Comunicaciones Celulares S.A.

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	28005
Company name	Millicom International Cellular S.A. - MIC
Country	Guatemala
Sector	Information
Environmental category	B
Department	Global Inform. & Comm. Tech.
Status	Pending Approval

Date SPI disclosed	May 26, 2009
Projected board date	June 26, 2009

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project consists of a corporate loan for the expansion and upgrade of Comcel S.A.’s 2G and 3G mobile network throughout Guatemala, including rural areas of the country. Comcel S.A. is the largest mobile telephony operator in Guatemala. It has 4.5 million subscribers and approximately 45% market share.

Project sponsor and major shareholders of project company

The project is sponsored by Millicom International Cellular S.A (or “MIC”) and Mifin Associates Corp (“Mifin”). MIC owns 55% of Comcel, while Mifin holds the remaining 45%. Comcel is currently MIC’s largest subsidiary in terms of subscribers, revenue and income.

MIC is a NASDAQ and Stockholm Exchange-listed global cellular network operator. It was founded in 1990 and focuses on low and middle-income markets. MIC provides 2G and 3G mobile services in 19 countries and has 32 million subscribers as of year end 2008. Its operations cut across 4 main regions: Central America, South America, Africa, and Asia. For fiscal year 2008, MIC posted revenues of $3.4 billion, EBITDA of $1.5 billion (or 43% EBITDA margin) and net income of $518 million.

Total project cost and amount and nature of IFC's investment

Total project costs will amount to approximately $120 million, which will cover Comcel’s capital expenditures for 2009. Specifically, capital expenditures will be assigned to increasing coverage (39%), improving capacity (22%), value-added services (15%) and the acquisition of other infrastructure assets (25%). The project will be financed with debt of up to $90 million, with the balance funded through internal cash sources.

IFC will provide an A-loan of up to $35 million for IFC’s own account. IFC will also assist in mobilizing resources (i.e., either through a B-loan or through parallel financing) for the remaining amount.

Location of project and description of site

Comcel’s current network covers most of the populated areas of the country. Compared to its competitors America Movil and Telefonica, Comcel has the widest geographical coverage, covering 97% of Guatemala’s urban population and 86% of its rural population.

As of 2008, the network was comprised of 1844 base stations (BTS). 3G services are currently being offered in 65 cities. The network counts with an interurban microwave backbone connecting the main nodes (Guatemala City and three main towns) Comcel has a comprehensive system of backhaul some optical cable components. The company also has a data center able to store larger volumes of information, which is spread in three locations in Guatemala City. Finally, the Comcel operates its own call center, located in Guatemala City,

The project contemplates 225 new base stations throughout the country, increasing both coverage and capacity. Furthermore, the project contemplates the building of a fiber optics ring in the north of the country, providing backhaul for sites in this frontier region.

The company’s headquarters, together with the central IT facilities, are all located in Guatemala City

Anticipated development impact of the project

In general, the project will contribute towards:

- improving the performance of telecommunications networks (for both voice and data) in congested areas of main cities, and expand coverage in underserved and rural areas, where telecommunications services are scarce;
- providing capital investment and improve the telecommunications infrastructure in Guatemala;
- supporting the development of low-cost models of extending connectivity to rural areas;
- fostering the development of small medium enterprises (“SMEs”) and micro-entrepreneurs; and
- enabling other sectors of the economy to become more efficient through the increased use of ICT.

Further to improving coverage, affordability and availability of mobile telephony services, the project will also:

- increase broadband coverage through Comcel’s its 3G network;
- improve service quality;
- boost direct and indirect employment; and
- further fuel remittances through the purchase of airtime by individuals outside the country.

IFC's expected development contribution

Access to long term financing: The deterioration of international credit markets in recent months has increased the difficulty for even strong emerging market firms such as Comcel to obtain needed financing. Even in relatively stable markets such as Guatemala, firms of the size of Comcel experience difficulties in raising commercial financing for infrastructure projects. IFC’s participation in the proposed investment will send a positive signal to the market about the continued health of the company and the sector.

Resource mobilization: By either providing a B-loan or promoting / helping structure parallel financing, IFC would provide the structure for attracting resources from financial institutions wary of Guatemalan country risk and current market volatility.

Promote sustainable SMEs along the supply chain: In its strategy of “Availability, Accessibility and Affordability”, Comcel works closely with small and medium enterprises that serve as distribution partners and dealers for Comcel handsets and airtime. With Comcel’s further expansion into rural areas of Guatemala, IFC and the project would be contributing to helping such SMEs expand their coverage footprint too.

Environmental and social issues - Category B

The key issues associated with the project are environmental, health, safety, and social management; construction of towers; labor and working conditions (including occupational health and safety); pollution prevention and abatement, and community security. This has been classified as a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects. As a condition of IFC’s investment, Comcel will commit to an action plan for ensuring that all relevant social and environmental risks and impacts are managed as appropriate. Specific information about how risks, impacts and opportunities will be addressed by Comcel is summarized in the Environmental and Social Review Summary for the project.

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