Correspondence 0000950103-23-016423 from MILLICOM INTERNATIONAL CELLULAR SA (TIGO, MLCMF) (CIK 0000912958) (TIGO)
MILLICOM INTERNATIONAL CELLULAR SA (TIGO, MLCMF) (CIK 0000912958)
Date: Nov. 17, 2023 · CIK: 0000912958 · Accession: 0000950103-23-016423
AI Filing Summary & Sentiment
File numbers found in text: 001-38763
Referenced dates: September 30, 2023
Letter
Form 20-F for the Fiscal Year Ended December 31, 2022 Filed February 28, 2023 File No. 001-38763
Re: Millicom International Cellular S.A.
Dear Ms. Akst and Ms. Dietz,
This letter is submitted in response to the comments of the Staff of the Division of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) contained in your letter dated September 30, 2023 (the “Second Comment Letter”) with respect to the financial statements and related disclosures of the Form 20-F for the Fiscal Year Ended December 31, 2022 filed by Millicom International Cellular S.A. (“Millicom” or the “Company”) with the Commission on February 28, 2023.
For your convenience, we have reproduced the Staff’s comments preceding our responses below. We also suggest organizing a conference call once you have reviewed our answers, so that we can clarify any further questions or doubts you might have.
Meanwhile, please do not hesitate to contact Celso Vianna (Chief Accounting Officer) celso.vianna@millicom.com, Geoffrey Smets (Group Financial Reporting Director) geoffrey.smets@millicom.com or myself with any questions.
Very truly yours,
/s/ Sheldon
Bruha
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filename1.htm
November 17, 2023
Ms. Megan Akst (Senior
Staff Accountant)
Ms. Christine Dietz
(Senior Staff Accountant)
U.S. Securities
and Exchange Commission
Washington, D.C.
20549
Re: Millicom International Cellular
S.A.
Form
20-F for the Fiscal Year Ended December 31, 2022
Filed
February 28, 2023
File
No. 001-38763
Dear Ms. Akst and
Ms. Dietz,
This letter is submitted
in response to the comments of the Staff of the Division of Corporation Finance (the “Staff”) of the U.S. Securities and
Exchange Commission (the “Commission”) contained in your letter dated September 30, 2023 (the “Second Comment Letter”)
with respect to the financial statements and related disclosures of the Form 20-F for the Fiscal Year Ended December 31, 2022 filed by
Millicom International Cellular S.A. (“Millicom” or the “Company”) with the Commission on February 28, 2023.
For your convenience,
we have reproduced the Staff’s comments preceding our responses below. We also suggest organizing a conference call once you have
reviewed our answers, so that we can clarify any further questions or doubts you might have.
Meanwhile, please
do not hesitate to contact Celso Vianna (Chief Accounting Officer) celso.vianna@millicom.com,
Geoffrey Smets (Group Financial Reporting Director) geoffrey.smets@millicom.com or myself with
any questions.
Very truly yours,
/s/ Sheldon
Bruha
Sheldon Bruha
Chief Financial
Officer
Consolidated statement of income for
the years ended December 31, 2022, 2021 and 2020, page F-5
1. We note your
response to comment 1 and specifically how you define Cost of Sales, noting that it does
not include depreciation, amortization or any indirect cost of services necessary to generate
revenue. Please tell us in more detail about, and the amount of, depreciation, amortization
and indirect costs of services that were necessary to generate revenue in the periods presented.
We note your reference to paragraph 15 of IAS 1 and the concepts of fair presentation and
faithful representation. Please refer to paragraphs 2.12 to 2.14 of the IFRS Conceptual Framework
for Financial Reporting, which indicates that information must faithfully represent the substance
of what it purports to represent and that a faithful representation is, to the maximum extent
possible, complete, neutral and free from error. Please tell us how you considered the concept
of completeness when presenting a measure of “Gross Profit” that excludes certain
costs required or necessary to generate revenue. Tell us if you considered revising the title
of “Gross Profit” to provide an indication to your investors that it excludes
certain costs and/or if you have considered the presentation of an additional subtotal of
“Gross Profit” that includes all costs necessary to generate revenue.
As
noted in our previous response, the Group analyzes expenses recognized in the consolidated statement of income by their nature. As such,
the current Cost of Sales (COS) and Operating Expenses (OPEX) line items are not typically and equally correlated to the evolution of
the Revenue line. This explains why Management believes that the current presentation together with the additional details disclosed
in note B.2. ‘Expenses’ (which describes the nature of the expenses by category and amount) enable the users of the financial
statements to understand the composition of COS and OPEX, and therefore meet the requirement of paragraphs 2.12 to 2.14 of the IFRS Conceptual
Framework.
With
this being said, we agree with the Staff’s comment that the ‘Gross profit’ line might be unsuitable in a consolidated
statement of income presented by nature of expenses. As a result, and also considering the above explanations, we propose, in future
filings, to remove the “Gross Profit” line item, rename the COS line as ‘Costs of Goods Sold and Services Rendered’
and increase the level of details disclosed in note B.2.2.. These changes would be reflected as follows:
In
the consolidated statement of income:
In
the note B.2.:
Notes to Consolidated Financial Statements
Note B.3. Segmental Information, page
F-36
2. We note your
response to prior comment 2. Please address the following:
2.1. Provide
us with additional details about your management structure and how your company is organized,
including an organizational chart. In your response, identify and expand on your description
of country General Managers and country Chief Financial Officers, their roles and responsibilities,
and tell us who they report to. Also, indicate the individual or individuals responsible
for the Honduras joint venture.
The
Company management structure from January 1, 2022 to December 31, 2022 was organized as follows:
1. Level
1 is the Chief Executive Officer (CEO) that reports to the Board of Directors
2. Level
2 are the Executive Vice Presidents (Executive team members) that report to the CEO:
a. Chief Financial Officer (CFO)
b. Chief Operating Officer (COO)
c. Chief Technology an Information Officer
(CCTO)
d. Chief Legal and Compliance Officer (CLCO)
e. Chief Human Resources Officer (CHRO)
f. Chief External Affairs Officer (CEAO)
The CEO and
EVPs form the ‘Executive Team’ (ET).
Organizational
chart of the Executive Team – information extracted from the Company’s HRIS system:
3. Level
3 are the General Managers (GMs) of the country operations that report into the COO role
(the COO also has some additional direct reports).
See below
the Organizational chart of the COO’s team – information extracted from the Company’s HR system:
As depicted
above, the GMs report to the COO and are responsible for the day-to-day management of its country operations, the local commercial and
technical deployment of the Group’s strategy, as well as the execution of the budget, as defined by the Executive Team (“ET”)
and approved by the Board of Directors. The GMs possess a limited level of authority, which restrict their ability to make decisions
that could significantly affect the financial performance or results of operations for the following reasons:
- GMs report directly to the COO, part of
the CODM, who has ultimate responsibility for the segment and country operations financial
performance and results of operations. See organizational chart above.
- The COO sets the overall strategic direction
for the segment and country operations. For example, pricing changes and decisions need to
be reviewed and agreed by the COO and his team.
- The COO approves the segment and country
operations operating plan. The GMs cannot make adjustments to their annual budget without
the approval of the COO.
- The COO monitors the segment and country
operations performance and makes adjustments to the operating plan as needed. See example
of Capex allocation under our answer to question 4. Below.
- The GMs’ compensation package is
heavily tied to the segment’s financial performance (35% of base salary), while the
compensation package of the COO and CODM is fully weighted based on the segment’s financial
performance.
- The COO has the authority to make decisions
with the potential to significantly affect the financial performance or results of operations
within the segment and country. To illustrate, country operations are charged annual management
fees amounting to 6 to 7.5% of the total revenue. These percentages may be subject to adjustments
by the COO during the year depending on the country operations performance, and GMs do not
possess the authority to oppose such adjustments.
Based on
the information provided above and the reasons outlined elsewhere in this letter (see also answer to question 5.), our perspective is
that the COO ultimately serves as the segment manager, reporting directly to the CODM.
Below
are some examples of the key roles and responsibilities of the GMs:
o Accountable
for the overall performance and successful execution of the country’s business plan
as defined by the ET for the short and long term, and the overall strategic direction for
the country operations set by the COO (operating plan, pricing strategy, etc.).
o Ensure
that the company is adequately and effectively represented within local regulatory, fiscal,
and operational landscape while aligning with corporate policies
o Ensure
the optimal utilization of resources within the budget that is defined by the ET and the
application of Group´s organizational policies.
o Implement
key decisions regarding major technological transformations and digital evolution that is
defined by the Group CTIO.
o Promote
the Millicom culture within country organization.
o Be
a leader and promoter of talent and organizational culture aligned with the vision, purpose
and guidelines defined by the Group.
o Build
long-term relationships with different stakeholders, government, and regulatory entities.
4. Level 4:
Country CFOs (Heads of Finance in Country Operations) report directly to their respective
GMs, with a dotted line to the Group CFO.
The
Heads of Finance in Country Operations are responsible for all financial and internal controls’ compliance aspects of their respective
operations. Below are the key roles and responsibilities of the CFOs:
o Management
of financial risk, planning, and record-keeping activities, as well as financial reporting
according to corporate, regulatory and shareholder requirements.
o Design
and implement procedures and controls necessary to ensure the quality of information and
safeguard of all company assets.
o Full
responsibility for ensuring compliance of all corporate policies and relevant local and international
regulations where the Group operates.
o Responsible
for developing the business cases for capital investment projects (i.e. the CAPEX Approval
Requests – See answer to question 4.), which are presented to the Group Capex Committee
for approval.
o Active
participation in the strategic planning process, budgeting, and implementing of a reliable
forecasting process defined and led by the ET.
o Manage
local liquidity risk, cash management, debt issuance, foreign exchange, and interest rate
risk under the ET´s authority. Also manage local bank relationships in conjunction
with Group Treasury as all debt issuance and redemption activities require ET approval.
o Management
and supervision of the adequate tracking and accounting of the operation’s fixed assets.
o Accountability
for producing and managing all information related to taxes, tariffs and contributions according
to local legal requirements.
Lastly,
in response to your question about the individuals responsible for the Honduras joint venture (“JV”), the governance of the
JV is structured under a shareholders’ Agreement (SHA). Similar to other Millicom’s country of operations, the Honduras Board
of Directors appoints a GM who is responsible for the day-to-day management of its country operations, the local commercial and technical
deployment of the Group’s strategy, as well as the execution of the budget, as approved by the Board of Directors. The board is
composed of representatives from both shareholders as described below. They collectively oversee the strategic and operational aspects
of the JV.
A. 66.67% Millicom,
represented by:
I. Esteban
Iriarte (member and Deputy Chair) – Millicom Group COO
II. Paola Ballesteros
(member and Secretary) – Millicom Group VP of strategic Planning and Performance
III. Xavier
Rocoplan (member) – Millicom Group CTIO
IV. Luciano
Pablo Marino (alternate member and alternate Deputy Chair) – Millicom Group VP B2C
V. Salvador
Escalon (alternate member and alternate Secretary) – Millicom Group CLCO
VI. Karen Salas-Morales
(alternate member) – Millicom Group VP and General Counsel – Corporate •
General Counsel LATAM
B. 33.33% CentroTel
Group, represented by:
I. Antonio
Tavel Otero (member and Chair)
II. Jimmy Zuniga
(member)
III. Roberto
Isaias Plaza (alternate member and alternate Chair)
IV. Roberto
Kury (alternate member)
2.2. Describe
the key operating decisions within your business and who makes these decisions.
Millicom’s
Board of Directors has delegated its authority to the E