |
Cash and cash equivalents | N/A | 188 | | 189 | |
Debt and financing – non-current | N/A | 619 | | 1,152 | |
Debt and financing – current | N/A | 24 | | 21 | |
Net cash from operating activities | 611 | | 598 | | 588 | |
Net cash from (used in) investing activities | (192) | | (289) | | (205) | |
Net cash from (used in) financing activities | (406) | | (308) | | (412) | |
Exchange impact on cash and cash equivalents, net | 1 | | (2) | | 1 | |
Net increase in cash and cash equivalents | 13 | | (1) | | (28) | |
(i) In 2020, Financial expenses include a $18 million charge related to early redemption of bonds - see below.
(ii) Information for the statement of income and cash flows is for the period from January 1 to November 12, 2021. No information is disclosed on statement of financial position items as these are now fully consolidated in the Group numbers.
Guatemala financing
In 2014, Intertrust SPV (Cayman) Limited, acting as trustee of the Comcel Trust, a trust established and consolidated by Comcel for the purposes of the transaction, issued $800 million 6.875% Senior Notes to refinance existing local and MIC S.A. corporate debt. The bond was issued at 98.233% of the principal and had an effective interest rate of 7.168%. The bond was guaranteed by Comcel and listed on the Luxembourg Stock Exchange.
On November 18, 2020, the $800 million aggregate principal amount of its outstanding 6.875% Senior Notes due 2024 was early redeemed 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. The redemption premium ($18 million) and additional interest ($7 million), as well as the remaining unamortized deferred costs of $8 million were recorded as financial expenses during the year. This early redemption was financed through local financing in local currency as well as by shareholder loans (see note G.5.).
The impact on the Group's statement of income was a $18 million expense (at 55% ownership) reported on the line "Share of profit in joint ventures".
On October 5, 2020, Comcel executed a credit agreement with Banco Industrial for GTQ 1,697 million (approximately $218 million using the exchange rate as of December 31, 2020) for a 5 year term to refinance other credit agreements with Banco Industrial and to finance and refinance working capital, capital expenditures and general corporate purposes.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
AirtelTigo Ghana
Our joint venture in Ghana has been disposed of during the year. The only material effect for this year's statement of income is the loss recognized on the exit financing which is further explain in note A.2.. Therefore, the 2021 financial information is not disclosed in the table below.
| | | | | | | | |
| 2020 | 2019 |
| |
Revenue | 132 | | 142 | |
Depreciation and amortization | (42) | | (69) | |
Operating loss | (30) | | (72) | |
Financial income (expenses), net | (41) | | (77) | |
Loss before taxes | (85) | | (123) | |
Charge for taxes, net | — | | — | |
Loss for the period | (85) | | (123) | |
Net loss for the period attributable to Millicom | 0 | | (40) | |
| | |
Total non-current assets (excluding goodwill) | 204 | | 168 | |
Total non-current liabilities | 289 | | 245 | |
Total current assets | 41 | | 42 | |
Total current liabilities | 218 | | 187 | |
Total net assets | (263) | | (223) | |
Group's share in % | 50 | % | 50 | % |
Group's share in USD millions | (132) | | (111) | |
Goodwill and consolidation adjustments | 89 | | 90 | |
Unrecognised losses | (42) | | (22) | |
Carrying value of investment in joint venture | — | | 0 | |
| | |
Cash and cash equivalents | 1 | | 5 | |
Debt and financing – non-current | 289 | | 245 | |
Debt and financing – current | 40 | | 27 | |
| | |
Net cash from operating activities | (8) | | (5) | |
Net cash from (used in) investing activities | — | | — | |
Net cash from (used in) financing activities | 4 | | (6) | |
Net increase in cash and cash equivalents | (4) | | (11) | |
A.2.3. Impairment of investment in joint ventures
While no impairment triggers were identified for the Group’s investments in joint ventures in 2021, according to its policy, management have completed an impairment test for its joint ventures in Honduras.
The Group’s investments in Honduras operations was tested for impairment by assessing the recoverable amount (using a value in use model based on discounted cash flows) against the carrying amount. The cash flow projections used were extracted from financial budgets approved by management and reviewed by the Board (refer to note E.1.6. for further details on impairment testing). Cash flows beyond this period have been extrapolated using a perpetual growth rate of 1% (2020: 1%). Discount rate used in determining recoverable amount was 8.9% (2020: 9.0%).
For the year ended December 31, 2021 and 2020, and as a result of the impairment testing described above, management concluded that none of the Group’s investments in joint ventures should be impaired.
Sensitivity analysis was performed on key assumptions within the impairment tests. The sensitivity analysis determined that sufficient headroom exists from realistic changes to the assumptions that would not impact the overall results of the testing.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
A.3. Investments in associates
Millicom has significant influence over immaterial associates as shown below:
| | | | | | | | | | | | | | |
| | | December 31, 2021 | December 31, 2020 |
Entity | Country | Activity(ies) | % holding | % holding |
Africa | | | | |
West Indian Ocean Cable Company Limited (WIOCC) | Republic of Mauritius | Telecommunication carriers’ carrier | 9.1 | | 9.1 | |
Latin America | | | | |
MKC Brilliant Holding GmbH (LIH) | Germany | Online marketplace, retail and services | 35.0 | | 35.0 | |
Unallocated | | | | |
Milvik AB | Sweden | Other | 9.7 | | 9.7 | |
At December 31, 2021 and 2020, the carrying value of Millicom’s main associates was as follows:
Carrying value of investments in associates at December 31
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Milvik AB | 8 | | 10 | |
West Indian Ocean Cable Company Limited (WIOCC) | 14 | | 14 | |
Total | 22 | | 24 | |
A.3.1. Accounting for investments in associates
The Group accounts for associates in the same way as it accounts for joint ventures.
A.3.2. Impairment of interests in associates
MKC Brilliant Holding GmbH (LIH)
Millicom’s 35.0% investment in LIH had been fully impaired in two stages (by $40 million in 2016 and $48 million in 2017) as a result of the annual impairment test conducted back then. The impairment test performed in 2021 confirmed this conclusion.
A.4. Discontinued operations
A.4.1. Classification of discontinued operations
Discontinued operations are those which have identifiable operations and cash flows (for both operating and management purposes) and represent a major line of business or geographic area which has been disposed of, or are held for sale. Revenue and expenses associated with discontinued operations are presented retrospectively in a separate line in the consolidated statement of income.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
A.4.2. Millicom’s discontinued operations
In accordance with IFRS 5 and as further explained in Note A.1.3. , the Group’s businesses in Chad and Rwanda had been classified as discontinued operations. For further details, refer to note E.4.
B. Performance
B.1. Revenue
Millicom’s revenue comprises sale of services from its mobile business (including Mobile Financial Services - MFS) and its cable and other fixed services, as well as related devices and equipment. Recurring revenue consists of monthly subscription fees, airtime and data usage fees, interconnection fees, roaming fees, TV services, B2B contracts, MFS commissions and fees from other telecommunications services such as data services, short message services and other value added services.
Revenue from continuing operations by
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Mobile | 2,347 | | 2,116 | | 2,150 | |
Cable and other fixed services | 1,947 | | 1,803 | | 1,928 | |
Other | 60 | | 52 | | 51 | |
Service revenue | 4,354 | | 3,971 | | 4,130 | |
Telephone and equipment | 263 | | 201 | | 206 | |
Total revenue | 4,617 | | 4,171 | | 4,336 | |
Revenue from continuing operations by country or operation (i)
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Colombia | 1,414 | | 1,346 | | 1,532 | |
Paraguay | 555 | | 544 | | 610 | |
Bolivia | 623 | | 584 | | 639 | |
El Salvador | 445 | | 389 | | 386 | |
Tanzania | 357 | | 366 | | 382 | |
Nicaragua | 238 | | 220 | | 157 | |
Costa Rica | 141 | | 140 | | 153 | |
Panama | 632 | | 585 | | 475 | |
Guatemala (ii) | 223 | | — | | — | |
Other operations | 2 | | 3 | | 4 | |
Eliminations | (13) | | (5) | | (3) | |
Total | 4,617 | | 4,171 | | 4,336 | |
(i) The revenue figures above are shown after intercompany eliminations.
(ii) Tigo Guatemala is fully consolidated since the acquisition of the remaining 45% shareholding on November 12, 2021. See note A.1.2. for further details.
B.1.1. Accounting for revenue
Revenue recognition
Revenue is recognized at an amount that reflects the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer.
The Group applies the following practical expedients foreseen in IFRS 15:
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
•No adjustment to the transaction price for the means of a financing component whenever the period between the transfer of a promised good or service to a customer and the associated payment is one year or less; when the period is more than one year the financing component is adjusted, if material.
•Disclosure in the Group Financial Statements the transaction price allocated to unsatisfied performance obligations only for contracts that have an original expected duration of more than one year (e.g. unsatisfied performance obligations for contracts that have an original duration of one year or less are not disclosed).
•Application of the practical expedient not to disclose the price allocated to unsatisfied performance obligations, if the consideration from a customer corresponds to the value of the entity’s performance obligation to the customer (i.e, if billing corresponds to accounting revenue).
•Application of the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less.
Post-paid connection fees are derived from the payment of a non-refundable / one-time fee charged to customer to connect to the network (e.g. connection / installation fee). Usually, it does not represent a distinct good or service, and therefore does not give rise to a separate performance obligation and revenue is recognized over the minimum contract duration. However, if 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 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.
Post-paid mobile / cable subscription fees are recognized over the relevant enforceable/subscribed service period (recurring monthly access fees that do not vary based on usage). The service provision is usually considered as a series of distinct services that have the same pattern of transfer to the customer. Remaining unrecognized subscription fees, which are not refunded to the customers, are fully recognized once the customer has been disconnected.
Prepaid scratch / SIM cards are services where customers purchase a specified amount of airtime or other credit in advance. Revenue is recognized as the credit is used. Unused credit is carried in the statement of financial position as a contract liability. Upon expiration of the validity period, the portion of the contract liability relating to the expiring credit is recognized as revenue, since there is no longer an obligation to provide those services.
Telephone and equipment sales are recognized as revenue once the customer obtains control of the good. That criteria is fulfilled when the customer has the ability to direct the use and obtain substantially all of the remaining benefits from that good.
Revenue from provision of Mobile Financial Services (MFS) is recognized once the primary service has been provided to the customer.
Customer premise equipment (CPE) are provided to customers as a prerequisite to receive the subscribed Home services and shall be returned at the end of the contract duration. Since CPEs provided over the contract term do not provide benefit to the customer on their own, they do not give rise to separate performance obligations and therefore are accounted for as part of the service provided to the customers.
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 + 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 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 (i.e., wholesale international traffic) where the Group neither controls a right to the provider’s service nor controls the underlying service itself are presented net because the Group is acting as an agent. The Group generally acts as a principal for other types of services where the Group is the primary obligor of the arrangement. In cases the Group determines that it acts as a principal, revenue is recognized in the gross amount, whereas in cases the Group acts as an agent revenue is recognized in the net amount.
Revenue from the sale of cables, fiber, wavelength or capacity contracts, when part of the ordinary activities of the operation, is recognized as recurring revenue. Revenue is recognized when the cable, fiber, wavelength or capacity has been delivered to the customer, based on the amount expected to be received from the customer.
Revenue from operating lease of tower space is recognized over the period of the underlying lease contracts. Finance leases revenue is apportioned between lease of tower space and interest income.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
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 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 input and uses the expected cost plus margin approach to estimate the standalone selling price.
B.2. Expenses
The cost of sales and operating expenses incurred by the Group can be summarized as follows:
Cost of sales
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) | |
Direct costs of services sold | (938) | | (847) | | (878) | |
Cost of telephone, equipment and other accessories | (278) | | (216) | | (230) | |
Bad debt and obsolescence costs | (86) | | (108) | | (93) | |
Cost of sales | (1,302) | | (1,171) | | (1,201) | |
Operating expenses, net
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) | |
Marketing expenses | (495) | | (396) | | (402) | |
Site and network maintenance costs | (254) | | (234) | | (245) | |
Employee related costs (B.4.) | (503) | | (477) | | (496) | |
External and other services | (177) | | (174) | | (204) | |
Rentals and leases | — | | (1) | | (1) | |
Other operating expenses | (248) | | (225) | | (257) | |
Operating expenses, net | (1,677) | | (1,505) | | (1,604) | |
The other operating income and expenses incurred by the Group can be summarized as follows:
Other operating income (expenses), net
| | | | | | | | | | | | | | |
| Notes | 2021 | 2020 | 2019 |
| | (US$ millions) | |
Income from tower deal transactions | E.3. | — | | — | | 5 | |
Impairment of intangible assets and property, plant and equipment | E.1., E.2. | (5) | | — | | (8) | |
Gain (loss) on disposals of intangible assets and property, plant and equipment | | 6 | | — | | — | |
Impairment of AirtelTigo's receivable | G.5. | | (45) | | — | |
| | | | |
Reverse earn-out in respect of Zantel's acquisition (i) | | 11 | | — | | — | |
Gain (loss) on disposal of equity investments | C.7.3. | (15) | | 25 | | (32) | |
Other income (expenses) (ii) | | 10 | | 9 | | 1 | |
Other operating income (expenses), net | | 6 | | (12) | | (34) | |
(i) In January 2022, Millicom received $11 million from Etisalat as earn-out income related to the purchase of Zantel in 2015. This settlement was considered as an adjusting event and recorded in 'other operating income' in the statement of income.
(ii) Other income (expenses) can be mainly attributed to social obligations spectrum liability derecognition in Paraguay of $4 million and reversal provision related to Ghana of $4 million.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
B.2.1. Accounting for cost of sales and operating expenses
Cost of sales
Cost of sales is recorded on an accrual basis.
Incremental costs of obtaining a contract
Incremental costs of obtaining a contract, including dealer commissions, are capitalized as Contract Costs in the statement of financial position and amortized in operating expenses over the expected benefit period, which is based on the average duration of contracts with customer (see practical expedient in note B.1.1.).
B.3. Segmental information
Management determines operating and reportable segments based on information used by the chief operating decision maker (CODM) to make strategic and operational decisions from both a business and geographic perspective. The Group’s risks and rates of return are predominantly affected by operating in different geographical regions. The Group has businesses in two main regions: Latin America ("Latam") and Africa. The Latam figures below include Guatemala and Honduras as if they were fully consolidated by the Group, over all periods presented, 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. See also note A.1.2. on Guatemala's acquisition on November 12, 2021. This acquisition has no impact on the way we present our Latin America segment as it already included Guatemala as if fully consolidated. Finally, even prior to its formal disposal in October 2021, our Africa segment did not include our joint venture in Ghana because our management did not consider it a strategic part of our Group (See also note A.2.).
Revenue, operating profit (loss), EBITDA and other segment information for the years ended December 31, 2021, 2020 and 2019, were as follows:
| | | | | | | | | | | | | | | | | | | | |
| Latin America | Africa | Unallocated | Guatemala and Honduras (vii) (viii) | Eliminations and Transfers | Total |
| (US$ millions) |
Year ended December 31, 2021 | | | | | | |
Mobile revenue | 3,372 | | 347 | | — | | (1,372) | | — | | 2,347 | |
Cable and other fixed services revenue | 2,275 | | 9 | | — | | (334) | | (2) | | 1,947 | |
Other revenue | 70 | | — | | — | | (8) | | (2) | | 60 | |
Service revenue (i) | 5,716 | | 357 | | — | | (1,715) | | (4) | | 4,354 | |
Telephone and equipment and other revenue (i) | 503 | | — | | — | | (240) | | — | | 263 | |
Revenue | 6,220 | | 357 | | — | | (1,955) | | (4) | | 4,617 | |
Operating profit (loss) | 1,001 | | 29 | | (7) | | (574) | | 210 | | 659 | |
Add back: | | | | | | |
Depreciation and amortization | 1,504 | | 83 | | 12 | | (403) | | — | | 1,196 | |
Share of profit in joint ventures | — | | — | | — | | — | | (210) | | (210) | |
Other operating income (expenses), net | (8) | | (1) | | 2 | | — | | — | | (6) | |
EBITDA (ii) | 2,498 | | 111 | | 6 | | (977) | | — | | 1,639 | |
EBITDA from discontinued operations | — | | — | | — | | — | | — | | — | |
EBITDA incl discontinued operations | 2,498 | | 111 | | 6 | | (977) | | — | | 1,639 | |
Capital expenditure (iii) | (1,015) | | (42) | | (7) | | 238 | | — | | (827) | |
Changes in working capital and others (iv) | (200) | | 33 | | 116 | | (13) | | — | | (65) | |
Taxes paid | (241) | | (20) | | (9) | | 143 | | — | | (127) | |
Operating free cash flow (v) | 1,041 | | 81 | | 106 | | (609) | | — | | 619 | |
Total Assets (vi) | 14,400 | | 870 | | 6,401 | | (6,430) | | (103) | | 15,139 | |
Total Liabilities | 8,333 | | 937 | | 5,081 | | (1,761) | | (191) | | 12,399 | |
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
| | | | | | | | | | | | | | | | | | | | |
| Latin America | Africa | Unallocated | Guatemala and Honduras(vii) | Eliminations and Transfers | Total |
| (US$ millions) |
Year ended December 31, 2020 | | | | | | |
Mobile revenue | 3,220 | | 357 | | — | | (1,461) | | — | | 2,116 | |
Cable and other fixed services revenue | 2,097 | | 8 | | — | | (302) | | (1) | | 1,803 | |
Other revenue | 60 | | 1 | | — | | (6) | | (2) | | 52 | |
Service revenue (i) | 5,377 | | 366 | | — | | (1,769) | | (4) | | 3,971 | |
Telephone and equipment revenue (i) | 466 | | — | | — | | (266) | | — | | 201 | |
Revenue | 5,843 | | 366 | | — | | (2,035) | | (4) | | 4,171 | |
Operating profit (loss) | 803 | | 36 | | (32) | | (536) | | 175 | | 446 | |
Add back: | | | | | | |
Depreciation and amortization | 1,561 | | 89 | | 11 | | (453) | | — | | 1,208 | |
Share of profit in joint ventures | — | | — | | — | | — | | (171) | | (171) | |
Other operating income (expenses), net | (5) | | — | | 23 | | (3) | | (4) | | 12 | |
EBITDA (ii) | 2,360 | | 125 | | 2 | | (992) | | — | | 1,495 | |
EBITDA from discontinued operations | — | | (4) | | — | | — | | — | | (4) | |
EBITDA incl discontinued operations | 2,360 | | 121 | | 2 | | (992) | | — | | 1,491 | |
Capital expenditure (iii) | (926) | | (42) | | (4) | | 258 | | — | | (714) | |
Changes in working capital and others (iv) | 61 | | 11 | | (7) | | (43) | | — | | 22 | |
Taxes paid | (260) | | (10) | | (2) | | 131 | | — | | (142) | |
Operating free cash flow (v) | 1,234 | | 80 | | (11) | | (645) | | — | | 657 | |
Total Assets (vi) | 13,418 | | 926 | | 4,052 | | (5,116) | | (859) | | 12,422 | |
Total Liabilities | 8,878 | | 959 | | 3,342 | | (2,044) | | (987) | | 10,148 | |
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
| | | | | | | | | | | | | | | | | | | | |
| Latin America | Africa | Unallocated | Guatemala and Honduras(vii) | Eliminations and Transfers | Total |
| (US$ millions) |
Year ended December 31, 2019 | | | | | | |
Mobile revenue | 3,258 | | 372 | | — | | (1,480) | | — | | 2,150 | |
Cable and other fixed services revenue | 2,197 | | 9 | | — | | (277) | | — | | 1,928 | |
Other revenue | 60 | | 1 | | — | | (9) | | — | | 51 | |
Service revenue (i) | 5,514 | | 382 | | — | | (1,766) | | — | | 4,130 | |
Telephone and equipment revenue (i) | 449 | | — | | — | | (243) | | — | | 206 | |
Total Revenue | 5,964 | | 382 | | — | | (2,010) | | — | | 4,336 | |
Operating profit (loss) | 980 | | 19 | | (64) | | (540) | | 179 | | 575 | |
Add back: | | | | | | |
Depreciation and amortization | 1,435 | | 99 | | 9 | | (444) | | — | | 1,100 | |
Share of profit in joint ventures | — | | — | | — | | — | | (179) | | (179) | |
Other operating income (expenses), net | 2 | | (2) | | 42 | | (8) | | — | | 34 | |
EBITDA (ii) | 2,418 | | 117 | | (13) | | (992) | | — | | 1,530 | |
EBITDA from discontinued operations | — | | (3) | | — | | — | | — | | (3) | |
EBITDA incl discontinued operations | 2,418 | | 114 | | (13) | | (992) | | — | | 1,527 | |
Capital expenditure (iii) | (1,040) | | (58) | | (9) | | 261 | | — | | (846) | |
Changes in working capital and others (iv) | (86) | | 14 | | (52) | | (18) | | — | | (143) | |
Taxes paid | (225) | | (10) | | (8) | | 129 | | — | | (114) | |
Operating free cash flow (v) | 1,067 | | 59 | | (82) | | (619) | | — | | 425 | |
Total Assets (vi) | 13,859 | | 936 | | 3,715 | | (5,465) | | (150) | | 12,895 | |
Total Liabilities | 8,413 | | 909 | | 3,977 | | (2,119) | | (965) | | 10,215 | |
(i) Service revenue is Group revenue related to the provision of ongoing services such as monthly subscription fees, airtime and data usage fees, interconnection fees, roaming fees, mobile finance service commissions, installation fees and fees from other telecommunications services such as data services, SMS and other value-added services excluding telephone and equipment sales. Revenues from other sources comprises rental, sub-lease rental income and other non-recurring revenues. The Group derives revenue from the transfer of goods and services over time and at a point in time. Refer to the table below.
(ii) EBITDA is operating profit excluding impairment losses, depreciation and amortization and gains/losses on the disposal of fixed assets. EBITDA is used by the management to monitor the segmental performance and for capital management.
(iii) Cash spent for capex excluding spectrum and licenses of $37 million (2020: $101 million; 2019: $59 million) and cash received on tower deals of nil (2020: nil ; 2019: $22 million).
(iv) Changes in working capital and others include changes in working capital as stated in the cash flow statement, as well as share-based payments expense and non-cash bonuses.
(v) Operating Free Cash Flow is EBITDA less cash capex (excluding spectrum and license costs) less change in working capital, other non-cash items (share-based payment expense and non-cash bonuses) and taxes paid.
(vi) Segment assets include goodwill and other intangible assets.
(vii) Including eliminations for Guatemala and Honduras as reported in the Latam segment.
(viii) Our operations in Guatemala are fully consolidated since the acquisition of the remaining 45% shareholding on November 12, 2021. See note A.1.2. for further details. As a result, from the acquisition date of November 12, 2021, Guatemala's statement of income and cash flow figures are no longer deducted to reconcile to the total consolidated balances.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Revenue from contracts with customers from continuing operations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Twelve months ended December 31, 2021 | Twelve months ended December 31, 2020 | Twelve months ended December 31, 2019 |
$ millions | Timing of revenue recognition | Latin America | Africa | Total Group | Latin America | Africa | Total Group | Latin America | Africa | Total Group |
Mobile | Over time | 1,963 | | 233 | | 2,196 | | 1,728 | | 239 | | 1,967 | | 1,747 | | 261 | | 2,007 | |
Mobile Financial Services | Point in time | 37 | | 114 | | 150 | | 31 | | 118 | | 149 | | 31 | | 112 | | 143 | |
Cable and other fixed services | Over time | 1,938 | | 9 | | 1,947 | | 1,794 | | 8 | | 1,803 | | 1,919 | | 9 | | 1,928 | |
Other | Over time | 60 | | — | | 60 | | 51 | | 1 | | 52 | | 51 | | 1 | | 52 | |
Service Revenue | | 3,998 | | 357 | | 4,354 | | 3,604 | | 366 | | 3,971 | | 3,748 | | 382 | | 4,130 | |
Telephone and equipment | Point in time | 263 | | — | | 263 | | 201 | | — | | 201 | | 206 | | — | | 206 | |
Revenue from contracts with customers | | 4,261 | | 357 | | 4,617 | | 3,805 | | 366 | | 4,171 | | 3,954 | | 382 | | 4,336 | |
B.4. People
Number of permanent employees
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
Continuing operations (i) | 19,749 | | 16,955 | | 17,687 | |
Joint ventures (ii) | 938 | | 4,464 | | 4,688 | |
Discontinued operations | — | | — | | — | |
Total | 20,687 | | 21,419 | | 22,375 | |
(i) Emtelco headcount are excluded from this disclosure and any internal reporting because their costs are classified as direct costs and not employee related costs. Includes Guatemala for 2021.
(ii) Includes only Honduras for 2021 and also Guatemala and Ghana for 2020 and 2019.
| | | | | | | | | | | | | | |
| Notes | 2021 | 2020 | 2019 |
| | (US$ millions) | |
Wages and salaries | | (383) | | (356) | | (358) | |
Social security | | (71) | | (66) | | (68) | |
Share based compensation | B.4.1. | (17) | | (24) | | (27) | |
Pension and other long-term benefit costs | B.4.2. | (6) | | (4) | | (4) | |
Other employees related costs | | (27) | | (27) | | (39) | |
Total | | (503) | | (477) | | (496) | |
B.4.1. Share-based compensation
1.Equity-settled
Millicom shares granted to management and key employees includes share-based compensation in the form of long-term share incentive plans. Since 2016, Millicom has two types of annual plans, a performance share plan (PSP) and a deferred share plan (DSP). The different plans are further detailed below.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Cost of share-based compensation
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) | |
2017 incentive plans | — | | — | | (7) | |
2018 incentive plans | — | | (2) | | (8) | |
2019 incentive plans | 3 | | (8) | | (14) | |
2020 incentive plans | (3) | | (13) | | — | |
2021 incentive plans | (17) | | — | | — | |
Total share based compensation | (17) | | (24) | | (27) | |
Deferred share plan (unchanged since 2014, except for vesting schedule)
As from the 2019 plan, shares vest at a rate of 30% on January 1 of each of year one and two, and the remaining 40% on 1 January of year three. Vesting is conditional upon the participant remaining employed with Millicom at each vesting date. The cost of this long-term incentive plan, which is not conditional on performance conditions, is calculated as follows:
Fair value (share price) of Millicom’s shares at grant date x number of shares expected to vest.
Performance share plan (for plans issued from 2018)
Shares granted under this performance share plan vest at the end of the three-year period, subject to performance conditions, 25% based on Relative Total Shareholder Return (“Relative TSR”), 25% based on the achievement of the Service Revenue target measured on a 3-year CAGRs from year one to year three of the plan (“Service Revenue”) and 50% based on the achievement of the Operating Free Cash Flow (“Operating Free Cash Flow”) target measured on a 3-year CAGRs from year one to year three of the plan. From 2020 onwards, the Operating Free Cash Flow target has been redefined to consider payments made in respect of leases. As a result, the target is since then the Operating Free Cash Flow after Leases ("OFCFaL").
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 at grant date.
Performance share plan (for plans issued from 2021)
Shares granted under this performance share plan generally follow the same rules as for previous performance share plans. However, and to reflect the need for retention and to align more with U.S. practice, Millicom have added time vested Restricted Stock Units (“RSU’s”) as a component of the LTI 2021 representing 35% of the award. The RSU’s will vest at the end of three years depending on satisfactory service condition. The Relative TSR, which account for 20% of the award, will be measured over the 10 trading days before / after December 31 of the last year of the corresponding three-year measurement period. The Service Revenue (15%) and Operating Cash Flow after Leases ("OCFaL") (30%) performance conditions will not be measured based on a CAGR anymore but on the actual cumulative achievement against the 3-year cumulative targets to better reflect the performance over the three-year period rather than simply the end point as is the case with a CAGR target.
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 at grant date.
Assumptions and fair value of the shares under the TSR portion(s) | | | | | | | | | | | | | | | | | |
| Risk-free rate % | Dividend yield % | Share price volatility(i) % | Award term (years) | Share fair value (in US$) |
Performance share plan 2021 (Relative TSR) | 0.29 | | 1.28 | | 46.28 | | 2.82 | | 52.99 | |
Performance share plan 2020 (Relative TSR) | 0.61 | | 1.47 | | 24.54 | | 2.93 | | 55.66 | |
Performance share plan 2019 (Relative TSR) | (0.24) | | 3.01 | | 26.58 | | 2.93 | | 49.79 | |
Performance share plan 2018 (Relative TSR) | (0.39) | | 3.21 | | 30.27 | | 2.93 | | 57.70 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
(i) Historical volatility retained was determined on the basis of a three-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.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
The cost of these plans is recognized, together with a corresponding increase in equity (share compensation reserve), over the period in which the performance and/or employment conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award. Adjustments are made to the expense recorded for forfeitures, mainly due to management and employees leaving Millicom. Non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the 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 (such as the Relative TSR). These are treated as vested, regardless of whether or not the market conditions are satisfied, provided that all other performance conditions are satisfied. Where the terms of an equity-settled award are modified, as a minimum an expense is 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.
Plan awards and shares expected to vest
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2021 plans | 2020 plans | 2019 plans | 2018 plans |
| PSP | DSP | PSP | DSP | PSP | DSP | PSP | DSP |
| | | (number of shares) |
Initial shares granted | 451,363 | | 536,890 | | 341,897 | | 370,131 | | 257,601 | | 297,856 | | 237,196 | | 262,317 | |
Additional shares granted(i) | — | | 5,824 | | — | | 5,928 | | — | | 43,115 | | — | | 3,290 | |
Revision for forfeitures | (17,469) | | (11,790) | | (264,137) | | (26,815) | | (204,649) | | (31,553) | | (78,903) | | (38,167) | |
Revision for cancellations | — | | — | | — | | — | | — | | — | | (4,728) | | — | |
Total before issuances | 433,894 | | 530,924 | | 77,760 | | 349,244 | | 52,952 | | 309,418 | | 153,565 | | 227,440 | |
| | | | | | | | |
Shares issued in 2018 | — | | — | | — | | — | | — | | — | | (97) | | (18,747) | |
Shares issued in 2019 | — | | — | | — | | — | | (150) | | (24,294) | | (3,109) | | (54,971) | |
Shares issued in 2020 | — | | — | | — | | (3,571) | | (17) | | (96,629) | | (304) | | (35,125) | |
Shares issued in 2021 | (1,121) | | (5,760) | | — | | (113,653) | | — | | (87,141) | | (103,725) | | (118,597) | |
Performance conditions not met | — | | — | | — | | — | | — | | — | | (46,330) | | — | |
Shares still expected to vest | 432,773 | | 525,164 | | 77,760 | | 232,020 | | 52,785 | | 101,354 | | — | | — | |
Estimated cost over the vesting period (US$ millions) | 16 | | 19 | | 4 | | 15 | | 3 | | 18 | | 12 | | 14 | |
(i) Additional shares granted represent grants made for new joiners and/or as per CEO contractual arrangements.
2.Cash-settled
In 2021, and in the light of the impact on future LTI awards as a consequence of the impact of COVID-19 on our business, the Board awarded a one-time Retention Plan to a selected group of executives, including the CEO and CFO. The plan is based on Market Stock Units (“MSU”) and is a performance-based scheme where the outcome is dependent on the share price at the time of vesting. The number of MSUs granted to each participant is determined on the basis of a share price at inception of $43.09 for Tranche 2022 and $47.00 for Tranche 2023 (targets consider that Millicom share price at grant date - $39.17 - will appreciate 10% for Tranche 2022 and 20% for tranche 2 from the grant price). At the vesting date, the value of the MSU will be determined by the 30-trading day average share price ending on June 30, 2022 for Tranche 2022, and the 30-trading day average share price ending on June 30, 2023 for Tranche 2023. For each Tranche, the payment will be made in cash 12 months after those dates, provided the participant is still employed (subject to limited allowances for good leavers). For every participant, payment is capped at 150% of their Target MSU Award Value set up for each Tranche. Participants of the Retention Plan were required to forfeit their awards under the LTI plans 2019 and 2020 in respect of the Financial targets (Service Revenue and Operating Cash flow growths), provided that the TSR component will continue to be active for these schemes.
The MSU is a cash-settled share-based payment plan and Millicom will measure the services acquired over the relevant service period and the liability incurred at the fair value of the liability. Until the liability is settled, Millicom is required to remeasure the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in value recognised the statement of income.
As of December 31, 2021, the fair value of the liability was determined by using Millicom's share price (using a Black-Scholes model would not result in material differences) and amounts to $3 million (the expense for the year is for the same amount).
B.4.2. Pension and other long-term employee benefit plans
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Pension plans
The pension plans apply to employees who meet certain criteria (including years of service, age and participation in collective agreements).
Pension and other similar employee related obligations can result from either defined contribution plans or defined benefit plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. No further payment obligations exist once the contributions have been paid. The contributions are recognized as employee benefit expenses when they are due. Prepaid contributions are recognized as assets to the extent that a cash refund or a reduction in future payments is available.
Defined benefit pension plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the statement of financial position in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by independent actuaries. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows, using an appropriate discount rate based on maturities of the related pension liability.
Re-measurement of net defined benefit liabilities are recognized in other comprehensive income and not reclassified to the statement of income in subsequent years.
Past service costs are recognized in the statement of income on the earlier of the date of the plan amendment or curtailment, and the date that the Group recognizes related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit asset/liability.
Long-service plans
Long-service plans apply for Colombian subsidiary UNE employees with more than five years of service whereby additional bonuses are paid to employees that reach each incremental length of service milestone (from five to 40 years).
Termination plans
In addition, UNE has a number of employee defined benefit plans. The level of benefits provided under the plans depends on collective employment agreements and Colombian labor regulations. There are no defined assets related to the plans, and UNE make payments to settle obligations under the plans out of available cash balances.
At December 31, 2021, the defined benefit obligation liability amounted to $42 million (2020: $59 million) and payments expected in the plans in future years totals $81 million (2020: $95 million). The average duration of the defined benefit obligation at December 31, 2021 is 5 years (2020: 6 years). The termination plans apply to employees that joined UNE prior to December 30, 1996. The level of payments depends on the number of years in which the employee has worked before retirement or termination of their contract with UNE.
Except for the UNE pension plan described above, there are no other significant defined benefits plans in the Group.
B.4.3. Directors and executive management
The remuneration of the members of the Board of Directors comprises an annual fee and shares. Director remuneration is proposed by the Nomination Committee and approved by the shareholders at their Annual General Meeting (AGM).
Remuneration charge for the Board (gross of withholding tax)
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ ’000) |
Chairperson | 300 | | 300 | | 366 | |
Other members of the Board | 1,338 | | 1,188 | | 1,557 | |
Total (i) | 1,638 | | 1,488 | | 1,923 | |
Shares beneficially owned by the Directors
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
| | | | | | | | |
| 2021 | 2020 |
| (number of shares) |
Chairperson | 18,634 | | 13,427 | |
Other members of the Board | 61,022 | | 52,593 | |
Total (i) | 79,656 | | 66,020 | |
(i)Cash compensation is denominated in USD. Share based compensation based on the market value of Millicom shares on the corresponding AGM date (2021: in total 24,737 shares; 2020: in total 32,358 shares; 2019: in total 19,483 shares-includes 2,876 additional shares that were awarded for the period from the 9 January 2019 date of listing on the Nasdaq Stock Market in the US and the date of the 2019 AGM). Net remuneration comprised 73% in shares and 27% in cash (SEK) (2020: 71% in shares and 29% in cash; 2019: 73% in shares and 27% in cash).
The remuneration of executive management of Millicom comprises an annual base salary, an annual bonus, share based compensation, social security contributions, pension contributions and other benefits. Bonus and share based compensation plans (see note B.4.1.) are based on actual and future performance. Share based compensation is granted once a year by the Compensation Committee of the Board.
If the employment of Millicom’s senior executives is terminated, severance of up to 12 months’ salary is potentially payable.
The annual base salary and other benefits of the Chief Executive Officer (CEO) and the Executive Vice Presidents (Executive team) are proposed by the Compensation Committee and approved by the Board.
Remuneration charge for the Executive Team
| | | | | | | | | | | |
| CEO | CFO | Executive Team (5 members) |
| (US$ ’000) |
2021 | | | |
Base salary | 1,185 | | 708 | | 2,783 | |
Bonus | 2,164 | | 969 | | 2,718 | |
Pension | 284 | | 106 | | 652 | |
Other benefits | 88 | | 46 | | 791 | |
MSU (v) | 991 | | 198 | | 545 | |
| | | |
Total before share based compensation | 4,712 | | 2,027 | | 7,489 | |
Share based compensation(i)(ii) in respect of 2021 LTIP (iv) | 7,914 | | 1,652 | | 5,383 | |
Total | 12,626 | | 3,679 | | 12,872 | |
| | | | | | | | | | | |
| CEO | CFO | Executive Team (9 members) (iii) |
| (US$ ’000) |
2020 | | | |
Base salary | 1,173 | | 670 | | 2,612 | |
Bonus | 1,301 | | 509 | | 1,837 | |
Pension | 285 | | 100 | | 663 | |
Other benefits | 82 | | 38 | | 303 | |
| | | |
Total before share based compensation | 2,841 | | 1,317 | | 5,414 | |
Share based compensation(i)(ii) in respect of 2020 LTIP (iv) | 7,114 | | 1,834 | | 3,796 | |
Total | 9,955 | | 3,151 | | 9,210 | |
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
| | | | | | | | | | | |
| CEO | CFO | Executive team (9 members) |
| (US$ ’000) |
2019 | | | |
Base salary | 1,167 | | 654 | | 3,498 | |
Bonus | 1,428 | | 626 | | 2,098 | |
Pension | 279 | | 98 | | 798 | |
Other benefits | 50 | | 260 | | 1,521 | |
Termination benefits | — | | — | | 863 | |
Total before share based compensation | 2,924 | | 1,639 | | 8,779 | |
Share based compensation(i)(ii) in respect of 2019 LTIP (iv) | 5,625 | | 1,576 | | 5,965 | |
Total | 8,549 | | 3,215 | | 14,743 | |
(i) See note B.4.1.
(ii) Share awards of 196,904 and 211,578 were granted in 2021 under the 2019 LTIPs to the CEO, and Executive Team (2020: 153,894 and 135,269, respectively; 2019: 102,122 and 135,480, respectively).
(iii) 'Other Executives' includes compensation paid in 2020 to Rachel Samren former Chief External Affairs Officer (departure August 31, 2020) and to HL Rogers former Chief Ethics and Compliance Officer (departure January 1, 2020). Additionally other Benefits' for 'Other Executives' include medical and dental insurance for Daniel Loria, former CHRO.
(iv) Calculated based on the closing Millicom share price on the Nasdaq in the US at the grant date.
(v) Represents the amount earned in 2021.
Share ownership and unvested share awards granted from Company equity plans to the Executive team
| | | | | | | | | | | |
| CEO | Executive team | Total |
| (number of shares) |
2021 | | | |
Share ownership (vested from equity plans and otherwise acquired) | 232,562 | | 221,407 | | 453,969 | |
Share awards not vested | 278,666 | | 295,568 | | 574,234 | |
2020 | | | |
Share ownership (vested from equity plans and otherwise acquired) | 194,432 | | 169,725 | | 364,157 | |
Share awards not vested | 325,250 | | 297,317 | | 622,567 | |
B.5. Other non-operating (expenses) income, net
Non-operating items mainly comprise changes in fair value of derivatives and the impact of foreign exchange fluctuations on the results of the Group.
| | | | | | | | | | | | | | |
| | December 31 |
| Note | 2021 | 2020 | 2019 |
| | (US$ millions) | |
Change in fair value of derivatives | C.7.2. | 3 | | (11) | | 0 | |
Change in fair value in investment in Jumia (i) | | — | | (18) | | (38) | |
Change in fair value in investment in HT (ii) | C.7.3. | 18 | | (16) | | 312 | |
Change in value of call option asset and put option liability | C.7.4. | (31) | | 5 | | (25) | |
Exchange gains (losses), net | | (43) | | (69) | | (32) | |
Other non-operating income (expenses), net | | 3 | | 3 | | 10 | |
Total | | (50) | | (106) | | 227 | |
(i) In June 2020, Millicom disposed of its entire stake in Jumia for a total net consideration of $29 million, triggering a net gain on disposal of $15 million recorded in the statement of income under ‘other operating income (expenses), net’. The changes in fair value prior to the disposal were shown under "Other non-operating (expenses) income, net" .
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
(ii) In June 2021, Millicom disposed of its entire stake in HT for a total net consideration of $163 million, triggering a net loss on disposal of $15 million recorded in the statement of income under ‘other operating income (expenses), net’. The changes in fair value prior to the disposal were shown under "Other non-operating (expenses) income, net"
Foreign exchange gains and losses
Transactions denominated in a currency other than the functional currency are translated into the functional currency using exchange rates prevailing at the transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions, and on translation of monetary assets and liabilities denominated in currencies other than the functional currency at year-end exchange rates, are recognized in the consolidated statement of income, except when deferred in equity as qualifying cash flow hedges.
B.6. Taxation
B.6.1. Income tax expense
Tax mainly comprises income taxes of subsidiaries and withholding taxes on intra-group dividends and royalties for use of Millicom trademarks and brands. Millicom operations are in jurisdictions with income tax rates of 10% to 35% levied on either revenue or profit before income tax (2020: 10% to 35%; 2019: 10% to 35%). Income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated statement of income.
Income tax charge
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Income tax (charge) credit | | | |
Withholding tax | (56) | | (83) | | (56) | |
Other income tax relating to the current year | (112) | | (65) | | (88) | |
| | | |
Adjustments in respect of prior years | (18) | | (29) | | (7) | |
Total | (186) | | (177) | | (151) | |
Deferred tax (charge) credit | | | |
Origination and reversal of temporary differences | 73 | | 99 | | 58 | |
Effect of change in tax rates | 29 | | (5) | | (8) | |
Tax income (expense) before valuation allowances | 102 | | 94 | | 50 | |
Effect of valuation allowances | (87) | | (19) | | (9) | |
Total | 15 | | 75 | | 41 | |
Adjustments in respect of prior years | (18) | | — | | (10) | |
| (3) | | 75 | | 31 | |
Tax (charge) credit on continuing operations | (189) | | (102) | | (120) | |
Tax (charge) credit on discontinuing operations | — | | (2) | | (2) | |
Total tax (charge) credit | (189) | | (104) | | (122) | |
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Reconciliation between the tax expense and tax at the weighted average statutory tax rate is as follows:
Income tax calculation
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2021 | 2020 | 2019 |
| | | Total | Continuing operations | Discontinued operations | Total | Continuing operations | Discontinued operations | Total |
| | | (US$ millions) |
Profit before tax | | | 732 | | (271) | | (11) | | (282) | | 218 | | 59 | | 277 | |
Tax at the weighted average statutory rate | | | (154) | | 82 | | 3 | | 85 | | (37) | | (11) | | (48) | |
Effect of: | | | | | | | | | |
Items taxed at a different rate | | | 9 | | 1 | | — | | 1 | | (1) | | — | | (1) | |
Change in tax rates on deferred tax balances | | | 29 | | (5) | | — | | (5) | | (8) | | — | | (8) | |
Expenditure not deductible and income not taxable | | | 79 | | (106) | | (3) | | (109) | | (37) | | 9 | | (28) | |
Unrelieved withholding tax | | | (55) | | (83) | | — | | (83) | | (56) | | — | | (56) | |
Accounting for associates and joint ventures | | | 41 | | 42 | | — | | 42 | | 36 | | — | | 36 | |
Movement in deferred tax on unremitted earnings | | | (15) | | 15 | | — | | 15 | | 9 | | — | | 9 | |
Unrecognized deferred tax assets | | | (144) | | (27) | | — | | (27) | | (20) | | — | | (20) | |
Recognition of previously unrecognized deferred tax assets | | | 57 | | 8 | | — | | 8 | | 11 | | — | | 11 | |
Adjustments in respect of prior years | | | (36) | | (29) | | (2) | | (31) | | (17) | | — | | (17) | |
Total tax (charge) credit | | | (189) | | (102) | | (2) | | (104) | | (120) | | (2) | | (122) | |
Weighted average statutory tax rate | | | 21.0 | % | 30.3 | % | | 30.1 | % | 17.0 | % | | 17.3 | % |
Effective tax rate | | | 25.8 | % | -37.5 | % | | -36.8 | % | 55.0 | % | | 44.0 | % |
B.6.2. Current tax assets and liabilities
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 by the statement of financial position date.
B.6.3. Deferred tax
Deferred tax is calculated using the liability method on 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 tax assets are recognized for all temporary differences including unused tax credits and tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences 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. It is probable that taxable profit will be available when there are sufficient taxable temporary differences relating to the same tax authority and the same taxable entity which are expected to reverse in the same period as the expected reversal of the deductible temporary difference.
The carrying amount of deferred 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 them. Unrecognized deferred 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 asset to be recovered.
Deferred 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.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
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.
Deferred tax
| | | | | | | | | | | | | | | | | | | | |
| Fixed assets | Unused tax losses | Unremitted earnings | Other | Offset | Total |
| (US$ millions) |
Balance at December 31, 2019 | (223) | | 34 | | (25) | | 129 | | — | | (85) | |
Deferred tax assets | 84 | | 34 | | — | | 134 | | (52) | | 200 | |
Deferred tax liabilities | (307) | | — | | (25) | | (5) | | 52 | | (285) | |
Balance at December 31, 2019 | (223) | | 34 | | (25) | | 129 | | — | | (85) | |
(Charge)/credit to income statement | 81 | | 150 | | 15 | | (171) | | — | | 75 | |
Change in scope | — | | — | | — | | — | | — | | — | |
| | | | | | |
Exchange differences | — | | 3 | | (1) | | (4) | | — | | (2) | |
Balance at December 31, 2020 | (142) | | 187 | | (11) | | (46) | | — | | (12) | |
Deferred tax assets | 97 | | 187 | | — | | 102 | | (189) | | 197 | |
Deferred tax liabilities | (239) | | — | | (11) | | (148) | | 189 | | (209) | |
Balance at December 31, 2020 | (142) | | 187 | | (11) | | (46) | | — | | (12) | |
Change in scope | (9) | | — | | — | | 3 | | — | | (6) | |
(Charge)/credit to income statement (i) | 23 | | (27) | | (15) | | 16 | | — | | (3) | |
Charge to Other Comprehensive Income | — | | — | | — | | (1) | | — | | (1) | |
Exchange differences | (2) | | (4) | | — | | (6) | | — | | (12) | |
Balance at Balance at 31 December 2021 | (130) | | 156 | | (26) | | (34) | | — | | (34) | |
| | | | | | |
Deferred tax assets | 97 | | 156 | | — | | 162 | | (235) | | 180 | |
Deferred tax liabilities | (227) | | — | | (26) | | (196) | | 235 | | (214) | |
Balance at December 31, 2021 | (130) | | 156 | | (26) | | (34) | | — | | (34) | |
(i) The movement in the deferred tax balance includes the net effect of the derecognition and recognition of certain deferred tax assets in Colombia (a net negative movement of $30 million).
Deferred tax assets have not been recognized in respect of the following deductible temporary differences:
| | | | | | | | | | | | | | |
| Fixed assets | Unused tax losses | Other | Total |
| (US$ millions) |
At December 31, 2021 | 117 | | 4,856 | | 103 | | 5,076 | |
At December 31, 2020 | 57 | | 4,668 | | 218 | | 4,943 | |
Unrecognized tax losses carryforward related to continuing operations expire as follows:
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Expiry: | | | |
Within one year | 1 | | 3 | | 1 | |
Within one to five years | 2 | | 3 | | 2 | |
After five years | 1,232 | | 1,089 | | 493 | |
No expiry | 3,621 | | 3,573 | | 4,209 | |
Total | 4,856 | | 4,668 | | 4,705 | |
With effect from 2017, Luxembourg tax losses incurred may be carried forward for a maximum of 17 years. Losses incurred before 2017 may be carried forward without limitation of time.
At December 31, 2021, Millicom had $725 million of unremitted earnings of Millicom operating subsidiaries for which no deferred tax liabilities were recognized (2020: $621 million; 2019: $697 million). Except for intragroup dividends to be paid out of 2021 profits
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
in 2022 for which deferred tax of $26 million (2020: $11 million; 2019 $26 million) has been provided, it is anticipated that intra-group dividends paid in future periods will be made out of profits of future periods.
B.7. Earnings per share
Basic earnings (loss) per share are calculated by dividing net profit for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during each year.
Diluted earnings (loss) per share are calculated by dividing the net profit for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during each year, plus the weighted average number of dilutive potential shares.
Net profit/(loss) used in the earnings (loss) per share computation
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Basic and Diluted | | | |
Net profit (loss) attributable to equity holders from continuing operations | 591 | | (332) | | 93 | |
Net profit (loss) attributable to equity holders from discontinued operations | — | | (12) | | 57 | |
Net profit/(loss) attributable to all equity holders to determine the basic profit (loss) per share | 590 | | (344) | | 149 | |
Weighted average number of shares in the earnings (loss) per share computation
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (thousands of shares) |
Weighted average number of ordinary shares (excluding treasury shares) for basic earnings (loss) per share | 101,129 | | 101,172 | | 101,144 | |
Potential incremental shares | — | | — | | — | |
Weighted average number of ordinary shares (excluding treasury shares) adjusted for the effect of dilution | 101,129 | | 101,172 | | 101,144 | |
C. Capital structure and financing
C.1. Share capital, share premium and reserves
Common shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.
Where any Group company purchases the Company’s share capital, the consideration paid, including any directly attributable incremental costs, is shown under Treasury shares and deducted from equity attributable to the Company’s equity holders until the shares are canceled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental costs and the related income tax effects is included in equity attributable to the Company’s equity holders.
Share capital, share premium
| | | | | | | | |
| 2021 (i) | 2020 |
Authorized and registered share capital (number of shares) | 133,333,200 | | 133,333,200 | |
Subscribed and fully paid up share capital (number of shares) | 101,739,217 | | 101,739,217 | |
Par value per share | 1.50 | | 1.50 | |
Share capital (US$ millions) | 153 | | 153 | |
Share premium (US$ millions) | 476 | | 478 | |
Total (US$ millions) | 628 | | 630 | |
(i) On December 13, 2021, Millicom's Board of Directors proposed to increase the authorized share capital of the Company to $300 million divided into 200,000,000 shares with a par value of $1.50 each, through an extraordinary general meeting ("EGM"). The proposal has been ratified at the EGM which took place on February 28, 2022.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Other equity reserves
| | | | | | | | | | | | | | | | | | | | |
| Legal reserve | Equity settled transaction reserve | Hedge reserve | Currency translation reserve | Pension obligation reserve | Total |
| (US$ millions) |
As of January 1, 2019 | 16 | | 47 | | (1) | | (599) | | (3) | | (538) | |
Share based compensation | — | | 29 | | — | | — | | — | | 29 | |
Issuance of shares – 2015, 2016, 2017 LTIPs | — | | (25) | | — | | — | | — | | (25) | |
Remeasurements of post-employment benefit obligations | — | | — | | — | | — | | 0 | | 0 | |
Cash flow hedge reserve movement | — | | — | | (16) | | — | | — | | (16) | |
Currency translation movement | — | | — | | — | | (2) | | — | | (2) | |
Effect of restructuring in Tanzania | — | | — | | — | | 9 | | — | | 9 | |
As of December 31, 2019 | 16 | | 52 | | (18) | | (593) | | (2) | | (544) | |
Share based compensation | — | | 24 | | — | | — | | — | | 24 | |
Issuance of shares –2016, 2017, 2018 LTIPs | — | | (26) | | — | | — | | — | | (26) | |
Remeasurements of post-employment benefit obligations | — | | — | | — | | — | | (2) | | (2) | |
Cash flow hedge reserve movement | — | | — | | (1) | | — | | — | | (1) | |
Currency translation reserved recycled to statement of income | — | | — | | — | | — | | — | | — | |
Currency translation movement | — | | — | | — | | (12) | | — | | (12) | |
As of December 31, 2020 | 16 | | 50 | | (19) | | (605) | | (4) | | (562) | |
Share based compensation | — | | 18 | | — | | — | | — | | 18 | |
Issuance of shares –2017, 2018, 2019 LTIPs | — | | (25) | | — | | — | | — | | (25) | |
Remeasurements of post-employment benefit obligations | — | | — | | — | | — | | 1 | | 1 | |
Cash flow hedge reserve movement | — | | — | | 14 | | — | | — | | 14 | |
| | | | | | |
Currency translation movement | — | | — | | 1 | | (41) | | — | | (41) | |
As of December 31, 2021 | 16 | | 43 | | (3) | | (646) | | (3) | | (594) | |
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
C.1.1. Legal reserve
If Millicom International Cellular S.A. reports an annual net profit on a non-consolidated basis, Luxembourg law requires appropriation of an amount equal to at least 5% of the annual net profit to a legal reserve until such reserve equals 10% of the issued share capital. This reserve is not available for dividend distribution. No appropriation was required in 2020 or 2021 as the 10% minimum level was reached in 2011 and maintained each subsequent year.
C.1.2. Equity settled transaction reserve
The cost of LTIPs is recognized as an increase in the equity-settled transaction reserve over the period in which the performance and/or service conditions are rendered. When shares under the LTIPs vest and are issued the corresponding reserve is transferred to share premium.
C.1.3. Hedge reserve
The effective portions of changes in value of cash flow hedges are recorded in the hedge reserve (see note C.1. ).
C.1.4. Currency translation reserve
In the financial statements, the relevant captions in the statements of financial position of subsidiaries without US dollar functional currencies are translated to US dollars using the closing exchange rate. Statements of income or statement of income captions (including those of joint ventures and associates) are translated to US dollars at monthly average exchange rates during the year. The currency translation reserve includes foreign exchange gains and losses arising from these translations. When the Group disposes of or loses control or significant influence over a foreign operation, exchange differences that were recorded in equity are recognized in the consolidated statement of income as part of gain or loss on sale or loss of control and/or significant influence.
C.2. Dividend distributions
On May 4, 2021 and on June 25, 2020, as a result of the uncertainties triggered by the COVID-19 pandemic and Group's shareholders consciousness to protect the Group's liquidity, the shareholders decided not to proceed to the payment of a dividend related to 2020 and 2019 profits, respectively.
On May 2, 2019, a dividend distribution of $2.64 per share from Millicom’s retained profits at December 31, 2018, was approved by the shareholders at the AGM and paid in equal portions in May and November 2019.
The ability of the Company to make dividend payments is subject to, among other things, the terms of indebtedness, legal restrictions and the ability to repatriate funds from Millicom’s various operations. At December 31, 2021, $486 million (December 31, 2020: $310 million; December 31, 2019: $306 million) of Millicom’s retained profits represent statutory reserves that are unavailable to be distributed to owners of the Company.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
C.3. Debt and financing
Debt and financing by type (i)
| | | | | | | | | | | |
| Note | 2021 | 2020 |
| | (US$ millions) |
Debt and financing due after more than one year | | | |
Bonds | C.3.1. | 4,030 | | 4,253 | |
Banks | C.3.2. | 1,851 | | 1,337 | |
Other financing (ii) | | 36 | | 41 | |
Total non-current financing | | 5,916 | | 5,631 | |
Less: portion payable within one year | | (12) | | (54) | |
Total non-current financing due after more than one year | | 5,904 | | 5,578 | |
Debt and financing due within one year | | | |
Bonds | C.3.1. | 61 | | 44 | |
Banks | C.3.2. | 1,768 | | 15 | |
| | | |
Total current debt and financing | | 1,828 | | 59 | |
Add: portion of non-current debt payable within one year | | 12 | | 54 | |
Total | | 1,840 | | 113 | |
Total debt and financing | | 7,744 | | 5,691 | |
(i) See note D.1.1 for further details on maturity profile of the Group debt and financing.
(ii) In July 2018, the Company issued a COP144,054.5 million /$50 million bilateral facility with IIC (Inter-American Development Bank) for a USD indexed to COP Note. The note bears interest at 9.450% p.a.. This COP Note is used as net investment hedge of the net assets of our operations in Colombia.
Debt and financing by location
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Millicom International Cellular S.A. (Luxembourg) | 4,020 | | 2,504 | |
Guatemala (i) | 605 | | — | |
Colombia | 802 | | 803 | |
Paraguay | 751 | | 738 | |
Bolivia | 310 | | 337 | |
Panama | 846 | | 869 | |
Tanzania | 189 | | 203 | |
Costa Rica | 121 | | 119 | |
El Salvador | 100 | | 118 | |
Total debt and financing | 7,744 | | 5,691 | |
(i) Tigo Guatemala is fully consolidated since the acquisition of the remaining 45% shareholding on November 12, 2021. See note A.1.2. for further details.
Debt and financings are initially recognized at fair value, net of directly attributable transaction costs. They are subsequently measured at amortized cost using the effective interest rate method or at fair value. Amortized cost is calculated by taking into account 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 consolidated statement of income over the period of the borrowing. Borrowings are classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at least 12 months from the statement of financial position date.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
C.3.1. Bond financing
Bond financing
| | | | | | | | | | | | | | | | | | | | |
| Note | Country | Maturity | Interest Rate % | 2021 | 2020 |
| | | (US$ millions) |
SEK Variable Rate Notes | 1 | | Luxembourg | 2024 | STIBOR (i) + 2.350% | 220 | | 241 | |
USD 4.500% Senior Notes | 2 | | Luxembourg | 2031 | 4.500 | % | 777 | | 494 | |
USD 6.625% Senior Notes | 3 | | Luxembourg | 2026 | 6.625 | % | 147 | | 495 | |
USD 6.250% Senior Notes | 4 | | Luxembourg | 2029 | 6.250 | % | 670 | | 743 | |
USD 5.125% Senior Notes | 5 | | Luxembourg | 2028 | 5.125 | % | 445 | | 493 | |
USD 5.875% Senior Notes | 6 | | Paraguay | 2027 | 5.875 | % | 556 | | 558 | |
PYG 8.750% Notes (tranche A) | 6 | | Paraguay | 2024 | 8.750 | % | 17 | | 17 | |
PYG 9.250% Notes (tranche B) | 6 | | Paraguay | 2026 | 9.250 | % | 7 | | 7 | |
PYG 10.000% Notes (tranche C) | 6 | | Paraguay | 2029 | 10.000 | % | 9 | | 9 | |
PYG 9.250% Notes (tranche D) | 6 | | Paraguay | 2026 | 9.250 | % | 1 | | 1 | |
PYG 10.000% Notes (tranche E) | 6 | | Paraguay | 2029 | 10.000 | % | 4 | | 4 | |
PYG 9.250% Notes (tranche F) | 6 | | Paraguay | 2027 | 9.250 | % | 2 | | 2 | |
PYG 10.000% Notes (tranche G) | 6 | | Paraguay | 2030 | 10.000 | % | 3 | | 3 | |
PYG 6.000% Notes (tranche H) | 6 | | Paraguay | 2026 | 6.000 | % | 14 | | — | |
PYG 6.700% Notes (tranche I) | 6 | | Paraguay | 2028 | 6.700 | % | 21 | | — | |
PYG 7.500% Notes (tranche J) | 6 | | Paraguay | 2031 | 7.500 | % | 23 | | — | |
BOB 5.800% Notes | 7 | | Bolivia | 2026 | 5.800 | % | 50 | | 50 | |
BOB 4.850% Notes | 7 | | Bolivia | 2023 | 4.850 | % | 28 | | 42 | |
BOB 3.950% Notes | 7 | | Bolivia | 2024 | 3.950 | % | 21 | | 29 | |
BOB 4.600% Notes | 7 | | Bolivia | 2024 | 4.600 | % | 40 | | 40 | |
BOB 4.300% Notes | 7 | | Bolivia | 2029 | 4.300 | % | 17 | | 19 | |
BOB 4.300% Notes | 7 | | Bolivia | 2022 | 4.300 | % | 11 | | 20 | |
BOB 4.700% Notes | 7 | | Bolivia | 2024 | 4.700 | % | 25 | | 28 | |
BOB 5.300% Notes | 7 | | Bolivia | 2026 | 5.300 | % | 9 | | 11 | |
BOB 5.000% Notes | 7 | | Bolivia | 2026 | 5.000 | % | 54 | | 61 | |
UNE Bond 2 (tranches A and B) | 8 | | Colombia | 2023 | CPI + 4.76% | 38 | | 44 | |
UNE Bond 3 (tranche A) | 8 | | Colombia | 2024 | 9.350 | % | 40 | | 47 | |
UNE Bond 3 (tranche B) | 8 | | Colombia | 2026 | CPI + 4.15% | 64 | | 74 | |
UNE Bond 3 (tranche C) | 8 | | Colombia | 2036 | CPI + 4.89% | 32 | | 37 | |
UNE Bond 6.600% | 8 | | Colombia | 2030 | 6.600 | % | 38 | | 44 | |
UNE Bond 4 (tranche A) | 8 | | Colombia | 2028 | 5.560 | % | 29 | | — | |
UNE Bond 4 (tranche B) | 8 | | Colombia | 2031 | CPI + 2.61 | 71 | | — | |
UNE Bond 4 (tranche C) | 8 | | Colombia | 2036 | CPI + 3.18 | 21 | | — | |
USD 4.500% Senior Notes | 9 | | Panama | 2030 | 4.500 | % | 587 | | 586 | |
Cable Onda Bonds 5.750% | 9 | | Panama | 2025 | 5.750 | % | — | | 99 | |
Total bond financing | | | | | 4,090 | | 4,297 | |
(i) STIBOR – Swedish Interbank Offered Rate.
Luxembourg
(1) SEK Notes
In May 2019, MIC S.A. completed its offering of a SEK 2 billion floating rate senior unsecured sustainability bond due 2024. The bond carries a floating coupon of 3-month Stibor+235bps which we swapped with various banks to hedge its interest rate exposure,
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
pursuant to which it will effectively pay fixed-rate coupons in US dollars between 4.990% and 4.880% (see D.1.2.). The bond has been listed and commenced trading on the Nasdaq Stockholm sustainable bond list on June 12, 2019. Millicom is using the net proceeds of the bond in accordance with the Sustainability Bond Framework which includes both environmental and social investments such as in energy efficiencies, and the expansion of its fixed and mobile networks. Costs of issuance of $2.4 million is amortized over the five year life of the bond (the effective interest rate is 2.600%)
(2) (2031) USD 4.500% Senior Notes
On October 19, 2020, MIC S.A. issued $500 million aggregate principal amount of 4.500% Senior Notes due 2031. The Notes bear interest at 4.500% p.a., payable semiannually in arrears on each interest payment date. Proceeds were used to early redeem MIC S.A.'s $500 million 6.000% Senior Notes due 2025. Costs of issuance of $5.5 million is amortized over the eleven-year life of the notes (the effective interest rate is 4.800%).
On September 22, 2021, Millicom announced the early participation exchange results from its offer dated September 8, 2021; $302.1 million of the 6.625% Notes due 2026 were exchanged for $307.5 million of the 4.5% Notes due 2031 (at 101.812% exchange ratio). The gain of $15 million, derived from applying the "modification accounting" under IFRS 9 to this exchange, has been recorded under "Interest and other financial income" in the statement of income during the year ended December 31, 2021. Transaction costs attributable to this exchange amount to approximately $4 million and are amortized over the remaining life of the Notes due 2031.
(3) (2026) USD 6.625% Senior Notes
In October 2018, MIC S.A. issued $500 million aggregate principal amount of 6.625% Senior Notes due 2026. The Notes bear interest at 6.625% p.a., payable semiannually in arrears on each interest payment date. Proceeds were used to finance Cable Onda’s acquisition. Costs of issuance of $6 million were amortized over the eight-year life of the notes (the effective interest rate is 6.750%).
As aforementioned, $302.1 million of the 6.625% Notes due 2026 were exchanged during 2021 for $307.5 million of newly issued 4.5% Notes due 2031.
On February 22, 2021, Millicom redeemed 10% of the principal outstanding of its Notes due 2026, 2028 and 2029 at a price of 103%. This redemption followed Millicom’s announcement dated February 11, 2021. Total consideration of approximately $180 million was funded from cash, consistent with the Company's decision to prioritize debt reduction. The redemption premium of $5 million and the accelerated amortization of the upfront costs of $3 million, have been recorded in the line "Interest and other financial expenses" in the statement of income during the year ended December 31, 2021.
(4) (2029) USD 6.250% Senior Notes
In March 2019, MIC S.A. issued $750 million of 6.250% notes due 2029. The notes bear interest at 6.250% p.a., payable semi-annually in arrears on March 25 and September 25 of each year, starting on September 25, 2019. The net proceeds were used to finance, in part, the completed Telefónica CAM Acquisitions (see note A.1.2.). Costs of issuance of $8.2 million are amortized over the ten-year life of the notes (the effective interest rate is 6.360%).
On February 22, 2021, Millicom redeemed 10% of the principal outstanding of its Notes due 2026, 2028 and 2029 at a price of 103%. See above.
(5) (2028) USD 5.125% Senior Notes
In September 2017, MIC S.A. issued a $500 million, ten-year bond due January 2028, with an interest rate of 5.125%. Costs of issuance of $7 million are amortized over the ten year life of the notes (effective interest rate is 5.240%).
On February 22, 2021, Millicom redeemed 10% of the principal outstanding of its Notes due 2026, 2028 and 2029 at a price of 103%. See above.
Paraguay
(6) (2027) USD 5.875% Senior Notes and (2024-2031) PYG Notes
In April 2019, Telefónica Celular del Paraguay S.A.E. (Telecel) issued $300 million 5.875% senior notes due 2027. The notes bear interest at 5.875% p.a., payable semi-annually in arrears on April 15 and October 15 of each year, starting on October 15, 2019. The net proceeds were used to finance the repurchase of the Telecel 6.750% 2022 notes. Costs of issuance of $4 million are amortized over the eight-year life of the notes (the effective interest rate is 6.000%). On January 28, 2020, Telecel issued at a premium $250 million of 5.875% Senior Notes due 2027 (the "New Notes"), representing an additional issuance from the Senior Notes described above. The New Notes are treated as a single class with the initial notes, and were priced at 106.375% for an implied yield to maturity of 4.817%. The corresponding $15 million premium received is amortized over the Senior Notes maturity.
In May 2020, Telefónica Celular del Paraguay, S.A.E.. completed the acquisition of another Millicom subsidiary in Paraguay - Mobile Cash Paraguay S.A , and further on June 30, 2020, the acquisition of Servicios y Productos Multimedios S.A.. Effective as of those
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
dates, these new entities now form part of the borrower's group for the purposes of the $550 million 5.875% Senior Notes due 2027 issued by Telefónica Celular del Paraguay, S.A.E.. In addition, as of July 7, 2020 Servicios y Productos Multimedios S.A. became guarantor of the 5.875% Notes due 2027.
Between June 2019 and February 2020, Telecel registered and completed the issuance of a bond program for PYG 300,000 million (approximately $43 million using December 31, 2021 exchange rate) program on the Paraguayan stock market, launched in different series from 5 years to 10 years.
On October 1, 2021, Telecel issued another PYG 400,000 million bond (approximately $58 million using December 31, 2021 exchange rate) in three series with fixed interest rates between 6% to 7.5% and a repayment period from 5 to 10 years.
Bolivia
(7) BOB Notes
In November 2015, Telefónica Celular de Bolivia S.A. issued a BOB 696 million (approximately $100 million) of notes in two series, series A for BOB 104.4 million (approximately $15 million), with a fixed annual interest rate of 4.050%, maturing in August 2020 and series B for BOB 591.6 million (approximately $85 million) with a fixed annual interest rate of 4.850%, maturing in August 2023. The bond has coupon with interest payable semi-annually in arrears in March and September during the first two years, thereafter each February and August. The effective interest rate is 4.840%. These bonds are listed on the Bolivia Stock Exchange.
In August 2016, Telefónica Celular de Bolivia S.A. issued a new bond for a total amount of BOB 522 million consisting of two tranches (approximately $50 million and $25 million, respectively). Tranche A and B bear fixed interest at 3.950% and 4.300%, and will mature in June 2024 and June 2029, respectively. These bonds are listed on the Bolivia Stock Exchange.
In October 2017, Telefónica Celular de Bolivia S.A placed approximately $80 million of local currency bonds in three tranches, which will mature in 2022, 2024 and 2026 with a 4.300% , 4.700% and 5.300% respectively. These bonds are listed on the Bolivia Stock Exchange.
In July 2019 Telefónica Celular de Bolivia S.A issued two bonds one for BOB 420 million (approximately $61 million) with a 5.000% coupon maturing on August 2026 and another one for BOB 280 million (approximately $40 million) with a 4.600% coupon maturing on August 2024. Interest payments is semiannual and both bonds are listed on the Bolivia Stock Exchange.
In December 2020, Telefónica Celular de Bolivia S.A. issued BOB 345 million (approximately $50 million) senior notes due 2026.
Colombia
(8) UNE Bonds
In May 2011, UNE issued a COP300 billion (approximately $126 million) bond consisting of two equal tranches with five and twelve-year maturities. Interest rates are variable and depend on the tranche. Tranche A had variable interest, based on CPI, in Colombian peso and paid in Colombian peso. Tranche B bears variable interest, based on CPI, in Colombian peso and paid in Colombian peso. UNE applied the proceeds to finance its investment plan. Tranche A matured in October 2016 and tranche B will mature in October 2023.
In May 2016, UNE issued a COP540 billion bond (approximately $176 million) consisting of three tranches (approximately $52 million, $83 million and $41 million respectively). Interest rates are either fixed or variable depending on the tranche. Tranche A bears fixed interest at 9.350%, while tranche B and C bear variable interest, based on CPI, (respective margins of CPI + 4.150% and CPI + 4.890%), in Colombian peso. UNE applied the proceeds to finance its investment plan and repay one bond (COP150 billion tranche). Tranches A, B and C will mature in May 2024, May 2026 and May 2036, respectively.
In March 2020, UNE issued local bonds for an amount of COP 150 billion (approximately $44 million) to repay an existing bond for the same value, with a 6.600% fixed rate for 10 years.
On February 16, 2021, UNE issued under the approved local bond program, a COP 485,680 million bond (approximately $138 million using the transaction date exchange rate) with 3 maturities; Series 7 years at 5.56% fixed rate, Series 10 years at CPI plus 2.61% and Series 15 years at CPI plus 3.18% margin. With the aim to improve UNE’s natural hedge against local currency, the bond proceeds were used on March 26, 2021 to partially repay 50% of the $300 million syndicated loan of Colombia Movil S.A. (originally due in December 2024).
Panama
(9) Cable Onda Bonds
In August 2015, Cable Onda issued local bonds in Panama for a total amount of $185 million. These bonds were listed on the Panama Stock Exchange and borne a fixed annual interest of 5.750% and were initially due in August 2025. In December 2020, Cable Onda early repaid $85 million on these bonds, at par. The remaining $100 million were early repaid in 2021.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
In November 2019, Cable Onda issued $600 million aggregate principal amount of 4.500% senior notes due 2030 payable in U.S. dollars, registered with the Superintendencia del Mercado de Valores de Panamá and listed on the Luxembourg Stock Exchange and on the Panamá Stock Exchange. The Notes bear interest from November 1, 2019 at a rate of 4.500% per annum, payable on January 30, 2020 for the first payment and thereafter semiannually in arrears on each interest payment date. The proceeds were used to fund the Panama Acquisition and to refinance certain local financing. Costs of issuance of $16 million, which include an original issue discount (OID) is amortized over the ten-year life of the notes (the effective interest rate is 4.690%).
C.3.2. Bank and Development Financial Institution financing
| | | | | | | | | | | | | | | | | | | | |
| Note | Country | Maturity range | Interest rate | 2021 | 2020 |
| | | | | (US$ millions) |
Fixed rate loans | | | | | | |
PYG Long-term loans | 1 | Paraguay | 2022-2026 | Fixed | 94 | | 137 | |
USD - Long-term loans | 2 | Panama | 2022-2026 | Fixed | 259 | | 185 | |
BOB Long-term loans | 3 | Bolivia | 2022-2026 | Fixed | 54 | | 37 | |
GTQ Long-term loans | 9 | Guatemala | 2025-2027 | Fixed | 605 | | na |
Variable rate loans | | | | | | |
USD Long-term loans | 4 | Costa Rica | 2023 | Variable | — | | 119 | |
USD Long-term loans | 4 | Costa Rica | 2026 | Variable | 33 | | |
CRC Long-term loans | 4 | Costa Rica | 2026 | Variable | 88 | | — | |
USD Long-term loans | 5 | Tanzania | 2022-2025 | Variable | 150 | | 162 | |
TZS Long-term loans | 5 | Tanzania | 2022-2025 | Variable | 38 | | 41 | |
COP Long-term loans | 6 | Colombia | 2025-2031 | Variable | 322 | | 262 | |
USD Long-term loans | 6 | Colombia | 2024 | Variable | 148 | | 296 | |
USD Credit Facility / Senior Unsecured Term Loan Facility | 7 | El Salvador | 2021-2023 | Variable | — | | 118 | |
USD Credit Facility / Senior Unsecured Term Loan Facility | 7 | El Salvador | 2026 | Variable | 99 | | — | |
USD Long-term loans (i) | 8 | Luxembourg | 2025 | Variable | (4) | | (5) | |
USD Bridge Loan | 8 | Luxembourg | 2022 | Variable | 1,632 | | — | |
USD DNB Bilateral | 8 | Luxembourg | 2026 | Variable | 99 | | — | |
Total Bank and Development Financial Institution financing | | | | | 3,618 | | 1,353 | |
(i) Relates to the amortized costs of the undrawn RCF that the Company entered into in October 2020 - see point 8 below.
1.Paraguay
In October 2015, Telefónica Celular del Paraguay S.A.E. entered into a five -year loan facility with Banco Itau for PGY 257,700 million (approximately $40 million) which bears a fixed annual interest rate. The final maturity of the loan was on September 10, 2020.
In July 2018, Telefónica Celular del Paraguay S.A.E. executed a seven-year loan with Regional Bank for PYG 115,000 million (approximately $18 million) with a final maturity in 2025.
In January 2019, Telefónica Celular del Paraguay S.A.E. obtained a seven-year loan from BBVA Bank for PYG 177,000 million which is due on November, 26, 2025.
In September 2019, Telefónica Celular del Paraguay S.A.E. executed an amended and restated agreement with Banco Continental S.A.E.C.A., to consolidate three existing loans, for a PYG 370,000 million (approximately $57 million). The new loan has a maturity of 7 years.
In January 2020, Telecel refinanced its previous loan with Banco Itaú and obtained a new long-term loan from Banco Itaú Paraguay S.A., for Gs. 154.6 billion (approximately $24 million) , amortizing semi-annually and maturing on December 27, 2024. This loan was refinanced with a new loan obtained with Banco GNB on December 2021.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
In December 2020, Telecel executed a credit agreement with Banco Continental S.A.E.C.A for PYG 200,000 million (approximately $29 million using the exchange rate as of December 31, 2020) with a duration of 2.5 years. Main aim is to refinance outstanding bank loans with maturities from 2021 to 2025.
2.Panama
In August 2019, Cable Onda S.A entered into two credit agreements, one with Banco Nacional de Panama S.A , for $75 million which bears a fixed interest and has a 5 year duration and another one with the Bank of Nova Scotia (Sucursal Panama) for $75 million with a fixed interest and a five year duration to finance and refinance working capital and capital expenditures. In October 2020 and September 2021, the $75 million credit agreement with Banco Nacional de Panama S.A. has been early repaid.
In December 2020, Cable Onda S.A. executed a credit agreement with Bank of Nova Scotia with a 60 month duration for $110 million divided into 2 tranches. Tranche A ($85 million) was disbursed on December 2020 to partially recall the Local Bond ($85 million) and Tranche B ($25 million) was disbursed on March 1, 2021.
On August 31, 2021, Cable Onda executed an agreement with Bank of Scotia for $75 million at a fixed rate. The facility was used to repay Cable Onda's remaining balance under the 5.75% local bond, which was initially due on September 3, 2025.
3.Bolivia
In June 2018, Telefónica Celular de Bolivia S.A.. entered into a two tranche loan agreement with Banco BISA S.A for BOB 69.6 million (approximately $10 million) each, with a fixed interest rate. The loans have a term of 7 years.
In November 2019, they executed a new loan with Banco de Crédito de Bolivia S.A for Bs. 78 million (approximately $11 million), with semiannual payments and a fixed interest rate. The loan has a term of 4 years.
In October 2021, Tigo Bolivia signed additional credit facilities for a total amount of approximately $26 million with a repayment period between 2.5 and 5 years and fixed interest rate of 5.5% per annum.
4.Costa Rica
In April 2018, Millicom Cable Costa Rica S.A. entered into a $150 million variable rate syndicated loan with Citibank as agent. In June 2020, Millicom Cable Costa Rica S.A partially repaid an amount of $30 million of this loan.
On October 25, 2021, Millicom Cable Costa Rica S.A. repaid the remaining $120 million under this syndicated loan which was initially due on 2023. This was executed with the proceeds of a new syndicated loan entered into by the Company and Millicom Cable Costa Rica as co-borrowers for an amount of $125 million. The latter has 2 tranches, a USD $33 million tranche with a LIBOR+ margin and a local currency tranche at TBP+margin for an amount equivalent to $92 million. Cross currency swaps used to hedge the interest and principal on the previous loan were terminated on the same date (see note D.1.2.).
5.Tanzania
On June 2019, MIC Tanzania Public Limited Company entered into a syndicated loan facility agreement with the Standard Bank of South Africa acting as an agent and a consortium of banks acting as the original lenders, for $174.75 million (tranche A) and TZS103,000 million (tranche B - approximately $45 million) which bears variable interests: for Tranche A Libor plus a margin and for Trance B T-Bill rate plus a margin. The facility agreement has an all asset debenture securing the whole amount, as well as a pledge over the shares of the immediate holding company of the borrower. The Facility was amended and restated in December 2019 and maturity was extended to 66 months and 100% of the USD portion and TZS 34 billion (approximately $15 million) were disbursed. In January 2020, TZS 35 billion (approximately $15 million) were disbursed and the last tranche of TZS 34 billion (approximately $15 million) was disbursed in February 2020.
6.Colombia
On December 14, 2021, UNE EPM Telecomunicaciones S.A. entered into an ESG Linked agreement with Bancolombia for a COP 450,000 million (approximately $111 million at the December 31, 2021 exchange rate) loan with a variable rate and a maturity of 7 years.
On December 20, 2019, our operation in Colombia executed an amendment to the $300 million loan between Colombia Móvil S.A. E.S.P. as borrower and UNE EPM Telecomunicaciones S.A., as guarantor with a consortium of banks to extend the maturity for 5 years (now due on December 20, 2024) and lower the applicable margin. On March 26, 2021, $150 million were paid. See also note I. for further details on repayments subsequent to year-end.
On September and November 2020, Colombia executed 4 new cross currency swaps of $25 million each with Bancolombia, JP Morgan and BBVA to complete $100 million and hedge the exposure of a portion of the $300 million syndicated loan, fixing the exchange rate on average to USD/COP 3.682 and interest rate of 5.35%. See note I for further details.
7.El Salvador
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
On June 3, 2016, Telemóvil El Salvador, S.A. de C.V. executed a $30 million credit facility with Citibank N.A., for general corporate purposes, bearing variable interest rate per annum. The facility was guaranteed by MICSA and was repaid in July 2021.
In March 2018, Telemóvil El Salvador executed a $100 million credit facility with DNB at a variable rate facility with DNB and Nordea with a 5-year bullet repayment.The facility is guaranteed by MICSA. On December 26, 2021, Telemovil El Salvador S.A. executed a new credit agreement for $100 million, which bears a variable interest, to refinance the $100 million loan agreement with DNB and Nordea, which was entirely repaid on December 29, 2021. The agreement is guaranteed by Millicom.
In June 2020, Telemóvil El Salvador. S.A de C.V repaid in its entirety $150 million of the principal under a credit agreement dated January 2018 entered into with the Bank of Nova Scotia, as lender, and the Company as guarantor.
On December 26, 2021, Telemovil El Salvador S.A. executed a new credit agreement for $100 million with a 5 year maturity, which bears a variable interest to refinance the $100 million loan agreement dated March 23, 2018 with DNB and Nordea, which was entirely repaid on December 29, 2021. The credit agreement is guaranteed by Millicom.
8.Luxembourg
In March 2020, MICSA drew down $400 million from the $600 million revolving credit facility it entered into in January 2017 (the "RCF"). $337 million was disbursed in March 2020 and the remaining $63 million in April 2020. The draw down had an initial six-month term and Millicom had the option to extend up to January 2022 (the maturity date of the RCF). The RCF was fully repaid on June 29, 2020.
In October 2020, MICSA. entered into a 5 year, $600 million ESG-linked revolving credit facility (the "Facility") with a syndicate of 11 commercial banks. This facility will be used to refinance the above existing multi-currency revolving credit facility which was due to expire in 2022 and for general corporate purposes.
On November 10, 2021, Millicom executed a Bridge Loan Agreement of $2.15 billion with a consortium of banks. The proceeds were used for the acquisition of Tigo Guatemala's remaining 45% shareholding (see note A.1.2.). The Bridge Loan bears a variable interest rate with a step up every three months and has a maturity period of 6 months, extendable for an additional 6 months. The initial costs of issuance amounted to $28 million and are being amortized based on the six-month expected timing of refinancing of this Bridge Loan. [On December 29, 2021, Millicom partially repaid $500 million of this Bridge loan, partially with Millicom's own cash and partially with proceeds from the $100 million bilateral loan with DNB bank, executed on December 20, 2021, with a variable interest rate and a 5-year maturity.] For further reference, see note I.
9.Guatemala
In October 2020, Comcel and Navega executed several credit agreements with Banco Industrial, Banco G&T Continental, Banco de America Central and Banco Agromercantil for a total amount of GTQ 3,223 million (approximately $420 million using the exchange rate as of December 31, 2021) for 5 and 7 year term to refinance other credit agreements to finance and refinance working capital, capital expenditures and general corporate purposes.
On December 9, 2021, the Guatemalan operations entered into the following loan agreements:
•a GTQ 950 million loan with Banco Industrial (approximately $123 million as at December 31, 2021) which bears a fixed interest and matures in October 2025.
•two loans for a total of GTQ 500 million with Banco G&T Continental S.A. (approximately $65 million as at December 31, 2021) which bear a fixed interest rate and mature in December 2026.
Right of set-off and derecognition
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
A financial asset (or a part of a financial asset or part of a group of similar financial assets) is derecognized when:
• Rights to receive cash flows from the asset have expired; or
• Rights to receive cash flows from the asset or obligations to pay the received cash flows in full without material delay have been transferred to a third party under a “pass-through” arrangement; and the Group has either transferred substantially all the risks and rewards of the asset or the control of the asset.
When rights to receive cash flows from an asset have been transferred or a pass-through arrangement concluded, an evaluation is made if and to what extent the risks and rewards of ownership have been retained. When the Group has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
A financial liability is derecognized when the obligation under the liability is discharged or canceled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of income.
C.3.3. Interest and other financial expenses
The Group’s interest and other financial expenses comprised the following:
| | | | | | | | | | | |
| December 31 |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Interest expense on bonds and bank financing | (345) | | (386) | | (348) | |
Interest expense on leases | (131) | | (156) | | (157) | |
Early redemption charges | (5) | | (15) | | (10) | |
Others | (50) | | (67) | | (47) | |
Total interest and other financial expenses | (531) | | (624) | | (564) | |
C.3.4. Guarantees and pledged assets
Guarantees
Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognized, less cumulative amortization.
Liabilities to which guarantees are related are recorded in the consolidated statement of financial position under Debt and financing, and liabilities covered by supplier guarantees are recorded under Trade payables or Debt and financing, depending on the underlying terms and conditions.
Maturity of guarantees
| | | | | | | | | | | | | | |
| Bank and financing guarantees (i) | Supplier guarantees |
Terms | As at December 31, 2021 | As at December 31, 2020 | As at December 31, 2021 | As at December 31, 2020 |
| Outstanding and Maximum exposure | Outstanding and Maximum exposure |
0-1 year | 71 | | 59 | | 82 | | 82 | |
1-3 years | 6 | | 227 | | — | | — | |
3-5 years | 223 | | — | | — | | — | |
| | | | |
Total | 300 | | 287 | | 82 | | 82 | |
(i) If non-payment by the obligor, the guarantee ensures payment of outstanding amounts by the Group's guarantor.
Pledged assets
As at December 31, 2021, the Group’s share of total debt and financing secured by either pledged assets, pledged deposits issued to cover letters of credit, or guarantees issued was $300 million (December 31, 2020: $287 million). At December 31, 2021 and December 31, 2020 there were no assets pledged by the Group over these debts and financings. The remainder represented primarily guarantees issued by Millicom S.A. to guarantee financings raised by other Group operating entities.
In addition to the above, on June 4, 2019, MIC Tanzania Public Limited Company entered into a loan facility agreement which was further amended and restated on December 12, 2019, with the Standard Bank of South Africa acting as an agent and a consortium of
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
banks acting as the original lenders. The facility agreement, maturing in 2025, has an all asset debenture securing the whole amount, as well as a pledge over the shares of the immediate holding company of the borrower.
C.3.5. Covenants
Millicom’s financing facilities are subject to a number of covenants including net leverage ratio, debt service coverage ratios, or debt to earnings ratios, among others. In addition, certain of its financings contain restrictions on sale of businesses or significant assets within the businesses. At December 31, 2021, there were no breaches of financial covenants.
C.4. Lease liabilities
At December 31, 2021, lease liabilities are presented in the statement of financial position as follows:
| | | | | | | | |
| December 31, 2021 | December 31, 2020 |
| (US$ millions) |
Current | 171 | | 123 | |
Non-Current | 996 | | 897 | |
Total Lease liabilities | 1,167 | | 1,021 | |
As permitted under IFRS 16, Millicom has elected not to recognize a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are rather recognized on a straight-line basis as an expense in the statement of income. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture. In addition, certain variable lease payments are not permitted to be recognized as lease liabilities and are expensed as incurred.
The expenses relating to payments not included in the measurement of the lease liability are disclosed in operating expenses (note B.3.) and are as follows:
| | | | | | | | | | |
| 2021 | 2020 | | |
| (US$ millions) | | |
Expense relating to short-term leases (included in cost of sales and operating expenses) | 0 | | (1) | | | |
| | | | |
| | | | |
The total cash outflow for leases in 2021 was $277 million (2020: $267 million). Lease liabilities split by maturity and future cash outflows are disclosed in note D.5..
At December 31, 2021, the Group has not committed to any material leases which had not yet commenced and has no material lease contracts with variable lease payments.
The Group's leasing activities and how these are accounted for
The Group leases various lands, sites, towers (including those related to towers sold and leased back), 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.
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 Group. Each lease payment is allocated between the reduction of the liability and finance cost. The finance cost is charged to the statement of income 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.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
•fixed payments (including in-substance fixed payments), less any lease incentives receivable
•variable lease payment that are based on an index or a rate
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
•amounts expected to be payable by the lessee under residual value guarantees
•the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
•payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. As it is generally impracticable to determine that rate, the Group uses the lessee’s incremental borrowing rate, 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 Group determines the incremental borrowing rate by country and by considering the risk-free rate, the country risk, the industry risk, the credit risk and the currency risk, as well as the lease and payment terms and dates.
The 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. The initial discount rate is used if future lease payments are reflecting market or index rates or if they are in substance fixed. The discount rate is revised, if a change in floating interest rates occurs. The Group reassesses the variable payment only when there is a change in cash flows resulting from a change in the reference index or rate and not at each reporting date.
According to 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, Millicom 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 Millicom operates in. The assessment must be focused on the economic incentives for Millicom to exercise (or not) an option to early terminate/extend a contract. The 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.
Millicom considered the specialized nature of most of its assets under lease, the low likelihood the lessor can find a third party to substitute Millicom as a 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.
Under IFRS 16, the accounting for sale and leaseback transactions has changed as the underlying sale transaction needs to be first analyzed using the guidance of IFRS 15. The seller/lessee recognizes a right-of-use asset in the amount of the proportional original carrying amount that relates to the right of use retained. Accordingly, only the proportional amount of gain or loss from the sale must be recognized. The impact from sale and leaseback transactions was not material for Millicom Group as of the date of initial application.
Finally, the Group has taken the additional following decisions when adopting the standard:
•Non-lease components are capitalized (IFRS16.15)
•Intangible assets are out of IFRS 16 scope (IFRS16.4)
C.5. Cash and deposits
C.5.1. Cash and cash equivalents
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Cash and cash equivalents in USD | 526 | | 619 | |
Cash and cash equivalents in other currencies | 369 | | 256 | |
Total cash and cash equivalents | 895 | | 875 | |
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.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Cash deposits with banks with maturities of more than three months that generally earn interest at market rates are classified as time deposits.
C.5.2. Restricted cash
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Mobile Financial Services | 197 | | 192 | |
Others | 7 | | 7 | |
Restricted cash | 203 | | 199 | |
Cash held with banks related to MFS which is restricted in use due to local regulations is denoted as restricted cash. The increase is in line with the current increase in digital transactions due to the pandemic.
C.5.3. Pledged deposits
Pledged deposits represent contracted cash deposits with banks that are held as security for debts at corporate or operational entity level. Millicom is unable to access these funds until either the relevant debt is repaid or alternative security is arranged with the lender.
At December 31, 2021, there were $35 million pledged deposits (2020: nil).
C.6. Net financial obligations
Net financial obligations
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Total debt and financing | 7,744 | | 5,691 | |
Lease liabilities | 1,167 | | 1,021 | |
Gross financial obligations | 8,911 | | 6,711 | |
Less: | | |
Cash and cash equivalents | (895) | | (875) | |
Pledged deposits | (35) | | — | |
Time deposits related to bank borrowings | — | | — | |
Net financial obligations at the end of the year | 7,981 | | 5,837 | |
Add (less) derivatives related to debt (note D.1.2.) | (20) | | (12) | |
Net financial obligations including derivatives related to debt | 7,961 | | 5,825 | |
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
| | | | | | | | | | | | | | | | | | |
| Assets | Liabilities from financing activities | |
| Cash and cash equivalents | Other | Bond and bank debt and financing | | Lease liabilities | Total |
Net financial obligations as at January 1, 2020 | 1,164 | | 2 | | 5,972 | | | 1,096 | | 5,902 | |
Cash flows | (272) | | (2) | | (274) | | | (116) | | (117) | |
| | | | | | |
Recognition / Remeasurement | — | | — | | — | | | 68 | | 68 | |
| | | | | | |
Interest accretion | — | | — | | 16 | | | 1 | | 17 | |
Foreign exchange movements | (17) | | — | | (10) | | | (34) | | (26) | |
| | | | | | |
Transfers | — | | — | | (3) | | | 6 | | 3 | |
Other non-cash movements | — | | — | | (10) | | | — | | (10) | |
Net financial obligations as at December 31, 2020 | 875 | | — | | 5,691 | | | 1,021 | | 5,837 | |
Cash flows | (169) | | 31 | | 1,779 | | | (137) | | 1,780 | |
Scope changes | 199 | | 4 | | 413 | | | 204 | | 414 | |
Recognition / Remeasurement | — | | — | | — | | | 123 | | 123 | |
| | | | | | |
Interest accretion | — | | — | | 20 | | | — | | 20 | |
Foreign exchange movements | (10) | | — | | (108) | | | (44) | | (142) | |
| | | | | | |
Transfers | — | | — | | (15) | | | 1 | | (14) | |
Other non-cash movements | — | | — | | (36) | | | — | | (36) | |
Net financial obligations as at December 31, 2021 | 895 | | 35 | | 7,744 | | | 1,167 | | 7,981 | |
C.7. Financial instruments
i) Equity and debt instruments
Classification
The Group classifies its financial assets in the following measurement categories:
•those to be measured subsequently at fair value either through Other Comprehensive Income (OCI), or through profit or loss, and
•those to be measured at amortized cost.
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).
The Group reclassifies debt investments when and only when its business model for managing those assets changes.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the group classifies its debt instruments:
•Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
and presented in other gains / (losses), together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the consolidated statement of income.
• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in ‘Other non-operating (expenses) income, net’. Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses and impairment expenses are presented as ‘Other non-operating (expenses) income, net’ in the consolidated statement of income.
• FVPL: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognized in profit or loss and presented net within ‘Other non-operating (expenses) income, net’ in the period in which it arises.
Equity instruments
The Group subsequently measures all equity investments at fair value. The Group does not hold equity instruments for trading. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Purchases and sales of equity instruments are recognized as of their settlement date. Dividends from such investments continue to be recognized in profit or loss as other income when the Group’s right to receive payments is established.
Otherwise, changes in the fair value of financial assets at FVPL are recognized in ‘Other non-operating (expenses) income, net’ in the consolidated statement of income as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
Impairment
The Group assesses on a forward looking basis the expected credit losses associated with its financial assets carried at amortized cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the trade receivables.
The provision is recognized in the consolidated statement of income within Cost of sales.
ii) Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at fair value at each subsequent closing date. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The Group designates certain derivatives as either:
a) Hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedge); or
b) Hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge).
For transactions designated and qualifying for hedge accounting, at the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. This is done in reference to the Group Treasury Policy as last updated and approved by the Audit Committee in late 2020. The Group also documents its assessment, both at hedge inception and on an ongoing basis (quarterly), of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
The full fair value of a hedging instrument is classified as a non-current asset or liability when the period to maturity of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability when the remaining period to maturity of the hedged item is less than 12 months.
The change in fair value of hedging instruments that are designed and qualify as fair value hedges is recognized in the statement of income as finance costs or income. The change in fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the statement of income as finance costs or income.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. Gains or loss relating to any ineffective portion is recognized immediately in the statement of income within Other non-operating (expenses) income, net. Amounts accumulated in equity are reclassified to the statement of income in the periods when the hedged item affects profit or loss.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time is recycled to the statement of income within Other non-operating (expenses) income, net.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the statement of income within Other non-operating (expenses) income, net.
C.7.1. Fair value measurement hierarchy
Millicom uses the following fair value measurement hierarchy:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3 – Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade ratings. Interest rate swaps and foreign exchange forward contracts are valued using valuation techniques, which employ the use of markets observable data. The most frequently applied valuation techniques include forward pricing and swap models using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, interest rate curves and forward curves.
C.7.2. Fair value of financial instruments
The fair value of Millicom’s financial instruments are shown at amounts at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The fair value of all financial assets and all financial liabilities, except debt and financing approximate their carrying value largely due to the short-term maturities of these instruments. The fair values of all debt and financing have been estimated by the Group, based on discounted future cash flows at market interest rates.
Fair values of financial instruments at December 31,
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
| | | | | | | | | | | | | | | | | |
| | Carrying value | Fair value |
| Note | 2021 | 2020 | 2021 | 2020 |
| | (US$ millions) |
Financial assets | | | | | |
Derivative financial instruments | | 21 | | 24 | | 21 | | 24 | |
Other non-current assets | | 74 | | 77 | | 74 | | 77 | |
Trade receivables, net | | 405 | | 351 | | 405 | | 351 | |
Amounts due from non-controlling interests, associates and joint venture partners | G.5. | 65 | | 296 | | 65 | | 296 | |
Prepayments and accrued income | | 168 | | 149 | | 168 | | 149 | |
Supplier advances for capital expenditures | | 35 | | 21 | | 35 | | 21 | |
Call option (ii) | C.7.4. | — | | 3 | | — | | 3 | |
Equity Investments | C.7.3. | — | | 160 | | — | | 160 | |
Other current assets | | 302 | | 181 | | 302 | | 181 | |
Restricted cash | C.5.2. | 203 | | 199 | | 203 | | 199 | |
Cash and cash equivalents | C.5.1. | 895 | | 875 | | 895 | | 875 | |
Total financial assets | | 2,169 | | 2,337 | | 2,169 | | 2,337 | |
Current | | 2,051 | | 2,143 | | 2,051 | | 2,143 | |
Non-current | | 119 | | 194 | | 119 | | 194 | |
Financial liabilities | | | | | |
Debt and financing (i) | C.3. | 7,744 | | 5,691 | | 7,817 | | 5,572 | |
Trade payables | | 347 | | 334 | | 347 | | 334 | |
Payables and accruals for capital expenditure | | 452 | | 345 | | 452 | | 345 | |
Derivative financial instruments | | 1 | | 16 | | 1 | | 16 | |
Put option liability | C.7.4. | 290 | | 262 | | 290 | | 262 | |
Amounts due to non-controlling interests, associates and joint venture partners | G.5. | 74 | | 339 | | 74 | | 339 | |
Accrued interest and other expenses | | 539 | | 445 | | 539 | | 445 | |
Other liabilities | | 812 | | 885 | | 812 | | 885 | |
Total financial liabilities | | 10,259 | | 8,317 | | 10,332 | | 8,198 | |
Current | | 3,856 | | 2,145 | | 3,856 | | 2,145 | |
Non-current | | 6,403 | | 6,173 | | 6,476 | | 6,054 | |
(i) Fair values are measured with reference to Level 1 (for listed bonds) or level 2.
(ii) Measured with reference to Level 3, using a Monte Carlo option pricing model.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
C.7.3. Equity investments
As at December 31, 2021 and 2020, Millicom has the following investments in equity instruments:
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
| | |
Investment in HT | — | | 160 | |
Equity investment - total | — | | 160 | |
Helios Towers plc (“HT”)
In October 2019, Helios Towers plc (a company inserted as the holding company of HTA just prior to IPO) completed its IPO on the London Stock Exchange at a price of GBP 1.15 per share valuing the company at enterprise value of approximately $2.0 billion and a market capitalization of $1.45 billion.
As part of the listing process, on October 17, 2019, Millicom first was diluted as HT management exercised their IPO option rights (~4%). This event triggered the recognition of a non-cash dilution loss of $3 million recorded under ‘Income/(loss) from other joint ventures and associates’.
On the same day, Millicom resigned from its board of directors seats, which resulted in the loss of the Group's significant influence over HT. As a result, as from that date, Millicom derecognized its investment in associate in HT and recognized it as a financial asset at fair value under IFRS 9. The derecognition of the investment in associate and recognition of the equity investment in HT at a fair value of $292 million triggered the recognition of a net non-cash gain of $208 million recorded under ‘Other non-operating income (expense), net’ in the Group's statement of income. Fair value was determined using the IPO reference share price of GBP1.15.
As a result of the IPO and the subsequent exercise of the overallotment option, Millicom disposed of a portion of its ownership (in total ~20%) yielding $57 million in gross proceeds and $25 million in net proceeds after fees and Millicom's share in tax escrow of $30 million which has been deducted in full from the gain given the high level of uncertainties used in assessing the potential tax liability. These disposals triggered a loss of $32 million, as a result of the tax escrow and transaction fees, and are recorded under ‘Other operating income (expenses), net’.
During 2020, Millicom disposed of a total of 85 million shares that it owned in HT for a total net consideration of GBP 130 million ($169 million), triggering a total net gain on disposal of $6 million recorded in the statement of income under ‘Other operating income (expenses), net’.
In June 2021, Millicom disposed of its remaining 76 million shares it owned in HT for a total net consideration of GBP 115 million ($163 million), triggering a net loss on disposal of $15 million, recorded under ‘other operating income (expenses), net’. In total, starting June 2020, Millicom sold 162 million shares it held in HT, yielding total proceeds of GBP 244 million ($383 million). Following these disposals, Millicom has no remaining ownership in HT. At December 31, 2020, Millicom owned a remaining shareholding of 7.6% in HT, valued at $160 million (level 1) at the December 31, 2020 share price (£1.53). The changes in fair value were shown under 'Other non-operating (expenses) income, net' (see note B.5.).
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
C.7.4. Call and put options
Cable Onda call and put options
As part of the acquisition of Cable Onda, the shareholders agreed on certain put and call options as follows - as amended subsequent to the acquisition of Telefónica Panama:
The 'Transaction Price' call and put options are conditional to the occurrence of certain events, such as change of control of Millicom or at any time if Millicom's non-controlling partners’ shareholdings fall below 10%, and become exercisable on the date of the Telefónica Panama closing (August 29, 2019) and extending until June 13, 2022. These put and call options are exercisable at the purchase price in the Cable Onda transaction (enterprise value of $1.46 billion), plus interest at 5% per annum (put) and at 10% per annum (call), respectively. From June 14, 2022, up to July 14, 2022, both options will be unconditional.
In addition, the parties agreed on 'Unconditional' call and put options to acquire the remaining 20% non-controlling interest in Cable Onda becoming exercisable at any time from July 15, 2022, both, at fair market value.
Millicom determined that the 'Transaction Price' put option could be exercised as a result of events falling outside of Millicom's control, and therefore that it met the criteria under IAS 32 for recognition as a liability and a corresponding equity decrease. The put option liability would be payable in Millicom's shares or in cash at the discretion of the partner. Therefore, Millicom recorded a liability for the put option at acquisition completion date of $239 million representing the present value of the redemption amount. As of December 31, 2021, the value of the 'Transaction Price' put option is lower than the 'Unconditional' put option's value, and therefore the Group recognized the put option liability at the higher of both valuations at $290 million (December 31, 2020: $262 million).
At December 31, 2021, the 'Transaction Price' call option has been valued at $0.3 million (December 31, 2020: $3 million) using a Monte Carlo simulation model. At December 31, 2021, the 'Unconditional' call option will be exercisable at fair market value and has therefore no value as at December 31, 2021 (December 31, 2020: nil).
The changes in value of the call option asset and put option liability are recorded in the Group's statement of income (see note B.5.).
D. Financial risk management
Exposure to interest rate, foreign currency, non-repatriation, liquidity, capital management and credit risks arise in the normal course of Millicom’s business. Each year Group Treasury revisits and presents to the Audit committee updated Group Treasury policy. The Group analyzes each of these financial risks individually as well as on an interconnected basis and defines and implements strategies to manage the economic impact on the Group’s performance in line with its policy. This policy was last reviewed in late 2021. As part of the annual review of the above mentioned risks, the Group agrees to a strategy over the use of derivatives and natural hedging instruments ranging from raising debt in local currency (where the Company targets to reach 40% of debt in local currency over the medium term) to maintain a combination of up to 75/25% mix between fixed and floating rate debt or agreeing to cover up to six months forward of operating costs and capex denominated in non-functional currencies through a rolling and layering strategy. Millicom’s risk management strategies may include the use of derivatives to the extent a market would exist in the jurisdictions where the Group operates. Millicom’s policy prohibits the use of such derivatives in the context of speculative trading.
Accounting policies for derivatives is further detailed in note C.7. On December 31, 2021 and 2020 fair value of derivatives held by the Group can be summarized as follows:
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Derivatives | | |
Cash flow hedge derivatives | 20 | | 12 | |
Net derivative asset (liability) | 20 | | 12 | |
D.1. Interest rate risk
Debt and financing issued at floating interest rates expose the Group to cash flow interest rate risk. Debt and financing issued at fixed rates expose the Group to fair value interest rate risk. The Group’s exposure to risk of changes in market interest rates relate to both of the above. To manage this risk, the Group’s policy is to maintain a combination of fixed and floating rate debt with target that more than 75% of the debt be at fixed rate. The Group actively monitors borrowings against this target. The target mix between fixed and floating rate debt is reviewed periodically. The purpose of Millicom’s policy is to achieve an optimal balance between cost of funding and volatility of financial results, while considering market conditions as well as our overall business strategy. At
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
December 31, 2021, approximately 64% of the Group’s borrowings are at a fixed rate of interest or for which variable rates have been swapped for fixed rates with interest rate swaps (2020: 84%).
D.1.1. Fixed and floating rate debt
Financing at December 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | |
| Amounts due within: |
1 year | 1–2 years | 2–3 years | 3–4 years | 4–5 years | >5 years | Total |
| (US$ millions) |
Fixed rate financing | 91 | | 151 | | 460 | | 662 | | 372 | | 3,219 | | 4,956 | |
Floating rate financing | 1,750 | | 55 | | 26 | | 181 | | 386 | | 391 | | 2,789 | |
Total | 1,840 | | 206 | | 487 | | 843 | | 758 | | 3,610 | | 7,744 | |
Weighted average nominal interest rate | 1.93 | % | 5.97 | % | 5.47 | % | 5.86 | % | 5.11 | % | 5.34 | % | 5.55 | % |
Financing at December 31, 2020
| | | | | | | | | | | | | | | | | | | | | | | |
| Amounts due within: |
1 year | 1–2 years | 2–3 years | 3–4 years | 4–5 years | >5 years | Total |
| (US$ millions) |
Fixed rate financing | 80 | | 90 | | 268 | | 561 | | 269 | | 3,498 | | 4,766 | |
| | | | | | | |
Floating rate financing | 33 | | 17 | | 171 | | 250 | | 197 | | 256 | | 926 | |
| | | | | | | |
Total | 113 | | 107 | | 439 | | 811 | | 467 | | 3,755 | | 5,691 | |
Weighted average nominal interest rate | 4.65 | % | 4.95 | % | 5.76 | % | 4.15 | % | 5.09 | % | 5.21 | % | 4.90 | % |
A 100 basis point fall or rise in market interest rates for all currencies in which the Group had borrowings at December 31, 2021 would increase or reduce profit before tax from continuing operations for the year by approximately $28 million (2020: $9 million).
D.1.2. Interest rate swap contracts
From time to time, Millicom enters into currency and interest rate swap contracts to manage its exposure to fluctuations in interest rates and currency fluctuations in accordance with its Financial Risk Management policy. Details of these arrangements are provided below.
MIC S.A. entered into swap contracts in order to hedge the foreign currency and interest rate risks in relation to the SEK 2 billion (approximately $208 million using the May 15, 2019) senior unsecured sustainability bond issued in May 2019 (note C.3.1.). 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 date is May 2024. The hedging relationship is highly effective and related fluctuations are recorded through other comprehensive income. At December 31, 2021, the fair values of the swaps amount to an asset of $6 million. (December 31, 2020: a liability of $23 million).
Through our operations in Colombia, El Salvador and Costa Rica, we 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. As of December 31, 2021, the fair value of the swaps from our operations in El Salvador amount to a liability of $1 million (December 31, 2020: a liability of $3 million) and the fair value of the swaps from our operations in Colombia amounts to an asset of $15 million (December 31, 2020: a liability of $7 million). The swaps previously contracted through our operations in Costa Rica have been settled as a result of the redemption of the USD syndicated loan (see note C.3.2.) resulting in a loss of $1.6 million recorded under "Other non-operating (expenses) income, net" (December 31, 2020: liability of $5 million and an asset of $1 million).
Interest rate and currency swaps are measured with reference to Level 2 of the fair value hierarchy.
There are no other derivative financial instruments with a significant fair value at December 31, 2021.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
D.2. Foreign currency risks
The Group is exposed to foreign exchange risk arising from various currency exposures in the countries in which it operates. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.
Millicom seeks to reduce its foreign currency exposure through a policy of matching, as far as possible, assets and liabilities denominated in foreign currencies, or entering into agreements that limit the risk of exposure to currency fluctuations against the US dollar reporting currency. In some cases, Millicom may also borrow in US dollars where it is either commercially more advantageous for joint ventures and subsidiaries to incur debt obligations in US dollars or where US dollar denominated borrowing is the only funding source available to a joint venture or subsidiary. In these circumstances, Millicom accepts the remaining currency risk associated with financing its joint ventures and subsidiaries, principally because of the relatively high cost of forward cover, when available, in the currencies in which the Group operates.
D.2.1. Debt denominated in US dollars and other currencies
Debt denomination at December 31
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Debt denominated in US dollars | 4,827 | | 3,384 | |
Debt denominated in currencies of the following countries | | |
Guatemala (ii) | 605 | | na |
Colombia | 699 | | 614 | |
Tanzania | 38 | | 40 | |
Bolivia | 310 | | 337 | |
Paraguay | 195 | | 180 | |
El Salvador(i) | 99 | | 118 | |
Panama(i) | 846 | | 869 | |
Luxembourg (COP denominated) | 36 | | 41 | |
Costa Rica | 88 | | 107 | |
| | |
Total debt denominated in other currencies | 2,917 | | 2,307 | |
Total debt | 7,744 | | 5,691 | |
(i) El Salvador's official unit of currency is the U.S. dollar, while Panama uses the U.S. dollar as legal tender. Our local debt in both countries is therefore denominated in U.S. dollars but presented as local currency (LCY).
(ii)Tigo Guatemala is fully consolidated since the acquisition of the remaining 45% shareholding on November 12, 2021. See note A.1.2. for further details.
At December 31, 2021, if the US dollar had weakened/strengthened by 10% against the other functional currencies of our operations and all other variables held constant, then profit before tax from continuing operations would have increased/decreased by $38 million (2020: $45 million). This increase/decrease in profit before tax would have mainly been as a result of the conversion of the USD-denominated net debts in our operations with functional currencies other than the US dollar.
D.2.2. Foreign currency swaps
See note D.1.2. Interest rate swap contracts.
D.3. Non-repatriation risk
Most of Millicom’s operating subsidiaries and joint ventures generate most of the revenue of the Group and in the currency of the countries in which they operate. Millicom is therefore dependent on the ability of its subsidiaries and joint venture operations to transfer funds to the Company.
Although foreign exchange controls exist in some of the countries in which Millicom Group companies operate, none of these controls currently significantly restrict the ability of these operations to pay interest, dividends, technical service fees, royalties or repay loans by exporting cash, instruments of credit or securities in foreign currencies. However, existing foreign exchange controls may be strengthened in countries where the Group operates, or foreign exchange controls may be introduced in countries where
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
the Group operates that do not currently impose such restrictions. If such events were to occur, the Company’s ability to receive funds from the operations could be subsequently restricted, which would impact the Company’s ability to make payments on its interest and loans and, or pay dividends to its shareholders. As a policy, all operations which do not face restrictions to deposit funds offshore and in hard currencies should do so for the surplus cash generated on a weekly basis. The Company and its subsidiaries make use of notional and physical cash pooling arrangements in hard currencies to the extent permitted.
In addition, in some countries it may be difficult to convert large amounts of local currency into foreign currency because of limited foreign exchange markets. The practical effects of this may be time delays in accumulating significant amounts of foreign currency and exchange risk, which could have an adverse effect on the Group. This is a relatively rare case for the countries in which the Group operates.
Lastly, repatriation most often results in taxation, which is evidenced in the amount of taxes paid by the Group relative to the Corporate Income Tax reported in its statement of income.
D.4. Credit and counterparty risk
Financial instruments that subject the Group to credit risk include cash and cash equivalents, pledged deposits, letters of credit, trade receivables, amounts due from joint venture partners and associates, supplier advances and other current assets and derivatives. Counterparties to agreements relating to the Group’s cash and cash equivalents, pledged deposits and letters of credit are significant financial institutions with investment grade ratings. Management does not believe there are significant risks of non-performance by these counterparties and maintain a diversified portfolio of banking partners. Allocation of deposits across banks are managed such that the Group’s counterparty risk with a given bank stays within limits which have been set, based on each bank’s credit rating.
A large portion of revenue of the Group is comprised of prepaid products and services. For postpaid customers, the Group follows risk control procedures to assess the credit quality of the customer, taking into account its financial position, past experience and other factors. Accounts receivable also comprise balances due from other telecom operators. Credit risk of other telecom operators is limited due to the regulatory nature of the telecom industry, in which licenses are normally only issued to credit-worthy companies. The Group maintains a provision for expected credit losses of trade receivables based on its historical credit loss experience.
As the Group has a large number of internationally dispersed customers, there is generally no significant concentration of credit risk with respect to trade receivables, except for certain B2B customers (mainly governments). See note F.1.
D.5. Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group has significant indebtedness but also has significant cash balances. Millicom evaluates its ability to meet its obligations on an ongoing basis using a recurring liquidity planning tool. This tool considers the operating net cash flows generated from its operations and the future cash needs for borrowing, interest payments, dividend payments and capital and operating expenditures required in maintaining and developing its operating businesses.
The Group manages its liquidity risk through use of bank overdrafts, bank loans, bonds, vendor financing, Export Credit Agencies and Development Finance Institutions (DFI) loans. Millicom believes that there is sufficient liquidity available in the markets to meet ongoing liquidity needs. Additionally, Millicom is able to arrange offshore funding. Millicom has a diversified financing portfolio with commercial banks representing about 41% of its gross financing (2020: 20%), bonds 46% (2020: 64%), Development Finance Institutions 0% (2020: 1%) and leases 13% (2020: 15%).
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Maturity profile of net financial liabilities at December 31, 2021
| | | | | | | | | | | | | | |
| Less than 1 year | 1 to 5 years | >5yrs | Total |
| (US$ millions) |
Total debt and financing | (1,840) | | (2,294) | | (3,610) | | (7,744) | |
Lease liability | (171) | | (591) | | (404) | | (1,167) | |
Cash and equivalents | 895 | | — | | — | | 895 | |
Pledged deposits | 35 | | — | | — | | 35 | |
Refundable deposit | — | | — | | — | | — | |
Derivative financial instruments | — | | 20 | | — | | 20 | |
Net cash (debt) including derivatives related to debt | (1,082) | | (2,865) | | (4,014) | | (7,961) | |
Future interest commitments related to debt and financing | (340) | | (1,086) | | (98) | | (1,524) | |
Future interest commitments related to leases | (144) | | (380) | | (179) | | (704) | |
Trade payables (excluding accruals) | (624) | | — | | — | | (624) | |
Other financial liabilities (including accruals) | (1,141) | | — | | — | | (1,141) | |
Put option liability | (290) | | — | | — | | (290) | |
Trade receivables | 405 | | — | | — | | 405 | |
Other financial assets | 344 | | 98 | | — | | 442 | |
Net financial liabilities | (2,871) | | (4,234) | | (4,291) | | (11,396) | |
Maturity profile of net financial liabilities at December 31, 2020
| | | | | | | | | | | | | | |
| Less than 1 year | 1 to 5 years | >5yrs | Total |
| (US$ millions) |
Total debt and financing | (113) | | (1,824) | | (3,755) | | (5,691) | |
Lease liability | (123) | | (525) | | (373) | | (1,021) | |
Cash and equivalents | 875 | | — | | — | | 875 | |
Pledged deposits (related to back borrowings) | — | | — | | — | | — | |
Refundable deposit | — | | — | | — | | — | |
Derivative financial instruments | — | | 12 | | — | | 12 | |
Net cash (debt) including derivatives related to debt | 639 | | (2,336) | | (4,128) | | (5,825) | |
Future interest commitments related to debt and financing | (311) | | (1,069) | | (104) | | (1,484) | |
Future interest commitments related to leases | (146) | | (410) | | (203) | | (759) | |
Trade payables (excluding accruals) | (576) | | — | | — | | (576) | |
Other financial liabilities (including accruals) | (1,185) | | (29) | | — | | (1,214) | |
Put option liability | (262) | | — | | — | | (262) | |
Trade receivables | 351 | | — | | — | | 351 | |
Other financial assets | 568 | | 167 | | — | | 735 | |
Net financial liabilities | (922) | | (3,676) | | (4,435) | | (9,034) | |
D.6. Capital management
The primary objective of the Group’s capital management is to ensure a strong credit rating and solid capital ratios in order to support its business and maximize shareholder value.
The Group manages its capital structure with reference to local economic conditions and imposed restrictions such as debt covenants. To maintain or adjust its capital structure, the Group may make dividend payments to shareholders, return capital to shareholders through share repurchases or issue new shares. At December 31, 2021, Millicom was rated at one notch below
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
investment grade by the independent rating agencies Moody’s (Ba1 stable) and Fitch (BB+ stable). The Group primarily monitors capital using net financial obligations to EBITDA.
The Group reviews its gearing ratio (net financial obligations divided by total capital plus net financial obligations) periodically. Net financial obligations includes interest bearing debt and lease liabilities, less cash and cash equivalents (included restricted cash) and pledged and time deposits related to bank borrowings. Capital represents equity attributable to the equity holders of the parent.
Net financial obligations to EBITDA
| | | | | | | | | | | |
| Note | 2021 | 2020 |
| (US$ millions) |
Net financial obligations | C.6. | 7,981 | | 5,837 | |
EBITDA | B.3. | 1,639 | | 1,495 | |
Net financial obligations to EBITDA (i) | | 4.87 | | 3.90 | |
(i) The ratio is above 3.0x on an IFRS basis. However, according to the terms of the indenture, this ratio is calculated differently, resulting in a ratio below 3.0x for covenant purposes. Also, the ratio in 2021 is artificially high as the full debt of Tigo Guatemala has been consolidated from the acquisition date on November 12, 2021, while the Group consolidated only 1.5 months of Tigo Guatemala's EBITDA.
Gearing ratio
| | | | | | | | | | | |
| Note | 2021 | 2020 |
| (US$ millions) |
Net financial obligations | C.6. | 7,981 | | 5,837 | |
Equity attributable to Owners of the Company | C.1. | 2,583 | | 2,059 | |
Net financial obligations and equity | | 10,564 | | 7,896 | |
Gearing ratio | | 0.76 | | 0.74 | |
E. Long-term assets
E.1. Intangible assets
Millicom’s intangible assets mainly consist of goodwill arising from acquisitions, customer lists acquired through acquisitions, licenses and rights to operate and use spectrum.
E.1.1. Accounting for intangible assets
Intangible assets acquired in business acquisitions are initially measured at fair value at the date of acquisition, and those which are acquired separately are measured at cost. Internally generated intangible assets, excluding capitalized development costs, are not capitalized but expensed to the statement of income in the expense category consistent with the function of the intangible assets. Subsequently intangible assets are carried at cost, less any accumulated amortization and any accumulated impairment losses.
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 expected useful lives or the expected beneficial use of the assets are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates.
Amortization expense on intangible assets with finite lives is recognized in the consolidated statement of income in the expense category consistent with the function of the intangible assets.
Goodwill
Goodwill represents the excess of cost of an acquisition over the Group’s share in the fair value of identifiable assets less liabilities and contingent liabilities of the acquired subsidiary, at the date of the acquisition. If the fair value or the cost of the acquisition can only be determined provisionally, then goodwill is initially accounted for using provisional values. Within 12 months of the acquisition date, any adjustments to the provisional values are recognized. This is done when the fair values and the cost of the
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
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. Goodwill on acquisition of joint ventures or associates is included in investments in joint ventures and associates. Following initial recognition, goodwill is measured at cost, less any accumulated impairment losses. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
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.
Licenses
Licenses are recorded at either historical cost or, if acquired in a business combination, at fair value at the date of acquisition. Cost includes cost of acquisition and other costs directly related to acquisition and retention of licenses over the license period. These costs may include up-front and deferred payments as well as estimates related to fulfillment of terms and conditions related to the licenses such as service or coverage obligations, especially when there is a clear objective evidence that the cost of fulfilling these obligations will be significantly onerous for the Group.
Licenses 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 licenses over their estimated useful lives.
The terms of licenses, which have been awarded for various periods, are subject to periodic review for, among other things, rate setting, frequency allocation and technical standards. Licenses are initially measured at cost and are amortized from the date the network is available for use on a straight-line basis over the license period. Licenses held, subject to certain conditions, are usually renewable and generally non-exclusive. When estimating useful lives of licenses, renewal periods are included only if there is evidence to support renewal by the Group without significant cost.
Trademarks and customer lists
Trademarks and customer lists 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 lists have indefinite or finite useful lives. Trademarks and customer lists used by the Group for its own activities are unlikely to generate largely independent cash inflows and therefore are tested for impairment annually together with other assets at each cash-generating unit level. Finite useful life trademarks are carried at cost, less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of the trademarks and customer lists over their estimated useful lives. The estimated useful lives for trademarks and customer lists are based on specific characteristics of the market in which they exist. Trademarks and customer lists are included in Intangible assets, net.
Estimated useful lives are:
| | | | | |
| Years |
Estimated useful lives | |
Trademarks | 1 to 15 |
Customer lists | 4 to 20 |
Programming and content rights
Programming and content master rights which are purchased or acquired in business combinations 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.
Non-exclusive and programming and content rights for periods less than one year are expensed over the period of the rights.
Indefeasible rights of use
There is no universally-accepted definition of an indefeasible rights of use (IRU). These agreements come in many forms. However, the key characteristics of a typical arrangement include:
• The right to use specified network infrastructure or capacity;
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
• For a specified term (often the majority of the useful life of the relevant assets);
• Legal title is not transferred;
• A number of associated service agreements including operations and maintenance (O&M) and co-location agreements. These are typically for the same term as the IRU; and
• Any payments are usually made in advance.
IRUs are accounted for either as a lease, or service contract based on the substance of the underlying agreement.
IRU arrangements will qualify as a lease if, and when:
• The purchaser has an exclusive right for a specified period and has the ability to resell (or sublet) the capacity; and
• The capacity is physically limited and defined; and
• The purchaser bears all costs related to the capacity (directly or not) including costs of operation, administration and maintenance; and
• The purchaser bears the risk of obsolescence during the contract term.
If all of these criteria are not met, the IRU is treated as a service contract.
An IRU of network infrastructure (cables or fiber) is accounted for as a right of use asset (see E.3.), while capacity IRU (wavelength) is accounted for as an intangible asset.
The costs of an IRU recognized as service contract is recognized as prepayment and amortized in the statement of income as incurred over the duration of the contract.
E.1.2. Impairment of non-financial assets
At each reporting date Millicom assesses whether there is an indication that a non-financial asset may be impaired. If any such indication exists, or when annual impairment testing for a non-financial asset is required, an estimate of the asset’s recoverable amount is made. The recoverable amount is determined 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 related to assets of continuing operations are recognized in the consolidated statement of income in expense categories consistent with the function of the impaired asset.
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.
E.1.3. Movements in intangible assets
In December 2019, Tigo Colombia participated in an auction launched by the Ministerio de Tecnologias de la Informacion y las Comunicaciones (MINTIC), and acquired licenses granting the right to use a total of 40 MHz in the 700 MHz band. The 20-year license will expire in 2040. As a result of this auction,Tigo Colombia has strengthened its spectrum position, which also includes 55 MHz in the 1900 band and 30 MHz of AWS. Tigo Colombia agreed to a total notional consideration of COP 2.45 billion (equivalent to approximately $615 million using the December 31, 2021 exchange rate), of which approximately 55% is payable in cash and 45% in coverage obligations to be met by 2025.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
An initial payment of approximately $33 million was made in 2020, with the remainder payable in 12 annual installments beginning in 2026 and ending in 2037. The 55% cash portion bears interest at the Colombia-10 years Treasury Bond rate. In April and May 2020, local management received permission to operate 40 Mhz in the 700 MHz band and accounted for the spectrum as an Intangible asset at an amount of $388 million corresponding to the net present value of the future payments, plus other costs directly attributable to this acquisition. The related future interest commitments will be recognized as interest expense over the next 17 years. The remaining 45% consideration due as coverage obligations are currently being estimated and will be recognized in the statement of financial position as incurred.
Movements in intangible assets in 2021
| | | | | | | | | | | | | | | | | | | | | | | |
| Goodwill | Licenses | Customer Lists | IRUs | Trademark | Other (i) | Total |
| (US$ millions) |
Opening balance, net | 1,659 | | 870 | | 423 | | 86 | | 77 | | 289 | | 3,403 | |
Change in scope (see note A.1.2.) | 3,257 | | 319 | | 91 | | 6 | | 848 | | 25 | | 4,546 | |
Additions | — | | 29 | | — | | — | | — | | 135 | | 164 | |
Amortization charge | — | | (82) | | (56) | | (14) | | (67) | | (100) | | (320) | |
Impairment | — | | — | | — | | — | | — | | (1) | | (1) | |
Disposals, net | — | | — | | — | | — | | — | | (1) | | (1) | |
Transfers | — | | — | | — | | 2 | | 1 | | 46 | | 49 | |
| | | | | | | |
Exchange rate movements | (32) | | (67) | | (1) | | (5) | | — | | (15) | | (121) | |
Closing balance, net | 4,884 | | 1,070 | | 456 | | 75 | | 858 | | 379 | | 7,721 | |
Cost or valuation | 4,884 | | 1,728 | | 1,251 | | 210 | | 1,189 | | 1,059 | | 10,322 | |
Accumulated amortization and impairment | — | | (658) | | (795) | | (135) | | (331) | | (681) | | (2,600) | |
Net | 4,884 | | 1,070 | | 456 | | 75 | | 858 | | 379 | | 7,721 | |
Movements in intangible assets in 2020
| | | | | | | | | | | | | | | | | | | | | | | |
| Goodwill | Licenses | Customer Lists | IRUs | Trademark | Other (i) | Total |
| (US$ millions) |
Opening balance, net | 1,684 | | 468 | | 470 | | 107 | | 183 | | 282 | | 3,195 | |
| | | | | | | |
Additions | — | | 421 | | — | | — | | — | | 99 | | 520 | |
Amortization charge | — | | (71) | | (44) | | (13) | | (106) | | (84) | | (318) | |
Impairment | — | | — | | — | | — | | — | | — | | — | |
Disposals, net | — | | — | | — | | 14 | | — | | — | | 13 | |
Transfers | — | | 3 | | — | | (18) | | — | | (1) | | (16) | |
Transfer to/from held for sale | — | | — | | — | | — | | — | | — | | — | |
Exchange rate movements | (26) | | 49 | | (3) | | (3) | | — | | (8) | | 10 | |
Closing balance, net | 1,659 | | 870 | | 423 | | 86 | | 77 | | 289 | | 3,403 | |
Cost or valuation | 1,659 | | 1,305 | | 630 | | 196 | | 323 | | 840 | | 4,953 | |
Accumulated amortization and impairment | — | | (435) | | (207) | | (111) | | (246) | | (550) | | (1,550) | |
Net | 1,659 | | 870 | | 423 | | 86 | | 77 | | 289 | | 3,403 | |
(i) Other includes mainly software costs
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
E.1.4. Cash used for the purchase of intangible assets
Cash used for intangible asset additions
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Additions | 164 | | 520 | | 202 | |
Change in accruals and payables for intangibles | (29) | | (315) | | (32) | |
Cash used for additions | 135 | | 202 | | 171 | |
E.1.5. Goodwill and indefinite useful life trademarks
Allocation of Goodwill to cash generating units (CGUs)
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Guatemala (see note A.1.2.) | 3,258 | | — | |
Panama (see note A.1.2.) | 907 | | 907 | |
El Salvador | 194 | | 194 | |
Costa Rica | 110 | | 115 | |
Paraguay | 47 | | 47 | |
Colombia | 149 | | 173 | |
Tanzania | 12 | | 12 | |
Nicaragua (see note A.1.2) | 203 | | 207 | |
Bolivia | 3 | | 3 | |
Total | 4,884 | | 1,659 | |
Allocation of indefinite useful life trademarks to cash generating units (CGUs)
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Guatemala | 848 | | — | |
Tanzania | 10 | | 10 | |
Total | 858 | | 10 | |
E.1.6. Impairment testing of goodwill and indefinite useful life trademarks
Goodwill and indefinite useful life trademarks from CGUs are tested for impairment at least once a year and more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment losses on goodwill are not reversed.
Goodwill arising on business combinations is allocated to each of the Group’s CGUs or groups of CGUs that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is allocated:
• Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and
• Is not larger than an operating segment.
Impairment is determined by assessing the value-in-use and, if appropriate, the fair value less costs to sell of the CGU (or group of CGUs), to which goodwill relates.
Impairment testing at December 31, 2021
Goodwill and indefinite useful life trademarks were tested for impairment by assessing the recoverable amount against the carrying amount of the CGU based on discounted cash flows. The recoverable amounts are based on value-in-use. The value-in-use is determined based on the method of discounted cash flows. The cash flow projections used (operating profit margins, income tax,
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
working capital, capex and license renewal cost) are extracted from business plans approved by management and presented to the Board, covering a fifteen-year planning horizon. The Group uses a fifteen-year planning horizon to obtain a stable business outlook, in particular due to the long investment cycles in the industry and the long-term planned and expected investments in licenses and spectrum. Cash flows beyond this period are extrapolated using a perpetual growth rate. When value-in-use results are lower than the carrying values of the CGUs, management determines the recoverable amount by using the fair value less cost of disposal (FVLCD) of the CGUs. FVLCD is usually determined by using recent offers received from third parties (Level 1).
For the year ended December 31, 2021, management concluded that no impairment should be recorded in the Group consolidated financial statements.
Impairment testing at December 31, 2020
For the year ended December 31, 2020, management concluded that no impairment should be recorded in the Group consolidated financial statements.
Key assumptions used in value in use calculations
The process of preparing the cash flow projections considers the current market condition of each CGU, analyzing the macroeconomic, competitive, regulatory and technological environments, as well as the growth opportunities of the CGUs. Therefore, a growth target is defined for each CGU, based on the appropriate allocation of operating resources and the capital investments required to achieve the target. The foregoing forecasts could differ from the results obtained through time; however, the Company prepares its estimates based on the current situation of each of the CGUs. Relevance of budgets used for the impairment test is also reviewed annually, with management performing regressive analysis between actual figures and budget/Long Range Plans (LRPs) used for previous year impairment test.
The cash flow projections for all CGUs is most sensitive to the following key assumptions:
•EBITDA margin is determined by dividing EBITDA by total revenues.
•CAPEX intensity is determined by dividing CAPEX by total revenues.
•Perpetual growth rate does not exceed the countries' GDP.
•Weighted average cost of capital (“WACC”) is used to discount the projected cash flows.
The most significant estimates used for the 2021 and 2020 impairment test are shown below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
CGU | Average EBITDA margin (%) (i) | Average CAPEX intensity (%) (i) | Perpetual growth rate (%) | WACC rate after tax (%) |
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 |
Bolivia | 42.7 | 39.2 | 16.6 | 16.8 | 1.0 | 1.0 | 11.6 | 11.5 |
| | | | | | | | |
Colombia | 36.1 | 35.7 | 17.4 | 17.7 | 2.0 | 2.0 | 8.9 | 8.3 |
Costa Rica | 35.5 | 32.9 | 15.1 | 17.8 | 2.0 | 2.0 | 11.1 | 12.1 |
El Salvador | 39.3 | 35.4 | 12.9 | 14.0 | 1.0 | 1.0 | 14.7 | 13.8 |
Nicaragua (see note A.1.2) | 45.9 | 45.6 | 16.0 | 15.9 | 3.0 | 3.0 | 12.5 | 13.8 |
Panamá (see note A.1.2) | 47.0 | 48.2 | 17.2 | 17.5 | 1.0 | 1.0 | 7.0 | 7.6 |
Paraguay | 42.6 | 44.3 | 15.4 | 15.6 | 1.0 | 1.0 | 8.3 | 8.4 |
Guatemala | 54.7 | 53.2 | 12.3 | 12.4 | 1.0 | 1.0 | 8.4 | 8.6 |
Tanzania | 38.0 | 39.5 | 12.5 | 11.7 | 1.0 | 1.0 | 13.2 | 13.8 |
(i) Average is computed over the period covered by the plan.
Sensitivity analysis to changes in assumptions
Management performed a sensitivity analysis on key assumptions within the test. The following maximum increases or decreases, expressed in percentage points, were considered for all CGUs:
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
| | | | | |
Reasonable changes in key assumptions (%) |
Financial variables | |
WACC rates | +/-1 |
Perpetual growth rates | +/-1 |
Operating variables | |
EBITDA margin | +/-2 |
CAPEX intensity | +/-1 |
The sensitivity analysis shows a comfortable headroom between the recoverable amounts and the carrying values for all CGUs at December 31, 2021.
E.2. Property, plant and equipment
E.2.1. Accounting for property, plant and equipment
Items of property, plant and equipment are stated at either historical cost less accumulated depreciation and accumulated impairment. Historical cost includes expenditure that is directly attributable to 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 | Duration |
Buildings | Up to 40 years |
Networks (including civil works) | 5 to 15 years |
Other | 2 to 7 years |
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The assets’ residual value and useful life is reviewed, and adjusted if appropriate, at each statement of financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if its 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 Group, or purchased assets which have yet to be deployed. When the assets become operational, the related costs are transferred from construction in progress to the appropriate asset category and depreciation commences.
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 Group and the cost of the item can be measured reliably. Ongoing routine repairs and maintenance are charged to the statement of income 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 derecognised.
Equipment installed on customer premises which is not sold to customers is capitalized and amortized over the customer contract period.
A liability for the present value of the cost to remove an asset on both owned and leased sites (for example cell towers) and for assets installed on customer premises (for example set-top boxes), is recognized when a present obligation for the removal exists. The corresponding cost of the obligation is included in the cost of the asset and depreciated over the useful life of the asset, or lease period if shorter.
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 contribute to future economic benefits for the Group and the costs can be measured reliably.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
E.2.2. Movements in tangible assets
Movements in tangible assets in 2021
| | | | | | | | | | | | | | | | | |
| Network Equipment (ii) | Land and Buildings | Construction in Progress | Other(i) | Total |
| (US$ millions) |
Opening balance, net | 2,175 | | 185 | | 308 | | 87 | | 2,755 | |
Change in scope (see note A.1.2.) | 494 | | 9 | | 29 | | 11 | | 543 | |
| | | | | |
Additions | 30 | | — | | 752 | | 4 | | 787 | |
Impairments/reversal of impairment, net | — | | — | | (3) | | (1) | | (4) | |
Disposals, net | (10) | | — | | (4) | | — | | (14) | |
Depreciation charge | (651) | | (16) | | — | | (73) | | (739) | |
Asset retirement obligations | 31 | | 1 | | — | | — | | 32 | |
Transfers | 572 | | 5 | | (646) | | 41 | | (28) | |
Transfer from/(to) assets held for sale (see note E.4) | — | | — | | — | | — | | — | |
Exchange rate movements | (115) | | (10) | | (6) | | (2) | | (133) | |
Closing balance, net | 2,527 | | 175 | | 429 | | 68 | | 3,198 | |
Cost or valuation | 8,373 | | 333 | | 429 | | 390 | | 9,524 | |
Accumulated amortization and impairment | (5,846) | | (158) | | — | | (322) | | (6,326) | |
Net at December 31, 2021 | 2,527 | | 175 | | 429 | | 68 | | 3,198 | |
Movements in tangible assets in 2020
| | | | | | | | | | | | | | | | | |
| Network equipment | Land and buildings | Construction in progress | Other(i) | Total |
| (US$ millions) |
Opening balance, net | 2,212 | | 206 | | 355 | | 127 | | 2,899 | |
Change in Scope | — | | — | | — | | — | | — | |
| | | | | |
Additions | 31 | | — | | 606 | | 11 | | 649 | |
Impairments/reversal of impairment, net | — | | — | | — | | — | | — | |
Disposals, net | 31 | | (2) | | (2) | | (41) | | (13) | |
Depreciation charge | (644) | | (22) | | — | | (83) | | (749) | |
Asset retirement obligations | 17 | | 2 | | — | | — | | 19 | |
Transfers | 588 | | 5 | | (644) | | 75 | | 24 | |
Transfers from/(to) assets held for sale (see note E.4.) | 1 | | 1 | | — | | — | | 3 | |
Exchange rate movements | (62) | | (5) | | (8) | | (2) | | (77) | |
Closing balance, net | 2,175 | | 185 | | 308 | | 87 | | 2,755 | |
Cost or valuation | 6,423 | | 329 | | 308 | | 407 | | 7,466 | |
Accumulated amortization and impairment | (4,248) | | (144) | | — | | (320) | | (4,711) | |
Net at December 31, 2020 | 2,175 | | 185 | | 308 | | 87 | | 2,755 | |
(i) Other mainly includes office equipment and motor vehicles.
Borrowing costs capitalized for the years ended December 31, 2021, 2020 and 2019 were not significant.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
E.2.3. Cash used for the purchase of tangible assets
Cash used for property, plant and equipment additions
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Additions | 787 | | 649 | | 719 | |
Change in advances to suppliers | (6) | | (4) | | 1 | |
Change in accruals and payables for property, plant and equipment | (40) | | (22) | | 17 | |
Other | (1) | | (1) | | (1) | |
Cash used for additions | 740 | | 622 | | 736 | |
E.3. Right of use assets
Right-of-use assets are measured at cost comprising the following:
•the amount of the initial measurement of lease liability
•any lease payments made at or before the commencement date less any lease incentives received
•any initial direct costs, and
•restoration costs
Refer to note C.4. for further details on lease accounting policies.
Movements in right of use assets in 2021
| | | | | | | | | | | | | | | | | | | | | | | |
Right-of-use assets | Land and buildings | Sites rental | Tower rental | Other network equipment | Capacity | Other | Total |
| (US$ millions) | | | |
Opening balance, net | 147 | | 93 | | 607 | | 31 | | 14 | | 2 | | 895 | |
Change in scope (see note A.1.2.) | 16 | | 107 | | 48 | | 3 | | — | | 13 | | 187 | |
Additions | 37 | | 14 | | 53 | | — | | — | | 1 | | 106 | |
Modifications | 14 | | 8 | | 3 | | 1 | | — | | (1) | | 25 | |
Impairments | (1) | | — | | — | | — | | — | | — | | (1) | |
Disposals | (2) | | (2) | | (2) | | (1) | | — | | — | | (7) | |
Depreciation | (36) | | (22) | | (81) | | (4) | | (1) | | (2) | | (145) | |
Asset retirement obligations | 1 | | — | | — | | — | | — | | — | | — | |
Transfers | — | | 4 | | (17) | | (5) | | (1) | | — | | (18) | |
| | | | | | | |
Exchange rate movements | (9) | | (1) | | (24) | | — | | — | | — | | (34) | |
Closing balance, net | 169 | | 201 | | 587 | | 25 | | 12 | | 13 | | 1,008 | |
Cost of valuation | 254 | | 317 | | 908 | | 40 | | 17 | | 21 | | 1,557 | |
Accumulated depreciation and impairment | (85) | | (116) | | (320) | | (14) | | (5) | | (8) | | (549) | |
Net at 31 December 2021 | 169 | | 201 | | 587 | | 25 | | 12 | | 13 | | 1,008 | |
There have been no unusual significant events affecting lease liabilities (and right-of-use assets) during the year ended December 31, 2021.
Movements in right of use assets in 2020
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Right-of-use assets | Land and buildings | Sites rental | Tower rental | Capacity | Other network equipment | Other | Total |
| (US$ millions) | | | |
Opening balance, net | 148 | | 101 | | 729 | | 15 | | 16 | | 3 | | 1,012 | |
Change in scope | — | | — | | — | | — | | — | | — | | — | |
Additions | 41 | | 2 | | 23 | | 1 | | 18 | | 1 | | 86 | |
Modifications (i) | 9 | | 10 | | (27) | | — | | (1) | | — | | (8) | |
Impairments | (1) | | — | | — | | — | | — | | — | | (1) | |
Disposals | (10) | | (1) | | — | | — | | (1) | | — | | (12) | |
Depreciation | (38) | | (17) | | (88) | | (1) | | (8) | | (2) | | (155) | |
Asset retirement obligations | — | | 1 | | — | | — | | — | | (1) | | — | |
Transfers | — | | — | | (2) | | — | | 5 | | 1 | | 4 | |
Transfers to/from assets held for sale | — | | — | | — | | — | | — | | — | | — | |
Exchange rate movements | (3) | | (2) | | (27) | | — | | — | | — | | (32) | |
Closing balance, net | 147 | | 93 | | 607 | | 14 | | 31 | | 2 | | 895 | |
Cost of valuation | 206 | | 127 | | 839 | | 18 | | 42 | | 6 | | 1,238 | |
Accumulated depreciation and impairment | (59) | | (34) | | (232) | | (4) | | (12) | | (3) | | (343) | |
Net at 31 December 2020 | 147 | | 93 | | 607 | | 14 | | 31 | | 2 | | 895 | |
(i) In early 2020, and following a change in regulation in Colombia, future lease payments for the use of certain public assets have been significantly decreased. This triggered a lease modification and a decrease of the related lease liabilities (and right-of-use assets) of approximately $45 million.
Tower Sale and Leaseback
In 2018 and 2019, the Group announced agreements to sell and leaseback wireless communications towers in Paraguay, Colombia and El Salvador. Total gain on sale recognized in 2021 was nil (2020: nil, 2019:$5 million) and cash received from these sales in 2021 was nil, (2020: nil, 2019: $22 million).
E.4. Assets held for sale
If Millicom decides to sell subsidiaries, investments in joint ventures or associates, or specific non-current assets in its businesses, these items qualify as assets held for sale if certain conditions are met and necessary regulatory approvals obtained.
E.4.1. Classification of assets held for sale
Non-current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is expected to be recovered principally through sale, not through continuing use. Liabilities of disposal groups are classified as Liabilities directly associated with assets held for sale.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
E.4.2. Millicom’s assets held for sale
The following table summarizes the nature of the assets and liabilities reported under assets held for sale and liabilities directly associated with assets held for sale as at December 31, 2021 and 2020:
| | | | | | | | |
| December 31, |
| 2021 | 2020 |
| (US$ millions) |
Assets and liabilities reclassified as held for sale ($ millions) | | |
| | |
Towers Colombia (see note E.4.1.) | — | | 1 | |
Towers El Salvador (see note E.4.1.) | — | | — | |
Towers Zantel | — | | — | |
| | |
Total assets of held for sale | — | | 1 | |
| | |
Total liabilities directly associated with assets held for sale | — | | — | |
Net assets held for sale / book value | — | | 1 | |
In accordance with IFRS 5 and as further explained in Note A.1.3. , financial information relating to discontinued operations for the years ended December 31, 2021, 2020 and 2019 is set out below. Figures shown below are after intercompany eliminations.
Results from discontinued operations
| | | | | | | | | | | |
| December 31 |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Revenue | — | | — | | 50 | |
Cost of sales | — | | — | | (14) | |
Operating expenses | — | | (4) | | (2) | |
Other expenses linked to the disposal of discontinued operations | — | | (9) | | (10) | |
Depreciation and amortization | — | | — | | (11) | |
Other operating income (expenses), net | — | | — | | — | |
Gain/(loss) on disposal of discontinued operations | — | | — | | 74 | |
Operating profit (loss) | — | | (12) | | 88 | |
Interest income (expense), net | — | | — | | (2) | |
Other non-operating (expenses) income, net | — | | — | | — | |
Profit (loss) before taxes | — | | (12) | | 86 | |
Credit (charge) for taxes, net | — | | — | | (2) | |
Net profit/(loss) from discontinuing operations | — | | (12) | | 84 | |
Cash flows from discontinued operations
| | | | | | | | | | | |
| December 31 |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Cash from (used in) operating activities, net | — | | — | | (8) | |
Cash from (used in) investing activities, net | — | | — | | 5 | |
Cash from (used in) financing activities, net | — | | — | | 7 | |
F. Other assets and liabilities
F.1. Trade receivables
Millicom’s trade receivables mainly comprise interconnect receivables from other operators, postpaid mobile and residential cable subscribers, as well as B2B customers. The nominal value of receivables adjusted for impairment approximates the fair value of trade receivables.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Gross trade receivables | 722 | | 649 | |
Less: provisions for expected credit losses | (316) | | (298) | |
Trade receivables, net | 405 | | 351 | |
Aging of trade receivables
| | | | | | | | | | | | | | |
| Neither past due nor impaired | Past due (net of impairments) | |
30–90 days | >90 days | Total |
| (US$ millions) |
2021: | | | | |
Telecom operators | 18 | | 3 | | 4 | | 25 | |
Own customers | 210 | | 59 | | 34 | | 303 | |
Others | 58 | | 12 | | 8 | | 77 | |
Total | 286 | | 74 | | 46 | | 405 | |
2020: | | | | |
Telecom operators | 15 | | 7 | | 3 | | 25 | |
Own customers | 167 | | 65 | | 34 | | 266 | |
Others | 34 | | 19 | | 8 | | 60 | |
Total | 216 | | 90 | | 45 | | 351 | |
Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for expected credit losses. The Group recognizes an allowance for expected credit losses (ECLs) applying a simplified approach in calculating the ECLs. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime of ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. The provision for expected credit losses is recognized in the consolidated statement of income within Cost of sales.
Loans and receivables 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 those maturing more 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. Gains and losses are recognized in the statement of income when the loans and receivables are derecognized or impaired, as well as through the amortization process.
F.2. Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
Inventories
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Telephone and equipment | 43 | | 23 | |
SIM cards | 5 | | 4 | |
IRUs | — | | — | |
Other | 15 | | 10 | |
Inventory at December 31, | 63 | | 37 | |
F.3. Trade payables
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
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.
From time to time, the Group enters into agreements to extend payment terms with various suppliers, and with factoring companies when such payments are discounted. The corresponding amount pending payment as of December 31, 2021, is recognized in Trade payables for an amount of $38 million (2020: $46 million).
F.4. Current and non-current provisions and other liabilities
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, if it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain.
The expense relating to any provision is presented in the statement of income net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, risks specific to the liability. Where discounting is used, increases in the provision due to the passage of time are recognized as interest expenses.
F.4.1. Current provisions and other liabilities
Current
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Deferred revenue | 110 | | 78 | |
Customer deposits | 15 | | 14 | |
Current legal provisions | 24 | | 22 | |
Tax payables | 88 | | 72 | |
Customer and MFS distributor cash balances | 194 | | 186 | |
Withholding tax on payments to third parties | 11 | | 6 | |
| | |
Other current liabilities(i) | 105 | | 133 | |
Total | 546 | | 511 | |
(i) Includes $25 million (2020: $44 million) of tax risk liabilities not related to income tax.
F.4.2. Non-current provisions and other liabilities
Non-current
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Non-current legal provisions | 22 | | 30 | |
Long-term portion of asset retirement obligations | 177 | | 107 | |
Long-term portion of deferred income on tower sale and leasebacks recognized under IAS 17 | 46 | | 57 | |
Long-term employment obligations | 56 | | 67 | |
Other non-current liabilities | 63 | | 67 | |
Total | 364 | | 328 | |
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
F.5. Assets and liabilities related to contract with customers
Contract assets, net
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Long-term portion | 18 | | 6 | |
Short-term portion | 54 | | 28 | |
Less: provisions for expected credit losses | (4) | | (2) | |
Total | 69 | | 31 | |
Contract liabilities
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Long-term portion | 2 | | 2 | |
Short-term portion | 95 | | 89 | |
Total | 97 | | 90 | |
The Group recognized revenue for $86 million in 2021 (2020: $82 million) that was included in the contract liability balance at the beginning of the year.
The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at December 31, 2021 is $101 million ($96 million is expected to be recognized as revenue in the 2023 financial year and the remaining $6 million in the 2024 financial year or later) (i).
(i) This amount does not consider contracts that have an original expected duration of one year or less, neither contracts in which consideration from a customer corresponds to the value of the entity’s performance obligation to the customer (i.e. billing corresponds to accounting revenue).
Contract costs, net (i)
| | | | | | | | |
| 2021 | 2020 |
| (US$ millions) |
Net at January 1 | 5 | | 5 | |
Change in scope | 2 | | — | |
Contract costs capitalized | 2 | | 1 | |
Amortization of contract costs | (1) | | (1) | |
Net at December 31 | 8 | | 5 | |
(i) Incremental costs of obtaining a contract are expensed when incurred if the amortization period of the asset that Millicom otherwise would have recognized is one year or less.
G. Additional disclosure items
G.1. Fees to auditors
| | | | | | | | | | | |
| 2021 | 2020 | 2019 |
| (US$ millions) |
Audit fees | 5.2 | | 5.8 | | 6.8 | |
Audit related fees | 1.4 | | 0.5 | | 1.3 | |
Tax fees | 0.1 | | 0.1 | | 0.1 | |
Other fees | 0.4 | | 0.1 | | 0.6 | |
Total | 7.1 | | 6.4 | | 8.8 | |
G.2. Capital and operational commitments
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Millicom has a number of capital and operational commitments to suppliers and service providers in the normal course of its business. These commitments are mainly contracts for acquiring network and other equipment, and leases for towers and other operational equipment.
G.2.1. Capital commitments
At December 31, 2021, the Company and its subsidiaries had fixed commitments to purchase network equipment, land and buildings, other fixed assets and intangible assets of $761 million of which $428 million are due within one year (December 31, 2020: $564 million of which $400 million were due within one year). The Group’s share of commitments from the joint ventures is, respectively $41 million and $41 million. (December 31, 2020: $69 million and $52 million, respectively).
G.3. Contingent liabilities
G.3.1. Litigation and legal risks
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 December 31, 2021, the total amount of claims brought against Millicom and its subsidiaries is $246 million (December 31, 2020: $288 million). The Group's share of the comparable exposure for joint ventures is $13 million (December 31, 2020: $14 million).
As at December 31, 2021, $36 million has been provided by its subsidiaries for these risks in the consolidated statement of financial position (December 31, 2020: $45 million). The Group’s share of provisions made by the joint ventures was $1 million (December 31, 2020: $3 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.
On May 25, 2020, as a result of the termination of the Costa Rica acquisition (see Note A.1.2.), Telefónica filed a complaint, followed by an amended complaint on August 3, 2020, against us in the Supreme Court of New York. The amended complaint asserts claims for breach of contract and alleges, among other things, that we were required to close the transaction because the closing conditions specified in the sale and purchase agreement for the acquisition had been satisfied. The complaint seeks, among other relief, a declaration of Telefónica’s rights, and unspecified damages, costs, and fees. We believe the complaint is without merit and that our position will ultimately be vindicated through the judicial process.
Other
At December 31, 2021, Millicom has various other less significant claims which are not disclosed separately in these consolidated financial statements because they are either not material or the related risk is remote.
G.3.2. Tax related risks and uncertain tax position
The Group operates in developing countries where the tax systems, regulations and enforcement processes have varying stages of development creating uncertainty regarding the application of the tax law and interpretation of tax treatments. The Group is also subject to regular tax audits in the countries where it operates. When there is uncertainty over whether the taxation authority will accept a specific tax treatment under the local tax law, that tax treatment is therefore uncertain. The resolution of tax positions taken by the Group, through negotiations with relevant tax authorities or through litigation, can take several years to complete and, in some cases, it is difficult to predict the ultimate outcome. Therefore, judgment is required to determine liabilities for taxes.
In assessing whether and how an uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, the Group assumes that a taxation authority with the right to examine amounts reported to it will examine those amounts and have full knowledge of all relevant information when making those examinations.
The Group has a process in place, and applies significant judgment, in identifying uncertainties over income tax treatments. Management considers whether or not it is probable that a taxation authority will accept an uncertain tax treatment. On that basis, the identified risks are split into three categories (i) remote risks (risk of outflow of tax payments are up to 20%), (ii) possible risks (risk of outflow of tax payments assessed from 21% to 49%) and probable risks (risk of outflow is more than 50%). The process is repeated every quarter by the Group.
If the Group concludes that it is probable or certain that the taxation authority will accept the tax treatment, the risks are categorized either as possible or remote, and it determines the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment used or planned to be used in its income tax filings. The risks considered as possible are not provisioned but disclosed as tax contingencies in the Group consolidated financial statements while remote risks are neither provisioned nor disclosed.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
If the Group concludes that it is probable that the taxation authority will not accept the Group’s interpretation of the uncertain tax treatment, the risks are categorized as probable, and are presented to reflect the effect of uncertainty in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates by generally using the most likely amount method – the single most likely amount in a range of possible outcomes.
If an uncertain tax treatment affects both deferred tax and current tax, the Group makes consistent estimates and judgments for both. For example, an uncertain tax treatment may affect both taxable profits used to determine the current tax and tax bases used to determine deferred tax.
If facts and circumstances change, the Group reassesses the judgments and estimates regarding the uncertain tax position taken.
At December 31, 2021, the tax risks exposure of the Group's subsidiaries is estimated at $343 million, for which provisions of $69 million have been recorded in tax liabilities; representing the probable amount of eventual claims and required payments related to those risks (2020: $339 million of which provisions of $77 million were recorded). The Groups' share of comparable tax exposure and provisions in its joint ventures amounts to $68 million (2020: $69 million) and $3 million (2020: $7 million), respectively. During 2021, due to tax audit closure in Tanzania, the Group has released tax risk contingencies amounting to $25 million which were considered as 'possible risks' and has also recorded the reversal of a $30 million provision for claims no longer deemed as 'probable risks'.
G.4. Non-cash investing and financing activities
Non-cash investing and financing activities from continuing operations
| | | | | | | | | | | | | | |
| Note | 2021 | 2020 | 2019 |
| | (US$ millions) |
Investing activities | | | | |
Acquisition of property, plant and equipment | E.2.2. | (47) | | (27) | | 17 | |
Acquisition of lease right of use assets obtained in exchange of lease liabilities | E.3. | 106 | | 92 | | 100 | |
Asset retirement obligations | E.2.2. | 32 | | 19 | | 19 | |
| | | | |
Financing activities | | | | |
Share based compensation | B.4.1. | 17 | | 24 | | 27 | |
G.5. Related party balances and transactions
The Group’s significant related parties are:
• Until November 14, 2019, date on which Millicom SDRs were paid out to the shareholders of Kinnevik (see 'Introduction' note), Kinnevik AB (Kinnevik) was Millicom’s previous principal shareholder;
• Helios Towers Africa Ltd (HTA), in which Millicom held a direct or indirect equity interest - until October 15, 2019, date on which Millicom lost significant influence on HTA and started accounting for its investments at fair value under IFRS 9 (see note A.3.1.and C.7.3.).
• EPM and subsidiaries (EPM), the non-controlling shareholder in our Colombian operations (see note A.1.4.);
• Miffin Associates Corp and subsidiaries (Miffin), our joint venture partner in Guatemala until November 12, 2021, date on which Millicom signed and closed an agreement to acquire the remaining 45% equity interest in our joint venture business in Guatemala from Miffin (see note A.1.2.).
• Cable Onda partners and subsidiaries, the non-controlling shareholders in our Panama operations (see note A.1.2.).
Kinnevik
Until November 14, 2019, Kinnevik was Millicom's principal shareholder, owning approximately 37% of Millicom. Kinnevik is a Swedish holding company with interests in the telecommunications, media, publishing, paper and financial services industries.
During 2019, Kinnevik did not purchase any Millicom shares. There were no significant loans made by Millicom to or for the benefit of Kinnevik or Kinnevik controlled entities.
During 2019, the Company purchased services from Kinnevik subsidiaries including fraud detection, procurement and professional services. Transactions and balances with Kinnevik Group companies are disclosed under 'Other' in the tables below.
Helios Towers
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
Millicom sold its tower assets and leased back a portion of space on the towers in several African countries and contracted for related operation and management services with HTA. The Group has future lease commitments in respect of the tower companies (see note E.4.). As mentioned above, Helios Towers ceased to be a related party to the Group from October 15, 2019.
Empresas Públicas de Medellín (EPM)
EPM is a state-owned, industrial and commercial enterprise, owned by the municipality of Medellin, and provides electricity, gas, water, sanitation, and telecommunications. EPM owns 50% of our operations in Colombia.
Miffin Associates Corp (Miffin)
The Group purchases and sells products and services from and to the Miffin Group. Transactions with Miffin represent recurring commercial operations such as purchase of handsets, and sale of airtime. As mentioned above, Miffin ceased to be a related party to the Group from November 12, 2021.
Cable Onda Partners
Our partners in Panama are the non-controlling shareholders of Cable Onda and own 20% of the company, and indirectly 20% of Grupo de Comunicaciones Digitales S.A. (formerly Telefónica Móviles Panamá, S.A.), which had been acquired by Cable Onda in August 2019. Additionally, they also hold interests in several entities which have purchasing and selling recurring commercial operations with Cable Onda (such as the sale of content costs, delivery of broadband services, etc.). Transactions and balances with Cable Onda Partners companies are disclosed under 'Other' in the tables below given their individual immateriality.
| | | | | | | | | | | |
Expenses from transactions with related parties | 2021 | 2020 | 2019 |
| (US$ millions) |
Purchases of goods and services from Miffin (i) | (165) | | (216) | | (214) | |
Purchases of goods and services from EPM | (39) | | (37) | | (42) | |
Lease of towers and related services from HTA (ii) | — | | — | | (146) | |
Other expenses | (18) | | (57) | | (10) | |
Total | (221) | | (310) | | (412) | |
| | | | | | | | | | | |
Income and gains from transactions with related parties | 2021 | 2020 | 2019 |
| (US$ millions) |
Sale of goods and services to Miffin (i) | 299 | | 327 | | 306 | |
Sale of goods and services to EPM | 14 | | 15 | | 13 | |
Other revenue | 2 | | 2 | | 3 | |
Total | 314 | | 343 | | 322 | |
(i) Miffin entities are not considered as related parties since November 12, 2021.
(ii) HTA ceased to be a related party on October 15, 2019. See note C.7.3. for further details.
As at December 31, the Company had the following balances with related parties:
| | | | | | | | |
| December 31 |
| 2021 | 2020 |
| (US$ millions) |
Liabilities | | |
Payables to Guatemala joint venture (i) | — | | 231 | |
Payables to Honduras joint venture (ii) | 69 | | 103 | |
Payables to EPM | 15 | | 20 | |
Payables to Panama non-controlling interests | 1 | | 1 | |
Other accounts payable | 2 | | 1 | |
Total | 87 | | 356 | |
(i) Since November 12, 2021, Tigo Guatemala is accounted for as a subsidiary and intercompany transactions are eliminated on consolidation (see note A.1.2. to our audited consolidated financial statements).
(ii) Mainly advances for dividends expected to be declared in 2022.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
| | | | | | | | |
| December 31 |
| 2021 | 2020 |
| (US$ millions) |
Assets | | |
Receivables from EPM | 2 | | 3 | |
Receivables from Guatemala joint venture (i) | — | | 206 | |
Receivables from Honduras joint venture (ii) | 62 | | 84 | |
Receivables from Panama non-controlling interests | 1 | | 1 | |
Receivable from AirtelTigo Ghana | — | | — | |
Other accounts receivable | 5 | | 5 | |
Total | 70 | | 299 | |
(i) In 2021 and prior to the acquisition of the remaining 45% shareholding, our former joint venture in Guatemala repaid the entire $193 million Millicom shareholder loan granted in October 2020 and originally repayable by January 13, 2022, at the latest. As explained above, Tigo Guatemala is as a wholly owned subsidiary from November 12, 2021.
(ii) In November 2020, our operations in Honduras completed a shareholding restructuring whereby Telefónica Celular S.A. acquired the shares of Navega S.A. de C.V. from its existing shareholders. The sale consideration will be payable in several installments with a final settlement in November 2023. As of December 31, 2021, $24 million out of a total receivable of $53 million is due after more than one year and therefore disclosed in non-current assets. During 2021, our operations in Honduras repaid $30 million to Millicom.
H. Millicom’s operations in Tanzania
Tanzania divestiture
On April 19, 2021, Millicom agreed to sell its entire operations in Tanzania to a consortium led by Axian, a pan-African group that was part of the consortium that acquired Millicom’s operations in Senegal in 2018. The Group is still awaiting the necessary regulatory approvals in order to complete the disposal.
IPO – Tanzania
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 Group reached an agreement with the Tanzanian government that such public offering must take place before 31 December 2025 at the latest.
| | | | | |
Notes to the Consolidated Financial Statements For the years ended December 31, 2021, 2020 and 2019 | |
I. Subsequent Events
Financing
On January 27, 2022, our principal subsidiary in Guatemala, Comcel, completed the issuance of a new 10-year $900 million Bond with a coupon of 5.125%. Proceeds from this bond as well as cash 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 our Tigo Guatemala operations. As of February 8, 2022, a balance of $450 million remained unpaid under the initial $2.15 billion bridge loan agreement.
On January 13, 2022, we completed the issuance of a new 5-year sustainability bond raising SEK 2.25 billion (approximately $252 million) at a fully swapped rate of Secured Overnight Financing Rate plus 3.496%. Proceeds will be used to fund investments in accordance with the Company's sustainability framework. This bond has been fully hedged against foreign exchange fluctuations.
In January 2022, Colombia Movil S.A. partially repaid $100 million syndicated loan, which was initially due in 2024. Cross currency swaps used to hedge the previous interest and principal on the previous loan for $50 million were terminated. The outstanding amount of $50 million remains fully swapped.
Zantel's earn out
In January 2022, Millicom received $11 million from Etisalat as earn-out income related to the purchase of Zantel in 2015. This settlement was considered as an adjusting event and recorded in 'other operating income' in the statement of income.
Share capital
On February 28, 2022, the extraordinary general meeting of shareholders of Millicom resolved to authorize the Board of Directors of Millicom to increase the authorized share capital of the Company from $199,999,800 divided into 133,333,200 shares, with a par value of $1.50 per share, to $300,000,000 divided into 200,000,000 shares, with a par value of $1.50 per share.
INDENTURE
among
Walkers Fiduciary Limited
as trustee of the CT Trust established pursuant to
the Declaration of Trust, dated January 12, 2022
as Issuer
Comunicaciones Celulares, S.A.,
Cloud2Nube, S.A.,
Comunicaciones Corporativas, S.A.,
Distribuidora Central de Comunicaciones, S.A.,
Distribuidora de Comunicaciones de Occidente, S.A.,
Distribuidora de Comunicaciones de Oriente, S.A.,
Distribuidora Internacional de Comunicaciones, S.A.,
Navega.com, S.A.,
Servicios Especializados en Telecomunicaciones, S.A. and
Servicios Innovadores de Comunicación y Entretenimiento, S.A.
as Note Guarantors
and
The Bank of New York Mellon
as Indenture Trustee, Note Registrar, Paying Agent and Transfer Agent
5.125% Senior Notes due 2032
Dated as of February 3, 2022
TABLE OF CONTENTS
Page
| | | | | |
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION |
SECTION 1.1 Definitions | 2 |
SECTION 1.2 Construction | 40 |
SECTION 1.3 Actions of the Cayman Trustee | 41 |
ARTICLE II THE NOTES |
SECTION 2.1 Designation | 41 |
SECTION 2.2 Authentication and Delivery of Notes | 41 |
SECTION 2.3 Aggregate Amount; Additional Notes | 42 |
SECTION 2.4 Form of Indenture Trustee’s Authentication | 43 |
SECTION 2.5 Form of the Notes | 43 |
SECTION 2.6 Limited Recourse; Payments from Trust Assets | 45 |
SECTION 2.7 Maturity of the Notes | 46 |
SECTION 2.8 Interest; Interest Periods | 46 |
SECTION 2.9 Record Date | 46 |
SECTION 2.10 Issuance | 46 |
SECTION 2.11 Denominations, etc | 46 |
SECTION 2.12 Execution of Notes | 47 |
SECTION 2.13 Registration; Restrictions on Transfer and Exchange | 47 |
SECTION 2.14 Mutilated, Destroyed, Lost and Stolen Notes | 54 |
SECTION 2.15 Payments | 55 |
SECTION 2.16 Taxation | 56 |
SECTION 2.17 Persons Deemed Owners; Etc | 57 |
SECTION 2.18 Cancellation | 58 |
SECTION 2.19 Allocation of Payments | 58 |
SECTION 2.20 CUSIP and ISIN Numbers | 59 |
SECTION 2.21 Noteholder Lists | 59 |
ARTICLE III ESTABLISHMENT OF ACCOUNTS |
SECTION 3.1 Establishment and Administration of Loan Collection Account | 59 |
SECTION 3.2 Establishment and Administration of the Payment Account | 60 |
SECTION 3.3 Applicable Taxes | 60 |
ARTICLE IV REDEMPTION; OFFER TO PURCHASE |
SECTION 4.1 Redemption Events | 61 |
| | | | | |
SECTION 4.2 Repurchase of Notes Tendered upon a Change of Control Event | 64 |
SECTION 4.3 Repurchase of Notes Tendered upon an Asset Sale Offer | 66 |
ARTICLE V COLLATERAL |
SECTION 5.1 Pledge of Interest in Trust Assets | 66 |
ARTICLE VI COVENANTS OF THE ISSUER |
SECTION 6.1 Payment Obligations under the Notes and the Indenture | 69 |
SECTION 6.2 Performance obligations under Transaction Documents | 69 |
SECTION 6.3 Maintenance of Approvals | 69 |
SECTION 6.4 Maintenance of Books and Records | 69 |
SECTION 6.5 Maintenance of Office or Agency | 69 |
SECTION 6.6 Maintenance of Existence | 69 |
SECTION 6.7 Consolidations, Merger, Conveyance or Transfer | 70 |
SECTION 6.8 Negative Pledge | 70 |
SECTION 6.9 Compliance with Laws | 70 |
SECTION 6.10 Limitation on Nature of Business | 70 |
SECTION 6.11 Payment of Taxes and Other Claims | 70 |
SECTION 6.12 Ranking | 70 |
SECTION 6.13 Limitations on Sale and Lease-back Transactions | 71 |
SECTION 6.14 Limitation on Indebtedness | 71 |
SECTION 6.15 No Liquidation or Termination without Consent | 71 |
SECTION 6.16 Appointment to Fill a Vacancy in Office of Indenture Trustee | 71 |
SECTION 6.17 Provision of Financial Statements and Reports | 71 |
ARTICLE VII COVENANTS OF THE PARENT NOTE GUARANTORS |
SECTION 7.1 Limitation on Debt | 72 |
SECTION 7.2 Limitation on Restricted Payments | 76 |
SECTION 7.3 Limitation on Dividend and Other Payment Restrictions Affecting the Parent Note Guarantors and Restricted Subsidiaries | 80 |
SECTION 7.4 [Reserved] | 82 |
SECTION 7.5 Limitation on Liens | 82 |
SECTION 7.6 Limitation on Guarantees of the Note Guarantors’ Subordinated Debt. | 82 |
SECTION 7.7 Limitation on Asset Dispositions | 82 |
SECTION 7.8 Transactions with Affiliates | 85 |
SECTION 7.9 Limited Condition Transaction. | 87 |
SECTION 7.10 Payment of Taxes | 88 |
SECTION 7.11 Provision of Financial Information | 88 |
| | | | | |
SECTION 7.12 Limitation on Lines of Business | 89 |
SECTION 7.13 Unrestricted Subsidiaries | 89 |
SECTION 7.14 Release from Covenants | 90 |
SECTION 7.15 Merger, Consolidations and Certain Sales of Assets of the Note Guarantors | 90 |
ARTICLE VIII EVENTS OF DEFAULT; REMEDIES |
SECTION 8.1 Events of Default | 92 |
SECTION 8.2 Acceleration | 92 |
SECTION 8.3 Other Remedies | 93 |
SECTION 8.4 Waiver of Past Default | 93 |
SECTION 8.5 Control by Majority | 93 |
SECTION 8.6 Limitation on Suits | 93 |
SECTION 8.7 Rights of Noteholders to Receive Payment | 93 |
SECTION 8.8 Priorities | 94 |
SECTION 8.9 Undertaking for Costs | 94 |
SECTION 8.10 Proof of Claim | 94 |
ARTICLE IX CONCERNING THE INDENTURE TRUSTEE |
SECTION 9.1 Certain Rights and Duties of Indenture Trustee; Notices and Information Received from the Administrative Agent | 94 |
SECTION 9.2 Indenture Trustee Not Responsible for Recitals; Etc | 98 |
SECTION 9.3 Indenture Trustee and Others May Hold Notes | 99 |
SECTION 9.4 Moneys Held by Indenture Trustee or Paying Agent | 99 |
SECTION 9.5 Compensation of the Indenture Trustee and its Lien | 100 |
SECTION 9.6 Right of Indenture Trustee to Rely on Officer’s Certificates and Opinions of Counsel | 101 |
SECTION 9.7 Persons Eligible for Appointment as Indenture Trustee | 101 |
SECTION 9.8 Resignation and Removal of Indenture Trustee; Appointment of Successor | 101 |
SECTION 9.9 Acceptance of Appointment by Successor Indenture Trustee | 102 |
SECTION 9.10 Merger, Conversion or Consolidation of Indenture Trustee | 103 |
SECTION 9.11 Maintenance of Offices and Agencies | 104 |
SECTION 9.12 Indenture Trustee Risk | 105 |
SECTION 9.13 Appointment of Co-Indenture Trustee | 106 |
SECTION 9.14 Knowledge of Default | 107 |
SECTION 9.15 Securities Laws/Transfer Disclaimer | 107 |
SECTION 9.16 Incumbency Certificate/Specimen Signatures | 107 |
SECTION 9.17 Lien/Right of Set-Off | 107 |
SECTION 9.18 Electronic Transmission Language | 107 |
| | | | | |
SECTION 9.19 Force Majeure | 108 |
SECTION 9.20 Waiver of Damages | 109 |
SECTION 9.21 Rights Applicable to Agents | 109 |
ARTICLE X CONCERNING THE HOLDERS |
SECTION 10.1 Acts of Noteholders | 109 |
ARTICLE XI PARTICIPATION AGREEMENT |
SECTION 11.1 Certain Rights of the Noteholders with Respect to the Participation Agreement and the Guarantees; Remedies Available under the Participation Agreement and Guarantees | 110 |
ARTICLE XII AMENDMENTS |
SECTION 12.1 With Consent of Noteholders | 112 |
SECTION 12.2 Without Consent of Noteholders | 113 |
SECTION 12.3 Execution of Supplemental Indentures | 114 |
SECTION 12.4 Effect of Supplemental Indentures | 115 |
SECTION 12.5 Reference in Notes to Supplemental Indentures | 115 |
SECTION 12.6 Notification of Luxembourg Stock Exchange | 115 |
ARTICLE XIII DEFEASANCE AND DISCHARGE |
SECTION 13.1 Satisfaction and Discharge of Indenture | 115 |
SECTION 13.2 Legal Defeasance | 116 |
SECTION 13.3 Covenant Defeasance | 117 |
SECTION 13.4 Application of Trust Money | 118 |
SECTION 13.5 Repayment to Issuer | 118 |
SECTION 13.6 Reinstatement | 118 |
ARTICLE XIV NOTE GUARANTEES |
SECTION 14.1 Guarantees | 118 |
SECTION 14.2 Release of Note Guarantors | 120 |
SECTION 14.3 Future Note Guarantors | 120 |
SECTION 14.4 Guarantees Absolute | 122 |
SECTION 14.5 Waivers and Acknowledgments | 123 |
SECTION 14.6 Subrogation | 124 |
SECTION 14.7 Payments Free and Clear of Taxes, Etc | 125 |
SECTION 14.8 Representations and Warranties | 125 |
SECTION 14.9 Covenants | 127 |
SECTION 14.10 [Reserved] | 127 |
| | | | | |
SECTION 14.11 No Waiver; Remedies | 127 |
SECTION 14.12 Indemnification | 127 |
SECTION 14.13 Subordination | 128 |
SECTION 14.14 Continuing Guarantee; Assignments | 129 |
ARTICLE XV
MISCELLANEOUS |
SECTION 15.1 Compliance Certificates and Opinions | 129 |
SECTION 15.2 Officer’s Certificate; Form of Documents Delivered to Indenture Trustee | 130 |
SECTION 15.3 Notices, etc. | 130 |
SECTION 15.4 Notices to Noteholders; Waiver | 132 |
SECTION 15.5 Effect of Headings and Table of Contents | 133 |
SECTION 15.6 Successors and Assigns | 133 |
SECTION 15.7 Severability Clause | 133 |
SECTION 15.8 Benefits of Indenture | 133 |
SECTION 15.9 Legal Holidays | 133 |
SECTION 15.10 Currency Rate Indemnity | 133 |
SECTION 15.11 Communication by Noteholders with other Noteholders | 134 |
SECTION 15.12 Governing Law | 134 |
SECTION 15.13 Waiver of Jury Trial | 134 |
SECTION 15.14 Waiver of Immunity | 134 |
SECTION 15.15 Submission to Jurisdiction, etc | 135 |
SECTION 15.16 Assignment | 136 |
SECTION 15.17 Power to Employ Agents and Advisors | 136 |
SECTION 15.18 Execution in Counterparts | 136 |
SECTION 15.19 Entire Agreement | 136 |
SECTION 15.20 Patriot Act | 136 |
SECTION 15.21 Non-Petition Covenant | 137 |
EXHIBIT A-1 Form of Rule 144A Restricted Global Note
EXHIBIT A-2 Form of Regulation S Unrestricted Global Note
EXHIBIT B Form of Authentication and Delivery Order
EXHIBIT C Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S
EXHIBIT D Form of Transfer Certificate for Transfer to Qualified Institutional Buyers (QIBs) who are also Qualified Purchasers
EXHIBIT E Form of Qualified Institutional Buyer/Qualified Purchaser Certification
EXHIBIT F Form of Section 3(c)(7) Reminder Notice
EXHIBIT G Form of Rule 144A Bloomberg Request Letter
EXHIBIT H Request to the Depository Trust Company
This INDENTURE (the “Indenture”), dated as of February 3, 2022, among Walkers Fiduciary Limited, an ordinary company incorporated with limited liability duly incorporated under the laws of the Cayman Islands, as trustee (the “Cayman Trustee”) of the CT Trust (the “Trust”) established under the Declaration of Trust, dated January 12, 2022 (the “Declaration of Trust”), as issuer hereunder (the Cayman Trustee acting hereunder in its capacity as trustee of the Trust pursuant to the Declaration of Trust and in relation to the assets forming part of the Trust, being the “Issuer”), Comunicaciones Celulares, S.A. (“Comcel”), Cloud2Nube, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A. and Servicios Innovadores de Comunicación y Entretenimiento, S.A., as guarantors (the “Loan Guarantors” and together with Comcel the “Parent Note Guarantors,” and together with the Subsidiary Guarantors, as defined below, the “Note Guarantors”), The Bank of New York Mellon, a New York banking corporation, as indenture trustee (the “Indenture Trustee”), note registrar, paying agent and transfer agent.
W I T N E S S E T H:
WHEREAS, Comunicaciones Celulares, S.A., a stock corporation (sociedad anónima) organized under the laws of Guatemala, as borrower (in such capacity, the “Borrower”), the Loan Guarantors, JPMorgan Chase Bank, N.A., as lender (the “Lender”), and The Bank of New York Mellon, as administrative agent (in such capacity, the “Administrative Agent”) entered into a credit and guaranty agreement dated as of the date hereof (the “Credit and Guaranty Agreement”) pursuant to which the Lender agreed to extend on the date hereof a senior unsecured loan (the “Loan”) to the Borrower guaranteed by the Loan Guarantors in an amount equal to U.S.$900,000,000 in the aggregate, the net proceeds of which to be used to repay the existing debt of the Borrower and the Note Guarantors and to lend the balance of the proceeds of the Loan to the shareholders of the Borrower and the remainder for general corporate purposes;
WHEREAS, the syndication of the Loan has been arranged pursuant to (a) the establishment of the Trust, (b) the sale of a 100% participation interest in the Loan and certain rights relating thereto pursuant to that certain participation agreement dated the date hereof by and among the Lender, the Administrative Agent and the Cayman Trustee, acting as trustee of the Trust (the “Participation Agreement”), (c) the issuance by the Issuer of the Notes (as defined below) pursuant to this Indenture, and (d) the listing of the Notes on the Luxembourg Stock Exchange;
WHEREAS, the Issuer has duly authorized the issue of its 5.125% Senior Notes due 2032, substantially in the form hereinafter set forth in such principal amount or amounts as may from time to time be authorized in accordance with the terms of this Indenture (the “Notes”) and is on the date hereof issuing U.S.$900,000,000 of its Notes (the “Initial Notes”);
WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture to provide for the authentication and delivery of the Notes by the Indenture Trustee;
WHEREAS, the Issuer, in connection with the issuance of the Notes, will grant a security interest in all of the Trust Assets (as defined below) to the Indenture Trustee on behalf of the Noteholders (as defined below); and
WHEREAS, all things necessary to make the Notes, when executed by the Issuer and authenticated and delivered by the Indenture Trustee as provided in this Indenture, the valid, binding and legal obligations of the Issuer, and to constitute these presents a valid indenture and agreement according to its terms, have been done;
NOW, THEREFORE, for and in consideration of the premises and of the covenants herein contained and of the purchase of the Notes by the Noteholders, it is mutually covenanted and agreed, for the benefit of the parties hereto and the equal and proportionate benefit of all Noteholders, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 Definitions. The following capitalized terms shall have the meanings set forth below:
“Acceleration Redemption Event” has the meaning set forth in Section 4.1(a)(vii).
“Acquired Debt” means Debt of the Parent Note Guarantors or their respective Subsidiaries:
(i) Incurred and outstanding on the date on which a Subsidiary (a) was acquired by any Parent Note Guarantor or any of the Restricted Subsidiaries or (b) is merged, consolidated, amalgamated or otherwise combined with (including pursuant to any acquisition of assets and assumption of related liabilities) any Parent Note Guarantors or the Restricted Subsidiary; or
(ii) Incurred to provide all or part of the funds utilized to consummate the transaction or series of related transactions pursuant to which such Person became a Subsidiary of any Parent Note Guarantor or was otherwise acquired by a Parent Note Guarantor or its Subsidiary;
provided that, after giving pro forma effect to the transactions by which such Person became a Subsidiary of any Parent Note Guarantor or is merged, consolidated, amalgamated or otherwise combined with any Parent Note Guarantor or its Subsidiary, (a) the Parent Note Guarantors would have been able to Incur $1.00 of additional Debt pursuant to Section 7.1; or (b) the Leverage Ratio would not be greater than such ratio before giving effect to such transactions.
Acquired Debt shall be deemed to have been Incurred, with respect to clause (i) on the date such Person becomes a Subsidiary and, with respect to clause (ii) on the date of consummation of such acquisition of assets.
“Act” when used with respect to any Noteholder, has the meaning set forth in Section 10.1.
“Additional Amounts” has the meaning set forth in the Credit and Guaranty Agreement.
“Additional Notes” has the meaning set forth in Section 2.3.
“Administrative Agent” has the meaning set forth in the recitals hereto.
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Applicable Procedures” has the meaning set forth in Section 2.13.
“Asset Disposition” means any transfer, conveyance, sale, lease or other disposition by any Parent Note Guarantor or any Restricted Subsidiary (including a consolidation or merger or other sale of any such Restricted Subsidiary with, into or to another Person in a transaction in which such Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a disposition by a Restricted Subsidiary to a Parent Note Guarantor or Restricted Subsidiary which is an 80% or more owned Subsidiary of one or more Note Guarantors or by any Parent Note Guarantor to a Restricted Subsidiary which is an 80% or more owned Subsidiary of any Parent Note Guarantor or by any Parent Note Guarantor to another Parent Note Guarantor) of
(i) shares of Capital Stock (other than directors’ qualifying shares and shares to be held by third parties to satisfy applicable legal requirements) or other ownership interests of a Restricted Subsidiary,
(ii) substantially all of the assets of any Parent Note Guarantor or any Restricted Subsidiary representing a division or line of business, or
(iii) other assets or rights of the Parent Note Guarantors or any Restricted Subsidiary outside of the ordinary course of business;
provided that the term “Asset Disposition” shall not include
(1) any disposition of Tower Equipment, including any Sale/Leaseback Transaction;
(2) a transfer of assets between or among the Parent Note Guarantors and any Restricted Subsidiaries;
(3) the issuance of Capital Stock by a Subsidiary to the Parent Note Guarantors or to another Subsidiary of the Parent Note Guarantors;
(4) dispositions of assets of any Parent Note Guarantor or any Restricted Subsidiary, or the issuance or sale of Capital Stock of any Restricted Subsidiary in a single transaction or series of related transactions with an aggregate fair market value in any calendar year of less than the greater of $50,000,000 and 3.0% of Combined Total Assets (with unused amounts in any calendar year being carried over to the next succeeding year);
(5) any disposition of Capital Stock of a Subsidiary pursuant to an agreement or other obligation with or to a Person (other than a Parent Note Guarantor or its Subsidiary) from whom such Subsidiary was acquired or from whom such Subsidiary acquired its business and assets (having been newly formed in connection with such acquisition), made as part of such acquisition and in each case comprising all or a portion of the consideration in respect of such sale or acquisition;
(6) the sale, lease or other transfer of products, services, accounts receivable, inventory or other assets in the ordinary course of business and any sale or other disposition of damaged, surplus, worn-out or obsolete assets;
(7) dispositions in connection with Permitted Liens;
(8) disposals of assets, rights or revenue not constituting part of the Related Business and other disposals of non-core assets acquired in connection with any acquisition permitted hereunder;
(9) licenses and sublicenses of the Parent Note Guarantors or any of their Subsidiaries in the ordinary course of business;
(10) any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business;
(11) the disposition of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings;
(12) the granting of Liens not prohibited by the covenant described under Section 7.5;
(13) a transfer or disposition of assets described in Section 7.15;
(14) a transfer or disposition of assets described in Section 7.2;
(15) the sale or other disposition of cash or Cash Equivalents;
(16) the foreclosure, condemnation or any similar action with respect to any property or other assets;
(17) sales of accounts receivable and related assets or an interest therein of the type specified in the definition of “Qualified Receivables Transaction” to a Receivables Entity, and Investments in a Receivables Entity consisting of cash or Securitization Obligations;
(18) any disposition or expropriation of assets or Capital Stock which any Parent Note Guarantor or any Subsidiary is required by, or made in response to concerns raised by, a regulatory authority or court of competent jurisdiction;
(19) any disposition of Capital Stock, Debt or other securities of an Unrestricted Subsidiary;
(20) any disposition of assets to a Person who is providing services related to such assets, the provision of which have been or are to be outsourced by any Parent Note Guarantor or any Subsidiary to such Person;
(21) any disposition of Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding agreements; provided that any cash or Cash Equivalents received in such disposition is applied in accordance with the requirements set forth in Section 7.7;
(22) contractual arrangements under long-term contracts with customers entered into by a Parent Note Guarantor or a Restricted Subsidiary in the ordinary course of business which are treated as sales for accounting purposes; provided that there is no transfer of title in connection with such contractual arrangement;
(23) any sale or disposition with respect to property built, repaired, improved, owned or otherwise acquired by the Parent Note Guarantors or any Subsidiary pursuant to customary Sale/Leaseback Transactions, asset securitizations and other similar financings permitted by the Indenture;
(24) any dispositions constituting the surrender of tax losses by Parent Note Guarantors or their Subsidiaries (1) to another Parent Note Guarantor or a Subsidiary; (2) in order to eliminate, satisfy or discharge any tax liability of any Person that was formerly a Subsidiary of a Parent Note Guarantor which has been disposed of pursuant to a disposal permitted by the terms of this Indenture, to the extent that such Parent Note Guarantor or a Subsidiary would have a liability (in the form of an indemnification obligation or otherwise) to one or more Persons in relation to such tax liability if not so eliminated, satisfied or discharged;
(25) leases or subleases to third parties of real property owned in fee or leased by a Parent Note Guarantor or a Restricted Subsidiary or a disposition or assignment (as
lessor) of a lease of real property or right of way, in each case, in the ordinary course of business; or
(26) Permitted Asset Swaps.
“Asset Sale Notice” has the meaning set forth in the Credit and Guaranty Agreement.
“Asset Sale Offer” has the meaning set forth in Section 7.7(d).
“Asset Sale Payment Date” means a Business Day no earlier than 30 days nor later than 60 days subsequent to the date on which the Asset Sale Notice is delivered by the Borrower to the Lender and the Administrative Agent (other than as may be required by applicable law) under the Credit and Guaranty Agreement.
“Asset Sale Prepayment Amount” means the principal amount of the Loan the Borrower is required to offer to the Lender to prepay as a result of an Asset Sale Prepayment Event.
“Asset Sale Prepayment Event” means the Borrower has become obligated to make an offer to the Lender to prepay any portion of the principal amount of the Loan as a result of a covenant of the Borrower and Note Guarantors pursuant to Section 7.7.
“Authenticating Agent” means the Person acting as Authenticating Agent hereunder pursuant to Section 9.11(b).
“Authorized Agent” means any Paying Agent, Authenticating Agent, Note Registrar, Transfer Agent or other agent appointed by the Issuer or Indenture Trustee in accordance with this Indenture to perform any function that this Indenture authorizes the Indenture Trustee or such agent to perform.
“Authorized Representative” of the Issuer or any other Person means the person or persons authorized to act on behalf of such entity by its chief executive officer, president, chief operating officer, chief financial officer or any vice president or its Board of Directors or any other governing body of such entity, including, for the avoidance of doubt, any duly appointed attorney-in-fact of the Issuer.
“Authorized Signatory” means any officer of the Indenture Trustee or any other individual who shall be duly authorized by appropriate corporate action on the part of the Indenture Trustee to authenticate Notes.
“Bankruptcy Case” has the meaning set forth in Section 15.21.
“Bankruptcy Law” has the meaning set forth in Section 14.1(c).
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the Beneficial Ownership of any
particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have Beneficial Ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.
“Board of Directors” means the board of directors of the Borrower or any Parent Note Guarantor.
“Board Resolution” means, with respect to any Person, a copy of a resolution certified by the President Chief Executive Officer, any Director, the Secretary or an Assistant Secretary of the Board of Directors or sole administrator (administrador único) of such Person to have been duly adopted by the Board of Directors or by the sole administrator (administrador único) of such Person and to be in full force and effect on the date of such certification, and delivered to the Indenture Trustee.
“Borrower” has the meaning set forth in the recitals to this Indenture.
“Business Day” means a day (other than a Saturday or Sunday) that is not (i) a day on which banking institutions in New York, New York, Guatemala City, Guatemala or the Cayman Islands generally are authorized or obligated by law, regulation or executive order to close, or (ii) a day on which banking and financial institutions in New York, New York Guatemala City, Guatemala or the Cayman Islands are closed for business with the general public.
“Capital Lease Obligation” of any Person means the obligation to pay rent or other payment amounts under a lease of real or personal property of such Person which is required to be classified and accounted for as a capital lease on the face of a balance sheet of such Person in accordance with IFRS. The Stated Maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. The principal amount of Debt represented by such obligation shall be the capitalized amount thereof that would appear on the face of a balance sheet of such Person in accordance with IFRS.
“Capital Stock” of any Person means any and all shares, interests, participation or other equivalents (however designated) of corporate stock or other equity participation, including partnership interests, whether general or limited, of such Person.
“Cash Equivalents” means, with respect to any Person:
(i) (a) United States dollars, Euros, Quetzales or money in other currencies received in the ordinary course of business and (b) any direct obligations of, or obligations guaranteed by, the United States of America (or by any agency thereof), the United Kingdom or any member of the European Union to the extent such obligations or guarantees are backed by the full faith and credit of the United States, the United
Kingdom or such member of the European Union and which have a remaining Weighted Average Life to Maturity of not more than one year from the date of Investment therein;
(ii) term deposit accounts (excluding current and demand deposit accounts), certificates of deposit, time deposits and money market deposits, bankers’ acceptances and overnight bank deposits, in each case, issued by or with (a) BAC Guatemala, Banco G&T Continental, Banco Agricola Mercantil, Banco del Desarrollo Rural, Banco Industrial, Bank of America, BBVA, BNP Paribas, Citigroup (including Citibank, N.A. Guatemala Branch), Credit Suisse, DNB, Goldman Sachs, J.P. Morgan, Morgan Stanley, Santander Scotiabank or any of the lenders under the Revolving Credit Facility and their respective Affiliates, (b) any bank or trust company which is organized under the laws of the United States of America, any state thereof, the United Kingdom, Switzerland, Canada, Australia or any member state of the European Union, or Guatemala, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of US$100,000,000 (or the foreign currency equivalent thereof) and has outstanding debt which is rated no less than Investment Grade (or such similar equivalent rating) or higher by at least one Rating Agency, or (c) any money market funds rated at least AAA by at least one Rating Agency;
(iii) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i)(a) and (b) entered into with any financial institution meeting the qualifications specified in clause (i)(b) above;
(iv) commercial paper having one of the two highest ratings obtainable from Fitch or Moody’s and in each case maturing within 365 days after the date of acquisition;
(v) money market mutual funds at least 95% of the assets of which constitute Cash Equivalents of the types described in clauses (i) through (iii) of this definition;
(vi) with respect to any Person organized under the laws of, or having its principal business operations in, a jurisdiction outside the United States, the United Kingdom or the European Union, those Investments that are of the same type as investments in clauses (i), (iii) and (iv) of this definition except that the obligor thereon is organized under the laws of the country (or any political subdivision thereof) in which such Person is organized or conducting business; and
(vii) up to US$2,000,000 (or the equivalent in other currencies) in aggregate of other Investments held by any of the Parent Note Guarantors or the Restricted Subsidiaries.
“Cash Management Loans” means Debt arising in connection with cash management and cash pooling arrangements between the Note Guarantors and their respective Subsidiaries, on the one hand, and Millicom and its Subsidiaries, on the other hand, in the ordinary course of business.
“Cayman Trustee” has the meaning set forth in the preamble to this Indenture.
“Change of Control” has the meaning set forth in the Credit and Guaranty Agreement.
“Change of Control Notice” has the meaning set forth in the Credit and Guaranty Agreement.
“Change of Control Offer” has the meaning set forth in the Credit and Guaranty Agreement.
“Change of Control Payment” has the meaning set forth in the Section 4.2(a).
“Change of Control Payment Date” means a Business Day no earlier than 35 days nor later than 65 days subsequent to the date on which the Change of Control Notice is delivered by the Borrower to the Lender and the Administrative Agent (other than as may be required by applicable Law) under the Credit and Guaranty Agreement.
“Change of Control Prepayment Event” means the occurrence of both a Change of Control and a Rating Decline.
“Change of Control Remainder Event” has the meaning set forth in the Credit and Guaranty Agreement.
“Clearstream” means Clearstream Banking, société anonyme.
“Collateral” has the meaning set forth in Section 5.1.
“Combined EBITDA” means, for any period, the combined operating profit or loss of the Restricted Group (or the Person or group or Persons indicated), as such amount is determined in accordance with IFRS, plus the sum of the following amounts, in each case, without double counting (losses shall be added (as a positive number) and gains shall be deducted, in each case, to the extent such amounts were included in calculating operating profit):
(i) depreciation and amortization expenses;
(ii) the net loss or gain on the disposal and impairment of assets;
(iii) share-based compensation expenses;
(iv) at the Parent Note Guarantors’ option, other non-cash charges reducing operating profit (provided that if any such non-cash charge represents an accrual of or reserve for potential cash charges in any future period, the cash payment in respect thereof in such future period shall reduce operating profit to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period) less other non-cash items of income increasing operating income (excluding any such non-cash item of income to the extent it represents (a) a receipt of cash payments in any future period, (b) the reversal of an accrual or reserve for a potential cash item that reduced operating income in
any prior period and (c) any non-cash gains with respect to cash actually received in a prior period so long as such cash did not increase operating income in such prior period);
(v) any material extraordinary, one-off, non-recurring, exceptional or unusual gain, loss, expense or charge, including any charges or reserves in respect of any restructuring, redundancy, relocation, refinancing, integration or severance or other post-employment arrangements, signing, retention or completion bonuses, transaction costs, acquisition costs, disposition costs, business optimization, information technology implementation or development costs, costs related to governmental investigations and curtailments or modifications to pension or postretirement benefits schemes, litigation or any asset impairment charges or the financial impacts of natural disasters (including fire, flood and storm and related events);
(vi) at the Parent Note Guarantors’ option, the effects of adjustments in its consolidated financial statements pursuant to IFRS (including inventory, property, equipment, software, goodwill, intangible assets, in process research and development, deferred revenue and debt line items) attributable to the application of recapitalization accounting or acquisition accounting, as the case may be, in relation to any consummated acquisition or joint venture Investment or the amortization or write-off or write-down of amounts thereof, net of taxes;
(vii) any reasonable expenses, charges or other costs related to any Equity Offering, Investment, acquisition, disposition, recapitalization or the Incurrence of any Debt, in each case, as determined in good faith by a responsible financial or accounting officer of the Parent Note Guarantors;
(viii) any gains or losses on associates;
(ix) any unrealized gains or losses due to changes in the fair value of equity Investments;
(x) any unrealized gains or losses due to changes in the fair value of Interest Rate, Currency or Commodity Price Agreements;
(xi) any unrealized gains or losses due to changes in the carrying value of put options in respect of Capital Stock of, or voting rights with respect to, any Subsidiary, joint venture or associate;
(xii) any unrealized gains or losses due to changes in the carrying value of call options in respect of Capital Stock of, or voting rights with respect to, any Subsidiary, joint venture or associate;
(xiii) any net foreign exchange gains or losses;
(xiv) at the Parent Note Guarantors’ option, any adjustments to reduce the impact of the cumulative effect of a change in accounting principles and changes as a result of the adoption or modification of accounting policies;
(xv) accruals and reserves that are established or adjusted within twelve months after the closing date of any acquisition that are so required to be established or adjusted as a result of such acquisition in accordance with IFRS;
(xvi) any expenses, charges or losses to the extent covered by insurance or indemnity and actually reimbursed, or, so long as the Parent Note Guarantors have made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer or indemnifying party and only to the extent that such amount is in fact reimbursed within 365 days of the date of the insurable or indemnifiable event (net of any amount so added back in any prior period to the extent not so reimbursed within the applicable 365-day period);
(xvii) the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any acquisition, Investment or any sale, conveyance, transfer or other disposition of assets;
(xviii) any net gain (or loss) realized upon any Sale/Leaseback Transaction that is not sold or otherwise disposed of in the ordinary course of business, determined in good faith by a responsible financial or accounting officer of the Parent Note Guarantors;
(xix) the amount of loss on the sale or transfer of any assets in connection with an asset securitization program, receivables factoring transaction or other receivables transaction (including, without limitation, a Qualified Receivables Transaction); and
(xx) Specified Legal Expenses.
For the purposes of calculating Combined EBITDA for any period, as of such date of determination:
(1) if, since the beginning of such period any Parent Note Guarantor or any Restricted Subsidiary has made any Asset Disposition or disposed of any company, any business, or any group of assets constituting an operating unit of a business (any such disposition, a “Sale”), including any Sale occurring in connection with a transaction causing a calculation to be made hereunder, then Combined EBITDA for such period will be reduced by an amount equal to the Combined EBITDA (if positive) attributable to the assets which are the subject of such Sale for such period or increased by an amount equal to the Combined EBITDA (if negative) attributable thereto for such period;
(2) if, since the beginning of such period any Parent Note Guarantor or any Restricted Subsidiary (by merger or otherwise) will have made an Investment in any Person that thereby becomes a Restricted Subsidiary, or otherwise acquires any company, any business, or any group of assets constituting an operating unit of a business (any such Investment or acquisition, a “Purchase”), including any such Purchase occurring in connection with a transaction causing a calculation to be made hereunder, then
Combined EBITDA for such period will be calculated after giving pro forma effect thereto as if such Purchase occurred on the first day of such period;
(3) if, since the beginning of such period any Person (that became a Restricted Subsidiary or was merged with or into any Parent Note Guarantor or any Restricted Subsidiary since the beginning of such period) will have made any Sale or any Purchase that would have required an adjustment pursuant to clauses (1) or (2) above if made by a Parent Note Guarantor or a Restricted Subsidiary since the beginning of such period, Combined EBITDA for such period will be calculated after giving pro forma effect thereto as if such Sale or Purchase occurred on the first day of such period, including anticipated synergies and cost savings as if such Sale or Purchase occurred on the first day of such period;
(4) whenever pro forma effect is applied, the pro forma calculations will be as determined in good faith by a responsible financial or accounting officer of the Parent Note Guarantors (including in respect of anticipated synergies and cost savings) as though the full effect of synergies and cost savings were realized on the first day of the relevant period and shall also include the reasonably anticipated full run rate cost savings effect (as calculated in good faith by a responsible financial or chief accounting officer of the Parent Note Guarantors) of cost savings programs that have been initiated by the Parent Note Guarantors or their Subsidiaries as though such cost savings programs had been fully implemented on the first day of the relevant period; provided that if the aggregate amount of such anticipated synergies and cost savings exceed 5.0 % of the Combined EBITDA (calculated without reference to the applicable Purchase or Sale), such amounts are confirmed by a reputable, independent third party advisor;
(5) for the purposes of determining the amount of Combined EBITDA under this definition denominated in a foreign currency, the Parent Note Guarantors may, at its option, calculate the U.S. Dollar Equivalent amount of such Combined EBITDA based on either (i) the weighted average exchange rates for the relevant period used in the combined financial statements of the Parent Note Guarantors for such relevant period or (ii) the relevant currency exchange rate in effect on the Issue Date; and
(6) the amount of any fees payable by any person in the Restricted Group to another person in the Restricted Group or Millicom or any of its Subsidiaries in connection with any services rendered (including, without limitation, any Value Creation Fees and similar fees) shall be excluded.
For the purpose of calculating the Combined EBITDA of the Restricted Group, any Joint Venture EBITDA shall be added to the amount determined in accordance with the foregoing.
“Combined Interest Expense” means for any period the combined interest expense included in a combined income statement (without deduction of interest income) of the Parent Note Guarantors and their Restricted Group for such period calculated on a combined basis in
accordance with IFRS, including without limitation or duplication (or, to the extent not so included, with the addition of):
(1) the amortization of Debt discounts;
(2) any payments or fees with respect to letters of credit, bankers’ acceptances or similar facilities;
(3) fees with respect to interest rate swap or similar agreements or foreign currency hedge, exchange or similar agreements;
(4) Preferred Stock dividends (other than with respect to Redeemable Stock) declared paid or payable;
(5) accrued Redeemable Stock dividends whether or not declared or paid;
(6) interest on Debt guaranteed by any Parent Note Guarantors or any member of their Restricted Group; and
The term “Combined Interest Expense” shall not include:
(i) interest on Capital Lease Obligations; or
(ii) interest on Debt owed to Millicom or any Subsidiary of Millicom.
“Combined Total Assets” means, as of any date of determination, the total assets shown on the combined balance sheet of the Parent Note Guarantors and the Restricted Subsidiaries as of the most recent date for which such a balance sheet is available, determined on a combined basis in accordance with IFRS, calculated to give pro forma effect to any acquisition (including through mergers or consolidations) and dispositions that have occurred subsequent to such period, including any such acquisitions to be made with the proceeds of Debt giving rise to the need to calculate Combined Total Assets.
“Common Stock” of any Person means Capital Stock of such Person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person.
“Corporate Trust Office” means the office of the Indenture Trustee at which the corporate trust business of the Indenture Trustee under the Indenture is administered, which office is currently located at 240 Greenwich Street, New York, New York 10286, Attn: Corporate Trust Administration.
“Credit Facility” means, a debt facility, arrangement, instrument, trust deed, note purchase agreement, indenture, purchase money financing, commercial paper facility or overdraft facility with banks or other institutions or investors providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such
institutions or to special purpose entities formed to borrow from such institutions against such receivables), letters of credit or other Debt, in each case, as amended, restated, modified, renewed, refunded, replaced, restructured, refinanced, repaid, increased or extended, in whole or in part from time to time, and in each case, including all agreements, instruments and documents executed and delivered pursuant to or in connection with the foregoing (including, but not limited to, any notes and letters of credit issued pursuant thereto and any guarantee and collateral agreement, patent and trademark security agreement, mortgages or letter of credit applications and other guarantees, pledges, agreements, security agreements and collateral documents). Without limiting the generality of the foregoing, the term “Credit Facility” shall include any agreement or instrument (i) changing the maturity of any Debt Incurred thereunder or contemplated thereby, (ii) adding Subsidiaries of the Note Guarantors as additional borrowers or guarantors thereunder, (iii) increasing the amount of Debt Incurred thereunder or available to be borrowed thereunder or (iv) otherwise altering the terms and conditions thereof.
“Credit and Guaranty Agreement” has the meaning set forth in the recitals to this Indenture.
“Credit and Guaranty Agreement Information” has the meaning set forth in the Participation Agreement.
“Custodian” has the meaning set forth in Section 2.5(d).
“Debt” means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent:
(1) the principal of and premium, if any, in respect of every obligation of such Person for money borrowed;
(2) the principal of and premium, if any, in respect of every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments;
(3) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person (but only to the extent such obligations are not reimbursed within 30 days following receipt by such Person of a demand for reimbursement); and
(4) the principal component of every obligation of the type referred to in clauses (1) through (3) of another Person and all dividends of another Person the payment of which, in either case, such Person has Guaranteed or is responsible or liable for, directly or indirectly, as obligor, guarantor or otherwise to the extent not otherwise included in the Debt of such Person.
The “amount” or “principal amount” of Debt at any time of determination as used herein represented by (a) any Debt issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with IFRS, (b) any Redeemable Stock, shall be the maximum fixed redemption or repurchase price in respect thereof, and (c) any amount of Debt that has been cash-collateralized, to the
extent so cash-collateralized, shall be excluded from any calculation of Debt. Notwithstanding anything else to the contrary, for all purposes under the Indenture, the amount of Debt Incurred, repaid, redeemed, repurchased or otherwise acquired by a Restricted Subsidiary of the Parent Note Guarantors shall equal the liability in respect thereof determined in accordance with IFRS and reflected on the Parent Note Guarantors’ combined statement of financial position.
The term Debt shall not include:
(i) Cash Management Loans;
(ii) any liability of the Note Guarantors or any of their Subsidiaries attributable to a synthetic instrument or any other arrangement or agreement to the extent such obligation under the relevant instrument, arrangement or agreement has not come due but is classified as a financial liability in accordance with IFRS and recorded as a current liability on such Note Guarantors’ consolidated statement of financial position;
(iii) any Restricted MFS Cash;
(iv) any liability of the Note Guarantors attributable to a put option or similar instrument, arrangement or agreement entered into after the Issue Date granted by any Note Guarantor relating to an interest in any other entity, in each case to the extent such option has not been exercised or such obligation under the relevant instrument, arrangement or agreement has not come due but is classified as a financial liability in accordance with IFRS, and recorded as a current liability on such Note Guarantor’s consolidated statement of financial position;
(v) any standby letter of credit, performance bond or surety bond provided by a Note Guarantor or any Subsidiary that is customary in the Related Business to the extent such letters of credit or bonds are not drawn upon or, if and to the extent drawn upon, are honored in accordance with their terms;
(vi) any deposits or prepayments received by the Parent Note Guarantors or a Subsidiary from a customer or subscriber for its service and any other deferred or prepaid revenue;
(vii) any obligations to make payments in relation to earn outs;
(viii) Debt which is in the nature of equity (other than Redeemable Stock) or equity derivatives;
(ix) Capital Lease Obligations or operating leases;
(x) Receivables sold or discounted, whether recourse or non-recourse, including for the avoidance of doubt any debt in respect of Qualified Receivables Transactions, including without limitation guarantees by a Receivables Entity of the obligations of another Receivables Entity;
(xi) pension obligations or any obligation under employee plans or employment agreements;
(xii) any “parallel debt” obligations to the extent that such obligations mirror other Debt;
(xiii) any payments or liability for assets acquired or services supplied deferred (including trade payables) in accordance with the terms pursuant to which the relevant assets were or are to be acquired or services were or are to be supplied;
(xiv) the principal component or liquidation preference of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Redeemable Stock or, with respect to any Subsidiary, any Preferred Stock (including, in each case, any accrued dividends);
(xv) any Debt (contingent or otherwise) which, when incurred, is without recourse to any Parent Note Guarantor or any Restricted Subsidiary, as applicable; and
(xvi) the net obligations of such Person under any Interest Rate, Currency or Commodity Price Agreement.
“Declaration of Trust” has the meaning set forth in the preamble to this Indenture.
“Default” means an event that with the passing of time or the giving of notice, or both would constitute an Event of Default.
“Denomination Currency” has the meaning set forth in Section 15.10(b).
“Distribution Compliance Period” means, with regard to Notes offered and sold in their initial distribution outside the United States in reliance on Regulation S, the period of 40 consecutive days beginning on the later of (a) the date on which the Notes are first offered to Persons other than distributors (as defined in Regulation S) in reliance on Regulation S (according to a written notice to the Indenture Trustee by the Initial Purchasers thereof) and (b) the date on which the Notes are initially issued, authenticated and sold.
“DTC” means The Depository Trust Company.
“Electronic Means” means the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Indenture Trustee, or another method or system specified by the Indenture Trustee as available for use in connection with its services hereunder.
“Enforcer” means GTCS Enforcers Limited.
“Equity Offering” means a sale of Qualified Capital Stock of any Parent Note Guarantor or a Holding Company of any Parent Note Guarantor pursuant to which the Net Cash
Proceeds are contributed to such Parent Note Guarantor in the form of a subscription for, or a capital contribution in respect of, Qualified Capital Stock of such Parent Note Guarantor.
“Euroclear” means Euroclear Bank S.A./N.V., as operator of the Euroclear System, N.V.
“Event of Default” has the meaning specified in Section 8.1.
“Excess Proceeds” has the meaning set forth in Section 7.7 herein.
“Exchange Act” means the United States Securities Exchange Act of 1934, as amended and in effect from time to time.
“Excluded Contributions” means Net Cash Proceeds received by any Parent Note Guarantor from:
(i) contributions to its common equity capital;
(ii) Net Cash Proceeds from any stockholder loans; or
(iii) the sale (other than to a Subsidiary of any Parent Note Guarantor or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of any Parent Note Guarantor or any Subsidiary) of Capital Stock (other than Redeemable Stock) of any Parent Note Guarantor;
in each case designated as Excluded Contributions pursuant to an Officer’s Certificate executed by the principal financial officer of the relevant Parent Note Guarantor on the date such capital contributions are made or the date such equity interests are sold, as the case may be, and delivered to the Indenture Trustee.
“Expense Reimbursement and Indemnity Agreement” means the Expense Reimbursement and Indemnity Agreement, dated as of February 3, 2022, by and among the Borrower, the Loan Guarantors, the Lender, the Cayman Trustee, the Enforcer, the Indenture Trustee and the Authorized Agents.
“Financing Statement” has the meaning specified in Section 9-102(a)(39) of the UCC.
“Fitch” means Fitch Ratings Ltd., and its successors.
“GAAP” means generally accepted accounting principles in the United States.
“Global Note” means any Note issued in fully-registered certificated form to the Registered Depositary (or its nominee), as depositary for the beneficial owners thereof, which shall be substantially in the form of Exhibit A, with appropriate legends as specified in Exhibit A.
“Governmental Approval” means any authorization, consent, approval, order, license, franchise, ruling, permit, certification, waiver, exemption, filing or registration by or with any Governmental Authority (including, without limitation, environmental approvals, zoning variances, special exceptions and non-conforming uses) relating to the execution, delivery or performance of any Transaction Document.
“Government Securities” means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States is pledged and which have a remaining weighted average life to maturity of not more than one year from the date of Investment therein.
“Governmental Authority” means the government of Guatemala or of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“Gradation” means a gradation within a Rating Category or a change to another Rating Category, which shall include: (i) “+” and “-” in the case of Fitch’s current Rating Categories (e.g., a decline from BB+ to BB would constitute a decrease of one Gradation), (ii) 1, 2 and 3 in the case of Moody’s current Rating Categories (e.g., a decline from Ba1 to Ba2 would constitute a decrease of one Gradation), or (iii) the equivalent in respect of successor Rating Categories of Fitch or Moody’s or Rating Categories used by Rating Agencies other than Fitch and Moody’s.
“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guaranteeing, any Debt of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person
(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt;
(2) to purchase property, securities or services for the purpose of assuring the holder of such Debt of the payment of such Debt; or
(3) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt (and “Guaranteed,” “Guaranteeing” and “Guarantor” shall have meanings correlative to the foregoing); provided, however, that the Guarantee by any Person shall not include endorsements by such Person for collection or deposit, in either case, in the ordinary course of business.
“Guaranteed Obligations” has the meaning set forth in Section 14.1.
“Note Guarantors” has the meaning set forth in the preamble to this Indenture.
“Holding Company” means any Person (other than a natural person) which legally and Beneficially Owns more than 50% of the Voting Stock and/or Capital Stock of another Person, either directly or through one or more Subsidiaries.
“IFRS” means the International Financial Reporting Standards promulgated by the International Accounting Standards Board or any successor board or agency as in effect on the Issue Date; provided that the Parent Note Guarantors may, at any time, irrevocably elect by written notice to the Indenture Trustee to use IFRS as in effect from time to time, and, upon such notice, references herein to IFRS shall thereafter be construed to mean IFRS as in effect from time to time. The Parent Note Guarantors also may, at any time, irrevocably elect by written notice to the Indenture Trustee to use GAAP as in effect from time to time in lieu of IFRS and, upon such notice, references herein to IFRS shall thereafter be construed to mean GAAP as in effect from time to time.
“Incur” means, with respect to any Debt or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or otherwise become liable in respect of such Debt or other obligation, including by acquisition of Subsidiaries (the Debt of any other Person becoming a Subsidiary of such Person being deemed for this purpose to have been incurred at the time such other Person becomes a Subsidiary), or the recording, as required pursuant to IFRS or otherwise, of any such Debt or other obligation on the balance sheet of such Person (and “Incurrence,” “Incurred,” “Incurrable” and “Incurring” shall have meanings correlative to the foregoing); provided, however, that a change in IFRS that results in an obligation of such Person that exists at such time becoming Debt shall not be deemed an Incurrence of such Debt.
“Indenture” has the meaning set forth in the preamble to this Indenture.
“Indenture Trustee” means the Person named as the “Indenture Trustee” in the preamble to this Indenture and its successors and assigns.
“Initial Notes” has the meaning set forth in the recitals to this Indenture.
“Initial Purchasers” means Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, BNP Paribas Securities Corp. and Scotia Capital (USA) Inc. with respect to the initial issuance of the Initial Notes hereunder and such other parties as may be identified in a supplemental indenture with respect to any Additional Notes.
“Interest Rate” has the meaning set forth in Section 2.8.
“Interest Rate, Currency or Commodity Price Agreement” of any Person means any forward contract, futures contract, swap, option or other financial agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements) relating to, or the value of which is dependent upon, interest rates, currency exchange rates or commodity prices or indices (excluding contracts for the purchase or sale of goods in the ordinary course of business).
“Interest Payment Date” has the meaning set forth in Section 2.8.
“Intergroup Subordinated Loans” means (a) Debt of the Restricted Group owed to Millicom or any of its Subsidiaries (other than the Restricted Group), and (b) Debt of Millicom or any of its Subsidiaries (other than the Restricted Group) owed to any of the Restricted Group that, in each case, (1) it will not have the benefit of any negative pledge covenant, collateral or security interest, (2) the terms of which provide that, in the event that (a) an installment of interest with respect to such Debt is not paid on the applicable interest payment date or (b) the principal of, or premium, if any, on any such Debt is not paid on the stated maturity or other date set for redemption, then the obligation to make such payment on such interest payment date, maturity date or other redemption date will not be a default under such Debt until after the maturity date of the Notes, and (3) the terms of which provide that no amount will be payable in bankruptcy, liquidation or any similar proceeding with respect to the Person Incurring such Debt until all claims of senior creditors of such Person, including, without limitation, the Noteholders, admitted in such proceeding have been satisfied.
“Investment” by any Person means any direct or indirect loan, advance or other extension of credit or capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) to, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Debt issued by, any other Person, including any payment on a Guarantee of any obligation of such other Person, but shall not include (a) trade accounts receivable in the ordinary course of business on credit terms made generally available to the customers of such Person, or (b) commission, travel, payroll, entertainment, relocation and similar advances to officers and employees and profit sharing and other employee benefit plan contributions made in the ordinary course of business.
“Investment Company Act” means the United States Investment Company Act of 1940, as amended.
“Investment Grade” means (i) BBB- or above in the case of Fitch (or its equivalent under any successor Rating Categories of Fitch), (ii) Baa3 or above, in the case of Moody’s (or its equivalent under any successor Rating Categories of Moody’s), and (iii) the equivalent in respect of the Rating Categories of any other Rating Agencies.
“Issue Date” has the meaning set forth in Section 2.8.
“Issuer” has the meaning set forth in the preamble to this Indenture.
“Issuer Order” means a written request or order signed in the name of the Issuer by one or more of its Authorized Representatives and, in the case of an Issuer Order given pursuant to Section 2.2, substantially in the form of Exhibit B.
“Joint Venture EBITDA” means an amount equal to the product of (i) the Combined EBITDA of any joint venture (determined in good faith by a responsible financial or accounting officer of the Parent Note Guarantor on the same basis as provided for in the
definition of “Combined EBITDA” (with the exception of clause (i) and the last sentence thereof) as if each reference to the “Parent Note Guarantor” in such definition was to such joint venture) whose financial results are not consolidated with those of any Parent Note Guarantor in accordance with IFRS and (ii) a percentage equal to the direct equity ownership percentage of the Parent Note Guarantor and/or their respective Subsidiaries in the Capital Stock of such joint venture and its Subsidiaries.
“Judgment Currency” has the meaning set forth in Section 15.10(b).
“Law” means any constitutional provision, law, statute, rule, regulation, ordinance, treaty, order, decree, judgment, decision, certificate, holding, injunction, enforceable at law or in equity, along with the interpretation and administration thereof by any Governmental Authority charged with the interpretation or administration thereof.
“LCT Election” has the meaning set forth in Section 7.9.
“LCT Test Date” has the meaning set forth in Section 7.9.
“Lender” has the meaning set forth in the recitals to this Indenture.
“Leverage Ratio,” when used in connection with any Incurrence (or deemed Incurrence) of Debt, means the ratio of (i) the principal amount of Debt of the Note Guarantors and their Restricted Group on a combined basis outstanding as of the most recent available quarterly or annual balance sheet, after giving pro forma effect to (a) the Incurrence of such Debt and any other Debt Incurred since such balance sheet date, (b) the receipt and application of the proceeds thereof and (c) (without duplication) the repayment, redemption or repurchase of any other Debt since such balance sheet date, to (ii) Combined EBITDA for the last four full fiscal quarters prior to the Incurrence of such Debt for which combined financial statements are available, determined on a pro forma basis as if any such Debt had been Incurred and the proceeds thereof had been applied, or such other Debt had been repaid, redeemed or repurchased, as applicable, at the beginning of such four fiscal quarter period.
“Lien” means, with respect to any property or assets, any mortgage, pledge, security interest, lien, charge, encumbrance, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing).
“Limited Condition Transaction” means (i) any Investment or acquisition, in each case, by one or more of the Parent Note Guarantors and their Subsidiaries of any assets, business or Person whose consummation is not conditioned on the availability of, or on obtaining, third party financing and (ii) any redemption, repurchase, defeasance, satisfaction and discharge or repayment of Debt requiring irrevocable notice in advance of such redemption, repurchase, defeasance, satisfaction and discharge or repayment.
“Loan” has the meaning set forth in the recitals to this Indenture.
“Loan Collection Account” has the meaning set forth in Section 3.1.
“Loan Event of Default” has the meaning assigned to the term “Event of Default” under Section 10 of the Credit and Guaranty Agreement.
“Loan Guarantee” has the meaning set forth under “Guaranty” in Section 1.01 of the Credit and Guaranty Agreement.
“Loan Guarantors” has the meaning set forth in the preamble to this Indenture.
“Material Adverse Effect” means a material adverse effect on (a) the ability of the Issuer to perform its material obligations under this Indenture or any other Transaction Document, or (b) the rights of the Indenture Trustee, acting on behalf of the Noteholders, or such Noteholders, under any of the Transaction Documents.
“Market Capitalization” means an amount equal to (i) the total number of issued and outstanding shares of Capital Stock of the Borrower on the date of the declaration of the relevant dividend, multiplied by (ii) the arithmetic mean of the closing prices per share of such Capital Stock for the 30 consecutive trading days immediately preceding the date of the declaration of such dividend.
“Maturity” when used with respect to any Note, means the date on which the principal of such Note becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
“Maturity Date” has the meaning set forth in Section 2.7.
“Millicom” means Millicom International Cellular S.A.
“Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.
“Non-U.S. Person” means any Person who is not a “U.S. Person” as defined in Regulation S under the Securities Act.
“Net Available Proceeds” from any Asset Disposition means cash or readily marketable cash equivalents received (including by way of sale or discounting of a note, installment receivable or other receivable, but excluding any Related Assets and other consideration received in the form of assumption by the acquiror of Debt or other obligations relating to such properties or assets) therefrom by any Parent Note Guarantor or any Restricted Subsidiary, net of:
(1) all legal, title and recording tax expenses, commissions and other fees and expenses Incurred and all federal, state, provincial, foreign and local taxes required to be accrued as a liability as a consequence of such Asset Disposition;
(2) all payments made by any Parent Note Guarantor or any Restricted Subsidiary, on any Debt which is secured by such assets in accordance with the terms of
any Lien upon or with respect to such assets or which must by the terms of such Debt or Lien, or in order to obtain a necessary consent to such Asset Disposition or by applicable law, be repaid out of the proceeds from such Asset Disposition;
(3) all distributions and other payments made to other equity holders in the Parent Note Guarantors’ Restricted Subsidiaries, or joint ventures as a result of such Asset Disposition; and
(4) appropriate amounts to be provided by the Parent Note Guarantors or any Restricted Subsidiary, as the case may be, as a reserve in accordance with IFRS, against any liabilities associated with such assets and retained by the Parent Note Guarantors or any Restricted Subsidiary, as the case may be, after such Asset Disposition, including, without limitation, liabilities under any indemnification obligations and severance and other employee termination costs associated with such Asset Disposition, in each case as determined by the Board of Directors, in its reasonable good faith judgment evidenced by a Board Resolution filed with the Indenture Trustee; provided, however, that any reduction in such reserve within twelve months following the consummation of such Asset Disposition will be treated for all purposes of the Indenture and the Notes as a new Asset Disposition at the time of such reduction with Net Available Proceeds equal to the amount of such reduction.
“Net Cash Proceeds” with respect to any issuance or sale of Capital Stock or any Incurrence of Debt, means the cash proceeds of such issuance or sale or such Incurrence net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, listing fees, discounts or commissions and brokerage, consultant and other fees, expenses and charges actually Incurred in connection with such issuance or sale or such Incurrence and net of taxes paid or payable (in the good faith determination of the Parent Note Guarantors) in connection with such issuance or sale or such Incurrence (including any repatriation of the proceeds of such sale or Incurrence).
“Note Additional Amounts” has the meaning set forth in Section 2.16.
“Notes Asset Sale Offer” has the meaning set forth in Section 7.7(e).
“Note Guarantee” has the meaning set forth in Section 14.1(a).
“Note Interest” means interest on the Notes at a fixed rate of 5.125% per annum.
“Note Redemption Event” has the meaning set forth in Section 4.1(a).
“Note Register” has the meaning set forth in Section 2.13.
“Note Registrar” means any Person acting as note registrar pursuant to Section 2.13.
“Noteholder” means a Person in whose name a Note is registered in the Note Register.
“Notes” has the meaning set forth in the recitals to this Indenture.
“Notes Change of Control Offer” has the meaning set forth in Section 4.2(b).
“Obligations” has the meaning set forth in Section 5.1.
“Offering Memorandum” means the final offering memorandum dated January 27, 2022 relating to the Notes.
“Officer’s Certificate” means a certificate signed by the President, Chairman of the board of directors, any Vice Chairman of the board of directors, any Director, the Chief Executive Officer, the Chief Financial Officer, any Senior Vice President, or the Secretary of the board of directors of any Person, or in the case of the Issuer, by any authorized representative thereof, and delivered to the Indenture Trustee.
“Opinion of Counsel” means a written opinion of counsel in compliance with the requirements of Section 15.1 hereof from any Person either expressly referred to herein or otherwise reasonably satisfactory to the Indenture Trustee which may include, without limitation, counsel for such Person, whether or not such counsel is an employee of such Person.
“Optional Redemption Event” has the meaning set forth in Section 4.1(a).
“Other Taxes” has the meaning set forth in the Credit and Guaranty Agreement.
“Outstanding”, when used with respect to Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:
(i) Notes theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation;
(ii) Notes for whose payment or redemption money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent (other than a Note Guarantor) in trust or set aside and segregated in trust by a Note Guarantor (if such Note Guarantor shall act as its own Paying Agent) for the Noteholders of such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and
(iii) Notes which have been paid or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Indenture Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such Notes are valid obligations of the Parent Note Guarantors;
provided, however, that in determining whether the holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by any Note Guarantor or any other
obligor upon the Notes or any Affiliate of any Note Guarantor or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer of the Indenture Trustee receives written notice confirming that such Notes are so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not any Note Guarantor or any other obligor upon the Notes or any Affiliate of any Note Guarantor or of such other obligor.
“Parent Note Guarantor” has the meaning set forth in the preamble to this Indenture.
“Parent Note Guarantor Expenses” means (A) the reasonable fees and expenses actually incurred in connection with servicing of the Loan and the Notes or any exchange of securities or tender for outstanding Notes, (B) fees, taxes and expenses required to maintain the corporate existence of the Note Guarantors, and (C) any other fees and expenses relating to (A) or (B).
“Participation” means a 100% interest in all of the Lender’s rights under the Credit and Guaranty Agreement, the Loan, and all guarantees, security agreements, mortgages, deeds of trust, letters of credit, reimbursement agreements, waivers, amendments, modifications, supplements, forbearances, intercreditor agreements, subordination agreements and all other agreements, documents or instruments executed and delivered in connection therewith acquired by the Issuer pursuant to the Participation Agreement.
“Participation Agreement” has the meaning set forth in the recitals to this Indenture.
“Pari Passu Debt” means any Debt of the Note Guarantors that ranks pari passu in right of payment to the Loan and the Guarantees.
“Paying Agents” mean the Persons named as paying agents in the preamble to this Indenture, each other paying agent appointed pursuant to this Indenture and each of their respective successors and assigns.
“Payment Account” means the account contemplated in Section 3.2 hereof.
“Payment Date” means any of the Interest Payment Dates, the Maturity Date or any other date on which payments on the Notes in respect of principal, interest or other amounts are required to be paid pursuant to this Indenture and the Notes.
“Permitted Asset Swap” means the concurrent purchase and sale or exchange of related business assets or a combination of related business assets, cash and Cash Equivalents between the Parent Note Guarantors or any of their Subsidiaries and another Person.
“Permitted Debt” has the meaning set forth in Section 7.1(b).
“Permitted Investments” means:
(1) Investments in (i) Cash Equivalents or (ii) deposit accounts, certificates of deposit and time deposits and money market deposits, bankers’ acceptances and overnight bank deposits, in each case issued by or with a bank or trust company which is organized under the laws of the jurisdiction in which the Note Guarantor or Restricted Subsidiary which makes such Investment operates; provided that the Parent Note Guarantors shall use their reasonable efforts to ensure that any such bank or trust company described in this clause (ii) is a credit-worthy institution;
(2) Investments by any Parent Note Guarantor or any Restricted Subsidiary in a Note Guarantor or a Restricted Subsidiary that is primarily engaged in a Related Business;
(3) Investments by a Parent Note Guarantor or any Restricted Subsidiary in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary that is primarily engaged in a Related Business or (ii) such Person is merged, consolidated or amalgamated into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, a Note Guarantor or a Restricted Subsidiary that is primarily engaged in a Related Business;
(4) Investments acquired as consideration as permitted under “Limitation on Asset Dispositions”;
(5) Restricted Payments directly or indirectly to a Parent Note Guarantor to fund permitted Parent Note Guarantor Expenses;
(6) Reasonable and customary payments to or on behalf of any of the directors, officers or employees of the Restricted Group or Millicom or any of its Subsidiaries, or in reimbursement of reasonable and customary payments or reasonable and customary expenditures made or Incurred by such Persons as directors, officers or employees;
(7) Investments in customers and suppliers in the ordinary course of business which either (A) generate accounts receivable or (B) are accepted in settlement of bona fide disputes;
(8) loans or advances to employees and officers (or loans to any direct or indirect parent, the proceeds of which are used to make loans or advances to employees or officers, or Guarantees of third-party loans to employees or officers) in the ordinary course of business;
(9) stock, obligations or securities received in satisfaction of judgments, foreclosure of liens or settlement of debts (whether pursuant to a plan of reorganization or similar arrangement or otherwise);
(10) any Investment existing on the Issue Date;
(11) Investments in Interest Rate, Currency or Commodity Price Agreements not otherwise prohibited under the Indenture;
(12) Investments in Millicom or any Subsidiary of Millicom for the purpose of acquiring any property so long as such acquired property is transferred to the Parent Note Guarantor or a Restricted Subsidiary within 60 days of such Investment;
(13) Investments made pursuant to Section 7.7(a)(3)(i)(D), (E) and (F);
(14) Cash Management Loans;
(15) Intergroup Subordinated Loans; and
(16) other Investments in Persons primarily engaged in a Related Business in an aggregate cumulative amount at any time outstanding not to exceed US$50,000,000.
“Permitted Liens” means:
(1) Liens for taxes, assessments or governmental charges or levies on the property of any Parent Note Guarantor or any Restricted Subsidiary if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceeds promptly instituted and diligently concluded; provided that any reserve or other appropriate provision that shall be required in conformity with IFRS shall have been made therefor;
(2) Liens imposed by law, such as statutory Liens of landlords’, carriers’, warehousemen’s and mechanics’ Liens and other similar Liens, on the property of any Parent Note Guarantor or any Restricted Subsidiary arising in the ordinary course of business or Liens arising solely by virtue of any statutory or common law (but not contractual) provisions relating to bankers’ liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depositary institution;
(3) Liens on the property of any Parent Note Guarantor or any Restricted Subsidiary Incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance bids, trade contracts, letters of credit performance or return-of-money bonds, surety bonds, obligations in connection with a bid or other process for the award or acquisition of a telecommunications license or usufruct right, or other obligations of a like nature and Incurred in a manner consistent with industry practice, in each case which are not Incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property and which do not in the aggregate impair in any material respect the use of property in the operation of the business of the Parent Note Guarantors and the Restricted Group taken as a whole;
(4) Liens on property at the time any Parent Note Guarantor or any Restricted Subsidiary acquired such property, including any acquisition by means of a merger or
consolidation with or into any Parent Note Guarantor or any Restricted Subsidiary; provided, however, that any such Lien may not extend to any other property of any Parent Note Guarantor or any Restricted Subsidiary;
(5) Liens on the property of a Person at the time such Person becomes a Restricted Subsidiary; provided, however, that any such Lien may not extend to any other property of any Parent Note Guarantor, any other Restricted Subsidiary that is not a direct or, prior to such time, indirect Subsidiary of such Person, other than pursuant to after-acquired property clauses in effect with respect to such Lien at the time of acquisition of property of the type that would have been subject to such Lien notwithstanding the occurrence of such acquisitions;
(6) pledges or deposits by any Parent Note Guarantor or any Restricted Subsidiary under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Debt) or leases to which any Parent Note Guarantor or any Restricted Subsidiary is party, or deposits to secure public or statutory obligations of any Parent Note Guarantor or any Restricted Subsidiary or deposits for the payment of rent, in each case Incurred in the ordinary course of business;
(7) utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character;
(8) Liens in favor of a credit card processor arising in the ordinary course of business under any processor agreement;
(9) any provision for the retention of title to any property by the vendor or transferor of such property which property is acquired by any Parent Note Guarantor or a Restricted Subsidiary in a transaction entered into in the ordinary course of business of any Parent Note Guarantor or a Restricted Subsidiary and for which kind of transaction it is customary market practice for such retention of title provision to be included;
(10) Liens arising by means of any judgment, decree or order of any court, to the extent not otherwise resulting in a Default hereunder so long as any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order have not been fully terminated or the period within which such proceedings may be initiated has not expired and any Liens that are required to protect or enforce rights in any administrative, arbitration or other court proceeding in the ordinary course of business;
(11) Liens securing any Credit Facility permitted under Section 7.1(b)(iii) or any Interest Rate, Currency or Commodity Price Agreement;
(12) Liens on and pledges of the Capital Stock of any Unrestricted Subsidiary to secure Debt of that Unrestricted Subsidiary;
(13) mortgages, liens, security interests, restrictions, encumbrances or any other matters of record that have been placed by any developer, landlord or other third party on property over which any Parent Note Guarantor or any Restricted Subsidiary has easement rights or on any real property leased by any Parent Note Guarantor or any Restricted Subsidiary or similar agreements relating thereto and any condemnation or eminent domain proceedings or compulsory purchase order affecting real property;
(14) Liens existing on the date of the Indenture;
(15) Liens in favor of any Parent Note Guarantor or any Restricted Subsidiary;
(16) Liens on insurance policies and the proceeds thereof, or other deposits, to secure insurance premium financings in respect of any Parent Note Guarantor or any of its Restricted Subsidiaries;
(17) Liens arising from financing statement filings (or other similar filings in any applicable jurisdiction) regarding operating leases entered into by any Restricted Subsidiary of the Parent Note Guarantors in the ordinary course of business;
(18) Liens on goods (and the proceeds thereof) and documents of title and the property covered thereby securing Debt in respect of commercial letters of credit issued to facilitate the purchase, shipment or storage of such inventory or other goods;
(19) Liens for the purpose of securing the payment of all or a part of the purchase price of Capital Lease Obligations or payments Incurred by the Parent Note Guarantors or their respective Subsidiaries to finance the acquisition, improvement or construction of, assets or property acquired or constructed in the ordinary course of business; provided that such Liens do not encumber any other assets or property of any Parent Note Guarantor or any Restricted Subsidiary other than such assets or property and assets affixed or appurtenant thereto;
(20) Liens on property of any Parent Note Guarantor or any Restricted Subsidiary to secure Debt Incurred by any Parent Note Guarantor or such Restricted Subsidiary pursuant to clauses (viii), (ix), (x), and (xi) of the definition of Permitted Debt set forth in Section 7.1(b);
(21) Liens on the property of any Parent Note Guarantor or any Restricted Subsidiary to replace in whole or in part, any Lien described in the foregoing clauses (1) through (19); provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Debt being refinanced or in respect of property that is the security for a Permitted Lien hereunder;
(22) Any interest or title of a lessor under any Capital Lease Obligation or operating lease;
(23) Liens on any escrow account used in connection with an acquisition of property or Capital Stock of any Person or pre-funding a refinancing of Debt otherwise permissible by the Indenture;
(24) Liens on any Parent Note Guarantor’s and any of their respective Subsidiaries’ deposits in favor of financial institutions arising from any netting or set-off arrangement substantially consistent with its current practice for the purpose of netting debt and credit balances substantially consistent with the Parent Note Guarantor’s or the Subsidiaries existing future cash pooling arrangements;
(25) Liens Incurred in the ordinary course of business of the Parent Note Guarantors or any Restricted Subsidiary with respect to obligations that do not exceed the greater of US$100,000,000 or 6% of the Combined Total Assets at any one time outstanding and that do not in the aggregate materially detract from the value of the property of the Parent Note Guarantors and the Restricted Subsidiaries, taken as a whole, or materially impair the use thereof in the operation of business by such Parent Note Guarantor or such Restricted Subsidiary;
(26) Liens over cash or other assets that secure collateralized obligations Incurred as Permitted Debt; provided that the amount of cash collateral does not exceed the principal amount of the Permitted Debt;
(27) Liens on Receivables and related assets of the type described in the definition of “Qualified Receivables Transaction” Incurred in connection with a Qualified Receivables Transaction, and Liens on Investments in Receivables Entities;
(28) Liens consisting of any right of set-off granted to any financial institution acting as a lockbox bank in connection with a Qualified Receivables Transaction;
(29) Liens for the purpose of perfecting the ownership interests of a purchaser of Receivables and related assets pursuant to any Qualified Receivables Transaction;
(30) Liens arising in connection with other sales of Receivables permitted hereunder without recourse to any Parent Note Guarantor or any of the Restricted Subsidiaries;
(31) Liens securing Debt or other obligations of a Restricted Subsidiary owing to any Parent Note Guarantor or another Restricted Subsidiary;
(32) Liens in respect of the ownership interests in, or assets owned by, any joint ventures or similar arrangements, other than joint ventures and similar arrangements that are Restricted Subsidiaries, securing obligations of such joint ventures or similar agreements;
(33) any encumbrance or restriction (including, but not limited to, put and call arrangements) with respect to Capital Stock of any joint venture or similar arrangement pursuant to any joint venture or similar agreement;
(34) Liens for the benefit of the Lender or the Noteholders; and
(35) Liens over rights under loan agreements relating to, or over notes or similar instruments evidencing, the on-loan of proceeds received by a Restricted Subsidiary from the issuance of Debt, which Liens are created to secure payment of such Debt.
“Permitted Refinancing Debt” means any renewals, extensions, substitutions, defeasances, discharges, refinancings or replacements (each, for purposes of this definition and clause (vii) of the definition of Permitted Debt, a “refinancing”) of any Debt of the Note Guarantors or the Restricted Subsidiaries or pursuant to this definition, including any successive refinancings, as long as:
(i) such Permitted Refinancing Debt is in an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) not in excess of the sum of: (a) the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value plus all accrued interest) then outstanding of the Debt being refinanced; and (b) an amount necessary to pay any fees and expenses, including premiums and defeasance costs, related to such refinancing;
(ii) such Permitted Refinancing Debt has (a) a Stated Maturity that is either (1) no earlier than the Stated Maturity of the Debt being refinanced or (2) after the Stated Maturity of the Notes and (b) a Weighted Average Life to Maturity that is equal to or greater than the Weighted Average Life to Maturity of the Debt being refinanced;
(iii) if the Debt being refinanced is subordinated in right of payment to the Note Guarantee and the Loan, such Permitted Refinancing Debt is subordinated in right of payment to the Note Guarantee and the Loan on terms at least as favorable to the Noteholders as those contained in the documentation governing the Debt being refinanced; and
(iv) if a Note Guarantor was the obligor on the Debt being refinanced, such Permitted Refinancing Debt is Incurred by such Note Guarantor.
Permitted Refinancing Debt in respect of any Credit Facility or any other Debt may be Incurred from time to time after the termination, discharge or repayment of all or any part of such Credit Facility or other Debt.
“Person” means any natural person, corporation, company, voluntary association, partnership, limited liability company, joint venture, trust, unincorporated organization or Governmental Authority or other entity of whatever nature.
“Place of Payment”, when used with respect to the Notes, means the offices or agencies maintained pursuant to Section 9.11 and such other place or places, if any, specified by the Issuer for such purpose; provided, however, that so long as the Notes are held in the name of the Registered Depositary or its nominee, the Indenture Trustee or such Paying Agent will make
such payments to the Registered Depositary or its nominee, as the case may be, in accordance with the Registered Depositary’s Applicable Procedures.
“Predecessor Notes”, with respect to any particular Note, means any previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; for the purposes of this definition, any Note authenticated and delivered under Section 2.14 in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the lost, destroyed or stolen Note.
“Preferred Stock” of any Person means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, provisional liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person.
“Prepayment Amount” means all amounts paid by the Borrower to the Lender pursuant to the Credit and Guaranty Agreement as a result of a Note Redemption Event.
“Process Agent” has the meaning set forth in Section 15.15.
“Promissory Note” has the meaning set forth in the Credit and Guaranty Agreement.
“Purchase Money Obligations” means any Debt Incurred to finance or refinance the acquisition, leasing, construction or improvement of property (real or personal) or assets (including Capital Stock), and whether acquired through the direct acquisition of such property or assets or the acquisition of the Capital Stock of any Person owning such property or assets, or otherwise.
“QIB” means a qualified institutional buyer as defined in Rule 144A under the Securities Act.
“Qualified Capital Stock” of any Person means any and all Capital Stock of such Person other than Redeemable Stock.
“Qualified Purchaser” means a qualified purchaser as defined in Section 2(a)(51) of the Investment Company Act.
“Qualified Receivables Transaction” means any transaction or series of transactions that may be entered into by any Parent Note Guarantor or any of the Restricted Subsidiaries pursuant to which any Parent Note Guarantor or any of the Restricted Subsidiaries may sell, convey or otherwise transfer to (i) a Receivables Entity (in the case of a transfer by any Parent Note Guarantor or any of the Restricted Subsidiaries) and (ii) any other Person (in the case of a transfer by a Receivables Entity), or may grant a Lien in, any Receivables (whether now existing or arising in the future) of any Parent Note Guarantor or any of the Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such Receivables, all contracts and all Guarantees or other obligations in respect of such
accounts receivable, the proceeds of such Receivables and other assets which are customarily transferred, or in respect of which Liens are customarily granted, in connection with asset securitization involving Receivables and any Interest Rate, Currency or Commodity Price Agreement entered into by any such Parent Note Guarantor or any such Restricted Subsidiary in connection with such Receivables.
“Rating Agency” means each of (i) Fitch, Moody’s and S&P or (ii) if any of Fitch, Moody’s or S&P are not making ratings of the Notes publicly available, an internationally recognized rating agency or agencies as the case may be, selected by the Borrower, which will be substituted for such Rating Agency that is not making ratings of the Notes publicly available.
“Rating Category” means (i) with respect to Fitch, any of the following categories (any of which may include a “+” or “—”): AAA, AA, A, BBB, BB, B, CCC, CC, C, R, SD and D (or equivalent successor categories); (ii) with respect to Moody’s, any of the following categories (any of which may include a “1,” “2” or “3”): Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C (or equivalent successor categories), and (iii) the equivalent of any such categories of Fitch or Moody’s used by another Rating Agency, if applicable.
“Rating Decline” means the occurrence if at any time within the earlier of (i) 90 days after the date of public notice of a Change of Control, or of any Parent Note Guarantors’ intention or the intention of any Person to effect a Change of Control and (ii) the occurrence of the Change of Control (which period shall in either event be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by a Rating Agency), the rating of the Notes is decreased by a Rating Agency by two or more Gradations expressly stated to be due to a Change of Control.
“Receivable” means a right to receive payment arising from a sale or lease of goods or the performance of services by a Person pursuant to an arrangement with another Person pursuant to which such other Person is obligated to pay for goods or services under terms that permit the purchase of such goods and services on credit and shall include, in any event, any items of property that would be classified as an “account,” “chattel paper,” “payment intangible” or “instrument” under the Uniform Commercial Code as in effect in the State of New York and any “supporting obligations” as so defined.
“Receivables Entity” means a Wholly Owned Subsidiary of any of the Parent Note Guarantors (or another Person in which the Parent Note Guarantors or any Subsidiary make an Investment or to which a Parent Note Guarantor or any Subsidiary transfers Receivables and related assets) which engages in no activities other than in connection with the financing of Receivables and which is designated by the Board of Directors or senior management of a Parent Note Guarantor (as provided below) as a Receivables Entity:
(i) no portion of the Debt or any other obligations (contingent or otherwise) of which:
(a) is Guaranteed by any Parent Note Guarantor or any of their Subsidiaries (excluding Guarantees of obligations (other than the principal of, and interest on, Debt) pursuant to Standard Securitization Undertakings);
(b) is recourse to or obligates any Parent Note Guarantor or any of their Subsidiaries in any way other than pursuant to Standard Securitization Undertakings; or
(c) subjects any property or asset of any Parent Note Guarantor or any of their Subsidiaries, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings except, in each such case, Permitted Liens as defined in clauses (26) through (29) of the definition thereof;
(ii) with which neither the Parent Note Guarantors nor any of their Subsidiary has any material contract, agreement, arrangement or understanding (except in connection with a Purchase Money Obligation or Qualified Receivables Transaction) other than on terms not materially less favorable to such Parent Note Guarantor or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Parent Note Guarantors, other than fees payable in the ordinary course of business in connection with servicing Receivables; and
(iii) to which neither the Parent Note Guarantors nor any of their Subsidiaries have any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results (other than those related to or incidental to the relevant Qualified Receivables Transaction).
Any such designation by the Board of Directors or senior management of the Parent Note Guarantors shall be evidenced to the Indenture Trustee by promptly filing with the Indenture Trustee a certified copy of the Board Resolutions of the applicable Parent Note Guarantor giving effect to such designation or an Officer’s Certificate certifying that such designation complied with the foregoing conditions.
“Receivables Repurchase Obligation” means any obligation of a seller of Receivables in a Qualified Receivables Transaction to repurchase Receivables arising as a result of a breach of a representation, warranty or covenant or otherwise, including as a result of a receivable or portion thereof becoming subject to any asserted defense, dispute, offset or counterclaim of any kind as a result of any action taken by, any failure to take action by or any other event relating to the seller.
“Record Date” means the January 18 or July 18, as the case may be, immediately preceding an interest payment date.
“Redeemable Stock” of any Person means any Capital Stock of such Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or otherwise (including upon the occurrence of an event) matures or is required to
be redeemed (pursuant to any sinking fund obligation or otherwise) or is convertible into or exchangeable for Debt or is redeemable at the option of the holder thereof, in whole or in part, at any time prior to the final Stated Maturity of the Notes or the Loan.
“Registered Depositary” means The Depository Trust Company, having a principal office at 55 Water Street, New York, New York 10041-0099, together with any Person succeeding thereto by merger, consolidation or acquisition of all or substantially all of its assets, including substantially all of its securities payment and transfer operations.
“Regulation S” means Regulation S promulgated under the Securities Act, as amended and in effect from time to time.
“Regulation S Note” means a Note sold in reliance on Regulation S, including a Regulation S Unrestricted Global Note, required to bear the Restrictive Legend provided for in Exhibit A-2.
“Regulation S Unrestricted Global Note” has the meaning set forth in Section 2.5(b)
“Related Assets” means all assets, rights (contractual or otherwise) and properties, whether tangible or intangible (including ownership interests), used or intended for use in connection with a Related Business.
“Related Business” means any business in which any Parent Note Guarantor or their Subsidiaries are engaged, directly or indirectly, that consists primarily of, or are related to, operating, acquiring, developing or constructing any telecommunications, media or financial services (including, without limitation, fixed and mobile telephony, broadband internet, network- related services, cable television, satellite television, broadcast, music and video related content, software, applications, value-added services (VAS), network-neutral services, electronic transactional, financial and commercial services related to the remittance of money, including licensed banking operations, or provision of telephony or internet services) and related businesses.
“Related Person” of any Person means any other Person directly or indirectly owning (a) 5% or more of the outstanding Common Stock of such Person (or, in the case of a Person that is not a corporation, 5% or more of the equity interest in such Person) or (b) 5% or more of the combined voting power of the Voting Stock of such Person.
“Relevant Taxing Jurisdiction” means Guatemala, the Cayman Islands, the United States, or any other jurisdiction from or through which payments under the Credit and Guaranty Agreement, the Participation Agreement, the Expense Reimbursement and Indemnity Agreement, this Indenture or the Notes are made, or any political subdivision thereof or any authority therein having power to tax.
“Required Holders” means Noteholders of more than 50% of the aggregate principal amount of the Outstanding Notes.
“Responsible Officer” means, any officer of the Indenture Trustee with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer of the Indenture Trustee to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.
“Restricted Cash” means the amount of cash that would be stated as “restricted cash” on the combined statement of financial position of the Parent Note Guarantors as of such date in accordance with IFRS.
“Restricted Group” means the Parent Note Guarantors and the Restricted Subsidiaries, taken together on a combined basis.
“Restricted MFS Cash” means, as of any date of determination, an amount equal to any cash paid in or deposited by or held on behalf of any customer or dealer of, or any other third party in relation to, one or more of the Note Guarantors’ Subsidiaries engaged in the provision of mobile financial services and designated as “restricted cash” on the consolidated statement of financial position of such Note Guarantor, together with any interest thereon.
“Restricted Note” means a Note sold in reliance on Rule 144A, including a Rule 144A Restricted Global Note, required to bear the Restrictive Legend provided for in Exhibit A-1.
“Restricted Payment” has the meaning set forth in Section 7.2(a).
“Restricted Subsidiary” means any Subsidiary of any Parent Note Guarantor or any other Restricted Subsidiary, other than an Unrestricted Subsidiary.
“Restrictive Legend” means the legends required by the forms of Note attached hereto as Exhibits A-1 and A-2.
“Revolving Credit Facility’ means the $600,000,000 revolving credit facility agreement dated October 15, 2020 entered into by Millicom and a consortium of banks, which may be increased in an additional $300,000,000, as the same may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part).
“Rule 144” means Rule 144 promulgated under the Securities Act, as amended and in effect from time to time.
“Reversion Date” has the meaning set forth in Section 7.14(b).
“Rule 144A” means Rule 144A promulgated under the Securities Act, as amended and in effect from time to time.
“Rule 144A Restricted Global Note” has the meaning set forth in Section 2.5(a).
“S&P” means S&P Global Ratings (a division of S&P Global Inc.) and its successors.
“Sale and Lease-back Transaction” means any direct or indirect arrangement relating to assets or property now owned or hereafter acquired whereby any Parent Note Guarantor or a Restricted Subsidiary transfers such assets or property to another Person and such Parent Note Guarantor or such Restricted Subsidiary leases it from such Person.
“Section 3(c)(7) Reminder Notice” means a notice from the Issuer to the Noteholders to be delivered in accordance with Section 9.1 and in the form of Exhibit F.
“SEC” means the Securities and Exchange Commission.
“Securities Act” means the United States Securities Act of 1933, as amended.
“Securitization Obligations” means any Debt or other obligation of any Receivables Entity.
“Senior Secured Debt” means, as of any date of determination, any Debt of a Parent Note Guarantor or any Restricted Subsidiary that is secured by a security interest in any assets of a Parent Note Guarantor or any of its respective Subsidiaries.
“Shareholder Loans” means Debt of the Parent Note Guarantor or a Subsidiary of Parent Note Guarantor that is issued to and held by an equity owner of such the Parent Note Guarantor or such Subsidiary, other than any the Parent Note Guarantor or a Subsidiary of a Parent Note Guarantor, that, in each case, (1) will not have the benefit of any negative pledge covenant, collateral or security interest, (2) the terms of which provide that, in the event that (a) an installment of interest with respect to such Debt is not paid on the applicable interest payment date or (b) the principal of, or premium, if any, on any such Debt is not paid on the stated maturity or other date set for redemption, then the obligation to make such payment on such interest payment date, maturity date or other redemption date will not be a default under such Debt until after the maturity date of the Loan, and (3) the terms of which provide that no amount will be payable in bankruptcy, liquidation or any similar proceeding with respect to the Person Incurring such Debt until all claims of senior creditors of such Person, including, without limitation, the Noteholders and the Lender under the Loan, admitted in such proceeding have been satisfied.
“Significant Subsidiary” means any Restricted Subsidiary that would be, in respect of the Note Guarantors and their Subsidiaries taken as a whole, a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the date of this Indenture.
“Specified Legal Expenses” means, to the extent not constituting an extraordinary, non-recurring or unusual loss, charge or expense, all attorneys’ and experts’ fees and expenses and all other costs, liabilities (including all damages, penalties, fines and indemnification and settlement payments) and expenses paid or payable in connection with any
threatened, pending, completed or future claim, demand, action, suit, proceeding, inquiry or investigation (whether civil, criminal, administrative, governmental or investigative).
“Standard Securitization Undertakings” means representations, warranties, covenants and indemnities entered into by any Parent Note Guarantor or any Subsidiary which are reasonably customary in a securitization of Receivables transactions, including, without limitation, those relating to the servicing of the assets of a Receivables Entity, it being understood that any Receivables Repurchase Obligation shall be deemed to be a Standard Securitization Undertaking.
“Stated Maturity”, when used with respect to any security or any installment of interest thereon, means the date specified in such security as the fixed date on which the principal of such security or such installment of interest is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred).
“Subsidiary” of any Person means (i) a corporation more than 50% of the combined voting power of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation) in which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof.
“Subsidiary Guarantor” has the meaning set forth in Section 14.3(a).
“Suspended Covenants” has the meaning set forth in Section 7.14(a).
“Taxes” means all taxes, withholdings, duties, levies, assessments, value-added taxes or other governmental charges (including interest and penalties) imposed or levied by or on behalf of any Relevant Taxing Jurisdiction.
“Tax Reimbursement Payments” has the meaning set forth in the Expense Reimbursement and Indemnity Agreement.
“Tower Equipment” means passive infrastructure related to telecommunications services, excluding telecommunications equipment, but including, without limitation, towers (including tower lights and lightning rods), power breakers, deep cycle batteries, generators, voltage regulators, main AC power, rooftop masts, cable ladders, grounding, walls and fences, access roads, shelters, air conditioners and BTS batteries owned by any Parent Note Guarantor or any Restricted Subsidiary of a Parent Note Guarantor.
“Transaction Documents” means the Notes, this Indenture (including the Note Guarantees provided for herein), the Credit and Guaranty Agreement, the Promissory Note, the Participation Agreement and the Expense Reimbursement and Indemnity Agreement.
“Transfer Agent” means the Person named as transfer agent in the preamble to this Indenture, each other transfer agent appointed pursuant to this Indenture and each of their respective successors and assigns.
“Trust” has the meaning set forth in the preamble to this Indenture.
“Trust Assets” means the Issuer’s Participation interest in the Loan and all its right, title and interest in, to and under the Participation Agreement, its right to receive cash and all other distributions and proceeds under the Participation Agreement, all cash and other distributions and proceeds received in respect of this Indenture, the Credit and Guaranty Agreement, the Expense Reimbursement and Indemnity Agreement and any other Transaction Documents, as applicable, and all rights, title and interest in, to, under and related to the foregoing.
“UCC” means the Uniform Commercial Code as in effect in the State of New York or, if different, the state of the United States that governs the perfection of the relevant security interest, in each case, as amended from time to time.
“United States” or “U.S.” means the United States of America.
“U.S. Dollar Equivalent” means with respect to any monetary amount in a currency other than U.S. dollars, at any time of determination thereof, the amount of U.S. dollars obtained by translating such other currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S. dollars with the applicable other currency as published in the Financial Times on the date that is two Business Days prior to such determination.
“U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer’s option.
“Value Creation Fees” means any fees, royalties, management, consultancy or stewardship fees, service fees and any other fees paid by any of the Restricted Group to Millicom or any of its subsidiaries (other than the Restricted Group).
“Voting Stock” of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency.
“Weighted Average Life to Maturity” means, when applied to any Debt or Preferred Stock at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Debt or liquidation preference of such Preferred Stock, as the case may be, into (b) the total of the product obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal or upon mandatory redemption, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment.
“Wholly Owned Subsidiary” means (i) in respect of any Person, a Person, all of the Capital Stock of which (other than (a) directors’ qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law, regulation or to ensure limited liability and (b) in the case of a Receivables Entity, shares held by a Person that is not an Affiliate of any Parent Note Guarantor solely for the purpose of permitting such Person (or such Person’s designee) to vote with respect to customary major events with respect to such Receivables Entity, including without limitation the institution of bankruptcy, insolvency or other similar proceedings, any merger or dissolution, and any change in charter documents or other customary events) is owned by that Person directly or (ii) indirectly by a Person that satisfies the requirements of clause (i).
“Withholding Tax Event” has the meaning set forth in the Credit and Guaranty Agreement.
SECTION 1.2 Construction. For all purposes of this Indenture (and for all purposes of any other Transaction Document or any other instrument or agreement that incorporates provisions of this Indenture by reference), except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in this Article I, and include the plural as well as the singular;
(b) unless otherwise specified, all references in this Indenture (including the appendices and schedules hereto) to designated “Articles”, “Sections” and other subdivisions are to the designated articles, sections and other subdivisions of this Indenture;
(c) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;
(d) unless the context clearly indicates otherwise, pronouns having a masculine or feminine gender shall be deemed to include the other;
(e) unless otherwise expressly specified, any agreement, contract or document defined or referred to herein shall mean such agreement, contract or document as in effect as of the date hereof, as the same may thereafter be amended, supplemented or otherwise modified from time to time in accordance with the terms of this Indenture and the other Transaction Documents and shall include any agreement, contract, instrument or document in substitution or replacement of any of the foregoing entered into in accordance with the terms of this Indenture and the other Transaction Documents;
(f) any reference to any Person shall include its permitted successors and assigns in accordance with the terms of this Indenture and the other Transaction Documents
including, in the case of any Governmental Authority, any Person succeeding to its functions and capacities;
(g) unless the context clearly requires otherwise, references to “Law” or to any particular Law shall include Laws or such particular Law as in effect at each, every and any of the times in question, including any amendments, replacements, supplements, extensions, modifications, consolidations, restatements, revisions or reenactments thereto or thereof, and whether or not in effect at the date of this Indenture;
(h) the use of the word “or” shall not be exclusive; and
(i) “including” means without limitation.
SECTION 1.3 Actions of the Cayman Trustee. The Trust is an equitable obligation binding the Cayman Trustee to deal with the trust property in a particular way in accordance with the terms of the Declaration of Trust. The Noteholders are not, and shall not be, beneficiaries under the Declaration of Trust, and the Cayman Trustee does not owe the Noteholders any fiduciary duties. When used herein, the term “Trust” shall not refer to a separate legal entity but shall, unless the context otherwise requires, refer to the Cayman Trustee acting as trustee of the Trust in accordance with the Declaration of Trust and in relation to the assets forming part of the Trust.
ARTICLE II
THE NOTES
SECTION 2.1 Designation.
(a) There is hereby created a series of “5.125% Senior Notes due 2032” which shall initially be issued in the aggregate principal amount of U.S.$900,000,000 and which are to be issued pursuant to this Indenture.
(b) The Notes shall be direct, senior, secured and limited recourse Debt of the Issuer and shall at all times rank pari passu, without any preference among themselves and equal in right of payment with all of the Issuer’s other present and future obligations (for the avoidance of doubt, being solely those obligations which are assumed by the Cayman Trustee in its capacity as trustee of the Trust and in relation to the Trust Assets) that are not, by their terms, expressly subordinated in right of payment to the Notes or which rank senior thereto by operation of Law.
SECTION 2.2 Authentication and Delivery of Notes.
(a) Any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Notes executed by the Issuer to the Indenture Trustee for authentication, together with an Issuer Order for the authentication and delivery of such Notes, and the Indenture Trustee shall thereupon authenticate and make available for delivery such Notes in accordance with such Issuer Order, without any further action by the Issuer.
(b) No Note shall be secured by or entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication, in the form provided for in Section 2.4 hereof, executed by the Indenture Trustee by the manual or electronic signature of any Authorized Signatory, and such certificate upon any Notes shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered thereunder.
(c) The Indenture Trustee shall have the right to decline to authenticate and deliver the Notes under this Section 2.2 if the Indenture Trustee, upon the advice of counsel, determines that such action may not lawfully be taken by the Issuer or the Indenture Trustee or if the Indenture Trustee shall determine in good faith that such action does not comply with the provisions of this Indenture or any document or instrument delivered in connection herewith, or could expose the Indenture Trustee to personal or financial liability. Prior to the authentication and delivery of the Notes, the Indenture Trustee shall also receive such other funds, accounts, documents, certificates, instruments or opinions as may be required thereunder or it may request in order to provide it with assurances that all action necessary in connection therewith has been taken.
(d) Notwithstanding the foregoing, if any Note shall have been authenticated and delivered hereunder but never issued or sold by the Issuer, and the Issuer shall deliver such Note to the Indenture Trustee for cancellation as provided in Section 2.18 together with a written statement (which need not comply with Section 15.2 and need not be accompanied by an Opinion of Counsel) stating that such Note has never been issued or sold by the Issuer, for all purposes of this Indenture such Note shall be deemed never to have been authenticated and delivered hereunder and shall never have been or be entitled to the benefits hereof.
SECTION 2.3 Aggregate Amount; Additional Notes.
(a) The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is unlimited.
(b) Additional notes of the same series as the Notes (such additional notes being “Additional Notes”) may be issued from time to time under this Indenture so long as, on the date of issuance of such Additional Notes: (i) the requirements of this Section 2.3 have been complied with, (ii) the Lender has made an additional disbursement under the Credit and Guaranty Agreement equal to the aggregate face amount of the Additional Notes to be issued, (iii) the Participation Agreement has been amended to reflect the additional disbursement, (iv) no Default or Loan Event of Default shall have occurred and then be continuing or shall occur as a result of the issuance of such Additional Notes, (v) such Additional Notes shall rank pari passu with the Notes referred to in Section 2.1 and shall have substantially identical terms, conditions and benefits as the Notes (except as otherwise expressly provided in Section 2.3(d)), (vi) the Issuer and the Indenture Trustee shall have executed and delivered a supplemental indenture to this Indenture providing for the issuance of such Additional Notes and reflecting such amendments to this Indenture as may be required to reflect the increase in the aggregate principal amount of the Notes resulting from the issuance of the Additional Notes, (vii) each of the Rating Agencies that has rated the Notes has confirmed to the Issuer in writing (with a copy to the Indenture Trustee), prior to the issuance of such Additional Notes, that the issuance of such
Additional Notes will not result in a lowering or a withdrawal of the then existing rating of the Outstanding Notes, and (viii) the Indenture Trustee shall have received all such opinions and other documents as it shall have reasonably requested.
(c) All Additional Notes issued hereunder will, when issued, be considered Notes for all purposes hereunder and will be subject to and take benefit of all the terms, conditions and provisions of this Indenture.
(d) The Additional Notes shall have the same terms in all respects as the Notes, except that such Additional Notes may have a different issue price or first payment date, provided, however, that unless such Additional Notes are issued under a separate CUSIP number, such Additional Notes must be fungible with the Notes for U.S. federal income tax purposes. The Notes offered hereby and any Additional Notes shall be treated as a single class for all purposes hereunder and will vote together as one class on all matters with respect to the Notes. For purposes of this Indenture, whether or not expressly stated, reference to the Notes includes Additional Notes except as otherwise indicated.
SECTION 2.4 Form of Indenture Trustee’s Authentication. The Indenture Trustee’s certificate of authentication on all Notes shall be in substantially the following form:
“This Note is one of the Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK MELLON,
as Indenture Trustee
By:
Authorized Signatory”
SECTION 2.5 Form of the Notes.
(a) Notes offered and sold in reliance on Rule 144A will be initially represented by one or more, permanent Global Notes (in substantially the form of Exhibit A-1) in definitive, fully registered book entry form without interest coupons (collectively, the “Rule 144A Restricted Global Note”) which will be registered in the name of a nominee of the Registered Depositary and deposited on behalf of the purchasers of the Notes represented thereby with the Indenture Trustee, as a custodian for DTC [ADD TO DEFINITIONS] for credit to the respective accounts of such purchasers (or to such other accounts as they may direct) at direct or indirect participants of DTC. The aggregate principal amount of the Rule 144A Restricted Global Note may from time to time be increased or decreased by adjustments made on the records of the Note Registrar and the Registered Depositary as hereinafter provided.
(b) Notes offered and sold in reliance on Regulation S will be initially represented by one or more permanent Global Notes without interest coupons (in substantially the form of Exhibit A-2) in definitive, fully registered book entry form (collectively, the “Regulation S Unrestricted Global Note”) which will be registered in the name of a nominee of the Registered Depositary and deposited on behalf of the purchasers of the Notes represented
thereby the Indenture Trustee, as a custodian for DTC for credit to the respective accounts of such purchasers (or to such other accounts as they may direct) at direct or indirect participants of DTC. The aggregate principal amount of the Regulation S Unrestricted Global Note may from time to time be increased or decreased by adjustments made on the records of the Note Registrar and the Registered Depositary as hereinafter provided.
(c) The Notes shall be in registered form and may have such letters, numbers or other marks of identification and such legends or endorsements printed, lithographed, engraved, typewritten or photocopied thereon as may be required to comply with the rules of any securities exchange upon which the Notes are to be listed or to conform to any usage in respect thereof, or as may, consistently herewith, be prescribed by the Board of Directors of the Issuer or by the Authorized Representative executing such Notes, such determination by said Authorized Representative to be evidenced by its signing the Notes.
(d) The Notes may be issued in the form of (a) certificated Notes under the circumstances described in Section 2.13(c) hereto or (b) one or more Global Notes. The Notes shall not be issuable in bearable form. Notes issued in certificated form shall be registered in the name or names of such Persons and for the principal amounts as the Issuer may request. The Issuer has initially appointed the Registered Depository to act as depositary for the Global Notes. Notes issued in the form of a Global Note shall be registered in the name of the Registered Depositary or its nominee. In the event any of the Notes are issued in a transaction under Rule 144A of the Securities Act, any such Person shall purchase such Notes in transactions complying with Rule 144A under the Securities Act. The Indenture Trustee, as custodian (“Custodian”), will act as custodian of each Global Note for the Registered Depositary or appoint a sub custodian to act in such capacity. So long as the Registered Depositary or its nominee is the registered owner of the Global Note, it shall be considered the Noteholder of the Notes represented thereby for all purposes hereunder and under the Global Note. None of the Indenture Trustee, or any Authorized Agent shall have any responsibility or obligation to any beneficial owner of an interest in a Global Note, any agent member or other member of, or a participant in, the Registered Depositary or other Person with respect to the accuracy of the records of the Registered Depositary or any nominee or participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any agent member or other participant, member, beneficial owner or other Person (other than Registered Depositary) of any notice or the payment of any amount or delivery of any Notes (or other security or property) under or with respect to such Notes. All notices and communications to be given to the Noteholders and all payments to be made to Noteholders in respect of the Notes shall be given or made only to or upon the order of the registered Noteholders (which shall be the Registered Depositary or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Registered Depositary, subject to its applicable rules and procedures. The Indenture Trustee, and the Authorized Agents may rely and shall be fully protected in relying upon information furnished by the Registered Depositary with respect to its agent members and other members, participants and any beneficial owners.
(e) Interests in the Global Note shall be transferred on the Registered Depositary’s book entry settlement system.
(f) At such time as all beneficial interests in a particular Global Note have been exchanged for Notes in certificated form or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, such Global Note shall be returned to or retained and cancelled by the Indenture Trustee in accordance with Section 2.18. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or in the form of Notes in certificated form, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Indenture Trustee or by the Registered Depositary at the direction of the Indenture Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Indenture Trustee or by the Registered Depositary at the direction of the Indenture Trustee to reflect such increase.
(g) The forms of Notes may have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistent herewith, be applicable thereto or determined by officers of the Issuer executing such Notes, as evidenced by their execution thereof. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereof on the face of the Note. If the Notes conflict or are inconsistent with the provisions of this Indenture, then this Indenture shall control.
(h) At such time as all beneficial interests in a particular Global Note have been exchanged for Notes in certificated form or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, such Global Note shall be returned to or retained and cancelled by the Indenture Trustee in accordance with Section 2.18. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or in the form of a certificated Note, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Indenture Trustee or by the Registered Depositary at the direction of the Indenture Trustee to reflect such reduction and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Indenture Trustee or by the Registered Depositary at the direction of the Indenture Trustee to reflect such increase.
SECTION 2.6 Limited Recourse; Payments from Trust Assets.
(a) Notwithstanding any other provision of this Indenture, all payments to be made by, and all liabilities of, the Cayman Trustee under this Indenture or any of the documents to which the Cayman Trustee is a party shall be made only from, and shall be limited to, the income and proceeds of the Trust Assets and only to the extent that the Cayman Trustee shall have received income or proceeds from the Trust Assets sufficient to make such payments or satisfy such liabilities in accordance with the terms hereof. No recourse shall be had to the assets
of the Cayman Trustee which are owned by it beneficially or held by it as trustee for any other trust. The Cayman Trustee shall not sell or otherwise dispose of any of the Trust Assets unless otherwise specifically permitted under this Indenture, and the Cayman Trustee shall not take any actions under the Participation Agreement except as authorized by the Noteholders in accordance with Section 11.6 or Article VII herein. The Cayman Trustee shall not sell or otherwise dispose of the Participation without the consent of all of the Noteholders and payment of all amounts owing to the Indenture Trustee and agents appointed pursuant to this Indenture.
(b) Subject to the rights of the Indenture Trustee and the Authorized Agents under the Expense Reimbursement and Indemnity Agreement, following the application of the income and proceeds of the Trust Assets in accordance with this Indenture, none of the Noteholders, the Indenture Trustee, the Trust, the Cayman Trustee, the Administrative Agent, the Lender or any other party to the Transaction Documents will be entitled to take any action to recover any sums due but remaining unpaid under this Indenture or the Notes and all remaining claims in respect of this Indenture and the Notes will be extinguished.
SECTION 2.7 Maturity of the Notes. The Issuer shall pay the principal amount of the Notes in full in a single payment on February 3, 2032 (the “Maturity Date”) to the extent the Notes have not been redeemed or repurchased prior thereto as provided under Article IV hereof. No payments in respect of the principal of the Notes shall be paid prior to the Maturity Date except upon redemption prior to the Maturity Date pursuant to Article IV hereof.
SECTION 2.8 Interest; Interest Periods. The Notes will accrue interest from and including the most recent date to which interest has been paid on the Notes or, if no interest has been paid, from and including February 3, 2022 (the “Issue Date”) to but excluding the Maturity Date (to the extent the Notes have not been redeemed or repurchased prior thereto as provided under Article IV hereof ) at a rate per annum equal to 5.125% (the “Interest Rate”), payable semi-annually in arrears on February 3 and August 3 of each year, commencing on August 3, 2022 (each an “Interest Payment Date”). The Interest Rate will be computed on the basis of a 360-day year of twelve 30-day months.
SECTION 2.9 Record Date. The Indenture Trustee shall treat the Person in whose name any Note is registered on the applicable Record Date as the Noteholder for all payments of interest with respect to the Notes.
SECTION 2.10 Issuance. No Note may be offered, sold or delivered as part of the distribution by the Initial Purchasers at any time, or otherwise, within the United States or to, or for the benefit of, U.S. Persons except to Persons that are both (i) QIBs and (ii) Qualified Purchasers. The Notes may be sold or resold, as the case may be, outside the United States to Non-U.S. Persons in accordance with Regulation S under the Securities Act. The Notes shall be subject to restrictions on transfer and resale as provided in Section 2.13 hereof.
SECTION 2.11 Denominations, etc. The Notes shall be issued only in fully registered form, without coupons and as otherwise provided herein. Notes sold pursuant to Rule 144A shall be issued in the form of beneficial interests in one or more Global Notes in minimum
denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. Notes sold pursuant to Regulation S shall be issued in the form of beneficial interests in one or more Global Notes in minimum denominations of $200,000 and integral multiples of U.S.$1,000 in excess thereof. Beneficial interests in any Global Notes shall be shown on, and transfers thereof shall be effected only through, the book-entry records maintained by the Registered Depositary and its participants. Notes issued in physical, certificated form shall not be permitted to be traded through the facilities of the Registered Depositary, except in connection with a transfer of a Note in certificated form to a transferee that takes delivery in the form of beneficial interests in a Global Note pursuant to Rule 144A or Regulation S, as the case may be.
SECTION 2.12 Execution of Notes.
(a) The Notes shall be executed on behalf of the Issuer by one of its Authorized Representatives. The signature of any such Authorized Representatives on the Notes may be manual, facsimile or Electronic Means. Notes bearing the manual, facsimile or Electronic Means signatures of individuals who were, at the time such signatures were affixed, the proper Authorized Representatives of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to be Authorized Representatives prior to the authentication and delivery of such Notes or were not Authorized Representatives at the date of such Notes.
(b) Pending the preparation of certificated Notes as contemplated in Section 2.13, the Issuer may execute, and the Indenture Trustee, upon receipt of an Issuer Order, shall authenticate and deliver, temporary Notes that are printed, lithographed, typewritten, mimeographed or otherwise reproduced, in any authorized denomination, substantially of the tenor of the certificated Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Authorized Representatives executing such Notes may determine, as conclusively evidenced by their execution of such Notes.
(c) Following the issuance of temporary Notes, the Issuer will cause certificated Notes to be prepared without unreasonable delay. The certificated Notes shall be printed, lithographed or engraved, or provided by any combination thereof, or in any other manner permitted by the rules and regulations of any applicable securities exchange, all as determined by the Authorized Representatives executing such certificated Notes. After the preparation of certificated Notes, the temporary Notes shall be exchangeable for certificated Notes upon surrender of the temporary Notes at the office or agency maintained by the Issuer for such purpose pursuant to Section 9.11, without charge to the Noteholder. Upon surrender for cancellation of any one or more temporary Notes, the Issuer shall execute, and the Indenture Trustee, upon receipt of an Issuer Order, shall authenticate and deliver, in exchange therefor the same aggregate principal amount of certificated Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as certificated Notes.
SECTION 2.13 Registration; Restrictions on Transfer and Exchange.
(a) The Issuer shall cause to be kept at the Corporate Trust Office of the Note Registrar a register which, subject to such reasonable regulations as the Issuer may prescribe, shall provide for the registration of Notes and for the registration of transfers and exchanges of Notes. This register and, if there shall be more than one Note Registrar, the combined registers maintained by all such note registrars, are herein sometimes referred to as the “Note Register”. The Indenture Trustee is hereby appointed the initial Note Registrar for the purpose of registering Notes and transfers and exchanges of Notes as herein provided. Upon any resignation or removal of the Note Registrar, the Issuer shall promptly appoint a successor, or in the absence of such appointment, assume the duties of such Note Registrar. The Issuer may appoint one or more co-registrars.
(b) If a Person other than the Indenture Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt written notice of the appointment of a Note Registrar and of the location, and any change in the location of the Note Register, and the Indenture Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely upon such Note Register as to the names and addresses of the Noteholders and the principal amounts and numbers of such Notes.
(c) Any Global Note deposited with the Registered Depositary shall be exchanged for certificated Notes, without coupons, and delivered to and registered in the name of Persons named by the Registered Depositary, rather than to the nominee for the Registered Depositary, only if an Event of Default has occurred and is continuing or if at any time the Registered Depositary ceases to be a clearing agency registered under the Exchange Act, and in either case, a successor depositary is not appointed by the Issuer within 90 calendar days.
(d) Upon the occurrence of any of the events in the paragraph (c) above, the Indenture Trustee shall, by forwarding any notice received from the Issuer to the Registered Depositary, be deemed to have notified all Persons who hold a beneficial interest in the Global Note through participants in the Registered Depositary or indirect participants through participants in the Registered Depositary of the availability of certificated Notes. Any Global Note that is transferable to the beneficial owners thereof pursuant to paragraph (c) above shall be surrendered by the Registered Depositary to the Note Registrar, to be so transferred, in whole or from time to time in part, without charge, and the Indenture Trustee shall, upon provision by the Issuer of certificates therefor and receipt by the Indenture Trustee of an Issuer Order, authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Notes of authorized denominations. Any portion of a Global Note transferred pursuant to paragraph (c) above and this paragraph shall be executed, authenticated and delivered only in the denominations specified in the form of Note and registered in such names as the Registered Depositary shall direct. Any certificated Note delivered in exchange for an interest in the Rule 144A Restricted Global Note shall bear the Restrictive Legend regarding transfer restrictions applicable to the Rule 144A Restricted Global Note set forth on the form of Note attached as Exhibit A-1 hereto. Any certificated Note delivered in exchange for an interest in the Regulation S Unrestricted Global Note shall bear the Restrictive Legend regarding transfer restrictions applicable to the Regulation S Unrestricted Global Note set forth on the form of Note attached as Exhibit A-2 hereto. In the event of the occurrence of any of the events specified in
Section 2.13(c), the Issuer will promptly make available to the Indenture Trustee a reasonable supply of certificated Notes in certificated, fully registered form without interest coupons.
(e) Notwithstanding any provisions to the contrary herein, so long as any Global Note remains Outstanding and is held by or on behalf of the Registered Depositary, transfers of such Global Note, in whole or in part, shall only be made in accordance with this paragraph and paragraph (d) above.
(i) Subject to this paragraph and paragraph (d) above, transfers of a Global Note shall be limited to transfers of such Global Note in whole, or in part, to nominees of the Registered Depositary or to a successor of the Registered Depositary or such successor’s nominee.
(ii) Transfers of beneficial interests in Global Notes may be effected only through the book-entry system maintained by the Registered Depositary in compliance with applicable rules and procedures of the Registered Depositary and its direct and indirect participants (including Euroclear and Clearstream, if applicable), in each case to the extent applicable to such transaction and in effect from time to time (the “Applicable Procedures”).
(iii) In the event that a Global Note is exchanged for Notes in certificated registered form without interest coupons pursuant to paragraph (d) above, such Notes may be exchanged for one another only in accordance with such procedures as are substantially consistent with the provisions of paragraphs (iv), (v), (vi), (vii) and (viii) below (including the certification requirements) and as may be from time to time adopted by the Issuer and notified, in writing, to the Indenture Trustee.
(iv) If the owner of a beneficial interest in a Rule 144A Restricted Global Note wishes at any time to transfer such interest (or portion thereof) to a Non-U.S. Person pursuant to Regulation S who wishes to hold its interest in the Notes through a beneficial interest in the Regulation S Unrestricted Global Note, such transfer may be effected only (A) upon receipt by the Note Registrar of:
(1) a written order given by the Registered Depositary or its authorized representative directing the Note Registrar to credit or cause to be credited a beneficial interest in the Regulation S Unrestricted Global Note equal to the principal amount of the beneficial interest in the Rule 144A Restricted Global Note to be transferred, and
(2) a certificate in the form of Exhibit C duly executed by the transferor, or his attorney duly authorized in writing,
and (B) subject to the Applicable Procedures, the Note Registrar shall increase the Regulation S Unrestricted Global Note and decrease the Rule 144A Restricted Global Note by such amount in accordance with the foregoing. Any beneficial interest in the Rule 144A Restricted Global Note that is transferred to a Person that takes delivery in the form of a
beneficial interest in the Regulation S Unrestricted Global Note will, upon transfer, cease to be an interest in the Rule 144A Restricted Global Note and will become an interest in the Regulation S Unrestricted Global Note subject to all transfer restrictions and other procedures applicable to beneficial interests in the Regulation S Global Note.
(v) If the owner of an interest in a Regulation S Unrestricted Global Note wishes at any time to transfer such interest (or any portion thereof) to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Rule 144A Restricted Global Note, such transfer may be effected only (A) upon receipt by the Note Registrar of:
(1) a written order given by the Registered Depositary or its authorized representative directing the Note Registrar to credit or cause to be credited a beneficial interest in the Rule 144A Restricted Global Note equal to the principal amount of the beneficial interest in the Regulation S Unrestricted Global Note to be transferred, and
(2) if such transfer is to occur during (but only during) the Distribution Compliance Period, a certificate in the form of Exhibit D duly executed by the transferor or his attorney duly authorized in writing (accompanied, in the case of a transfer under an exemption from the registration requirements under the Securities Act other than pursuant to Rule 144A or Rule 144 under the Securities Act, by an Opinion of Counsel stating that such exemption is available to the transferor), and
(3) a certificate in the form of Exhibit E executed by the transferee,
and (B) subject to the Applicable Procedures, the Note Registrar shall increase the Rule 144A Restricted Global Note and decrease the Regulation S Unrestricted Global Note by such amount in accordance with the foregoing. Any beneficial interest in the Regulation S Unrestricted Global Note that is transferred to a Person that takes delivery in the form of a beneficial interest in the Rule 144A Restricted Global Note will, upon transfer, cease to be an interest in the Regulation S Unrestricted Global Note and will become an interest in the Rule 144A Restricted Global Note subject to all transfer restrictions and other procedures applicable to beneficial interest in the Rule 144A Restricted Global Note.
(vi) If the Noteholder of a Restricted Note (other than a Global Note) wishes at any time to transfer such Restricted Note (or a portion thereof) to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Rule 144A Restricted Global Note or the Regulation S Unrestricted Global Note, such transfer may be effected only (A) upon receipt by the Note Registrar of:
(1) such Restricted Note, duly endorsed as provided herein,
(2) instructions from such Noteholder directing the Note Registrar to credit or cause to be credited a beneficial interest in the Rule 144A Restricted
Global Note or Regulation S Unrestricted Global Note equal to the principal amount (or portion thereof) of such certificated Note to be transferred, and
(3) a certificate in the form of Exhibit C duly executed by the Noteholder or his attorney duly authorized in writing if the specified account to be credited with a beneficial interest in the Regulation S Unrestricted Global Note, or certificates in the form of Exhibit D duly executed by the Noteholder or his attorney duly authorized in writing and Exhibit E duly executed by the transferee if the specified account is to be credited with a beneficial interest in the Rule 144A Restricted Global Note,
and (B) subject to the Applicable Procedures of the Registered Depositary, the Note Registrar shall:
(1) cancel the Restricted Note delivered to it (and issue a new Note in respect of any untransferred portion thereof), and
(2) increase the Rule 144A Restricted Global Note or the Regulation S Unrestricted Global Note, as the case may be, in accordance with the foregoing.
(vii) If the Noteholder of a Regulation S Note (other than a Global Note) wishes to transfer such Regulation S Note (or a portion thereof) to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Rule 144A Restricted Global Note or the Regulation S Unrestricted Global Note, such transfer may be effected only, (A) upon receipt by the Note Registrar of:
(1) such Regulation S Note, duly endorsed as provided herein,
(2) instructions from the Noteholder of such certificated Note directing the Note Registrar to credit or cause to be credited a beneficial interest in the Rule 144A Restricted Global Note or the Regulation S Unrestricted Global Note equal to the principal amount of the certificated Note (or portion thereof) to be transferred, and
(3) if the transfer is to occur during (but only during) the Distribution Compliance Period and the specified account is to be credited with a beneficial interest in the Rule 144A Restricted Global Note, certificates in the form of Exhibit D duly executed by the transferor or his attorney duly authorized in writing and Exhibit E duly executed by the transferee, or if the specified account is to be credited with a beneficial interest in the Regulation S Unrestricted Global Note, a certificate in the form of Exhibit C,
and (B) subject to the Applicable Procedures of the Registered Depositary, the Note Registrar shall:
(1) cancel the Regulation S Note delivered to it (and issue a new Note in respect of any untransferred portion thereof) and
(2) increase the Rule 144A Restricted Global Note or the Regulation S Unrestricted Global Note, as the case may be, for such amount in accordance with the foregoing.
(viii) A beneficial interest in a Rule 144A Restricted Global Note or a Regulation S Unrestricted Global Note may be exchanged for a Note that is not a Global Note as provided in Section 2.13(c) and (d); provided that, if such interest is a beneficial interest in the Rule 144A Restricted Global Note, or if such interest is a beneficial interest in the Regulation S Unrestricted Global Note and such exchange is to occur during the Distribution Compliance Period, then such interest shall be exchanged for a Restricted Note or a Regulation S Note, as the case may be. A Restricted Note or Regulation S Note that is not a Global Note may be exchanged for a beneficial interest in a Global Note only if (A) such exchange occurs in connection with paragraph (e)(vi) or (vii) above or (B) such Note is a Regulation S Note and such exchange occurs after the Distribution Compliance Period.
(f) Upon surrender for registration of transfer of any Note, together with a written instrument of transfer satisfactory to the Note Registrar, as the case may be, at an office or agency of the Issuer appointed in or pursuant to Section 9.11 for such purposes, the Issuer shall execute, and the Indenture Trustee, upon receipt of an Issuer Order, shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denomination or denominations and of the same aggregate principal amount. At the option of each Noteholder, Notes may be exchanged for other Notes of any authorized denomination or denominations and of the same aggregate principal amount, upon surrender of the Notes to be exchanged at any such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Indenture Trustee, upon receipt of an Issuer Order, shall authenticate and deliver, the Notes that the Noteholder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same security and benefits under this Indenture and the other Transaction Documents, as the Notes surrendered upon such registration of transfer or exchange.
(g) Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Note Registrar or any Transfer Agent, duly executed by the Noteholder thereof or such Noteholder’s attorney duly authorized in writing.
(h) No service charge shall be required of any Noteholders participating in any transfer or exchange of Notes in respect of such transfer or exchange, but the Note Registrar may require payment of a sum sufficient to cover any Tax that may be imposed in connection with any transfer or exchange of Notes, other than exchanges pursuant to Sections 2.12(c) or 2.13 not involving any transfer.
(i) The Note Registrar shall not be required (x) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business in the City of New York 15 days before the day of the giving of a notice of redemption of Notes selected for
redemption under Article IV and ending at the close of business on the day of such notice or (y) to issue, register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note redeemed in part.
(j) If Notes are issued upon the transfer, exchange or replacement of Notes subject to restrictions on transfer and bearing the Restrictive Legends set forth on the forms of Note attached hereto as Exhibit A-1 and Exhibit A-2, setting forth such restrictions, or if a request is made to remove the Restrictive Legend on a Note, the Notes so issued shall bear the Restrictive Legend, or the Restrictive Legend shall not be removed, as the case may be, unless there is delivered to the Issuer and the Note Registrar such evidence as shall be satisfactory to the Issuer, which shall include an Opinion of Counsel, as may be reasonably required by the Issuer, that neither the Restrictive Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144 or Regulation S under the Securities Act or that such Notes are not “restricted securities” within the meaning of Rule 144 under the Securities Act. Upon provision of such satisfactory evidence, the Indenture Trustee, at the direction of the Issuer and upon receipt of an Issuer Order, shall authenticate and deliver a Note that does not bear the Restrictive Legend. If a Restrictive Legend is removed from the face of a Note and the Note is subsequently held by an Affiliate of the Issuer, the Restrictive Legend shall be reinstated.
(k) None of the Indenture Trustee or any Authorized Agent, nor any agent of the Indenture Trustee or any Authorized Agent, shall have any obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable Law with respect to any transfer of any interests in any Note (including transfers between or among participants in the Registered Depositary or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. None of the Issuer, the Indenture Trustee any Authorized Agent or any of their respective agents, will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
(l) (a)If any U.S. Person that is not a QIB and a Qualified Purchaser shall become the owner of a beneficial interest in a Rule 144A Restricted Global Note, or if any U.S. Person shall become the owner of a beneficial interest in a Regulation S Unrestricted Global Note (any such Person, a “Non-Permitted Holder”), the Issuer may, promptly after discovery by the Issuer that such Person is a Non-Permitted Holder, send notice to such Non-Permitted Holder demanding that such Non-Permitted Holder transfer its interest to a Person that is not a Non-Permitted Holder within 30 days of the date of such notice. If such Non-Permitted Holder fails to so sell its interest, the Issuer shall have the right, without further notice to the Non-Permitted Holder, to (i) sell such interest in a commercially reasonable sale to a purchaser selected by the Issuer that is not a Non-Permitted Holder and that certifies to the Issuer that it meets the requirements of this Indenture or (ii) to redeem such interest for an amount equal to the outstanding principal of the Notes plus accrued and unpaid interest.
(m) The Noteholder of each Note, the Non-Permitted Holder and each other Person in the chain of title from the Noteholder to the Non-Permitted Holder, by their acceptance of an interest in the Notes agree to cooperate with the Issuer to effect such transfers. The proceeds of such sale or redemption, net of any commissions, expenses and taxes due in connection with such sale or redemption, shall be remitted to the Non-Permitted Holder. The terms and conditions of any sale or redemption under this subsection shall be determined in the sole discretion of the Issuer, and the Issuer shall not be liable to any Person having an interest in the Notes sold or redeemed as a result of any such sale or redemption or the exercise of such discretion.
SECTION 2.14 Mutilated, Destroyed, Lost and Stolen Notes.
(a) If (i) any mutilated or defaced Note is surrendered to the Indenture Trustee, or the Issuer and the Note Registrar and the Indenture Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Issuer, the Note Registrar and the Indenture Trustee evidence to their satisfaction of the ownership and authenticity thereof, and such security and/or indemnity as may be required by them to save each of them harmless, then, in the absence of written notice to the Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a protected purchaser, the Issuer shall execute and the Indenture Trustee, upon receipt of an Issuer Order, shall authenticate and make available for delivery at an office or agency of the Issuer appointed in or pursuant to Section 8.11 in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of like tenor, interest rate and principal amount, bearing a number not then Outstanding and registered in the same manner. If, after the delivery of such new Note, a protected purchaser of the original Note in lieu of which such new Note was issued presents for payment such original Note, the Issuer and the Indenture Trustee shall be entitled to recover such new Note from the Person to whom it was delivered or any Person taking therefrom, except a protected purchaser, and shall be entitled to recover upon the security and/or indemnity provided therefor to the extent of any loss, damage, cost or expenses incurred by the Issuer or the Indenture Trustee in connection therewith.
(b) Notwithstanding the foregoing, in case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Issuer, upon satisfaction of the conditions set forth in clauses (i) and (ii) of paragraph (a) of this Section 2.14 may, instead of issuing a new Note, pay such Note.
(c) Upon the issuance of any new Note under this Section 2.14, the Issuer and the Indenture Trustee may require the payment of a sum sufficient to cover any Tax that may be imposed in relation thereto and any other expenses connected therewith.
(d) Every new Note issued pursuant to this Section 2.14 in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.
(e) The provisions of this Section 2.14 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.15 Payments.
(a) Subject to the limitations set forth in Section 2.6 above, the Issuer hereby acknowledges and confirms that it is and at all times shall remain absolutely and unconditionally obligated to pay all amounts due and owing by the Issuer hereunder and under any other Transaction Document, as the same shall become due and owing. All payments of principal, interest and other amounts required to be made by the Issuer hereunder and under the other Transaction Documents shall be made, pursuant to the terms hereof, by the Issuer to the Indenture Trustee promptly upon receipt by the Issuer of any cash proceeds with respect to (i) the Participation, unless any such payment amounts are paid directly to the Indenture Trustee at the direction of the Lender pursuant to the Participation Agreement, and (ii) any Tax Reimbursement Payments pursuant to Section 2 of the Expense Reimbursement and Indemnity Agreement. The Issuer will, on or before 10:00 a.m. at least one Business Day prior to each due date of the principal of, premium (if any) or interest on the Notes or other amounts, deposit with the Indenture Trustee a sum sufficient to pay such principal, interest or other amounts so becoming due. All such payments to the Indenture Trustee shall be made by the Issuer or on behalf of the Issuer by the Lender or the Administrative Agent by depositing immediately available funds in U.S. dollars to the Loan Collection Account provided for herein.
(b) So long as any of the Notes remain Outstanding, the Issuer will maintain one or more agents in New York City to whom (i) the Notes may be presented for payment and the Notes may be presented for exchange, transfer, redemption or registration of transfer as provided in this Indenture. The Issuer may have one or more additional paying agents. Unless otherwise specified, the Issuer hereby initially designates the Corporate Trust Office as the office to be maintained by it for each such purpose and where the Note Register will be maintained. If the Issuer shall fail to so designate or maintain any such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Corporate Trust Office. Interest on any Note that is payable, and punctually paid or duly provided for, on any Interest Payment Date or any other Payment Date (other than the Maturity Date) shall be paid to the Person in whose name that Note (or one or more Predecessor Notes) is registered at the close of business on the Record Date for such payment. Payment of interest on the Notes shall be made at the Place of Payment (or, if such office is not in the City of New York, at either such office or an office to be maintained in such city) payable as provided herein. The principal amount of any Note, whether due on the Maturity Date a redemption date or any other Payment Date, will be payable only upon surrender of such Note at the Corporate Trust Office of the Indenture Trustee or at the specified offices of any Paying Agent appointed by the Indenture Trustee; provided, however, that so long as the Notes are held in the name of a nominee of DTC, the Indenture Trustee, or such Paying Agent, will make such payments to DTC or its nominee, as the case may be, in accordance with DTC’s Applicable Procedures.
(c) Subject to the foregoing provisions of this Section 2.15, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.
(d) In order to comply with applicable Tax Laws (inclusive of rules, regulations and interpretations promulgated by competent authorities) related to this Indenture and the other Transaction Documents in effect from time to time (“Applicable Law”) that a foreign financial institution, issuer, trustee, paying agent or other party is or has agreed to be subject to, each of the Issuer and the Note Guarantors agrees (i) to provide to the Indenture Trustee and the Paying Agents sufficient information about the Issuer and the Note Guarantors and/or the transactions to which the Transaction Documents relate (including any modification to the terms of such transactions) in each case, which is within each party’s knowledge and control, so the Indenture Trustee and the Paying Agents can determine whether it has tax related obligations under Applicable Law, (ii) that the Indenture Trustee and the Paying Agents shall be entitled to make any withholding or deduction from payments to the extent necessary to comply with Applicable Law for which the Indenture Trustee and the Paying Agents shall not have any liability, and (iii) to hold harmless each of the Indenture Trustee and the Paying Agents for any losses it may suffer due to the actions it takes to comply with Applicable Law. The terms of this Section 2.15(d) shall survive the payment of the Notes, resignation or removal of the Indenture Trustee or any Paying Agent and termination of this Indenture.
SECTION 2.16 Taxation.
(a) Except as compelled by Law, the Issuer shall make any and all payments of principal, premium, interest or any other amounts under this Indenture or in respect of the Notes free and clear of, and without withholding or deduction for or on account of, any Taxes imposed or levied by or on behalf of a Relevant Taxing Jurisdiction. If any such Taxes are required to be deducted or withheld:
(i) the Issuer shall notify the Lender and the Indenture Trustee that it is required by law to withhold or deduct such Taxes;
(ii) the Issuer shall make all such withholdings and deductions; and
(iii) the Issuer shall pay the full amount withheld or deducted to the relevant taxation authority in accordance with applicable Law.
(b) The sum payable by the Issuer under this Indenture shall be increased by the sum of (x) the Additional Amounts payable to the Issuer pursuant to the Participation Agreement and the Credit and Guaranty Agreement or the Loan Guarantees, respectively, and (y) the Tax Reimbursement Payments payable to the Issuer by the Borrower or the Note Guarantors pursuant to the Expense Reimbursement and Indemnity Agreement or the Loan Guarantees, respectively, after accounting for any Taxes withheld from such payments to the Issuer or otherwise payable by the Issuer in respect of such payments (“Note Additional Amounts”).
(c) In addition, if any Other Taxes are imposed in connection with this Indenture, the Notes or any Note Guarantee or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Indenture or the Notes, and the Borrower or Note Guarantor fails to comply with their obligations under the Expense Reimbursement and Indemnity Agreement to pay promptly when due such Other Taxes, then the Issuer shall pay such Other Taxes (except for any taxes to be paid by any Noteholder pursuant to Section 2.13(h) of this Indenture).
(d) All references to principal, interest or other amounts payable under this Indenture shall be deemed to include any Note Additional Amounts payable by the Issuer under this Section 2.16 or otherwise with respect to this Indenture. The foregoing obligations in this Section 2.16 shall survive the payment of the Notes any termination, defeasance or discharge of this Indenture.
(e) At least 10 Business Days prior to the first Interest Payment Date for the Notes, and, if there has been any change with respect to the matters set forth in the below mentioned certificate at least 10 Business Days prior to each Interest Payment Date for the Notes, the Issuer shall furnish to the Indenture Trustee an Officer’s Certificate instructing the Indenture Trustee as to any circumstances in which payments of principal of, premium (if any) or interest on the Notes due on such date shall be subject to deduction or withholding for or on account of any Taxes and the rate of any such deduction or withholding. The Issuer covenants to indemnify the Indenture Trustee and any other Paying Agents for, and to hold each harmless against, any loss, liability or expense reasonably incurred without gross negligence, bad faith or willful misconduct on their part, arising out of or in connection with actions taken or not taken by any of them in reliance on any certificate furnished to them pursuant to this paragraph or the failure to furnish any such certificate. The obligations of the Issuer under the preceding sentence shall survive the resignation or removal of the Indenture Trustee, the Registrar or any Paying Agent.
(f) The Issuer shall provide the Indenture Trustee with documentation reasonably satisfactory to the Indenture Trustee evidencing the payment of Taxes in respect of which the Issuer, the Borrower or any Note Guarantor has paid any Note Additional Amounts. Copies of such documentation shall be, made available by the Indenture Trustee to the Noteholders or the other Paying Agents, as applicable, upon written request therefor.
(g) By their purchase of Notes, each Noteholder or beneficial owner of Notes agrees to provide the Issuer with such forms or other documentation as the Issuer may from time to time require to assist it in fulfilling its withholding and backup withholding tax obligations.
SECTION 2.17 Persons Deemed Owners; Etc. Subject to the rights of the relevant Noteholders as of any Record Date to receive payments of interest on the related Interest Payment Date, prior to due presentment of a Note for registration of transfer, the Person in whose name any Note is registered shall be deemed to be the owner of such Note for the purpose of receiving payment of principal of, premium (if any) and interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, regardless of any notice to anyone to the contrary. The Noteholder may grant proxies and otherwise authorize any Person, including
members of, or participants in, the Registered Depositary and Persons that may hold interests through such members of, or participants in, the Registered Depositary, to take any action that a Noteholder is entitled to take under this Indenture or the Notes.
SECTION 2.18 Cancellation. All Notes surrendered for payment, redemption, registration of transfer or exchange or deemed lost or stolen shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee for cancellation and may not be reissued or sold. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever. All Notes so delivered shall be promptly cancelled by the Indenture Trustee at the written direction of the Issuer. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Notes held by the Indenture Trustee shall be cancelled by the Indenture Trustee in accordance with its standard retention policy, unless the Issuer shall direct by an Issuer Order that they be returned to it.
SECTION 2.19 Allocation of Payments.
(a) On each Payment Date, the Indenture Trustee or the Paying Agents shall withdraw all amounts then credited to the Loan Collection Account and apply such amounts in the following order of priority:
(i) FIRST, to the Lender, the Administrative Agent, the Indenture Trustee and any Authorized Agents appointed pursuant to this Indenture in an amount equal to any due but unpaid amounts owing by the Borrower and the Note Guarantors under the Credit and Guaranty Agreement and the Expense Reimbursement and Indemnity Agreement in respect of fees and expenses to the extent the Borrower or the Note Guarantors have not theretofore paid the same; and
(ii) SECOND, the remainder to the Payment Account;
provided, however, that the Indenture Trustee shall only be required to make the payments described in clause (a)(i) above to the Lender, the Administrative Agent, the Indenture Trustee and/or any Authorized Agent only if and to the extent it receives written notice of such amounts and payment instructions from the Lender, the Administrative Agent or such Authorized Agent, as applicable, no later than five (5) Business Days preceding the relevant Payment Date.
(b) On each Payment Date, the Indenture Trustee or the Paying Agents shall distribute the funds deposited into the Payment Account in accordance with Section 2.19(a) above in the following order of priority, with the amount of each such distribution (and the components thereof) as set forth in this Indenture and the Notes:
(i) FIRST, to each Noteholder, its proportionate share of the accumulated and unpaid Note Interest then due and payable in respect of the Notes held by such Noteholder; and
(ii) SECOND, to each Noteholder, its proportionate interest in the principal amount of the Notes then due and payable in respect of the Notes held by such Noteholder.
(c) Each Noteholder agrees, by its acceptance of a Note, that it will promptly remit to the Indenture Trustee any excess payment it receives on the Notes.
SECTION 2.20 CUSIP and ISIN Numbers. The Issuer in issuing the Notes may use CUSIP and ISIN numbers, and, if so, the Indenture Trustee shall use CUSIP and ISIN numbers in notices of redemption as a convenience to Noteholders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer will promptly, and in any event within 10 Business Days, notify the Indenture Trustee of any initial CUSIP and/or ISIN numbers and any change in the CUSIP or ISIN numbers.
SECTION 2.21 Noteholder Lists. The Indenture Trustee shall preserve in as current form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders. If the Indenture Trustee is not the Note Registrar, the Issuer shall furnish to the Indenture Trustee, in writing at least seven Business Days before each Interest Payment Date and at such other times as the Indenture Trustee may request in writing, a list in such form and as of such date as the Indenture Trustee may reasonably require of the names and addresses of the Noteholders.
ARTICLE III
ESTABLISHMENT OF ACCOUNTS
SECTION 3.1 Establishment and Administration of Loan Collection Account.
(a) On or prior to the Issue Date, the Trust shall establish and, until the Notes and all amounts due in respect thereof and otherwise payable pursuant to this Indenture have been paid in full and so long as the Indenture Trustee has a security interest in the Collateral, maintain a special purpose non-interest bearing account (the “Loan Collection Account”). The Issuer agrees that the Loan Collection Account shall be maintained in the name of the Trust and under its sole dominion and control (acting on behalf of the Indenture Trustee, the Authorized Agents, and the Noteholders). No funds contained in the Loan Collection Account shall be used for any other purpose or in any manner not expressly provided for herein nor shall the Issuer or any other Person have any right of withdrawal or any other interest therein, except for any residual rights to the amounts on deposit in the Loan Collection Account that the Issuer may have under applicable Law.
(b) The Issuer shall promptly deposit, or cause to be deposited in the Loan Collection Account all amounts received by the Issuer from the Lender or the Administrative Agent on behalf of the Lender with respect to or as contemplated under the Participation Agreement and any Transaction Document, including all periodic principal, interest and other
payments received by the Issuer in respect of the Participation representing funds received in respect of the principal, interest and other payments payable by the Borrower and the Note Guarantors under the Credit and Guaranty Agreement. No funds contained in the Loan Collection Account shall be used for any other purpose or in any manner not expressly provided for herein nor shall the Issuer or any other Person have an interest therein or amounts on deposit therein.
(c) The Indenture Trustee shall possess all right, title and interest in all available funds on deposit from time to time in the Loan Collection Account and in all proceeds thereof (including all income thereon) pursuant to the security interest granted to it under the terms hereof, and such funds (except funds payable to the Lender, the Administrative Agent, the Indenture Trustee or any Authorized Agent pursuant to the Expense Reimbursement and Indemnity Agreement) shall constitute part of the Trust Assets.
SECTION 3.2 Establishment and Administration of the Payment Account.
(a) On or prior to the Issue Date, the Issuer directs the Indenture Trustee to establish and, until the Notes and all accounts due in respect thereof have been paid in full, maintain a special purpose non-interest bearing amounts (the “Payment Account”) into which all payments required to be made by the Issuer under or with respect to the Notes shall be deposited. The Issuer agrees that the Payment Account shall be maintained in the name of the Issuer and under its sole dominion and control (acting on behalf of the Indenture Trustee, the Authorized Agents, and the Noteholders) and used solely to make payments of principal, interest and other amounts from time to time due and owing on, or with respect to, the Notes. No funds contained in the Payment Account shall be used for any other purpose or in any manner not expressly provided for herein nor shall the Issuer or any other Person have an interest therein or amounts on deposit therein.
(b) The Indenture Trustee shall apply all such amounts as from time to time are on deposit in the Payment Account to all such amounts as are due to the Noteholders pursuant to this Indenture or otherwise. All such amounts shall be applied ratably, without preference or priority of any kind among Noteholders, in accordance with this Indenture.
SECTION 3.3 Applicable Taxes.
The Issuer shall pay or reimburse the Indenture Trustee upon request for any transfer taxes or other taxes relating to the funds held in the accounts incurred in connection herewith and shall indemnify and hold harmless the Indenture Trustee any amounts that it is obligated to pay in the way of such taxes. Any payments of income from the accounts shall be subject to withholding regulations then in force with respect to United States taxes. The Issuer will provide the Indenture Trustee with appropriate W-9 forms for tax identification number certifications, or W-8 forms for nonresident alien certifications. It is understood that the Indenture Trustee shall only be responsible for income reporting with respect to income earned on the accounts and will not be responsible for any other reporting. This paragraph shall survive notwithstanding any termination of this Indenture or the resignation or removal of the Indenture Trustee.
ARTICLE IV
REDEMPTION; OFFER TO PURCHASE
SECTION 4.1 Redemption Events.
(a) The Issuer shall redeem the Notes, in whole or in part, as applicable, upon the deposit by the Lender, or otherwise as provided in the Credit and Guaranty Agreement or Participation Agreement, in the Loan Collection Account of any Prepayment Amount upon the occurrence of any optional or mandatory prepayment by the Borrower of the amounts outstanding from time to time under the Credit and Guaranty Agreement and the Loan due to the occurrence of any of the following:
(i) any optional prepayment of the Loan, in whole or in part, with a make-whole premium in accordance with Section 3.03(b) of the Credit and Guaranty Agreement,
(ii) any optional prepayment of the Loan, in whole or in part, without a make-whole premium in accordance with Section 3.03(c) of the Credit and Guaranty Agreement,
(iii) any optional prepayment upon certain tender offers, in whole or in part, in accordance with Section 3.03(d) of the Credit and Guaranty Agreement,
(iv) any optional prepayment of the Loan, in whole but not in part, upon a Withholding Tax Event in accordance with Section 3.03(e) of the Credit and Guaranty Agreement,
(v) any optional prepayment of the Loan, in whole but not in part, upon the occurrence of a Change of Control Remainder Event in accordance with Section 3.03(f) of the Credit and Guaranty Agreement,
(vi) a Change of Control Prepayment Event in accordance with Section 3.04(a) of the Credit and Guaranty Agreement,
(vii) an Asset Sale Prepayment Event in accordance with Section 3.04(b) of the Credit and Guaranty Agreement, or
(viii) upon the acceleration of the Loan as a result of the occurrence of a Loan Event of Default (an “Acceleration Redemption Event”)
(each of clauses (i) through (v), an “Optional Redemption Event” and, together with the redemption events described in clauses (vi), (vii) and (viii), the “Note Redemption Events”).
(b) Upon notice to the Issuer from the Administrative Agent, the Borrower or the Lender of any event constituting a Note Redemption Event, the Issuer will deliver a copy of the notice to the Indenture Trustee and promptly (and in no event later than 10 days and not more than 60 days prior to the relevant redemption date) give (or the Indenture Trustee, in the name of
and at the expense of the Issuer, upon the Issuer providing written instruction to the Indenture Trustee setting forth the information to be contained in the notice of redemption at least 3 Business Days before the notice is to be given to Noteholders (or such shorter time as is acceptable to the Indenture Trustee) shall give) notice of redemption as described in Section 15.4 to each Noteholder (with a copy to the Indenture Trustee unless the Indenture Trustee sends the notice) at a price equal to the Prepayment Amount upon substantially identical terms as and pursuant to the Borrower’s notice of redemption or prepayment. Each notice of redemption shall state:
(i) the redemption date;
(ii) the reason for the redemption;
(iii) the redemption price and the amount of any accrued interest payable as provided in Section 4.1(d);
(iv) whether or not all Outstanding Notes are being redeemed;
(v) if the Issuer is not redeeming all Outstanding Notes, the aggregate principal amount of Notes that the Issuer is redeeming and the aggregate principal amount of Notes that shall be Outstanding after the partial redemption, as well as the identification of the particular Notes, or portions of the particular Notes, that the Issuer is redeeming;
(vi) if the Issuer is redeeming only part of a Note, the notice that relates to that Note shall state that on and after the redemption date, upon surrender of that Note, the Holder shall receive, without charge, a new Note or Notes of authorized denominations for the principal amount of the Note remaining unredeemed in the case of a certificated Note, otherwise in accordance with the Registered Depositary’s applicable procedures;
(vii) that on the redemption date the redemption price and any accrued interest payable to the redemption date as provided in Section 4.1(d) shall become due and payable in respect of each Note, or the portion of each Note, to be redeemed, and, unless the Issuer defaults in making the redemption payment, that interest on each Note, or the portion of each Note, to be redeemed, shall cease to accrue on and after the redemption date;
(viii) the place or places where a Noteholder must surrender the Noteholder’s Notes for payment of the redemption price;
(ix) the CUSIP or ISIN number, if any, listed in the notice or printed on the Notes, and that no representation is made as to the accuracy or correctness of such CUSIP or ISIN number;
(x) the applicable record date; and
(xi) any condition precedent to which the redemption or the repayment may be conditioned.
(c) Pursuant to the Credit and Guaranty Agreement, the Borrower may make the repayment or notice of Optional Redemption subject to the satisfaction of conditions precedent. If such repayment or notice of Optional Redemption is subject to satisfaction of one or more conditions precedent, such notice shall state that, in the Borrower’s discretion, the repayment or redemption date may be delayed until such time (but no more than 60 days after the date of the notice of redemption) as any or all such conditions shall be satisfied, or such repayment or redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the repayment or redemption date, or by the repayment or redemption date so delayed. In addition, the Borrower may provide in such notice that payment of the repayment or redemption price and performance of the Borrower’s obligations with respect to such repayment or redemption may be performed by another Person.
Notwithstanding anything herein to the contrary, notice to Noteholders from the Issuer of any Optional Redemption Event may be subject to one or more conditions precedent set forth in the notice of the Optional Redemption Event from the Borrower to the Lender in accordance with the terms of the Credit and Guaranty Agreement.
(d) Upon (i) the occurrence of a Note Redemption Event and payment by the Borrower to the Lender or the Administrative Agent on behalf of the Lender of the applicable Prepayment Amount with respect to a Note Redemption Event, as provided for in the Credit and Guaranty Agreement and (ii) payment by the Lender or the Administrative Agent on behalf of the Lender of the Prepayment Amount so received from the Borrower for deposit to the Loan Collection Account for the benefit of the Issuer and the Indenture Trustee on behalf of the Noteholders, the Issuer shall pay on the applicable redemption date the redemption price for the Notes together with accrued and unpaid interest thereon to but not including the date of redemption solely out of the Prepayment Amount received from the Borrower with respect to such redemption.
(e) If fewer than all of the Notes are being redeemed, the Notes to be redeemed shall be selected, in the case of certificated Notes, by lot or by such other method as the Indenture Trustee will deem to be fair and appropriate, and in the case of global notes, in accordance with DTC’s applicable policies and procedures (in integral multiples of US$1,000; provided that the remaining principal amount of any Noteholder’s Note will not be less than US$200,000). Upon surrender of any Note redeemed in part, the Noteholder will receive a new Note equal in principal amount to the unredeemed portion of the surrendered Note (or appropriate adjustments will be made to the amount of such global note in accordance with the Registered Depository’s policies and procedures).
(f) Notes called for redemption become due and payable at the redemption price on the redemption date. On and after the applicable redemption date, interest will cease to accrue on the Notes as long as the Issuer has deposited with the Paying Agent funds in satisfaction of the applicable redemption price together with accrued and unpaid interest thereon
pursuant to this Indenture. Upon redemption of the Notes by the Issuer, the redeemed Notes will be cancelled and cannot be reissued.
(g) Notwithstanding anything herein to the contrary, the obligation of the Issuer to so redeem the Notes shall be limited in extent to funds in respect of the Prepayment Amount actually received in the Loan Collection Account by the Issuer from the Lender under the Participation Agreement following receipt of the same from the Borrower or any Note Guarantor. Following any Note Redemption Event pursuant to this Section 4.1, the aggregate principal amount of the Notes Outstanding shall be reduced for all Noteholders in an amount equal to the aggregate principal amount of the Notes redeemed, and all amounts thereafter due and payable in respect of the Notes shall be payable based on the then Outstanding amount of the Notes after giving effect to any such Note Redemption Event.
SECTION 4.2 Repurchase of Notes Tendered upon a Change of Control Event.
(a) Upon the occurrence of a Change of Control Prepayment Event, the Borrower shall provide a Change of Control Notice to the Lender and the Administrative Agent and make a Change of Control Offer in accordance with the terms of the Credit and Guaranty Agreement. Pursuant to Section 3.04 of the Credit and Guaranty Agreement, the Borrower will be required, if requested by the Lender, to purchase all or a portion of the Loan in the principal amount as shall be requested by the Lender, at a prepayment price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the prepayment date and any Additional Amounts thereon (the “Change of Control Payment”).
(b) The Borrower will provide a Change of Control Notice to the Issuer on the same date it provides such notice to the Lender and the Administrative Agent under the Credit and Guaranty Agreement. Upon the Issuer’s receipt from the Lender or the Borrower of a Change of Control Notice in accordance with the Credit and Guaranty Agreement, the Issuer will deliver a copy of the notice to the Indenture Trustee and promptly (and in no event later than 30 days prior to the Change of Control Payment Date) give (or the Indenture Trustee, in the name of and at the expense of the Issuer, upon the Issuer providing written instruction to the Indenture Trustee containing all of the relevant information to be included in the notice at least 3 Business Days before the notice is to be given to Noteholders (or such shorter time as is acceptable to the Indenture Trustee) shall give) notice as described in Section 15.4 to each Noteholder (with a copy to the Indenture Trustee unless the Indenture Trustee sends the notice) offering to purchase (subject to the receipt by the Issuer from the Lender of Change of Control Payment) the Notes on the Change of Control Payment Date at a price equal to the Change of Control Payment upon substantially identical terms as and pursuant to the Borrower’s Change of Control Offer (the “Notes Change of Control Offer”). In addition to the information contained in the Borrower’s Change of Control Notice, the notice of the Notes Change of Control Offer will include instructions and materials necessary to enable Noteholders to tender Notes pursuant to the offer. The Change of Control Payment Date shall be no earlier than 30 days nor later than 60 days subsequent to the date on which the notice of the Notes Change of Control Offer is delivered to Noteholders (other than as may be required by applicable Law) and will be the same herein and under the Credit and Guaranty Agreement.
(c) Upon a Notes Change of Control Offer, each Noteholder will have the right to require that the Issuer purchase (subject to the receipt by the Issuer from the Lender of the Change of Control Payment) all or a portion of such Noteholder’s Notes in integral multiples of US$1,000; provided that the remaining principal amount of such Noteholder’s Notes will not be less than US$200,000. Tender of any Notes to be purchased in connection with the Notes Change of Control Offer must be received by the Issuer no later than five Business Days preceding the Change of Control Payment Date and may also be withdrawn until the same.
(d) The Issuer shall provide prompt notice (and in any event no later than four Business Days prior to the Change of Control Payment Date) to the Administrative Agent and the Lender of the aggregate principal amount of Notes validly tendered and not validly withdrawn, and upon notice from the Lender setting forth the aggregate principal amount of the Loan corresponding to the principal amount of the Notes validly tendered and not validly withdrawn, the Borrower will be required to prepay the Loan in the amount of the Change of Control Payment, pursuant to the Credit and Guaranty Agreement.
(e) No later than three Business Days prior to the Change of Control Payment Date, the Issuer will deliver to the Indenture Trustee an Officer’s Certificate stating the aggregate principal amount of Notes or portions thereof to be purchased by the Issuer.
(f) Upon payment by the Lender of the amounts so received from the Borrower for deposit to the Loan Collection Account for the benefit of the Issuer and the Indenture Trustee on behalf of the Noteholders, and on the Change of Control Payment Date, the Issuer shall, to the extent lawful, accept for payment all Notes or portions thereof validly tendered and not validly withdrawn, make payment or cause payment to be made for such Notes or portions thereof accepted for payment and deliver or cause to be delivered to the Indenture Trustee the Notes so accepted, and the Issuer shall instruct the Indenture Trustee, in writing, to cancel such Notes in accordance with its applicable procedures. Notwithstanding anything herein to the contrary, the obligation of the Issuer to so repurchase the Notes shall be limited in extent to funds in respect of the amount actually received by the Issuer. Following any Change of Control Payment pursuant to this Section 4.2, the aggregate principal amount of the Notes Outstanding shall be reduced for all Noteholders in an amount equal to the aggregate principal amount of the Notes repurchased, and all amounts thereafter due and payable in respect of the Notes shall be payable based on the then Outstanding amount of the Notes after giving effect to such repurchase.
(g) The Issuer will not be required to make a Notes Change of Control Offer if a third party makes a Notes Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements, set forth in this Indenture, that are applicable to a Notes Change of Control Offer made by the Issuer and such third party purchases all Notes properly tendered and not withdrawn under the Notes Change of Control Offer.
(h) The Borrower and the Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations to the extent any such rule, laws and regulations are applicable in connection with the prepayment of all or any part of the Loan and the purchase of all or part of the Notes in connection with a Notes Change
of Control Offer, as applicable. To the extent that the provisions of any applicable securities laws or regulations conflict with the Change of Control provisions of the Credit and Guaranty Agreement or this Indenture, the Borrower and the Issuer will comply with such securities laws and regulations and will not be deemed to have breached the obligations under the Credit and Guaranty Agreement or this Indenture by doing so.
SECTION 4.3 Repurchase of Notes Tendered upon an Asset Sale Offer.
The Notes shall be subject to redemption upon the occurrence of any prepayment by the Borrower of amounts outstanding from time to time under the Credit and Guaranty Agreement and the Loan due to the occurrence of an Asset Sale Prepayment Event as further described under Section 7.7 herein.
ARTICLE V
COLLATERAL
SECTION 5.1 Pledge of Interest in Trust Assets.
(a) The Issuer hereby (i) pledges, assigns and grants to the Indenture Trustee a first priority perfected security interest in the Trust Assets and all proceeds of any of the foregoing (collectively, the “Collateral”) and (ii) represents and warrants that the Issuer is the owner of the Trust Assets free and clear of all Liens (except as provided herein) with the power to charge both the legal and beneficial interests therein and the Trust (including the Cayman Trustee) has not made any other representation or warranty in respect of the transactions contemplated under this Indenture and the Transaction Documents other than as set forth hereunder and thereunder.
(b) The Collateral secures the payment by the Issuer of the Notes and all of its obligations now or hereafter existing under this Indenture and thereunder, whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interests, fees, premiums, penalties, indemnifications, contract paragraphs of action, costs, expenses or otherwise (the “Obligations”). Without limiting the generality of the foregoing, the Collateral secures the payment of all amounts which constitute part of the Obligations and would be owed by the Issuer to the Indenture Trustee under this Indenture and the Notes, but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Issuer.
(c) To give effect to the foregoing, all certificates or instruments, if any, representing or evidencing the Collateral (other than the Promissory Note) shall be delivered to and held by or on behalf of the Indenture Trustee pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank. The Indenture Trustee shall have the right (but shall not be obligated), at any time (acting at the written direction of Required Holders) and without notice to the Issuer, to transfer to or to register in the name of the Indenture Trustee or any of its nominees any or all of the Collateral. In addition, the Indenture Trustee shall have the right at any time to exchange
certificates or instruments, if any, representing or evidencing Collateral for certificates or instruments of smaller or larger denominations.
(d) The Issuer hereby appoints the Indenture Trustee as the Issuer’s attorney in fact, with full authority in the place and stead of the Issuer and in the name of the Issuer or otherwise, from time to time to take any action and to execute any instrument necessary or advisable to accomplish the purposes set forth herein, including, without limitation, to receive, indorse and collect all instruments made payable to the Issuer representing any interest payment, dividend or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same.
(e) If the Issuer fails to perform any agreement contained herein, the Indenture Trustee may itself (but shall not be obligated to) perform, or cause performance of, such agreement, and the expenses of the Indenture Trustee incurred in connection therewith shall be payable by the Issuer.
(f) The powers conferred on the Indenture Trustee hereunder are solely to protect the Indenture Trustee’s interest in the Collateral and shall not impose any duty upon the Indenture Trustee to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Indenture Trustee shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Indenture Trustee has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral.
(g) A continuing security interest in the Collateral shall (i) be created and shall remain in full force and effect until the payment in full of the Obligations and all other amounts payable hereunder and under the Notes, in accordance with Section 13.1, (ii) be binding upon the Issuer, its successors and assigns, and (iii) inure to the benefit of, and be enforceable by, the Indenture Trustee and its successors, transferees and assigns. Upon the payment in full of the Obligations and all other amounts payable hereunder and thereunder, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Issuer. Upon any such termination, the Indenture Trustee will, at the Issuer’s written request and expense, return to the Issuer, in accordance with the amount of Collateral contributed by the Issuer, such of the Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof and execute and deliver to the Issuer such documents as the Issuer shall reasonably request to evidence such termination (in form and substance satisfactory to the Indenture Trustee).
(h) The Issuer hereby agrees to file a Financing Statement that names the Issuer as debtor and the Indenture Trustee as secured party and that describes “all assets now owned or hereafter acquired” as the Trust Assets in which the Indenture Trustee has a security interest. For the avoidance of doubt, nothing herein shall require the Indenture Trustee to file Financing Statements or continuation statements, or be responsible for maintaining the security interests purported to be created as described herein (except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by it hereunder or under any other Transaction Document) and such responsibility shall be solely that of the Issuer.
(i) The Indenture Trustee shall not be responsible for and makes no representation as to the existence, genuineness, value or protection of any Collateral, for the legality, effectiveness or sufficiency of any security document, or for the validity, creation, perfection, priority, sufficiency or protection of any Liens securing the Notes, for the validity of the title of any grantor to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or liens upon the Collateral.
(j) Beyond the exercise of reasonable care in the custody of the Collateral in its possession, the Indenture Trustee will have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto. The Indenture Trustee will be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and the Indenture Trustee will not be liable or responsible for any loss or diminution in the value of any of the Collateral by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Indenture Trustee in good faith.
(k) In the event that the Indenture Trustee is required to acquire title to an asset for any reason, or take any managerial action of any kind in regard thereto, in order to carry out any fiduciary or trust obligation for the benefit of another, which in the Indenture Trustee’s sole discretion may cause the Indenture Trustee, as applicable, to be considered an “owner or operator” under any environmental laws or otherwise cause the Indenture Trustee to incur, or be exposed to, any environmental liability or any liability under any other federal, state or local law, the Indenture Trustee reserves the right, instead of taking such action, either to resign as Indenture Trustee or to arrange for the transfer of the title or control of the asset to a court appointed receiver. The Indenture Trustee will not be liable to any person for any environmental claims or any environmental liabilities or contribution actions under any federal, state or local law, rule or regulation by reason of the Indenture Trustee’s actions and conduct as authorized, empowered and directed hereunder or relating to any kind of discharge or release or threatened discharge or release of any hazardous materials into the environment.
(l) The Cayman Trustee shall register the security interest granted under this Indenture in its register of mortgages and charges.
(m) Notwithstanding anything herein or in any other Transaction Document to the contrary, the Indenture Trustee shall not be required to initiate or conduct any litigation, collection or enforcement proceedings with respect to the Collateral or otherwise take any action under any Transaction Document outside of the United States.
ARTICLE VI
COVENANTS OF THE ISSUER
For so long as the Notes remain Outstanding and the Trust has obligations under this Indenture, the Issuer will comply with the terms and covenants set forth below.
SECTION 6.1 Payment Obligations under the Notes and the Indenture. The Trust shall duly and punctually pay all amounts owed by it, and comply with all its other obligations, under the terms of the Notes and the Indenture, to the extent of availability of the amount in the Trust Assets.
SECTION 6.2 Performance obligations under Transaction Documents. The Trust agrees to duly and punctually perform, comply with and observe all obligations and agreements to be performed by it set forth in this Indenture, the Notes, the Participation Agreement, the Expense Reimbursement and Indemnity Agreement, the Declaration of Trust and the DTC letter of representations.
SECTION 6.3 Maintenance of Approvals. The Trust shall duly obtain and maintain in full force and effect all governmental approvals, consents or licenses of any Governmental Authority under the laws of the Cayman Islands or any other jurisdiction having jurisdiction over it, its business or the transactions contemplated herein, as well as of any third party under any agreement to which the Trust may be subject, in connection with its execution, delivery and performance of the Transaction Documents, to which it is a party (including, without limitation, any authorization required to obtain and transfer U.S. dollars or any other currency which at that time is legal tender in the United States out of the Cayman Islands in connection with the Notes, the Indenture, the Participation Agreement, the Expense and Reimbursement Agreement and the Declaration of Trust) or validity or enforceability thereof.
SECTION 6.4 Maintenance of Books and Records. The Trust shall maintain books, accounts and records as may be necessary to comply with all applicable laws and to enable its financial statements to be prepared, if any, and it will allow the Indenture Trustee, by prior written request, access to copies of those books, accounts and records at reasonable times.
SECTION 6.5 Maintenance of Office or Agency. The Trust shall maintain an agent in New York County, where notices to and demands upon the Trust in respect of the Indenture and the Notes may be served. Initially this office will be at the offices of CT Corp., and the Trust agrees not to change the designation of such office without prior written notice to the Indenture Trustee and designation of a replacement office in the same general location.
SECTION 6.6 Maintenance of Existence. The Cayman Trustee shall maintain in effect the existence of the Trust and all registrations necessary therefor and take all actions to maintain all rights, privileges, titles to property, franchises and the like necessary or desirable in the normal conduct of its business, activities or operations; provided, however, that this covenant shall not require the Cayman Trustee to maintain any such right, privilege, title to property, franchise or the like of the Trust, if the failure to do so does not, and will not, have a material adverse effect on the Trust or have a Material Adverse Effect on the rights of the Indenture Trustee or the Noteholders.
SECTION 6.7 Consolidations, Merger, Conveyance or Transfer. The Cayman Trustee shall not establish or acquire any subsidiaries as part of the Trust Assets or in one or a series of transactions, consolidate, amalgamate or merge the Trust into any other trust or convey, lease or transfer either all or substantially all of the Trust Assets to any other person or permit any person to merge with or into it other than an affiliate, or acquire the Trust Assets.
SECTION 6.8 Negative Pledge. The Trust shall not grant any lien, pledge, charge, security interest or encumbrance of any kind or nature on any of the Trust Assets except as described under this Indenture.
SECTION 6.9 Compliance with Laws. The Trust shall comply at all times with all applicable laws, rules, regulations, orders and directives of any government or government agency or authority having jurisdiction over the Trust, the Trust’s business or any of the transactions contemplated herein, except where the failure by the Trust to comply would not have a Material Adverse Effect on the Trust or have a material adverse effect on the rights of the Lender, the Indenture Trustee or the Noteholders.
SECTION 6.10 Limitation on Nature of Business. The Trust is not permitted to engage in any lines of business with respect to the Trust and having reference to the Trust Assets other than (i) holding the Participation and issuing the Notes and other matters described in the Offering Memorandum under the heading “The Trust—Purpose and Powers” and (ii) those matters that are reasonably related and ancillary to the ownership of, and enforcement of the Trust’s rights with respect to, the same.
SECTION 6.11 Payment of Taxes and Other Claims. (a) Subject to reimbursement by the Borrower and the Loan Guarantors under the Expense Reimbursement and Indemnity Agreement, the Trust shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, all taxes, assessments and governmental charges levied or imposed upon the Trust provided, however, that the Trust shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith and, if appropriate, by appropriate legal proceedings or where the failure to do so would not have a material adverse effect on the Trust or have a material adverse effect on the rights of the Noteholders.
(b) The Issuer will comply with all applicable withholding Tax requirements (including, without limitation, any United States backup withholding requirements). The Issuer will file (or cause to be filed) any required withholding Tax forms with all applicable Tax authorities and, unless an exception from withholding and backup withholding tax is properly established by a Noteholder, will remit amounts withheld, if any, with respect to the Noteholders to the applicable Tax authorities.
SECTION 6.12 Ranking. The Trust shall ensure that the Notes constitute general senior, unsubordinated obligations of the Trust and rank pari passu, without any preferences among themselves, with all other present and future obligations of the Trust (other than obligations preferred by statute or by operation of law).
SECTION 6.13 Limitations on Sale and Lease-back Transactions. The Trust shall not issue, assume or guarantee any obligation or Debt of kind or nature whatsoever, except for the issuance of the Notes (including any Additional Notes).
SECTION 6.14 Limitation on Indebtedness. The Trust shall not enter into any Sale and Leaseback Transaction with respect to any of the Trust Assets.
SECTION 6.15 No Liquidation or Termination without Consent. To the extent applicable, the Cayman Trustee shall not terminate or commence a voluntary case or other proceeding seeking, liquidation, provisional liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seek the appointment of a trustee, receiver, liquidator, provisional liquidator, custodian or other similar official of it or any substantial part of its property, or consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or make a general assignment or conveyance for the benefit of creditors, or take any corporate action to authorize any of the foregoing without the unanimous consent of the Noteholders of the Outstanding Notes. Insofar as the Trust operates through the Cayman Trustee, the Cayman Trustee will agree to refrain from taking any of the foregoing actions unless and until a successor trustee has assumed the obligations of the Cayman Trustee with respect to the Trust, including any obligations under the Transaction Documents.
SECTION 6.16 Appointment to Fill a Vacancy in Office of Indenture Trustee. Promptly, and in any event, within ten (10) calendar days after an officer of the Trust, acting on behalf of the Trust, becomes aware of a Default or Event of Default under the Credit and Guaranty Agreement, the Trust shall furnish written notice of the same to a Responsible Officer of the Indenture Trustee, specifically stating the event or condition that caused the Default or Event of Default, specifically stating that such event or condition has occurred and describing it and any action being or proposed to be taken by the Borrower with respect thereto. Upon receipt of such notice from the Trust, the Indenture Trustee will promptly give such notice to the Noteholders.
SECTION 6.17 Provision of Financial Statements and Reports. (a) For as long as the Notes are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Trust shall, to the extent required, furnish to any Noteholders holding an interest in a Restricted Global Note, or to any prospective purchaser designated by such Noteholders, upon request of such Noteholders, financial and other information described in paragraph (d)(4) of Rule 144A with respect to the Trust to the extent required in order to permit such Noteholders to comply with Rule 144A with respect to any resale of its Notes, unless during that time, the Trust is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or is exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act and no such information about the Trust is otherwise required pursuant to Rule 144A.
(b) In the event the Trust shall be required under the law of the Cayman Islands to prepare any financial statements or reports or shall publish or otherwise make such
statements or reports publicly available, the Trust shall promptly furnish a copy of such statements or reports to the Indenture Trustee for delivery to the Noteholders.
Delivery of such reports, information and documents to the Indenture Trustee (and any reports or information pursuant to Section 7.11) is for informational purposes only and the Indenture Trustee’s receipt of such shall not constitute actual or constructive notice or knowledge of any information contained therein or determinable from information contained therein, including the Trust’s or any other Person’s compliance with any of its covenants under the Indenture or any other Transaction Document (as to which the Indenture Trustee is entitled to rely exclusively on Officer’s Certificates).
SECTION 6.18 Economic Sanctions. (a) The Issuer covenants and represents that neither it nor any of its subsidiaries, directors or officers nor, to the knowledge of the Issuer, its affiliates, are currently the target or subject of any sanctions enforced by the US Government, (including, without limitation, the Office of Foreign Assets Control of the US Department of the Treasury or the US Department of State), the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively “Sanctions”);
(b) The Issuer covenants and represents that neither it nor any of its affiliates, subsidiaries, directors or officers will directly or indirectly use any payments made pursuant to this agreement, (i) to fund or facilitate any activities of or business with any person who, at the time of such funding or facilitation, is the subject or target of Sanctions, (ii) to fund or facilitate any activities of or business with any country or territory that is the target or subject of Sanctions, or (iii) in any other manner that will result in a violation of Sanctions by any person.
ARTICLE VII
COVENANTS OF THE PARENT NOTE GUARANTORS
SECTION 7.1 Limitation on Debt.
(a) The Parent Note Guarantors may not, and may not permit any of the Restricted Subsidiaries to, Incur any Debt, unless the Leverage Ratio for the most recently completed fiscal quarter for which financial statements are available would be less than 4.0 to 1.
(b) Notwithstanding the foregoing limitation, the following Debt (“Permitted Debt”) may be Incurred:
(i) any direct or indirect obligations owed in connection with the payment obligations on the Loan, Loan Guarantees, and the Note Guarantees, excluding any Loan Guarantees of additional amounts issued under the Credit and Guaranty Agreement or Note Guarantees of Additional Notes;
(ii) Debt (other than Debt described in another clause of this paragraph) outstanding, committed or mandated on the date hereof;
(iii) Pari Passu Debt of the Note Guarantors and Debt of the Restricted Subsidiaries under Credit Facilities and any Permitted Refinancing Debt in respect thereof, in an aggregate principal amount at any one time outstanding that does not exceed an amount equal to the greater of (a) US$150,000,000 (or the U.S. Dollar Equivalent of any other currency) and (b) 8.0% of Combined Total Assets, plus, (1) any accrual or accretion of interest that increases the principal amount of Debt under Credit Facilities and (2) in the case of any refinancing of Debt permitted under this clause (iii) or any portion thereof, the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses Incurred in connection with such refinancing;
(iv) Debt owed by any of the Note Guarantors to any other of the Note Guarantors or any of the Restricted Subsidiaries or Debt owed by any of the Restricted Subsidiaries to any of the Note Guarantors or any other of the Restricted Subsidiaries; provided, however, that upon either (1) the transfer or other disposition by such Note Guarantor or such Restricted Subsidiary of any Debt so permitted to a Person other than a Note Guarantor or a Restricted Subsidiary or (2) such Restricted Subsidiary ceasing to be a Restricted Subsidiary, the provisions of this clause (iv) shall no longer be applicable to such Debt and such Debt shall be deemed to have been Incurred at the time of such transfer or other disposition;
(v) Acquired Debt;
(vi) [Reserved];
(vii) Permitted Refinancing Debt of any Note Guarantor or Restricted Subsidiary Incurred in exchange for or the proceeds of which are used to refinance or refund or replace, or any extension or renewal of (including, in each case, successive refinancings, extensions and renewals), outstanding Debt of any such Note Guarantor or any such Restricted Subsidiary (including, in each case, successive refinancings, extensions and renewals), incurred pursuant to the first paragraph of Section 7.1(a) and paragraphs (i), (ii), (v) or this (vii) of the definition of Permitted Debt, as the case may be;
(viii) Debt of any Note Guarantor or any Restricted Subsidiary represented by letters of credit in order to provide security for workers’ compensation claims, health, disability or other employee benefits, payment obligations in connection with self-insurance or similar requirements of the Note Guarantors or any Restricted Subsidiary in the ordinary course of business;
(ix) customary indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition of any assets of any Note Guarantor or any Restricted Subsidiary, and earn-out provisions or contingent payments in respect of purchase price or adjustment of purchase price or similar obligations in acquisition agreements other than Guarantees of Debt
incurred by any Person acquiring all or any portion of such assets for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of each such Incurrence of such Debt will at no time exceed the gross proceeds actually received by a Note Guarantor or Restricted Subsidiary in connection with the related disposition;
(x) obligations in respect of (a) bid proposals or applications for telecommunications spectrum licenses, telecommunications usufruct rights or other licenses, in the ordinary course of business and not related to Debt for borrowed money and (b) customs, VAT or other tax guarantees, (c) bid, performance, completion, guarantee, surety and similar bonds, including guarantees or obligations of any Note Guarantor or any Restricted Subsidiary with respect to letters of credit supporting such obligations and (d) the financing of insurance premiums, in each case, in the ordinary course of business and not related to Debt for borrowed money;
(xi) Debt of any Note Guarantor or any Restricted Subsidiary arising from the honoring by a bank or other financial institution of a check, draft or similar instrument including, but not limited to, electronic transfers, wire transfers, netting services and commercial card payments, drawn against insufficient funds; provided that such Debt is extinguished within five Business Days of Incurrence;
(xii) guarantees by any Note Guarantor or any Restricted Subsidiary of Debt or any other obligation or liability of any Note Guarantor or any Restricted Subsidiary (other than of any Debt Incurred in violation of this covenant); provided, however, that if the Debt being guaranteed is subordinated in right of payment to the Note Guarantees or the Loan, then such guarantee shall be subordinated substantially to the same extent as the relevant Debt guaranteed;
(xiii) Debt arising under borrowing facilities provided by a special purpose vehicle notes issuer to any Note Guarantor or any Restricted Subsidiary in connection with the issuance of notes or other similar debt securities intended to be supported primarily by the payment obligations of any Note Guarantor or any Restricted Subsidiary in connection with any vendor financing platform;
(xiv) Debt consisting of Interest Rate, Currency or Commodity Price Agreements;
(xv) Debt consisting of (a) mortgage financings, asset backed financings, Purchase Money Obligations or other financings, Incurred for the purpose of financing all or any part of the purchase price or cost of design, construction, installation or improvement (including, without limitation, in respect of tenant improvement) of property (real or personal), plant, equipment or other assets (including, without limitation, network assets) used or useful in the business of any Note Guarantor or any Restricted Subsidiary or (b) Debt
otherwise Incurred to finance the purchase, lease, rental or cost of design, development, construction, installation or improvement (including, without limitation, in respect of tenant improvement) of property (real or personal), plant, equipment or other assets (including, without limitation, network assets) used or useful in the business of any Note Guarantor or any Restricted Subsidiary, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets, and any Permitted Refinancing Debt in respect thereof, in an aggregate outstanding principal amount which, when taken together with the principal amount of all other Debt Incurred pursuant to this clause (15) will not exceed the greater of (a) US$40,000,000 and (B) 2.0% of the Combined Total Assets at any time outstanding;
(xvi) Shareholder Loans or Intergroup Subordinated Loans;
(xvii) Debt not otherwise permitted to be Incurred pursuant to clauses (i) through (xvi) above, which, together with any other outstanding Debt Incurred pursuant to this clause (vii), including any Permitted Refinancing Debt in respect thereof, has an aggregate principal amount at any time outstanding not in excess of the greater of US$150,000,000 and 8.0% of the Combined Total Assets, plus, in the case of any refinancing of Debt permitted under this clause (xvii) or any portion thereof, the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses Incurred in connection with such refinancing.
The Note Guarantors will not incur any Debt (including Permitted Debt) that is contractually subordinated in right of payment to any other Debt of the Note Guarantors unless such Debt is also contractually subordinated in right of payment to the Loan and the Note Guarantees on substantially identical terms; provided, however, that no Debt will be deemed to be contractually subordinated in right of payment to any other Debt of any Note Guarantor solely by virtue of being unsecured or by virtue of being secured with different collateral or by virtue of being secured on a junior priority basis or by virtue of the application of waterfall or other payment ordering provisions affecting different tranches of Debt.
(c) For the purposes of determining compliance with this covenant, in the event that an item of Debt meets the criteria of more than one of the types of Permitted Debt or is entitled to be Incurred pursuant to Section 7.1(a) above, the Note Guarantors in their sole discretion may classify and from time to time reclassify such item of Debt or any portion thereof and only be required to include the amount of such Debt as one of such types.
(d) For the purposes of determining compliance with any covenant in this Indenture or whether an Event of Default has occurred, in each case, where Debt is denominated in a currency other than U.S. dollars, the amount of such Debt will be the U.S. Dollar Equivalent determined on the date of such Incurrence; provided, however, that if any such Debt that is denominated in a different currency is subject to an Interest Rate, Currency or Commodity Price Agreement with respect to U.S. dollars covering principal and premium, if any, payable on such
Debt, the amount of such Debt expressed in U.S. dollars will be adjusted to take into account the effect of such an agreement.
SECTION 7.2 Limitation on Restricted Payments.
(a) The Parent Note Guarantors may not, and may not permit the Restricted Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend or make any distribution in respect of the Parent Note Guarantors’ or the Restricted Subsidiaries’ Capital Stock, excluding (a) any dividends or distributions by the Parent Note Guarantors or the Restricted Subsidiaries payable solely in shares of such Parent Note Guarantor’s or the Restricted Subsidiaries’ Capital Stock (other than Redeemable Stock) or in options, warrants or other rights to acquire the Parent Note Guarantor’s Capital Stock (other than Redeemable Stock) and (b) any dividends or distributions payable to the Parent Note Guarantors or any of their Restricted Subsidiaries (and, if such Restricted Subsidiary has shareholders other than the Parent Note Guarantors or any Subsidiary of the Parent Note Guarantors, to its other shareholders on a pro rata basis (or on less than a pro rata basis to such shareholders));
(ii) purchase, redeem, or otherwise acquire or retire for value (a) any of a Parent Note Guarantor’s or Restricted Subsidiary’s Capital Stock or (b) any options, warrants or other rights to acquire shares of a Parent Note Guarantor’s or Restricted Subsidiary’s Capital Stock (in respect of (a) and (b) above, in each case, other than (x) from a Parent Note Guarantor or any Restricted Subsidiaries and (y) any such acquisition of the shares or rights to acquire shares of a Restricted Subsidiary by a Parent Note Guarantor or another Restricted Subsidiary);
(iii) redeem, repurchase, defease or otherwise acquire or retire for value prior to any scheduled maturity, repayment or sinking fund payment the Parent Note Guarantor’s Debt which is subordinate in right of payment to the Notes (other than any direct or indirect obligations by the Parent Note Guarantors for the sole purpose of effectuating payments on the Notes); or
(iv) make any Investment, other than Permitted Investments
(each of clauses (i) through (iv) being a “Restricted Payment”).
(b) If:
(1) a Default or an Event of Default shall have occurred and is continuing or would result from such Restricted Payment; or
(2) after giving pro forma effect to such Restricted Payment as if such Restricted Payment had been made at the beginning of the applicable fiscal
quarter period, the Parent Note Guarantors could not Incur at least US$1.00 of additional Debt pursuant to Section 7.1(a) herein; or
(3) upon giving effect to such Restricted Payment, the aggregate of all Restricted Payments from the date of the Indenture, excluding those made pursuant to the further provisos (A) to (N) below, exceeds the sum of
(i) the difference of (x) 100% of cumulative Combined EBITDA from January 1, 2021 through the last day of the last full fiscal quarter ended immediately prior to the date of such Restricted Payment for which the Parent Note Guarantors’ quarterly or annual financial statements are available minus (y) the product of 1.5 times cumulative Combined Interest Expense from January 1, 2021 through the last day of the last full fiscal quarter ended immediately prior to such Restricted Payment for which the Parent Note Guarantors’ quarterly or annual fiscal statements are available; plus
(ii) the net reduction in the Parent Note Guarantors’ Investments in any Unrestricted Subsidiary resulting from payments of interest on Debt, dividends, return of capital, repayments of loans or advances, payments of fees or other transfers of assets, in each case to the Parent Note Guarantors or the Restricted Subsidiaries from such Unrestricted Subsidiary (except to the extent that any such payment is included in the calculation of Combined EBITDA) or from re-designations of Unrestricted Subsidiaries as Restricted Subsidiaries; provided that the amount included in clause (ii) shall not exceed the amount of Investments previously made by the Parent Note Guarantors and the Restricted Subsidiaries in such Unrestricted Subsidiary; plus
(iii) the cash return, after the Issue Date, on any other Investment made after the Issue Date pursuant to this paragraph, as a result of any sale for cash, repayment, redemption, liquidating distribution or other cash realization (not included in Combined EBITDA), not to exceed the amount of such Investment so made; plus
(iv) an amount not to exceed the sum of the aggregate net proceeds received by the Parent Note Guarantors after the Issue Date, including the fair market value of property other than cash (determined in good faith by the Parent Note Guarantor’s Board of Directors as evidenced by a Board Resolution filed with the Indenture Trustee), from contributions of capital or the issuance and sale (other than to any of the Parent Note Guarantors or Restricted Subsidiaries) of the Parent Note Guarantor’s Capital Stock (other than Redeemable Stock or Excluded Contributions), options, warrants or other rights to acquire any Parent Note Guarantor’s Capital Stock (other than Redeemable Stock) or any Parent Note Guarantor’s Debt or Debt of the Restricted Subsidiaries that
has been converted into or exchanged for such Parent Note Guarantor’s Capital Stock (other than Redeemable Stock and other than by or from any of the Parent Note Guarantors’ Restricted Subsidiaries) after the Issue Date provided that any such net proceeds received by any Parent Note Guarantors from an employee stock ownership plan financed by loans from any Parent Note Guarantor or any of its respective Subsidiaries shall be included only to the extent such loans have been repaid with cash on or prior to the date of determination; minus
(v) any Note Guarantor or their respective Subsidiaries’ deposits are withdrawn and acquired by the depositary institution (and not returned to the Note Guarantors or one of their Subsidiaries) as the result of any netting or set-off arrangement entered into by the Note Guarantors or any of their Subsidiaries (except to the extent such deposits are used to satisfy obligations solely of the Note Guarantors or their Subsidiaries).
(c) Notwithstanding the foregoing,
(A) the Parent Note Guarantors may pay any dividend on Capital Stock of any class within 60 days after the declaration thereof if, on the date when the dividend was declared, the Parent Note Guarantors could have paid such dividend in accordance with the foregoing provision;
(B) any of the Note Guarantors and any of the Restricted Subsidiaries may refinance any Debt otherwise as permitted by Section 7.1(b) of this Indenture or in exchange for or out of the net proceeds of the sale (other than from or to any of the Note Guarantors or Restricted Subsidiaries or from or to an employee stock ownership plan financed by loans from any of the Note Guarantors or any of the Restricted Subsidiaries) of shares of any of the Note Guarantors’ Capital Stock (other than Redeemable Stock) or the subordinated obligations of any Note Guarantor or any Restricted Subsidiary to be Incurred pursuant to this definition of Permitted Debt, provided however, that such exchange or repurchase must be made within 90 days of the issuance of Capital Stock or such subordinated obligations;
(C) any of the Note Guarantors and any of the Restricted Subsidiaries may purchase, redeem, acquire or retire any shares of its Capital Stock solely in exchange for or out of the net proceeds of (i) the substantially concurrent sale (other than from or to any of the Note Guarantors or Restricted Subsidiaries or from or to an employee stock ownership plan financed by loans from any of the Note Guarantors or any of the Restricted Subsidiaries) of shares of any of the Note Guarantors’ Capital Stock (other than Redeemable Stock) (ii) an Asset Disposition to the extent of Excess Proceeds of an Asset Disposition or (iii) a Sale/Leaseback of Tower Equipment that would have been an Asset Disposition but for the proviso in clause (a) of the Asset Disposition definition, provided that the Parent Note Guarantors make an offer to purchase Outstanding Notes prior to
reliance on this provision at 100% of their principal amount plus accrued interest to the date of purchase and then to the extent of such Excess Proceeds of an Asset Disposition;
(D) the Note Guarantors and any of the Restricted Subsidiaries may make loans to employees in connection with such employees’ exercise of options to purchase Capital Stock or otherwise in the ordinary course of business;
(E) the Note Guarantors and any of the Restricted Subsidiaries may make payments that are made with Excluded Contributions;
(F) the making or facilitation of a loan to the holders of Capital Stock of the Borrower or other Parent Note Guarantors, in each case from the proceeds of the incurrence of the Loan as described under “Use of Proceeds” in the Offering Memorandum; provided such loan is made or facilitated to such holders of Capital Stock within 45 days of the Issue Date; and (ii) if such loan is repaid in whole or in part, from time to time, the subsequent declaration and payment of a dividend or other distribution in respect of the Capital Stock of the Borrower or other Parent Note Guarantors in an amount equal to the principal amount of the loan that has been so repaid; and
(G) the Note Guarantors and the Restricted Subsidiaries may repurchase or fund the repurchase of shares of such Note Guarantor or Millicom held by employees or former employees of such Note Guarantor or any Restricted Subsidiary in an amount not to exceed $5,000,000 in any twelve month period;
(H) the Note Guarantors and any of the Restricted Subsidiaries may cause a distribution of shares of any Unrestricted Subsidiary;
(I) the Note Guarantors or any Restricted Subsidiary may pay a Dividend on Capital Stock of any class with the proceeds of any public Equity Offering or any public sale of Qualified Capital Stock of such Note Guarantor or Restricted Subsidiary in an amount not to exceed 6% of the Market Capitalization of the Borrower at the time of such public Equity Offering or public sale of Qualified Capital Stock if after giving pro forma effect to such Restricted Payment as if such Restricted Payment had been made at the beginning of the applicable fiscal quarter period the Note Guarantor could Incur at least $1.00 of additional Debt pursuant to the first paragraph of Section 7.1;
(J) the Note Guarantors and any Restricted Subsidiary may make Restricted Payments, including the purchase of Receivables and the payment of fees, in connection with any Qualified Receivables Transaction;
(K) the Note Guarantors and any Restricted Subsidiary may engage in cash management and pooling transactions with Millicom and its Subsidiaries in the ordinary course of business;
(L) the Note Guarantors and any Restricted Subsidiary may make or repay Intergroup Subordinated Loans so long as no Default or Event of Default shall have occurred and be continuing or would result from such Restricted Payment;
(M) the Note Guarantors and any Restricted Subsidiary may make Restricted Payments to Millicom or any Subsidiary thereof so long as the proceeds thereof are transferred to such Note Guarantors or any Restricted Subsidiary within three days of the making of such Restricted Payment and do not exceed 10.0% of Combined Total Assets; and
(N) the Note Guarantors and any of the Restricted Subsidiaries may make Restricted Payments not otherwise permitted hereby in an aggregate amount not to exceed the greater of US$100,000,000 and 6.0% of Combined Total Assets.
(d) Any Restricted Payments made pursuant to clauses (A), (D) or (I) of Section 7.2(c) shall be a Restricted Payment for purposes of calculating the aggregate Restricted Payments pursuant to clause (c)(3) above.
SECTION 7.3 Limitation on Dividend and Other Payment Restrictions Affecting the Parent Note Guarantors and Restricted Subsidiaries.
(a) The Parent Note Guarantors may not, and may not permit any of the Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Parent Note Guarantor or Restricted Subsidiary
(i) to pay dividends (in cash or otherwise) or make any other distributions in respect of its Capital Stock to the Parent Note Guarantors or any other Restricted Subsidiary or pay any Debt or other obligation owed to the Parent Note Guarantors or any other such Restricted Subsidiary;
(ii) to make loans or advances to the Parent Note Guarantors or any other Restricted Subsidiary; or
(iii) to transfer any of its property or assets to the Parent Note Guarantors or any other Restricted Subsidiary.
(b) Notwithstanding the foregoing, the Parent Note Guarantors may, and may permit any of the Restricted Subsidiaries to, suffer to exist any such encumbrance or restriction
(1) Pursuant to the Credit and Guaranty Agreement, this Indenture and the Note Guarantees;
(2) pursuant to any agreement in effect on the date of this Indenture;
(3) pursuant to an agreement relating to any Debt Incurred by a Person prior to the date on which such Person became such a Restricted Subsidiary and outstanding on such date and not Incurred in anticipation of becoming such a Restricted Subsidiary which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired;
(4) pursuant to an agreement by which the Parent Note Guarantors or a Restricted Subsidiary obtains financing; provided that (x) such restriction is not materially more restrictive than customary provisions in comparable financing agreements and (y) the Parent Note Guarantors’ management determines that at the time such agreement is entered into such restriction will not materially impair the Parent Note Guarantors’ ability to make payments on the Loan and the Notes;
(5) pursuant to an agreement effecting a renewal, refunding or extension of Debt Incurred pursuant to an agreement referred to in clause (1), (2), (3) or (4) above; provided, however, that the provisions contained in such renewal, refunding or extension agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, as determined in good faith by the Parent Note Guarantors’ management;
(6) in the case of clause (iii) above, restrictions contained in any security agreement (including a capital lease) securing Debt of any of the Parent Note Guarantors or the Parent Note Guarantors’ Restricted Subsidiaries otherwise permitted under the Indenture, but only to the extent such restrictions restrict the transfer of the property subject to such security agreement;
(7) in the case of clause (iii) above, customary nonassignment provisions entered into in the ordinary course of business in leases to the extent such provisions restrict the transfer or subletting of any such lease;
(8) pursuant to customary restrictions contained in asset sale agreements limiting the transfer of property subject to such agreements pending the closing of such sales or pursuant to customary restrictions in share purchase agreements otherwise permitted under the Indenture for the sale of Subsidiaries on such sold Subsidiaries;
(9) customary restrictions pursuant to joint venture agreements or similar documents that restrict the transfer of ownership interests in or the payment of dividends or distributions from such joint venture or similar Person or agreements entered into in the ordinary course of business; provided further that the Parent Note Guarantor’s respective Board of Directors determines that, at the time such encumbrance or restriction arises or is agreed to, it will not materially impair such Parent Note Guarantor’s ability to make payments on the Notes; or
(10) if such encumbrance or restriction is the result of applicable law or regulation.
SECTION 7.4 [Reserved].
SECTION 7.5 Limitation on Liens.
The Parent Note Guarantors shall not, and shall not permit the Restricted Subsidiaries to, Incur or suffer to exist any Lien (other than Permitted Liens) on or with respect to any property or assets now owned or hereafter acquired to secure any Debt unless the Loan, the Loan Guarantees and the Note Guarantees are equally and ratably secured by such Lien; provided that, if the Debt secured by such Lien is subordinate or junior in right of payment to the Loan, the Loan Guarantees and the Note Guarantees, then the Lien securing such Debt shall be subordinate or junior in priority to the Lien securing the Loan, the Loan Guarantees and the Note Guarantees.
SECTION 7.6 Limitation on Guarantees of the Note Guarantors’ Subordinated Debt.
The Parent Note Guarantors may not permit any of the Restricted Subsidiaries, directly or indirectly, to assume, Guarantee or in any other manner become liable with respect to any of the Note Guarantors’ Debt that is expressly by its terms subordinated or junior in right of payment to any other Debt of a Note Guarantor.
SECTION 7.7 Limitation on Asset Dispositions.
(a) Each of the Parent Note Guarantors may not, and may not permit the Restricted Subsidiaries to, make any Asset Disposition in one or more related transactions unless:
(1) such Parent Note Guarantor or Restricted Subsidiary, as the case may be, receives consideration for such disposition at least equal to the fair market value for the assets sold or disposed of as determined by the Parent Note Guarantor’s senior management or Board of Directors in good faith;
(2) unless the Asset Disposition is a Permitted Asset Swap, at least 75% of the consideration for such disposition consists of (a) cash or Cash Equivalents, (b) the assumption of such Parent Note Guarantor’s or Restricted Subsidiary’s Debt or other liabilities (including Debt or liabilities that are subordinated to the Loan or the Notes) or Debt or other liabilities of such Restricted Subsidiary relating to such assets and, in each case, such Parent Note Guarantor or the Restricted Subsidiary, as applicable, is released from all liability on the Debt assumed or (c) any Capital Stock or assets of the kind referred to in Section 7.7(a)(3)(i)(D) or 7.7(a)(3)(i)(E), or any combination thereof; and
(3) within 365 days of such Asset Disposition, at the Parent Note Guarantors’ or applicable Restricted Subsidiary’s option:
(i) the Net Available Proceeds are applied:
(A) to repay, redeem, retire or cancel outstanding Senior Secured Debt;
(B) first, if the Borrower makes an Asset Sale Offer, to the Lender pursuant to the terms of the Credit and Guaranty Agreement as set forth in the Credit and Guaranty Agreement, and, second, to the extent any Net Available Proceeds from such Asset Disposition remain, to any other use as determined by the applicable Parent Note Guarantor or the applicable Restricted Subsidiary that is not otherwise prohibited by this Indenture;
(C) to repurchase, prepay, redeem or repay Pari Passu Debt; provided that, concurrently with such repayment, the Borrower makes an Asset Sale Offer to the Lender pursuant to the terms of Section 3.04(b) of the Credit and Guaranty Agreement;
(D) to acquire all or substantially all of the assets of, or any Capital Stock of, another Related Business, if, after giving effect to any such acquisition of Capital Stock, the Related Business is or becomes a Restricted Subsidiary of the Parent Note Guarantors;
(E) to make a capital expenditure or acquire other assets (other than Capital Stock and cash or Cash Equivalents), rights (contractual or otherwise) and properties, whether tangible or intangible (including ownership interests) that are used or intended for use in connection with a Related Business;
(F) to the extent permitted, to redeem Notes as provided under clauses (i) through (v) of Section 4.1(a); or
(G) any combination of the foregoing subclauses (A) through (F) of this Section 7.7(a)(3)(i).
(ii) the relevant Parent Note Guarantor enters into a binding commitment to apply the Net Available Proceeds pursuant to subclauses (D) or (E) of Section 7.7(a)(3)(i); provided that such binding commitment (or any subsequent binding commitment replacing the initial binding commitment that is entered into within 180 days following the aforementioned 365-day period) shall be treated as a permitted application of the Net Available Proceeds from the date of such commitment until the earlier of (x) the date on which such acquisition or expenditure is consummated and (y) the 180th day following the expiration of the aforementioned 365-day period.
(b) The amount of such Net Available Proceeds not so used as set forth in the paragraph above constitutes “Excess Proceeds.” Pending the final application of any such Net Available Proceeds, the Parent Note Guarantors may temporarily reduce revolving credit borrowings or otherwise use such Net Available Proceeds in any manner that is not prohibited by the terms of this Indenture. For purposes of this Section 7.7, any securities, notes or other
obligations received by such Parent Note Guarantor or any such Restricted Subsidiary from such transferee that are promptly converted by the recipient thereof into cash, Cash Equivalents or readily marketable securities (to the extent of the cash, Cash Equivalents or readily marketable securities received in that conversion), shall be deemed cash.
(c) Notwithstanding the foregoing, the Borrower will not be required to make an Asset Sale Offer to repay the Loan pursuant to the requirements described above if the funds available for such use in respect of Asset Dispositions in the same fiscal year, together with the funds available for such use in respect of all prior Asset Dispositions, which were not so used pursuant to the provisions described in Section 7.7(a)(3) are less than US$30,000,000.
(d) Pursuant to the terms of the Credit and Guaranty Agreement, upon the determination of the Borrower to make an offer to the Lender to prepay all or a portion of the principal amount of the Credit and Guaranty Agreement, the Borrower shall provide an Asset Sale Notice and make an offer to prepay the Loan in a principal amount up to the Asset Sale Prepayment Amount (the “Asset Sale Offer”), pursuant to which the Borrower shall be required, if requested by the Lender (for the avoidance of doubt, as instructed by the Issuer, who shall be instructed by the Indenture Trustee at the written instruction of the Required Holders), to purchase up to the Asset Sale Prepayment Amount in principal amount of the Loan at a prepayment price equal to 100% of the principal amount of the Loan being prepaid, plus accrued and unpaid interest thereon, if any, to but excluding the prepayment date and any Additional Amounts thereon.
(e) Upon the Issuer’s receipt from the Lender or the Borrower of an Asset Sale Notice in accordance with the Credit and Guaranty Agreement, the Issuer shall give a copy of the notice to the Indenture Trustee and promptly (and in no event later than 30 days prior to the Asset Sale Payment Date) give (or the Indenture Trustee, in the name of and at the expense of the Issuer, upon the Issuer providing written instruction to the Indenture Trustee at least 3 Business Days before the notice is to be given to the Noteholders (or such shorter time as is acceptable to the Indenture Trustee) shall give) notice as described in Section 15.4 to each Noteholder (with a copy to the Indenture Trustee unless the Indenture Trustee gives the notice) offering to purchase the Notes pursuant to the Borrower’s Asset Sale Offer (the “Notes Asset Sale Offer”). In addition to the information contained in the Borrower’s Asset Sale Notice, the Notes Asset Sale Offer will include instructions and materials necessary to enable Noteholders to tender Notes pursuant to the offer.
(f) The Asset Sale Payment Date shall be a Business Day no earlier than 30 days nor later than 60 days subsequent to the date on which the Notes Asset Sale Offer is delivered to Noteholders (other than as may be required by applicable Law).
(g) Upon a Notes Asset Sale Offer, each Noteholder will have the option to tender to the Issuer all or a portion of the Noteholder’s Notes in integral multiples of US$1,000; provided that the remaining principal amount of such Noteholder’s Note will not be less than US$200,000. Tender of any Notes to be purchased in connection with the Notes Asset Sale Offer must be received by the Trust no later than five Business Days preceding the Asset Sale Payment Date and may also be withdrawn until the same.
(h) The Issuer shall provide prompt notice to the Administrative Agent and the Lender of the aggregate principal amount of Notes validly tendered, and upon notice from the Lender setting forth the aggregate principal amount of the Loan corresponding to the principal amount of the Notes validly tendered, the Borrower will be required to prepay such aggregate principal amount of the Loan, plus accrued and unpaid interest to but excluding the prepayment date and any Additional Amounts in an amount up to the Asset Sale Prepayment Amount.
(i) To the extent that Noteholders and holders of other Debt, if any, which are the subject of an Asset Sale Offer properly tender and do not withdraw Notes or the other Debt in an aggregate amount exceeding the amount of Excess Proceeds, the Borrower will purchase a principal amount of the Loan (and the Issuer, therefore, will purchase a principal amount of the Notes) and the Borrower will purchase such other Debt on a pro rata basis (based on amounts tendered). If only a portion of a Note is purchased pursuant to an Asset Sale Offer, a new Note in a principal amount equal to the portion thereof not purchased will be issued in the name of the Noteholder thereof upon cancellation of the original Note (or appropriate adjustments to the amount and beneficial interests in a Global Note will be made, as appropriate). Notes (or portions thereof) purchased pursuant to a Notes Asset Sale Offer will be cancelled and cannot be reissued. No later than three Business Days prior to the Asset Sale Payment Date, the Issuer shall deliver to the Indenture Trustee an Officer’s Certificate stating the aggregate principal amount of Notes or portions thereof to be purchased by the Issuer.
(j) On the Asset Sale Payment Date, the Issuer will, to the extent lawful, accept for payment all Notes or portions thereof properly tendered and accepted pursuant to this Section 7.7(i) and not withdrawn and deliver or cause to be delivered to the Indenture Trustee the Notes so accepted. No later than three Business Days prior to the Asset Sale Payment Date, the Trust shall deliver to the Indenture Trustee an Officer’s Certificate stating the aggregate principal amount of the Notes or the portions thereof to be purchased by the Issuer.
SECTION 7.8 Transactions with Affiliates.
(a) Each of the Parent Note Guarantors may not, and may not permit any of the Restricted Subsidiaries to, enter into any transaction that involves in excess of US$20,000,000 with any Parent Note Guarantor’s Affiliate (other than the Parent Note Guarantors or any of the Restricted Subsidiaries), either directly or indirectly, unless such transaction is on terms no less favorable to the Parent Note Guarantors or such Restricted Subsidiary than those that could be obtained in a comparable arm’s length transaction with an entity that is not an Affiliate of the Parent Note Guarantors or such Restricted Subsidiary. For any such transaction that involves in excess of (a) US$30,000,000, a majority of the members of the relevant Parent Note Guarantor’s Board of Directors shall determine that such transaction satisfies the above criteria and shall evidence such a determination by a Board Resolution filed with the Indenture Trustee.
(b) The foregoing restriction shall not apply to
(i) reasonable and customary payments to or on behalf of a Parent Note Guarantor’s directors, officers or employees or any of the directors, officers or employees
of a Parent Note Guarantor’s Restricted Subsidiaries, or in reimbursement of reasonable and customary payments or reasonable and customary expenditures made or Incurred by such Persons as directors, officers or employees;
(ii) any Restricted Payment permitted under Section 7.2 or Permitted Investments;
(iii) any loan or advance by a Parent Note Guarantor or any of the Restricted Subsidiaries to employees of any of them in the ordinary course of business;
(iv) (A) transactions with customers, distributors, suppliers, purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with this Indenture, or (B) transactions existing on the Issue Date and described under “Related Party Transactions” in the Offering Memorandum and any amendment, supplement, restatement, replacement, renewal, extension, refinancing, thereof or thereto, including without limitation with different counterparties (so long as the renewed, replaced or new agreement, when taken as a whole is not more disadvantageous to the Noteholders in any material respect than the original agreement in effect on the Issue Date);
(v) any transaction with a Receivables Entity effected as part of a Qualified Receivables Transaction, acquisitions of Permitted Investments in connection with a Qualified Receivables Transaction, and other Investments in Receivables Entities consisting of cash or Securitization Obligations;
(vi) the payment to Millicom or any Subsidiary of Millicom of all reasonable expenses Incurred by Millicom or any Subsidiary of Millicom in connection with its direct or indirect Investment in the Parent Note Guarantors, their respective Subsidiaries and unpaid amounts accrued for prior periods;
(vii) the payment to Millicom and its Affiliates or Subsidiaries of Value Creation Fees of up to the greater of US$150,000,000 and 8.0% of Combined Total Assets per annum;
(viii) the issuance of shares or Intergroup Subordinated Loans;
(ix) transactions with Affiliates in their capacity as holders of indebtedness of any Parent Note Guarantor or any Restricted Subsidiary.
(x) Cash Management Loans;
(xi) any transaction under any tax sharing agreement or arrangement and payments pursuant thereto between or among Millicom, any Subsidiary of Millicom, a Note Guarantor, a Restricted Subsidiary or any other Person not otherwise prohibited by this Indenture and any payments or other transactions pursuant to a tax sharing agreement between any Note Guarantor or a Restricted Subsidiary and any other Person with which the Note Guarantors or any of the Restricted Subsidiaries files a consolidated tax return
or with which the Note Guarantors or any of the Restricted Subsidiaries is part of a group for tax purposes (including a fiscal unity) or any tax advantageous group contribution made pursuant to applicable legislation; provided that any such payments or other transactions pursuant to a tax sharing agreement under this clause (xii) does not exceed the taxes that would be payable by the Note Guarantors and their Subsidiaries on a stand-alone basis or as a stand-alone tax group, reduced by any such taxes paid by the Note Guarantors and/or any of their respective Subsidiaries; and
(xii) contributions to the common equity capital of any Parent Note Guarantor or the issue or sale of Capital Stock of a Parent Note Guarantor.
SECTION 7.9 Limited Condition Transaction.
(a) In connection with any action being taken in connection with a Limited Condition Transaction, for purposes of determining compliance with any provision of this Indenture which requires that no Default or Event of Default, as applicable, has occurred, is continuing or would result from any such action, as applicable, such condition shall, at the option of the Parent Note Guarantors, be deemed satisfied, so long as no Default or Event of Default, as applicable, exists on the date the definitive agreement (or other relevant definitive documentation) for such Limited Condition Transaction is entered into. For the avoidance of doubt, if any Parent Note Guarantor has exercised its option under the first sentence of this paragraph, and any Default or Event of Default occurs following the date such definitive agreement for a Limited Condition Transaction is entered into and prior to the consummation of such Limited Condition Transaction, any such Default or Event of Default shall be deemed to not have occurred or be continuing for purposes of determining whether any action being taken in connection with such Limited Condition Transaction is permitted hereunder.
(b) In connection with any action being taken in connection with a Limited Condition Transaction for purposes of:
(i) determining compliance with any provision of this Indenture which requires the calculation of any financial ratio or test, including the Leverage Ratio; or
(ii) testing baskets set forth in this Indenture (including baskets measured as a percentage of Combined Total Assets);
(c) in each case, at the option of the Parent Note Guarantors (the Parent Note Guarantors’ election to exercise such option in connection with any Limited Condition Transaction, an “LCT Election”), the date of determination of whether any such action is permitted hereunder, shall be deemed to be the date the definitive agreement (or other relevant definitive documentation) for such Limited Condition Transaction is entered into (the “LCT Test Date”); provided, however, that the Parent Note Guarantors shall be entitled to subsequently elect, in its sole discretion, the date of consummation of such Limited Condition Transaction instead of the LCT Test Date as the applicable date of determination, and if, after giving pro forma effect to the Limited Condition Transaction and the other transactions to be entered into in connection therewith (including any Incurrence of Debt and the use of proceeds thereof), as are
appropriate and consistent with the pro forma adjustment provisions set forth in the definition of “Combined EBITDA” and “Leverage Ratio,” the Parent Note Guarantors or any Subsidiary could have taken such action on the relevant LCT Test Date in compliance with such ratio, test or basket, such ratio, test or basket shall be deemed to have been complied with.
(d) If the Parent Note Guarantors have made an LCT Election and any of the ratios, tests or baskets for which compliance was determined or tested as of the LCT Test Date are exceeded as a result of fluctuations in any such ratio, test or basket, including due to fluctuations in Combined EBITDA or Combined Total Assets, of the Parent Note Guarantors and their respective Subsidiaries at or prior to the consummation of the relevant transaction or action, such baskets or ratios will not be deemed to have been exceeded as a result of such fluctuations. If the Parent Note Guarantors have made an LCT Election for any Limited Condition Transaction, then in connection with any subsequent calculation of any ratio, test or basket availability under this Indenture (including with respect to the Incurrence of Debt or Liens, or the making of Asset Dispositions, acquisitions, mergers, the conveyance, lease or other transfer of all or substantially all of the assets of the Parent Note Guarantors or any Subsidiary or the designation of an Unrestricted Subsidiary) on or following the relevant LCT Test Date and prior to the earlier of the date on which such Limited Condition Transaction is consummated or the definitive agreement for such Limited Condition Transaction is terminated or expires without consummation of such Limited Condition Transaction, any such ratio, test or basket shall be calculated on a pro forma basis assuming such Limited Condition Transaction and other transactions in connection therewith (including any Incurrence of Debt and the use of proceeds thereof) have been consummated.
SECTION 7.10 Payment of Taxes. The Parent Note Guarantors will pay or discharge or cause to be paid or discharged, before the same becomes delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Parent Note Guarantors or any of the Restricted Subsidiaries, or the Parent Note Guarantors’ or any of the Restricted Subsidiaries’ income, profits or property, and (2) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the Parent Note Guarantors’ property, or the Restricted Subsidiaries’ property; provided, however, that the Parent Note Guarantors shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings or, except where the failure to pay or discharge such taxes, assessments, governmental charges or claims would not, singly or in the aggregate have a material adverse effect on the Note Guarantors.
SECTION 7.11 Provision of Financial Information.
(a) The Parent Note Guarantors will furnish to the Indenture Trustee and the Noteholders, without cost to any of them:
(1) within 120 days after the end of each fiscal year (including for the avoidance of doubt, the fiscal year ended December 31, 2021), the Parent Note Guarantors’ audited combined financial statements for the two most recent years (including income statements, statements of financial position, cash flow
statements and statements of changes in shareholders’ equity) and related notes thereto prepared in accordance with IFRS, as issued by the International Accounting Standards Board and as adopted by the EU, consistently applied, together with a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section with scope and content substantially similar to the corresponding section of the Offering Memorandum (after taking into consideration any changes to the Parent Note Guarantors’ business and operations after the Issue Date) and, with respect to the annual financial information, a report thereon by the Parent Note Guarantors’ certified independent auditors together with a certificate of the chief financial officer of each Parent Note Guarantor stating that, to the best of such officer’s knowledge after due inquiry, each Parent Note Guarantor during such period has kept, observed, performed and fulfilled each and every covenant and condition contained in this Indenture and the Credit and Guaranty Agreement and that such officer has obtained no knowledge of any Default or Event of Default; and
(2) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, quarterly reports attaching the Parent Note Guarantors’ unaudited combined interim financial statements for the period then ended and the comparable period in the prior year (including income statements, statements of financial position, cash flow statements and statements of changes in shareholders’ equity) prepared in accordance with IFRS, as issued by the International Accounting Standards Board and as adopted by the EU, together with footnote disclosure.
(b) So long as the Notes remain Outstanding and during any period during which the Parent Note Guarantors are not subject to Section 13 or 15(d) of the U.S. Exchange Act nor exempt therefrom pursuant to Rule 12g3-2(b), the Parent Note Guarantors will furnish to holders and prospective purchasers of the Notes upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the U.S. Securities Act.
SECTION 7.12 Limitation on Lines of Business. The Note Guarantors, together with the Restricted Subsidiaries, shall not primarily engage in any business other than in a Related Business.
SECTION 7.13 Unrestricted Subsidiaries. Any Note Guarantor may designate any of the Restricted Subsidiaries to be an “Unrestricted Subsidiary” as provided below, in which event such Subsidiary and each other Person that is then or thereafter becomes a Subsidiary of such Subsidiary will be deemed to be an Unrestricted Subsidiary. “Unrestricted Subsidiary” means (1) any Subsidiary designated as such by a Note Guarantor’s Board of Directors as set forth below and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of any Note Guarantor may designate any of such Note Guarantor’s Subsidiaries to be an Unrestricted Subsidiary provided (A) no default with respect to any Debt of such Subsidiary or any Subsidiary (other than any Unrestricted Subsidiary) of such Subsidiary (including any right which the Noteholders thereof may have to take enforcement action against such Subsidiary) would permit (upon notice, lapse of time or both) any holder of Debt to declare a
default on such Debt or cause the payment thereof to be accelerated or payable prior to its Stated Maturity, and (B) if the Subsidiary to be so designated has total assets in excess of US$250,000, the Note Guarantors could make a Restricted Payment as a Permitted Investment in an amount equal to the fair market value of such Note Guarantor’s Investment in such Subsidiary pursuant to the Section 7.2 and such amount is thereafter treated as a Restricted Payment for the purpose of calculating the aggregate amount available for Restricted Payments thereunder.
SECTION 7.14 Release from Covenants.
(a) If on any date the Notes have an Investment Grade rating from at least two of Fitch, Moody’s and S&P and no Event of Default has occurred and is continuing, and notwithstanding that the Notes may later cease to have such Investment Grade ratings, the Parent Note Guarantors and the Restricted Subsidiaries shall be released from their obligations to comply with clause (iii) of Sections 7.1, 7.2, 7.3. 7.7 and 7.15(a). The foregoing release shall be effective as of the date that the Issuer sends the Indenture Trustee and the Noteholders a notice, in writing, that the Notes have an Investment Grade rating. The Indenture Trustee shall be under no obligation to monitor or determine when the Notes have achieved the requisite Investment Grade rating.
SECTION 7.15 Merger, Consolidations and Certain Sales of Assets of the Note Guarantors.
(a) A Parent Note Guarantor may not, in a single transaction or a series of related transactions, (a) consolidate with or merge into any other Person or permit any other Person to consolidate with or merge into such Parent Note Guarantor or (b) directly or indirectly, convey, transfer, sell, lease or otherwise dispose of all or substantially all of such Parent Note Guarantor’s assets to any other Person, unless:
(i) (A) in a transaction in which such Parent Note Guarantor does not survive or in which such Parent Note Guarantor sells, leases or otherwise disposes of all or substantially all of its assets, the Parent Note Guarantor’s successor entity shall expressly assume, by (i) a supplemental indenture executed and delivered to the Indenture Trustee, all of the Parent Note Guarantor’s obligations under this Indenture, including its Note Guarantee and (ii) an instrument executed and delivered to the Lender, all of the Parent Note Guarantor’s obligations under the Credit and Guaranty Agreement and Expense Reimbursement and Indemnity Agreement and (B) is organized under the laws of (1) Guatemala or (2) the United States of America or any State thereof or the District of Columbia or (3) any other country if such successor entity undertakes, in such supplemental indenture, to pay such additional amounts in respect of principal (and premium, if any) and interest as may be necessary in order that the net amounts paid pursuant to the Loan or the Note Guarantees after deduction or withholding of any present or future withholding taxes, levies, imports or charges whatsoever imposed by or for the account of such country or any political subdivision or taxing authority thereof or therein shall equal the respective amounts of principal (and premium, if any) and interest specified in the Loan or Notes;
(ii) immediately after giving effect to such transaction and treating any Debt which becomes such Note Guarantor’s obligation or that of any of the Restricted Subsidiaries as a result of such transaction as having been Incurred by such Note Guarantor or such Restricted Subsidiary at the time of the transaction, no Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction and treating any Debt which becomes a Parent Note Guarantor’s obligation, or that of any of the Restricted Subsidiaries, as a result of such transaction as having been Incurred at the time of the transaction, (a) such Parent Note Guarantor (including any successor entity) could Incur at least US$1.00 of additional Debt pursuant to Section 7.1(a); or (b) the Leverage Ratio would not be greater than such ratio before giving effect to such transaction; provided, however, that this clause (iii)(b) will not apply if the Person merged or consolidated with or into the Parent Note Guarantor is a Subsidiary of Millicom incorporated in Guatemala and the transaction is carried out on terms not materially less favorable to the Parent Note Guarantor than those that might be obtained at the time from Persons that are not Affiliates of the Parent Note Guarantor. This clause (iii) will not apply if, in the good faith determination of such Parent Note Guarantor’s Board of Directors, which determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change such Parent Note Guarantor’s jurisdiction of incorporation; and
(iv) the Parent Note Guarantor or the surviving entity has delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that the consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if required in connection with such transaction, the supplemental indenture, complies with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to the transaction and the execution of the supplemental indenture, if applicable, have been satisfied.
(b) Upon any consolidation or merger in which a Parent Note Guarantor is not the continuing corporation or any transfer (excluding any lease) of all or substantially all of the assets of a Parent Note Guarantor in accordance with the foregoing, the successor entity shall succeed to, and be substituted for, and may exercise every right and power of, such Parent Note Guarantor under its Note Guarantee and this Indenture with the same effect as if such successor entity had been named as such.
(c) No Subsidiary Guarantor may, in a single transaction or a series of related transactions, (a) consolidate with or merge into any other Person or permit any other Person to consolidate with or merge into such Subsidiary Guarantor or (b) directly or indirectly, convey, transfer, sell, lease or otherwise dispose of all or substantially all of such Subsidiary Guarantor’s assets to any other Person, unless: (A) (i) the other Person is a Parent Note Guarantor or any Restricted Subsidiary that is a Note Guarantor or becomes a Note Guarantor concurrently with the transaction; (ii) (1) either (x) the Subsidiary Guarantor is the continuing Person or (y) the
resulting, surviving or transferee Person (if not such Subsidiary Guarantor) expressly assumes by supplemental indenture all of the obligations of the Subsidiary Guarantor under its Note Guarantee; and (2) immediately after giving effect to the transaction, no Default has occurred and is continuing; or (iii) the transaction constitutes a sale or other disposition (including by way of consolidation or merger) of the Subsidiary Guarantor or the sale or disposition of all or substantially all the assets of the Subsidiary Guarantor (in each case other than to a Parent Note Guarantor or a Restricted Subsidiary) otherwise permitted by the Indenture; and (B) the Subsidiary Guarantor has delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that the consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if required in connection with such transaction, the supplemental indenture, complies with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to the transaction and the execution of the supplemental indenture, if applicable, have been satisfied.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
SECTION 8.1 Events of Default. An “Event of Default” with respect to this Indenture shall mean the occurrence or existence of any Loan Event of Default. The Issuer shall not direct the Lender, or the Administrative Agent on behalf of the Lender, to notify the Borrower of any Default under clause (d) of Section 10 of the Credit and Guaranty Agreement without having first received directions with respect thereto from holders of at least 25% of the aggregate principal amount of the Outstanding Notes (or the Indenture Trustee acting on behalf of such Noteholders), in accordance with the terms of this Indenture.
SECTION 8.2 Acceleration(a) . (a) If an Event of Default (other than an Event of Default specified in Section 10(g) or Section 10(h) of the Credit and Guaranty Agreement) has occurred and is continuing, the Indenture Trustee or the Noteholders of at least 25% in principal amount of Outstanding Notes may declare the unpaid principal of and premium, if any, and accrued and unpaid interest on all the Notes to be immediately due and payable by notice in writing to the Issuer (and the Indenture Trustee if given by the Noteholders) specifying the Event of Default and that it is a “notice of acceleration.” Upon such declaration the principal and interest shall be due and payable immediately.
(b) If an Event of Default specified in Section 10(g) or Section 10(h) of the Credit and Guaranty Agreement occurs, then the unpaid principal of and premium, if any, and accrued and unpaid interest on all the Notes will become immediately due and payable without any declaration or other act on the part of the Indenture Trustee or any Noteholder.
(c) At any time after a declaration of acceleration has occurred and before a judgment for payment of the money due has been obtained, the Required Holders, by written notice to the Issuer (with a copy to the Indenture Trustee), may rescind and annul such declaration and its consequences if the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, all existing Events of Default, other than the nonpayment of the principal and interest on the Notes that have become due solely by the declaration of
acceleration, have been cured or waived, and no such rescission shall affect any subsequent Default or impair any right consequent thereon.
SECTION 8.3 Other Remedies. If an Event of Default occurs and is continuing, the Indenture Trustee may pursue any available remedy to collect the payment of principal or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Indenture Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Indenture Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 8.4 Waiver of Past Default. The Required Holders by written notice to the Indenture Trustee may waive an existing Default and its consequences except a Default triggered by a default in the payment of the principal of or interest due on the Loan under the Credit and Guaranty Agreement.
SECTION 8.5 Control by Majority. The Required Holders (or such other percentage of Noteholders of Outstanding Notes as may be permitted or required pursuant to the terms of this Indenture) may direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee or exercising any trust or power conferred on the Indenture Trustee. However, the Indenture Trustee may refuse to follow any direction that conflicts with law or this Indenture, is unduly prejudicial to the rights of other Noteholders, or would involve the Indenture Trustee in personal or financial liability or expense for which the Indenture Trustee has not received an indemnity or security satisfactory to it.
SECTION 8.6 Limitation on Suits. A Noteholder may pursue a remedy with respect to this Indenture or the Notes only if: (1) the Noteholder gives to the Indenture Trustee notice of a continuing Event of Default; (2) the Noteholders of at least 25% in principal amount of the Notes Outstanding make a request to the Indenture Trustee to pursue the remedy and offer the Indenture Trustee indemnity and/or security satisfactory to it against any loss, liability, cost, and/or expense of pursuing such remedy; (3) the Indenture Trustee either (i) gives to such Noteholders notice it will not comply with the request, or (ii) does not comply with the request within 30 days after receipt of the request and such indemnity and/or security; and (4) the Required Holders do not give the Indenture Trustee a direction inconsistent with the request prior to the earlier of the date, if ever, on which the Indenture Trustee delivers a notice under Section 8.6(3)(i) or the expiration of the period described in Section 8.6(3)(ii). A Noteholder may not use this Indenture to prejudice the rights of another Noteholder or to obtain a preference or priority over another Noteholder.
SECTION 8.7 Rights of Noteholders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Noteholder to receive payment of principal and interest on the Notes, on or after the respective due dates expressed in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Noteholder.
SECTION 8.8 Priorities. After an Event of Default any money or other property distributable in respect of the Issuer’s obligations under this Indenture shall be paid in the following order:
FIRST: to the Indenture Trustee (including any predecessor Indenture Trustee) and the Authorized Agents for amounts due under the Expense Reimbursement and Indemnity Agreement;
SECOND: to the Lender for amounts due under the Expense Reimbursement and Indemnity Agreement;
THIRD: to Noteholders for amounts due and unpaid on the Notes for principal, interest and other amounts, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively; and
FOURTH: to the Issuer.
The Indenture Trustee may fix a record date and payment date for any payment to Noteholders.
SECTION 8.9 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Indenture Trustee for any action taken or omitted by it as Indenture Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 8.9 does not apply to a suit by the Indenture Trustee, a suit by a Noteholder pursuant to Section 8.7 or a suit by Noteholders of more than 10% in principal amount of the Outstanding Notes.
SECTION 8.10 Proof of Claim. In the event of any proceeding, the Indenture Trustee may file a claim for the unpaid balance of the Notes in the form required in the proceeding and cause the claim to be approved or allowed. Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment, or composition affecting the Notes or the rights of any Noteholder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any proceeding.
ARTICLE IX
CONCERNING THE INDENTURE TRUSTEE
SECTION 9.1 Certain Rights and Duties of Indenture Trustee; Notices and Information Received from the Administrative Agent.
(a) Except during the continuance of an Event of Default, the Indenture Trustee undertakes to perform only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Indenture
Trustee. The Indenture Trustee may conclusively rely and shall be fully protected in acting, or refraining from acting, upon any resolution, certificate, statement, instruction, direction, calculation, instrument, opinion, report, notice, request, consent, order, Note, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties; provided that in the case of any such certificates or opinions which by the provisions hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture but need not verify the contents thereof (but need not, absent manifest error, confirm or investigate the accuracy of mathematical calculations or other facts stated therein).
(b) In case an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.
(c) No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own grossly negligent action, its own grossly negligent failure to act, or its own willful misconduct, except that:
(i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;
(ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Indenture Trustee unless it shall be proved that the Indenture Trustee was grossly negligent in ascertaining the pertinent facts;
(iii) the Indenture Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it in good faith to be authorized or within the discretion or rights or powers conferred upon it by this Indenture or with respect to any action it takes or omits to take in good faith in accordance with a direction received by it from Noteholders holding a sufficient percentage of Notes to give such direction as permitted by this Indenture; and
(iv) no provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d) Subject to the provisions of Section 9.1(a), (b) and (c):
(i) any request, direction, order or demand of the Issuer or any Note Guarantor mentioned herein shall be sufficiently evidenced by an Officer’s Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors of any Person shall be evidenced to the Indenture Trustee by a Board Resolution.
(ii) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture, and may refuse to perform any duty or exercise any such rights or powers unless it shall have been offered security and/or indemnity to its satisfaction against the costs, expenses and liabilities which may reasonably be incurred therein or thereby.
(iii) the Indenture Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture (provided that the Indenture Trustee’s conduct does not constitute gross negligence or willful misconduct).
(iv) the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instruction, direction, calculation, instrument, opinion, report, notice, request, consent, order, approval, appraisal, Note, debenture or other paper or document with respect to the Notes. The Indenture Trustee need not investigate any fact or matter stated in any document, but the Indenture Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Indenture Trustee shall determine in good faith to make such further inquiry or investigation, it shall be entitled upon reasonable notice to examine the books, records and premises of the Issuer, personally or by its agent or attorney at the sole cost of the Issuer.
(v) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any agent, attorney custodian or nominee appointed with due care by it hereunder.
(vi) The Indenture Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with any direction of the Issuer given under this Indenture, provided that the Indenture Trustee’s conduct does not constitute gross negligence or willful misconduct.
(vii) Neither the Indenture Trustee nor any Authorized Agent shall have any liability or responsibility with respect to, or obligation or duty to monitor, determine or inquire as to the Issuer’s, any Note Guarantor’s or any Subsidiary’s compliance with any covenant under this Indenture or any other Transaction Document.
(viii) The Indenture Trustee shall have no obligation to invest or reinvest or pay interest on any cash held pursuant to this Indenture.
(ix) The Indenture Trustee may request that each of the Issuer and the Note Guarantors deliver an Officer’s Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officer’s Certificates may be signed by any Person authorized to sign an Officer’s Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded.
(x) The permissive rights of the Indenture Trustee hereunder shall not be construed as a duty.
(e) The Indenture Trustee may reasonably request information, including an Officer’s Certificate, from time to time, as necessary or appropriate in order to ascertain compliance with the requirements of this Indenture and the Notes and may, at the expense of the Issuer, consult with counsel and the advice or opinion of counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in accordance with such advice or opinion.
(f) If the Indenture Trustee has or shall acquire a conflicting interest, the Indenture Trustee shall either eliminate such interest or resign.
(g) The Indenture Trustee shall (on behalf of the Issuer), promptly upon receipt from the Lender, the Administrative Agent, the Issuer or any Note Guarantor and only to the extent actually received from the Lender, the Administrative Agent, the Issuer or any Note Guarantor and in no event later than two (2) Business Days from receipt thereof by the Indenture Trustee pursuant to Section 6(a) of the Participation Agreement or Section 7.11 of this Indenture, deliver to the Noteholders the Credit and Guaranty Agreement Information, financial statements and other information set forth in Section 7.11, as applicable, together, with (i) a Section 3(c)(7) Reminder Notice and (ii) a request that the Registered Depositary forward such financial statements or other information and such Section 3(c)(7) Reminder Notice to the relevant Registered Depositary participants for further delivery to beneficial owners of interests in the Global Notes. The Indenture Trustee shall provide to the Issuer on request the monthly account statements as the Indenture Trustee may have in relation to the Loan Payment Account and the Payment Account. The requirements of this Section 9.1(g) may be performed by the Indenture Trustee by granting the Issuer on-line read only access to the accounts.
(h) The Indenture Trustee shall deliver to Noteholders all reports and financial information received from the Issuer pursuant to Section 6.17.
(i) The Indenture Trustee shall, on behalf of the Issuer, within five (5) Business Days after the Issue Date send to the Registered Depositary a Section 3(c)(7) Reminder Notice, the form of which is attached as Exhibit F hereto, with a request that the Registered Depositary forward such Section 3(c)(7) Reminder Notice to the relevant Registered Depositary participants for further delivery to beneficial owners of interests in the Global Notes.
(j) The Indenture Trustee, on behalf of the Issuer, shall deliver a request to the Registered Depositary in the form of Exhibit H hereto within five (5) Business Days of the
Issue Date that the Registered Depositary take the following (or substantially similar) steps in connection with the Rule 144A Restricted Global Notes:
(i) to include the “3c7” and “144A” markers in the Registered Depositary 20- character security descriptor and the 48-character additional descriptor for the Rule 144A Restricted Global Notes in order to indicate that sales are limited to QIBs that are also Qualified Purchasers;
(ii) to cause (i) each physical Registered Depositary delivery order ticket delivered by the Registered Depositary to purchasers to contain the Registered Depositary 20-character security descriptors and (ii) each Registered Depositary delivery order ticket delivered by the Registered Depositary to purchasers in electronic form to contain the “3c7” and “144A” indicators and the related user manual for participants, which shall contain a description of the relevant restrictions;
(iii) to include the Rule 144A Restricted Global Notes in the Registered Depositary’s “Reference Directory” of Section 3(c)(7) offerings;
(iv) to include in all “confirms” of trades of the Rule 144A Restricted Global Notes in the Registered Depositary CUSIP numbers with a “fixed field” attached to the CUSIP number that has the “3c7” and “144A” markers; and
(v) to deliver to the Issuer a list of all Registered Depositary participants holding an interest in the Rule 144A Global Notes.
(k) The Indenture Trustee, on behalf of the Issuer, (who shall execute any documentation required in connection therewith), shall deliver a request in the form of Exhibit G, within five Business Days after the Issue Date, to Bloomberg, L.P. and any other third-party vendor identified to it by the Issuer, to include the following (or substantially similar language) at the bottom of each DES screen containing information about the Rule 144A Restricted Global Notes to: “ISS’D UNDER 144A/3C7. SEE RESTRICTIONS IN OM-QIB/QP ONLY. NON- COMPLIANT PURCHASE MAY BE VOIDED AND/OR RESULT IN FORCED SALE”;
(l) The Issuer, in collaboration with the Initial Purchasers, shall request and obtain confirmation from the CUSIP Service Bureau that each “CUSIP” number obtained for the Rule 144A Restricted Global Notes has an attached “fixed field” that contains “3c7” and “144A” markers.
SECTION 9.2 Indenture Trustee Not Responsible for Recitals; Etc. The recitals contained herein and in the Notes or any other document in connection with the sale of the Notes (including the Offering Memorandum), except the Indenture Trustee’s certificate of authentication, shall be taken as the statements of the Issuer and the Note Guarantors and the Indenture Trustee assumes no responsibility for the correctness of the same. The Indenture Trustee shall not be responsible for and makes no representations as to the validity or sufficiency of this Indenture, any offering materials of, the Notes, any Note Guarantees or any other Transaction Document. The Indenture Trustee shall not be accountable for the use or application
by the Issuer of any of the Notes or of the proceeds of such Notes and it shall not be responsible for the use or application of any money received by any Paying Agent other than the Indenture Trustee. The Indenture Trustee shall not be responsible or liable for non-compliance by the Registered Depositary or Bloomberg with any request made by the Indenture Trustee to the Registered Depositary or Bloomberg. The Indenture Trustee shall also not be responsible or liable for any failure of the Issuer or any other party to comply with any securities laws, including, without limitation, the Securities Act or the Investment Company Act, that may be caused by or may result because of the failure of the Registered Depositary or Bloomberg to comply with any request made by the Indenture Trustee pursuant to Section 9.1.
SECTION 9.3 Indenture Trustee and Others May Hold Notes. Each of the Indenture Trustee or any Authorized Agent, or any of their respective Affiliates, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Issuer the Note Guarantors or any other obligor on the Notes with the same rights it would have if it were not Indenture Trustee, such Authorized Agent or such Affiliate.
SECTION 9.4 Moneys Held by Indenture Trustee or Paying Agent.
(a) Whenever the Issuer shall have one or more Paying Agents any amounts deposited with any such Paying Agent shall be held in trust by the Paying Agent for the benefit of the Persons entitled thereto, and (unless such Paying Agent is the Indenture Trustee) such Paying Agent will promptly notify the Indenture Trustee of its action or failure so to act. Each Paying Agent other than the Indenture Trustee shall execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section, to the effect that such Paying Agent will:
(i) hold all amounts held by it for the making of payments in respect of the Notes in trust for the benefit of the Persons entitled thereto until such amounts shall be paid to such Persons or otherwise disposed of as herein provided;
(ii) provide the Indenture Trustee notice of any default in payment on the
Notes;
(iii) at any time during the continuance of any such default payment, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all amounts so held in trust by such Paying Agent; and
(iv) if required by law, it will collect U.S. Internal Revenue Service Form W-8 or W-9, as applicable, from Noteholders and will file U.S. Internal Revenue Service Forms 1042, 1042S, 1096 and 1099 with respect to the Notes and payments in respect thereof.
(b) The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay or deliver, or direct any Paying Agent to pay or deliver, to the Indenture Trustee all amounts held in trust by the Issuer or such Paying Agent, such amounts to be held by the Indenture Trustee upon the same trusts as those
upon which such amounts were held by the Issuer or such Paying Agent; and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such sums.
(c) The Indenture Trustee shall arrange with all such Paying Agents for the payment, from funds furnished by the Issuer to the Indenture Trustee pursuant to this Indenture, of the principal of and interest and other amounts due on the Notes.
(d) If the Issuer shall act as its own Paying Agent with respect to any Notes, it will, on or before each due date of the principal of, premium (if any) or interest on such Notes or other amounts, set aside, segregate and hold in trust for the benefit of the Noteholders of such Notes a sum sufficient to pay such principal, interest or other amounts so becoming due. The Issuer will promptly notify the Indenture Trustee, in writing, of any failure to take action.
(e) Anything in this Section 9.4, to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Section 13.4.
(f) The Issuer agrees to indemnify the Noteholders, out of the Trust Assets, against any failure on the part of any Paying Agent to pay, in accordance with the terms hereof, any sum due in respect of the Notes on the applicable Payment Date.
SECTION 9.5 Compensation of the Indenture Trustee and its Lien.
(a) The Issuer covenants and agrees to pay to the Indenture Trustee (all references in this Section 9.5 to the Indenture Trustee shall be deemed to apply to the Indenture Trustee in its capacities as Indenture Trustee, Paying Agent, Note Registrar and Transfer Agent and to each of the other Authorized Agents) from time to time, and the Indenture Trustee shall be entitled to, compensation for all services rendered by it hereunder (which shall be agreed to from time to time by the Issuer or the Borrower and the Indenture Trustee and which shall not be limited by any provision of Law in regard to the compensation of a trustee of an express trust), and, except as herein otherwise expressly provided, the Issuer will pay or reimburse the Indenture Trustee upon its request for all reasonable and documented expenses and disbursements incurred or made by the Indenture Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the reasonable expenses, advances and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense or disbursement as may arise from its gross negligence or bad faith. The Issuer also covenants and agrees to indemnify the Indenture Trustee and any predecessor Indenture Trustee for, defend, and hold harmless each of the Indenture Trustee and any predecessor Indenture Trustee and its respective officers, directors, employees, representatives and agents from and against, any loss, liability, claim, damage or expense incurred without gross negligence or bad faith on the part of the Indenture Trustee or any of its employees, officers, directors, representatives or agents, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder and this Indenture, the performance of its duties and obligations and the exercise of its rights hereunder, including liability that the Indenture Trustee may incur as a result of failure to withhold, pay or report Taxes and including the costs and expenses of
defending itself against any claim or liability in the premises and including, without limitation, any loss, liability, claim, damage or expense relating to or arising out of any environmental law. The obligations of the Issuer under this Section shall constitute additional Debt hereunder. In no event shall the Indenture Trustee be liable to any Person for special, indirect, punitive, or consequential loss or damages whatsoever (including, but not limited to lost profits), even if the Indenture Trustee has been advised of the likelihood of such damage and regardless of the form of action taken.
(b) The obligations of the Issuer under this Section 9.5 shall survive payment in full of the Notes, the resignation or removal of the Indenture Trustee and the termination of this Indenture.
(c) When the Indenture Trustee incurs expenses after the occurrence of Event of Default under Section 10(g) or Section 10(h) of the Credit and Guaranty Agreement, the expenses are intended to constitute expenses of administration under any bankruptcy law; provided, however, that this shall not affect the Indenture Trustee’s rights as set forth in this Section 9.5 or Section 8.8.
SECTION 9.6 Right of Indenture Trustee to Rely on Officer’s Certificates and Opinions of Counsel. Before the Indenture Trustee acts or refrains from acting with respect to any matter contemplated by this Indenture, it may require an Officer’s Certificate of the Issuer and an Opinion of Counsel, which shall conform to the provisions of Section 15.1. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion as set forth in Section 9.1(b)(v).
SECTION 9.7 Persons Eligible for Appointment as Indenture Trustee. There shall at all times be a Indenture Trustee hereunder which shall at all times be a bank, having a combined capital and surplus of at least $100,000,000. If such corporation publishes reports of condition at least annually, then for the purposes of this Section 9.7, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with this Section 9.7, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 9.8.
SECTION 9.8 Resignation and Removal of Indenture Trustee; Appointment of Successor.
(a) The Indenture Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice to the Issuer and by giving notice of such resignation to the Noteholders in the manner provided in Section 15.4.
(b) In case at any time any of the following shall occur with respect to any
Notes:
(i) the Indenture Trustee shall cease to be eligible under Section 9.7 and shall fail to resign after written request therefore by the Issuer or by any Noteholder, or
(ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, (A) the Issuer may remove the Indenture Trustee, and appoint a successor trustee, or (B) any Noteholder who has been a bona fide Noteholder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.
(c) The Required Holders at the time Outstanding may at any time, upon thirty (30) days prior written notice, remove the Indenture Trustee and appoint a successor Indenture Trustee by delivering to the Indenture Trustee so removed, to the successor Indenture Trustee so appointed and to the Issuer, the evidence provided for in Section 10.1 of the action taken by the Noteholders, provided that the Issuer shall consent (such consent not to be unreasonably withheld and no consent shall be required if an Event of Default has occurred and is continuing).
(d) If the Indenture Trustee shall resign, be removed, or become incapable of acting or if a vacancy shall occur in the office of Indenture Trustee with respect to the Notes for any cause, the Issuer shall promptly appoint a successor Indenture Trustee or Indenture Trustees by written instrument, in duplicate, executed by order of the Board of Directors of the Issuer, one copy of which instrument shall be delivered to the former Indenture Trustee and one copy to the successor Indenture Trustee. If no successor Indenture Trustee shall have been so appointed and have accepted such appointment pursuant to Section 9.9 within 30 days after the giving of such notice of resignation or removal, the former Indenture Trustee may itself, on behalf of the Issuer, appoint a successor Indenture Trustee, at the Issuer’s expense, petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee, or any Noteholder who has been a bona fide Noteholder for at least six months may, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Indenture Trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a successor Indenture Trustee.
(e) Any resignation or removal of the Indenture Trustee and any appointment of a successor Indenture Trustee pursuant to this Section shall become effective only upon acceptance of appointment by the successor Indenture Trustee as provided in Section 9.9.
(f) If an Indenture Trustee is removed with or without cause, all fees and expenses (including the reasonable fees and expenses of counsel) of the Indenture Trustee incurred in the administration of the trust or in performing the duties or exercising the rights hereunder shall be paid to the Indenture Trustee.
SECTION 9.9 Acceptance of Appointment by Successor Indenture Trustee.
(a) Any successor Indenture Trustee appointed under Section 9.8 shall execute, acknowledge and deliver to the Issuer and to its predecessor Indenture Trustee an
instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Indenture Trustee shall become effective and such successor Indenture Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of its predecessor Indenture Trustee hereunder, with like effect as if originally named as Indenture Trustee herein; but, nevertheless, on the written request of the Issuer or of the successor Indenture Trustee, the Indenture Trustee ceasing to act shall, upon payment of any such amounts then due it pursuant to the provisions of Section 9.5, execute and deliver an instrument (in form and substance reasonably satisfactory to the predecessor trustee) transferring to such successor Indenture Trustee all the rights, powers and trusts of the Indenture Trustee so ceasing to act, and shall assign, transfer and deliver to such successor Indenture Trustee all property and money as may be held by such Indenture Trustee ceasing to act. Upon request of any such successor Indenture Trustee, the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Indenture Trustee all such rights and powers. Any Indenture Trustee ceasing to act shall, nevertheless, retain a Lien in accordance with Section 9.17 upon all property or funds held or collected by such Indenture Trustee to secure any amounts then due it pursuant to Section 9.5.
(b) No successor Indenture Trustee shall accept appointment as provided in this Section 9.9 unless at the time of such acceptance such successor Indenture Trustee shall be eligible under Section 9.7.
(c) Upon acceptance of appointment by a successor Indenture Trustee, the Issuer shall give notice of the succession of such Indenture Trustee hereunder to the Noteholders in the manner provided in Section 15.4. If the Issuer fails to give such notice within 10 days after acceptance of appointment by the successor Indenture Trustee, the successor Indenture Trustee shall cause such notice to be given at the expense of the Issuer.
SECTION 9.10 Merger, Conversion or Consolidation of Indenture Trustee.
(a) Any Person into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Indenture Trustee (including this transaction), shall be the successor of the Indenture Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such successor Indenture Trustee shall be eligible under the provisions of Section 9.7 hereof.
(b) In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Notes so authenticated and, in case at that time any of the Notes shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor trustee, and in such cases such certificate shall have the same force under the Notes and under this Indenture as if authenticated by such predecessor Indenture Trustee; provided that the certificate of the Indenture Trustee shall have provided that the right to adopt the certificate
of authentication of any predecessor Indenture Trustee or the authenticated Notes in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation.
SECTION 9.11 Maintenance of Offices and Agencies.
(a) There shall at all times be maintained in New York County, and in such other places of payment, if any, as shall be specified for the Notes, an office or agency where Notes may be presented or surrendered for registration of transfer or exchange and for payment of principal, premium (if any) and interest. Such agency shall be initially located at the address set forth in Section 15.3 hereto. Notices and demands to or upon the Issuer and the Note Guarantors (other than the type contemplated by Section 15.15) in respect of the Notes, the Note Guarantees or this Indenture may be served at the Corporate Trust Office. Written notice of the location of each of such other office or agency and of any change of location thereof shall be given by the Issuer to the Indenture Trustee and by the Indenture Trustee to the Noteholders in the manner specified in Section 15.4. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations, surrenders and demands (other than the type contemplated by Section 15.15) may be made and notices may be served at the Corporate Trust Office.
(b) There shall at all times be a Note Registrar and a Paying Agent hereunder. In addition, at any time when any Notes remain Outstanding, the Indenture Trustee may appoint an Authenticating Agent or Agents with respect to the Notes which shall be authorized to act on behalf of the Indenture Trustee to authenticate Notes issued upon original issuance, exchange, registration of transfer or redemption thereof or pursuant to Section 2.13, and Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Indenture Trustee hereunder (it being understood that wherever reference is made in this Indenture to the authentication and delivery of Notes by the Indenture Trustee or the Indenture Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Indenture Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Indenture Trustee by an Authenticating Agent). The Issuer agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this paragraph.
(c) [Reserved].
(d) Any Authorized Agent shall be a bank or trust company and shall be a Person (i) organized and doing business under the laws of the United States or any State thereof, (ii) with a combined capital and surplus of at least $50,000,000, and (iii) authorized under such laws to exercise corporate trust powers, subject to supervision by United States Federal or state authorities. If such Authorized Agent publishes reports of its condition at least annually, pursuant to Law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 9.11, the combined capital and surplus of such Authorized Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authorized Agent shall cease to be eligible in
accordance with the provisions of this Section 9.11, such Authorized Agent shall resign immediately in the manner and with the effect specified in this Section 9.11.
(e) The Indenture Trustee at its Corporate Trust Office, is hereby appointed as Paying Agent, Note Registrar and Transfer Agent hereunder.
(f) Notwithstanding any other provision of this Indenture, any payment required to be made to or received or held by the Indenture Trustee may, to the extent authorized by written instructions of the Indenture Trustee, be made to or received or held by a Paying Agent in New York County, for the account of the Indenture Trustee.
(g) Any Person into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent hereunder, if such successor Person is otherwise eligible under this Section 9.11, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor Person.
(h) Any Authorized Agent may at any time resign by giving written notice of resignation to the Indenture Trustee and the Issuer. The Issuer may, and at the request of the Indenture Trustee shall, at any time, terminate the agency of any Authorized Agent by giving written notice of such termination to the Authorized Agent and to the Indenture Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section 9.11 (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Issuer shall promptly appoint one or more qualified successor Authorized Agents to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section 9.11. The Issuer shall give written notice of any such appointment to all Noteholders in accordance with Section 15.4.
(i) The Issuer initially appoints The Bank of New York Mellon, as Note Registrar and Paying Agent.
(j) [Reserved].
(k) [Reserved].
SECTION 9.12 Indenture Trustee Risk. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal or financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it.
SECTION 9.13 Appointment of Co-Indenture Trustee.
(a) It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction, denying or restricting the right of banking corporations or associations to transact business as Indenture Trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture or any Transaction Document, and in particular in case of the enforcement of any such document on default, or in case the Indenture Trustee deems that by reason of any present or future Law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Indenture Trustee or hold title to the properties, in trust, as herein granted, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Indenture Trustee appoint an additional individual or institution as a separate or co-trustee. The following provisions of this Section 9.13 are adopted to these ends.
(b) In the event that the Indenture Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, indemnity, estate, title, interest and Lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Indenture Trustee with respect thereto shall be exercisable by and vested in such separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them.
(c) Should any instrument in writing be required by the separate trustee or co-trustee so appointed by the Indenture Trustee for more fully and certainly vesting in and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer. In case any separate trustee or co-trustee, or a successor to either, shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co-trustee, so far as permitted by Law, shall vest in and be exercised by the Indenture Trustee until the appointment of a new trustee or successor to such separate trustee or co-trustee.
(d) Every separate trustee and co-trustee shall, to the extent permitted by Law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any Law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to any property or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally or financially liable by reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.
SECTION 9.14 Knowledge of Default. Subject to receiving notice from the Issuer pursuant to Section 6.11 of this Indenture, the Indenture Trustee will give notice to the Noteholders, promptly but no later than thirty (30) days after a Responsible Officer obtains knowledge of the occurrence of any Event of Default, accompanied by a detailed description, if any, received from the Issuer with respect to such Event of Default and stating what action the Borrower has proposed to take with respect thereto. The Indenture Trustee shall not be deemed to have notice of a Default or Event of Default unless a Responsible Officer has received written notice of such Default or Event of Default at the Corporate Trust Office of the Indenture Trustee and such notice references the Notes and the provisions of this Indenture.
SECTION 9.15 Securities Laws/Transfer Disclaimer. None of the Indenture Trustee nor any Authorized Agent shall have any obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable Law with respect to any transfer of any interest in any Note (including any transfers between or among the depositary participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
SECTION 9.16 Incumbency Certificate/Specimen Signatures. With the delivery of this Indenture, each of the Issuer and the Note Guarantors is furnishing to the Indenture Trustee, and from time to time thereafter may furnish, one or more Officer’s Certificates identifying and certifying the incumbency and specimen signatures of the Authorized Representatives of the Issuer and the Note Guarantors. Until the Indenture Trustee receives a subsequent Officer’s Certificate, the Indenture Trustee shall be entitled to conclusively rely on the last such Officer’s Certificate delivered to it for purposes of determining the Authorized Representatives of the Issuer and the Note Guarantors, as applicable.
SECTION 9.17 Lien/Right of Set-Off. To secure the obligations owed to the Indenture Trustee and any Authorized Agent hereunder, the Indenture Trustee or such Authorized Agent, as the case may be, shall have a Lien prior on all money or property held or collected by the Indenture Trustee and or any Authorized Agent in its capacity as Indenture Trustee and/or any Authorized Agent, and may withhold or set-off any amounts due and owing to it under this Indenture from any money or property held or collected by the Indenture Trustee and/or any Authorized Agent in its capacity as Indenture Trustee and/or any Authorized Agent.
SECTION 9.18 Electronic Transmission Language. The Indenture Trustee shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Indenture and the Transaction Documents and delivered
using Electronic Means; provided, however, that the Issuer and/or the Note Guarantors, as applicable, shall provide to the Indenture Trustee an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the Issuer and/or the Note Guarantors, as applicable, whenever a person is to be added or deleted from the listing. If the Issuer and/or the Note Guarantors, as applicable, elects to give the Indenture Trustee Instructions using Electronic Means and the Indenture Trustee in its discretion elects to act upon such Instructions, the Indenture Trustee’s understanding of such Instructions shall be deemed controlling. The Issuer and the Note Guarantors understand and agree that the Indenture Trustee cannot determine the identity of the actual sender of such Instructions and that the Indenture Trustee shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Indenture Trustee have been sent by such Authorized Officer. The Issuer and the Note Guarantors shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Indenture Trustee and that the Issuer, the Note Guarantors and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the Issuer and/or the Note Guarantors, as applicable. The Indenture Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Indenture Trustee’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The Issuer and the Note Guarantors agree: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Indenture Trustee, including without limitation the risk of the Indenture Trustee acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Indenture Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the Issuer and/or the Note Guarantors, as applicable; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Indenture Trustee immediately upon learning of any compromise or unauthorized use of the security procedures.
SECTION 9.19 Force Majeure. Notwithstanding any provision herein to the contrary, in no event shall the Indenture Trustee or any Authorized Agent be liable for any failure or delay in the performance of its obligations under this Indenture because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, pandemics or epidemics, civil unrest, fire, riot, strikes or work stoppages for any reason, embargo, government action, including any laws, ordinances, regulations or the like which restrict or prohibit the providing of the services contemplated by this Indenture, inability to obtain material, equipment, or communications or computer facilities, or the failure of equipment or interruption of communications or computer facilities, or the unavailability of the Federal Reserve Bank wire, facsimile, Electronic Means, or other wire or communication facilities and other causes beyond its control whether or not of the same class or kind as specifically named above.
SECTION 9.20 Waiver of Damages. Anything in this Indenture or any other Transaction Document to the contrary notwithstanding, in no event shall the Indenture Trustee or any Authorized Agent be liable under or in connection with this Indenture, the Notes, the Note Guarantees or any other Transaction Document for indirect, special, incidental, punitive or consequential losses or damages of any kind whatsoever, including but not limited to lost profits, whether or not foreseeable, even if the Indenture Trustee or such Authorized Agent has been advised of the possibility thereof and regardless of the form of action in which such damages are sought.
SECTION 9.21 Rights Applicable to Agents. The rights, privileges, protections, immunities, and benefits given to the Indenture Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Indenture Trustee, in its capacity as Paying Agent, Transfer Agent and Note Registrar hereunder, each Authorized Agent, custodian and any other Person employed by the Issuer to act hereunder or any agent appointed by the Indenture Trustee hereunder.
ARTICLE X
CONCERNING THE HOLDERS
SECTION 10.1 Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders (collectively, an “Act” of such Noteholders, which term also shall refer to the instruments or record evidencing or embodying the same) may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by an agent duly appointed in writing or, alternatively, may be embodied in and evidenced by the record of Noteholders voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Noteholders duly called and held in accordance with the provisions of Article XI, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record, or both, are delivered to the Indenture Trustee, and when it is specifically required herein, to the Issuer. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 9.1) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 10.1. The record of any meeting of Noteholders shall be proved in the manner provided in Section 11.5.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to such officer the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer, and where such execution is by an officer of a corporation or association or of the Issuer, on behalf of such corporation, association or the Issuer, such certificate or affidavit shall also constitute sufficient proof of such Person’s authority. The fact and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any other manner which the Indenture Trustee deems sufficient.
(c) The ownership of the Notes, the principal amount and serial numbers of Notes held by any Person, and the date or dates of holding the same, shall be proved by the Note Register and the Indenture Trustee shall not be affected by notice to the contrary.
(d) Any act of any Noteholder (i) shall bind the holder of such Note and every future Noteholder of the same Note and the Noteholder of every Note issued upon the transfer thereof or the exchange therefore or in lieu thereof, whether or not notation of such action is made upon such Note and whether or not such Noteholder has given its consent (unless required under this Indenture) to such Act or was present at any duly held meeting, and (ii) shall be valid notwithstanding that such Act is taken in connection with the transfer of such Note to any other Person, including the Issuer or any Affiliate thereof.
(e) Until such time as written instruments shall have been delivered with respect to the requisite percentage of principal amount of Notes for the Act contemplated by such instruments, any such instrument executed and delivered by or on behalf of a Noteholder may be revoked with respect to any or all of such Notes by written notice by such Noteholder (or its duly appointed agent) or any subsequent Noteholder (or its duly appointed agent), proven in the manner in which such instrument was proven unless such instrument is by its terms expressly irrevocable.
(f) Notes authenticated and delivered after any Act of Noteholders may, and shall if required by the Issuer, bear a notation in form approved by the Issuer as to any action taken by such Act of Noteholders. If the Issuer shall so determine, new Notes so modified as to conform, in the opinion of the Issuer, to such action, may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes in accordance with the terms of this Indenture.
(g) The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Noteholders entitled to sign any instrument evidencing or embodying an Act of the Noteholders. If a record date is fixed, those Persons who were Noteholders at such record date (or their duly appointed agents), and only those Persons, shall be entitled to sign any such instrument evidencing or embodying an Act of Noteholders or to revoke any such instrument previously signed, whether or not such Persons continue to be Noteholders after such record date. No such instrument shall be valid or effective if signed more than 90 days after such record date, and may be revoked as provided in paragraph (e) above.
ARTICLE XI
PARTICIPATION AGREEMENT
SECTION 11.1 Certain Rights of the Noteholders with Respect to the Participation Agreement and the Guarantees; Remedies Available under the Participation Agreement and Guarantees.
(a) If at any time the Issuer is notified in writing by the Lender, the Administrative Agent on behalf of the Lender or the Borrower of any action upon which the Issuer is entitled to exercise a right or remedy under the Credit and Guaranty Agreement or the Loan pursuant to the Participation Agreement, the Issuer shall promptly and in any event within five Business Days of receipt of such notice send written notification to the Indenture Trustee. The Indenture Trustee shall promptly, but no later than five Business Days after receipt of such notification from the Issuer, send notice to each Noteholder (prepared by the Issuer) in the manner set forth in Section 15.4 hereof, which notice shall contain (i) such information as is contained in such notice to the Indenture Trustee from the Issuer, (ii) a statement that the Noteholders at the close of business on a specified record date will be entitled, subject to any applicable provision of Law or of this Indenture, to direct the Issuer as to the exercise of such right or remedy and (iii) a brief statement as to the manner in which such specific directions may be given. Any notice that is given in the manner herein provided in Section 15.4 to a Noteholder shall be conclusively presumed to have been duly given, whether or not the Noteholder receives such notice. In the absence of specific instructions from the Noteholders or the Indenture Trustee, the Issuer shall abstain from exercising its rights and remedies with respect to the Participation Agreement.
(b) With respect to the exercise of any right or remedy under the Credit and Guaranty Agreement or the Loan that requires the consent of the Lender, upon receipt by the Issuer of specific written direction from Required Holders or the Indenture Trustee acting on behalf of and at the written direction of the Required Holders (or such other percentage of Noteholders of Outstanding Notes as may be permitted or required pursuant to the terms of this Indenture) approving the exercise of such right or remedy, the Issuer shall promptly notify the Administrative Agent and the Lender, in writing, that it consents to the exercise.
(c) Notwithstanding the foregoing, the Issuer shall not consent to any such exercise of a right or remedy unless the Issuer has obtained an opinion of nationally recognized outside tax counsel experienced in such matters to the effect that such action will not result in the Trust being classified as an association (or a publicly traded partnership) taxable as a corporation for United States federal income tax purposes.
(d) Any written direction pursuant to this Section 11.6 by a Noteholder to the Indenture Trustee and by the Indenture Trustee to the Issuer, as to any proposed exercise of a right or remedy shall constitute full protection to the Indenture Trustee and the Issuer for any action taken or omitted to be taken by it in good faith reliance thereon.
(e) The Issuer acknowledges and agrees that, to the extent permitted under the terms of the Participation Agreement, the Issuer (i) except to the extent permitted in Sections 12.1 and 12.2, shall not take any action, or refrain from taking any action, with respect to the Participation Agreement or any other Transaction Document to which it is a party, without the written consent of the Noteholders and (ii) shall take all action, or refrain from taking any action, as the Noteholders shall direct in writing.
ARTICLE XII
AMENDMENTS
SECTION 12.1 With Consent of Noteholders.
(a) The Issuer shall provide written notice to the Indenture Trustee promptly of any request by the Borrower for amendment, waiver or consent or any other affirmative action with respect to the Borrower and the Transaction Documents and at least ten Business Days prior to effectiveness of any such amendment, waiver or consent.
(b) Notwithstanding anything to the contrary in any Transaction Document, as a result of the pledge described in Article V, the Issuer shall not agree to any modification of the terms of any Transaction Document to which it is a party without having first received directions from the Indenture Trustee, acting upon the written instructions of the Required Holders, except as set forth under Section 12.1(c) and 12.2.
(c) At the written direction or consent of the Required Holders, each of the Issuer and the Indenture Trustee shall, subject to Sections 12.3 and 12.4, enter into an indenture or indentures supplemental hereto for the purpose of amending the provisions of this Indenture and the Issuer shall otherwise amend, modify or supplement any other Transaction Document to which it is a party; provided, however, that without the consent or direction of 90% of the aggregate principal amount of the then Outstanding Notes directly affected thereby, no such supplemental indenture or modification or amendment shall cause, with respect to this Indenture or any other Transaction Document, any of the following:
(i) change the maturity of any payment of principal of or any installment of interest on any Note;
(ii) reduce the principal amount or the rate of interest, or change the method of computing the amount of principal, interest or Note Additional Amounts, payable under any Transaction Document on any date;
(iii) change any Place of Payment where the principal of or interest under any Transaction Document is payable;
(iv) change the coin or currency in which the principal of or interest on any Transaction Document is payable;
(v) impair the right of the Noteholders to institute suit for the enforcement of any payment on or after the date due;
(vi) release the security interest in the Trust Assets created under this Indenture or waive any of the payment obligations of the Issuer that would otherwise be payable to the Noteholders;
(vii) following the delivery of notice to the Noteholders by the Issuer (or the Indenture Trustee on behalf of the Issuer) of any Notes Change of Control Offer or Notes Asset Sale Offer, modify any such offer in a manner adverse to the Noteholders;
(viii) reduce the percentage in principal amount of the Outstanding Notes, the consent of whose Noteholders is required for any modification or the consent of whose Noteholders is required for any waiver of compliance with this Indenture; or
(ix) modify or change any of the provisions of this Indenture requiring consent or direction of Noteholders to amend, modify or waive any other provisions or terms except to increase any required percentage of consenting Noteholders or to provide that one or more provisions of this Indenture cannot be modified or waived without the consent of each Noteholder.
(d) Upon receipt by the Indenture Trustee of Board Resolutions, an Officer’s Certificate and an Opinion of Counsel, and such other documentation as the Indenture Trustee may reasonably require and upon the filing with the Indenture Trustee of evidence of the Act of said Noteholders, the Indenture Trustee shall join in the execution of such supplemental indenture or other instrument, as the case may be, subject to the provisions of Sections 12.3 and 12.4.
(e) It shall not be necessary for any Act of Noteholders under this Section 12.1 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
(f) The Issuer shall deliver notice to the Rating Agencies, if any, of any indenture or supplemental indenture prior to the execution of such indenture or supplemental indenture.
(g) Notwithstanding the foregoing, that without the consent or direction, as applicable, of the Noteholders of all Outstanding Notes no supplemental indenture or modification or amendment to any Transaction Document shall take effect unless the Issuer has obtained an opinion of a United States nationally recognized outside tax counsel experienced in such matters to the effect that following such amendment the Trust will not be classified as an association (or a publicly traded partnership) taxable as a corporation for United States federal income tax purposes.
SECTION 12.2 Without Consent of Noteholders.
(a) Notwithstanding anything to the contrary provided for in Section 12.1 hereof, the Issuer, the Borrower, the Lender, the Administrative Agent and the Indenture Trustee at any time and from time to time, may, without the consent of any Noteholders, enter into one or more indentures supplemental hereto or other instrument to amend or modify any Transaction Document to which it is a party without the direction of the Noteholders in order to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in such Transaction Document or in any amendment thereto that may be defective or inconsistent with any other provision of any Transaction Document or in any amendment to any Transaction Document;
(iii) conform to any change in the Investment Company Act or securities law or any change in interpretation or application of the rules and regulations promulgated thereunder by any legislative body, court, government agency or regulatory authority;
(iv) modify, eliminate or add to any provision of any Transaction Document to such extent as shall be necessary to ensure that the Issuer will not be classified as an association (or a publicly traded partnership) taxable as a corporation for United States federal income tax purposes;
(v) modify, eliminate or add to any provision of any Transaction Document to such extent as may be necessary or desirable; provided in each case that such amendments do not have a material adverse effect on the rights, preferences or privileges of the Issuer and, to the extent applicable, the Indenture Trustee and the Noteholders under the Transaction Documents;
(vi) make any other change that does not materially and adversely affect the rights of any Noteholder or to conform any Transaction Document to the descriptions thereof in “The Credit and Guaranty Agreement and the Loan,” “The Participation Agreement,” “The Trust,” or “Description of the Notes and the Note Guarantees” in the Offering Memorandum; or
(vii) make such other provisions in regard to matters or questions arising under such other Transaction Documents as the Issuer, and to the extent applicable, the Indenture Trustee and the Noteholders, may deem necessary or desirable and which will not adversely affect the interests of the Issuer, and to the extent applicable, the Indenture Trustee and the Noteholders thereunder.
(b) Notwithstanding the foregoing, the Issuer shall not amend or waive or instruct the Lender to amend or waive any provision of any Transaction Document, as applicable, unless the Issuer has obtained an opinion of a United States nationally recognized outside tax counsel experienced in such matters to the effect that following such amendment the Trust will not be classified as an association (or a publicly traded partnership) taxable as a corporation for United States federal income tax purposes.
SECTION 12.3 Execution of Supplemental Indentures. In executing supplemental indentures or amendments to the Transaction Documents permitted by this Article XII or the modifications thereby of the trusts created by this Indenture or granting any waivers hereunder, the Indenture Trustee shall be entitled to receive, and (subject to Section 9.1) shall be fully protected in relying conclusively upon, an Officer’s Certificate and Opinion of Counsel of the Issuer or any Note Guarantor stating that the execution of such supplemental indenture or amendment is authorized or permitted by this Indenture or the relevant Transaction Document, as applicable and all conditions precedent to the execution of such supplemental indenture or amendment have been met. The Indenture Trustee shall not be obligated to enter into any supplemental indentures or amendment which affect the Indenture Trustee’s own rights, duties, indemnities or immunities under this Indenture, the Notes, any Note Guarantee, any Transaction Document or otherwise.
SECTION 12.4 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article XII, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Noteholder of a Note theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 12.5 Reference in Notes to Supplemental Indentures. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article XII may, and shall if required by the Issuer, bear a notation in form approved by the Issuer as to any matter provided for in such supplemental indenture; and, in such case, suitable notation may be made upon Outstanding Notes after proper presentation and demand. If the Issuer shall so determine, new Notes so modified as to conform, in the opinion of the Issuer and the Indenture Trustee, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes in accordance with the terms of this Indenture.
SECTION 12.6 Notification of Luxembourg Stock Exchange. As long as the Notes are listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so require, the Issuer, or any Person acting on behalf of the Issuer, shall notify the Luxembourg Stock Exchange of any modification or supplement to this Indenture.
ARTICLE XIII
DEFEASANCE AND DISCHARGE
SECTION 13.1 Satisfaction and Discharge of Indenture.
(a) Subject to paragraph (b), the Issuer’s obligations under the Notes and this Indenture, and each Note Guarantor’s obligations under its Note Guarantee, will terminate if:
(i) (A) all Notes previously authenticated and delivered (other than (1) destroyed, lost or stolen Notes that have been replaced or (2) Notes that are paid pursuant to Section 2.15 or (3) Notes for whose payment U.S. dollars and/or U.S. Government Obligations have been held in trust and then repaid to the Issuer pursuant to Section 13.5) have been delivered to the Indenture Trustee for cancellation and the Issuer has paid all sums payable by it hereunder; or
(B) (1) the Notes mature within sixty days, or all of them are to be called for redemption (provided any such redemption date shall be irrevocably designated by an Officer’s Certificate of the Issuer delivered to the Indenture Trustee on or prior to the date of deposit and shall be accompanied by an irrevocable request that the Indenture Trustee give notice of redemption to the Noteholders not less than 10 nor more than 60 days prior to such redemption date in accordance with this Indenture and including a form of such redemption notice including all information required to be set forth therein), under arrangements satisfactory to the Indenture Trustee for giving the notice of redemption,
(2) the Borrower irrevocably prepays the Loan and causes the Lender to deposit in trust with the Indenture Trustee or a Note Guarantor irrevocably deposits in trust with the Indenture Trustee, as trust funds solely for the benefit of the Noteholders, money and/or U.S. Government Obligations or a combination thereof in such amounts as shall be, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certificate delivered to the Indenture Trustee, sufficient without consideration of any reinvestment, to pay principal of and interest on the Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder,
(3) no Default has occurred and is continuing on the date of the deposit, and
(4) the deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound; and
(ii) the Issuer delivers to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with.
(b) After satisfying the conditions in clauses (i)(A) and (ii), only the Issuer’s obligations in Sections 9.5, 3.3 and 2.16 shall survive. After satisfying the conditions in clauses (i)(B) and (ii), only the Issuer’s and the Note Guarantors’ obligations in Article II and Sections 6.1, 6.12, 8.7, 8.8, 9.5, 9.8, 9.9, 13.5, 13.6, 14.1(a), the last sentence of Section 14.4, Sections 14.7 and 14.12 will survive. In either case, the Indenture Trustee upon the Issuer’s request will acknowledge in writing the discharge of the Issuer’s obligations under the Notes and this Indenture other than the surviving obligations.
SECTION 13.2 Legal Defeasance. After the 123rd day following the deposit referred to in clause (a) below, the Issuer will be deemed to have paid and will be discharged from its obligations in respect of the Notes and this Indenture, other than its obligations in Article II and Sections 6.1, 6.12, 8.7, 8.8, 9.5, 9.8, 9.9, 13.5, 13.6 and 14.12, and each Note Guarantor’s obligations under its Note Guarantee will terminate, provided the following conditions have been satisfied:
(a) The Borrower has irrevocably prepaid the Loan and caused the Lender to deposit in trust with the Indenture Trustee, as trust funds solely for the benefit of the Noteholders, money or U.S. Government Obligations or a combination thereof sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certificate thereof delivered to the Indenture Trustee, without consideration of any reinvestment, to pay principal of and interest on the Notes to maturity or redemption, as the case may be, provided that any redemption before maturity has been irrevocably provided for under arrangements satisfactory to the Indenture Trustee;
(b) No Default has occurred and is continuing on the date of the deposit or occurs at any time during the 123-day period following the deposit;
(c) The deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound;
(d) The Issuer has delivered to the Indenture Trustee:
(i) either (x) a ruling received from the Internal Revenue Service to the effect that the beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the defeasance and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same times as would otherwise have been the case or (y) an Opinion of Counsel stating that, as a result of an Internal Revenue Service ruling or a change in applicable federal income tax law, the beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the defeasance and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same times as would otherwise have been the case, and
(ii) an Opinion of Counsel to the effect that after the passage of 123 days following the deposit, the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; and
(e) The Issuer has delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance have been complied with. After the expiration of the 123rd day referred to above, the Indenture Trustee, upon the written request and at the expense of the Issuer, will acknowledge in writing the discharge of the Issuer’s obligations under the Notes and this Indenture except for the surviving obligations specified above.
SECTION 13.3 Covenant Defeasance. After the 123rd day following the deposit referred to in Section 13.2(a), the Parent Note Guarantors’ will no longer be subject to the obligations set forth in Sections 7.1 through 7.3, Section 7.7 and Section 7.15(a)(iii), and Sections 10(c), 10(d), 10(e) and 10(f) of the Credit and Guaranty Agreement will no longer constitute Loan Events of Default, provided the following conditions have been satisfied:
(a) the Issuer has complied with clauses (a), (b), (c), d(ii) and (e) of Section 13.2; and
(b) the Issuer has delivered to the Indenture Trustee either (x) a ruling received from the Internal Revenue Service to the effect that the beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the defeasance and will be subject to U.S. federal income tax on the same amount and in the same
manner and at the same times as would otherwise have been the case or (y) an Opinion of Counsel to the same effect as the ruling described in clause (x).
Except as specifically stated above in this Section 13.3, none of the Issuer’s obligations under this Indenture will be discharged.
SECTION 13.4 Application of Trust Money. Subject to Section 13.5, the Indenture Trustee will hold in trust the money or U.S. Government Obligations deposited with it pursuant to Sections 13.1, 13.2 or 13.3, and apply the deposited money and the proceeds from deposited U.S. Government Obligations to the payment of principal of and interest on the Notes in accordance with the Notes and this Indenture. Such money and U.S. Government Obligations need not be segregated from other funds except to the extent required by law.
SECTION 13.5 Repayment to Issuer. Subject to Sections 9.5, 9.17, 13.1, 13.2 and 13.3, the Indenture Trustee will promptly pay to the Issuer upon request any excess money held by the Indenture Trustee at any time and thereupon be relieved from all liability with respect to such money. The Indenture Trustee will pay to the Issuer upon request any money held for payment with respect to the Notes that remains unclaimed for two years, provided that before making such payment the Indenture Trustee may (but shall be under no obligation to) at the expense of the Issuer send to each Noteholder entitled to such money, notice that the money remains unclaimed and that after a date specified in the notice (at least 30 days after the date of the publication or notice) any remaining unclaimed balance of money will be repaid to the Issuer. After payment to the Issuer, Noteholders entitled to such money must look solely to the Issuer for payment, unless applicable law designates another Person, and all liability of the Indenture Trustee with respect to such money will cease.
SECTION 13.6 Reinstatement. If and for so long as the Indenture Trustee or any Paying Agent is unable to apply any money or U.S. Government Obligations held in trust pursuant to Section 13.1, 13.2 or 13.3 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer’s and the Note Guarantors’ obligations under this Indenture and the Notes will be reinstated as though no such deposit in trust had been made. If the Issuer or any Note Guarantor makes any payment of principal of or interest on any Notes because of the reinstatement of its obligations, it will be subrogated to the rights of the Noteholders of such Notes to receive such payment from the money or U.S. Government Obligations held in trust.
ARTICLE XIV
NOTE GUARANTEES
SECTION 14.1 Guarantees.
(a) Upon the receipt by the Borrower of the net proceeds of the Loan, each of the Note Guarantors hereby absolutely, unconditionally and irrevocably guarantees, jointly and severally, to the Indenture Trustee, on behalf of itself (in each of its capacities under this Indenture) and the Noteholders (each, a “Note Guarantee” and collectively, the “Note
Guarantees”) (i) the punctual payment of the Notes, and (ii) the performance of all other obligations of the Issuer under this Indenture and the Notes (net, in each case, any amounts paid by the Borrower in accordance with the Credit and Guaranty Agreement, whether or not those amounts have been paid to the Issuer or the Indenture Trustee in accordance with the terms of the Participation Agreement and this Indenture) (such payments and obligations being the “Guaranteed Obligations”).
Each Note Guarantor hereby guarantees the full punctual payment when due, whether at the expected Maturity Date, by acceleration, redemption or otherwise, of the principal of, premium, if any, and interest, if any, in respect of amounts constituting Guaranteed Obligations and agrees to pay any and all fees and expenses (including, without limitation, fees and expenses of counsel) incurred by the Indenture Trustee in enforcing any rights under the Notes Guarantees or any other Transaction Document or otherwise owed to the Indenture Trustee under this Indenture or any other Transaction Document. Each Note Guarantor hereby agrees that, immediately upon its receipt of notice of nonpayment or nonperformance of the Borrower or the Issuer by the Indenture Trustee (acting at the written direction of the Required Holders), such Note Guarantor shall make immediate payment to the Indenture Trustee in U.S. dollars of the applicable Guaranteed Obligations. Each Note Guarantee is a Guarantee of payment and compliance and is in no way conditioned or contingent upon any attempt to collect from or compliance by the Borrower or the Issuer or upon any other event, contingency or circumstance whatsoever. Without limiting the generality of the foregoing, each Note Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrower or the Issuer to the Indenture Trustee under or in respect of the Transaction Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower or the Issuer.
Notwithstanding any provision herein to the contrary, in the event that the Borrower pays the Lender the amounts due and owed under the Credit and Guaranty Agreement and the Lender fails to make the required payments to the Issuer pursuant to the Participation and the Participation Agreement, the Note Guarantees shall not be available with respect to such amounts.
(b) All amounts payable by each Note Guarantor under its respective Note Guarantee shall be payable in U.S. dollars and in same day funds to the Indenture Trustee at the account specified by the Indenture Trustee.
(c) Each of the Note Guarantors hereby confirms, and by its acceptance of a Note, each Noteholder is deemed to confirm, that it is the intention of all such Persons that these Note Guarantees and the obligations of the Note Guarantors hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law (as hereinafter defined), the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Guatemalan or other international, foreign or U.S. federal or state law to the extent applicable to these Note Guarantees and the obligations of the Guarantors hereunder. To effectuate the foregoing intention, the Indenture Trustee and each Guarantor hereby irrevocably agree that the obligations of such Guarantor under its respective Note Guarantee at any time shall be limited to the maximum amount as will result in the obligations of such Guarantor under its respective Note
Guarantee not constituting a fraudulent transfer or conveyance. For purposes hereof, “Bankruptcy Law” means any proceeding of the type referred to in Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors.
(d) Each Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to the Indenture Trustee (acting at the written direction of the Required Holders) under its respective Note Guarantee, such Guarantor will contribute, to the maximum extent permitted by law, such amounts so as to maximize the aggregate amount paid to the Indenture Trustee under or in respect of the Transaction Documents.
(e) Each Guarantor’s obligations under its Note Guarantee will be unsecured, and, in the event of such Guarantor’s bankruptcy, liquidation or dissolution under Guatemalan law, will rank pari passu in right of payment with all other present and future senior, unsecured and unsubordinated indebtedness of such Guarantor, but effectively junior to their present and future secured obligations, with respect to the value of the assets securing such indebtedness, and statutory obligations resulting under applicable Law.
SECTION 14.2 Release of Note Guarantors.
Other than the Note Guarantee of the Borrower, the Note Guarantee of a Note Guarantor will terminate upon: (1) a sale or other disposition (including by way of consolidation or merger) of such Note Guarantor or the sale or disposition of all or substantially all the assets of such Note Guarantor (other than to another Note Guarantor) otherwise permitted by this Indenture, provided that in the case of a sale of a Note Guarantor by an entity that is not another Note Guarantor, such release and termination shall not be effective unless (i) the sale is consummated in compliance with Section 7.7(a) (1) and (2) and (ii) the seller, whether or not party to this Indenture, or another Note Guarantor, makes an Asset Sale Offer in accordance with the terms of Section 7.7(a) in the amount of (A) the Net Available Proceeds of such sale (provided such amount, taken together with any other funds available for similar use from all prior similar sales or Asset Dispositions in the same fiscal year and not so used exceed US$30,000,000) or, (B) assuming the investment of any such proceeds in compliance with clause (3) of the first paragraph of Section 7.7(a) with respect to the remaining Note Guarantors, the Excess Proceeds (provided such amount (having deducted any amount used to purchase, prepay, repay or reduce Debt of a Parent Note Guarantor that is secured or pari passu with the Notes or Debt of an Restricted Subsidiary that is not a Note Guarantor), taken together with any other funds available for similar use from all prior similar sales or Asset Dispositions in the same fiscal year and not so used exceed US$30,000,000); or (2) the designation of such Note Guarantor as an Unrestricted Subsidiary or such Note Guarantor otherwise ceases to be a Restricted Subsidiary, in accordance with this Indenture.
SECTION 14.3 Future Note Guarantors.
(a) Each of the Parent Note Guarantors agrees to cause any Restricted Subsidiary that is not a Note Guarantor to promptly execute a supplemental indenture and deliver an Officer’s Certificate and Opinion of Counsel to the Indenture Trustee pursuant to which such
Restricted Subsidiary (each, a “Subsidiary Guarantor”) will provide a Note Guarantee at the times and to the extent required by Sections 14.3(b), (c) and (d) and on the conditions described in this Article XIV.
(b) If any Parent Note Guarantor or a Restricted Subsidiary acquires or creates any Significant Subsidiary on or after the date hereof, then that newly acquired or created Significant Subsidiary shall provide a Note Guarantee and become a Note Guarantor hereunder in accordance with Section 14.3(a); provided that (i) such Significant Subsidiary’s Note Guarantee will be limited to the maximum amount that would not result in a breach or violation by such Significant Subsidiary of any provision of any agreement to which it is party existing at the time of such acquisition or creation; provided, that such provision was not adopted in connection with, or in contemplation of, such acquisition or creation or to avoid providing a Note Guarantee, and (ii) such Significant Subsidiary will not be required to execute any such supplemental indenture if (a) such Significant Subsidiary has any minority shareholders representing, in the aggregate, more than 30% of the outstanding Capital Stock of such Significant Subsidiary and the execution of such supplemental indenture would result in a breach or violation by such Significant Subsidiary or the relevant Parent Note Guarantor of any provision of any agreement to which such minority shareholders, such Significant Subsidiary or the relevant Parent Note Guarantor, as applicable; provided, that such provision was not adopted to avoid providing a Note Guarantee, or (b) the execution or enforcement of such supplemental indenture and the resultant Note Guarantee thereunder is prohibited by, or in violation of, any applicable law to which such Significant Subsidiary is subject and the Borrower has delivered to the Indenture Trustee an Opinion of Counsel to that effect. Notwithstanding the foregoing, if at the time of such acquisition or creation, such Significant Subsidiary has no Debt, such Significant Subsidiary shall not be required to become a Subsidiary Guarantor or provide a Note Guarantee; provided that if at any time after such acquisition or creation, such Significant Subsidiary Incurs any Debt, at the time of such Incurrence such Significant Subsidiary will become a Subsidiary Guarantor in accordance with Section 14.3(a).
(c) The Parent Note Guarantors represent that (i) the Combined EBITDA of the Note Guarantors (taken together on a standalone basis) for the twelve month period ended September 30, 2021, represents more than 80% of Combined EBITDA of the Parent Note Guarantors and their Subsidiaries for such reference period, and (ii) the Combined Total Assets of the Note Guarantors (taken together on a standalone basis) as of September 30, 2021 represents more than 80% of Combined Total Assets of the Parent Note Guarantors and their Subsidiaries as such date.
Notwithstanding the foregoing, from time to time, if as of the end of the period of four full fiscal quarters most recently ended (the “reference period”), (i) Combined EBITDA of the Note Guarantors (taken together on a standalone basis) for such reference period represents less than 80% of Combined EBITDA of the Parent Note Guarantors and their Subsidiaries for such reference period or (ii) Combined Total Assets of the Note Guarantors (taken together on a standalone basis) as of the end of such reference period represent less than 80% of Combined Total Assets of the Parent Note Guarantors and their Subsidiaries as of the end of such reference period, the Parent Note Guarantors will, promptly following the date on which the combined financial statements of the Parent Note Guarantors for the fiscal quarter ended on the last day of
such reference period become available, cause one or more Restricted Subsidiaries to become Subsidiary Guarantors, subject to applicable legal limitations, in accordance with Section 14.3(a) and, in addition, provide the Indenture Trustee with an Officer’s Certificate of such Note Guarantor to the effect that after giving effect to the delivery of the Note Guarantee, the Combined EBITDA and assets of the Note Guarantors (taken together on a standalone basis) in aggregate represent at least 80% of the (x) Combined Total Assets of the Parent Note Guarantors and their Subsidiaries as of the end of such reference period, and (y) Combined EBITDA of the Note Guarantors and their Subsidiaries for such reference period. If the execution or enforcement of a supplemental indenture and the resultant Note Guarantee thereunder with respect to a certain Restricted Subsidiary is prohibited by, or in violation of, any applicable law to which such Restricted Subsidiary is subject and the Borrower has delivered to the Indenture Trustee an Opinion of Counsel to that effect, then, such Restricted Subsidiary shall not be required to become a Subsidiary Guarantor; provided, however that, such exemption to cause such Restricted Subsidiary to become a Subsidiary Guarantor, shall not release the Parent Note Guarantor to comply with this paragraph by causing other Restricted Subsidiaries not so restricted to become Subsidiary Guarantors.
(d) The Note Guarantors will not permit any Restricted Subsidiary, directly or indirectly, to Guarantee any Debt of any Note Guarantor unless such Restricted Subsidiary (a) is a Note Guarantor or (b) becomes a Note Guarantor and provides a Note Guarantee in accordance with Section 14.3(a), which Note Guarantee will rank senior in right of payment to or equally in right of payment with such Restricted Subsidiary’s Guarantee of such other Debt.
SECTION 14.4 Guarantees Absolute. Each Note Guarantor guarantees that the Guaranteed Obligations will be paid in accordance with the terms of the Transaction Documents, regardless of whether or not the Issuer has received payment. The obligations of each Note Guarantor under or in respect of its respective Note Guarantee are independent of the Guaranteed Obligations or any other obligations of the Issuer or the Borrower under or in respect of the Transaction Documents, and a separate action or actions may be brought and prosecuted against each Note Guarantor to enforce its respective Note Guarantee, irrespective of whether any action is brought against the Issuer or the Borrower or whether any of the Issuer or the Borrower is joined in any such action or actions. The liability of each Note Guarantor under its respective Note Guarantee shall be irrevocable, absolute and unconditional, and joint and several, and shall remain in full force and effect until all the Guaranteed Obligations have been paid and satisfied in full, irrespective of, and each Note Guarantor hereby irrevocably waives, any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:
(a) any lack of authorization, validity or enforceability of any Transaction Document or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other obligations of the Issuer or the Borrower under or in respect of the Transaction Documents, or any other amendment or waiver of or any consent to departure from any Transaction Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Issuer or the Borrower or any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other Guarantee, for all or any of the Guaranteed Obligations;
(d) any manner of application of any collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations or any other obligations of the Issuer or the Borrower under the Transaction Documents or any other assets of the Issuer or the Borrower or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate structure or existence of the Issuer or the Borrower or any of its Subsidiaries;
(f) the failure of any other Person to execute or deliver its Note Guarantee or any other Guarantee or agreement or the release or reduction of liability of such Note Guarantor (or any other guarantor or surety with respect to the Guaranteed Obligations); or
(g) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Indenture Trustee that might otherwise constitute a defense available to, or a discharge of, the Issuer or the Borrower or any other guarantor or surety.
The Note Guarantors’ obligations under the Note Guarantees will remain in full force and effect until all the Guaranteed Obligations have been paid or satisfied in full. The Note Guarantees shall continue to be effective or be reinstated, as the case may be, if at any time any payment of all or any portion of the Guaranteed Obligations is rescinded or must otherwise be returned by the Indenture Trustee or any Noteholder upon the insolvency, bankruptcy or reorganization of the Lender, the Issuer, any Guarantor or the Borrower, all as though such payment had not been made.
SECTION 14.5 Waivers and Acknowledgments.
(a) Each Note Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and its respective Note Guarantee and any requirement that the Indenture Trustee or any Noteholder protect, secure, perfect or insure any lien, pledge or other encumbrance or any property subject thereto or exhaust any right or take any action against the Issuer, the Borrower or any other Person or any collateral for any of the Guaranteed Obligations.
(b) Each Note Guarantor hereby unconditionally and irrevocably waives any right to revoke its respective Note Guarantee and acknowledges that such Note Guarantee is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.
(c) To the extent that any Note Guarantor may in any jurisdiction claim for itself or its respective assets immunity from a suit, execution, attachment, whether in aid of execution, before judgment or otherwise, or other legal process in connection with its respective Note Guarantee (or the Credit and Guaranty Agreement) and to the extent that in any jurisdiction there may be immunity attributed to such Note Guarantor or its respective assets, whether or not claimed, such Note Guarantor hereby irrevocably agrees with the Indenture Trustee and the Noteholders not to claim, and irrevocably waive, immunity to the full extent permitted by Law.
(d) Each Note Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by the Indenture Trustee or any Noteholder that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Note Guarantor or other rights of such Note Guarantor to proceed against any of the other parties to the Transaction Documents, any other guarantor or any other Person or any collateral for any of the Guaranteed Obligations and (ii) any defense based on any right of set-off or counterclaim against or in respect of the obligations of such Note Guarantor hereunder.
(e) Each Note Guarantor acknowledges that the Indenture Trustee and any Noteholder may, without notice to or demand upon such Note Guarantor and without affecting the liability of such Note Guarantor under its respective Note Guarantee, foreclose under any mortgage by nonjudicial sale, and such Note Guarantor hereby waives any defense to the recovery by the Indenture Trustee or any Noteholder against such Note Guarantor of any deficiency after such nonjudicial sale and any defense or benefits that may be afforded by applicable Law.
(f) Each Note Guarantor hereby unconditionally and irrevocably waives any duty on the part of the Indenture Trustee to disclose to such Note Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Issuer or the Borrower or any of its Subsidiaries now or hereafter known by the Indenture Trustee.
(g) Each Note Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Transaction Documents and that the waivers set forth in Section 14.4 and this Section 14.5 are knowingly made in contemplation of such benefits.
SECTION 14.6 Subrogation. Each Note Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Issuer or any other Person that arise from the existence, payment, performance or enforcement of such Note Guarantor’s obligations under or in respect of its respective Note Guarantee or any other Transaction Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification or any right to participate in any claim or remedy of the Indenture Trustee or any Noteholder against the Issuer or any other Person or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Issuer, the Borrower or any other insider guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under such Note Guarantee shall have been irrevocably paid in full in cash. If any amount shall be paid to any Note Guarantor in violation of the immediately preceding sentence at any time prior to the latest of (a) the irrevocable payment in full in cash of the Guaranteed Obligations and all other amounts payable under its respective Guarantee and (b) the Maturity Date, such amount shall be received and held in trust for the benefit of the Indenture Trustee, shall be segregated from other property and funds of such Note Guarantor and shall forthwith be paid or delivered to the Indenture Trustee in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under such Note Guarantee, whether matured or unmatured, in accordance with the terms of the Transaction Documents, or to be held as collateral for any Guaranteed Obligations or other amounts payable under such Note Guarantee thereafter arising.
SECTION 14.7 Payments Free and Clear of Taxes, Etc. Each Note Guarantor will make any and all payments under its respective Note Guarantee free and clear of any Taxes; if any Taxes are required to be deducted or withheld, the Note Guarantor shall pay such additional amounts as may be necessary to ensure that the amounts received by the Noteholders, after giving effect to any such Taxes, will equal the respective amounts that would have been receivable in the absence of such Taxes, in the same manner and subject to the same exceptions as set forth in Section 2 of the Expense Reimbursement and Indemnity Agreement.
SECTION 14.8 Representations and Warranties. Each Note Guarantor hereby makes each representation and warranty made in the Transaction Documents by the Borrower with respect to such Note Guarantor and such Note Guarantor hereby further represents and warrants as follows:
(a) There are no conditions precedent to the effectiveness of its respective Note Guarantee that have not been satisfied or waived.
(b) Such Note Guarantor has independently and without reliance upon the Indenture Trustee and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to provide its respective Note Guarantee and enter into each Transaction Document to which it is or is to be a party, and such Note Guarantor has established adequate means of obtaining from the Issuer and the Borrower on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of the Issuer and the Borrower, respectively.
(c) Such Note Guarantor hereby unconditionally and irrevocably agrees that its obligations to make any payment under its respective Note Guarantee will rank pari passu with all of its other senior unsecured obligations that are not, by their terms, expressly subordinated in right of payment to the obligations of such Note Guarantor under its respective Note Guarantee.
(d) Such Note Guarantor has been duly organized and is validly existing as a corporation in good standing under the laws of the Republic of Guatemala. Such Note Guarantor is licensed (if and to the extent necessary) and has the full corporate power and authority to enter into and perform its obligations under its respective Note Guarantee and the Transaction Documents to which it is a party.
(e) Its respective Note Guarantee, the Credit and Guaranty Agreement, and each other document executed and delivered in connection therewith to which such Note Guarantor is party has been duly authorized and, assuming due authorization, execution and delivery thereof by each other party to those Transaction Documents (other than such Note Guarantor), when executed and delivered by such Note Guarantor, will constitute a legal, valid and binding agreement of such Note Guarantor, enforceable against such Note Guarantor in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors’ rights generally from time to time in effect and to general principles of equity).
(f) No consent, approval, authorization, filing with or order of any governmental authority is required for the execution, delivery or performance by such Note Guarantor of any of its obligations under its respective Note Guarantee, including, without limitation, making any of the applicable payments required to be made on or after the date hereof under or in respect of any of the Transaction Documents other than any such authorization, approval, action, notice or filing which has been obtained or made, as the case may be, prior to the date hereof and is in full force and effect on the date hereof.
(g) Such Note Guarantor is currently not in violation of its charter, by-laws or comparable organizational documents; neither the execution and delivery of any of the Transaction Documents nor the consummation of any of the transactions described or contemplated therein, nor the fulfillment of the terms thereof will conflict with, or give rise to any right to accelerate the maturity or require the prepayment, repurchase or redemption of any indebtedness under, or result in a breach or violation or imposition of any lien, charge or encumbrance upon any property or assets of such Note Guarantor or any of its Subsidiaries pursuant to, (i) their respective charter, by-laws or comparable organizational documents, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which they are a party or bound or to which any of their property or assets is subject or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to them, except in the case of clauses (ii) or (iii) such as could not reasonably be expected to have a Material Adverse Effect.
(h) Such Note Guarantor has filed or caused to be filed all material Tax returns that are required to be filed by it, and has paid or caused to be paid all Taxes shown to be due and payable on such returns or on any material assessments received by it, other than any such Tax or assessment that is being contested in good faith and by proper proceedings diligently conducted and as to which appropriate reserves are being maintained or as would not have a Material Adverse Effect and except as set forth in or contemplated in the Offering Memorandum under the heading “Business—Legal and Administrative Proceedings.”
SECTION 14.9 Covenants.
(a) Each Note Guarantor covenants and agrees that, so long as any part of the Guaranteed Obligations shall remain unpaid, such Note Guarantor will perform and observe all of the terms, covenants and agreements set forth in the Credit and Guaranty Agreement and other Transaction Documents on its or their part to be performed or observed or that the Borrower has agreed to cause such Note Guarantor to perform or observe, and understands that failure to be in compliance with such covenants shall constitute an event of default under the Credit and Guaranty Agreement.
(b) Each Note Guarantor agrees that, if a judgment or order made by any court for the payment of any amount in respect of any of its obligations under its respective Note Guarantee is expressed in a currency other than U.S. dollars, it will indemnify each of the Indenture Trustee, and the Noteholders, against any deficiency arising from any variation in rates of exchange between the date as of which the denomination currency is notionally converted into the judgment currency for the purposes of the judgment or order and the date of actual payment. This indemnity will constitute a separate and independent obligation from such Note Guarantor’s other obligations under its respective Note Guarantee, will give rise to a separate and independent cause of action, will apply irrespective of any waiver of such indemnity by the Lender under Section 14 of the Credit and Guaranty Agreement (or waiver by the Lender of any other provision of the Credit and Guaranty Agreement or such Note Guarantor’s respective Loan Guarantee) granted from time to time and will continue in full force and effect notwithstanding any judgment or order for a liquidated sum or sums in respect of amounts due in respect of the Credit and Guaranty Agreement or under any such judgment or order.
SECTION 14.10 [Reserved].
SECTION 14.11 No Waiver; Remedies. No failure on the part of the Indenture Trustee to exercise, and no delay in exercising, any right with respect to any Note Guarantee shall operate as a waiver thereof; nor shall any single or partial exercise of any right with respect to any Note Guarantee preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided with respect to any Note Guarantee are cumulative and not exclusive of any remedies provided by Law.
SECTION 14.12 Indemnification.
(a) Without limitation on any other obligations of the Note Guarantors or remedies of the Indenture Trustee under the Note Guarantees, each Note Guarantor shall, jointly and severally, to the fullest extent permitted by law, indemnify, defend and save and hold harmless the Indenture Trustee, each Authorized Agent and each of its Affiliates and its respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms.
(b) Each Note Guarantor hereby (i) also agrees that none of the Indemnified Parties shall have any liability (whether in contract, tort or otherwise) to such Note Guarantor or any of its Affiliates or any of their respective officers, directors, employees, agents and advisors, and (ii) agrees not to assert any claim against any Indemnified Party on any theory of liability for special, indirect, consequential or punitive damages arising out of or otherwise relating to this Indenture, the Credit and Guaranty Agreement, the actual or proposed use of the proceeds of the Loan, the Transaction Documents or any of the transactions contemplated by the Transaction Documents.
(c) Without prejudice to the survival of any of the other agreements of any Note Guarantor under its respective Note Guarantee or any of the other Transaction Documents, the agreements and obligations of each Note Guarantor contained in Section 13.6, Section 14.1(a) (with respect to enforcement expenses), the last sentence of Section 14.4, Section 14.7, this Section 14.12 shall survive the payment in full of the Guaranteed Obligations and all of the other amounts payable under the Note Guarantees.
SECTION 14.13 Subordination. Each Note Guarantor hereby subordinates any and all debts, liabilities and other obligations owed to such Note Guarantor by the Issuer (the “Subordinated Obligations”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 14.13:
(a) Prohibited Payments, Etc. Except during the continuance of a Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to the Issuer), such Note Guarantor may receive regularly scheduled payments from the Issuer on account of the Subordinated Obligations, if any. After the occurrence and during the continuance of any Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to the Issuer), however, unless the Indenture Trustee otherwise agrees, such Note Guarantor shall not demand, accept or take any action to collect any payment on account of the Subordinated Obligations.
(b) Prior Payment of Guaranteed Obligations. In any proceeding under any Bankruptcy Law relating to the Issuer, such Note Guarantor agrees that the Indenture Trustee shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“Post Petition Interest”)) before such Note Guarantor receives payment of any Subordinated Obligations.
(c) Turn-Over. After the occurrence and during the continuance of any Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to the Issuer), such Note Guarantor shall collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Indenture Trustee and deliver such payments to the Indenture Trustee on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Note Guarantor under the other provisions of its respective Note Guarantee.
(d) Indenture Trustee Authorization. After the occurrence and during the continuance of any Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to the Trust), the Indenture Trustee is authorized and empowered (but without any obligation to so do), (i) in the name of such Note Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require such Note Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Indenture Trustee for application to the Guaranteed Obligations (including any and all Post Petition Interest).
SECTION 14.14 Continuing Guarantee; Assignments. The Note Guarantees are continuing Guarantees and will continue to be effective or may be reinstated if at any time any payment of all or any portion of the Guaranteed Obligations is rescinded or must otherwise be returned by the Indenture Trustee upon the insolvency, bankruptcy or reorganization of the Lender, the Cayman Trustee or any Note Guarantor, all as though such payment had not been made. No Note Guarantor may assign its rights or obligations hereunder except in accordance with Section 7.15. Each Note Guarantee and all rights therein will be assigned to, and continue in full force and effect for the benefit of, any person to whom this Indenture and the Notes are assigned. The covenants of the Borrower contained in the Credit and Guaranty Agreement will be deemed made by each of the Note Guarantors in its respective Note Guarantee for the benefit of the Indenture Trustee and the Noteholders.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Compliance Certificates and Opinions.
(a) Upon any application or request by the Issuer or any Note Guarantor to the Indenture Trustee that the Indenture Trustee take any action or refrain from taking any action under any provision of this Indenture, the Issuer or such Note Guarantor shall furnish to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and that in the opinion of such counsel all such conditions precedent, if any, have been complied with.
(b) Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:
(i) a statement substantially to the effect that each individual signing such certificate or opinion has read such covenant or condition;
(ii) a brief statement substantially to the effect as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such individual, such examination or investigation has been made as is necessary to enable such individual to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
SECTION 15.2 Officer’s Certificate; Form of Documents Delivered to Indenture Trustee.
(a) In any case where several matters are required to be certified by, or covered by an opinion of any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
(b) Any certificate or opinion of an Authorized Representative of the Issuer or officer of any other Person may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Authorized Representative or officer knows or has reason to believe that the certificate or opinion or representations with respect to the matters upon which such Officer’s Certificate or opinion is based are erroneous or otherwise inaccurate. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate of, or representations by, an Authorized Representative of the Issuer stating that the information with respect to such factual matters is in the possession of the Issuer, unless such counsel knows that the certificate or representations with respect to such matters are erroneous.
(c) Any Opinion of Counsel stated to be based on the opinion of other counsel shall be accompanied by a copy of such other opinion.
(d) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 15.3 Notices, etc. Any Act of Noteholders, notice, request certificate, instruction or other document required or permitted to be delivered to the Issuer, the Indenture Trustee or any Note Guarantor by this Indenture, the Notes or any other Transaction Document shall be deemed to have been made or given, as applicable, only if such document is in writing, in English, and delivered personally, or by registered or certified first-class United States mail with postage prepaid and return receipt requested, or made, given or furnished in writing by confirmed facsimile transmission or other electronic transmission, or by prepaid courier service to the appropriate party as set forth below:
Indenture Trustee, Registrar, Paying Agent and Transfer Agent:
The Bank of New York Mellon
240 Greenwich Street, Floor 7 West
New York, New York 10286
Attn: Corporate Trust Administration
With a copy to:
The Bank of New York Mellon
385 Rifle Camp Road, 3rd Floor
Woodland, Park, NJ 07424
Attention: Alicia Coronado / Structured Cross-Border
E-Mail: Alicia.coronado@bnymellon.com
Issuer:
CT Trust, c/o Walkers Fiduciary Limited
Walkers Fiduciary Limited
190 Elgin Avenue
George Town
Grand Cayman KY1-9008
Cayman Islands
With copies to:
Comunicaciones Celulares, S.A.
Km 9.5 Carretera al Salvador (CA1)
Plaza Tigo, 4to nivel Torre 1,
Santa Catarina Pinula, Guatemala
Attention: Legal Department
Telephone No: (502) 2428-0000
Note Guarantors:
Comunicaciones Celulares, S.A.,
Cloud2Nube, S.A.
Comunicaciones Corporativas, S.A.,
Distribuidora Central de Comunicaciones, S.A.,
Distribuidora de Comunicaciones de Occidente, S.A.,
Distribuidora de Comunicaciones de Oriente, S.A.,
Distribuidora Internacional de Comunicaciones, S.A.,
Navega.com, S.A.,
Servicios Especializados en Telecomunicaciones, S.A. and
Servicios Innovadores de Comunicación y Entretenimiento, S.A.
c/o Comunicaciones Celulares, S.A.
Km 9.5 Carretera al Salvador (CA1)
Plaza Tigo, 4to nivel Torre 1,
Santa Catarina Pinula, Guatemala
Attention: Legal Department
E-mail: msisniega@tigo.com.gt and cnavarrete@tigo.com.gt
Any party may change its address by giving notice of such change in the manner set forth herein. Any notice given to a party shall be deemed delivered upon receipt thereof.
SECTION 15.4 Notices to Noteholders; Waiver. (a) Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if
(i) the notice is to be provided to Noteholders of non-Global Notes, such notice is in writing and mailed, first class postage prepaid, to such Noteholders, at their addresses as they appear in the Note Register; and
(ii) the notice is to be provided to Noteholders of Global Notes, such notice is given to the Registered Depositary in accordance with its Applicable Procedures,
in each case not later than the latest date, if any, and not earlier than the earliest date, if any, prescribed for the giving of such notice
Each Person owning a beneficial interest in a Global Note who is not a participant in Registered Depositary must rely on the procedures of the participant through which the Person owns its interest in the Global Note to receive notices provided to Registered Depositary.
(b) In addition, from and after the date the Notes are listed on the Official List of the Luxembourg Stock Exchange and so long as it is required by the rules of such exchange, all notices to Noteholders will be published by the Note Guarantors in English on the website of the Luxembourg Stock Exchange at www.bourse.lu. The Note Guarantors (and not the Indenture Trustee) shall have the sole responsibility for ensuring notices are sent in accordance with the requirements of the Luxembourg Stock Exchange.
(c) Notices to Noteholders will be deemed to have been given on the date of delivery to the Registered Depositary or mailing, as applicable, or of publication as aforesaid or, if published on different dates, on the date of the first such publication.
(d) Where this Indenture provides for notice, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given.
SECTION 15.5 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
SECTION 15.6 Successors and Assigns. All covenants, agreements, representations and warranties in this Indenture by the Issuer and the Note Guarantors and all covenants and agreements in this Indenture by the Indenture Trustee shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not.
SECTION 15.7 Severability Clause. In case any provision in this Indenture, the Notes or any Note Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 15.8 Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Noteholders, any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 15.9 Legal Holidays. In any case where any Payment Date, shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Notes to the contrary) payment of interest, principal and/or any other amount due and owing need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Payment Date and, if such payment is timely made, no interest shall accrue on the payment so deferred for the period from and after such Payment Date, to the date of such payment.
SECTION 15.10 Currency Rate Indemnity.
(a) The Issuer shall (to the extent lawful) indemnify the Indenture Trustee and the Noteholders and keep them indemnified against:
(i) in the case of nonpayment by the Issuer of any amount due to the Indenture Trustee or the Noteholders under this Indenture or any Note, any loss or damage incurred by any of them arising by reason of any variation between the rates of exchange used for the purposes of calculating the amount due under a judgment or order in respect thereof and those prevailing at the date of actual payment by the Issuer; and
(ii) any deficiency arising or resulting from any variation in rates of exchange between (i) the date as of which the local currency equivalent of the amounts due or contingently due under this Indenture or in respect of the Notes is calculated for the purposes of any bankruptcy, insolvency or liquidation of the Issuer, and (ii) the final date for ascertaining the amount of claims in such bankruptcy, insolvency or liquidation. The amount of such deficiency shall be deemed not to be increased or reduced by any variation in rates of exchange occurring between the said final date and the date of any
bankruptcy, insolvency or liquidation or any distribution of assets in connection therewith.
(b) The Issuer agrees that, if a judgment or order given or made by any court for the payment of any amount in respect of its obligations hereunder is expressed in a currency (the “Judgment Currency”) other than U.S. dollars (the “Denomination Currency”), it will indemnify each of the Indenture Trustee and the relevant Noteholder against any deficiency arising or resulting from any variation in rates of exchange between the date at which the amount in the Denomination Currency is notionally converted into the amount in the Judgment Currency for the purposes of such judgment or order and the date of actual payment thereof.
(c) The above indemnities shall constitute separate and independent obligations of the Issuer from its obligations hereunder, will give rise to separate and independent causes of action, will apply irrespective of any indulgence granted from time to time and will continue in full force and effect notwithstanding any judgment or the filing of any proof or proofs in any bankruptcy, insolvency or liquidation of the Issuer for a liquidated sum or sums in respect of amounts due under this Indenture or the Notes.
SECTION 15.11 Communication by Noteholders with other Noteholders. Noteholders may communicate with other Noteholders with respect to their rights under this Indenture and the Notes.
SECTION 15.12 Governing Law. This Indenture (including the Note Guarantees herein) and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.
SECTION 15.13 Waiver of Jury Trial. THE ISSUER, EACH NOTE GUARANTOR, THE INDENTURE TRUSTEE AND EACH HOLDER (PURSUANT TO ITS PURCHASE OF A NOTE) HEREBY IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR ANY NOTE GUARANTEE.
SECTION 15.14 Waiver of Immunity. This Indenture and any other documents delivered pursuant hereto, and any actions taken hereunder, constitute commercial acts by the Issuer and each Note Guarantor. Each of the Issuer and each Note Guarantor irrevocably and unconditionally and to the fullest extent permitted by Law, waives, and agrees not to plead or claim, any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) for itself of any of its property, assets or revenues wherever located with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Indenture, the Notes, any Note Guarantee, the Transaction Documents or any other document delivered pursuant hereto, in each case for the benefit of each assigns, it being intended that the foregoing waiver and agreement will be effective, irrevocable and not subject to withdrawal in any and all jurisdiction, and, without limiting the generality of the foregoing, agrees that the waivers set forth in this Section 15.14 shall have the fullest scope permitted under the United
States Foreign Sovereign Immunities Act of 1976 and are intended to be irrevocable for the purposes of such act.
SECTION 15.15 Submission to Jurisdiction, etc.
(a) The Issuer, each Note Guarantor and the Indenture Trustee irrevocably submit to the exclusive personal jurisdiction of any New York state or United States federal court located in the City of New York, New York in any action arising out of or relating to this Indenture, the Notes, the Note Guarantees or any of the other Transaction Documents to which each is or is to be a party, or for recognition or enforcement of any judgment, and the Issuer, each Note Guarantor and the Indenture Trustee hereby irrevocably and unconditionally agree that all claims in respect of such action or proceeding may be heard and determined in any such court of the State of New York or, to the extent permitted by Law, in such Federal court. The Issuer, each Note Guarantor and the Indenture Trustee irrevocably waive, to the fullest extent permitted by Law, any objection to any suit, action, or proceeding that may be brought in connection with this Indenture, the Notes, the Note Guarantees or any of the other Transaction Documents in such courts whether on the grounds of venue, residence or domicile or on the ground that any such suit, action or proceeding has been brought in an inconvenient forum. The Issuer, each Note Guarantor and the Indenture Trustee agree that final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing in this Indenture, the Notes or any other Transaction Document shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Indenture, the Notes or any other Transaction Document in the courts of any jurisdiction.
(b) Each of the Issuer and the Note Guarantors hereby irrevocably appoints and empowers C T Corporation System, located at 28 Liberty Street, New York, New York 10005 as its Authorized Agent (the “Process Agent”) to accept and acknowledge for and on its behalf and on behalf of its property service of any and all legal process, summons, notices and documents which may be served in any such suit, action or proceeding in any New York State court or United States Federal court sitting in the Borough of Manhattan, The City of New York, New York, United States and any appellate court from any thereof, which service may be made on such designee, appointee and agent in accordance with legal procedures prescribed for such courts. The Issuer and each Note Guarantor will take any and all action necessary to continue such designation in full force and effect and to advise the Indenture Trustee in writing of any change of address of such Process Agent; should such Process Agent become unavailable for this purpose for any reason, the Issuer and each Note Guarantor will promptly and irrevocably designate a new Process Agent within New York, New York, which will agree to act as such, with the powers and for the purposes specified in this subsection (b). Each of the Issuer and the Note Guarantors irrevocably consents and agrees to the service of any and all legal process, summons, notices and documents out of any of the aforesaid courts in any such action, suit or proceeding by hand delivery, to it at its address set forth in Section 15.3 or to any other address of which it shall have given notice pursuant to Section 15.3 or to its Process Agent. Service upon the Issuer or any Note Guarantor, as the case may be, or the Process Agent as provided for herein, will, to the fullest extent permitted by Law, constitute valid and effective personal service upon it, and the failure of the Process Agent to give any notice of such service to the Issuer or
any Note Guarantor, as the case may be, shall not impair or affect in any way the validity of such service or any judgment rendered in any action or proceeding based thereon.
SECTION 15.16 Assignment.
(a) Under the Credit and Guaranty Agreement, the Lender’s interest in the Loan may not be assigned to any Person except in accordance with Section 14.04 of the Credit and Guaranty Agreement. In the event of the assignment of the Loan to the Issuer in accordance with Section 14.04 of the Credit and Guaranty Agreement, the Issuer will succeed to all rights of the Lender under the Credit and Guaranty Agreement and the Loan and, pursuant to the pledge of the Trust Assets contemplated herein, the Indenture Trustee, acting pursuant to the written instructions of the Required Holders (or such other percentage of Noteholders of Outstanding Notes as may be permitted or required pursuant to the terms of this Indenture), shall have the right to direct the Issuer with respect to all matters relating to the Credit and Guaranty Agreement and the Loan as contemplated under Section 11.6.
(b) Each Person who becomes a Noteholder or an owner of a beneficial interest in a Note shall be deemed to have consented to any subsequent assignment to the Issuer of all or any portion of the Credit and Guaranty Agreement, the Loan and the Expense Reimbursement and Indemnity Agreement.
SECTION 15.17 Power to Employ Agents and Advisors. The Issuer shall be entitled to appoint such agents and engage such advisors, as it may consider necessary or desirable in order to perform or satisfy its obligations under this Indenture, provided, however, that such delegation or appointment shall not release the Issuer’s obligations hereunder. The Issuer shall supervise the conduct of such agents or advisor and shall at all times remain liable for any acts or omissions of such agents or advisors to the same extent as if they were the Issuer’s own acts or omissions subject to Section 2.6.
SECTION 15.18 Execution in Counterparts. This Indenture and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and delivered by any standard form of telecommunication, each of which shall constitute an original and all of which together shall constitute one and the same agreement. Counterparts may be delivered via facsimile, electronic mail (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
SECTION 15.19 Entire Agreement. Notwithstanding any supplemental agreements that the parties may execute, this Indenture, together with the Notes, the Note Guarantees and the Participation Agreement, sets forth the entire agreement of the parties hereto with respect to the subject matter hereof.
SECTION 15.20 Patriot Act. The parties hereto acknowledge that in order to help the United States government fight the funding of terrorism and money laundering
activities, pursuant to Federal regulations that became effective on October 1, 2003 (Section 326 of the USA PATRIOT Act) all financial institutions are required to obtain, verify, record and update information that identifies each person establishing a relationship or opening an account. Each party to this Indenture agrees that it will provide to the Indenture Trustee and Authorized Agents such information as they may request, from time to time, in order for the Indenture Trustee and Authorized Agents to satisfy the requirements of the USA PATRIOT Act, including but not limited to the name, address, tax identification number and other information that will allow them to identify the individual or entity who is establishing the relationship or opening the account and may also ask for formation documents such as articles of incorporation or other identifying documents to be provided.
SECTION 15.21 Non-Petition Covenant. Notwithstanding anything herein to the contrary, each party hereto agrees that it shall not (i) take any action to, or give or make any consent, instruction, vote, claim, approval, filing or notice to commence (or oppose the dismissal of) any case, proceeding or other action under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization, rehabilitation, arrangement, adjustment, winding-up, liquidation, provisional liquidation, sequestration, dissolution, composition, or other relief with respect to the Cayman Trustee or any of the assets or debts of the Cayman Trustee (a “Bankruptcy Case”), (ii) join with, cause, solicit or instruct any other party to commence (or oppose the dismissal of) such a Bankruptcy Case, (iii) move, directly or indirectly, for appointment of a receiver, liquidator, provisional liquidator, assignee, trustee, custodian, examiner or sequestrator or similar official with respect to the Cayman Trustee or any of the assets or debts of the Cayman Trustee, or (iv) seek any order relating to the winding up, liquidation, provisional liquidation or dissolution of the Cayman Trustee or a general assignment for the benefit of the Cayman Trustee’s creditors. Nothing in this Section 15.21 shall preclude, or be deemed to stop any party hereto (i) from taking any action in (A) any Bankruptcy Case voluntarily filed or commenced by the Cayman Trustee or its shareholders or (B) any involuntary insolvency Bankruptcy Case filed or commenced by a Person other than the Cayman Trustee, or (ii) from commencing against the Issuer or any of its assets any legal action which is not a Bankruptcy Case.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
Executed by:
WALKERS FIDUCIARY LIMITED,
in its capacity as, trustee of the CT Trust
By: ___________________________________
Name:
Title:
In the presence of:
Witness: ______________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
NOTE GUARANTORS:
COMUNICACIONES CELULARES, S.A.
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
CLOUD2NUBE, S.A.
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
DISTRIBUIDORA CENTRAL DE
COMUNICACIONES, S.A.
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
DISTRIBUIDORA INTERNACIONAL
DE COMMUNICACIONES, S.A.
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
SERVICIOS ESPECIALIZADOS EN
TELECOMUNICACIONES, S.A.
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
DISTRIBUIDORA DE
COMMUNICACIONES DE
OCCIDENTE,S.A.
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
NAVEGA.COM., S.A
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
DISTRIBUIDORA DE
COMUNICACIONES DE ORIENTE,
S.A.
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
COMUNICACIONES
CORPORATIVAS, S.A.
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
SERVICIOS INNOVADORES DE
COMUNICACIONY
ENTRETENIMENTO, S.A.
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
THE BANK OF NEW YORK MELLON,
as Indenture Trustee, Note Registrar, Transfer Agent and Paying Agent
By: ___________________________________
Name:
Title:
[Signature Page to the Indenture]
#95429618v7
EXHIBIT A-1
FORM OF RULE 144A RESTRICTED GLOBAL NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO WALKERS FIDUCIARY LIMITED, AS TRUSTEE OF THE CT TRUST, AS ISSUER (THE “ISSUER”), OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTES MAY BE PURCHASED AND TRANSFERRED ONLY IN MINIMUM PRINCIPAL AMOUNTS OF US$200,000 AND INTEGRAL MULTIPLES OF US$1,000 IN EXCESS THEREOF. IF AT ANY TIME THE TRUST DETERMINES IN GOOD FAITH THAT A HOLDER OR BENEFICIAL OWNER OF THIS NOTE OR BENEFICIAL INTERESTS HEREIN IS IN BREACH, AT THE TIME GIVEN, OF ANY OF THE TRANSFER RESTRICTIONS SET FORTH HEREIN AND IN THE INDENTURE, THE TRUST MAY REQUIRE SUCH HOLDER TO TRANSFER THIS NOTE (OR INTEREST HEREIN) TO A TRANSFEREE ACCEPTABLE TO THE TRUST WHO IS ABLE TO AND WHO DOES SATISFY ALL OF THE REQUIREMENTS SET FORTH HEREIN AND IN THE INDENTURE. PENDING SUCH TRANSFER, SUCH HOLDER WILL BE DEEMED NOT TO BE THE HOLDER OF THIS NOTE (OR INTEREST HEREIN) FOR ANY PURPOSE, INCLUDING BUT NOT LIMITED TO RECEIPT OF PRINCIPAL AND INTEREST PAYMENTS ON THE NOTE, AND SUCH HOLDER WILL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THE NOTE EXCEPT AS OTHERWISE REQUIRED TO SELL ITS INTEREST THEREIN AS DESCRIBED HEREIN.
THE NOTES EVIDENCED BY THIS GLOBAL NOTE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE ISSUER OF THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED AS AN INVESTMENT COMPANY UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “INVESTMENT COMPANY ACT”). THE NOTES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO THE TRUST OR THE BORROWER OR (A)(1) TO A PERSON WHO IS BOTH A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) AND A “QUALIFIED PURCHASER” (AS DEFINED IN SECTION 2(A)(51) OF THE INVESTMENT COMPANY ACT AND RELATED RULES), IN EACH CASE PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER WHO IS ALSO A QUALIFIED PURCHASER AS TO WHICH THE PURCHASER EXERCISES SOLE INVESTMENT DISCRETION, IN RELIANCE ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144A, AND PROVIDED THAT EACH SUCH PERSON AND ACCOUNT FOR WHICH SUCH PERSON IS PURCHASING (A) IS NOT A BROKER-DEALER THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN US$25,000,000 IN SECURITIES OF ISSUERS THAT ARE NOT ITS AFFILIATED PERSONS, (B) IS NOT FORMED FOR THE PURPOSE OF INVESTING IN THE TRUST, (C) IT HAS NOT INVESTED MORE THAN 40% OF ITS ASSETS IN THE NOTES (OR BENEFICIAL INTERESTS THEREIN) AND/OR OTHER SECURITIES OF THE ISSUER AFTER GIVING
EFFECT TO THE PURCHASE OF THE NOTES (OR BENEFICIAL INTERESTS THEREIN) (UNLESS ALL OF ITS BENEFICIAL OWNERS ARE QUALIFIED INSTITUTIONAL BUYERS WHO ARE ALSO QUALIFIED PURCHASERS), (D) IT IS NOT A PARTICIPANT-DIRECTED EMPLOYEE PLAN, SUCH AS A 401(K) PLAN, OR A TRUST HOLDING THE ASSET OF SUCH A PLAN, UNLESS THE INVESTMENT DECISIONS WITH RESPECT TO SUCH PLAN ARE MADE SOLELY BY THE FIDUCIARY, TRUSTEE OR SPONSOR OF SUCH PLAN, (E) IT IS NOT A PARTNERSHIP, COMMON TRUST FUND OR CORPORATION, SPECIAL TRUST, PENSION FUND OR RETIREMENT PLAN, OR OTHER ENTITY, IN WHICH THE PARTNERS, BENEFICIARIES, BENEFICIAL OWNERS, PARTICIPANTS, SHAREHOLDERS OR OTHER EQUITY OWNERS, AS THE CASE MAY BE, MAY DESIGNATE THE PARTICULAR INVESTMENT TO BE MADE, OR THE ALLOCATION THEREOF, UNLESS ALL SUCH PARTNERS, BENEFICIARIES, BENEFICIAL OWNERS, PARTICIPANTS, SHAREHOLDERS OR OTHER EQUITY OWNERS ARE QUALIFIED INSTITUTIONAL BUYERS WHO ARE ALSO QUALIFIED PURCHASERS, (F) UNDERSTANDS THAT THE TRUST MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS IN THIS SECURITY FROM ONE OR MORE BOOK-ENTRY DEPOSITARIES, (G) IF IT IS A SECTION 3(C)(1) OR SECTION 3(C)(7) INVESTMENT COMPANY, OR A SECTION 7(D) FOREIGN INVESTMENT COMPANY RELYING ON SECTION 3(C)(1) OR SECTION 3(C)(7) OF THE INVESTMENT COMPANY ACT WITH RESPECT TO ITS U.S. HOLDERS AND WAS FORMED ON OR BEFORE APRIL 30, 1996, IT HAS RECEIVED THE NECESSARY CONSENT FROM ITS BENEFICIAL OWNERS AS REQUIRED BY THE INVESTMENT COMPANY ACT AND (H) MUST BE ABLE TO AND WILL BE DEEMED TO REPRESENT THAT IT AGREES TO COMPLY WITH THE APPLICABLE TRANSFER RESTRICTIONS, AND WILL NOT TRANSFER THIS NOTE OR ANY BENEFICIAL INTERESTS HEREIN EXCEPT TO A PURCHASER WHO CAN MAKE THE SAME REPRESENTATIONS AND AGREEMENTS ON BEHALF OF ITSELF AND EACH ACCOUNT FOR WHICH IT IS PURCHASING OR (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF REGULATION S (“REGULATION S”) UNDER THE SECURITIES ACT, AND (B) IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES, PROVIDED THAT, AS A CONDITION TO THE REGISTRATION OF THE TRANSFER THEREOF, THE TRUST OR THE INDENTURE TRUSTEE MAY REQUIRE THE DELIVERY OF ANY DOCUMENTS, INCLUDING AN OPINION OF COUNSEL, THAT THE TRUST, IN ITS SOLE DISCRETION, MAY DEEM NECESSARY OR APPROPRIATE TO EVIDENCE COMPLIANCE WITH SUCH EXEMPTION. THE HOLDER HEREOF, BY PURCHASING OR ACCEPTING THIS NOTE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE TRUST THAT IT WILL NOTIFY ANY PURCHASER OF THIS NOTE FROM THE HOLDER OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
THE FOREGOING LEGENDS MAY BE REMOVED FROM THIS NOTE ONLY ON THE CONDITIONS SPECIFIED IN THE INDENTURE REFERRED TO HEREIN.
FACE OF NOTE
WALKERS FIDUCIARY LIMITED
AS TRUSTEE OF THE CT TRUST
5.125% SENIOR NOTES DUE 2032
RULE 144A RESTRICTED GLOBAL NOTE
No.R-[ ]
CUSIP No.: 12659B AA2
ISIN No.: US12659BAA26
Common Code: 241147797
Principal Amount: U.S.$[ ],
as revised by the Schedule of Increases and
Decreases in Global Note attached hereto
Initial Issuance Date: February 3, 2022
This Note is one of a duly authorized issue of Notes of Walkers Fiduciary Limited, as trustee (the “Cayman Trustee”) of the CT Trust (the “Issuer”), designated as its 5.125% Senior Notes due 2032 (the “Notes”), issued in an initial aggregate principal amount of U.S.$900,000,000 under an indenture (the “Indenture”) dated as of February 3, 2022, among the Issuer, Comunicaciones Celulares, S.A., Cloud2Nube, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A. and Servicios Innovadores de Comunicación y Entretenimiento, S.A. (the “Guarantors”) and The Bank of New York Mellon, as indenture trustee (the “Indenture Trustee”, which term includes any successor Indenture Trustee under the Indenture), Note Registrar, Paying Agent and Transfer Agent, to which Indenture reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Issuer, the Guarantors, the Indenture Trustee and the Noteholders, and of the terms upon which the Notes are, and are to be, authenticated and delivered. All terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture.
The Issuer, for value received, hereby promises to pay to Cede & Co. or its registered assigns, as nominee of The Depository Trust Company (“DTC”) and the holder of record of this Note (the “Noteholder”), the principal amount specified above in U.S. dollars on February 3, 2032 (the “Stated Maturity”) (or earlier or later as provided in the Indenture as hereinafter described) upon presentation and surrender hereof, at the office or agency of the Indenture Trustee referred to below.
Interest Rate: 5.125%
Interest Payment Dates: February 3 and August 3 of each year, commencing on August 3, 2022
Record Dates: With respect to any payment to be made on an Interest Payment Date, the January 18 or July 18 preceding such Interest Payment Date; other than the Interest Payment Date which is the same as the Maturity Date, in which case it will be the Maturity Date
Maturity Date February 3, 2032
Additional provisions of this Note are set forth on the other side of this Note.
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed.
WALKERS FIDUCIARY LIMITED,
AS TRUSTEE OF THE CT TRUST
By: ____________________________________
Name:
Title:
Date:
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK MELLON,
as Indenture Trustee
By: ____________________________________
Authorized Signatory
Date:
REVERSE SIDE OF NOTE
5.125% SENIOR NOTES DUE 2032
The Issuer has issued the Notes under an Indenture, dated as of February 3, 2022 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the “Indenture”), among the Issuer, the Guarantors and the Indenture Trustee. The terms of the Notes include those stated in the Indenture and capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Noteholders are referred to the Indenture for a statement of those terms. Each Noteholder by accepting a Note agrees to be bound by all of the terms and provisions of the Indenture. With the proceeds from the Notes, the Issuer will acquire, pursuant to a participation agreement to be dated as of February 3, 2022 (the “Participation Agreement”) by and among the Issuer, JPMorgan Chase Bank, N.A. (the “Lender”), and The Bank of New York Mellon, as administrative agent (the “Administrative Agent”), a 100% participation interest in a US$900,000,000 loan (the “Loan”) made by the Lender to Comunicaciones Celulares, S.A. (in such capacity, the “Borrower”), pursuant to a credit agreement dated as of February 3, 2022 (the “Credit and Guaranty Agreement”) among the Lender, the Borrower and Cloud2Nube, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A. and Servicios Innovadores de Comunicación y Entretenimiento, S.A., as guarantors (in such capacity, the “Loan Guarantors”), and the Administrative Agent.
This Note does not purport to summarize the Indenture and reference is made to the Indenture for information with respect to interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. The terms of this Note are made expressly subject to the terms of the Indenture and should any ambiguity arise in relation to the terms of the Note and the provisions of the Indenture, the provisions of the Indenture shall prevail.
Unless the certificate of authentication hereon has been duly executed by or on behalf of the Indenture Trustee or any Authenticating Agent by manual or electronic signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.
1. Maturity.
The Issuer shall pay the principal amount of the Notes in full in a single payment on February 3, 2032 (the “Maturity Date”) to the extent the Notes have not been redeemed or repurchased prior thereto as provided under Article IV of the Indenture. No payments in respect of the principal of the Notes shall be paid prior to the Maturity Date except upon redemption prior to the Maturity Date pursuant to Article IV of the Indenture.
2. Interest.
(a) The Notes will accrue interest from and including the most recent date to which interest has been paid on the Notes or, if no interest has been paid, from and including February 3, 2022 (the “Issue Date”) to but excluding the Maturity Date (to the extent the Notes have not been redeemed or repurchased prior thereto as provided under Article IV of the Indenture ) at a rate per annum equal to 5.125% (the “Interest Rate”), payable semi-annually in arrears on February 3 and August 3 of each year, commencing on August 3, 2022 (each an “Interest Payment Date”). The Interest Rate will be computed on the basis of a 360-day year of twelve 30-day months.
3. Method of Payment.
(a) Subject to the limited recourse provisions described in Section 16 herein and Section 2.6 of the Indenture, the Issuer shall pay all amounts due and owing by the Issuer under the Indenture, as the same shall become due and owing. All payments of principal, interest and other amounts required to be made by the Issuer shall be made, pursuant to the terms of the Indenture, by the Issuer to the Indenture Trustee promptly upon receipt by the Issuer of any cash proceeds with respect to (i) the Participation, unless any such payment amounts are paid directly to the Indenture Trustee at the direction of the Lender pursuant to the Participation Agreement, and (ii) any Tax Reimbursement Payments pursuant to Section 2 of the Expense Reimbursement and Indemnity Agreement. All such payments to the Indenture Trustee shall be made by the Issuer or on behalf of the Issuer by the Lender or the Administrative Agent by depositing immediately available funds in U.S. dollars to the Loan Collection Account provided for in the Indenture.
(b) Interest on any Note that is payable, and punctually paid or duly provided for, on any Interest Payment Date or any other Payment Date (other than the Maturity Date) shall be paid to the Person in whose name that Note (or one or more Predecessor Notes) is registered at the close of business on the Record Date for such payment. Payment of interest on the Notes shall be made at the Place of Payment (or, if such office is not in the City of New York, at either such office or an office to be maintained in such city). The principal amount of any Note, whether due on the Maturity Date, a redemption date or on any other Payment Date, will be payable only upon surrender of such Note at the Corporate Trust Office of the Indenture Trustee or at the specified offices of any Paying Agent appointed by the Indenture Trustee; provided, however, that so long as the Notes are held in the name of a nominee of DTC, the Indenture Trustee, or such Paying Agent, will make such payments to DTC or its nominee, as the case may be, in accordance with DTC’s applicable procedure. If the due date for payment of the principal amount of the Notes in respect of any Note is not a Business Day, the Noteholder thereof will not be entitled to payment of the amount due until the next succeeding Business Day and will not be entitled to any further interest or other payment in respect of any such delay.
(c) Payments with respect to any Note will be made (a) in the case of Global Notes, in U.S. dollars by wire transfer in accordance with DTC’s applicable policies and procedures; and (b) in the case of certificated notes, in U.S. dollars by wire transfer in immediately available funds to the account of such Noteholder at a bank or other entity having appropriate facilities therefor in the United States if such Noteholder has notified the Indenture Trustee or the Paying Agent, as applicable, in writing of wire instructions by the Record Date immediately prior to the applicable Note Payment Date. If a Noteholder does not provide the
Indenture Trustee or the Paying Agent, as applicable, with such wire transfer instructions, the Indenture Trustee or the Paying Agent, as applicable, will make payments by U.S. dollar check to the mailing address of such Noteholder appearing in the Note Register maintained by the Indenture Trustee. Until revoked, such instruction will remain in effect with respect to any future payments payable to such Noteholder with respect to such Notes.
4. Authorized Agents.
The Bank of New York Mellon (the “Indenture Trustee”) will act as Indenture Trustee, Paying Agent, Transfer Agent and Note Registrar. The Issuer may appoint and change any Authorized Agent without notice to any Noteholder.
5. Redemption Events Offers to Purchase.
(a) The Issuer shall redeem the Notes, in whole or in part, as applicable, upon the deposit by the Lender, or otherwise as provided in the Credit and Guaranty Agreement or Participation Agreement, in the Loan Collection Account of any Prepayment Amount upon the occurrence of any optional or mandatory prepayment by the Borrower of the amounts outstanding from time to time under the Credit and Guaranty Agreement and the Loan due to the occurrence of any of the following: (i) any optional prepayment of the Loan, in whole or in part, with a make-whole premium in accordance with Section 3.03(b) of the Credit and Guaranty Agreement, (ii) any optional prepayment of the Loan, in whole or in part, without a make-whole premium in accordance with Section 3.03(c) of the Credit and Guaranty Agreement, (iii) an optional redemption upon certain tender offers, in whole or in part, in accordance with Section 3.03(d) of the Credit and Guaranty Agreement, (iv) any optional prepayment of the Loan, in whole but not in part, upon a Withholding Tax Event in accordance with Section 3.03(e) of the Credit and Guaranty Agreement, (v) any optional prepayment of the Loan, in whole but not in part, upon occurrence of a Change of Control Remainder Event in accordance with Section 3.03(f) of the Credit and Guaranty Agreement, (vi) a Change of Control Prepayment Event in accordance with Section 3.04(a) of the Credit and Guaranty Agreement, (vii) an Asset Sale Prepayment Event in accordance with Section 3.04(b) of the Credit and Guaranty Agreement, and (viii) upon the acceleration of the Loan as a result of the occurrence of a Loan Event of Default, (each of clauses (i) through (v), an “Optional Redemption Event” and, together with the redemption events described in clauses (vi), (vii) and (viii), the “Note Redemption Events”).
(b) Upon (i) the occurrence of a Note Redemption Event and payment by the Borrower to the Lender or the Administrative Agent on behalf of the Lender of the applicable Prepayment Amount with respect to a Note Redemption Event, as provided for in the Credit and Guaranty Agreement and (ii) payment by the Lender or the Administrative Agent on behalf of the Lender of the Prepayment Amount so received from the Borrower for deposit to the Loan Collection Account for the benefit of the Issuer and the Indenture Trustee on behalf of the Noteholders, the Issuer shall pay on the applicable redemption date the redemption price for the Notes together with accrued and unpaid interest thereon to but not including the date of redemption solely out of the Prepayment Amount received from the Borrower with respect to such redemption.
(c) If fewer than all of the Notes are being redeemed, the Notes to be redeemed shall be selected, in the case of certified Notes, by lot or by such other method as the Indenture Trustee will deem to be fair and appropriate, and in the case of Global Notes, in accordance with DTC’s applicable policies and procedures (in integral multiples of US$1,000; provided that the remaining principal amount of such Noteholder’s Note will not be less than US$200,000). Upon surrender of any Note redeemed in part, the Noteholder will receive a new Note equal in principal amount to the unredeemed portion of the surrendered Note (or appropriate adjustments will be made to the amount of such Global Note in accordance with the Registered Depository’s policies and procedures).
(d) Notes called for redemption become due and payable at the redemption price on the redemption date. On and after the applicable redemption date, interest will cease to accrue on the Notes as long as the Issuer has deposited with the Paying Agent funds in satisfaction of the applicable redemption price together with accrued and unpaid interest thereon pursuant to the Indenture. Upon redemption of the Notes by the Issuer, the redeemed Notes will be cancelled and cannot be reissued.
(e) Notwithstanding anything herein to the contrary, the funds available to so redeem the Notes shall be limited to funds in respect of the Prepayment Amount actually received in the Loan Collection Account by the Issuer from the Lender under the Participation Agreement following receipt of the same from the Borrower or any Note Guarantor. Following any Note Redemption Event pursuant to this Section 5, the aggregate principal amount of the Notes Outstanding shall be reduced for all Noteholders in an amount equal to the aggregate principal amount of the Notes redeemed, and all amounts thereafter due and payable in respect of the Notes shall be payable based on the then Outstanding amount of the Notes after giving effect to any such Note Redemption Event.
6. Repurchase of Notes Tendered upon a Change of Control.
(a) Upon the Issuer’s receipt from the Lender or the Borrower of a Change of Control Notice in accordance with the Credit and Guaranty Agreement, the Issuer will deliver a copy of the notice to the Indenture Trustee and promptly (and in no event later than 30 days prior to the Change of Control Payment Date) give (or the Indenture Trustee, in the name of and at the expense of the Issuer, upon the Issuer providing written instruction to the Indenture Trustee containing all of the relevant information to be included in the notice at least 3 Business Days before the notice is to be given to Noteholders (or such shorter time as is acceptable to the Indenture Trustee) shall give) notice as described in Section 15.4 of the Indenture to each Noteholder (with a copy to the Indenture Trustee unless the Indenture Trustee sends the notice) offering to purchase (subject to the receipt by the Issuer from the Lender of Change of Control Payment) the Notes on the Change of Control Payment Date at a price equal to the Change of Control Payment upon substantially identical terms as and pursuant to the Borrower’s Change of Control Offer (the “Notes Change of Control Offer”). In addition to the information contained in the Borrower’s Change of Control Notice, the notice of the Notes Change of Control Offer will include instructions and materials necessary to enable Noteholders to tender Notes pursuant to the offer. The Change of Control Payment Date shall be no earlier than 30 days nor later than 60 days subsequent to the date on which the notice of the Notes Change of Control Offer is
delivered to Noteholders (other than as may be required by applicable Law) and will be the same herein and under the Credit and Guaranty Agreement.
(b) Upon a Notes Change of Control Offer, each Noteholder will have the right to require that the Issuer purchase (subject to the receipt by the Issuer from the Lender of the Change of Control Payment) all or a portion of such Noteholder’s Notes in integral multiples of US$1,000; provided that the remaining principal amount of such Noteholder’s Notes will not be less than US$200,000. Tender of any Notes to be purchased in connection with the Notes Change of Control Offer must be received by the Issuer no later than five Business Days preceding the Change of Control Payment Date and may also be withdrawn until the same.
(c) Upon payment by the Lender of the amounts so received from the Borrower for deposit to the Loan Collection Account for the benefit of the Issuer and the Indenture Trustee on behalf of the Noteholders, and on the Change of Control Payment Date, the Issuer shall, to the extent lawful, accept for payment all Notes or portions thereof validly tendered and not validly withdrawn, make payment or cause payment to be made for such Notes or portions thereof accepted for payment and deliver or cause to be delivered to the Indenture Trustee the Notes so accepted, and the Issuer shall instruct the Indenture Trustee to cancel such Notes in accordance with its applicable procedures. Notwithstanding anything herein to the contrary, the obligation of the Issuer to so repurchase the Notes shall be limited in extent to funds in respect of the amount actually received by the Issuer. Following any Change of Control Payment pursuant to this Section 6, the aggregate principal amount of the Notes Outstanding shall be reduced for all Noteholders in an amount equal to the aggregate principal amount of the Notes repurchased, and all amounts thereafter due and payable in respect of the Notes shall be payable based on the then Outstanding amount of the Notes after giving effect to such repurchase.
7. Repurchase of Notes Tendered upon an Asset Sale Offer
The Notes shall be subject to redemption upon the occurrence of any prepayment by the Borrower of amounts outstanding from time to time under the Credit and Guaranty Agreement and the Loan due to the occurrence of an Asset Sale Prepayment Event as further described under Section 7.7 of the Indenture.
8. Ranking.
The Notes shall be direct, senior, secured, limited recourse and unsubordinated Indebtedness of the Issuer and shall at all times rank pari passu without any preferences among themselves, with all other present and future obligations of the Issuer (other than obligations preferred by statute or by operation of Law).
9. Taxation.
(a) Except as compelled by law, the Issuer will make any and all payments of principal, premium, interest or any other amounts under the Indenture or in respect of the Notes free and clear of, and without withholding or deduction for or on account of, any Taxes imposed or levied by or on behalf of a Relevant Taxing Jurisdiction. If any such Taxes are required to be deducted or withheld:
(i) the Issuer shall notify the Lender and the Indenture Trustee that it is required by law to withhold or deduct such Taxes;
(ii) the Issuer shall make all such withholdings and deductions; and
(iii) the Issuer shall pay the full amount withheld or deducted to the relevant taxation authority in accordance with applicable law.
(b) The sum payable by the Issuer under the Indenture shall be increased by the sum of (x) the Additional Amounts payable to the Issuer pursuant to the Participation Agreement and the Credit and Guaranty Agreement or the Loan Guarantees, respectively, and (y) the Tax Reimbursement Payments payable to the Issuer by the Borrower or the Guarantors pursuant to the Expense Reimbursement and Indemnity Agreement or the Loan Guarantees, respectively, after accounting for any Taxes withheld from such payments to the Issuer or otherwise payable by the Issuer in respect of such payments (“Note Additional Amounts”).
(c) All references to principal, interest or other amounts payable under the Indenture shall be deemed to include any Note Additional Amounts payable by the Issuer under this Section 9 or otherwise with respect to the Indenture. The foregoing obligations in this Section 9 shall survive any termination, defeasance or discharge of the Indenture.
(d) At least 10 Business Days prior to the first Interest Payment Date for the Notes, and, if there has been any change with respect to the matters set forth in the below mentioned certificate at least 10 Business Days prior to each Interest Payment Date for the Notes, the Issuer shall furnish to the Indenture Trustee an Officer’s Certificate instructing the Indenture Trustee as to any circumstances in which payments of principal of, premium (if any) or interest on the Notes due on such date shall be subject to deduction or withholding for or on account of any Taxes and the rate of any such deduction or withholding. The Issuer covenants to indemnify the Indenture Trustee and any other Paying Agents for, and to hold each harmless against, any loss, liability or expense reasonably incurred without gross negligence, bad faith or willful misconduct on their part, arising out of or in connection with actions taken or not taken by any of them in reliance on any certificate furnished to them pursuant to this paragraph or the failure to furnish any such certificate. The obligations of the Issuer under the preceding sentence shall survive the resignation or removal of the Indenture Trustee, the Registrar or any Paying Agent.
(e) The Issuer shall provide the Indenture Trustee with documentation reasonably satisfactory to the Indenture Trustee evidencing the payment of Taxes in respect of which the Issuer, the Borrower or any Note Guarantor has paid any Note Additional Amounts. Copies of such documentation shall be made available by the Indenture Trustee to the Noteholders or the other Paying Agents, as applicable, upon written request therefor.
10. Denominations; Transfer; Exchange.
The Notes are in fully registered form, without coupons and in minimum denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. A Noteholder may transfer or exchange Notes in accordance with the Indenture.
11. Persons deemed owners.
The registered Noteholder of this Note may be treated as the owner of it for all purposes.
12. Unclaimed money.
The Indenture Trustee will pay to the Issuer upon request any money held for payment with respect to the Notes that remains unclaimed for two years, provided that before making such payment the Indenture Trustee may at the expense of the Issuer publish once in a newspaper of general circulation in New York City, or send to each Noteholder entitled to such money, notice that the money remains unclaimed and that after a date specified in the notice (at least 30 days after the date of the publication or notice) any remaining unclaimed balance of money will be repaid to the Issuer. After payment to the Issuer, Noteholders entitled to such money must look solely to the Issuer for payment, unless applicable law designates another Person, and all liability of the Indenture Trustee with respect to such money will cease.
13. Amendment, Waiver.
(a) Notwithstanding anything to the contrary in any Transaction Document, as a result of the pledge described in Article V of the Indenture, the Issuer shall not agree to any modification of the terms of any Transaction Document to which it is a party without having first received directions from the Indenture Trustee, acting upon the written instructions of the Required Holders, except as set forth under Section 12.1(c) and 12.2 of the Indenture.
(b) At the written direction or consent of the Required Holders, each of the Issuer and the Indenture Trustee shall, subject to Sections 12.3 and 12.4 of the Indenture, enter into an indenture or indentures supplemental hereto for the purpose of amending the provisions of the Indenture and the Issuer shall otherwise amend, modify or supplement any other Transaction Document to which it is a party; provided, however, that without the consent or direction of 90% of the aggregate principal amount of the then Outstanding Notes directly affected thereby, no such supplemental indenture or modification or amendment shall cause, with respect to the Indenture or any other Transaction Document, any of the following:
(i) change the maturity of any payment of principal of or any installment of interest on any Note;
(ii) reduce the principal amount or the rate of interest, or change the method of computing the amount of principal, interest or Note Additional Amounts, payable under any Transaction Document on any date;
(iii) change any Place of Payment where the principal of or interest under any Transaction Document is payable;
(iv) change the coin or currency in which the principal of or interest on any Transaction Document is payable;
(v) impair the right of the Noteholders to institute suit for the enforcement of any payment on or after the date due;
(vi) release the security interest in the Trust Assets created under the Indenture or waive any of the payment obligations of the Issuer that would otherwise be payable to the Noteholders;
(vii) following the delivery of notice to the holders of the Notes by the Issuer (or the Indenture Trustee on behalf of the Issuer) of any Notes Change of Control Offer or Notes Asset Sale Offer, modify any such offer in a manner adverse to the Noteholders;
(viii) reduce the percentage in principal amount of the Outstanding Notes, the consent of whose Noteholders is required for any modification or the consent of whose Noteholders is required for any waiver of compliance with the Indenture; or
(ix) modify or change any of the provisions of the Indenture requiring consent or direction of Noteholders to amend, modify or waive any other provisions or terms except to increase any required percentage of consenting Noteholders or to provide that one or more provisions of the Indenture cannot be modified or waived without the consent of each Noteholder.
14. Defaults and Remedies.
If an Event of Default (other than an Event of Default specified in Section 10(g) or Section 10(h) of the Credit and Guaranty Agreement) has occurred and is continuing, the Indenture Trustee or the Noteholders of at least 25% in principal amount of Outstanding Notes may declare the unpaid principal of and premium, if any, and accrued and unpaid interest on all the Notes to be immediately due and payable by notice in writing to the Issuer (and the Indenture Trustee if given by the Noteholders) specifying the Event of Default and that it is a “notice of acceleration.” Upon such declaration the principal and interest shall be due and payable immediately.
Noteholders may not enforce the Indenture or the Notes except as provided in the Indenture. The Required Holders (or such other percentage of Noteholders of Outstanding Notes as may be permitted or required pursuant to the terms of the Indenture) may direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee or exercising any trust or power conferred on the Indenture Trustee. However, the Indenture Trustee may refuse to follow any direction that conflicts with law or the Indenture, is unduly prejudicial to the rights of other Noteholders, or would involve the Indenture Trustee in personal or financial liability or expense for which the Indenture Trustee has not received an indemnity or security satisfactory to it.
15. Indenture Trustee Dealings with the Issuer.
Subject to certain limitations set forth in the Indenture, the Indenture Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Issuer or its
Affiliates and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee.
16. Limited Recourse.
(a) Notwithstanding any other provision of the Indenture, all payments to be made by, and all liabilities of, the Cayman Trustee under the Indenture, this Note and any other Transaction Document to which the Cayman Trustee is a party shall be made only from, and limited to, the income and proceeds of the Trust Assets and only to the extent that the Cayman Trustee shall have received income or proceeds from the Trust Assets sufficient to make such payments or satisfy such liabilities in accordance with the terms hereto. No recourse shall be had to the assets of the Cayman Trustee which are owned by it beneficially or held by it as trustee for any other trust. The Cayman Trustee shall not sell or otherwise dispose of any of the Trust Assets unless otherwise specifically permitted under the Indenture and the Cayman Trustee shall not take any actions under the Participation Agreement except as authorized by the Noteholders in accordance with Section 10.6 of the Indenture. The Cayman Trustee shall not sell or otherwise dispose of the Participation without the consent of all of the Noteholders and payment of all amounts to the Indenture Trustee and agents appointed pursuant to the Indenture.
(b) Following the application of the income and proceeds of the Trust Assets in accordance with the Indenture, none of the Noteholders will be entitled to take any further action to recover any sums due but remaining unpaid under the Indenture or the Notes and all remaining claims in respect of the Indenture and the Notes will thereupon be extinguished and shall not thereafter revive.
(c) No incorporator, director, officer, employee, stockholder or controlling Person of the Cayman Trustee shall have any liability for any obligations of the Cayman Trustee under the Notes or the Indenture or the other Transaction Documents or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Noteholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes.
17. Authentication.
This Note shall not be valid until an authorized signatory of the Indenture Trustee (or an Authenticating Agent acting on its behalf) signs the certificate of authentication on the other side of this Note.
18. CUSIP or ISIN Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Issuer has caused CUSIP or ISIN numbers to be printed on the Notes and has directed the Indenture Trustee to use CUSIP or ISIN numbers in notices of redemption as a convenience to Noteholders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
19. Governing Law.
This Note shall be governed by, and construed in accordance with, the law of the State of New York.
20. Currency Rate Indemnity.
The Issuer will indemnify each of the Indenture Trustee and the Noteholders as provided in the Indenture in respect of the conversion of currency relating to the Notes and the Indenture.
21. Agent for Service; Submission to Jurisdiction; Waiver of Immunities.
The Issuer and the Note Guarantors have consented to the exclusive jurisdiction of the U.S. federal and New York state courts in the Borough of Manhattan, The City of New York, and agreed that all disputes under the Indenture, the Notes, the Note Guarantees and the other Transaction Documents may be submitted to the jurisdiction of such courts. The Issuer and the Guarantors have irrevocably consented to and waived to the fullest extent permitted by law any objection that the Issuer or the Note Guarantors may have to the laying of venue of any suit, forum, action or proceeding against the Issuer or the Note Guarantors or any of their respective properties, assets and revenues with respect to the Indenture, the Note Guarantees and the other Transaction Documents or any such suit, action or proceeding in any such court and any right to which the Issuer or the Note Guarantors may be entitled on account of place of residence or domicile.
To the extent that the Issuer or any Note Guarantor or any of their respective revenues, assets or properties shall be entitled to any immunity from suit, from the jurisdiction of any such court, from attachment prior to judgment, from attachment in aid of execution of judgment, from execution of a judgment or from any other legal or judicial process remedy, the Issuer and the Note Guarantors have irrevocably agreed not to claim and will irrevocably waive such immunity to the fullest extent permitted by the laws of such jurisdiction.
The Issuer and the Note Guarantors have agreed that service of all writs, claims, process and summons in any suit, action or proceeding against the Issuer or the Guarantors or their respective properties, assets or revenues with respect to the Indenture, the Notes, the Note Guarantees and the other Transaction Documents or any suit, action or proceeding to enforce or execute any judgment brought against them in the State of New York may be made upon C T Corporation Systems, located at 28 Liberty Street, New York, New York 10005, and the Issuer and the Guarantors have irrevocably appointed C T Corporation Systems as their agent to accept such service of any and all such writs, claims, process and summonses.
ASSIGNMENT FORM
For value received
hereby sells, assigns and transfers unto
(Please insert social security or
other identifying number of assignee)
(Please print or type name and address,
including zip code, of assignee)
the within Note and does hereby irrevocably constitute and appoint _________ attorney to transfer the Note on the books of the Note Registrar with full power of substitution in the premises.
Date: Your signature: (Sign exactly as your name appears on the face of this Note)
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been made:
| | | | | | | | | | | | | | |
Date of Increase or Decrease | Amount of decrease in Principal Amount of this Global Note | Amount of increase in Principal Amount of this Global Note | Principal Amount of this Global Note following such decrease or increase | Signature of authorized signatory of Trustee or Note Custodian |
| | | | |
EXHIBIT A-2
FORM OF REGULATION S UNRESTRICTED GLOBAL NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO WALKERS FIDUCIARY LIMITED, AS TRUSTEE OF THE CT TRUST, AS ISSUER (THE “ISSUER”), OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTES MAY BE PURCHASED AND TRANSFERRED ONLY IN MINIMUM PRINCIPAL AMOUNTS OF $200,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF.
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY JURISDICTION AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.
FACE OF NOTE
WALKERS FIDUCIARY LIMITED
AS TRUSTEE OF THE CT TRUST
5.125% SENIOR NOTES DUE 2032
REGULATION S UNRESTRICTED GLOBAL NOTE
No. S-[ ]
CUSIP No.: G2588B AA2
ISIN No.: USG2588BAA29
Common Code: 241148769
Principal Amount: U.S.$[ ],
as revised by the Schedule of Increases and
Decreases in Global Note attached hereto
Initial Issuance Date: February 3, 2022
This Note is one of a duly authorized issue of Notes of Walkers Fiduciary Limited, as trustee (the “Cayman Trustee”) of the CT Trust (the “Issuer”), designated as its 5.125% Senior Notes due 2032 (the “Notes”), issued in an initial aggregate principal amount of U.S.$900,000,000 under an indenture (the “Indenture”) dated as of February 3, 2022, among the Issuer, Comunicaciones Celulares, S.A., Cloud2Nube, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A. and Servicios Innovadores de Comunicación y Entretenimiento, S.A. (the “Guarantors”) and The Bank of New York Mellon, as indenture trustee (the “Indenture Trustee”, which term includes any successor Indenture Trustee under the Indenture), Note Registrar, Paying Agent and Transfer Agent, to which Indenture reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Issuer, the Guarantors, the Indenture Trustee and the Noteholders, and of the terms upon which the Notes are, and are to be, authenticated and delivered. All terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture.
The Issuer, for value received, hereby promises to pay to Cede & Co. or its registered assigns, as nominee of The Depository Trust Company (“DTC”) and the holder of record of this Note (the “Noteholder”), the principal amount specified above in U.S. dollars on February 3, 2032 (the “Stated Maturity”) (or earlier or later as provided in the Indenture as hereinafter described) upon presentation and surrender hereof, at the office or agency of the Indenture Trustee referred to below.
Interest Rate: 5.125%
Interest Payment Dates: February 3 and August 3 of each year, commencing on August 3, 2022
Record Dates: With respect to any payment to be made on an Interest Payment Date, the January 18 or July 18 preceding such Interest Payment Date; other than the Interest Payment Date which is the same as the Maturity Date, in which case it will be the Maturity Date
Maturity Date February 3, 2032
Additional provisions of this Note are set forth on the other side of this Note.
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed.
WALKERS FIDUCIARY LIMITED, AS TRUSTEE OF THE CT TRUST
By: ___________________________________
Name:
Title:
Date:
CERTIFICATE OF AUTHENTICATION
This Note is one of the Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK MELLON,
as Indenture Trustee
By: __________________________________
Authorized Signatory
Date:
REVERSE SIDE OF NOTE
5.125% SENIOR NOTES DUE 2032
The Issuer has issued the Notes under an Indenture, dated as of February 3, 2022 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the “Indenture”), among the Issuer, the Guarantors and the Indenture Trustee. The terms of the Notes include those stated in the Indenture and capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Noteholders are referred to the Indenture for a statement of those terms. Each Noteholder by accepting a Note agrees to be bound by all of the terms and provisions of the Indenture. With the proceeds from the Notes, the Issuer will acquire, pursuant to a participation agreement to be dated as of February 3, 2022 (the “Participation Agreement”) by and among the Issuer, JPMorgan Chase Bank, N.A. (the “Lender”), and The Bank of New York Mellon, as administrative agent (the “Administrative Agent”), a 100% participation interest in a US$900,000,000 loan (the “Loan”) made by the Lender to Comunicaciones Celulares, S.A. (in such capacity, the “Borrower”), pursuant to a credit agreement dated as of February 3, 2022 (the “Credit and Guaranty Agreement”) among the Lender, the Borrower and Cloud2Nube, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A. and Servicios Innovadores de Comunicación y Entretenimiento, S.A., as guarantors (in such capacity, the “Loan Guarantors”), and the Administrative Agent.
This Note does not purport to summarize the Indenture and reference is made to the Indenture for information with respect to interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. The terms of this Note are made expressly subject to the terms of the Indenture and should any ambiguity arise in relation to the terms of the Note and the provisions of the Indenture, the provisions of the Indenture shall prevail.
Unless the certificate of authentication hereon has been duly executed by or on behalf of the Indenture Trustee or any Authenticating Agent by manual or electronic signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.
1. Maturity.
The Issuer shall pay the principal amount of the Notes in full in a single payment on February 3, 2032 (the “Maturity Date”) to the extent the Notes have not been redeemed or repurchased prior thereto as provided under Article IV of the Indenture. No payments in respect of the principal of the Notes shall be paid prior to the Maturity Date except upon redemption prior to the Maturity Date pursuant to Article IV of the Indenture.
2. Interest.
(a) The Notes will accrue interest from and including the most recent date to which interest has been paid on the Notes or, if no interest has been paid, from and including February 3, 2022 (the “Issue Date”) to but excluding the Maturity Date (to the extent the Notes have not been redeemed or repurchased prior thereto as provided under Article IV of the Indenture ) at a rate per annum equal to 5.125% (the “Interest Rate”), payable semi-annually in arrears on February 3 and August 3 of each year, commencing on August 3, 2022 (each an “Interest Payment Date”). The Interest Rate will be computed on the basis of a 360-day year of twelve 30-day months.
3. Method of Payment.
(a) Subject to the limited recourse provisions described in Section 16 herein and Section 2.6 of the Indenture, the Issuer shall pay all amounts due and owing by the Issuer under the Indenture, as the same shall become due and owing. All payments of principal, interest and other amounts required to be made by the Issuer shall be made, pursuant to the terms of the Indenture, by the Issuer to the Indenture Trustee promptly upon receipt by the Issuer of any cash proceeds with respect to (i) the Participation, unless any such payment amounts are paid directly to the Indenture Trustee at the direction of the Lender pursuant to the Participation Agreement, and (ii) any Tax Reimbursement Payments pursuant to Section 2 of the Expense Reimbursement and Indemnity Agreement. All such payments to the Indenture Trustee shall be made by the Issuer or on behalf of the Issuer by the Lender or the Administrative Agent by depositing immediately available funds in U.S. dollars to the Loan Collection Account provided for in the Indenture.
(b) Interest on any Note that is payable, and punctually paid or duly provided for, on any Interest Payment Date or any other Payment Date (other than the Maturity Date) shall be paid to the Person in whose name that Note (or one or more Predecessor Notes) is registered at the close of business on the Record Date for such payment. Payment of interest on the Notes shall be made at the Place of Payment (or, if such office is not in the City of New York, at either such office or an office to be maintained in such city). The principal amount of any Note, whether due on the Maturity Date, a redemption date or on any other Payment Date, will be payable only upon surrender of such Note at the Corporate Trust Office of the Indenture Trustee or at the specified offices of any Paying Agent appointed by the Indenture Trustee; provided, however, that so long as the Notes are held in the name of a nominee of DTC, the Indenture Trustee, or such Paying Agent, will make such payments to DTC or its nominee, as the case may be, in accordance with DTC’s applicable procedure. If the due date for payment of the principal amount of the Notes in respect of any Note is not a Business Day, the Noteholder thereof will not be entitled to payment of the amount due until the next succeeding Business Day and will not be entitled to any further interest or other payment in respect of any such delay.
(c) Payments with respect to any Note will be made (a) in the case of Global Notes, in U.S. dollars by wire transfer in accordance with DTC’s applicable policies and procedures; and (b) in the case of certificated notes, in U.S. dollars by wire transfer in immediately available funds to the account of such Noteholder at a bank or other entity having appropriate facilities therefor in the United States if such Noteholder has notified the Indenture Trustee or the Paying Agent, as applicable, in writing of wire instructions by the Record Date immediately prior to the applicable Note Payment Date. If a Noteholder does not provide the Indenture Trustee or the Paying Agent, as applicable, with such wire transfer instructions, the
Indenture Trustee or the Paying Agent, as applicable, will make payments by U.S. dollar check to the mailing address of such Noteholder appearing in the Note Register maintained by the Indenture Trustee. Until revoked, such instruction will remain in effect with respect to any future payments payable to such Noteholder with respect to such Notes.
4. Authorized Agents.
The Bank of New York Mellon (the “Indenture Trustee”), will act as Indenture Trustee, Paying Agent, Transfer Agent and Note Registrar. The Issuer may appoint and change any Authorized Agent without notice to any Noteholder.
5. Redemption Events Offers to Purchase.
(a) The Issuer shall redeem the Notes, in whole or in part, as applicable, upon the deposit by the Lender, or otherwise as provided in the Credit and Guaranty Agreement or Participation Agreement, in the Loan Collection Account of any Prepayment Amount upon the occurrence of any optional or mandatory prepayment by the Borrower of the amounts outstanding from time to time under the Credit and Guaranty Agreement and the Loan due to the occurrence of any of the following: (i) any optional prepayment of the Loan, in whole or in part, with a make-whole premium in accordance with Section 3.03(b) of the Credit and Guaranty Agreement, (ii) any optional prepayment of the Loan, in whole or in part, without a make-whole premium in accordance with Section 3.03(c) of the Credit and Guaranty Agreement, (iii) an optional redemption upon certain tender offers, in whole or in part, in accordance with Section 3.03(d) of the Credit and Guaranty Agreement, (iv) any optional prepayment of the Loan, in whole but not in part, upon a Withholding Tax Event in accordance with Section 3.03(e) of the Credit and Guaranty Agreement, (v) any optional prepayment of the Loan, in whole but not in part, upon occurrence of a Change of Control Remainder Event in accordance with Section 3.03(f) of the Credit and Guaranty Agreement, (vi) a Change of Control Prepayment Event in accordance with Section 3.04(a) of the Credit and Guaranty Agreement, (vii) an Asset Sale Prepayment Event in accordance with Section 3.04(b) of the Credit and Guaranty Agreement, and (viii) upon the acceleration of the Loan as a result of the occurrence of a Loan Event of Default, (each of clauses (i) through (v), an “Optional Redemption Event” and, together with the redemption events described in clauses (vi), (vii) and (viii), the “Note Redemption Events”).
(b) Upon (i) the occurrence of a Note Redemption Event and payment by the Borrower to the Lender or the Administrative Agent on behalf of the Lender of the applicable Prepayment Amount with respect to a Note Redemption Event, as provided for in the Credit and Guaranty Agreement and (ii) payment by the Lender or the Administrative Agent on behalf of the Lender of the Prepayment Amount so received from the Borrower for deposit to the Loan Collection Account for the benefit of the Issuer and the Indenture Trustee on behalf of the Noteholders, the Issuer shall pay on the applicable redemption date the redemption price for the Notes together with accrued and unpaid interest thereon to but not including the date of redemption solely out of the Prepayment Amount received from the Borrower with respect to such redemption.
(c) If fewer than all of the Notes are being redeemed, the Notes to be redeemed shall be selected, in the case of certificated Notes, by lot or by such other method as the Indenture Trustee will deem to be fair and appropriate, and in the case of Global Notes, in accordance with DTC’s applicable policies and procedures (in integral multiples of US$1,000; provided that the remaining principal amount of such Noteholder’s Note will not be less than US$200,000). Upon surrender of any Note redeemed in part, the Noteholder will receive a new Note equal in principal amount to the unredeemed portion of the surrendered Note (or appropriate adjustments will be made to the amount of such Global Note in accordance with the Registered Depository’s policies and procedures).
(d) Notes called for redemption become due and payable at the redemption price on the redemption date. On and after the applicable redemption date, interest will cease to accrue on the Notes as long as the Issuer has deposited with the Paying Agent funds in satisfaction of the applicable redemption price together with accrued and unpaid interest thereon pursuant to the Indenture. Upon redemption of the Notes by the Issuer, the redeemed Notes will be cancelled and cannot be reissued.
(e) Notwithstanding anything herein to the contrary, the funds available to so redeem the Notes shall be limited to funds in respect of the Prepayment Amount actually received in the Loan Collection Account by the Issuer from the Lender under the Participation Agreement following receipt of the same from the Borrower or any Guarantor. Following any Note Redemption Event pursuant to this Section 5, the aggregate principal amount of the Notes Outstanding shall be reduced for all Noteholders in an amount equal to the aggregate principal amount of the Notes redeemed, and all amounts thereafter due and payable in respect of the Notes shall be payable based on the then Outstanding amount of the Notes after giving effect to any such Note Redemption Event.
6. Repurchase of Notes Tendered upon a Change of Control.
(a) Upon the Issuer’s receipt from the Lender or the Borrower of a Change of Control Notice in accordance with the Credit and Guaranty Agreement, the Issuer will deliver a copy of the notice to the Indenture Trustee and promptly (and in no event later than 30 days prior to the Change of Control Payment Date) give (or the Indenture Trustee, in the name of and at the expense of the Issuer, upon the Issuer providing written instruction to the Indenture Trustee containing all of the relevant information to be included in the notice at least 3 Business Days before the notice is to be given to Noteholders (or such shorter time as is acceptable to the Indenture Trustee) shall give) notice as described in Section 15.4 of the Indenture to each Noteholder (with a copy to the Indenture Trustee unless the Indenture Trustee sends the notice) offering to purchase (subject to the receipt by the Issuer from the Lender of Change of Control Payment) the Notes on the Change of Control Payment Date at a price equal to the Change of Control Payment upon substantially identical terms as and pursuant to the Borrower’s Change of Control Offer (the “Notes Change of Control Offer”). In addition to the information contained in the Borrower’s Change of Control Notice, the notice of the Notes Change of Control Offer will include instructions and materials necessary to enable Noteholders to tender Notes pursuant to the offer. The Change of Control Payment Date shall be no earlier than 30 days nor later than 60 days subsequent to the date on which the notice of the Notes Change of Control Offer is
delivered to Noteholders (other than as may be required by applicable Law) and will be the same herein and under the Credit and Guaranty Agreement.
(b) Upon a Notes Change of Control Offer, each Noteholder will have the right to require that the Issuer purchase (subject to the receipt by the Issuer from the Lender of the Change of Control Payment) all or a portion of such Noteholder’s Notes in integral multiples of US$1,000; provided that the remaining principal amount of such Noteholder’s Notes will not be less than US$200,000. Tender of any Notes to be purchased in connection with the Notes Change of Control Offer must be received by the Issuer no later than five Business Days preceding the Change of Control Payment Date and may also be withdrawn until the same.
(c) Upon payment by the Lender of the amounts so received from the Borrower for deposit to the Loan Collection Account for the benefit of the Issuer and the Indenture Trustee on behalf of the Noteholders, and on the Change of Control Payment Date, the Issuer shall, to the extent lawful, accept for payment all Notes or portions thereof validly tendered and not validly withdrawn, make payment or cause payment to be made for such Notes or portions thereof accepted for payment and deliver or cause to be delivered to the Indenture Trustee the Notes so accepted, and the Issuer shall instruct the Indenture Trustee to cancel such Notes in accordance with its applicable procedures. Notwithstanding anything herein to the contrary, the obligation of the Issuer to so repurchase the Notes shall be limited in extent to funds in respect of the amount actually received by the Issuer. Following any Change of Control Payment pursuant to this Section 6, the aggregate principal amount of the Notes Outstanding shall be reduced for all Noteholders in an amount equal to the aggregate principal amount of the Notes repurchased, and all amounts thereafter due and payable in respect of the Notes shall be payable based on the then Outstanding amount of the Notes after giving effect to such repurchase.
7. Repurchase of Notes Tendered upon an Asset Sale Offer
The Notes shall be subject to redemption upon the occurrence of any prepayment by the Borrower of amounts outstanding from time to time under the Credit and Guaranty Agreement and the Loan due to the occurrence of an Asset Sale Prepayment Event as further described under Section 7.7 of the Indenture.
8. Ranking.
The Notes shall be direct, senior, secured, limited recourse and unsubordinated Indebtedness of the Issuer and shall at all times rank pari passu without any preferences among themselves, with all other present and future obligations of the Issuer (other than obligations preferred by statute or by operation of Law).
9. Taxation.
(a) Except as compelled by law, the Issuer will make any and all payments of principal, premium, interest or any other amounts under the Indenture or in respect of the Notes free and clear of, and without withholding or deduction for or on account of, any Taxes imposed or levied by or on behalf of a Relevant Taxing Jurisdiction. If any such Taxes are required to be deducted or withheld:
(i) the Issuer shall notify the Lender and the Indenture Trustee that it is required by law to withhold or deduct such Taxes;
(ii) the Issuer shall make all such withholdings and deductions; and
(iii) the Issuer shall pay the full amount withheld or deducted to the relevant taxation authority in accordance with applicable law.
(b) The sum payable by the Issuer under the Indenture shall be increased by the sum of (x) the Additional Amounts payable to the Issuer pursuant to the Participation Agreement and the Credit and Guaranty Agreement or the Loan Guarantees, respectively, and (y) the Tax Reimbursement Payments payable to the Issuer by the Borrower or the Guarantors pursuant to the Expense Reimbursement and Indemnity Agreement or the Loan Guarantees, respectively, after accounting for any Taxes withheld from such payments to the Issuer or otherwise payable by the Issuer in respect of such payments (“Note Additional Amounts”).
(c) All references to principal, interest or other amounts payable under the Indenture shall be deemed to include any Note Additional Amounts payable by the Issuer under this Section 9 or otherwise with respect to the Indenture. The foregoing obligations in this Section 9 shall survive any termination, defeasance or discharge of the Indenture.
(d) At least 10 Business Days prior to the first Interest Payment Date for the Notes, and, if there has been any change with respect to the matters set forth in the below mentioned certificate at least 10 Business Days prior to each Interest Payment Date for the Notes, the Issuer shall furnish to the Indenture Trustee an Officer’s Certificate instructing the Indenture Trustee as to any circumstances in which payments of principal of, premium (if any) or interest on the Notes due on such date shall be subject to deduction or withholding for or on account of any Taxes and the rate of any such deduction or withholding. The Issuer covenants to indemnify the Indenture Trustee and any other Paying Agents for, and to hold each harmless against, any loss, liability or expense reasonably incurred without gross negligence, bad faith or willful misconduct on their part, arising out of or in connection with actions taken or not taken by any of them in reliance on any certificate furnished to them pursuant to this paragraph or the failure to furnish any such certificate. The obligations of the Issuer under the preceding sentence shall survive the resignation or removal of the Indenture Trustee, the Registrar or any Paying Agent.
(e) The Issuer shall provide the Indenture Trustee with documentation reasonably satisfactory to the Indenture Trustee evidencing the payment of Taxes in respect of which the Issuer, the Borrower or any Note Guarantor has paid any Note Additional Amounts. Copies of such documentation shall be made available by the Indenture Trustee to the Noteholders or the other Paying Agents, as applicable, upon written request therefor.
10. Denominations; Transfer; Exchange.
The Notes are in fully registered form, without coupons and in minimum denominations of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. A Noteholder may transfer or exchange Notes in accordance with the Indenture.
11. Persons deemed owners.
The registered Noteholder of this Note may be treated as the owner of it for all purposes.
12. Unclaimed money.
The Indenture Trustee will pay to the Issuer upon request any money held for payment with respect to the Notes that remains unclaimed for two years, provided that before making such payment the Indenture Trustee may at the expense of the Issuer publish once in a newspaper of general circulation in New York City, or send to each Noteholder entitled to such money, notice that the money remains unclaimed and that after a date specified in the notice (at least 30 days after the date of the publication or notice) any remaining unclaimed balance of money will be repaid to the Issuer. After payment to the Issuer, Noteholders entitled to such money must look solely to the Issuer for payment, unless applicable law designates another Person, and all liability of the Indenture Trustee with respect to such money will cease.
13. Amendment, Waiver.
(a) Notwithstanding anything to the contrary in any Transaction Document, as a result of the pledge described in Article V of the Indenture, the Issuer shall not agree to any modification of the terms of any Transaction Document to which it is a party without having first received directions from the Indenture Trustee, acting upon the written instructions of the Required Holders, except as set forth under Section 12.1(c) and 12.2 of the Indenture.
(b) At the written direction or consent of the Required Holders, each of the Issuer and the Indenture Trustee shall, subject to Sections 12.3 and 12.4 of the Indenture, enter into an indenture or indentures supplemental hereto for the purpose of amending the provisions of the Indenture and the Issuer shall otherwise amend, modify or supplement any other Transaction Document to which it is a party; provided, however, that without the consent or direction of 90% of the aggregate principal amount of the then Outstanding Notes directly affected thereby, no such supplemental indenture or modification or amendment shall cause, with respect to the Indenture or any other Transaction Document, any of the following:
(i) change the maturity of any payment of principal of or any installment of interest on any Note;
(ii) reduce the principal amount or the rate of interest, or change the method of computing the amount of principal, interest or Note Additional Amounts, payable under any Transaction Document on any date;
(iii) change any Place of Payment where the principal of or interest under any Transaction Document is payable;
(iv) change the coin or currency in which the principal of or interest on any Transaction Document is payable;
(v) impair the right of the Noteholders to institute suit for the enforcement of any payment on or after the date due;
(vi) release the security interest in the Trust Assets created under the Indenture or waive any of the payment obligations of the Issuer that would otherwise be payable to the Noteholders;
(vii) following the delivery of notice to the holders of the Notes by the Issuer (or the Indenture Trustee on behalf of the Issuer) of any Notes Change of Control Offer or Notes Asset Sale Offer, modify any such offer in a manner adverse to the Noteholders;
(viii) reduce the percentage in principal amount of the Outstanding Notes, the consent of whose Noteholders is required for any modification or the consent of whose Noteholders is required for any waiver of compliance with the Indenture; or
(ix) modify or change any of the provisions of the Indenture requiring consent or direction of Noteholders to amend, modify or waive any other provisions or terms except to increase any required percentage of consenting Noteholders or to provide that one or more provisions of the Indenture cannot be modified or waived without the consent of each Noteholder.
14. Defaults and Remedies.
If an Event of Default (other than an Event of Default specified in Section 10(g) or Section 10(h) of the Credit and Guaranty Agreement) has occurred and is continuing, the Indenture Trustee or the Noteholders of at least 25% in principal amount of Outstanding Notes may declare the unpaid principal of and premium, if any, and accrued and unpaid interest on all the Notes to be immediately due and payable by notice in writing to the Issuer (and the Indenture Trustee if given by the Noteholders) specifying the Event of Default and that it is a “notice of acceleration.” Upon such declaration the principal and interest shall be due and payable immediately.
Noteholders may not enforce the Indenture or the Notes except as provided in the Indenture. The Required Holders (or such other percentage of Noteholders of Outstanding Notes as may be permitted or required pursuant to the terms of the Indenture) may direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee or exercising any trust or power conferred on the Indenture Trustee. However, the Indenture Trustee may refuse to follow any direction that conflicts with law or the Indenture, is unduly prejudicial to the rights of other Noteholders, or would involve the Indenture Trustee in personal or financial liability or expense for which the Indenture Trustee has not received an indemnity or security satisfactory to it.
15. Indenture Trustee Dealings with the Issuer.
Subject to certain limitations set forth in the Indenture, the Indenture Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Issuer or its
Affiliates and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee.
16. Limited Recourse.
(a) Notwithstanding any other provision of the Indenture, all payments to be made by, and all liabilities of, the Cayman Trustee under the Indenture, this Note and any other Transaction Document to which the Cayman Trustee is a party shall be made only from, and limited to, the income and proceeds of the Trust Assets and only to the extent that the Cayman Trustee shall have received income or proceeds from the Trust Assets sufficient to make such payments or satisfy such liabilities in accordance with the terms hereto. No recourse shall be had to the assets of the Cayman Trustee which are owned by it beneficially or held by it as trustee for any other trust. The Cayman Trustee shall not sell or otherwise dispose of any of the Trust Assets unless otherwise specifically permitted under the Indenture and the Cayman Trustee shall not take any actions under the Participation Agreement except as authorized by the Noteholders in accordance with Section 10.6 of the Indenture. The Cayman Trustee shall not sell or otherwise dispose of the Participation without the consent of all of the Noteholders and payment of all amounts to the Indenture Trustee and agents appointed pursuant to the Indenture.
(b) Following the application of the income and proceeds of the Trust Assets in accordance with the Indenture, none of the Noteholders will be entitled to take any further action to recover any sums due but remaining unpaid under the Indenture or the Notes and all remaining claims in respect of the Indenture and the Notes will thereupon be extinguished and shall not thereafter revive.
(c) No incorporator, director, officer, employee, stockholder or controlling Person of the Cayman Trustee shall have any liability for any obligations of the Cayman Trustee under the Notes or the Indenture or the other Transaction Documents or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Noteholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes.
17. Authentication.
This Note shall not be valid until an authorized signatory of the Indenture Trustee (or an Authenticating Agent acting on its behalf) signs the certificate of authentication on the other side of this Note.
18. CUSIP or ISIN Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Issuer has caused CUSIP or ISIN numbers to be printed on the Notes and has directed the Indenture Trustee to use CUSIP or ISIN numbers in notices of redemption as a convenience to Noteholders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
19. Governing Law.
This Note shall be governed by, and construed in accordance with, the law of the State of New York.
20. Currency Rate Indemnity.
The Issuer will indemnify each of the Indenture Trustee and the Noteholders as provided in the Indenture in respect of the conversion of currency relating to the Notes and the Indenture.
21. Agent for Service; Submission to Jurisdiction; Waiver of Immunities.
The Issuer and the Note Guarantors have consented to the exclusive jurisdiction of the U.S. federal and New York state courts in the Borough of Manhattan, The City of New York, and agreed that all disputes under the Indenture, the Notes, the Note Guarantees and the other Transaction Documents may be submitted to the jurisdiction of such courts. The Issuer and the Guarantors have irrevocably consented to and waived to the fullest extent permitted by law any objection that the Issuer or the Note Guarantors may have to the laying of venue of any suit, forum, action or proceeding against the Issuer or the Note Guarantors or any of their respective properties, assets and revenues with respect to the Indenture, the Note Guarantees and the other Transaction Documents or any such suit, action or proceeding in any such court and any right to which the Issuer or the Note Guarantors may be entitled on account of place of residence or domicile.
To the extent that the Issuer or any Note Guarantor or any of their respective revenues, assets or properties shall be entitled to any immunity from suit, from the jurisdiction of any such court, from attachment prior to judgment, from attachment in aid of execution of judgment, from execution of a judgment or from any other legal or judicial process remedy, the Issuer and the Note Guarantors have irrevocably agreed not to claim and will irrevocably waive such immunity to the fullest extent permitted by the laws of such jurisdiction.
The Issuer and the Note Guarantors have agreed that service of all writs, claims, process and summons in any suit, action or proceeding against the Issuer or the Guarantors or their respective properties, assets or revenues with respect to the Indenture, the Notes, the Note Guarantees and the other Transaction Documents or any suit, action or proceeding to enforce or execute any judgment brought against them in the State of New York may be made upon C T Corporation Systems, located at 28 Liberty Street, New York, New York 10005, and the Issuer and the Guarantors have irrevocably appointed C T Corporation Systems as their agent to accept such service of any and all such writs, claims, process and summonses.
ASSIGNMENT FORM
For value received
hereby sells, assigns and transfers unto
(Please insert social security
or other identifying number of assignee)
(Please print or type name and address,
including zip code, of assignee)
the within Note and does hereby irrevocably constitute and appoint ________ attorney to transfer the Note on the books of the Note Registrar with full power of substitution in the premises.
Date: Your signature: (Sign exactly as your name appears on the face of this Note)
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been made:
| | | | | | | | | | | | | | |
Date of Increase or Decrease | Amount of decrease in Principal Amount of this Global Note | Amount of increase in Principal Amount of this Global Note | Principal Amount of this Global Note following such decrease or increase | Signature of authorized signatory of Trustee or Note Custodian |
| | | | |
EXHIBIT B
FORM OF AUTHENTICATION AND DELIVERY ORDER
The Bank of New York Mellon, as Indenture Trustee
385 Rifle Camp Road, 3rd Floor
Woodland Park, New Jersey 07424
Attention: Alicia Coronado/Structured Cross-Border
Ladies and Gentlemen:
Pursuant to Section 2.2 of the Indenture dated as of February 3, 2022 (the “Indenture”) among Walkers Fiduciary Limited, as trustee of the CT Trust, as issuer (the “Issuer”), Comunicaciones Celulares, S.A., Cloud2Nube, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A. and Servicios Innovadores de Comunicación y Entretenimiento, S.A., as Guarantors and The Bank of New York Mellon, as indenture trustee (the “Indenture Trustee”), Registrar, Paying Agent and Transfer Agent, you are hereby ordered in your capacity as Indenture Trustee to authenticate, on the date hereof, U.S.$900,000,000 of the Issuer’s 5.125% Senior Notes due 2032 (the “Notes”) in the manner provided in the Indenture in global form and in the aggregate principal amount of U.S.$[●] in respect of the Rule 144A Restricted Global Note (CUSIP No. 12659B AA2) and U.S.$[●] in respect of the Regulation S Unrestricted Global Note (CUSIP No. G2588B AA2) heretofore duly executed by a proper Authorized Representative of the Issuer and delivered to you as provided in the Indenture and to hold the Notes in your capacity as custodian for The Depository Trust Company. Capitalized terms used but not defined herein have the meanings assigned to them in the Indenture.
Date: February 3, 2022
[Signature page follows]
(i)
IN WITNESS WHEREOF, I have signed this certificate.
Dated: February 3, 2022
WALKERS FIDUCIARY LIMITED, AS TRUSTEE OF THE CT TRUST
By:
Name:
Title:
By:
Name:
Title:
Receipt of the Global Notes is hereby
acknowledged.
Date: February 3, 2022
THE BANK OF NEW YORK MELLON. as Indenture Trustee
By:
Name:
Title:
:
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
[Date]
The Bank of New York Mellon
240 Greenwich Street
Floor 7 West
New York, New York 10286
Attention: Corporate Trust Administration
With a copy to:
The Bank of New York Mellon
385 Rifle Camp Road, 3rd Floor
Woodland, Park, NJ 07424
Attention: Alicia Coronado / Structured Cross-Border
Re: Walkers Fiduciary Limited, as trustee of
CT Trust, 5.125% Senior Notes due 2032
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of February 3, 2022 (as amended and supplemented from time to time, the “Indenture”), among Walkers Fiduciary Limited, as trustee of the CT Trust (the “Company”), as issuer, Comunicaciones Celulares, S.A., Cloud2Nube, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A. and Servicios Innovadores de Comunicación y Entretenimiento, S.A., as Guarantors and The Bank of New York Mellon, as Indenture Trustee, Note Registrar, Paying Agent and Transfer Agent. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S.$900,000,000 aggregate principal amount of the Company’s 5.125% Senior Notes due 2032 (the “Notes”) [in the case of a transfer of an interest in a Rule 144A Restricted Global Note: which represent an interest in a Rule 144A Restricted Global Note (CUSIP: [ ]/ISIN: [ ]) beneficially owned by] [in the case of a transfer of a certificated Note: held in the name of] the undersigned (“Transferor”) in connection with the request to effect the transfer of such Notes in exchange for an equivalent beneficial interest in a Regulation S Unrestricted Global Note (CUSIP: [ ]/ISIN: [ ]).
In connection with such request, the Transferor confirms that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, the Transferor represents that:
the offer of the Notes was not made to a person in the United States;
either (i) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on the Transferor’s behalf reasonably believed that the transferee was outside the United States (within the meaning of Regulation S) or (ii) the transaction is being executed in, on or through the facilities of a designated offshore securities market (within the meaning of Regulation S) and neither the Transferor nor any person acting on the Transferor’s behalf knows that the transaction has been pre-arranged with a buyer in the United States;
no directed selling efforts have been made in the United States in contravention of the requirements of Rule 904(b) of Regulation S;
the Transferor is not a distributor of the Notes, an affiliate of the Company, an affiliate of any distributor of the Notes or a person acting on behalf of any of the foregoing;
the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and
the Transferor is the beneficial owner of the principal amount of Notes being transferred.
In addition, if the sale is made during the period ending forty (40) days after the original issuance of the Notes and the transferee will take delivery in the form of a beneficial interest in the Regulation S Unrestricted Global Note, such beneficial interest will be held immediately after such transfer only in or through accounts maintained at the Registered Depositary through Euroclear or Clearstream (or by agent members acting for the account thereof).
You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.
Very truly yours, [Name of Transferor]
By: _____________________________
[Authorized Signature]
EXHIBIT D
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
TO QUALIFIED INSTITUTIONAL BUYERS (QIBS) WHO ARE ALSO QUALIFIED PURCHASERS
[Date]
The Bank of New York Mellon
240 Greenwich Street
Floor 7 West
New York, New York 10286
Attention: Corporate Trust Administration
With a copy to:
The Bank of New York Mellon
385 Rifle Camp Road, 3rd Floor
Woodland, Park, NJ 07424
Attention: Alicia Coronado / Structured Cross-Border
Re: Walkers Fiduciary Limited, as trustee of CT Trust, 5.125% Senior Notes due 2032
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of February 3, 2022 (as amended and supplemented from time to time, the “Indenture”), among Walkers Fiduciary Limited, as trustee of the CT Trust (the “Company”), as issuer, Comunicaciones Celulares, S.A., Cloud2Nube, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A. and Servicios Innovadores de Comunicación y Entretenimiento, S.A., as Guarantors and The Bank of New York Mellon, as Indenture Trustee, Note Registrar, Paying Agent and Transfer Agent. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture.
This letter relates to U.S.$900,000,000 aggregate principal amount of the Company’s 5.125% Senior Notes due 2032 (the “Notes”) [in the case of a transfer of an interest in a Regulation S Unrestricted Global Note: which represents an interest in a Regulation S Unrestricted Global Note (CUSIP: [ ]/ISIN: [ ]) beneficially owned by] [in the case of a transfer of a certificated Note: which are held in the name of] the undersigned (the “Transferor”) in connection with the request to effect the transfer of such Notes in exchange for an equivalent beneficial interest in the Rule 144A Restricted Global Note (CUSIP: [ ]/ISIN: [ ]).
In connection with such request, the Transferor does hereby certify that the [transferee is a Qualified Institutional Buyer that is also a Qualified Purchaser] [Transferor
reasonably believes that the transferee is a Qualified Institutional Buyer, is obtaining such beneficial interest in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction, and is also a Qualified Purchaser].
You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By: _____________________________
[Authorized Signature]
EXHIBIT E
FORM OF QUALIFIED INSTITUTIONAL BUYER/QUALIFIED PURCHASER CERTIFICATION
[Letterhead of Prospective Note Purchaser/Exchanger]
[Date]
The Bank of New York Mellon
240 Greenwich Street
Floor 7 West
New York, New York 10286
Attention: Corporate Trust Administration
With a copy to:
The Bank of New York Mellon
385 Rifle Camp Road, 3rd Floor
Woodland, Park, NJ 07424
Attention: Alicia Coronado / Structured Cross-Border
Re: CT Trust,
5.125% Senior Notes due 2032
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of February 3, 2022 (as amended and supplemented from time to time, the “Indenture”), among Walkers Fiduciary Limited, as trustee of the CT Trust, as issuer (the “Issuer”), Comunicaciones Celulares, S.A., Cloud2Nube, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A. and Servicios Innovadores de Comunicación y Entretenimiento, S.A., as Guarantors and The Bank of New York Mellon, as Indenture Trustee, Note Registrar, Paying Agent and Transfer Agent. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture.
In connection with the undersigned’s purchase of $US[ ] in aggregate principal amount of the Issuer’s 5.125% Senior Notes due 2032 to be represented by [Note ] (CUSIP: [ ]/ISIN: [ ] (the “Notes”), as set forth below, the undersigned hereby represents, acknowledges and agrees as follows:
It is (A) a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933, as amended, and is acquiring the Notes in reliance on the exemption from Securities Act registration provided by Rule 144A thereunder and (B) also a “qualified purchaser” for purposes of Section 3(c)(7) of the Investment Company Act of 1940, as amended.
Name of Purchaser:
Dated:
By: ______________________________
Name:
Title:
EXHIBIT F
FORM OF SECTION 3(C)(7) REMINDER NOTICE
THE DEPOSITORY TRUST COMPANY IMPORTANT
DATE: [ ]
TO: ALL PARTICIPANTS
FROM: Walkers Fiduciary Limited,
as trustee of CT Trust (the “Issuer”)
SUBJECT: Section 3(c)(7) restrictions for 5.125% Senior Notes due 2032
(A) CUSIP Number: 12659B AA2
(B) Note Description: 5.125% Senior Notes due 2032
(C) Offer Amount: $900,000,000
(D) Initial Purchasers: Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC
(E) Indenture Trustee: The Bank of New York Mellon
(F) Issue Date: February 3, 2022
Special Instructions: See Attached Important Instructions from the Issuer.
Walkers Fiduciary Limited,
as trustee of the CT Trust (the “Issuer”),
c/o The Bank of New York Mellon
240 Greenwich Street, Floor 7 West
New York, New York 10286
Attention: Corporate Trust Administration
IMPORTANT INSTRUCTIONS
5.125% Senior Notes due 2032 (the “Notes”)
CUSIP Number: 12659B AA2
The Issuer and the Initial Purchaser are putting The Depository Trust Company (“DTC”) participants on notice that they are required to follow these purchase and transfer restrictions with regard to the above-referenced Notes.
In order to qualify for the exemption provided by Section 3(c)(7) under the Investment Company Act of 1940, as amended (the “Investment Company Act”), and the exemption provided by Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), offers, sales and resales of the Notes issued by Walkers Fiduciary Limited, as trustee of the CT Trust, within the United States or to U.S. persons (within the meaning of Regulation S under the Securities Act (“U.S. Persons”)) may only be made to “qualified institutional buyers” (“QIBs”) within the meaning of Rule 144A who are also “qualified purchasers” (“QP”) within the meaning of Section 2(a)(51) of the Investment Company Act. Each purchaser of the Notes (including the registered holders and beneficial owners of the Notes as they exist from time to time, including as a result of transfers, in each case, as of the time of purchase) represents and agrees, on its own behalf and on behalf of each account for which it is purchasing, among other things, that: (1) it is a QIB who is also a QP (a “QIB/QP”), (2) it is aware the sale of the Notes to it is being made in reliance on Rule 144A, (3) it is acquiring such Notes for its own account or the account of a QIB/QP as to which the purchaser exercises sole investment discretion, (4) it and each such account (i) is not a broker-dealer which owns and invests on a discretionary basis less than U.S.$25,000,000 in securities of unaffiliated issuers, (ii) is not formed for the purpose of investing in the Issuer, (iii) has not invested more than 40% of its assets in the Notes (or beneficial interests therein) and/or other securities of the Trust after giving effect to the purchase of the Notes (or beneficial interests therein) (unless all of its beneficial owners are QIBs who are also Qualified Purchasers), (iv) is not a participant-directed employee plan, such as a 401(K) plan, or a trust holding the asset of such a plan, unless the investment decisions with respect to such plan are made solely by the fiduciary, trustee or sponsor of such plan, (v) is not a partnership, common trust fund or corporation, special trust, pension fund or retirement plan, or other entity, in which the partners, beneficiaries, beneficial owners, participants, shareholders or other equity owners, as the case may be, may designate the particular investment to be made, or the allocation thereof, unless all such partners, beneficiaries, beneficial owners, participants, shareholders or other equity owners are QIBs who are also Qualified Purchasers; (vi) will provide notice of the transfer restrictions to any subsequent transferees and (vii) acknowledges that the Issuer may receive a list of participants holding positions in the global note or notes representing the Notes from one or more book-entry depositaries, (5) it understands that the Company is not and will not be registered as an “investment company” under the Investment
Company Act, (6) it understands and acknowledges that the Notes are being offered only in a transaction not involving any public offering in the United States, within the meaning of the Securities Act, and the Notes have not been and will not be registered under the Securities Act or within any securities regulatory authority of any U.S. state, the Securities and Commodities Market Law of Guatemala or any other jurisdiction, and may not be offered, resold, pledged or otherwise transferred except (i) to the Issuer or the Borrower, (ii) to a person who the seller reasonably believes is a QIB/QP in a transaction meeting the requirements of Rule 144A or (iii) upon delivery of a written certification in the form provided in the Indenture, in an offshore transaction in accordance with Rule 904 of Regulation S, in each case in accordance with all applicable securities laws of the states of the United States, (7) it understands and acknowledges that the Notes (or any interest therein) may be purchased, sole, pledged or otherwise transferred only in minimum principal amounts of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof and (8) either (i) it is not and is not acquiring the Notes on behalf of, or with the assets of, any (a) “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) which is subject to Title I of ERISA, “plan” which is subject to Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) or entity whose underlying assets are treated as assets of any such employee benefit plan or plan pursuant to the U.S. Department of Labor regulation codified at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, or (b) governmental, church or non-U.S. plan that is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code (“Similar Law”), or entity whose assets are treated as assets of any such plan, or (ii) its purchase, holding and disposition of a Note will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, or violation of applicable Similar Law. Each purchaser further understands that the Notes will bear a Restrictive Legend with respect to such transfer restrictions. See “Transfer Restrictions” in the final offering memorandum dated as of February 3, 2022.
The Indenture provides that if, notwithstanding the restrictions on contained therein, the Issuer determines that any beneficial owner of (A) a Regulation S Global Note (or any interest therein) is a U.S. Person (within the meaning of Regulation S under the Securities Act) or (B) a Rule 144A Global Note is not both (i) a QIB and (ii) a QP (any such Person, a “Non-Permitted Holder”), then the Issuer may require, by notice to such Non-Permitted Holder, that such Non- Permitted Holder sell all of its right, title and interest to such Note (or interest therein) to a Person that (1) is not a U.S. Person (in the case of a Person holding its interest through a Regulation S Unrestricted Global Note) or (2) in the case of a Person holding its interest through a Rule 144A Restricted Global Note, is both (i) a QIB and (ii) a QP, with such sale to be effected within 30 days after notice of such sale requirement is given. If such Non-Permitted Holder fails to effect the transfer required within such 30-day period, (i) upon written direction from the Issuer, the Indenture Trustee, on behalf of and at the expense of the Issuer, shall cause such Non- Permitted Holder’s interest in such Note to be transferred in a commercially reasonable sale to a Person that certifies to the Indenture Trustee and the Issuer in connection with such transfer, that such Person (X) is not a U.S. person (in the case of a Person holding its interest through a Regulation S Unrestricted Global Note) or (Y) is both (i) a QIB and (ii) a QP (in the case of a Person holding its interest through a Rule 144A Restricted Global Note) and pending such transfer, no further payments will be made in respect of such Note held by such Non-Permitted Holder.
The restrictions on transfer required by the Issuer (outlined above) will be reflected under the notation “3c7” in DTC’s User Manuals and DTC’s Reference Directory.
Capitalized terms not defined herein are as defined in the Indenture, dated February 3, 2022, among Issuer, certain guarantors party thereto and The Bank of New York Mellon, as trustee, note registrar, paying agent and transfer agent.
EXHIBIT G
Walkers Fiduciary Limited,
as trustee of the CT Trust (the “Issuer”),
c/o The Bank of New York Mellon
240 Greenwich Street, Floor 7 West
New York, New York 10286
Attention: Corporate Trust Administration
[_____], 2022
Bloomberg, L.P.
731 Lexington Avenue
New York, New York 10022
Ladies and Gentlemen:
Pursuant to the indenture, dated as of February 3, 2022 (the “Indenture”), among Walkers Fiduciary Limited, acting as trustee of the CT Trust established pursuant to a Declaration of Trust, dated January 12, 2022 under the laws of the Cayman Islands, as issuer (the “Issuer”), Comunicaciones Celulares, S.A., Cloud2Nube, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A. and Servicios Innovadores de Comunicación y Entretenimiento, S.A., as Guarantors and The Bank of New York Mellon, as trustee (the “Indenture Trustee”), Note Registrar, Paying Agent and Transfer Agent, the Issuer is issuing US$900,000,000 5.125% Senior Notes due 2032 (collectively, the “Notes”). The Notes will be issued pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. CUSIP numbers issued by the CUSIP Service Bureau have been obtained for the Notes and are set forth on Schedule A of this letter.
The Notes will be issued to The Depository Trust Company (“DTC”) in the nominee name of Cede & Co. at closing. Beneficial interests in the Notes will be held and transferred by book entry either directly through DTC or through one or more participants in DTC. The Issuer is a “3(c)(7) Issuer”, meaning that the Issuer has not registered as an Investment Company within the meaning of the Investment Company Act of 1940, as amended, upon reliance on the exemption from registration thereunder contained in Section 3(c)(7) thereof. Accordingly, the Issuer hereby requests that Bloomberg, L.P. include the following (or substantially similar language) at the bottom of each DES screen containing information about the Rule 144A Global Notes (CUSIP 12659B AA2): “ISS’D UNDER 144A/3C7. SEE RESTRICTIONS IN OM-QIB/QP ONLY. NON-COMPLIANT PURCHASE MAY BE VOIDED AND/OR RESULT IN FORCED SALE”.
Very truly yours,
WALKERS FIDUCIARY LIMITED, ACTING AS TRUSTEE OF THE CT TRUST
By: ____________________________________
Name:
Title:
Schedule A
CUSIPs
144A: 12659B AA2
Reg S: G2588B AA2
EXHIBIT H
REQUEST TO THE DEPOSITORY TRUST COMPANY
Walkers Fiduciary Limited,
as trustee of CT Trust
Reference is made to the Indenture dated as of February 3, 2022 among Walkers Fiduciary Limited, an ordinary company incorporated with limited liability in the Cayman Islands, as trustee (the “Cayman Trustee”) of CT Trust (the “Trust”) established under the Declaration of Trust, dated as of January 12, 2022, as issuer (the “Issuer”), Comunicaciones Celulares, S.A., Comunicaciones Corporativas, S.A., Distribuidora Central de Comunicaciones, S.A., Distribuidora de Comunicaciones de Occidente, S.A., Distribuidora de Comunicaciones de Oriente, S.A., Distribuidora Internacional de Comunicaciones, S.A., Navega.com, S.A., Servicios Especializados en Telecomunicaciones, S.A., Servicios Innovadores de Comunicación y Entretenimiento, S.A. and Cloud2Nube, S.A., as Guarantors, The Bank of New York Mellon, as indenture trustee (the “Indenture Trustee”), Registrar, Paying Agent and Transfer Agent. Capitalized terms used and not otherwise defined herein have the respective meanings set forth in the Indenture.
Pursuant to the Indenture, the Issuer hereby instructs you, as the Registered Depositary, to take the following steps in connection with the Rule 144A Global Notes (CUSIP 12659B AA2):
(i) to include the “3c7” and “144A” markers in the Registered Depositary 20-character security descriptor and the 48-character additional descriptor for the Rule 144A Global Notes in order to indicate that sales are limited to QIBs that are also Qualified Purchasers;
(ii) to cause (i) each physical Registered Depositary delivery order ticket delivered by the Registered Depositary to purchasers to contain the Registered Depositary 20-character security descriptors and (ii) each Registered Depositary delivery order ticket delivered by the Registered Depositary to purchasers in electronic form to contain the “3c7” and “144A” indicators and the related user manual for participants, which shall contain a description of the relevant restrictions;
(iii) to send a notice substantially in the form attached hereto to all Registered Depositary participants in connection with the offering of the Rule 144A Global Notes;
(iv) to include the Rule 144A Global Notes in the Registered Depositary’s “Reference Directory” of Section 3(c)(7) offerings;
(v) to include in all “confirms” of trades of the Rule 144A Global Notes in the Registered Depositary CUSIP numbers with a “fixed field” attached to the CUSIP number that has the “3c7” and “144A” markers; and
(vi) to deliver to the Issuer and the Indenture Trustee from time to time a list of all Registered Depositary participants holding an interest in the Rule 144A Global Notes.
| | | | | |
By: | |
| Name: |
| Title: Authorized Signatory Walkers Fiduciary Limited as trustee of CT Trust |
TERMS AND CONDITIONS FOR
MILLICOM INTERNATIONAL CELLULAR S.A.
SEK 2,250,000,000
SENIOR UNSECURED FLOATING RATE SUSTAINABILITY NOTES
ISIN: SE0017133754
SELLING RESTRICTIONS
Other than the registration of the Notes under Swedish law, no action is being taken that would or is intended to permit a public offering of the Notes or the possession, circulation or distribution of this document or any other material relating to the Issuer or the Notes in any jurisdiction, where action for that purpose is required. Persons into whose possession this document comes are required by the Issuer to inform themselves about, and to observe, any applicable restrictions.
PRIVACY STATEMENT
Each of the Issuer, the Trustee and the Issuing Agent may collect and process personal data relating to the Noteholders, the Noteholders’ representatives or agents, and other persons nominated to act on behalf of the Noteholders pursuant to the Finance Documents (including name, contact details and, when relevant, holding of Notes). The personal data relating to the Noteholders is primarily collected from the registry kept by the CSD. The personal data relating to other persons is primarily collected directly from such persons.
The personal data collected will be processed by the Issuer, the Trustee and the Issuing Agent for the following purposes (i) to exercise their respective rights and fulfil their respective obligations under the Finance Documents, (ii) to manage the administration of the Notes and payments under the Notes, (iii) to enable the Noteholders to exercise their rights under the Finance Documents and (iv) to comply with their respective obligations under applicable laws and regulations.
The processing of personal data by the Issuer, the Trustee and the Issuing Agent in relation to items (i) to (iii) above is based on their legitimate interest in exercising their respective rights and fulfilling their respective obligations under the Finance Documents. In relation to item (iv), the processing is based on the fact that such processing is necessary for compliance with a legal obligation incumbent on the Issuer, the Trustee or the Issuing Agent (as applicable). Unless otherwise required or permitted by law, the personal data collected will not be kept longer than necessary given the purpose of the processing.
Personal data collected may be shared with third parties, such as the CSD, when necessary to fulfil the purpose for which such data is processed.
Subject to any legal preconditions, the applicability of which have to be assessed in each individual case, data subjects have rights as follows. Data subjects have the right to get access to their personal data and may request the same in writing at the address of the Issuer, the Trustee or the Issuing Agent (as applicable). In addition, data subjects have the right to (i) request that personal data is rectified or erased, (ii) object to specific processing, (iii) request that the processing be restricted and (iv) receive personal data provided by themselves in machine-readable format.
Data subjects are also entitled to lodge complaints with the relevant supervisory authority if dissatisfied with the processing carried out.
The Issuer’s, the Trustee's and the Issuing Agent’s addresses, and the contact details for their respective data protection officers (if applicable), are found on their respective websites: www.millicom.com, www.intertrustgroup.com and www.dnb.se.
TABLE OF CONTENTS
| | | | | |
1. Definitions and construction | |
2. STATUS OF THE NOTES | |
3. Use of Proceeds | |
4. conditions Precedent | |
5. NOTES IN BOOK-ENTRY FORM | |
6. RIGHT TO ACT on behalf of A NOTEHOLDER | |
7. PAYMENTS IN RESPECT OF THE NOTES | |
8. INTEREST | |
9. REDEMPTION and repurchase OF THE NOTES | |
10. INFORMATION TO NOTEHOLDERS | |
11. GENERAL UNDERTAKINGS | |
12. ACCELERATION OF THE NOTES | |
13. DISTRIBUTION OF PROCEEDS | |
14. DECISIONS BY NOTEHOLDERS | |
15. NOTEHOLDERS' MEETING | |
16. WRITTEN PROCEDURE | |
17. AMENDMENTS and waivers | |
18. REPLACEMENT OF BASE RATE | |
19. APPOINTMENT AND REPLACEMENT OF THE TRUSTEE | |
20. APPOINTMENT AND REPLACEMENT OF THE ISSUING Agent | |
21. APPOINTMENT AND REPLACEMENT OF THE CSD | |
22. NO DIRECT ACTIONS BY NOTEHOLDERS | |
23. PRESCRIPTION | |
24. NOTICES AND PRESS RELEASES | |
25. FORCE MAJEURE AND LIMITATION OF LIABILITY | |
26. ContractS (rights of third Parties) Act 1999 | |
27. GOVERNING LAW AND JURISDICTION | |
1.DEFINITIONS AND CONSTRUCTION
1.1Definitions
In these terms and conditions (the "Terms and Conditions"):
"Account Operator" means a bank or other party duly authorised to operate as an account operator pursuant to the Financial Instruments Accounts Act and through which a Noteholder has opened a Securities Account in respect of its Notes.
"Acquired Debt" means Financial Indebtedness of a person or its Subsidiary:
(a)incurred and outstanding on the date on which such person (i) was acquired by a Group Company or (ii) is merged, consolidated, amalgamated or otherwise combined with (including pursuant to any acquisition of assets and assumption of related liabilities) a Group Company; or
(b)incurred to provide all or part of the funds utilised to consummate the transaction or series of related transactions pursuant to which such person became a Restricted Subsidiary of the Issuer or was otherwise acquired by the Issuer or its Restricted Subsidiary; provided that, after giving pro forma effect to the transactions by which such person became a Restricted Subsidiary of the Issuer or is merged, consolidated, amalgamated or otherwise combined with a Group Company, (i) the Issuer would have been able to incur $1.00 of additional Financial Indebtedness pursuant to clause (a) of Condition 11.3 hereof; or (ii) the Net Leverage Ratio would not be greater than such ratio before giving effect to such transactions.
"Additional Notes" means any Notes issued after the First Issue Date on one or more occasions.
"Adjusted Nominal Amount" means the Total Nominal Amount less the Nominal Amount of all Notes owned by a Group Company, an Affiliate of a Group Company or any other person owning any Notes that has undertaken towards a Group Company or its Affiliate to exercise its voting rights in respect of such Notes in accordance with the instructions given by a Group Company or an Affiliate thereof, in each case, irrespective of whether such person is directly registered as owner of such Notes.
"Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control" when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any transfer, conveyance, sale, lease or other disposition by a Group Company (including a consolidation or merger or other sale of any Restricted Subsidiary with, into or to another person in a transaction in which such Restricted Subsidiary ceases to be a Restricted Subsidiary of the Issuer, but excluding a disposition by a Restricted Subsidiary of the Issuer to the Issuer or a Restricted Subsidiary of the Issuer which is an 80 per cent. or more owned Restricted Subsidiary of the Issuer) of (i) shares of Capital Stock (other than directors' qualifying shares and shares to be held by third parties to satisfy applicable legal requirements) or other ownership interests of a Restricted
Subsidiary, (ii) substantially all of the assets of a Group Company representing a division or line of business or (iii) other assets or rights of a Group Company outside of the ordinary course of business; provided that the term "Asset Disposition" shall not include:
(a)any dispositions of assets in a single transaction or series of transactions with an aggregate Fair Market Value in any calendar year of not more than the greater of (x) $25 million (or its equivalent in any other currency or currencies) and (y) 1 per cent. of Total Assets (with unused amounts in any calendar year being carried over to the next succeeding year subject to a maximum of the greater of $25 million (or its equivalent in any other currency or currencies) and 1 per cent. of Total Assets of carried over amounts for any calendar year);
(b)any disposition of Tower Equipment, including any sale/leaseback transaction; provided that any cash or Cash Equivalents received in connection with such disposition or sale/leaseback transaction must be applied in accordance with Condition 11.5;
(c)any Specified Subsidiary Sale;
(d)a transfer of assets between or among Group Companies;
(e)the issuance of Capital Stock by a Restricted Subsidiary to another Group Company;
(f)any disposition of Capital Stock of a Restricted Subsidiary pursuant to an agreement or other obligation with or to a person (other than a Group Company) from whom such Restricted Subsidiary was acquired or from whom such Restricted Subsidiary acquired its business and assets (having been newly formed in connection with such acquisition), made as part of such acquisition and in each case comprising all or a portion of the consideration in respect of such sale or acquisition;
(g)the sale, lease or other transfer of products, services, accounts receivable, inventory or other assets in the ordinary course of business and any sale or other disposition of damaged, surplus, worn-out or obsolete assets;
(h)dispositions in connection with Permitted Liens;
(i)disposals of assets, rights or revenue not constituting part of the Permitted Business and other disposals of non-core assets acquired in connection with any acquisition permitted under these Terms and Conditions;
(j)licences and sublicences of a Group Company in the ordinary course of business;
(k)any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business;
(l)the disposition of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings;
(m)the granting of Liens not prohibited by Condition 11.4 hereof;
(n)a transfer or disposition of assets that is governed by the provisions of these Terms and Conditions described under Condition 11.6 hereof;
(o)the sale or other disposition of cash or Cash Equivalents;
(p)the foreclosure, condemnation or any similar action with respect to any property or other assets;
(q)sales of accounts receivable and related assets or an interest therein of the type specified in the definition of "Qualified Receivables Transaction" to a Receivables Entity, and Investments in a Receivables Entity consisting of cash or securitisation obligations;
(r)any disposition or expropriation of assets or Capital Stock which a Group Company is required by, or made in response to concerns raised by, a regulatory authority or court of competent jurisdiction;
(s)any disposition of Capital Stock, Financial Indebtedness or other securities of an Unrestricted Subsidiary;
(t)disposal of non-core assets acquired in connection with any acquisition permitted under these Terms and Conditions;
(u)any disposition of assets to a person who is providing services related to such assets, the provision of which have been or are to be outsourced by a Group Company to such person;
(v)any disposition of investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding agreements; provided that any cash or Cash Equivalents received in such disposition are applied in accordance with the requirements set forth in Condition 11.5;
(w)any sale or disposition with respect to property built, repaired, improved, owned or otherwise acquired by a Group Company pursuant to customary sale and leaseback transactions, asset securitisations and other similar financings permitted by these Terms and Conditions;
(x)any dispositions constituting the surrender of tax losses by a Group Company (i) to another Group Company; (ii) in order to eliminate, satisfy or discharge any tax liability of any person that was formerly a Subsidiary of the Issuer which has been disposed of pursuant to a disposal permitted by the terms of these Terms and Conditions, to the extent that a Group Company would have a liability (in the form of an indemnification obligation or otherwise) to one or more persons in relation to such tax liability if not so eliminated, satisfied or discharged; and
(y)any other disposal of assets not described in clauses (a) to (x) above comprising in aggregate percentage value 10 per cent. or less of Total Assets.
"Base Rate" means STIBOR or any reference rate replacing STIBOR in accordance with Condition 18 (Replacement of Base Rate).
"Base Rate Administrator" means Swedish Financial Benchmark Facility AB (SFBF) or any person replacing it as administrator of the Base Rate.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the U.S. Securities Exchange Act of 1934, as amended and the rules and regulations
promulgated pursuant thereto (the "Exchange Act"), except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.
"Business Day" means a day other than a Sunday or other public holiday in Sweden. Saturdays, Midsummer Eve (midsommarafton), Christmas Eve (julafton) and New Year's Eve (nyårsafton) and any other day on which banking institutions are closed in Sweden shall for the purpose of this definition be deemed to be public holidays.
"Business Day Convention" means the first following day that is a Business Day unless that day falls in the next calendar month, in which case that date will be the first preceding day that is a Business Day.
"Capital Lease Obligation" means the obligation to pay rent or other payment amounts under a lease of real or personal property of a person which is required to be classified and accounted for as a capital lease on the face of a statement of financial position of such person in accordance with IFRS. The stated maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. The principal amount of Financial Indebtedness represented by such obligation shall be the capitalised amount thereof that would appear on the face of a statement of financial position of such person in accordance with IFRS.
"Capital Stock" of any person means any and all shares, interests, participation or other equivalents (however designated) of corporate stock or other equity participation, including partnership interests, whether general or limited, of such person.
"Cash Equivalents" means, with respect to any person:
(a)(i) direct obligations of, or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States of America is pledged and which have a remaining Weighted-Average Life to Maturity of not more than one year from the date of Investment therein and (ii) any direct obligations of, or obligations guaranteed by, a member of the European Union or the United Kingdom for the payment of which the full faith and credit of such member of the European Union or the United Kingdom is pledged and which have a remaining Weighted-Average Life to Maturity of not more than one year from the date of Investment therein;
(b)term deposit accounts (excluding current and demand deposit accounts), certificates of deposit and Eurodollar time deposits and money market deposits and bankers' acceptances, in each case, issued by or with (i) any lender under the Revolving Credit Facility , and their respective Affiliates (ii) a bank or trust company which is organised under the laws of the United States of America, any state thereof, the United Kingdom, Switzerland, Canada, Australia or any member state of the European Union, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $100,000,000 and has outstanding debt which is rated Investment Grade by at least one Rating Agency, or (iii) money market funds rated at least AAA by at least one Rating Agency or managed by any lender to the Revolving Credit Facility;
(c)repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any financial institution meeting the qualifications specified in paragraph (b)(ii) above;
(d)commercial paper having one of the two highest ratings obtainable from Fitch Ratings Ltd or Moody's Investor Services Limited and in each case maturing within 365 days after the date of acquisition;
(e)money market funds or mutual funds at least 95 per cent. of the assets of which constitute Cash Equivalents of the types described in paragraphs (a) through (d) of this definition;
(f)with respect to any person organised under the laws of, or having its principal business operations in, a jurisdiction outside the United States, the United Kingdom or the European Union, those investments that are of the same type as investments in paragraphs (a), (c) and (d) of this definition except that the obligor thereon is organised under the laws of the country (or any political subdivision thereof) in which such person is organised or conducting business; and
(g)up to $100,000,000 in the aggregate of term deposit accounts and overnight deposits or legal tender held by such person in countries where any Restricted Subsidiary operates its business.
"Change of Control" means:
(a)any person becomes the Beneficial Owner, directly or indirectly, of more than 50 per cent. of the Voting Stock of the Issuer, measured by voting power rather than number of shares;
(b)the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Issuer and its subsidiaries, taken as a whole, to any person occurs; or
(c)a plan relating to the liquidation or dissolution of the Issuer is adopted.
"Change of Control Triggering Event" means the occurrence of a Change of Control and a Rating Decline, provided that if at the time a Change of Control occurs the Issuer is not rated by any Rating Agency, then a Change of Control Triggering Event shall be deemed to occur upon the occurrence of a Change of Control.
"Consolidated EBITDA" means, for any period, operating profit of the Issuer and its Restricted Subsidiaries, as such amount is determined on a consolidated basis in accordance with IFRS, plus the sum of the following amounts, in each case, without duplication. Losses shall be added (as a positive number) and gains shall be deducted, in each case, to the extent such amounts were included in calculating operating profit:
(a)depreciation and amortisation expenses;
(b)the net loss or gain on the disposal and impairment of assets;
(c)share-based compensation expenses;
(d)at the Issuer's option, other non-cash charges reducing operating profit (provided that, if any such non-cash charge represents an accrual of or reserve for potential cash charges in any future period, the cash payment in respect thereof in such future period shall reduce operating profit to such extent, and excluding amortisation of a prepaid cash item that was paid in a prior period) less other non-cash items of income increasing operating income (excluding any such non-cash item of income to the extent it represents (x) a receipt of cash payments in any future period, (y) the reversal of an accrual or reserve for a potential cash item that reduced operating income in any prior period and (z) any non-cash gains with respect to cash actually received in a prior period so long as such cash did not increase operating income in such prior period);
(e)any material extraordinary, one-off, non-recurring, exceptional or unusual gain, loss, expense or charge, including any charges or reserves in respect of any restructuring, redundancy, relocation, refinancing, integration or severance or other post-employment arrangements, signing, retention or completion bonuses, transaction costs, acquisition costs, disposition costs, business optimisation, information technology implementation or development costs, costs related to governmental investigations and curtailments or modifications to pension or post-retirement benefits schemes, litigation or any asset impairment charges or the financial impacts of natural disasters (including fire, flood and storm and related events);
(f)at the Issuer's option, the effects of adjustments in its consolidated financial statements pursuant to IFRS (including inventory, property, equipment, software, goodwill, intangible assets, in process research and development, deferred revenue and debt line items) attributable to the application of recapitalisation accounting or acquisition accounting, as the case may be, in relation to any consummated acquisition or joint venture investment or the amortisation or write-off or write-down of amounts thereof, net of taxes;
(g)any reasonable expenses, charges or other costs related to any sale of Capital Stock (other than Redeemable Stock) of the Issuer or a Holding Company of the Issuer, Investment, acquisition, disposition, recapitalisation or the incurrence, waiver or amendment of any Financial Indebtedness (or the refinancing thereof) (whether or not successful or consummated), in each case, as determined in good faith by a responsible financial or accounting officer of the Issuer;
(h)any gains or losses on associates;
(i)any unrealised gains or losses due to changes in the fair value of equity Investments;
(j)any unrealised gains or losses due to changes in the fair value of Permitted Interest Rate, Currency or Commodity Price Agreements;
(k)any unrealised gains or losses due to changes in the carrying value of put options in respect of Capital Stock of, or voting rights with respect to, any Subsidiary, joint venture or associate;
(l)any unrealised gains or losses due to changes in the carrying value of call options in respect of Capital Stock of, or voting rights with respect to, any Subsidiary, joint venture or associate;
(m)any net foreign exchange gains or losses;
(n)at the Issuer's option, any adjustments to reduce the impact of the cumulative effect of a change in accounting principles and changes as a result of the adoption or modification of accounting policies;
(o)accruals and reserves that are established or adjusted within twelve months after the closing date of any acquisition that are so required to be established as a result of such acquisition in accordance with IFRS;
(p)any expenses, charges or losses to the extent covered by insurance or indemnity and actually reimbursed, or, so long as the Issuer or a Restricted Subsidiary has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer or indemnifying party and only to the extent that such amount is in fact reimbursed within 365 days of the date of the insurable or indemnifiable event (net of any amount so added back in any prior period to the extent not so reimbursed within the applicable 365-day period);
(q)the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any acquisition, Investment or any sale, conveyance, transfer or other disposition of assets;
(r)any net gain (or loss) realised upon any sale/leaseback transaction that is not sold or otherwise disposed of in the ordinary course of business, determined in good faith by a responsible financial or accounting officer of the Issuer;
(s)the amount of loss on the sale or transfer of any assets in connection with an asset securitisation program, receivables factoring transaction or other receivables transaction (including, without limitation, a Qualified Receivables Transaction); and
(t)Specified Legal Expenses.
For the purposes of calculating Consolidated EBITDA for any period, as of such date of determination:
(i)if, since the beginning of such period the Issuer or any Restricted Subsidiary has made any Asset Disposition or disposed of any company, any business, or any group of assets constituting an operating unit of a business (any such disposition, a "Sale"), including any Sale occurring in connection with a transaction causing a calculation to be made hereunder, then Consolidated EBITDA for such period will be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the assets which are the subject of such Sale for such period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such period;
(ii)if, since the beginning of such period, the Issuer or any Restricted Subsidiary (by merger or otherwise) has made an Investment in any person that thereby becomes a Restricted Subsidiary, or otherwise acquires any company, any business, or any group of assets constituting an operating unit of a business (any such Investment or acquisition, a "Purchase"), including any such Purchase occurring in connection with a transaction causing a calculation to be made hereunder, then Consolidated EBITDA for such period will be calculated after giving pro forma effect thereto as if such Purchase occurred on the first day of such period;
(iii)if, since the beginning of such period any person (that became a Restricted Subsidiary or was merged with or into the Issuer or any Restricted Subsidiary since
the beginning of such period) has made any Sale or any Purchase that would have required an adjustment pursuant to paragraphs (i) or (ii) above if made by the Issuer or a Restricted Subsidiary since the beginning of such period, Consolidated EBITDA for such period will be calculated after giving pro forma effect thereto as if such Sale or Purchase occurred on the first day of such period, including anticipated synergies and cost savings as if such Sale or Purchase occurred on the first day of such period;
(iv)whenever pro forma effect is applied, the pro forma calculations will be as determined in good faith by a responsible financial or accounting officer of the Issuer (including in respect of anticipated synergies and cost savings) as though the full effect of synergies and cost savings were realised on the first day of the relevant period and shall also include the reasonably anticipated full run rate cost savings effect (as calculated in good faith by a responsible financial or chief accounting officer of the Issuer) of cost savings programs that have been initiated by the Issuer or its Restricted Subsidiaries as though such cost savings programs had been fully implemented on the first day of the relevant period; and
(v)for the purposes of determining the amount of Consolidated EBITDA under this definition denominated in a foreign currency, the Issuer may, at its option, calculate the U.S. Dollar Equivalent amount of such Consolidated EBITDA based on either (i) the weighted average exchange rates for the relevant period used in the consolidated financial statements of the Issuer for such relevant period or (ii) the relevant currency exchange rate in effect on the First Issue Date.
For the purpose of calculating the Consolidated EBITDA of the Issuer, any Joint Venture Consolidated EBITDA shall be added to the amount determined in accordance with the foregoing.
"Consolidated Net Debt" means, as of any date of determination, the sum without duplication of:
(a)the total amount of Financial Indebtedness of the Issuer and its Restricted Subsidiaries on a consolidated basis in accordance with IFRS, minus
(b)the sum without duplication of (i) all Financial Indebtedness outstanding under Minority Shareholder Loans, (ii) any Financial Indebtedness which is a contingent obligation of the Issuer or its Restricted Subsidiaries on such date, (iii) all Financial Indebtedness permitted by paragraph (c) of the definition of Permitted Financial Indebtedness and (iv) all Financial Indebtedness permitted by paragraph (q) of the definition of Permitted Financial Indebtedness, minus
(c)the amount of cash and Cash Equivalents (other than cash or Cash Equivalents received from the incurrence of Financial Indebtedness by a Group Company to the extent such cash or Cash Equivalents have not been subsequently applied or used for any purpose not prohibited by these Terms and Conditions) of the Issuer and its Restricted Subsidiaries on a consolidated basis that would be stated on the statement of financial position of the Issuer as of such date in accordance with IFRS, excluding, for the avoidance of doubt, Restricted Cash.
"Credit Facility" means, a debt facility, arrangement, instrument, trust deed, note purchase agreement, indenture, purchase money financing, commercial paper facility or overdraft facility with banks or other institutions or investors providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such
institutions or to special purpose entities formed to borrow from such institutions against such receivables), letters of credit or other Financial Indebtedness, in each case, as amended, restated, modified, renewed, refunded, replaced, restructured, refinanced, repaid, increased or extended, in whole or in part from time to time, and in each case, including all agreements, instruments and documents executed and delivered pursuant to or in connection with the foregoing (including, but not limited to, any notes and letters of credit issued pursuant thereto and any guarantee and collateral agreement, patent and trademark security agreement, mortgages or letter of credit applications and other guarantees, pledges, agreements, security agreements and collateral documents). Without limiting the generality of the foregoing, the term "Credit Facility" shall include any agreement or instrument (i) changing the maturity of any Financial Indebtedness incurred thereunder or contemplated thereby, (ii) adding Subsidiaries of the Issuer as additional borrowers or guarantors thereunder, (iii) increasing the amount of Financial Indebtedness incurred thereunder or available to be borrowed thereunder or (iv) otherwise altering the terms and conditions thereof.
"Cross Acceleration" means any Financial Indebtedness of a Group Company is cancelled, or declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).
"Cross Payment Default" means any event of default (howsoever described) arising from a failure by the Issuer or any of its Restricted Subsidiaries to pay any Financial Indebtedness when due or within any originally applicable grace period.
"CSD" means the Issuer's central securities depository and registrar in respect of the Notes, Euroclear Sweden AB, Swedish Reg. No. 556112-8074, P.O. Box 191, 101 23 Stockholm, Sweden, or another party replacing it, as CSD, in accordance with these Terms and Conditions.
"CSD Regulations" means the CSD's rules and regulations applicable to the Issuer, the Trustee and the Notes from time to time.
"Default" means an Event of Default or any event or circumstance specified in Condition 12.1 which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.
"Eligible Assets and Projects" means one or more of the "Eligible Assets and Projects with Environmental Benefits" or "Eligible Assets and Projects with Social Benefits" as outlined in the Sustainability Bond Framework.
"Event of Default" means an event or circumstance specified in Condition 12.1.
"Excess Proceeds" has the meaning set forth in Condition 11.5.3.
"Excess Proceeds Offer" has the meaning set forth in Condition 9.5.1.
"Fair Market Value" means, with respect to any asset or property, the sale value that would be obtained in an arm's length free market transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Issuer's Chief Executive Officer, Chief Financial Officer or responsible accounting or financial officer.
"Final Maturity Date" means 20 January 2027.
"Finance Documents" means the Trust Deed (including these Terms and Conditions) and any other document designated by the Issuer and the Trustee (on behalf of the Noteholders) as a Finance Document.
"Financial Indebtedness" means (without duplication), with respect to any person, whether recourse is to all or a portion of the assets of such person and whether or not contingent:
(a)the principal of and premium, if any, in respect of every obligation of such person for money borrowed;
(b)the principal of and premium, if any, in respect of every obligation of such person evidenced by bonds, debentures, notes or other similar instruments;
(c)every reimbursement obligation of such person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such person (but only to the extent such obligations are not reimbursed within 30 days following receipt by such person of a demand for reimbursement); and
(d) the principal component of every obligation of the type referred to in paragraphs (a) through (c) of another person and all dividends of another person the payment of which, in either case, such person has guaranteed or is responsible or liable for, directly or indirectly, as obligor, guarantor or otherwise to the extent not otherwise included in the Financial Indebtedness of such person.
The "amount" or "principal amount" of Financial Indebtedness at any time of determination as used herein represented by (x) any Financial Indebtedness issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with IFRS, (y) any Redeemable Stock, shall be the maximum fixed redemption or repurchase price in respect thereof; and (z) any amount of Financial Indebtedness that has been cash-collateralised, to the extent so cash-collateralised, shall be excluded from any calculation of Financial Indebtedness. Notwithstanding anything else to the contrary, for all purposes under these Terms and Conditions, the amount of Financial Indebtedness incurred, repaid, redeemed, repurchased or otherwise acquired by a Restricted Subsidiary of the Issuer shall equal the liability in respect thereof determined in accordance with IFRS and reflected on the Issuer's consolidated statement of financial position.
The term "Financial Indebtedness" shall not include:
(i)obligations described in paragraphs (a) or (b) of the first paragraph of this definition of Financial Indebtedness that are incurred by a Restricted Subsidiary of the Issuer (the "Proceeds Recipient") and owed to a bank or other lending institution (the "On-Lend Bank") to facilitate the substantially concurrent on-lending of proceeds (the "Proceeds On-Loan") from Financial Indebtedness incurred by any Group Company (other than the Proceeds Recipient) as permitted by Condition 11.3 to the extent (A) the principal obligations in respect of the Proceeds On-Loan are secured by security over cash granted in favour of the On-Lend Bank or any of its Affiliates in an amount not less than the principal amount of the Proceeds On-Loan, (B) the Proceeds On-Loan is put in place substantially concurrently with a loan by any Group Company (other than the Proceeds Recipient) to the On-Lend Bank (the "On-Lend Bank Borrowing") pursuant to which the Proceeds Recipient is entitled to reduce the principal amount of the Proceeds On-Loan by an amount equal to the principal amount of the On-Lend Bank Borrowing if a default or acceleration occurs with respect to such On-Lend Bank Borrowing, or (C) the substantial risks and
rewards of the Proceeds On-Loan are transferred, using a synthetic instrument or any other arrangement or agreement, from the On-Lend Bank to any Group Company (other than the Proceeds Recipient) in exchange for an amount not less than (x) the amount of cash granted in favour of the On-Lend Bank or any of its Affiliates, or (y) the outstanding amount of the On-Lend Bank Borrowing, as applicable, in each case as at the effective date of such transfer;
(ii)any liability of the Issuer or any other Group Company (other than the Proceeds Recipient) attributable to a synthetic instrument or any other arrangement or agreement described in paragraph (i)(C) above to the extent such obligation under the relevant instrument, arrangement or agreement has not come due but is classified as a financial liability in accordance with IFRS and recorded as a current liability on the Issuer's consolidated statement of financial position;
(iii)any Restricted MFS Cash;
(iv)any liability of the Issuer attributable to a put option or similar instrument, arrangement or agreement entered into after the First Issue Date granted by the Issuer relating to an interest in any other entity, in each case to the extent such option has not been exercised or such obligation under the relevant instrument, arrangement or agreement has not come due but is classified as a financial liability in accordance with IFRS, and recorded as a current liability on the Issuer's consolidated statement of financial position;
(v)any standby letter of credit, performance bond or surety bond provided by a Group Company that is customary in the Permitted Business to the extent such letters of credit or bonds are not drawn upon or, if and to the extent drawn upon, are honoured in accordance with their terms;
(vi)any deposits or prepayments received by a Group Company from a customer or subscriber for its service and any other deferred or prepaid revenue;
(vii)any obligations to make payments in relation to earn outs;
(viii)Financial Indebtedness which is in the nature of equity (other than redeemable shares) or equity derivatives;
(ix)Capital Lease Obligations or operating leases;
(x)receivables sold or discounted, whether recourse or non-recourse, including for the avoidance of doubt any debt in respect of Qualified Receivables Transactions, including without limitation guarantees by a Receivables Entity of the obligations of another Receivables Entity;
(xi)pension obligations or any obligation under employee plans or employment agreements;
(xii)any "parallel debt" obligations to the extent that such obligations mirror other Financial Indebtedness;
(xiii)any payments or liability for assets acquired or services supplied deferred (including trade payables) in accordance with the terms pursuant to which the relevant assets were or are to be acquired or services were or are to be supplied;
(xiv)the principal component or liquidation preference of all obligations of such person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Restricted Subsidiary, any Preferred Stock (including, in each case, any accrued dividends); and
(xv)the net obligations of such person under any Permitted Interest Rate, Currency or Commodity Price Agreement.
For the purposes of determining compliance with any covenant in these Terms and Conditions or whether an Event of Default has occurred, in each case, where Financial Indebtedness is denominated in a currency other than U.S. Dollars, the amount of such Financial Indebtedness will be the U.S. Dollar Equivalent determined on the date of such incurrence and any covenant in these Terms and Conditions shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values; provided, however, that if any such Financial Indebtedness that is denominated in a different currency is subject to an Interest Rate, Currency or Commodity Price Agreement with respect to U.S. Dollars covering principal and premium, if any, payable on such Financial Indebtedness, the amount of such Financial Indebtedness expressed in U.S. Dollars will be adjusted to take into account the effect of such an agreement.
"Disqualified Stock" means, with respect to any person, any Capital Stock of such person which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event:
(a)matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise;
(b)is convertible or exchangeable for Financial Indebtedness or Disqualified Stock (excluding Capital Stock which is convertible or exchangeable solely at the option of the Issuer or a Restricted Subsidiary); or
(c)is redeemable at the option of the holder of the Capital Stock in whole or in part,
in each case on or prior to the earlier of (a) the Final Maturity Date or (b) the date on which there are no Notes outstanding, provided that only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date will be deemed to be Disqualified Stock; provided, further that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Issuer to repurchase such Capital Stock upon the occurrence of a change of control or asset sale (each defined in a substantially identical manner to the corresponding definitions in these Terms and Conditions) shall not constitute Disqualified Stock if the terms of such Capital Stock (and all such securities into which it is convertible or for which it is ratable or exchangeable) provide that the Issuer may not repurchase or redeem any such Capital Stock (and all such securities into which it is convertible or for which it is ratable or exchangeable) pursuant to such provision prior to compliance by the Issuer with the Condition 9.6 and Condition 11.5 hereof.
"Financial Instruments Accounts Act" means the Swedish Financial Instruments Accounts Act (lag (1998:1479) om kontoföring av finansiella instrument).
"Financial Quarter" means the period commencing on the day after one Quarter Date and ending on the next Quarter Date.
"Financial Year" means the annual accounting period of the Issuer ending on or about 31 December in each year.
"First Call Date" means 20 January 2024.
"First Issue Date" means 20 January 2022.
"Fitch" has the meaning set forth in the definition "Rating Agency".
"Force Majeure Event" has the meaning set forth in Condition 25.1.
"GAAP" means generally accepted accounting principles in the United States.
"Gradation" means a gradation within a Rating Category or a change to another Rating Category, which shall include: (i) "+" and "-" in the case of Fitch's current Rating Categories (e.g., a decline from BB+ to BB would constitute a decrease of one gradation), (ii) 1, 2 and 3 in the case of Moody's current Rating Categories (e.g., a decline from Ba1 to Ba2 would constitute a decrease of one gradation), or (iii) the equivalent in respect of successor Rating Categories of Fitch or Moody's or Rating Categories used by Rating Agencies other than Fitch and Moody's.
"Group" means the Issuer and its Restricted Subsidiaries from time to time (each a "Group Company").
"Holding Company" means any person (other than a natural person) which legally and Beneficially Owns more than 50% of the Voting Stock and/or Capital Stock of another person, either directly or through one or more Subsidiaries.
"IFRS" means the International Financial Reporting Standards promulgated by the International Accounting Standards Board or any successor board or agency (and, at the irrevocable option of the Issuer, as adopted by the European Union), as in effect on the First Issue Date; provided that the Issuer may, at any time, irrevocably elect by written notice to the Trustee to use IFRS as in effect from time to time, and, upon such notice, references herein to IFRS shall thereafter be construed to mean IFRS as in effect from time to time. The Issuer also may, at any time, irrevocably elect by written notice to the Trustee to use GAAP as in effect from time to time in lieu of IFRS and, upon such notice, references herein to IFRS shall thereafter be construed to mean GAAP as in effect from time to time; provided that upon first reporting its fiscal year results under GAAP, the Issuer shall restate the financial statements required to be delivered under Condition 10.1.1, on the basis of GAAP for the fiscal year ending immediately prior to the first fiscal year for which financial statements have been prepared on the basis of GAAP.
"Initial Notes" means the Notes issued on the First Issue Date.
"Insolvent" means, in respect of a relevant person, that it is deemed to be insolvent, or admits inability to pay its debts as they fall due, in each case within the meaning of Chapter 2, Sections 7-9 of the Swedish Bankruptcy Act (konkurslagen (1987:672)) (or its equivalent in any other jurisdiction), suspends making payments on any of its debts or by reason of actual financial difficulties commences negotiations with all or substantially all of its creditors (other than the Noteholders and creditors of secured debt) with a view to rescheduling any of its indebtedness (including company reorganisation under the Swedish Company Reorganisation Act (lag (1996:764) om företagsrekonstruktion) (or its equivalent in any other jurisdiction)) or is subject to involuntary winding-up, dissolution or liquidation.
"Interest" means the interest on the Notes calculated in accordance with Conditions 8.1 to 8.3.
"Interest Payment Date" means 20 January, 20 April, 20 July and 20 October of each year or, to the extent any such day is not a Business Day, the Business Day following from an application of the Business Day Convention. The first Interest Payment Date for the Initial Notes shall be 20 April 2022 and the last Interest Payment Date shall be the Final Maturity Date or any relevant Redemption Date prior thereto.
"Interest Period" means (i) in respect of the first Interest Period, the period from (but excluding) the First Issue Date to (and including) the first Interest Payment Date, and (ii) in respect of subsequent Interest Periods, the period from (but excluding) an Interest Payment Date to (and including) the next succeeding Interest Payment Date (or a shorter period if relevant).
"Interest Rate" means a per annum rate equal to STIBOR plus 3.00 per cent., as adjusted by any application of Condition 18 (Replacement of Base Rate).
"Interest Rate, Currency or Commodity Price Agreement" of any person means any forward contract, futures contract, swap, option or other financial agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements) relating to, or the value of which is dependent upon, interest rates, currency exchange rates or commodity prices or indices (excluding contracts for the purchase or sale of goods in the ordinary course of business).
"Investment" by any person means any direct or indirect loan, advance or other extension of credit or capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) to, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Financial Indebtedness issued by, any other person, including any payment on a guarantee of any obligation of such other person, together with all items that are or would be classified as Investments on a statement of financial position (excluding the footnotes thereto) prepared in accordance with IFRS, but shall not include:
(a)trade accounts receivable in the ordinary course of business on credit terms made generally available to the customers of such person; or
(b)commission, travel, payroll, entertainment, relocation and similar advances to officers and employees and profit sharing and other employee benefit plan contributions made in the ordinary course of business.
Except as otherwise provided in these Terms and Conditions, the amount of an Investment will be determined at the time the Investment is made and without giving effect to a subsequent change in value and, to the extent applicable, shall be determined based on the equity value of such Investment.
"Investment Grade" means (i) BBB- or above in the case of Fitch (or its equivalent under any successor Rating Categories of Fitch), (ii) Baa3 or above, in the case of Moody's (or its equivalent under any successor Rating Categories of Moody's), and (iii) the equivalent in respect of the Rating Categories of any Rating Agencies.
"Issuer" means Millicom International Cellular, S.A., a public limited liability company (société anonyme) incorporated under the laws of Luxembourg, having its registered office
at 2, rue du Fort Bourbon, L-1249 Luxembourg and registered with the Luxembourg Trade and Companies Register under number B 40630.
"Issuing Agent" means DNB Bank ASA, Sweden Branch, or another party replacing it, as Issuing Agent, in accordance with these Terms and Conditions and the CSD Regulations.
"Joint Venture Consolidated EBITDA" means an amount equal to the product of (i) the Consolidated EBITDA of any joint venture (determined in good faith by a responsible financial or accounting officer of the Issuer on the same basis as provided for in the definition of "Consolidated EBITDA" (with the exception of clause (i) and the last sentence thereof) as if each reference to the " Issuer and its Restricted Subsidiaries" in such definition was to such joint venture) whose financial results are not consolidated with those of the Issuer in accordance with IFRS and (ii) a percentage equal to the direct or indirect equity ownership percentage of the Issuer and/or its Restricted Subsidiaries in the Capital Stock of such joint venture and its Subsidiaries.
"Lien" means, with respect to any property or assets, any mortgage, pledge, security interest, lien, charge, encumbrance, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing).
"Limited Condition Transaction" means (i) any Investment or acquisition, including by way of merger, amalgamation or consolidation, in each case, by one or more of the Issuer and its Restricted Subsidiaries of any assets, business or person whose consummation is not conditioned on the availability of, or on obtaining, third party financing and (ii) any redemption, repurchase, defeasance, satisfaction and discharge or repayment of Financial Indebtedness requiring irrevocable notice in advance of such redemption, repurchase, defeasance, satisfaction and discharge or repayment.
"Listing Failure Event" means (i) that the Initial Notes or any Additional Notes are not admitted to trading on a Regulated Market within 60 days following the First Issue Date or the date of issuance of any Additional Notes, or (ii) in the case of a successful admission, that a period of 60 days has elapsed since the Initial Notes and/or any Additional Notes ceased to be listed on a Regulated Market.
"Market Loan" means any loan or other indebtedness in the form of certificates, convertibles, subordinated debentures, notes or any other debt securities (including, for the avoidance of doubt, medium term note programmes and other market funding programmes), provided in each case that such instruments and securities are or can be subject to trading on any Regulated Market or a multilateral trading facility (as defined in Directive 2014/65/EU on markets in financial instruments).
"Material Company" means:
(a)the Issuer;
(b)a Significant Subsidiary; or
(c)any other Restricted Subsidiaries which are not Significant Subsidiaries but which taken together, account for more than 10 per cent. of the Consolidated EBITDA of the Group or consolidated revenues of the Group, or whose assets, taken together, represent more than 10 per cent. of the assets of the Group.
"Minority Shareholder Loan" means Financial Indebtedness of a Restricted Subsidiary that is issued to and held by an equity owner of such Restricted Subsidiary, other than a Group Company.
"Moody's" has the meaning set forth in the definition "Rating Agency".
"Net Available Proceeds" from any Asset Disposition means cash or readily marketable Cash Equivalents received (including by way of sale or discounting of a note, instalment receivable or other receivable, but excluding any assets described in clauses (iv) and (v) of Condition 11.5.1(c) and other consideration received in the form of assumption by the acquiror of Financial Indebtedness or other obligations relating to such properties or assets) therefrom by the Issuer or any of its Restricted Subsidiaries, net of:
(a)all legal, title and recording tax expenses, commissions and other fees and expenses incurred, including, without limitation, legal, consultant, accounting and investment banking fees, sales commissions, discounts and brokerage costs, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability as a consequence of such Asset Disposition;
(b)all payments made by the Issuer or any of its Restricted Subsidiaries, on any Financial Indebtedness which is secured by such assets in accordance with the terms of any Lien upon or with respect to such assets or which must by the terms of such Financial Indebtedness or Lien, or in order to obtain a necessary consent to such Asset Disposition or by applicable law, be repaid out of the proceeds from such Asset Disposition;
(c)all distributions and other payments made to other equity holders in the Issuer's Subsidiaries or joint ventures as a result of such Asset Disposition; and
(d)appropriate amounts to be provided by the Issuer or any of its Restricted Subsidiaries, as the case may be, as a reserve in accordance with IFRS, against any liabilities associated with such assets and retained by the Issuer or any of its Restricted Subsidiaries, as the case may be, after such Asset Disposition, including, without limitation, liabilities under any indemnification obligations, relocation costs and severance and other employee termination costs associated with such Asset Disposition, in each case as determined by the Issuer's senior management or board of directors, in its reasonable good faith judgment.
"Net Leverage Ratio" means, as of any date of determination, the ratio of (a) the Consolidated Net Debt outstanding on such date to (b) the Consolidated EBITDA for the four most recent Financial Quarters ending immediately prior to such date for which consolidated financial statements are available, determined, in each case, on a pro forma basis as if any such Financial Indebtedness had been incurred, or such other Financial Indebtedness had been repaid, redeemed or repurchased, as applicable, at the beginning of such four Financial Quarter period; provided, however, that the pro forma calculation shall not give effect to (i) any Financial Indebtedness incurred on such determination date pursuant to Condition 11.3(b) (other than Financial Indebtedness incurred pursuant to paragraph (f) of the definition of "Permitted Financial Indebtedness"), or (ii) the discharge on such determination date of any Financial Indebtedness to the extent that such discharge results from the proceeds incurred pursuant to Condition 11.3(b) (other than the discharge of Financial Indebtedness using proceeds of Financial Indebtedness incurred pursuant to paragraph (f) of the definition of "Permitted Financial Indebtedness"). For the avoidance of doubt, in determining the Net Leverage Ratio, no cash or Cash Equivalents shall be included that are the proceeds of Financial Indebtedness in respect of which the pro forma calculation
is to be made, unless such proceeds are committed to be used for the repayment or refinancing of any Financial Indebtedness.
"Net Proceeds" means the gross proceeds from the offering of the relevant Notes, minus (i) in respect of the Initial Notes, the costs incurred by the Issuer in conjunction with the issuance and listing on Nasdaq Stockholm (or any other Regulated Market, as applicable) thereof, and (ii) in respect of any Additional Notes, the costs incurred by the Issuer in conjunction with the issuance and listing on Nasdaq Stockholm (or any other Regulated Market, as applicable) thereof.
"Nominal Amount" has the meaning set forth in Condition 2.3.
"Noteholder" means a person who is registered on a Securities Account as direct registered owner (ägare) or nominee (förvaltare) with respect to a Note.
"Noteholders' Meeting" means a meeting among the Noteholders held in accordance with Condition 15 (Noteholders' Meeting).
"Notes" means the SEK Senior Unsecured Floating Rate Sustainability Notes due 20 January 2027, ISIN: SE0017133754 (including the Initial Notes and any Additional Notes), being debt instruments (skuldförbindelser) for the Nominal Amount and of the type set forth in Chapter 1 Section 3 of the Financial Instruments Accounts Act and which are issued on the terms set out in these Terms and Conditions and constituted by, are subject to and have the benefit of, the Trust Deed.
"Offer Amount" has the meaning set forth in Condition 9.5.3.
"Offer Period" has the meaning set forth in Condition 9.5.3.
"Pari Passu Financial Indebtedness" means any Financial Indebtedness of the Issuer that ranks pari passu in right of payment with the Notes.
"Permitted Asset Swap" means the concurrent purchase and sale or exchange of related business assets or a combination of related business assets, cash and Cash Equivalents between the Issuer or any of its Restricted Subsidiaries and another person.
"Permitted Business" means:
(a)any business, services or activities engaged in by the Issuer or any of its Subsidiaries on the First Issue Date; and
(b)any business, services and activities that are related, complementary, incidental, ancillary or similar to any of the foregoing, or are extensions or developments thereof, including, without limitation, broadband internet, network-related services, cable television, broadcast content, network neutral services, electronic transactional, financial and commercial services related to provision of telephony or internet services.
"Permitted Discontinuance of Property Maintenance" means the discontinuance of the operation or maintenance of the properties of any Group Company which is, in the Issuer's judgment, desirable in the conduct of its business or the business of such other Group Company (as applicable), and which will not materially adversely affect the Noteholders.
"Permitted Financial Indebtedness" means:
(a)the incurrence by the Issuer of Financial Indebtedness pursuant to the Notes (other than Additional Notes);
(b)any Financial Indebtedness of a Group Company outstanding on the First Issue Date after giving effect to the use of proceeds of the Notes;
(c)Pari Passu Financial Indebtedness of the Issuer and Financial Indebtedness of any Group Company under Credit Facilities in an aggregate principal amount at any one time outstanding that does not exceed an amount equal to the greater of (x) $900 million and (y) 8 per cent. of Total Assets; and any Permitted Refinancing Debt in respect thereof, plus, (A) any accrual or accretion of interest that increases the principal amount of Financial Indebtedness under Credit Facilities and (B) in the case of any refinancing of Financial Indebtedness permitted under this paragraph (c) or any portion thereof, the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing;
(d)Financial Indebtedness owed by the Issuer to any Restricted Subsidiary or Financial Indebtedness owed by any Restricted Subsidiary to the Issuer or any other Restricted Subsidiary; provided, however, that (A) if the Issuer is the obligor on such Financial Indebtedness and the payee is not the Issuer, such Financial Indebtedness must be unsecured and expressly subordinated (provided, for the avoidance of doubt, that such subordination shall only apply if an Event of Default specified in clauses (a), (b), (h) or (i) of Condition 12.1 occurs)1 to the prior payment in full in cash of all obligations then due with respect to the Issuer's obligations under the Notes, and (B) either (x) the transfer or other disposition by the Issuer or such Restricted Subsidiary of any Financial Indebtedness so permitted to a person (other than to the Issuer or any of its Restricted Subsidiaries) or (y) such Restricted Subsidiary ceasing to be a Restricted Subsidiary of the Issuer, will at the time of such transfer or other disposition, in each case, be deemed to be an incurrence of such Financial Indebtedness not permitted by this paragraph (d);
(e)the guarantee by a Group Company of Financial Indebtedness of any of the Issuer's Restricted Subsidiaries to the extent that the guaranteed Financial Indebtedness was permitted to be incurred by another provision of this definition;
(f)Acquired Debt;
(g)Minority Shareholder Loans;
(h)the incurrence by a Group Company of Permitted Refinancing Debt in exchange for, or the net proceeds of which are used to refund, replace or refinance, Financial Indebtedness incurred by it pursuant to clause (a) of Condition 11.3 and paragraphs (a), (b), (f) and this paragraph (h) of this definition, as the case may be;
(i)Financial Indebtedness of a Group Company represented by letters of credit in order to provide security for workers' compensation claims, health, disability or other employee benefits, payment obligations in connection with self-insurance or similar requirements of a Group Company in the ordinary course of business;
1 Note to SM: This provision is and must remain consistent with Millicom's USD bonds.
(j)customary indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition of any assets of a Group Company, and earn-out provisions or contingent payments in respect of purchase price or adjustment of purchase price or similar obligations in acquisition agreements other than guarantees of Financial Indebtedness incurred by any person acquiring all or any portion of such assets for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of each such incurrence of such Financial Indebtedness will at no time exceed the gross proceeds actually received by a Group Company in connection with the related disposition;
(k)obligations in respect of (i) customs, VAT or other tax guarantees, (ii) bid, performance, completion, guarantee, surety and similar bonds, including guarantees or obligations of a Group Company with respect to letters of credit supporting such obligations, (iii) customary cash management, cash pooling or netting or setting off arrangements, and (iv) the financing of insurance premiums, in each case in the ordinary course of business and not related to Financial Indebtedness for borrowed money;
(l)Financial Indebtedness of a Group Company arising from the honouring by a bank or other financial institution of a cheque, draft or similar instrument including, but not limited to, electronic transfers, wire transfers, netting services and commercial card payments, drawn against insufficient funds; provided that such Financial Indebtedness is extinguished within 30 days of incurrence;
(m)Financial Indebtedness consisting of (i) mortgage financings, Purchase Money Obligations or other financings, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment acquired or constructed in the ordinary course of business or (ii) Financial Indebtedness otherwise incurred to finance the purchase, lease, rental or cost of design, construction, installation or improvement of property (real or personal) or equipment that is used or useful in the ordinary course of business, whether through the direct purchase of assets or the Capital Stock of any person owning such assets, and any Financial Indebtedness that refinances, replaces or refunds such Financial Indebtedness, in an aggregate outstanding principal amount that, when taken together with the principal amount of all other Financial Indebtedness incurred pursuant to this paragraph (m) and then outstanding, will not exceed at any time the greater of $250,000,000 and 3 per cent. of Total Assets;
(n)guarantees by a Group Company of Financial Indebtedness or any other obligation or liability of a Group Company (other than of any Financial Indebtedness incurred in violation of these Terms and Conditions); provided, however, that if the Financial Indebtedness being guaranteed is subordinated in right of payment to the Notes, then such guarantee shall be subordinated substantially to the same extent as the relevant Financial Indebtedness guaranteed;
(o)Financial Indebtedness of a Group Company in an aggregate outstanding principal amount which, when taken together with any Permitted Refinancing Debt in respect thereof and the principal amount of all other Financial Indebtedness incurred pursuant to this paragraph (o) and then outstanding, will not exceed 100 per cent. of the cash proceeds (net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, listing fees, discounts or commissions and brokerage, consultant and other fees and charges actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result of such issuance or sale (after taking into account any available tax credit or deductions and any tax sharing
arrangements)) received by the Issuer from the issuance or sale (other than to the Issuer or a Restricted Subsidiary) of its subordinated shareholder loans or Capital Stock or otherwise contributed to the equity of the Issuer, in each case, subsequent to the First Issue Date (and in each case, other than through the issuance of Disqualified Stock or Preferred Stock);
(p)Financial Indebtedness arising under borrowing facilities provided by a special purpose vehicle to a Group Company in connection with the issuance of notes or other similar debt securities intended to be supported primarily by the payment obligations of a Group Company in connection with any vendor financing platform; and
(q)the incurrence by a Group Company of Financial Indebtedness not otherwise permitted to be incurred pursuant to paragraphs (a) through (p) above, which, together with any other outstanding Financial Indebtedness incurred pursuant to this paragraph (q), has an aggregate principal amount at any time outstanding not in excess of the greater of $300,000,000 and 4 per cent. of Total Assets, and any Permitted Refinancing Debt of any debt which on the date it was incurred was permitted to be incurred pursuant to this paragraph (q), plus, in the case of any refinancing of Financial Indebtedness permitted under this paragraph (q) or any portion thereof, the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing.
In the event that an item of Financial Indebtedness meets the criteria of more than one of the types of Permitted Financial Indebtedness or is entitled to be incurred pursuant to paragraph (a) of Condition 11.3, the Issuer in its sole discretion may classify and from time to time reclassify such item of Financial Indebtedness or any portion thereof and only be required to include the amount of such Financial Indebtedness as one of such types.
"Permitted Interest Rate, Currency or Commodity Price Agreement" means any Interest Rate, Currency or Commodity Price Agreement entered into with one or more financial institutions in the ordinary course of business that is designed to protect against fluctuations in interest rates or currency exchange rates and which shall have a notional amount no greater than the payments due with respect to the Financial Indebtedness being hedged thereby, or in the case of currency or commodity protection agreements against currency exchange or commodity price fluctuations in the ordinary course of business relating to the then existing financial obligations and not for purposes of speculation.
"Permitted Investments" means (i) loans or advances to employees and officers (or loans to any direct or indirect parent, the proceeds of which are used to make loans or advances to employees or officers, or guarantees of third-party loans to employees or officers) in the ordinary course of business; and (ii) customary cash management, cash pooling or netting or setting off arrangements; and (iii) the granting of Liens pursuant to paragraph (ll) of the definition of Permitted Liens.
"Permitted Lien" means:
(a)Liens for taxes, assessments or governmental charges, or levies on the property of a Group Company if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve
or other appropriate provision that shall be required in conformity with IFRS shall have been made therefor;
(b)Liens imposed by law, such as statutory Liens of landlords', carriers', materialmen's, repairmen's, construction, warehousemen's and mechanics' Liens and other similar Liens, on the property of a Group Company arising in the ordinary course of trading or Liens arising solely by virtue of any statutory or common law provisions relating to attorneys' liens or bankers' liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depositary institution;
(c)Liens on the property of a Group Company incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance bids, trade contracts, letters of credit, performance or return-of-money bonds, surety bonds or other obligations of a like nature and incurred in a manner consistent with industry practice, in each case which are not incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property and which do not in the aggregate impair in any material respect the use of property in the operation of the business of the Group taken as a whole;
(d)Liens on property at the time a Group Company acquired such property and Liens incurred in anticipation of or in connection with the transaction or series of transactions pursuant to which such property was acquired by a Group Company, provided that any such Lien may not extend to any other property of a Group Company;
(e)Liens on the property of a person at the time such person becomes a Restricted Subsidiary (including Liens created, incurred or assumed in connection with or in contemplation of such acquisition or transaction); provided, however, that any such Lien may not extend to any other property of a Group Company that is not a Restricted Subsidiary of such person (other than pursuant to after-acquired property clauses in effect with respect to such Lien at the time of acquisition on property of the type that would have been subject to such Lien notwithstanding the occurrence of such acquisition);
(f)pledges or deposits by a Group Company under workmen's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Financial Indebtedness) or leases to which a Group Company is party, or deposits to secure public or statutory obligations of a Group Company or deposits for the payment of rent, in each case incurred in the ordinary course of business;
(g)utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character;
(h)any provision for the retention of title to any property by the vendor or transferor of such property which property is acquired by a Group Company in a transaction entered into in the ordinary course of business of a Group Company and for which kind of transaction it is customary market practice for such retention of title provision to be included;
(i)Liens arising by means of any judgment, decree or order of any court, to the extent not otherwise resulting in a Default, so long as any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order have not been fully terminated or the period within which such proceedings may be initiated has not expired and any Liens that are required to protect or enforce rights in any administrative, arbitration or other court proceeding in the ordinary course of business;
(j)Liens securing any Credit Facility or any Permitted Interest Rate, Currency or Commodity Price Agreement;
(k)Liens securing customary indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition of any assets by the Issuer or any Restricted Subsidiary, and earn-out provisions or contingent payments in respect of purchase price or adjustment of purchase price or similar obligations in acquisition agreements other than guarantees of Financial Indebtedness incurred by any person acquiring all or any portion of such assets for the purpose of financing such acquisition;
(l)mortgages, Liens, security interests, restrictions, encumbrances or any other matters of record that have been placed by any developer, landlord or other third party on property over which any Group Company has easement rights or on any real property leased by any Group Company, and any condemnation or eminent domain proceedings or compulsory purchase order affecting real property;
(m)Liens existing on the First Issue Date;
(n)Liens in favour of a Group Company;
(o)Liens on insurance policies and the proceeds thereof, or other deposits, to secure insurance premium financings in respect of a Group Company;
(p)Liens arising from financing statement filings (or other similar filings in any applicable jurisdiction) regarding operating leases entered into by any Restricted Subsidiary in the ordinary course of business;
(q)Liens on goods (and the proceeds thereof) and documents of title and the property covered thereby securing Financial Indebtedness in respect of commercial letters of credit issued to facilitate the purchase, shipment or storage of such inventory or other goods;
(r)Liens on property of any Restricted Subsidiary of the Issuer to secure Financial Indebtedness incurred by such Restricted Subsidiary pursuant to Condition 11.3 or paragraphs (i) through (m) (inclusive) of the definition of Permitted Financial Indebtedness;
(s)Liens on property of the Issuer to secure Financial Indebtedness incurred by the Issuer pursuant to paragraph (l) of the definition of Permitted Financial Indebtedness;
(t)Liens for the purpose of securing the payment of all or a part of the purchase price of Capital Lease Obligations or payments incurred by a Group Company to finance the acquisition, improvement or construction of, assets or property acquired or constructed in the ordinary course of business; provided that such Liens do not
encumber any other assets or property of a Group Company other than such assets or property and assets affixed or appurtenant thereto;
(u)Liens on the property of a Group Company to replace in whole or in part, any Lien described in the foregoing paragraphs (a) through (t); provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Financial Indebtedness being refinanced or in respect of property that is the security for a Permitted Lien hereunder;
(v)any interest or title of a lessor under any Capital Lease Obligation or operating lease;
(w)Liens on any escrow account used in connection with an acquisition of property or Capital Stock of any person or pre-funding a refinancing of Financial Indebtedness otherwise permitted under these Terms and Conditions;
(x)Liens on a Group Company's deposits in favour of financial institutions arising from any netting or set-off arrangement substantially consistent with its current practice for the purpose of netting debt and credit balances substantially consistent with the Issuer's or the Restricted Subsidiaries' existing cash pooling arrangements;
(y)Liens incurred in the ordinary course of business of the Issuer or any of its Restricted Subsidiaries with respect to obligations that do not exceed the greater of $500,000,000 or 4 per cent. of Total Assets at any one time outstanding and that do not in the aggregate materially detract from the value of the property of the Issuer, or materially impair the use thereof in the operation of business by the Group;
(z)Liens over cash or other assets that secure collateralised obligations incurred as Permitted Financial Indebtedness; provided that the amount of cash collateral does not exceed the principal amount of the Permitted Financial Indebtedness;
(aa)Liens on Restricted MFS Cash in favour of the customers or dealers of, or third parties in relation to, one or more Restricted Subsidiaries engaged in the provision of mobile financial services, in each case who provided such Restricted MFS Cash to the relevant Restricted Subsidiary;
(bb) Liens on Receivables and related assets of the type described in the definition of "Qualified Receivables Transaction" incurred in connection with a Qualified Receivables Transaction, and Liens on Investments in Receivables Entities;
(cc) Liens consisting of any right of set-off granted to any financial institution acting as a lockbox bank in connection with a Qualified Receivables Transaction;
(dd) Liens for the purpose of perfecting the ownership interests of a purchaser of Receivables and related assets pursuant to any Qualified Receivables Transaction;
(ee) Liens arising in connection with other sales of Receivables permitted hereunder without recourse to the Issuer or any of its Restricted Subsidiaries;
(ff) Liens on Receivables and related assets of the type specified in the definition of "Qualified Receivables Transaction" pursuant to any Qualified Receivables Transaction;
(gg) Liens for the purpose of securing the payment of all or a part of the purchase price of, or Capital Lease Obligations, Purchase Money Obligations or other payments incurred to finance the acquisition, improvement or construction of, assets or property acquired or constructed in the ordinary course of business (including Liens arising out of conditional sale, title retention, hire purchase, consignment or similar arrangements for the sale of goods entered into in the ordinary course of business), provided that such Liens do not encumber any other assets or property of the Issuer or any Restricted Subsidiary other than such assets or property and assets affixed or appurtenant thereto;
(hh) Liens securing Financial Indebtedness or other obligations of a Restricted Subsidiary owing to the Issuer or another Restricted Subsidiary;
(ii) Liens in respect of the ownership interests in, or assets owned by, any joint ventures or similar arrangements, other than joint ventures and similar arrangements that are Restricted Subsidiaries, securing obligations of such joint ventures or similar agreements;
(jj) any encumbrance or restriction (including, but not limited to, put and call arrangements) with respect to Capital Stock of any joint venture or similar arrangement pursuant to any joint venture or similar agreement;
(kk) Liens over rights under loan agreements relating to, or over notes or similar instruments evidencing, the on-loan of proceeds received by a Restricted Subsidiary from the issuance of Financial Indebtedness, which Liens are created to secure payment of such Financial Indebtedness;
(ll) Liens on Capital Stock or other securities or assets of any Unrestricted Subsidiary that secure Financial Indebtedness of such Unrestricted Subsidiary; and
(mm) Liens securing Acquired Debt described in clause (a) of the definition thereof (provided that any Liens securing Permitted Refinancing Debt with respect thereto shall not be a Permitted Lien pursuant to this paragraph (mm)).
For purposes of determining compliance with Condition 11.4, (x) a Lien need not be incurred solely by reference to one category of Permitted Liens but may be incurred under any combination of such categories (including in part under one such category and in part under any other such category) and (y) in the event that a Lien (or any portion thereof) meets the criteria of one or more of such categories of Permitted Liens the Issuer shall, in its sole discretion, divide, classify or may subsequently reclassify at any time such Lien (or any portion thereof) in any manner that complies with Condition 11.4 and this definition of "Permitted Lien".
With respect to any Lien securing Financial Indebtedness that was permitted to secure such Financial Indebtedness at the time of the incurrence of such Financial Indebtedness, such Lien shall also be permitted to secure any Increased Amount of such Financial Indebtedness. The "Increased Amount" of any Financial Indebtedness shall mean any increase in the amount of such Financial Indebtedness in connection with any accrual of interest, the accretion of accreted value, the amortisation of original issue discount, the payment of interest in the form of additional Financial Indebtedness with the same terms or in the form of common stock, the payment of dividends on Preferred Stock in the form of additional shares of Preferred Stock of the same class, accretion of original issue discount or liquidation preference, any fees, underwriting discounts, accrued and unpaid interest, premiums and other costs and expenses incurred in connection therewith and increases in the amount of
Financial Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies or increases in the value of property securing Financial Indebtedness.
"Permitted Refinancing Debt" means any renewals, extensions, substitutions, defeasances, discharges, refinancings or replacements (each, for purposes of this definition and clause (h) of the definition of Permitted Financial Indebtedness, a "refinancing") of any Financial Indebtedness of a Group Company or pursuant to this definition, including any successive refinancings, as long as:
(i)such Permitted Refinancing Debt is in an aggregate principal amount (or if incurred with original issue discount, an aggregate issue price) not in excess of the sum of: (i) the aggregate principal amount (or, if incurred with original issue discount, the aggregate accreted value plus all accrued interest) then outstanding of the Financial Indebtedness being refinanced; and (ii) an amount necessary to pay any fees and expenses, including premiums and defeasance costs, related to such refinancing;
(ii)such Permitted Refinancing Debt has (i) a stated maturity date that is either (X) no earlier than the stated maturity date of the Financial Indebtedness being refinanced or (Y) after the Final Maturity Date of the Notes and (ii) a Weighted-Average Life to Maturity that is equal to or greater than the Weighted-Average Life to Maturity of the Financial Indebtedness being refinanced;
(iii)if the Financial Indebtedness being refinanced is subordinated in right of payment to the Notes, such Permitted Refinancing Debt is subordinated in right of payment to the Notes on terms at least as favourable to the Noteholders as those contained in the documentation governing the Financial Indebtedness being refinanced; and
(iv)if the Issuer was the obligor on the Financial Indebtedness being refinanced, such Permitted Refinancing Debt is incurred by the Issuer.
Permitted Refinancing Debt in respect of any Credit Facility or any other Financial Indebtedness may be incurred from time to time after the termination, discharge or repayment of all or any part of such Credit Facility or other Financial Indebtedness. Permitted Refinancing Debt shall not include any Financial Indebtedness of the Issuer or any Restricted Subsidiary that refinances Financial Indebtedness of an Unrestricted Subsidiary.
"Preferred Stock" of any person means Capital Stock of such person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such person, to shares of Capital Stock of any other class of such person.
"Proceeds On-Loan" has the meaning set forth in the definition "Financial Indebtedness".
"Purchase Date" has the meaning set forth in Condition 9.5.3
"Purchase Money Note" means a promissory note of a Receivables Entity evidencing the deferred purchase price of Receivables (and related assets) and/or a line of credit, which may be irrevocable, from a Group Company in connection with a Qualified Receivables Transaction with a Receivables Entity, which note is intended to finance that portion of the purchase price that is not paid in cash or a contribution of equity and which (a) is repayable
from cash available to the Receivables Entity, other than (i) amounts required to be established as reserves pursuant to agreements, (ii) amounts paid to investors in respect of interest, (iii) principal and other amounts owing to such investors and (iv) amounts owing to such investors and amounts paid in connection with the purchase of newly generated Receivables and (b) may be subordinated to the payments described in clause (a).
"Purchase Money Obligations" means any Financial Indebtedness incurred to finance or refinance the acquisition, leasing, construction or improvement of property (real or personal) or assets (including Capital Stock), and whether acquired through the direct acquisition of such property or assets or the acquisition of the Capital Stock of any person owning such property or assets, or otherwise.
"Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by a Group Company pursuant to which a Group Company may sell, convey or otherwise transfer to (i) a Receivables Entity (in the case of a transfer by a Group Company) and (ii) any other person (in the case of a transfer by a Receivables Entity), or may grant a Lien in, any Receivables (whether now existing or arising in the future) of a Group Company, and any assets related thereto including, without limitation, all collateral securing such Receivables, all contracts and all guarantees or other obligations in respect of such Receivables, the proceeds of such Receivables and other assets which are customarily transferred, or in respect of which Liens are customarily granted, in connection with asset securitisations involving Receivables and any Interest Rate, Currency or Commodity Price Agreement entered into by a Group Company in connection with such Receivables.
"Quarter Date" means each of 31 March, 30 June, 30 September and 31 December.
"Quotation Day" means, in relation to any period for which an Interest Rate is to be determined, two Business Days before the first day of that period.
"Rating Agency" means (i) each of Standard & Poor's Rating Services ("S&P"), Fitch Ratings Ltd ("Fitch"), Moody's Investor Services Limited ("Moody's") or (ii) if any of S&P, Fitch or Moody's are not making ratings of the Notes publicly available, an internationally recognised credit rating agency or agencies, as the case may be, selected by the Issuer which will be substituted for any of S&P, Fitch or Moody's.
"Rating Category" means (i) with respect to Fitch, any of the following categories (any of which may include a "+" or "-"): AAA, AA, A, BBB, BB, B, CCC, CC, C, R, SD and D (or equivalent successor categories); (ii) with respect to Moody's, any of the following categories (any of which may include a "1", "2" or "3"): Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C (or equivalent successor categories), and (iii) the equivalent of any such categories of Fitch or Moody's used by another Rating Agency, if applicable.
"Rating Date" means the date which is the earlier of (i) 120 days prior to the occurrence of an event specified in clauses (a), (b) or (c) of the definition of Change of Control and (ii) the date of the first public announcement of the possibility of such event.
"Rating Decline" means the occurrence of, at any time within the earlier of (i) 90 days after the date of public notice of a Change of Control, or the Issuer's intention or the intention of any person to effect a Change of Control and (ii) the occurrence of the Change of Control (which period shall in either event be extended so long as the rating of the Issuer is under publicly announced consideration for possible downgrade by a Rating Agency), a Rating Agency withdrawal of its rating of the Issuer or a decrease in the rating of the Issuer by a Rating Agency as follows:
(a) if the Issuer is not rated Investment Grade by at least two of the three Rating Agencies on the Rating Date, by one or more Gradations; or
(b) if the Issuer is rated Investment Grade by at least two of the three Rating Agencies on the Rating Date, either (i) by two or more Gradations or (ii) such that the Issuer is no longer rated Investment Grade.
provided that, when announcing the relevant decision(s) to withdraw or decrease the rating, each such Rating Agency announces publicly or confirms in writing that such decision(s) resulted, in whole or in part, from the occurrence (or expected occurrence) of the Change of Control or the Issuer's announcement of the intention to effect a Change of Control.
"Receivable" means a right to receive payment arising from a sale or lease of goods or the performance of services by a person pursuant to an arrangement with another person pursuant to which such other person is obligated to pay for goods or services under terms that permit the purchase of such goods and services on credit and shall include, in any event, any items of property that would be classified as an "account," "chattel paper," "payment intangible" or "instrument" under the Uniform Commercial Code as in effect in the State of New York and any "supporting obligations" as so defined.
"Receivables Entity" means a direct or indirect wholly owned Subsidiary of the Issuer (or another person in which a Group Company makes an Investment or to which a Group Company transfers Receivables and related assets) which engages in no activities other than in connection with the financing of Receivables and which is designated by the board of directors or senior management of the Issuer (as provided below) as a Receivables Entity:
(a)no portion of the Financial Indebtedness or any other obligations (contingent or otherwise) of which:
(i)is guaranteed by a Group Company (excluding guarantees of obligations (other than the principal of, and interest on, Financial Indebtedness) pursuant to Standard Securitisation Undertakings);
(ii)is recourse to or obligates a Group Company in any way other than pursuant to Standard Securitisation Undertakings; or
(iii)subjects any property or asset of a Group Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitisation Undertakings, except, in each such case, Permitted Liens as defined in clauses (bb) through (ff) of the definition thereof;
(b)with which no Group Company has any material contract, agreement, arrangement or understanding (except in connection with a Purchase Money Note or Qualified Receivables Transaction) other than on terms not materially less favourable to such Group Company than those that might be obtained at the time from persons that are not Affiliates of the Issuer, other than fees payable in the ordinary course of business in connection with servicing Receivables; and
(c)to which no Group Company has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results (other than those related to or incidental to the relevant Qualified Receivables Transaction).
Any such designation by the board of directors or senior management of the Issuer shall be evidenced to the Trustee by promptly filing with the Trustee a certified copy of the resolution of the board of directors of the Issuer giving effect to such designation or an officer's certificate certifying that such designation complied with the foregoing conditions.
"Receivables Repurchase Obligation" means any obligation of a seller of Receivables in a Qualified Receivables Transaction to repurchase Receivables arising as a result of a breach of a representation, warranty or covenant or otherwise, including as a result of a receivable or portion thereof becoming subject to any asserted defence, dispute, offset or counterclaim of any kind as a result of any action taken by, any failure to take action by or any other event relating to the seller.
"Record Date" means the fifth Business Day prior to (i) an Interest Payment Date, (ii) a Redemption Date, (iii) a date on which a payment to the Noteholders is to be made under Condition 13 (Distribution of proceeds) or (iv) another relevant date, or in each case such other Business Day falling prior to a relevant date if generally applicable on the Swedish bond market.
"Redeemable Stock" of any person means any Capital Stock of such person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or otherwise (including upon the occurrence of an event) matures or is required to be redeemed (pursuant to any sinking fund obligation or otherwise) or is convertible into or exchangeable for Financial Indebtedness or is redeemable at the option of the holder thereof, in whole or in part, at any time prior to the Final Maturity Date.
"Redemption Date" means the date on which the relevant Notes are to be redeemed or repurchased in accordance with Condition 9 (Redemption and repurchase of the Notes).
"Regulated Market" means any regulated market (as defined in Directive 2014/65/EU on markets in financial instruments).
"Restricted Cash" means the sum of (a) Restricted MFS Cash, and (b) without duplication, the amount of cash that would be stated as "restricted cash" on the consolidated statement of financial position of the Issuer as of such date in accordance with IFRS.
"Restricted MFS Cash" means, as of any date of determination, an amount equal to any cash paid in or deposited by or held on behalf of any customer or dealer of, or any other third party in relation to, one or more of the Issuer's Subsidiaries engaged in the provision of mobile financial services and designated as "restricted cash" on the consolidated statement of financial position of the Issuer, together with any interest thereon.
"Restricted Subsidiary" means any Subsidiary of the Issuer other than an Unrestricted Subsidiary.
"Revolving Credit Facility" means the $600 million revolving credit facility agreement dated 15 October 2020 entered into by the Issuer and a consortium of banks, which may be increased by an additional $300 million, as the same may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part).
"Securities Account" means the account for dematerialised securities maintained by the CSD pursuant to the Financial Instruments Accounts Act in which (i) an owner of such
securities is directly registered or (ii) an owner's holding of securities is registered in the name of a nominee.
"Significant Subsidiary" means, at the date of determination, a Restricted Subsidiary that:
(a)for the most recent fiscal year, accounted for more than 10 per cent. of the Consolidated EBITDA of the Group or consolidated revenues of the Group; or
(b)whose assets represent more than 10 per cent. of the assets of the Group.
"Specified Legal Expenses" means, to the extent not constituting an extraordinary, non-recurring or unusual loss, charge or expense, all attorneys' and experts' fees and expenses and all other costs, liabilities (including all damages, penalties, fines and indemnification and settlement payments) and expenses paid or payable in connection with any threatened, pending, completed or future claim, demand, action, suit, proceeding, inquiry or investigation (whether civil, criminal, administrative, governmental or investigative).
"Specified Subsidiary Sale" means the sale, transfer or other disposition of all of the Capital Stock, or all of the assets or properties, of (a) any entity, the primary purpose of which is to own Tower Equipment located in any market in which a Group Company operates; (b) any person which operates a Group Company's mobile financial services business; (c) Latin America Internet Holding GmbH (or any successor in interest thereto); or (d) Africa Internet Holding GmbH (or any successor in interest thereto).
"Standard Securitisation Undertakings" means representations, warranties, covenants and indemnities entered into by a Group Company which are reasonably customary in a securitisation of Receivables transactions, including, without limitation, those relating to the servicing of the assets of a Receivables Entity, it being understood that any Receivables Repurchase Obligation shall be deemed to be a Standard Securitisation Undertaking.
"STIBOR" means:
(a) the Stockholm interbank offered rate (STIBOR) administered by the Base Rate Administrator for the offering of deposits in Swedish Kronor and for a period comparable to the relevant Interest Period (other than the first Interest Period to which, notwithstanding its duration, the applicable percentage rate per annum for the offering of deposits in Swedish Kronor for a period of three months will apply), as displayed on page STIBOR= of the Thomson Reuters screen (or any replacement thereof) as of or around 11:00 a.m. on the Quotation Day;
(b)if no rate described in paragraph (a) is available for the relevant Interest Period, the rate determined by the Trustee by linear interpolation between the two closest rates for STIBOR fixing, as displayed on page STIBOR= of the Thomson Reuters screen (or any replacement thereof) as of or around 11.00 a.m. on the Quotation Date for the offering of deposits in SEK;
(c)if no rate as described in paragraph (a) or (b) is available for the relevant Interest Period, the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Issuing Agent at its request quoted by leading banks in the Stockholm interbank market reasonably selected by the Issuing Agent in consultation with the Issuer, for deposits of SEK 100,000,000 for the relevant period; or
(d)if no rate as described in paragraph (a) or (b) is available for the relevant Interest Period and no quotation is available pursuant to paragraph (c), the interest rate which according to the reasonable assessment of the Issuing Agent best reflects the interest rate for deposits in Swedish Kronor offered in the Stockholm interbank market for the relevant period.
"Subsidiary" means in respect of any person:
(a)any corporation in which it or one or more of its Subsidiaries directly or indirectly owns more than 50 per cent. of the combined voting power of the outstanding Voting Stock; or
(b)any other entity in which it or one or more of its Subsidiaries:
(i)directly or indirectly has majority ownership, but only to the extent such majority ownership results in an entitlement to the majority of the profits generated by that entity; or
(ii)has the power to direct the policies, management and affairs thereof.
"Sustainability Bond Framework" means the sustainability bond framework of the Group as at the First Issue Date.
"Swedish Kronor" and "SEK" means the lawful currency of Sweden.
"Total Assets" means the consolidated total assets of the Group as shown on the Issuer's most recent consolidated statement of financial position prepared on the basis of IFRS prior to the relevant date of determination calculated to give pro forma effect to any acquisitions (including through mergers or consolidations) and dispositions that have occurred subsequent to such period, including any such acquisitions to be made with the proceeds of Financial Indebtedness giving rise to the need to calculate Total Assets.
"Total Nominal Amount" means the total aggregate Nominal Amount of the Notes outstanding at the relevant time.
"Tower Equipment" means passive infrastructure related to telecommunications services, excluding telecommunications equipment, but including, without limitation, towers (including tower lights and lightning rods), power breakers, deep cycle batteries, generators, voltage regulators, main AC power, rooftop masts, cable ladders, grounding, walls and fences, access roads, shelters, air conditioners and BTS batteries owned by any Group Company.
"Trust Deed" means the trust deed entered into on or prior to the First Issue Date, between the Issuer and the Trustee, or any replacement or supplemental trust deed entered into between the Issuer and the Trustee thereafter.
"Trustee" means Intertrust CN (Sweden) AB, Swedish Reg. No. 556625-5476, or another party replacing it, as Trustee, in accordance with these Terms and Conditions and the Trust Deed.
"Unrestricted Subsidiary" means any Subsidiary of the Issuer designated as such pursuant to Condition 11.8.
"U.S. Dollar Equivalent" means with respect to any monetary amount in a currency other than U.S. Dollars, at any time of determination thereof, the amount of U.S. Dollars
obtained by translating such other currency involved in such computation into U.S. Dollars at the spot rate for the purchase of U.S. Dollars with the applicable other currency as published in the Financial Times on the date that is two Business Days prior to such determination.
"U.S. Dollars" and "$" means the lawful currency of the United States of America.
"VAT" means:
(a)any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112); and
(b)any other tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or levied in addition to, such tax referred to in paragraph (a) above, or imposed elsewhere.
"Voting Stock" of any person means Capital Stock of such person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency.
"Weighted-Average Life to Maturity" means, when applied to any Financial Indebtedness or Preferred Stock at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Financial Indebtedness or liquidation preference of such Preferred Stock, as the case may be, into (b) the total of the product obtained by multiplying (x) the amount of each then remaining instalment, sinking fund, serial maturity or other required payments of principal or payment upon mandatory redemption, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment.
"Written Procedure" means the written or electronic procedure for decision making among the Noteholders in accordance with Condition 16 (Written Procedure).
1.2Construction
1.2.1Unless a contrary indication appears, any reference in these Terms and Conditions to:
(a) "assets" includes present and future properties, revenues and rights of every description;
(b)any agreement or instrument is a reference to that agreement or instrument as supplemented, amended, novated, extended, restated or replaced from time to time;
(c)a "regulation" includes any regulation, rule or official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;
(d)a provision of law is a reference to that provision as amended or re-enacted; and
(e)a time of day is a reference to Stockholm time.
1.2.2An Event of Default is continuing if it has not been remedied or waived.
1.2.3When ascertaining whether a limit or threshold specified in SEK has been attained or broken, an amount in another currency shall be counted on the basis of the rate of exchange for such currency against SEK for the previous Business Day, as published by the Swedish Central Bank (Riksbanken) on its website (www.riksbank.se). If no such rate is available, the most recently published rate shall be used instead.
1.2.4A notice shall be deemed to be sent by way of press release if it is made available to the public within Sweden promptly
1.2.5No delay or omission of the Trustee or of any Noteholder to exercise any right or remedy under the Finance Documents shall impair or operate as a waiver of any such right or remedy.
1.2.6The selling restrictions, the privacy notice and any other information contained in this document before the table of contents section do not form part of these Terms and Conditions and may be updated without the consent of the Noteholders and the Trustee.
2.STATUS OF THE NOTES
2.1The Notes are denominated in SEK and each Note is constituted by the Trust Deed and these Terms and Conditions. The Issuer undertakes to make payments in relation to the Notes and to comply with these Terms and Conditions.
2.2By subscribing for Notes, each initial Noteholder agrees that the Notes shall benefit from and be subject to the Finance Documents and by acquiring Notes, each subsequent Noteholder confirms such agreement.
2.3The nominal amount of each Initial Note is SEK 1,250,000 (the "Nominal Amount"). All Initial Notes are issued on a fully paid basis at an issue price of 100 per cent. of the Nominal Amount.
2.4Provided that no Event of Default is continuing or would result from such issue and subject to the terms of the Trust Deed and the satisfaction of the conditions precedent set out in Condition 4.1, the Issuer may, from time to time, without the consent of the Noteholders, issue Additional Notes having the same interest rate and ranking pari passu in all respects and so that the same shall be consolidated and form a single series with the Initial Notes and any other Additional Notes. The issue price of the Additional Notes may be set at a discount or at a premium compared to the Initial Notes. The aggregate nominal amount of Notes is not limited. Each Additional Note shall entitle its holder to Interest in accordance with Condition 8.1, and otherwise have the same rights as the Initial Notes.
2.5The Notes constitute direct, general, unconditional, unsubordinated and unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among them and at least pari passu with all other direct, unconditional, unsubordinated and unsecured obligations of the Issuer, except obligations which are mandatorily preferred by law.
2.6The Notes are freely transferable but the Noteholders may be subject to purchase or transfer restrictions with regard to the Notes, as applicable, under local laws to which a Noteholder may be subject. Each Noteholder must ensure compliance with such restrictions at its own cost and expense.
2.7No action is being taken in any jurisdiction that would or is intended to permit a public offering of the Notes or the possession, circulation or distribution of any document or other
material relating to the Issuer or the Notes in any jurisdiction other than Sweden, where action for that purpose is required. Each Noteholder must inform itself about, and observe, any applicable restrictions to the transfer of material relating to the Issuer or the Notes.
3.USE OF PROCEEDS
The Issuer shall use the Net Proceeds to finance or refinance Eligible Assets and Projects in accordance with the Sustainability Bond Framework. The proceeds from any issuance of Additional Notes shall be used for substantially the same purposes, in each case in accordance with the Sustainability Bond Framework.
4.CONDITIONS PRECEDENT
4.1Prior to the issuance of any Additional Notes, the Issuer shall provide to the Issuing Agent the following documents and evidence, in form and substance satisfactory to the Issuing Agent (acting reasonably):
(a)a copy of a resolution from the board of directors of the Issuer approving the issue of the Additional Notes and resolving to enter into any documents necessary in connection therewith;
(b)a certificate addressed to the Trustee, duly signed by the Issuer, evidencing for the relevant issue of Additional Notes that (i) no Event of Default is continuing or would result from such issue and (ii) in relation to such issue, the requirements of Condition 11.3 have been complied with; and
(c)such other documents and information as is agreed between the Issuing Agent and the Issuer.
4.2The Issuing Agent and the Trustee (as the case may be) may assume that the documentation delivered to it pursuant to Condition 4.1 is accurate, correct and complete unless it has actual knowledge that this is not the case, and neither the Issuing Agent nor the Trustee shall be required to verify the contents of any such documentation.
5.NOTES IN BOOK-ENTRY FORM
5.1The Notes will be registered for the Noteholders on their respective Securities Accounts and no physical notes will be issued. Accordingly, the Notes will be registered in accordance with the Financial Instruments Accounts Act. Registration requests relating to the Notes shall be directed to an Account Operator.
5.2Those who according to assignment, Lien, the provisions of the Swedish Children and Parents Code (föräldrabalken (1949:381)), conditions of will or deed of gift or otherwise have acquired a right to receive payments in respect of a Note shall register their entitlements to receive payment in accordance with the Financial Instruments Accounts Act.
5.3The Issuer and the Trustee shall at all times be entitled to obtain information from the debt register (skuldbok) kept by the CSD in respect of the Notes. For the purpose of carrying out any administrative procedure that arises out of the Finance Documents, the Issuing Agent shall be entitled to obtain information from the debt register kept by the CSD in respect of the Notes.
5.4The Issuer shall issue any necessary power of attorney to such persons employed by the Trustee, as notified by the Trustee, in order for such individuals to independently obtain
information directly from the debt register kept by the CSD in respect of the Notes. The Issuer may not revoke any such power of attorney unless directed by the Trustee or unless consent thereto is given by the Noteholders.
5.5The Issuer and the Trustee may use the information referred to in Condition 5.3 and 5.4 only for the purpose of carrying out their duties and exercising their rights in accordance with the Finance Documents and shall not disclose such information to any Noteholders or third party unless necessary for such purpose.
6.RIGHT TO ACT ON BEHALF OF A NOTEHOLDER
6.1If any person other than a Noteholder (including the beneficial owner of a Note, if such person is not the Noteholder) wishes to exercise any rights of a Noteholder under the Finance Documents on behalf of such Noteholder, it must obtain a power of attorney or other proof of authorisation from the Noteholder or a successive, coherent chain of powers of attorney or proofs of authorisation starting with the Noteholder and authorising such person.
6.2A Noteholder may issue one or several powers of attorney to third parties to represent it in relation to some or all of the Notes held by it. Any such representative may act independently under the Finance Documents in relation to the Notes for which such representative is entitled to represent the Noteholder and may further delegate its right to represent the Noteholder by way of a further power of attorney.
6.3The Trustee shall only have to examine the face of a power of attorney or other proof of authorisation that has been provided to it pursuant to Condition 6.2 and may assume that it has been duly authorised, is valid, has not been revoked or superseded and is in full force and effect, unless otherwise apparent from its face or the Trustee has actual knowledge to the contrary.
7.PAYMENTS IN RESPECT OF THE NOTES
7.1Any payment or repayment under the Finance Documents, or any amount due in respect of a repurchase of any Notes pursuant to these Terms and Conditions, shall be made to such person who is registered as a Noteholder on the Record Date prior to an Interest Payment Date or other relevant due date, or to such other person who is registered with the CSD on such date as being entitled to receive the relevant payment, repayment or repurchase amount.
7.2Deposits of principal, interest or any other payment shall be made to the bank account registered by the relevant Noteholder with the CSD and effected by the CSD on the relevant payment date. Should the CSD, due to a delay on behalf of the Issuer or some other obstacle, not be able to effect payments as aforesaid, the Issuer shall promptly provide notice of such non-payment to the Trustee in accordance with Condition 24 (Notices and Press Releases) and procure that such amounts are paid to the persons who are registered as Noteholders on the relevant Record Date as soon as possible after such obstacle has been removed.
7.3If, due to any obstacle for the CSD, the Issuer cannot make a payment or repayment, such payment or repayment may be postponed until the obstacle has been removed. Interest shall accrue in accordance with Condition 8.4 during such postponement.
7.4If payment or repayment is made in accordance with this Condition 7, the Issuer and the CSD shall be deemed to have fulfilled their obligation to pay, irrespective of whether such payment was made to a person not entitled to receive such amount. The Trustee shall have no obligation to ensure any payments or repayments made in accordance with this Condition 7.4 are actually received by the person entitled to such payment or repayment.
7.5 Neither the Issuer nor the Trustee shall be liable to gross-up any payments under the Finance Documents by virtue of any withholding tax, public levy or similar obligation.
8.INTEREST
8.1Each Initial Note shall bear Interest at the Interest Rate applied to the Nominal Amount from (but excluding) the First Issue Date up to (and including) the relevant Redemption Date. Any Additional Note will bear Interest at the Interest Rate applied to the Nominal Amount from (but excluding) the Interest Payment Date falling immediately prior to its issuance (or the First Issue Date if there is no such Interest Payment Date) up to (and including) the relevant Redemption Date.
8.2Interest accrues during an Interest Period. Payment of Interest in respect of the Notes shall be made to the Noteholders on each Interest Payment Date for the preceding Interest Period in accordance with Condition 7.
8.3Interest shall be calculated on the basis of the actual number of days in the Interest Period in respect of which payment is being made divided by 360 (actual/360-days basis).
8.4If the Issuer fails to pay any amount payable by it on its due date, default interest shall accrue on the overdue amount from (but excluding) the due date up to (and including) the date of actual payment at a rate which is one per cent. higher than the Interest Rate for such Interest Period. Accrued default interest shall not be capitalised. No default interest shall accrue where the failure to pay was solely attributable to the Issuing Agent or the CSD.
9.REDEMPTION AND REPURCHASE OF THE NOTES
9.1Redemption at maturity
The Issuer shall redeem all, but not some only, of the outstanding Notes in full on the Final Maturity Date with an amount per Note equal to the Nominal Amount together with accrued but unpaid Interest. If the Final Maturity Date is not a Business Day, then the redemption shall occur on the first Business Day following the Final Maturity Date.
9.2Purchase of Notes by Group Companies
Any Group Company may, subject to applicable law, at any time and at any price purchase Notes in the open market or in any other way. Notes held by a Group Company may at such Group Company's discretion be retained or sold or, if held by the Issuer, cancelled by the Issuer.
9.3Voluntary total redemption (call option)
9.3.1At any time on or after the First Call Date, the Issuer may redeem all, but not some only, of the outstanding Notes at an amount per Note equal to (i) if redeemed during the 12- month period commencing on 20 January 2024, 101.500 per cent. of the Nominal Amount, (ii) if redeemed during the 12-month period commencing on 20 January 2025, 100.750 per cent. of the Nominal Amount, (iii) if redeemed during the 9-month period commencing on 20 January 2026, 100.375 per cent. of the Nominal Amount and (iv) if redeemed during the 3-month period commencing on 20 October 2026, 100 per cent. of the Nominal Amount, in each case together with accrued but unpaid Interest.
9.3.2Redemption in accordance with Condition 9.3.1 shall be made by the Issuer giving not less than 15 Business Days' notice to the Noteholders and the Trustee. The notice from the Issuer
shall specify the Redemption Date and the Record Date on which a person shall be registered as a Noteholder to receive the amounts due on such Redemption Date. The notice is irrevocable but may, at the Issuer's discretion, contain one or more conditions precedent. Upon fulfilment of the conditions precedent (if any), the Issuer is bound to redeem the Notes specified in the notice at the applicable amount on the specified Redemption Date.
9.4Early redemption due to illegality (call option)
9.4.1The Issuer may redeem all, but not some only, of the outstanding Notes at an amount per Note equal to the Nominal Amount together with accrued but unpaid Interest on a date determined by the Issuer if it is or becomes unlawful for the Issuer to perform its obligations under the Finance Documents.
9.4.2The Issuer shall give written notice of redemption pursuant to Condition 9.4.1 no later than 20 Business Days after having received actual knowledge of any event specified therein (after which time period such right shall lapse). The notice from the Issuer is irrevocable and shall specify the Redemption Date and the Record Date on which a person shall be registered as a Noteholder to receive the amounts due on such Redemption Date. The Issuer is bound to redeem the Notes in full at the applicable amount on the specified Redemption Date.
9.5Repurchase with Excess Proceeds (put option)
9.5.1If, in accordance with Condition 11.5, the aggregate amount of Excess Proceeds from the disposition of assets by the Issuer or any of its Subsidiaries (other than an Unrestricted Subsidiary) exceeds $75 million (or its equivalent in any other currency or currencies), the Issuer shall make an offer to repurchase from the Noteholders and from the holders of any Pari Passu Financial Indebtedness, to the extent required by the terms thereof, on a pro rata basis, in accordance with this Condition 9.5 or the agreements governing any such Pari Passu Financial Indebtedness, in cash the maximum principal amount of the Notes (at an amount per Note equal to 100 per cent. of the Nominal Amount together with accrued but unpaid Interest if any to the date of purchase) and any such Pari Passu Financial Indebtedness (at a price no greater than 100 per cent. of the principal amount (or accreted value, as applicable) of such Pari Passu Financial Indebtedness together with accrued and unpaid interest if any to the date of purchase) that may be purchased with the amount of the Excess Proceeds (an "Excess Proceeds Offer").
9.5.2The Issuer shall give written notice of its offer to redeem pursuant to Condition 9.5.1 no later than 20 Business Days after the end of the 365 day period referred to in Condition 11.5.1(c). The notice from the Issuer is irrevocable and shall specify the amount of Notes that may be repurchased, the Purchase Date and the Record Date on which a person shall be registered as a Noteholder to receive the amounts due on such Purchase Date.
9.5.3Each Excess Proceeds Offer will remain open for a period of at least 20 Business Days and not more than 60 Business Days, following its commencement except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than three Business Days after the termination of the Offer Period (the "Purchase Date"), the Issuer will apply all Excess Proceeds (the "Offer Amount") to the purchase of the Notes and, if applicable, such other Pari Passu Financial Indebtedness (on a pro rata basis based on the principal amount of the Notes and such other Pari Passu Financial Indebtedness surrendered, if applicable or, if less than the Offer Amount has been tendered, all Notes tendered and, if applicable, other Financial Indebtedness tendered in response to the Excess Proceeds Offer).
9.5.4If the Purchase Date is on or after a Record Date for the payment of interest and on or before the related payment date, any accrued and unpaid interest, if any, will be paid to the person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Noteholders who tender Notes pursuant to the Excess Proceeds Offer.
9.5.5Upon the commencement of an Excess Proceeds Offer, the Issuer will send, by first class mail, a notice to the Trustee and each of the Noteholders with a copy to the Trustee. The notice will contain all instructions and materials necessary to enable such Noteholders to tender Notes pursuant to the Excess Proceeds Offer. The notice, which will govern the terms of the Excess Proceeds Offer, will state:
(a)that the Excess Proceeds Offer is being made pursuant to this Condition 9.5 and the length of time the Excess Proceeds Offer will remain open;
(b)the Offer Amount, the purchase price and the Purchase Date;
(c)that any Note not tendered or accepted for payment will continue to accrue interest;
(d)that, unless the Issuer defaults in making such payment, any Note accepted for payment pursuant to the Excess Proceeds Offer will cease to accrue interest after the Purchase Date;
(e)that Notes purchased pursuant to the Excess Proceeds Offer will be purchased in a minimum amount of SEK 1,250,000;
(f)the manner in which Noteholders electing to have a Note purchased pursuant to any Excess Proceeds Offer will be required to transfer such Note to the Issuer or its agent before the Purchase Date;
(g)the circumstances under which Noteholders will be entitled to withdraw their election prior to the expiration of the Offer Period and the procedures required in relation to such withdrawal; and
(h)that, if the aggregate principal amount of Notes and other Pari Passu Financial Indebtedness surrendered by holders thereof exceeds the Offer Amount, the Issuer (or its agent) will randomly select the Notes and other Pari Passu Financial Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other Pari Passu Financial Indebtedness surrendered (provided that Notes will be purchased in a minimum amount of SEK 1,250,000).
9.5.6On or before the Purchase Date, the Issuer will, to the extent lawful, accept for repurchase, the Offer Amount of Notes and, if applicable, other Pari Passu Financial Indebtedness tendered pursuant to the Excess Proceeds Offer (which Notes and, if applicable, other Pari Passu Financial Indebtedness shall be randomly selected by the Issuer or its agent if more than the Offer Amount has been tendered), or if less than the Offer Amount has been tendered, all Notes and, if applicable, other Pari Passu Financial Indebtedness tendered. The Issuer will pay each tendering Noteholder an amount equal to the purchase price of the Notes tendered by such Noteholder and accepted by the Issuer for purchase. Any purchase pursuant to this Condition 9.5 shall not be subject to conditions precedent.
9.5.7To the extent that the amount of Notes and any such Pari Passu Financial Indebtedness purchased pursuant to this Condition 9.5 is less than the aggregate amount of Excess Proceeds, the Issuer may use the amount of such Excess Proceeds not used to purchase Notes
and such Pari Passu Financial Indebtedness for purposes that are not otherwise prohibited by these Terms and Conditions. Upon completion of each redemption, the amount of Excess Proceeds will be reset to zero.
9.6Mandatory repurchase due to a Change of Control Triggering Event or a Listing Failure Event (put option)
9.6.1Upon the occurrence of a Change of Control Triggering Event or a Listing Failure Event, each Noteholder shall during a period of 20 Business Days from the effective date of a notice from the Issuer of the Change of Control Triggering Event or Listing Failure Event, as applicable, pursuant to Condition 10.1.2 (after which time period such right shall lapse), have the right to request that all, or some only, of its Notes be repurchased at a price per Note equal to 101 per cent. of the Nominal Amount together with accrued but unpaid Interest. However, such period may not start earlier than upon the occurrence of the Change of Control Triggering Event or Listing Failure Event, as applicable.
9.6.2The notice from the Issuer pursuant to Condition 10.1.2 shall specify the Record Date on which a person shall be registered as a Noteholder to receive interest and principal and the Redemption Date and include instructions about the actions that a Noteholder needs to take if it wants Notes held by it to be repurchased. If a Noteholder has so requested, and acted in accordance with the instructions in the notice from the Issuer, the Issuer shall repurchase the relevant Notes and the repurchase amount shall fall due on the Redemption Date specified in the notice given by the Issuer pursuant to Condition 10.1.2. The Redemption Date must fall no later than 40 Business Days after the end of the period referred to in Condition 9.6.1.
9.6.3If Noteholders representing more than 75 per cent. of the Adjusted Nominal Amount have requested that Notes held by them are repurchased pursuant to this Condition 9.6, the Issuer shall, no later than five Business Days after the end of the period referred to in Condition 9.6.1, send a notice to the remaining Noteholders, if any, giving them a further opportunity to request that Notes held by them be repurchased on the same terms during a period of 20 Business Days from the date such notice is effective. Such notice shall specify the Redemption Date and the Record Date on which a person shall be registered as a Noteholder to receive the amounts due on such Redemption Date and also include instructions about the actions that a Noteholder needs to take if it wants Notes held by it to be repurchased. If a Noteholder has so requested, and acted in accordance with the instructions in the notice from the Issuer, the Issuer shall repurchase the relevant Notes and the repurchase amount shall fall due on the Redemption Date specified in the notice given by the Issuer pursuant to this Condition 9.6.3. The Redemption Date must fall no later than 40 Business Days after the end of the period of 20 Business Days referred to in this Condition 9.6.3.
9.6.4The Issuer shall comply with the requirements of any applicable securities laws or regulations in connection with the repurchase of Notes. To the extent that the provisions of such laws and regulations conflict with the provisions in this Condition 9.6, the Issuer shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Condition 9.6 by virtue of the conflict.
9.6.5The Issuer shall not be required to repurchase any Notes pursuant to this Condition 9.6 if a third party in connection with the occurrence of a Change of Control Triggering Event or a Listing Failure Event offers to purchase the Notes in the manner and on the terms set out in this Condition 9.6 (or on terms more favourable to the Noteholders) and purchases all Notes validly tendered in accordance with such offer. If Notes tendered are not purchased within the time limits stipulated in this Condition 9.6, the Issuer shall repurchase any such Notes within five Business Days after the expiry of the time limit.
9.6.6No repurchase of Notes pursuant to this Condition 9.6 shall be required if the Issuer has given notice of a redemption pursuant to Condition 9.3 (Voluntary total redemption (call option)), provided that such redemption is duly exercised.
10.INFORMATION TO NOTEHOLDERS
10.1Information from the Issuer
10.1.1The Issuer shall provide the following information to the Trustee and make the same available to the Noteholders by way of press release (except as otherwise provided below) and by publication on the website of the Issuer:
(a)as soon as the same become available, but in any event within four months after the end of each Financial Year, the Issuer's audited consolidated financial statements for that Financial Year prepared in accordance with IFRS;
(b)as soon as the same become available, but in any event within two months after the end of each quarter of each Financial Year, the Issuer's consolidated financial statements or the year-end report (bokslutskommuniké) (as applicable) for such period prepared in accordance with IFRS;
(c)as soon as practicable following an acquisition or disposal of Notes by a Group Company, the aggregate Nominal Amount held by Group Companies, or the amount of Notes cancelled by the Issuer, solely by publication on the Issuer's website; and
(d)any other information required by the Swedish Securities Markets Act (lag (2007:582) om värdepappersmarknaden), Regulation No 596/2014 on market abuse and the rules and regulations of the Regulated Market on which the Notes are admitted to trading.
10.1.2The Issuer shall promptly notify the Noteholders and the Trustee in writing upon becoming aware of the occurrence of a Change of Control Triggering Event or a Listing Failure Event. Such notice may be given in advance of the occurrence of a Change of Control and conditioned upon the occurrence of a Change of Control Triggering Event, if a definitive agreement is in place providing for a Change of Control.
10.1.3When the financial statements and other information are made available to the Noteholders pursuant to Condition 10.1.1, the Issuer shall send copies of such financial statements and other information to the Trustee. Together with the annual financial statements of the Issuer, the Issuer shall submit to the Trustee a compliance certificate in a form agreed between the Issuer and the Trustee containing a confirmation that no Default or Event of Default has occurred (or, if a Default or an Event of Default has occurred, what steps have been taken to remedy it).
10.1.4The Issuer shall promptly notify the Trustee in writing (with full particulars) upon becoming aware of the occurrence of any event or circumstance which constitutes a Default or an Event of Default, and shall provide the Trustee with such further information as the Trustee may reasonably request in writing following receipt of such notice. Should the Trustee not receive such information, the Trustee is entitled to assume that no such event or circumstance exists or can be expected to occur, provided that the Trustee does not have actual knowledge by way of written notice of such event or circumstance.
10.1.5The Issuer is only obliged to inform the Trustee as set out in this Condition 10 if informing the Trustee would not conflict with any applicable laws or, when the Notes are listed, the
Issuer's registration contract with the Regulated Market. If such a conflict would exist pursuant to the listing contract with the Regulated Market or otherwise, the Issuer shall however be obliged to either seek approval from the Regulated Market or undertake other reasonable measures, including entering into a non-disclosure agreement with the Trustee, in order to be able to timely inform the Trustee as set out in this Condition 10.
10.2Information from the Trustee
10.2.1Subject to the restrictions of a non-disclosure agreement entered into by the Trustee in accordance with this Condition 10.2.1 and applicable law, the Trustee is entitled to disclose to the Noteholders any event or circumstance directly or indirectly relating to the Issuer or the Notes. Notwithstanding the foregoing, the Trustee may if it considers it to be beneficial to the interests of the Noteholders delay disclosure or refrain from disclosing certain information other than in respect of an Event of Default that has occurred and is continuing.
10.2.2If a committee representing the Noteholders' interests under the Finance Documents has been appointed by the Noteholders pursuant to Condition 14 (Decisions by Noteholders), the members of such committee may agree with the Issuer not to disclose information received from the Issuer, provided that it, in the reasonable opinion of such members, is beneficial to the interests of the Noteholders. The Trustee shall be a party to such agreement and receive the same information from the Issuer as the members of the committee.
10.3Publication of Finance Documents
10.3.1The latest version of these Terms and Conditions (including any document amending these Terms and Conditions), together with copies of the Sustainability Bond Framework and the second opinion of Sustainalytics on the Sustainability Bond Framework, shall be available on the website of the Issuer.
10.3.2The latest versions of the Finance Documents (including any documents amending such Finance Documents) shall be made available to the Noteholders at the office of the Trustee during normal business hours.
11.GENERAL UNDERTAKINGS
11.1Change of Business
The Issuer shall ensure that no substantial change is made to the general nature of the business of the Issuer or the Group from that carried on at the First Issue Date, provided that this Condition shall not prevent the Issuer from engaging in any Permitted Business.
11.2Preservation of properties
Subject to Permitted Discontinuance of Property Maintenance, the Issuer shall (and shall ensure that each other Group Company will) maintain in good repair, working order and condition (ordinary wear and tear excepted) all of its material properties necessary or desirable in the conduct of its business, all in accordance with the judgment of the Issuer (acting reasonably).
11.3Financial Indebtedness
The Issuer may not (and shall ensure that no other Group Company will), directly or indirectly incur any Financial Indebtedness, unless:
(a)at the time of such incurrence or immediately following the incurrence of such Financial Indebtedness and the application of the proceeds thereof, on a pro forma basis, the Net Leverage Ratio is less than 3.0 to 1.0; or
(b)the Financial Indebtedness is Permitted Financial Indebtedness.
11.4Negative pledge
The Issuer shall not (and shall ensure that no other Group Company will), directly or indirectly,
(a) create or permit to subsist any Lien over any of its assets; or
(b)(i) sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by any Group Company; (ii) sell, transfer or otherwise dispose of any of its receivables on recourse terms; (iii) enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or (iv) enter into any other preferential arrangement having a similar effect (each of paragraphs (i)-(iv) being a "Quasi-Security"), in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset,
unless the Lien or Quasi-Security is a Permitted Lien.
11.5Disposal of Assets
11.5.1The Issuer may not, and may not permit any other Group Company to, make any Asset Disposition in one or more related transactions unless:
(a)the consideration the Issuer or such Group Company receives for such Asset Disposition is not less than the Fair Market Value of the assets sold (as determined by the Issuer's senior management or board of directors); and
(b)unless the Asset Disposition is a Permitted Asset Swap, at least 75 per cent. of the consideration the Issuer or such Group Company receives in respect of such Asset Disposition consists of:
(i)cash or Cash Equivalents;
(ii)the assumption of a Group Company's Financial Indebtedness or other liabilities (other than contingent liabilities or Financial Indebtedness or liabilities that are subordinated to the Notes) or Financial Indebtedness or other liabilities of such Group Company relating to such assets and, in each case, the Group Company is released from all liability on the Financial Indebtedness assumed;
(iii)any Capital Stock or assets of the kind referred to in paragraphs (c)(iv) or (c)(v) of Condition 11.5.1(c); or
(iv)a combination of the consideration specified in paragraphs (i) to (iii) (inclusive) of this Condition 11.5.1(b); and
(c)within 365 days of such Asset Disposition, the Net Available Proceeds are applied (at the applicable Group Company's option):
(i)to repay, redeem, retire or cancel outstanding Financial Indebtedness secured by Lien over the assets of any Group Company;
(ii)if such Net Available Proceeds are received by the Issuer or any of its Restricted Subsidiaries, first, to redeem Notes or purchase Notes pursuant to an offer to all Noteholders at a purchase price equal to at least 100 per cent. of the principal amount thereof, plus accrued and unpaid interest and second, to the extent any Net Available Proceeds from such Asset Disposition remain, to any other use as determined by the Issuer or the applicable Restricted Subsidiary that is not otherwise prohibited by these Terms and Conditions;
(iii)to repurchase, prepay, redeem or repay any Pari Passu Financial Indebtedness; provided that if such Net Available Proceeds are received by the Issuer or any of its Restricted Subsidiaries, the Issuer makes an offer to all Noteholders on a pro rata basis to purchase their Notes in accordance with Condition 9.5 (Repurchase with Excess Proceeds (put option));
(iv)to acquire all or substantially all of the assets of, or any Capital Stock of, another Permitted Business, if, after giving effect to any such acquisition of Capital Stock, the Permitted Business is or becomes a Group Company;
(v)to make a capital expenditure or acquire other assets (other than Capital Stock and cash or Cash Equivalents), rights (contractual or otherwise) and properties, whether tangible or intangible (including ownership interests) that are used or intended for use in connection with a Permitted Business;
(vi)to the extent permitted, to redeem Notes as provided under Condition 9.3 (Voluntary total redemption (call option));
(vii)to enter into a binding commitment to apply the Net Available Proceeds pursuant to paragraphs (iv) or (v) of this Condition 11.5.1(c) (which will be deemed to constitute a permitted application of the Net Available Proceeds from the date of such commitment until the earlier of (X) the date on which such acquisition or expenditure is consummated and (Y) the 180th day following the expiration of the initial 365-day period); or
(viii)any combination of the foregoing paragraphs (i) to (vii) (inclusive) of this Condition 11.5.1(c).
11.5.2For purposes of Condition 11.5.1(c), any securities, notes or other obligations received by a Group Company from such transferee that are promptly converted by the recipient thereof into cash, Cash Equivalents or readily marketable securities (to the extent of the cash, Cash Equivalents or readily marketable securities received in that conversion), shall be deemed cash.
11.5.3The amount of such Net Available Proceeds received by the Issuer or any of its Restricted Subsidiaries and not applied pursuant to Condition 11.5.1(c) will constitute "Excess Proceeds". Pending the final application of any such Net Available Proceeds, the Issuer may temporarily use such Net Available Proceeds in any manner that is not prohibited by the terms of these Terms and Conditions.
11.6Merger
The Issuer may not, in a single transaction or a series of related transactions, (i) consolidate with or merge into any other person, or (ii) directly or indirectly, convey, transfer, sell, lease or otherwise dispose of all or substantially all of its assets to any other person, unless:
(a)the Issuer is the surviving corporation; or (ii) the person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made,
(i)shall expressly assume all of the Issuer's obligations under the Trust Deed and these Terms and Conditions and,
(ii)is organised under the laws of any member state of the European Union, the United Kingdom, Norway, Switzerland, Canada, Jersey, Guernsey, Mauritius, Cayman Islands, British Virgin Islands, any state of the United States of America or the District of Columbia
(b)immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing
(c)immediately after giving effect to such transaction and treating any Financial Indebtedness which becomes a Group Company's obligation, as applicable, as a result of such transaction as having been incurred at the time of the transaction, (x) a Group Company could incur at least $1.00 of additional Financial Indebtedness pursuant to Condition 11.3(a) or (y) the Net Leverage Ratio would not be greater than such ratio before giving effect to such transaction; provided that this paragraph (c) will not apply if, in the good faith determination of the Issuer's board of directors the principal purpose of such transaction is to change the Issuer's jurisdiction of incorporation; and
(d)the Issuer delivers to the Trustee a certificate stating that such consolidation, merger or transfer complies with this Condition 11.6.
11.7Admission to trading and listing
11.7.1The Issuer intends that the Initial Notes and any Additional Notes (as applicable), are admitted to trading on the sustainable bond list of Nasdaq Stockholm (or, if such admission to trading is not possible to obtain or maintain, admitted to trading on another Regulated Market) within 30 days after each of the First Issue Date and the date of issuance of any Additional Notes. The Issuer shall in any event ensure that the Initial Notes and any Additional Notes are admitted to trading on the sustainable bond list of Nasdaq Stockholm (or, if such admission to trading is not possible to obtain or maintain, admitted to trading on another Regulated Market) within 120 days after the First Issue Date and the date of issuance of any Additional Notes (as applicable).
11.7.2Following an admission to trading and listing on the sustainable bond list of Nasdaq Stockholm (or any other Regulated Market, as applicable), the Issuer shall use all reasonable efforts to ensure that the Notes continue being listed thereon (however, taking into account the rules and regulations of Nasdaq Stockholm (or any other Regulated Market, as applicable) and the CSD (as amended from time to time) preventing trading in the Notes in close connection to the redemption of the Notes).
11.8Designation of Unrestricted Subsidiaries
11.8.1(a) The Issuer may designate, after the First Issue Date, any Subsidiary of the Issuer (including any newly created or acquired Subsidiary) as an "Unrestricted Subsidiary" (a "Designation") only if, at the time of or after giving effect to such Designation:
(a)no Default or Event of Default shall have occurred and be continuing;
(b)a Group Company could incur US$1.00 of Financial Indebtedness pursuant to Condition 11.3(a); and
(c)the aggregate Investments (other than Permitted Investments) by the Group in all Unrestricted Subsidiaries shall not exceed the greater of (x) $950,000,000 or (y) 10 per cent. of Total Assets at any time outstanding.
11.8.2No Group Company will at any time:
(a)provide credit support for, subject any of its property or assets (other than Liens over the Capital Stock, Financial Indebtedness and other securities of any Unrestricted Subsidiary securing Financial Indebtedness of that Unrestricted Subsidiary and its Subsidiaries) to a Lien for the satisfaction of, or guarantee, any Financial Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Financial Indebtedness);
(b)be directly or indirectly liable for any Financial Indebtedness of any Unrestricted Subsidiary;
(c)be directly or indirectly liable for any Financial Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Financial Indebtedness of any Unrestricted Subsidiary; or
(d)make any Investment (other than a Permitted Investment) in any Unrestricted Subsidiary to the extent such Investment, together with the aggregate Investments in all Unrestricted Subsidiaries then outstanding, exceeds the amount set out in Condition 11.8.1(c).
11.8.3The Issuer may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a "Redesignation") only if all Liens and Financial Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Redesignation if incurred at such time would have been permitted to be incurred for all purposes of these Terms and Conditions.
11.8.4For purposes of this Condition 11.8:
(a)"Investments" shall equal the portion (proportionate to the Issuer's direct or indirect equity interest in a Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the Fair Market Value of the net assets of such Restricted Subsidiary at the time of the Designation of such Subsidiary as an Unrestricted Subsidiary;
(b)the aggregate Investments (other than Permitted Investments) by the Issuer and its Restricted Subsidiaries in all Unrestricted Subsidiaries shall be reduced upon the Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary by an amount equal to the lesser of (x) the Issuer's direct or indirect "Investment" in such
Unrestricted Subsidiary at the time of such Redesignation, and (y) the portion (proportionate to the Issuer's direct or indirect equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such Redesignation;
(c)any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer, as determined in good faith by the Issuer; and
(d)the amount of any Investment outstanding at any time shall be reduced by any dividend, distribution, interest payment, return of capital, repayment or other amount received by the Group in respect of such Investment.
11.8.5The Designation of a Subsidiary of the Issuer as an Unrestricted Subsidiary shall be deemed to include the Designation of all Subsidiaries of such Subsidiary as Unrestricted Subsidiaries.
11.8.6All Designations and Redesignations shall be evidenced by an officer's certificate of the Issuer, delivered to the Trustee certifying compliance with this Condition 11.8.
11.9Financial Calculations for Limited Condition Transactions
11.9.1In connection with any action being taken in connection with a Limited Condition Transaction, for purposes of determining compliance with any provision of these Terms and Conditions which requires that no Default or Event of Default, as applicable, has occurred, is continuing or would result from any such action, as applicable, such condition shall, at the option of the Issuer, be deemed satisfied, so long as no Default or Event of Default, as applicable, exists on the date the definitive agreement (or other relevant definitive documentation) for such Limited Condition Transaction is entered into. For the avoidance of doubt, if the Issuer has exercised its option under the first sentence of this paragraph, and any Default or Event of Default occurs following the date such definitive agreement for a Limited Condition Transaction is entered into and prior to the consummation of such Limited Condition Transaction, any such Default or Event of Default shall be deemed to not have occurred or be continuing for purposes of determining whether any action being taken in connection with such Limited Condition Transaction is permitted hereunder.
11.9.2In connection with any action being taken in connection with a Limited Condition Transaction for purposes of:
(a)determining compliance with any provision of these Terms and Conditions which requires the calculation of any financial ratio or test, including the Net Leverage Ratio; or
(b)testing baskets set forth in these Terms and Conditions (including baskets measured as a percentage of Total Assets);
in each case, at the option of the Issuer (the Issuer's election to exercise such option in connection with any Limited Condition Transaction, an "LCT Election"), the date of determination of whether any such action is permitted hereunder, shall be deemed to be the date the definitive agreement (or other relevant definitive documentation) for such Limited Condition Transaction is entered into (the "LCT Test Date"); provided, however, that the Issuer shall be entitled to subsequently elect, in its sole discretion, the date of consummation of such Limited Condition Transaction instead of the LCT Test Date as the applicable date of determination, and if, after giving pro forma effect to the Limited Condition Transaction
and the other transactions to be entered into in connection therewith (including any incurrence of Financial Indebtedness and the use of proceeds thereof), as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of "Consolidated EBITDA" and "Net Leverage Ratio", the Issuer or any Restricted Subsidiary could have taken such action on the relevant LCT Test Date in compliance with such ratio, test or basket, such ratio, test or basket shall be deemed to have been complied with.
11.9.3If the Issuer has made an LCT Election and any of the ratios, tests or baskets for which compliance was determined or tested as of the LCT Test Date are exceeded as a result of fluctuations in any such ratio, test or basket, including due to fluctuations in Consolidated EBITDA or Total Assets, of the Issuer and its Restricted Subsidiaries at or prior to the consummation of the relevant transaction or action, such baskets, tests or ratios will not be deemed to have been exceeded as a result of such fluctuations. If the Issuer has made an LCT Election for any Limited Condition Transaction, then in connection with any subsequent calculation of any ratio, test or basket availability under these Terms and Conditions (including with respect to the incurrence of Financial Indebtedness or Liens, or the making of Asset Dispositions, acquisitions, mergers, the conveyance, lease or other transfer of all or substantially all of the assets of the Issuer or any Restricted Subsidiary or the Designation of an Unrestricted Subsidiary) on or following the relevant LCT Test Date and prior to the earlier of the date on which such Limited Condition Transaction is consummated or the definitive agreement for such Limited Condition Transaction is terminated or expires without consummation of such Limited Condition Transaction, any such ratio, test or basket shall be calculated on a pro forma basis assuming such Limited Condition Transaction and other transactions in connection therewith (including any incurrence of Financial Indebtedness and the use of proceeds thereof) have been consummated.
11.10Suspension of certain covenants
If on any date following the First Issue Date, the Issuer is assigned an external credit rating of at least BBB- (or equivalent) by two Rating Agencies and no Event of Default is continuing then the Issuer shall notify the Trustee in writing of these events and beginning on that date and until such time as the Issuer ceases to have an external credit rating of at least BBB- (or equivalent) by either such Rating Agency, Conditions 11.3 (Financial Indebtedness), 11.5 (Disposal of assets), and paragraph (c) of Condition 11.6 (Merger) shall not apply. Any action taken by a Group Company during any such covenant suspension that would otherwise give rise to a breach of the aforementioned Conditions upon such covenant suspension ceasing to be in effect shall be deemed not to be a breach of these Terms and Conditions.
12.ACCELERATION OF THE NOTES
12.1Subject to Condition 12.2, the Trustee at its discretion may, and shall following an instruction in writing from a Noteholder (or Noteholders) representing at least 25 per cent. of the Adjusted Nominal Amount (such instruction may only be validly made by a person who is a Noteholder on the Business Day immediately following the day on which the instruction is received by the Trustee), provided the Noteholder or Noteholders (as applicable) have offered an indemnity and/or security and/or pre-funding satisfactory to the Trustee (i) by notice to the Issuer, declare all, but not some only, of the outstanding Notes immediately due and repayable at their Total Nominal Amount together with any other amounts payable under the Trust Deed (including, without limitation, pursuant to Condition 12.5) immediately or at such later date as the Trustee determines, and (ii) exercise any or all of its rights, remedies, powers and discretions under the Finance Documents if any of the following events occurs and is continuing:
(a)the Issuer does not pay on the due date any principal of, or (if any) premium on any Note when due (at maturity, upon redemption or otherwise);
(b)the Issuer does not pay on the due date any interest payable in respect of the Notes and such failure is not remedied within 30 days from the relevant Interest Payment Date;
(c)the Issuer does not pay on the due date any principal and interest on the Notes required to be purchased pursuant to Condition 9.5 or 9.6;
(d)the Issuer does not comply with the provisions of Condition 11.6;
(e)the Issuer does not comply with any terms or conditions of the Finance Documents to which it is a party (other than those terms referred to in paragraphs (a) through (d) above), unless the non-compliance (i) is capable of remedy; and (ii) is remedied within 60 days of the earlier of notice to the Issuer by the Trustee or Noteholders representing at least 25 per cent. of the Adjusted Nominal Amount;
(f)the occurrence of a Cross Payment Default or a Cross Acceleration, unless the aggregate amount of Financial Indebtedness which is the subject of any Cross Payment Default or Cross Acceleration, as applicable, is less than $100,000,000 (or its equivalent in any other currency or currencies), without double counting;
(g)a Group Company fails to pay final judgments entered by a court or courts of competent jurisdiction aggregating in excess of $100,000,000 (or its equivalent in any other currency or currencies) (exclusive of any amounts for which a solvent insurance company has acknowledged liability), which judgments shall not have been discharged or waived and there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of an appeal, waiver or otherwise, shall not have been in effect;
(h)(i) a Material Company is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling its indebtedness (including company reorganisation under the Swedish Company Reorganisation Act (lag (1996:764) om företagsrekonstruktion) (or its equivalent in any other jurisdiction)); (ii) the value of the assets of any Material Company is less than its liabilities (taking into account contingent and prospective liabilities); or (iii) a moratorium is declared in respect of any indebtedness of any Material Company; or
(i)any corporate action, legal proceedings or other procedure or step is taken in relation to:
(i)the winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise, other than a solvent reorganisation in which the relevant Material Company is the surviving entity) of any Material Company;
(ii)a general assignment, arrangement or composition with or for the benefit of the creditors of any Material Company;
(iii)the appointment of a liquidator (other than in respect of a solvent liquidation of a Group Company other than the Issuer), receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any Material Company or any of its assets; or
(iv)enforcement of any Lien over any assets of any Material Company,
or any analogous procedure or step is taken in any jurisdiction. This Condition (i) shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 30 days of commencement.
12.2The Trustee may not accelerate the Notes in accordance with Condition 12.1 by reference to a specific Event of Default if it is no longer continuing or if it has been decided, on a Noteholders Meeting or by way of a Written Procedure, to waive such Event of Default temporarily or permanently.
12.3The Trustee may, or the Noteholders of at least 50 per cent. of the Adjusted Nominal Amount may on demand in writing to the Trustee, waive all past or existing Events of Default (other than with respect to non-payment) and may rescind any such acceleration with respect to the Notes and its consequences if rescission would not conflict with any judgment or decree of a court of competent jurisdiction and if all amounts then due with respect to the Notes are paid (other than amounts due solely because of such acceleration) and all other defaults with respect to the Notes are cured.
12.4The Trustee shall notify the Noteholders of an Event of Default within five Business Days of the date on which the Trustee receives actual knowledge by way of written notice that an Event of Default has occurred and is continuing. The Trustee shall, within 20 Business Days of the date on which the Trustee receives actual knowledge by way of written notice that an Event of Default has occurred and is continuing seek instructions from the Noteholders in accordance with Condition 14 (Decisions by Noteholders). The Trustee shall always be entitled to take the time necessary to consider whether an occurred event constitutes an Event of Default.
12.5If the Noteholders instruct the Trustee to accelerate the Notes in accordance with Condition 12.1, the Trustee shall promptly declare the Notes due and payable and take such actions as the Noteholders deem to be necessary or desirable to enforce the rights of the Noteholders under the Finance Documents, unless the relevant Event of Default is no longer continuing.
12.6If the right to accelerate the Notes is based upon a decision of a court of law or a government authority, it is not necessary that the decision has become enforceable under law or that the period of appeal has expired in order for cause of acceleration to be deemed to exist.
12.7In the event of an acceleration of the Notes in accordance with this Condition 12, the Issuer shall redeem all Notes at an amount per Note equal to 100 per cent. of the Nominal Amount, together with accrued but unpaid Interest.
13.DISTRIBUTION OF PROCEEDS
13.1All payments by the Issuer relating to the Notes and the Finance Documents following an acceleration of the Notes in accordance with Condition 12 (Acceleration of the Notes) shall be distributed in the following order of priority, in accordance with the instructions of the Trustee:
(a)first, in or towards payment pro rata of (i) all unpaid fees, costs, expenses and indemnities payable by the Issuer to the Trustee in accordance with the Trust Deed (other than any indemnity given for liability against the Noteholders), (ii) other
(b) costs, expenses and indemnities relating to the acceleration of the Notes or the protection of the Noteholders' rights as may have been incurred by the Trustee, (iii) any costs incurred by the Trustee for external experts that have not been reimbursed by the Issuer in accordance with Condition 19.2.5, and (iv) any costs and expenses incurred by the Trustee in relation to a Noteholders' Meeting or a Written Procedure that have not been reimbursed by the Issuer in accordance with Condition 14.13;
(c)secondly, in or towards payment pro rata of accrued but unpaid Interest under the Notes (Interest due on an earlier Interest Payment Date to be paid before any Interest due on a later Interest Payment Date);
(d)thirdly, in or towards payment pro rata of any unpaid principal under the Notes; and
(e)fourthly, in or towards payment pro rata of any other costs or outstanding amounts unpaid under the Finance Documents.
Any excess funds after the application of proceeds in accordance with paragraphs (a) to (d) above shall be paid to the Issuer.
13.2Funds that the Trustee receives (directly or indirectly) in connection with the acceleration of the Notes shall be held on trust by the Trustee on the terms set out in the Trust Deed. The Trustee shall arrange for payments of such funds in accordance with this Condition 13 as soon as reasonably practicable.
13.3If the Issuer or the Trustee shall make any payment under this Condition 13, the Issuer or (in the case of payments by the Trustee) the Trustee, as applicable, shall notify the Noteholders of any such payment at least 15 Business Days before the payment is made. Such notice shall specify the Redemption Date and also the Record Date on which a person shall be registered as a Noteholder to receive the amounts due on such Redemption Date. Notwithstanding the foregoing, for any Interest due but unpaid the Record Date specified in Condition 7.1 shall apply.
14.DECISIONS BY NOTEHOLDERS
14.1A request by the Trustee for a decision by the Noteholders on a matter relating to the Finance Documents shall (at the option of the Trustee) be dealt with at a Noteholders' Meeting or by way of a Written Procedure.
14.2Any request from the Issuer or a Noteholder (or Noteholders) representing at least 10 per cent. of the Adjusted Nominal Amount (such request may only be validly made by a person who is a Noteholder on the Business Day immediately following the day on which the request is received by the Trustee) for a decision by the Noteholders on a matter relating to the Finance Documents shall be directed to the Trustee and dealt with at a Noteholders' Meeting or by way a Written Procedure, as determined by the Trustee. The person requesting the decision may suggest the form for decision making, but, if it is in the Trustee's opinion more appropriate that a matter is dealt with at a Noteholders' Meeting than by way of a Written Procedure, it shall be dealt with at a Noteholders' Meeting.
14.3The Trustee may refrain from convening a Noteholders' Meeting or instigating a Written Procedure if (i) the suggested decision must be approved by any person in addition to the Noteholders and such person has informed the Trustee that an approval will not be given, or (ii) the suggested decision is not in accordance with applicable laws.
14.4Only a person who is, or who has been provided with a power of attorney pursuant to Condition 6 (Right to act on behalf of a Noteholder) from a person who is, registered as a Noteholder:
(a)on the Record Date prior to the date of the Noteholders' Meeting, in respect of a Noteholders' Meeting, or
(b)on the Business Day specified in the communication pursuant to Condition 16.2, in respect of a Written Procedure,
may exercise voting rights as a Noteholder at such Noteholders' Meeting or in such Written Procedure, provided that the relevant Notes are included in the Adjusted Nominal Amount.
14.5The following matters shall require the consent of Noteholders representing at least 66⅔ per cent. of the Adjusted Nominal Amount for which Noteholders are voting at a Noteholders' Meeting or for which Noteholders reply in a Written Procedure in accordance with the instructions given pursuant to Condition 16.2:
(a)a change to the terms of any of Condition 2.1, and Conditions 2.5 to 2.7;
(b)a reduction of any premium payable upon the redemption or repurchase of any Note pursuant to Condition 9 (Redemption and repurchase of the Notes);
(c)a change to the Interest Rate (other than as a result of an application of Condition 18 (Replacement of Base Rate)) or the Nominal Amount;
(d)a change to the terms for the distribution of proceeds set out in Condition 13 (Distribution of proceeds);
(e)a change to the terms dealing with the requirements for Noteholders' consent set out in this Condition 14;
(f)an extension of the tenor of the Notes or any delay of the due date for payment of any principal or interest on the Notes;
(g)a mandatory exchange of the Notes for other securities; and
(h)early redemption of the Notes, other than upon an acceleration of the Notes pursuant to Condition 12 (Acceleration of the Notes) or as otherwise permitted or required by these Terms and Conditions.
14.6Any matter not covered by Condition 14.5 shall require the consent of Noteholders representing more than 50 per cent. of the Adjusted Nominal Amount for which Noteholders are voting at a Noteholders' Meeting or for which Noteholders reply in a Written Procedure in accordance with the instructions given pursuant to Condition 16.2. This includes, but is not limited to, any amendment to, or waiver of, the terms of any Finance Document that does not require a higher majority (other than an amendment permitted pursuant to Condition 17.1(a), (b) or (c) or an acceleration of the Notes).
14.7Quorum at a Noteholders' Meeting or in respect of a Written Procedure only exists if a Noteholder (or Noteholders) representing at least 50 per cent. of the Adjusted Nominal Amount in case of a matter pursuant to Condition 14.5, and otherwise 20 per cent. of the Adjusted Nominal Amount:
(a)if at a Noteholders' Meeting, attend the meeting in person or by telephone or video conference (or appear through duly authorised representatives); or
(b)if in respect of a Written Procedure, reply to the request.
If a quorum exists for some but not all of the matters to be dealt with at a Noteholders' Meeting or by a Written Procedure, decisions may be taken in the matters for which a quorum exists.
14.8If a quorum does not exist at a Noteholders' Meeting or in respect of a Written Procedure, the Trustee or the Issuer shall convene a second Noteholders' Meeting (in accordance with Condition 15.1) or initiate a second Written Procedure (in accordance with Condition 16.1), as the case may be, provided that the person(s) who initiated the procedure for Noteholders' consent has confirmed that the relevant proposal is not withdrawn. For the purposes of a second Noteholders' Meeting or second Written Procedure pursuant to this Condition 14.8, the date of request of the second Noteholders' Meeting pursuant to Condition 15.1 or second Written Procedure pursuant to Condition 16.1, as the case may be, shall be deemed to be the relevant date when the quorum did not exist. The quorum requirement in Condition 14.7 shall not apply to such second Noteholders' Meeting or Written Procedure.
14.9Any decision which extends or increases the obligations of the Issuer or the Trustee, or limits, reduces or extinguishes the rights or benefits of the Issuer or the Trustee, under the Finance Documents shall be subject to the Issuer's or the Trustee's consent, as applicable.
14.10A Noteholder holding more than one Note need not use all its votes or cast all the votes to which it is entitled in the same way and may in its discretion use or cast some of its votes only.
14.11The Issuer may not, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Noteholder for or as inducement to any consent under these Terms and Conditions, unless such consideration is offered to all Noteholders that consent at the relevant Noteholders' Meeting or in a Written Procedure within the time period stipulated for the consideration to be payable or the time period for replies in the Written Procedure, as the case may be.
14.12A matter decided at a duly convened and held Noteholders' Meeting or by way of Written Procedure is binding on all Noteholders, irrespective of them being present or represented at the Noteholders' Meeting or responding in the Written Procedure. The Noteholders that have not adopted or voted for a decision shall not be liable for any damages that this may cause other Noteholders and vice versa.
14.13All costs and expenses incurred by the Issuer or the Trustee for the purpose of convening a Noteholders' Meeting or for the purpose of carrying out a Written Procedure, including reasonable fees to the Trustee, shall be paid by the Issuer.
14.14If a decision is to be taken by the Noteholders on a matter relating to the Finance Documents, the Issuer shall promptly at the request of the Trustee provide the Trustee with a certificate specifying the number of Notes owned by Group Companies or (to the knowledge of the Issuer) other Affiliates of the Issuer or any other person owning any Notes that has undertaken towards a Group Company or its Affiliate to exercise its voting rights in respect of such Notes in accordance with the instructions given by a Group Company or an Affiliate thereof, in each case, irrespective of whether such person is directly registered as owner of such Notes. The Trustee shall not be responsible for the accuracy of such certificate or otherwise be responsible for determining whether a Note is owned by a Group Company or
any other Affiliate of the Issuer or any other person owning any Notes that has undertaken towards a Group Company or its Affiliate to exercise its voting rights in respect of such Notes in accordance with the instructions given by a Group Company or an Affiliate thereof.
14.15Information about decisions taken at a Noteholders' Meeting or by way of a Written Procedure shall promptly be sent by notice to the Noteholders and published on the website of the Issuer, provided that a failure to do so shall not invalidate any decision made or voting result achieved. The minutes from the relevant Noteholders' Meeting or Written Procedure shall at the request of a Noteholder be sent to it by the Issuer or the Trustee, as applicable.
15.NOTEHOLDERS' MEETING
15.1The Trustee shall convene a Noteholders' Meeting as soon as practicable and in any event no later than 10 Business Days after receipt of a valid request from the Issuer or the Noteholder(s) (or such later date as may be necessary for technical or administrative reasons) by sending a notice thereof to each person who is registered as a Noteholder on a date selected by the Trustee which falls no more than five Business Days prior to the date on which the notice is sent.
15.2Should the Issuer wish to replace the Trustee, it may convene a Noteholders' Meeting in accordance with Condition 15.1 with a copy to the Trustee. After a request from the Noteholders pursuant to Condition 19.4.3, the Issuer shall no later than five Business Days after receipt of such request (or such later date as may be necessary for technical or administrative reasons) convene a Noteholders' Meeting in accordance with Condition 15.1.
15.3The notice pursuant to Condition 15.1 shall include (i) time for the meeting, (ii) place for the meeting, (iii) agenda for the meeting (including each request for a decision by the Noteholders), and (iv) a form of power of attorney. Only matters that have been included in the notice may be resolved upon at the Noteholders' Meeting. Should prior notification by the Noteholders be required in order to attend the Noteholders' Meeting, such requirement shall be included in the notice.
15.4The Noteholders' Meeting shall be held no earlier than 10 Business Days and no later than 30 Business Days after the effective date of the notice.
15.5Without amending or varying these Terms and Conditions, the Trustee may prescribe such further regulations regarding the convening and holding of a Noteholders' Meeting as the Trustee may deem appropriate. Such regulations may include a possibility for Noteholders to vote without attending the meeting in person.
16.WRITTEN PROCEDURE
16.1The Trustee shall instigate a Written Procedure as soon as practicable and in any event no later than 10 Business Days after receipt of a valid request from the Issuer or the Noteholder(s) (or such later date as may be necessary for technical or administrative reasons) by sending a communication to each person who is registered as a Noteholder on a date selected by the Trustee which falls no more than five Business Days prior to the date on which the communication is sent.
16.2Should the Issuer wish to replace the Trustee, it may instigate a Written Procedure in accordance with Condition 16.1 with a copy to the Trustee.
16.3A communication pursuant to Condition 16.1 shall include (i) each request for a decision by the Noteholders, (ii) a description of the reasons for each request, (iii) a specification of the
Business Day on which a person must be registered as a Noteholder in order to be entitled to exercise voting rights, (iv) instructions and directions on where to receive a form for replying to the request (such form to include an option to vote yes or no for each request) as well as a form of power of attorney, and (v) the stipulated time period within which the Noteholder must reply to the request (such time period to last at least 10 Business Days and not longer than 30 Business Days from the effective date of the communication pursuant to Condition 16.1). If the voting is to be made electronically, instructions for such voting shall be included in the communication.
16.4When consents from Noteholders representing the requisite majority of the total Adjusted Nominal Amount pursuant to Conditions 14.5 and 14.6 have been received in a Written Procedure, the relevant decision shall be deemed to be adopted pursuant to Condition 14.5 or 14.6, as the case may be, even if the time period for replies in the Written Procedure has not yet expired.
17.AMENDMENTS AND WAIVERS
17.1The Issuer and the Trustee (acting on behalf of the Noteholders) may agree to amend the Finance Documents or waive any provision in a Finance Document, provided that:
(a)such amendment or waiver is not detrimental to the interest of the Noteholders as a group, or is made solely for the purpose of rectifying obvious errors and mistakes;
(b)such amendment or waiver is made pursuant to the terms of Condition 18 (Replacement of Base Rate);
(c)such amendment or waiver is required by applicable law, a court ruling or a decision by a relevant authority; or
(d)such amendment or waiver has been duly approved by the Noteholders in accordance with Condition 14 (Decisions by Noteholders).
17.2The consent of the Noteholders is not necessary to approve the particular form of any amendment or waiver to the Finance Documents. It is sufficient if such consent approves the substance of the amendment or waiver.
17.3The Trustee shall promptly notify the Noteholders of any amendments or waivers made in accordance with Condition 17.1, setting out the date from which the amendment or waiver will be effective, and ensure that any amendments to the Finance Documents are published in the manner stipulated in Condition 10.3 (Publication of Finance Documents). The Issuer shall ensure that any amendments to the Finance Documents are duly registered with the CSD and each other relevant organisation or authority.
17.4An amendment to the Finance Documents shall take effect on the date determined by the Noteholders Meeting, in the Written Procedure or by the Trustee, as the case may be.
18.REPLACEMENT OF BASE RATE
18.1General
18.1.1Any determination or election to be made by an Independent Adviser, the Issuer or the Noteholders in accordance with the provisions of this Condition 18 shall at all times be made by such Independent Adviser, the Issuer or the Noteholders (as applicable) acting in good faith, in a commercially reasonable manner and by reference to relevant market data.
18.1.2If a Base Rate Event has occurred, this Condition 18 shall take precedent over the fallbacks set out in paragraph (b) to (d) of the definition of STIBOR.
18.2Definitions
In this Condition 18:
"Adjustment Spread" means a spread (which may be positive, negative or zero) or a formula or methodology for calculating a spread, or a combination thereof determined in accordance with Condition 18.3.3, to be applied to a Successor Base Rate or an Alternative Base Rate, the objective of which, in each case, shall be to reduce or eliminate, to the fullest extent reasonably practicable, any transfer of economic value from one person to another as a result of a replacement of the Base Rate.
"Alternative Base Rate" means the reference rate that has replaced the Base Rate in customary market usage in the relevant debt capital markets for the purposes of determining rates of interest in respect of notes denominated in SEK.
"Base Rate Amendments" has the meaning set forth in Condition 18.3.5.
"Base Rate Event" means that:
(a)the Base Rate has (i) been permanently or indefinitely discontinued, (ii) ceased to exist or (iii) ceased to be published for at least five consecutive Business Days as a result of the Base Rate ceasing to be calculated or administered;
(b)the Base Rate Administrator ceases to publish the applicable Base Rate permanently or indefinitely and, at that time, no successor administrator has been appointed to continue to publish the Base Rate;
(c)the supervisor of the Base Rate Administrator (i) has made a public statement stating that the Base Rate is no longer representative of the underlying market or (ii) is recommending the usage of a Successor Base Rate for the applicable Base Rate;
(d)the Base Rate Administrator or its supervisor announces that (i) the Base Rate methodology has changed materially after the First Issue Date or (ii) the Base Rate may no longer be used, either generally or in respect of the Notes; or
(e)it has become unlawful for the Issuer or the Issuing Agent to calculate any payments due to be made to any Noteholder using the applicable Base Rate,
provided that in the case of paragraph (c), the Base Rate Event shall occur on the date of the cession of publication of the relevant Base Rate or the discontinuation of the relevant Base Rate, as the case may be, and not the date of the relevant public statement.
"Base Rate Event Announcement" means a public statement by the Base Rate Administrator or the supervisor of the Base Rate Administrator that any event or circumstance specified in paragraphs (a) to (e) of the definition of Base Rate Event will occur.
"Independent Adviser" means an independent financial institution or adviser of repute in the debt capital markets where the Base Rate is commonly used.
"Relevant Nominating Body" means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee of any of them or the Financial Stability Council (Finansiella stabilitetsrådet) or any part thereof.
"Successor Base Rate" means a screen or benchmark rate which is formally recommended as a successor to or replacement of the Base Rate by a Relevant Nominating Body.
18.3Determination of Base Rate, Adjustment Spread and Base Rate Amendments
18.3.1Without prejudice to Condition 18.3.2, upon a Base Rate Event Announcement, the Issuer may (acting in its sole discretion), at any time before the occurrence of the relevant Base Rate Event at the Issuer’s expense appoint an Independent Adviser to determine a Successor Base Rate or, if there is no Successor Base Rate, an Alternative Base Rate and, in each case, the Adjustment Spread and any Base Rate Amendments for purposes of determining and calculating the applicable Base Rate. For the avoidance of doubt, the Issuer will not be obliged to take any such actions until required to do so pursuant to Condition 18.3.2.
18.3.2If (i) a Base Rate Event has occurred or (ii) a Base Rate Event Announcement has been made and the announced Base Rate Event will occur within six months, the Issuer shall use all commercially reasonable endeavours to, as soon as reasonably practicable and at the Issuer’s expense, appoint an Independent Adviser to determine, as soon as commercially reasonable, a Successor Base Rate or (if there is no Successor Base Rate) an Alternative Base Rate and, in each case, the Adjustment Spread and any Base Rate Amendments for purposes of determining and calculating the applicable Base Rate.
18.3.3If the Issuer fails to appoint an Independent Adviser in accordance with Condition 18.3.2, the Noteholders shall, if so decided at a Noteholders’ Meeting or by way of Written Procedure, be entitled to appoint an Independent Adviser (at the Issuer’s expense) for the purposes set forth in Condition 18.3.2.
18.3.4The Adjustment Spread determined by the Independent Adviser in accordance with Condition 18.3.1 or 18.3.2, shall be the Adjustment Spread which:
(a)is formally recommended in relation to the replacement of the Base Rate by any Relevant Nominating Body; or
(b)if paragraph (a) above does not apply, the Independent Adviser determines is customarily applied to the relevant Successor Base Rate or Alternative Base Rate (as applicable), in comparable debt capital markets transactions.
18.3.5The Independent Adviser shall also determine any technical, administrative or operational changes required to ensure the proper operation of a Successor Base Rate or an Alternative Base Rate or to reflect the adoption of such Successor Base Rate or Alternative Base Rate in a manner substantially consistent with market practice ("Base Rate Amendments").
18.3.6Provided that a Successor Base Rate or (if there is no Successor Base Rate) an Alternative Base Rate and, in each case, the applicable Adjustment Spread and any Base Rate Amendments have been determined no later than 10 Business Days prior to the relevant Quotation Day in relation to the next succeeding Interest Period, they shall become effective with effect from and including the commencement of the next succeeding Interest Period.
18.4Interim measures
18.4.1If a Base Rate Event has occurred but no Successor Base Rate or Alternative Base Rate and Adjustment Spread have been determined at least 10 Business Days prior to the relevant Quotation Day in relation to the next succeeding Interest Period, the Interest Rate applicable to the next succeeding Interest Period shall be:
(a)if the previous Base Rate is available and can be used in accordance with applicable law and regulation, determined pursuant to the terms that would apply to the determination of the Base Rate as if no Base Rate Event had occurred; or
(b)if the previous Base Rate is no longer available or cannot be used in accordance with applicable law or regulation, equal to the Interest Rate determined for the immediately preceding Interest Period.
18.4.2For the avoidance of doubt, Condition 18.4.1 shall apply only to the relevant next succeeding Interest Period and any subsequent Interest Periods are subject to the subsequent operation of, and to adjustments as provided in, this Condition 18.
18.5Notices etc.
The Issuer shall promptly following the determination by the Independent Adviser of any Successor Base Rate, Alternative Base Rate, Adjustment Spread and any Base Rate Amendments give notice thereof to the Trustee, the Issuing Agent and the Noteholders in accordance with Condition 24 (Notices and press releases) and the CSD.
18.6Variation upon replacement of Base Rate
18.6.1No later than giving the Trustee notice pursuant to Condition 18.5, the Issuer shall deliver to the Trustee a certificate signed by the Independent Adviser and the CEO, CFO or any other duly authorised signatory of the Issuer confirming the relevant Successor Base Rate or Alternative Base Rate, the Adjustment Spread and any Base Rate Amendments, in each case as determined in accordance with the provisions of this Condition 18. The Successor Base Rate or Alternative Base Rate, the Adjustment Spread and any Base Rate Amendments (as applicable) specified in such certificate will, in the absence of manifest error or bad faith in any determination, be binding on the Issuer, the Trustee, the Issuing Agent and the Noteholders.
18.6.2Subject to receipt by the Trustee of the certificate referred to in Condition 18.6.1, the Issuer and the Trustee shall, at the request and expense of the Issuer, without the requirement for any consent or approval of the Noteholders, without undue delay effect such amendments to the Finance Documents as may be required by the Issuer in order to give effect to this Condition 18.
18.6.3The Trustee and the Issuing Agent shall always be entitled to consult with external experts prior to making any amendments which are to be effected pursuant to this Condition 18. Neither the Trustee nor the Issuing Agent shall be obliged to concur in making such amendments if in the reasonable opinion of the Trustee or the Issuing Agent (as applicable), doing so would impose more onerous obligations upon it or expose it to any additional duties, responsibilities or liabilities or reduce or amend the protective provisions afforded to the Trustee or the Issuing Agent in the Finance Documents.
18.7Limitation of liability for the Independent Adviser
Any Independent Adviser appointed pursuant to Condition 18.3 shall not be liable whatsoever for damage or loss caused by any determination, action taken or omitted by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct. The Independent Adviser shall never be responsible for indirect or consequential loss.
19.APPOINTMENT AND REPLACEMENT OF THE TRUSTEE
19.1Appointment of the Trustee
19.1.1By subscribing for Notes, each initial Noteholder appoints the Trustee to act pursuant to the Trust Deed as trustee in all matters relating to the Notes and the Finance Documents, and authorises the Trustee to act on its behalf (without first having to obtain its consent, unless such consent is specifically required by these Terms and Conditions or the Trust Deed) in any legal or arbitration proceedings relating to the Notes held by such Noteholder. By acquiring Notes, each additional Noteholder confirms such appointment and authorisation for the Trustee to act on its behalf.
19.1.2The Trustee shall not be bound to take any action in relation to the Trust Deed and these Terms and Conditions unless directed to do so in accordance with Conditions 14, 15 and/or 16, as applicable, and it has been indemnified and/or secured and/or prefunded to its satisfaction.
19.1.3The Issuer shall promptly upon request provide the Trustee with any documents and other assistance (in form and substance satisfactory to the Trustee), that the Trustee deems necessary for the purpose of exercising its rights and/or carrying out its duties under the Finance Documents.
19.1.4The Trustee is entitled to fees for its work and to be indemnified for costs, losses and liabilities on the terms set out in the Finance Documents and the Trustee's obligations as Trustee under the Finance Documents are conditioned upon the due payment of such fees and indemnifications.
19.1.5The Trustee may act as Trustee or trustee for several issues of securities issued by or relating to the Issuer and other Group Companies notwithstanding potential conflicts of interest.
19.2Duties of the Trustee
19.2.1The Trustee shall represent the Noteholders in accordance with the Finance Documents. The Trustee is not responsible for the execution or enforceability of the Finance Documents.
19.2.2When acting in accordance with the Finance Documents, the Trustee is always acting with binding effect on behalf of the Noteholders. The Trustee shall carry out its duties under the Finance Documents with the degree of care and diligence required of it as a trustee having regard to the provisions of the Trust Deed and the other Finance Documents.
19.2.3The Trustee is entitled to delegate its duties to other professional parties, but the Trustee shall remain liable for the actions of such parties under the Finance Documents.
19.2.4The Trustee shall treat all Noteholders equally and, when acting pursuant to the Finance Documents, act with regard only to the interests of the Noteholders and shall not be required to have
regard to the interests or to act upon or comply with any direction or request of any other person, other than as explicitly stated in the Finance Documents.
19.2.5The Trustee is entitled to engage external experts when carrying out its duties under the Finance Documents. The Issuer shall on demand by the Trustee pay all costs for external experts engaged after the occurrence of an Event of Default, or for the purpose of investigating or considering (i) an event or circumstance which the Trustee reasonably believes is or may lead to an Event of Default or (ii) a matter relating to the Issuer which the Trustee reasonably believes may be detrimental to the interests of the Noteholders under the Finance Documents. Any compensation for damages or other recoveries received by the Trustee from external experts engaged by it for the purpose of carrying out its duties under the Finance Documents shall be distributed in accordance with Condition 13 (Distribution of proceeds).
19.2.6The Trustee shall, as applicable, enter into agreements with the CSD, and comply with such agreements and the CSD Regulations applicable to the Trustee, as may be necessary in order for the Trustee to carry out its duties under the Finance Documents.
19.2.7Notwithstanding any other provision of the Finance Documents to the contrary, the Trustee is not obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation.
19.2.8If in the Trustee's reasonable opinion the cost, loss or liability which it may incur (including reasonable fees to the Trustee) in complying with instructions of the Noteholders, or taking any action at its own initiative, will not be covered by the Issuer, the Trustee may refrain from acting in accordance with such instructions, or taking such action, until it has received such funding or indemnities (or an adequate Lien has been provided therefor) as it may reasonably require.
19.2.9The Trustee shall give a notice to the Noteholders (i) before it ceases to perform its obligations under the Finance Documents by reason of the non-payment by the Issuer of any fee or indemnity due to the Trustee under the Finance Documents or (ii) if it refrains from acting for any reason described in Condition 19.2.8.
19.3Limited liability for the Trustee
19.3.1The Trustee will not be liable to the Noteholders for damage or loss caused by any action taken or omitted by it under or in connection with any Finance Document, unless directly caused by its negligence, wilful default or fraud. The Trustee shall never be responsible for indirect or consequential loss.
19.3.2The Trustee shall not be considered to have acted negligently if it has acted in accordance with advice from or opinions of reputable external experts engaged by the Trustee or if the Trustee has acted with reasonable care in a situation when the Trustee considers that it is detrimental to the interests of the Noteholders to delay the action in order to first obtain instructions from the Noteholders.
19.3.3The Trustee shall not be liable for any delay (or any related consequences) in crediting an account with an amount required pursuant to the Finance Documents to be paid by the Trustee to the Noteholders, provided that the Trustee has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Trustee for that purpose.
19.3.4The Trustee shall have no liability to the Noteholders for damage caused by the Trustee acting in accordance with instructions of the Noteholders given in accordance with Condition 14 (Decisions by Noteholders) or a demand by Noteholders given pursuant to Condition 12.1.
19.3.5Any liability towards the Issuer which is incurred by the Trustee in acting under, or in relation to, the Finance Documents shall not be subject to set-off against the obligations of the Issuer to the Noteholders under the Finance Documents.
19.4Replacement of the Trustee
19.4.1Subject to Condition 19.4.6, the Trustee may resign by giving notice to the Issuer and the Noteholders, in which case the Noteholders shall appoint a successor Trustee at a Noteholders' Meeting convened by the retiring Trustee or by way of Written Procedure initiated by the retiring Trustee.
19.4.2Subject to Condition 19.4.6, if the Trustee is Insolvent, the Trustee shall be deemed to resign as Trustee and the Issuer shall within 10 Business Days appoint a successor Trustee which shall be an independent financial institution or other reputable company which regularly acts as trustee under debt issuances.
19.4.3A Noteholder (or Noteholders) representing at least 10 per cent. of the Adjusted Nominal Amount may, by notice to the Issuer (such notice may only be validly given by a person who is a Noteholder on the Business Day immediately following the day on which the notice is received by the Issuer), require that a Noteholders' Meeting is held for the purpose of dismissing the Trustee and appointing a new Trustee. The Issuer may, at a Noteholders' Meeting convened by it or by way of Written Procedure initiated by it, propose to the Noteholders that the Trustee be dismissed and a new Trustee appointed.
19.4.4If the Noteholders have not appointed a successor Trustee within 90 days after (i) the earlier of the notice of resignation was given or the resignation otherwise took place or (ii) the Trustee was dismissed through a decision by the Noteholders, the Issuer shall appoint a successor Trustee which shall be an independent financial institution or other reputable company which regularly acts as trustee under debt issuances.
19.4.5The retiring Trustee shall, at its own cost, make available to the successor Trustee such documents and records and provide such assistance as the successor Trustee may reasonably request for the purposes of performing its functions as Trustee under the Finance Documents.
19.4.6The Trustee's resignation or dismissal shall only take effect upon the appointment of a successor Trustee and acceptance by such successor Trustee of such appointment and the execution of all necessary documentation to effectively substitute the retiring Trustee.
19.4.7Upon the appointment of a successor, the retiring Trustee shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of the Finance Documents and remain liable under the Finance Documents in respect of any action which it took or failed to take whilst acting as Trustee. Its successor, the Issuer and each of the Noteholders shall have the same rights and obligations amongst themselves under the Finance Documents as they would have had if such successor had been the original Trustee.
19.4.8In the event that there is a change of the Trustee in accordance with this Condition 19.4, the Issuer shall execute such documents and take such actions as the new Trustee may
reasonably require for the purpose of vesting in such new Trustee the rights, powers and obligation of the Trustee and releasing the retiring Trustee from its further obligations under the Finance Documents. Unless the Issuer and the new Trustee agree otherwise, the new Trustee shall be entitled to the same fees and the same indemnities as the retiring Trustee.
19.5New Trustee and Separate and Co-Trustees
19.5.1One or more persons may hold office as trustee or trustees under the Trust Deed but such trustee or trustees shall be or include a trust corporation. The power to appoint a new trustee under the Trust Deed shall be vested in the Issuer but no person shall be appointed who shall not previously have been approved by the Noteholders pursuant to Condition 14.6. Any appointment of a new trustee shall as soon as practicable thereafter be notified by the Issuer to the Noteholders in accordance with these Terms and Conditions.
19.5.2Notwithstanding the above, the Trustee may appoint any person established or resident in any jurisdiction (whether a trust corporation or not) to act either as a separate trustee or as a co-trustee jointly with the Trustee in certain circumstances.
20.APPOINTMENT AND REPLACEMENT OF THE ISSUING AGENT
20.1The Issuer has appointed the Issuing Agent to manage certain specified tasks under these Terms and Conditions and in accordance with the legislation, rules and regulations applicable to and/or issued by the CSD and relating to the Notes.
20.2The Issuing Agent may retire from its assignment or be dismissed by the Issuer, provided that the Issuer has approved that a commercial bank or securities institution approved by the CSD accedes as a new Issuing Agent at the same time as the old Issuing Agent retires or is dismissed.
21.APPOINTMENT AND REPLACEMENT OF THE CSD
21.1The Issuer has appointed the CSD to manage certain tasks under these Terms and Conditions and in accordance with the CSD Regulations and the other regulations applicable to the Notes.
21.2The CSD may retire from its assignment or be dismissed by the Issuer, provided that the Issuer has effectively appointed a replacement CSD that accedes as CSD at the same time as the old CSD retires or is dismissed and provided also that the replacement does not have a negative effect on any Noteholder or the listing of the Notes on a Regulated Market. The replacing CSD must be authorised to professionally conduct clearing operations pursuant to the Securities Markets Act (lag (2007:528) om värdepappersmarknaden) and be authorised as a central securities depository in accordance with the Financial Instruments Account Act (lag (1998:1479) om kontoföring av finansiella instrument).
22.NO DIRECT ACTIONS BY NOTEHOLDERS
No Noteholder shall itself be entitled to proceed directly against the Issuer unless the Trustee, having become bound to so proceed, fails to do so within a reasonable time and such failure is continuing. Further, a Noteholder may not take any steps whatsoever to enforce or recover any amount due or owing to it pursuant to the Trust Deed and/or the Notes, or to initiate, support or procure the winding-up, dissolution, liquidation, company reorganisation (företagsrekonstruktion) or bankruptcy (konkurs) (or its equivalent in any other jurisdiction) of the Issuer in relation to any of the obligations and liabilities of the
Issuer under the Trust Deed and/or the Notes, unless the Trustee, having become bound to take such action, fails to do so within a reasonable time and such failure is continuing.
23.PRESCRIPTION
The right to receive repayment of the principal of the Notes shall become prescribed 10 years from the Redemption Date. The right to receive payment of interest (excluding any capitalised interest) shall be prescribed and become void five years from the relevant due date for payment. The Issuer is entitled to any funds set aside for payments in respect of which the Noteholders' right to receive payment has been prescribed.
24.NOTICES AND PRESS RELEASES
24.1Notices
24.1.1Any notice or other communication to be made under or in connection with the Finance Documents:
(a) if to the Trustee, shall be given at Sveavägen 9, 111 57 Stockholm;
(b)if to the Issuer, shall be given at the address specified on its website www.millicom.com on the Business Day prior to dispatch; and
(c)if to the Noteholders, shall be given at their addresses as registered with the CSD, on the Record Date prior to dispatch, and by either courier delivery or letter for all Noteholders. A notice or other communication to the Noteholders shall also be published on the websites of the Issuer and the Trustee.
24.1.2Any notice or other communication made by one person to another under or in connection with the Finance Documents shall be sent by way of courier, personal delivery or letter, or, if between the Issuer and the Trustee, by email, and will only be effective, in case of courier or personal delivery, when it has been left at the address specified in Condition 24.1.1, in case of letter, three Business Days after being deposited postage prepaid in an envelope addressed to the address specified in Condition 24.1.1, or, in case of email, when received in readable form by the email recipient.
24.1.3Any notice which shall be provided to the Noteholders in physical form pursuant to these Terms and Conditions may, at the discretion of the Trustee, be limited to:
(a)a cover letter, which shall include:
(i)all information needed in order for Noteholders to exercise their rights under the Finance Documents;
(ii)details of where Noteholders can retrieve additional information;
(iii)contact details to the Trustee; and
(iv)an instruction to contact the Trustee should any Noteholder wish to receive the additional information by regular mail; and
(b)copies of any document needed in order for Noteholders to exercise their rights under the Finance Documents.
24.1.4Any notice pursuant to the Finance Documents shall be in English.
24.1.5Failure to send a notice or other communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders.
24.2Press releases
24.2.1Any notice that the Issuer or the Trustee shall send to the Noteholders pursuant to Conditions 9.3 (Voluntary total redemption (Call option)), 9.4 (Early redemption due to illegality), 9.5 (Repurchase with Excess Proceeds), 10.1.2, 12.4, 14.15, 15.1, 16.1, 17.3 and 18.5 shall also be published by way of press release by the Issuer or the Trustee, as applicable.
24.2.2In addition to Condition 24.2.1, if any information relating to the Notes or the Issuer contained in a notice which the Trustee may send to the Noteholders under these Terms and Conditions has not already been made public by way of a press release, the Trustee shall before it sends such information to the Noteholders give the Issuer the opportunity to issue a press release containing such information. If the Issuer does not promptly issue a press release and the Trustee considers it necessary to issue a press release containing such information before it can lawfully send a notice containing such information to the Noteholders, the Trustee shall be entitled to issue such press release.
25.FORCE MAJEURE AND LIMITATION OF LIABILITY
25.1Neither the Trustee nor the Issuing Agent shall be held responsible for any damage arising out of any legal enactment, or any measure taken by a public authority, or war, strike, lockout, boycott, blockade, natural disaster, insurrection, civil commotion, terrorism or any other similar circumstance (a "Force Majeure Event"). The reservation in respect of strikes, lockouts, boycotts and blockades applies even if the Trustee or the Issuing Agent itself takes such measures, or is subject to such measures.
25.2The Issuing Agent shall have no liability to the Noteholders if it has observed reasonable care. The Issuing Agent shall never be responsible for indirect damage with exception of gross negligence and wilful misconduct.
25.3Should a Force Majeure Event arise which prevents the Trustee or the Issuing Agent from taking any action required to comply with these Terms and Conditions, such action may be postponed until the obstacle has been removed.
25.4The provisions in this Condition 25 apply unless they are inconsistent with the provisions of the Financial Instruments Accounts Act which provisions shall take precedence.
26.CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
26.1No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999 except and to the extent, if any, that the Notes expressly provide for such Act to apply to any of their terms. This does not affect any right or remedy of a third party which exists or is available apart from that Act.
26.2For the avoidance of doubt, the Issuing Agent is intended to have the rights under the Contracts (Rights of Third Parties) Act 1999 to enforce the terms of Condition 4 (Condition Precedent)
27.GOVERNING LAW AND JURISDICTION
27.1The Trust Deed and the Notes, and any non-contractual obligations arising out of or in connection therewith, shall be governed by and construed in accordance with English law. For the avoidance of doubt, Articles 470-1 to 470-19 of the Luxembourg law dated 10 August 1915 as amended are excluded.
27.2The Issuer has in the Trust Deed agreed for the benefit of the Trustee and the Noteholders that the English courts shall have exclusive jurisdiction in relation to all disputes arising out of or in connection with the Trust Deed or the Notes (including claims for set-off and counterclaims), including, without limitation, disputes arising out of or in connection with: (i) the creation, validity, effect, interpretation, performance or non-performance of, or the legal relationships established by the Trust Deed and the Notes; and (ii) any non-contractual obligation arising out of or in connection with the Trust Deed and the Notes and accordingly submits to the exclusive jurisdiction of the English courts. For such purposes each of the Issuer and the Trustee irrevocably submits to the jurisdiction of the English courts and waives any objection to the exercise of such jurisdiction.
27.3Notwithstanding that, under the Financial Instruments Accounts Act or the operating procedures, rules and regulations of the CSD (together, the "Swedish Remedies"), holders of the Notes may have remedies against the Issuer for non-payment or non-performance under the Trust Deed and the Notes, a Noteholder must first exhaust all available remedies in the courts of England for non-payment or non-performance before any proceedings may be brought against the Issuer in Sweden in respect of the Swedish Remedies. Accordingly, a Noteholder may not therefore take concurrent proceedings in Sweden.
27.4The Issuer:
(a)waives any objection to the choice of or submission to the English courts on the grounds of inconvenient forum or otherwise as regards proceedings in connection with the Trust Deed and the Notes or any non-contractual obligations arising out of or in connection with the Trust Deed and the Notes; and
(b)agrees that a judgment, declaration or order (whether interim or final) of an English court in connection with the Trust Deed and the Notes or any non-contractual obligations arising out of or in connection with the Trust Deed and the Notes is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.
27.5The Issuer shall appoint an agent in England to which service of process and any other documents in proceedings in England in connection with the Trust Deed and the Notes, including these Terms and Conditions, may be made and any such documents may be served. Any claim form, judgment or other notice of legal process shall be sufficiently served on the Issuer if delivered to it (or, if appointed, such agent) at its address in England for the time being. The Issuer undertakes with the Trustee not to revoke the authority of any such agent without the prior written consent of the Trustee.