Correspondence 0000950103-23-017897 from MILLICOM INTERNATIONAL CELLULAR SA (TIGO, MLCMF) (CIK 0000912958) (TIGO)
MILLICOM INTERNATIONAL CELLULAR SA (TIGO, MLCMF) (CIK 0000912958)
Date: Dec. 26, 2023 · CIK: 0000912958 · Accession: 0000950103-23-017897
AI Filing Summary & Sentiment
File numbers found in text: 001-38763
Referenced dates: December 14, 2023, July 14, 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 December 14, 2023 (the “Third 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.
Meanwhile, we remain at your disposal; 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
Show Raw Text
CORRESP
1
filename1.htm
December 26, 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 December 14, 2023 (the “Third 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.
Meanwhile, we remain
at your disposal; 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
Form 20-F for the fiscal year ended
December 31, 2022
Item 5. Operating and Financial Review
and Prospects.
Results of operations, page 59
1. Please tell
us how you intend to present “Group” results in your results of operations section.
If you intend to present Group results on a basis other than consolidated results in accordance
with IFRS, for example the disclosures on pages 62 and 67, we may have additional concerns
as this may result in the presentation of non-IFRS measures. We refer you to prior comment
4 of our letter dated July 14, 2023.
As
further discussed below in response to later comments, in the Form 20-F and financial statements for the year ended December 31, 2023,
the company intends to change its reportable segments and no longer plans to report a “Group” segment. As such, in the Form
20-F for the year ended December 31, 2023, the Company will present and otherwise refer to “Group” results only when referring
to the consolidated results of operations of the Company prepared in accordance with IFRS. Management is also considering presenting
certain non-IFRS measures for the consolidated Group. Any non-IFRS measures will be presented in accordance with the applicable rules
and requirements of Commission.
In
the “Segment” results of operations section, management will provide details about the revenue generated by each of its reportable
segments, as shown in the table below. Management intends to include Honduras in the table as it considers Honduras to be a reportable
segment – see answer to question 4. below. Honduras figures will then be subtracted in order to reconcile with the consolidated
revenue prepared in accordance with IFRS, and as shown on the face of the statement of income of the Group.
As
an example, the table presented below illustrates the revenue generated by each reportable segment, and the total revenue will be reconciled
with the consolidated revenue reported in the Group’s statement of income:
“The
following table sets forth revenue from continuing operations by country of operations, before intercompany eliminations:
Item 18. Financial Statements
Consolidated statements of income
for the years ended December 31, 2022, 2021 and 2020, page F-5
2. We note in your
response to comment 1 that you intend to remove ‘Gross Profit’ and rename the
“Cost of Sales” line item to “Cost of Goods Sold and Services Rendered.”
We believe that an investor could misinterpret this line item as one that includes all costs
of sales. Please revise the name of this line item to clearly describe the nature of the
costs included in and/or excluded from this line item and revise the related footnote disclosure
accompanying the expense details accordingly to clarify your presentation.
The
financial statements’ line “Cost of Goods Sold and Services Rendered” includes the following items:
- TV content
and data costs
- Voice airtime
and transmission costs
- Value Added
Services (VAS) costs (SMS, data, etc)
- Call center
costs
- Cost of
telephone, equipment and other accessories
- Bad debt
and obsolescence costs
- Other costs
It
specifically excludes the following costs/expenses, which are further detailed elsewhere in the financial statements:
- ‘Operating
expenses, net’, also presented in Note B.2. ‘Expenses’, made up of:
o Marketing
expenses
o Site
and network maintenance costs
o Employee
related costs – further detailed in note B.4.
o External
and other services – such as audit fees, consulting services, etc
o Other
operating expenses
- Depreciation
and amortization, which are further detailed in Notes E.1.3. ‘Movements in intangible
assets’, E.2.2. ‘Movements in tangible assets’ and E.3. ‘Right of
use assets’.
- ‘Other
operating income (expenses), net’, also presented in Note B.2. ‘Expenses’,
mainly made up of impairment losses on goodwill and other non-financial assets, as well as
results on sale of financial and non-financial assets.
We
recognize that our peers and competitors use a similar term for this line item, which we believe aids investors and analysts in comparing
our financial performance. However, if the SEC staff finds the current description to still be misleading, we propose renaming it to
"Transmission, supply and other costs" to enhance clarity.
Finally,
in order to clarify the above information in the financial statements, and to add further details with respect to the Cost of Goods Sold
and Services Rendered, management propose to present note B.2. ‘Expenses’ as follows:
“B.2. Expenses
The cost of goods
sold and services rendered incurred by the Group is summarized below and exclude the following costs/expenses which are further detailed
elsewhere in the financial statements:
- 'Operating
expenses, net' further detailed below.
- Depreciation
and amortization, which are further detailed in Notes E.1.3. ‘Movements in intangible
assets’, E.2.2. ‘Movements in tangible assets’ and E.3. ‘Right of
use assets’.
- ‘Other
operating income (expenses), net’, also further detailed below.
Cost of goods
sold and services rendered
Operating expenses,
net
Operating expenses
incurred by the Group is summarized below:
Other operating
income (expenses), net
The other operating
income and expenses incurred by the Group is summarized below:
Note
B.3. Segmental information, page F-36
3. We note your
response to prior comments 2 through 5. Please provide us with an update to your previously
submitted segment identification analysis that reflects the changes you described during
our phone call on December 6, 2023. As part of your response, describe the reasons underlying
any changes in your operating and reportable segments, including but not limited to changes
in your organization or changes in the financial information regularly reviewed by your CODM.
Further, please include a draft of the segment disclosures required under IFRS 8.
Over
the last twelve months, Xavier Niel (XN), through his investment company Atlas Luxco, gradually acquired a significant stake in Millicom,
reaching up to 28% ownership. In May 2023, XN gained representation on Millicom’s Board of Directors, appointing three non-Executive
directors (out of nine). Additionally, Maxime Lombardi joined Millicom as President and COO, reporting directly to the CEO. Maxime is
the vice-chairman of Iliad Group, a French telecommunications company owned by XN, and previously served as its CEO. Current CEO Mauricio
Ramos was appointed Interim Chairman of the Board of Directors until the next Annual General Meeting in May 2024 and will step down from
its current CEO position on the same date.
As
a result, during the second half of 2023, Millicom implemented significant organizational changes to focus on driving profitable growth
with a lean corporate structure. The company also adopted a decentralized approach to streamline decision-making processes and enhance
agility to improve profitability and shareholder value. To that end, the General Managers of the operations (countries), which reported
to the Group COO, now directly report to the Group President and COO (Guatemala and Colombia) and to the Group Chief Commercial and Technology
Officer (the rest of the operations), who, together with the Group CEO and CFO now form the ‘Chief Operating Decision Maker’
(“CODM”).
In 2023, Millicom underwent
a series of significant organizational changes:
o Group
COO departed the Group.
o CTIO
assumed the role of Chief Commercial and Technology Officer (CCTO) and took over some of
the commercial activities previously handled by the departing COO.
o As
previously mentioned, the Group President and COO joined the Group in September 2023, acting
as potential successor to the current CEO. The current CEO was appointed as Interim Chairman
of the Board until he formally steps down and the Group President and COO assumes the role
of acting CEO.
o Chief
External Affair Officer (CEAO) and Chief Legal and Compliance Officer (CLCO) continue to
report into current CEO even after his appointment as Interim Chairman of the Board.
o Chief
Human Resources Officer (CHRO) is leaving the Group by the end of 2023.
o CFO
reports to Group President and COO overseeing finance and financial planning, reporting financial
performance, including external financial reporting, budgeting and forecasting, monitoring
expenditures and costs, implementing and enhancing related internal controls, and managing
Enterprise Risk Management.
o The
General Manager (GM) of Guatemala and Colombia report directly into the President and COO,
while the GMs of the remaining countries report into the CCTO, forming part of the new CODM.
o In
the latter half of 2023, Millicom embarked on a significant a significant restructuring program
(Everest), which involved the elimination of approximately 40% of its central functions.
This strategic move aligns with the company’s aim of adopting a more decentralized
operating model.
With
respect to the fiscal year 2022, as explained in our preceding answers, the Executive team was designated as the CODM, and, among other
centrally managed topics, they primarily evaluated performance and allocated resources at the Group segment level rather than the country-specific
level. Additionally, the CODM was not provided with detailed discrete financial information by country of operations. As a result, management
determined that the criteria outlined in IFRS 8.5 (b) and (c) for classifying country operations as reportable segments were not met.
In
response to the organizational modifications implemented in 2023, while the full Executive Team continues to be responsible for steering
the development and execution of the Group's strategy, day-to-day operations, management decisions (both operational and financial),
resource allocation, and performance assessment of the Group's components now fall under the purview of the Group President and COO,
CTIO/Chief Commercial Officer, and Group CEO and CFO, collectively forming the CODM.
While
the Group's executive management structure remains in a transitional phase, management believes these recent changes necessitate a revision
of the CODM definition as described above.
In
addition, several operational changes were implemented in 2023, including:
o The
Group President and COO, the CCTO and the Group CFO now all attend the monthly finance calls
organized by the Group CFO and have therefore access to detailed discrete financial information
at country of operations level. During these calls, country GMs present their country’s
operational activities for the month along with financial performance against budget. Prior
to these organizational changes, only the Group CFO attended these meetings.
o Every
month, the Group CFO, CCTO and President and COO prepare the so-named Monthly Reporting Pack
(MPR), which is reviewed by the Group CEO before being shared with the Board. MPR includes
mostly Group information (including and excluding Honduras), but now also receive more detailed
information at country level (since the appointment of our President and COO).
o All
purchase orders for direct or indirect purchases as well as capital expenditures (Capex),
including those of the countries, must be reviewed and approved by the Group President and
COO and the CCTO on a weekly basis, before proceeding with the service and payment of such
expenditures.
These
changes have led to the CODM becoming more involved in country-leve