Annual report and accounts 2008

Notes contents

Notes to the consolidated financial statements
As of December 31, 2008, 2007 and 2006

4.Acquisition of subsidiaries, joint ventures and minority interests

Year ended December 31, 2008

In 2008, Millicom acquired 100% interest in Amnet Telecommunications Holding Limited.

Amnet Telecommunications Holding Limited

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

Millicom completed the allocation of the purchase price to the assets acquired, liabilities assumed and contingent liabilities during the year ended December 31, 2008. The final determined fair value of the identifiable assets and liabilities acquired were as follows:

• (i) Intangible assets identified are trademarks for an amount of $5 million, with estimated useful life of 15 months; subscriber bases for an amount of $123 million, with estimated useful life of 4 to 9 years; and non-compete agreements for $19 million, with estimated useful lives of 4 years.
• (ii) Contingent liabilities relate to existing tax and other contingencies at the time of the acquisition amounting to $24 million were booked within “Other current liabilities”. The former shareholders of Amnet placed in escrow $35 million to cover these contingencies. Therefore a corresponding financial asset of $24 million has been recorded within “Other current assets”.
• (iii) Deferred tax liabilities, related to the differences between the tax base and the fair values of the identifiable assets acquired at the time of acquisition amounted to $42 million.

The goodwill is attributable to the profitability potential of the acquired business and the synergies expected to arise from the Group's acquisition of Amnet. The fair value of the subscriber bases was ascertained using the discounted excess earnings method and the fair value of the trademark was ascertained using the relief from royalty approach. The fair value of the non-compete agreements was ascertained using the incremental cash flow approach. Acquisition cost of Amnet was $546 million, including acquisition costs of $4 million and was funded through a one-year bridge loan facility with two commercial banks and cash (see note 24).

The acquired business contributed revenues of $43 million and net profit of $4 million for the period from acquisition to December 31, 2008. If the acquisition had occurred on January 1, 2008, unaudited pro forma Group revenue from continuing operations would have been $3,534 million, and the unaudited pro forma profit for the year from continuing operations would have been $437 million. These amounts have been calculated using the Group accounting policies.

Year ended December 31, 2007

Millicom did not acquire any subsidiaries, joint ventures or minority interests during the year ended December 31, 2007.

Year ended December 31, 2006

Millicom acquired the following subsidiaries, joint ventures and minority interests during the year ended December 31, 2006:

Colombia Móvil S.A.

On October 2, 2006, the Group acquired 50% plus one of the voting shares of Colombia Móvil S.A., a mobile operation in Colombia. Millicom completed the allocation of the purchase price to the assets acquired, liabilities assumed and contingent liabilities during the year ended December 31, 2006. The final determined fair value of the identifiable assets and liabilities acquired were as follows:

• (i) Intangible assets identified are trademarks for an amount of $5 million which were fully written off in the fourth quarter of 2006 as the operation was rebranded; subscriber bases for an amount of $100 million which have useful lives of 6 to 7 years; and licenses for $71 million which have useful lives of 7 years.
• (ii) Network equipment fair value at the date of acquisition is $30 million lower than its carrying value mainly due to falling network equipment prices which have resulted in a lower replacement cost than book value.
• (iii) Contingent liabilities relate to existing litigations at the time of the acquisition. The founding shareholders of Colombia Movil S.A. committed to reimburse the operation for any payments that need to be made relating to litigations existing at the time of the acquisition therefore a corresponding financial asset has been recorded.
• (iv) The business was acquired by purchasing new shares and therefore the purchase price, net of acquisition costs, was injected into the operation.

The goodwill is attributable to the profitability potential of the acquired business and the synergies expected to arise from the Group's acquisition of Colombia Movil S.A. The fair value of the subscriber bases was ascertained using the discounted excess earnings method and the fair value of the trademark was ascertained using the relief from royalty approach. The acquisition cost of Colombia Movil S.A. was $124 million, including acquisition costs of $2 million and was financed through borrowings.

The acquired business contributed revenues of $90 million and net losses of $14 million for the period from acquisition to December 31, 2006. If the acquisition had occurred on January 1, 2006, unaudited pro forma Group revenue from continuing operations would have been $1,823 million, and the unaudited pro forma profit for the year from continuing operations would have been $176 million. These amounts have been calculated using the Group accounting policies.

In 2007, the Group reversed $23 million of goodwill as a result of the recognition of deferred tax assets in respect of tax losses carried forward (see note 13).

Telefonica Celular del Paraguay S.A

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

Sentel GSM

On March 14, 2006, Millicom purchased for a total consideration of $35 million the remaining 25% ownership interest in Sentel GSM, its operation in Senegal in which Millicom now has 100% ownership. Millicom recognised goodwill of $32 million as a result of the acquisition of the minority interest, recorded under the caption "Intangible assets, net".

Millicom Sierra Leone Limited

On February 1, 2006, Millicom paid $2 million as the second instalment in respect of the acquisition on December 16, 2005 of 30% of the shares in Millicom Sierra Leone Limited.

Millicom Tanzania Limited

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