Annual report and accounts 2008

Notes contents

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

24.Borrowings

• (i)Excludes the fair value of the equity component.

The following table provides details of net debt change for the years 2008, 2007 and 2006:

10% Senior Notes

On November 24, 2003, Millicom issued $550 million aggregate principal amount of 10% Senior Notes (the "10% Senior Notes") due on December 1, 2013. The 10% Senior Notes bear interest at 10% per annum, payable semi-annually in arrears on June 1 and December 1. The effective interest rate is 10.7%.

The 10% Senior Notes are general unsecured obligations of Millicom and rank equal in right of payment with all future unsecured and unsubordinated obligations of Millicom. The 10% Senior Notes are not guaranteed by any of Millicom's subsidiaries, joint ventures or affiliates, and as a result are structurally subordinated in right of payment to all indebtedness of such subsidiaries, joint ventures and affiliates.

If Millicom experiences a Change of Control Triggering Event, defined as a rating decline resulting from a change in control, each holder will have the right to require Millicom to repurchase its notes at 101% of their principal amount plus accrued and unpaid interest and all other amounts due, if any.

During 2007, Millicom repurchased $90 million of the 10% Senior Notes incurring in a charge of $5 million which is recorded under the caption “Other non operating income (expenses), net”.

In October 2007, Millicom decided that it would redeem the balance of the Notes in December 2008 and pay the contractual redemption premium of 5%. As a result, Millicom reclassified the 10% Senior Notes from non current to current and recorded an additional interest expense of $31 million for the year ended December 31, 2007, which represented the increase in financial liabilities due to the recognition of the 5% pre-payment expense and an increase in the amortised cost of the Notes due to the earlier settlement date. Millicom reviewed its position to early repay the Notes in September 2008 and the Board of Directors decided not to early redeem the Notes but to keep them until the contractual maturity date (December 1, 2013). This decision impacted the future expected cash flows and, as a result, the 5% premium accrued in 2007 was completely reversed and an interest income amounting to $29 million was recorded in 2008. In addition the 10% Notes were reclassified as non-current.

4% convertible Notes

In January 2005, Millicom raised $200 million aggregate principal amount of 4% Convertible Notes due 2010 (the "4% Convertible Notes"). The net proceeds of the offering were received on January 7, 2005 in the amount of $196 million.

The 4% Convertible Notes were general unsecured obligations of Millicom and rank equal in right of payment with all future unsecured and unsubordinated obligations of Millicom. The rate of interest payable on the 4% Convertible Notes was 4% per annum. Interest is payable semi-annually in arrears on January 7 and July 7 of each year, beginning on July 7, 2005. The effective interest rate was 9.6%.

The 4% Convertible Notes were constituted by a trust deed dated January 7, 2005 between Millicom and The Bank of New York, as Trustee for the holders of notes.

Millicom apportioned part of the value of the 4% Convertible Notes to equity and part to debt. The value allocated to equity as of December 31, 2007 was $39 million (2006: $39 million) and the value allocated to debt was $179 million (2006: $171 million).

As of December 31, 2007, $1 million of the 4% Convertible Notes were converted into 28,686 SDRs.

On January 22, 2008, Millicom converted a further $196 million of the outstanding bonds into 5,420,235 Ordinary Shares and 202,236 SDRs. On the same day Millicom repaid in cash the remaining $3 million of bonds that were not converted, including accrued interest. The conversion resulted in an increase of equity amounting to $175 million in January 2008.

Other Debt and Financing

Significant individual financing facilities are described below:

(i)Amnet

In October 2008 Millicom Cable N.V. signed a 1 year financing agreement with RBS and Standard Bank for $200 million to partly finance the acquisition of Amnet. The loan bears interest for the first six months at $LIBOR plus 2.5%, for months seven to nine at $LIBOR plus 2.875% and months ten to twelve at $LIBOR plus 3.125%. The loan was increased by $30 million in December 2008 through a financing agreement with Nordea. The total loan, amounting to $230 million, is fully guaranteed by the Company. $230 million was outstanding as at December 31, 2008.

In addition as at December 31, 2008, Amnet had other debt and financing of $2 million.

(ii)Bolivia

In December 2007, Telefonica Celular de Bolivia SA ("Telecel Bolivia"), Millicom’s operation in Bolivia, signed a financing agreement for $40 million with the Nederlandse Financieringsmaatschappij Voor Ontwikkelingslanden, N.V. (FMO), also known as the Netherlands Development Finance Company. The A tranche of $20 million was provided directly by the FMO. This tranche is repayable over 7 years and bears an interest at $ LIBOR rate plus 2.25%. The B tranche of $20 million is provided equally by Nordea and Standard bank. This tranche is repayable over 5 years and bears interest at $ LIBOR plus 2%. Both tranches are guaranteed by the Company and were fully drawn as at December 31, 2008 and 2007.

In March 2008, Telecel Bolivia signed a 4 year and 9 months financing agreement for $30 million with the International Finance Corporation. The loan bears interest at $LIBOR plus 2% and is fully guaranteed by the Company. This loan was fully drawn as at December 31,2008.

In addition to the above, Telecel Bolivia also had vendor financings with Huawei (at interest rates of $LIBOR plus 2%) and FPLT totalling $32 million and $1 million of other debt and financing outstanding as at December 31, 2008 (2007: $2 million).

(iii) Colombia

In March 2008, Colombia Movil S.A. E.S.P ("Colombia Movil"), Millicom’s operation in Colombia, entered into a COP 393 billion ($173 million), 5 year facility with a club of Colombian banks. This facility bears interest at DTF plus 4.5% and is 50% guaranteed by the Company. As at December 31, 2008 $173 million was outstanding on this facility.

In October 2006, the Company acquired a majority ownership 50% plus 1 share in Colombia Movil. At the time of the acquisition the Company had a COP 168,539 million ($83 million) Hermes guaranteed export credit facility with Citigroup maturing in January 2012. This facility bears interest at IPC plus 6.30% and is 100% guaranteed by the minority shareholders. As at December 31, 2008 $37 million (2007: $54 million) was outstanding under this facility. In addition at the time of acquisition Colombia Movil also had a COP 309,800 million (total of $154 million, of which $94 million outstanding as at December 31, 2007) loan facility arranged by BBVA which was settled in 2008. This facility was bearing interest at DTF plus 4.15% and was 100% guaranteed by the minority shareholders.

Colombia Movil S.A. E.S.P. also had local currency loans from the minority shareholders outstanding as at December 31, 2008 of $230 million (2007: $230 million). These loans bear interest at DTF plus 4.15% and mature between 2011 and 2013.

In addition, as at December 31, 2008 Colombia Movil S.A. E.S.P. had no outstanding amount in respect of local currency 60 day treasury credits from various banks (2007: $57 million) and $16 million (2007: $2 million) of other debt and financing, in US$ and local currency.

(iv)Democratic Republic of Congo

In September 2006, Oasis S.P.R.L. ("Oasis"), Millicom's operation in the Democratic Republic of Congo, entered into a $106 million, 7 year loan from the China Development Bank to finance equipment purchases from Huawei, an equipment supplier. The loan bears interest at $ LIBOR plus 2% and is repayable over 17 equal quarterly installments commencing in 2009. This financing is 100% guaranteed by the Company. As of December 31, 2008, $59 million was outstanding under this facility (2007: $56 million) and in addition Oasis had other debt and financing of $4 million (2007: $5 million).

(v)El Salvador

In September 2006, Telemovil El Salvador S.A., Millicom’s operation in El Salvador, entered into a $200 million 5 year loan. The loan was syndicated amongst a group of local and international banks and was arranged by ABN AMRO, Citigroup and Standard Bank. The loan bears interest at $ LIBOR plus 1.75%. As of December 31, 2008, $180 million of this facility was outstanding (2007: $200 million).

In December 2008, Telemovil El Salvador S.A., entered into a $12 million 2 year loan with Banco Agrícola Comercial S.A. The loan bears interest at $ LIBOR plus 6%. As of December 31, 2008, the loan was fully drawn.

(vi) Ghana

In December 2007 Millicom (Ghana) Limited, Millicom’s operation in Ghana, entered into a $60 million local 5 year club-deal Facility. The loan bears interest at Libor plus 2 %. In parallel a $80 million offshore 7 year DFI (Development Finance Institution) financing which bears interest at Libor plus 2.25% was arranged. As at December 31, 2008, $139 million (2007: $90 million) was outstanding under these facilities.

In July 2005, Millicom (Ghana) Limited entered into a $20 million loan agreement with Citibank N.A., 75% guaranteed by the Overseas Private Investment Corporation and 100% guaranteed by the Company. This loan was bearing interest at $ LIBOR plus 2.5% and was repaid in 2008. As at December 31, 2007, $15 million was outstanding under this facility.

In addition as at December 31, 2008, Ghana had no other debt and financing (2007: $3 million).

(vii) Honduras

Telefonica Celular S.A., Millicom’s operation in Honduras, has facilities with several local banks maturing between 2009 and 2015. These facilities are in dollars and in Lempiras and are unsecured. Interest rates are either fixed or variable, ranging as of December 31, 2008 between 7.4% and 16% (2007: between 7.28% and 10.25%). As at December 31, 2008, the outstanding debt under these facilities was $91 million (2007: $57 million).

(viii) Paraguay

In July 2008, Telefonica Cellular Del Paraguay, Millicom’s operation in Paraguay entered into a $107 million, 8 year loan with the European Investment Bank (“EIB”). The loan is bearing interest at $LIBOR plus 0.125%. The outstanding amount as at December 31, 2008 was $50 million. The EIB is guaranteed for commercial risks by a group of banks.

In addition as at December 31, 2008, Telefonica Cellular Del Paraguay had $14 million (2007: $26 million) of other debt and financing outstanding.

(ix)Senegal

In December 2005, Sentel GSM, Millicom's operation in Senegal entered into a XAF12,500 million loan agreement with Crédit Lyonnais Sénégal ("CLS"). This loan bears a fixed interest rate of 8% and is fully repayable at maturity, in December 2010. The outstanding amount in US$ as at December 31, 2008 was $26 million (2007: $28 million). Sentel GSM also entered into a 5 year additional Tranche of XAF7,500 million with CLS in July 2007. This tranche bears an 8.5% fixed interest rate and was fully drawn at the end of 2007. The outstanding amount under this additional Tranche in US$ as at December 31, 2008 was $14 million (2007: $17 million). As at December 31, 2008 Sentel GSM was in breach of its debt covenants under the above facilities and as such these loans were reclassified as current. Negotiations are in progress with the bank to maintain the facilities and to waive the covenants.

In September 2006, Sentel GSM additionally entered into a XAF2,500 million bridge loan with the Compagnie Bancaire de l'Afrique Orientale (CBAO). This loan was bearing interest at 7% and was repaid in March 2008 (outstanding amount as at December 31, 2007 amounted to $1 million). Additionally in 2007, Sentel GSM entered into a new short term facility with CBAO amounting in to XAF7,500 million maturing on October 31, 2008 and bearing fixed interest of 6.5%. The facility has been rolled over and the amount outstanding as at December 31, 2008 was $18 million (2007: $17 million).

(x) Tanzania

In December 2008, Millicom Tanzania Limited, Millicom’s operation in Tanzania entered into facilities totaling $228 million comprising of a five year local currency syndicated tranche for TZS95 billion at the 180 days treasury Bill rate plus 3%, a seven year $116 million EKN guaranteed financing with 45% of the facility fixed at 4.1% and 55% of the facility at $LIBOR plus 0.665% and a seven year $40 million tranche with Proparco at $LIBOR plus 2.5%. All tranches are 100% guaranteed by the Company. As at December 31, 2008, the amount outstanding under these facilities was $152 million.

In March 2007 Millicom Tanzania Limited entered into a new 5 year Citi-Opic facilities, bearing interest rate of LIBOR plus 2.5%, composed of a $17.4 million $ Tranche and a Tranche in local currency up to the equivalent of $5 million. The outstanding US$ amount under these facilities as at December 31, 2008 amounted to $17 million (2007: $23 million).

At the same time Millicom Tanzania Limited entered into a 5 year $10 million Term Loan with Barclays bearing interest of LIBOR plus 3% and a 5 year $16.5 million vendor financing with Ericsson credit AB, priced at LIBOR plus 2.5%. The amount outstanding as at December 31, 2008 was nil (2007: $8 million) under the Barclays loan and nil (2007: $14 million) under the Ericsson loan.

Millicom Tanzania Limited had no other debt and financing outstanding as at December 31, 2008 (2007: $6 million).

Fair value of financial liabilities

• (i)Excludes the fair value of the equity component.

When the quoted price of the borrowings in an active market is not available, the fair value of the borrowings is calculated by discounting the expected future cash flows at market interest rates.

The nominal value of the other financial liabilities is assumed to approximate their fair values.

Guarantees

In the normal course of business, Millicom has issued guarantees to secure some of the obligations of some of its operations under bank and supplier financing agreements. The tables below describe the outstanding amount under the guarantees and the remaining terms of the guarantees as of December 31, 2008 and 2007. Amounts covered by bank guarantees are recorded in the consolidated balance sheets under the caption “Other debt and financing” and amounts covered by supplier guarantees are recorded under the caption “Trade payables” or “Other debt and financing” depending on the underlying terms and conditions.

As of December 31, 2008

As of December 31, 2007

• (i)The guarantee ensures payment by the Group's Company guarantor of outstanding amounts of the underlying loans in the case of non payment by the obligor.
• (ii)The guarantee ensures payment by the Group's Company guarantor of outstanding amounts of the underlying supplier financing in the case of non payment by the obligor.
• (iii)Including discontinued operations.

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 by the Company is $1,313 million (2007: $739 million). The assets pledged by the Group for these debts and financings amount to $610 million (2007: $449 million).