Annual report and accounts 2008

• 1.3 million subscribers added in Asia in 2008
• 2 million subscriber milestone reached in Sri Lanka
• Launch of a PDA based sales tracking system in Sri Lanka, a Millicom first
• Launch of VOIP in Cambodia
• Achievement of International Gateway Operator status and launch of Wimax broadband services in Laos
• 4 points of market share gain in both Laos and Sri Lanka

For Millicom’s operations in Asia, 2008 was characterized by the record addition of over 1.3 million subscribers in the year, bringing the year end total to 4.3 million, up 47% from the previous year. Revenues were $262 million, up 34% year-on-year and EBITDA was $100 million, up 26% year-on-year, producing an EBITDA margin of 38%.

The operating focus for the cluster in 2008 was on continuing to drive profitable top line growth in an environment of increased pricing pressure due to competition from new players and macro economic factors. In Cambodia, the focus was on maintaining our leadership position in the market in light of three new entrants, while at the same time maintaining quality through continued investment in the cellular and distribution networks. In Laos and Sri Lanka, the focus was on profitable growth by reinforcing Tigo's positioning as an aspirational brand synonymous with Accessibility, Affordability and Availability.

2008 saw the introduction of several innovative new products across the region in order to drive the affordability of our services. In Cambodia, we launched VOIP services to make IDD calls more affordable and also a $2 denomination card. In Laos, we launched a Call Collector program called “Yulala” where customers collect free outgoing airtime for each cent of incoming calls they receive. The program has now reached over 50% of our subscriber base and is delivering real value to our customers. We also ran two very successful promotions in Laos where customers enjoyed over an hour of free On-Net calls for $0.35. In Sri Lanka, we launched per second IDD tariffs and introduced a new low denomination by way of a 5 in 1 scratch card with a reload value of $0.9. We also launched ‘Free Incoming’, and ‘Bonus for Life’ propositions which made a strong contribution to Sri Lanka impressive net subscriber additions during the year.

In all three markets we launched new Value Added Services (VAS). In Cambodia, we introduced an exclusive English Premier League offering, allowing subscribers to watch near live video clips of soccer matches. In Laos, we launched a 1000 SMS offer for only 10 US cents which contributed to an increase in the VAS portion of revenues from 7% to 11%. In Sri Lanka, our PRBT (Personal Ring Back Tone) product took off very strongly as we made it easier for consumers to choose a new tone or copy their friends' tones through an innovative feature called Copy-A-Tune, a first in Sri Lanka. We also launched the ”Give Me Balance” product in Sri Lanka, enabling customers to ask their friends to transfer balance to them.

There have also been developments in Roaming. In Laos, inbound roaming revenue increased by 38% due to an increase in tourism and to our new status as an International Gateway Operator which allows us to receive income from direct international calls termination. In Sri Lanka, we added over 50 roaming partners for both Voice and GPRS.

During the year there were also developments in the provision of data services in Asia. In Cambodia, we continue to expand our 3G and HSDPA services in major cities and in Laos, we launched broadband services via Wimax.

In 2008, we continued to increase the number of sales outlets in the region and we ended the year with approximately 59,000 points of sale, an increase of 21% over 2007.

The Territory Management system continues to provide an unprecedented level of market information from the field in Cambodia, driving new connections and distribution outlets throughout the country. This system was introduced in Sri Lanka in 2008, with the country divided into 5 regions. Tigo is the first mobile operator in Sri Lanka to have a web-based Distribution Management System, which equips our retail sales force with handheld PDAs, giving them access to online real time information such as stock availability. In Laos, the number of distributors increased by 50% while the number of E-pin outlets more than doubled.

We continued to support our brands, Cellcard in Cambodia and Tigo in Laos and Sri Lanka with marketing campaigns targeted towards our dealers and customers. In Cambodia, we implemented dealer seminars with over 3,000 dealers nationwide trained in our products and services and we launched a ‘Best Dressed’ Campaign to maximize Cellcard’s brand visibility in outlets. In an independent survey, the Cellcard brand came up as the most preferred service provider, offering best value for money and the most comprehensive VAS.

Tigo's first anniversary in Laos was celebrated by 25,000 people, making it the most attended event in Laos in 2008. The Tigo brand was further promoted through sponsorship of events such as Ms Lao Pageant, the first ever Lao Music Awards, and the 2008 Vientiane Speed Fest. Laos has also delivered a Millicom first by exclusively branding the arrival and departure card at immigration, making Tigo the first point of contact for every one of the 2 million tourists that enter Laos each year.

Sri Lanka continues to be the major innovator in brand visibility with innovations such as Tigo buses, Tigo branded bus stations, Tigo painted walls with specific messages and cool hangout areas in the two biggest cities of Colombo and Kandy. In Sri Lanka, we focused on leveraging and communicating our three core benefits - per second billing, all incoming free and lifetime bonus with every reload. For the launch of ‘incoming free’, we provided all bus rides into Colombo for free for one week which created a buzz around Tigo and catapulted the benefits of "All Incoming Free", which is now the number two brand association for Tigo, after “Per Second Billing”. A research project carried out by Nielson revealed that Tigo Sri Lanka topped the list for best customer satisfaction across a number of factors including value for money, network quality and customer service. As our customers are the happiest customers, they bring in other customers, and this enabled us to cross the 2 million subscriber mark at the end of 2008.

During the year, we expanded our coverage and capacity greatly in all three countries with a strong focus on the profitability of sites. In Cambodia, we rolled out 579 sites which allowed us to increase our reach in the country and cover over 65% of the population. We also enabled the whole of the network to EDGE allowing our customers to enjoy even higher data connections speeds. To improve our network efficiency, we negotiated a fixed price, performance related, three year Service Support Agreement with our main vendor to ensure inflation protected technical support services with improved equipment repair commitments. We also delivered 400 hybrid solar solutions for coverage sites resulting in lower operational costs.

In Laos, we rolled out 99 new sites, bringing the total number to 274 and giving population coverage of over 20%. In order to improve the reliability of the network, a plan has been introduced to reinforce lightning protection, increase the reliability of the transmission links and extend the power backup of all sites. In addition, we have established troubleshooting teams of local technicians, able to assess problems on sites more quickly and therefore improving our network efficiency. The introduction of a new vendor for Civil Works and the Standardization of Civil Specifications brought cost savings and greater efficiencies in the second half of the year.

In Sri Lanka, we rolled out over 300 new sites, increasing our coverage to over 70% of the population. In order to improve the efficiency of the network, we identified one strategic vendor for the radio network and for the New Generation 3G capable equipment. This has allowed us to improve the quality of the network substantially without increasing our costs. In order to prepare the ground for 3G we also introduced Next Generation Network (NGN) equipment in the third quarter. These initiatives have strengthened our network and given Sri Lanka one of the highest call success rates amongst all Millicom operations.

There were a number of significant market developments in Asia in 2008 as the cluster continues to attract high levels of interest from new entrants. In Cambodia, three new players entered the market during the year and two more are poised to launch in early 2009. A new telecommunication act is under discussion in the parliament in Cambodia and the regulator has issued several new licenses which included Mobile, VoIP and ISP.

In Laos, a minority stake in the fourth operator was acquired by a regional player and the market leading operator launched commercial 3G services. Despite these market developments, Tigo continued to gain four points of market share. A new regulator, the National Authority for Post and Telecommunication (NAPT) was put into place in Laos in 2008 and in February, following 2.5 years of negotiations, Tigo was granted an International VOIP License. In April, we began our International Gateway operation and took up ISP services by providing WIMAX internet to customers. In late 2008 a Presidential Decree was signed based on recommendation made by NAPT on spectrum usage fees. Discussions on this topic are ongoing.

In Sri Lanka, our renewed license came into effect for a period of 10 years from 13th September 2008 and our 3G license approval has been secured, although we are still in the final stages of ratification by the government. Tigo added 4 points of market share in Sri Lanka in 2008, ahead of the launch of a fifth market operator in early January 2009.

The outlook for Millicom’s Asian operations for 2009 is promising as penetration rates are still low. All three operations will continue to invest aggressively to drive penetration and growth. With several new market entrants expected to launch services in 2009 and competition intensifying amongst the current players, the emphasis will be on maintaining and improving market share in a profitable manner. We intend to do this by continuing to lead in terms of affordability, availability and accessibility and by augmenting revenue streams through new Value-Added Services and a focus on higher ARPU segments. Progress will also continue to be made in terms of data, with the development of improved 3G services in Cambodia and Wimax in Laos.

To accommodate subscriber growth we will continue to grow our network coverage and capacity and increase the number of distribution and connection outlets. We will build in-depth understanding of our customers through utilizing the full potential of the territory management concept. As always, development of the businesses will be in the most cost efficient way, with procurement becoming more centralized and strong control over operating expenses. We are confident that our Asian businesses will account for a larger proportion of Group revenues in the future.