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Performance
 12 Months Ended
Dec. 31, 2019
Analysis of income and expense [abstract]  
Performance
Performance
Revenue
Millicom’s revenue comprises sale of services from its mobile business (including Mobile Financial Services - MFS) and its cable and other fixed services, as well as related devices and equipment. Recurring revenue consists of monthly subscription fees, airtime and data usage fees, interconnection fees, roaming fees, TV services, B2B contracts, MFS commissions and fees from other telecommunications services such as data services, short message services and other value added services.
Revenue from continuing operations by category
 
2019
2018
2017
 
(US$ millions)
Mobile
2,150

2,126

2,147

Cable and other fixed services
1,928

1,565

1,551

Other
52

43

38

Service revenue
4,130

3,734

3,737

Telephone and equipment and other
206

212

199

Total revenue
4,336

3,946

3,936

Revenue from continuing operations by country or operation (i)
 
2019
2018
2017
 
(US$ millions)
Colombia
1,532

1,661

1,739

Paraguay
609

679

662

Bolivia
639

614

555

El Salvador
386

405

422

Tanzania
382

399

384

Nicaragua
157

13

13

Costa Rica
153

155

153

Panama
475

17

—

Other operations
2

5

7

Total
4,336

3,946

3,936

(i)    The revenue figures above are shown after intercompany eliminations.
Accounting for revenue
Revenue recognition
Revenue is recognized at an amount that reflects the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer.
The Group applies the following practical expedients foreseen in IFRS 15:
•
No adjustment to the transaction price for the means of a financing component whenever the period between the transfer of a promised good or service to a customer and the associated payment is one year or less; when the period is more than one year the financing component is adjusted, if material.
•
Disclosure in the Group Financial Statements the transaction price allocated to unsatisfied performance obligations only for contracts that have an original expected duration of more than one year (e.g. unsatisfied performance obligations for contracts that have an original duration of one year or less are not disclosed).
•
Application of the practical expedient not to disclose the price allocated to unsatisfied performance obligations, if the consideration from a customer corresponds to the value of the entity’s performance obligation to the customer (i.e, if billing corresponds to accounting revenue).
•
Application of the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less.
Post-paid connection fees are derived from the payment of a non-refundable / one-time fee charged to customer to connect to the network (e.g. connection / installation fee). Usually, it does not represent a distinct good or service, and therefore does not give rise to a separate performance obligation and revenue is recognized over the minimum contract duration. However, if the fee is paid by a customer to get the right to receive goods or services without having to pay this fee again over his tenure with the Group (e.g. the customer can readily extend his contract without having to pay the same fee again), it is accounted for as a material right and revenue should be recognized over the customer retention period.
Post-paid mobile / cable subscription fees are recognized over the relevant enforceable/subscribed service period (recurring monthly access fees that do not vary based on usage). The service provision is usually considered as a series of distinct services that have the same pattern of transfer to the customer. Remaining unrecognized subscription fees, which are not refunded to the customers, are fully recognized once the customer has been disconnected.
Prepaid scratch / SIM cards are services where customers purchase a specified amount of airtime or other credit in advance. Revenue is recognized as the credit is used. Unused credit is carried in the statement of financial position as a contract liability. Upon expiration of the validity period, the portion of the contract liability relating to the expiring credit is recognized as revenue, since there is no longer an obligation to provide those services.
Telephone and equipment sales are recognized as revenue once the customer obtains control of the good. That criteria is fulfilled when the customer has the ability to direct the use and obtain substantially all of the remaining benefits from that good.
Revenue from provision of Mobile Financial Services (MFS) is recognized once the primary service has been provided to the customer.
Customer premise equipment (CPE) are provided to customers as a prerequisite to receive the subscribed Home services and shall be returned at the end of the contract duration. Since CPEs provided over the contract term do not provide benefit to the customer on their own, they do not give rise to separate performance obligations and therefore are accounted for as part of the service provided to the customers.
Bundled offers are considered arrangements with multiple deliverables or elements, which can lead to the identification of separate performance obligations. Revenue is recognized in accordance with the transfer of goods or services to customers in an amount that reflects the relative standalone selling price of the performance obligation (e.g. sale of telecom services, revenue over time + sale of handset, revenue at a point in time).
Principal-Agent, some arrangements involve two or more unrelated parties that contribute to providing a specified good or service to a customer. In these instances, the Group determines whether it has promised to provide the specified good or service itself (as a principal) or to arrange for those specified goods or services to be provided by another party (as an agent). For example, performance obligations relating to services provided by third-party content providers (i.e., mobile Value Added Services or “VAS”) or service providers (i.e., wholesale international traffic) where the Group neither controls a right to the provider’s service nor controls the underlying service itself are presented net because the Group is acting as an agent. The Group generally acts as a principal for other types of services where the Group is the primary obligor of the arrangement. In cases the Group determines that it acts as a principal, revenue is recognized in the gross amount, whereas in cases the Group acts as an agent revenue is recognized in the net amount.
Revenue from the sale of cables, fiber, wavelength or capacity contracts, when part of the ordinary activities of the operation, is recognized as recurring revenue. Revenue is recognized when the cable, fiber, wavelength or capacity has been delivered to the customer, based on the amount expected to be received from the customer.
Revenue from operating lease of tower space is recognized over the period of the underlying lease contracts. Finance leases revenue is apportioned between lease of tower space and interest income.
Significant judgments
The determination of the standalone selling price for contracts that involve more than one performance obligation may require significant judgment, such as when the selling price of a good or service is not readily observable.
The Group determines the standalone selling price of each performance obligation in the contract in accordance to the prices that the Group would apply when selling the same services and/or telephone and equipment included in the obligation to a similar customer on a standalone basis. When standalone selling price of services and/or telephone and equipment are not directly observable, the Group maximizes the use of external input and uses the expected cost plus margin approach to estimate the standalone selling price.
Expenses
The cost of sales and operating expenses incurred by the Group can be summarized as follows:
Cost of sales
 
2019
2018
2017
 
(US$ millions)
 
Direct costs of services sold
(878
)
(799
)
(881
)
Cost of telephone, equipment and other accessories
(230
)
(229
)
(217
)
Bad debt and obsolescence costs
(93
)
(90
)
(71
)
Cost of sales
(1,201
)
(1,117
)
(1,169
)


Operating expenses, net
 
2019
2018
2017
 
(US$ millions)
 
Marketing expenses
(402
)
(391
)
(448
)
Site and network maintenance costs
(245
)
(192
)
(178
)
Employee related costs (B.4.)
(496
)
(500
)
(434
)
External and other services
(204
)
(181
)
(163
)
Rentals and (operating) leases (i)
(1
)
(152
)
(151
)
Other operating expenses
(257
)
(201
)
(156
)
Operating expenses, net
(1,604
)
(1,616
)
(1,531
)

(i)
Decrease is due to IFRS 16 application - see further explanations above in "New and amended IFRS accounting standards" section
The other operating income and expenses incurred by the Group can be summarized as follows:
Other operating income (expenses), net
 
Notes
2019
2018
2017
 
 
(US$ millions)
 
Income from tower deal transactions
C.3.4.
5

61

63

Impairment of intangible assets and property, plant and equipment
E.1., E.2.
(8
)
(6
)
(12
)
Gain (loss) on disposals of intangible assets and property, plant and equipment
 
—

7

1

Loss on disposal of equity investments
C.7.3.
(32
)
—

—

Other income (expenses)
 
1

13

17

Other operating income (expenses), net
 
(34
)
75

69

Accounting for cost of sales and operating expenses
Cost of sales
Cost of sales is recorded on an accrual basis.
Incremental costs of obtaining a contract
Incremental costs of obtaining a contract, including dealer commissions, are capitalized as Contract Costs in the statement of financial position and amortized in operating expenses over the expected benefit period, which is based on the average duration of contracts with customer (see practical expedient in note B.1.1.).
Operating leases - until 2018 year-end
Operating leases were all leases that did not qualify as finance leases. Operating lease payments were recognized as expenses in the consolidated statement of income on a straight-line basis over the lease term.
Segmental information
Management determines operating and reportable segments based on information used by the chief operating decision maker (CODM) to make strategic and operational decisions from both a business and geographic perspective. The Group’s risks and rates of return are predominantly affected by operating in different geographical regions. The Group has businesses in two main regions: Latin America ("Latam") and Africa. The Latam figures below include Honduras and Guatemala as if they are fully consolidated by the Group, as this reflects the way management reviews and uses internally reported information to make decisions. Honduras and Guatemala are shown under the Latam segment. The joint venture in Ghana is not reported as if fully consolidated. Revenue, operating profit (loss), EBITDA and other segment information for the years ended December 31, 2019, 2018 and 2017, were as follows:
 
Latin America
Africa
Unallocated
Guatemala and Honduras(vii)
Eliminations and
Transfers
Total
 
(US$ millions)
Year ended December 31, 2019
 
 
 
 
 
 
Mobile revenue
3,258

372

—

(1,480
)
—

2,150

Cable and other fixed services revenue
2,197

9

—

(277
)
—

1,928

Other revenue
60

1

—

(8
)
—

52

Service revenue (i)
5,514

382

—

(1,766
)
—

4,130

Telephone and equipment and other revenue (i)
449

—

—

(243
)
—

206

Revenue
5,964

382

—

(2,009
)
—

4,336

Operating profit (loss)
1,006

24

(94
)
(540
)
179

575

Add back:
 
 
 
 
 
 
Depreciation and amortization
1,435

99

9

(444
)
—

1,100

Share of profit in joint ventures in Guatemala and Honduras
—

—

—

—

(179
)
(179
)
Other operating income (expenses), net
2

(2
)
42

(8
)
—

34

EBITDA (ii)
2,443

122

(43
)
(992
)
—

1,530

EBITDA from discontinued operations
—

(3
)
—

—

—

(3
)
EBITDA incl discontinued operations
2,443

119

(43
)
(992
)
—

1,527

Capital expenditure (iii)
(1,040
)
(58
)
(9
)
261

—

(846
)
Changes in working capital and others (iv)
(86
)
14

(52
)
(18
)
—

(143
)
Taxes paid
(225
)
(10
)
(8
)
129

—

(114
)
Operating free cash flow (v)
1,093

64

(112
)
(619
)
—

425

Total Assets (vi)
13,821

936

3,715

(5,465
)
(151
)
12,856

Total Liabilities
8,374

909

3,977

(2,119
)
(965
)
10,176

 
Latin America
Africa
Unallocated
Guatemala and Honduras(vii)
Eliminations and
Transfers
Total
 
(US$ millions)
Year ended December 31, 2018 (viii)
 
 
 
 
 
 
Mobile revenue
3,214

388

—

(1,475
)
—

2,126

Cable and other fixed services revenue
1,808

10

—

(253
)
—

1,565

Other revenue
48

1

—

(6
)
—

43

Service revenue (i)
5,069

398

—

(1,734
)
—

3,734

Telephone and equipment revenue (i)
415

—

—

(203
)
—

212

Revenue
5,485

399

—

(1,937
)
—

3,946

Operating profit (loss)
995

25

(47
)
(488
)
154

640

Add back:






Depreciation and amortization
1,133

80

5

(416
)
—

803

Share of profit in joint ventures in Guatemala and Honduras
—

—

—

—

(154
)
(154
)
Other operating income (expenses), net
(51
)
(3
)
(2
)
(19
)
—

(75
)
EBITDA (ii)
2,077

102

(44
)
(922
)
—

1,213

EBITDA from discontinued operations
—

44

—

—

—

44

EBITDA incl discontinued operations
2,077

146

(44
)
(922
)
—

1,257

Capital expenditure (iii)
(872
)
(59
)
(2
)
225

—

(708
)
Changes in working capital and others (iv)
(42
)
28

13

(12
)
—

(13
)
Taxes paid
(264
)
(24
)
(6
)
142

—

(153
)
Operating free cash flow (v)
899

91

(39
)
(568
)
—

383

Total Assets (vi)
11,751

839

2,752

(5,219
)
190

10,313

Total Liabilities
6,127

905

2,953

(1,814
)
(650
)
7,521

 
Latin America
Africa
Unallocated
Guatemala and Honduras(vii)
Eliminations and
Transfers
Total
 
(US$ millions)
Year ended December 31, 2017 (viii)
 
 
 
 
 
 
Mobile revenue
3,283

374

—

(1,510
)
—

2,147

Cable and other fixed services revenue
1,755

9

—

(213
)
—

1,551

Other revenue
40

2

—

(4
)
—

38

Service revenue (i)
5,078

385

—

(1,727
)
—

3,737

Telephone and equipment revenue (i)
363

1

—

(165
)
—

199

Total Revenue
5,441

386

—

(1,892
)
—

3,936

Operating profit (loss)
899

28

(5
)
(431
)
140

632

Add back:
 
 
 
 
 
 
Depreciation and amortization
1,174

81

6

(450
)
—

812

Share of profit in joint ventures in Guatemala and Honduras
—

—

—

—

(140
)
(140
)
Other operating income (expenses), net
(49
)
(11
)
10

(18
)
—

(69
)
EBITDA (ii)
2,024

97

12

(898
)
—

1,236

EBITDA from discontinued operations
—

115

—

—

—

115

EBITDA incl discontinued operations
2,024

212

12

(898
)
—

1,351

Capital expenditure (iii)
(855
)
(99
)
(1
)
237

—

(718
)
Changes in working capital and others (iv)
(53
)
(6
)
(10
)
27

—

(43
)
Taxes paid
(239
)
(18
)
1

124

—

(132
)
Operating free cash flow (v)
877

89

2

(511
)
1

459

Total Assets (vi)
10,411

1,482

598

(5,420
)
2,393

9,464

Total Liabilities
5,484

1,673

1,465

(1,961
)
(478
)
6,183

(i)
Service revenue is Group revenue related to the provision of ongoing services such as monthly subscription fees, airtime and data usage fees, interconnection fees, roaming fees, mobile finance service commissions and fees from other telecommunications services such as data services, SMS and other value-added services excluding telephone and equipment sales. Revenues from other sources comprises rental, sub-lease rental income and other non recurring revenues. The Group derives revenue from the transfer of goods and services over time and at a point in time. Refer to the table below.
(ii)
EBITDA is operating profit excluding impairment losses, depreciation and amortization and gains/losses on the disposal of fixed assets. EBITDA is used by the management to monitor the segmental performance and for capital management. For the year ended December 31, 2019, the application of IFRS 16 had a positive impact on EBITDA as compared to what our results would have been if we had continued to follow the IAS 17 standard.
(iii)
Cash spent for capex excluding spectrum and licenses of $59 million (2018: $61 million; 2017: $53 million) and cash received on tower deals of $22 million (2018: $141 million; 2017: $161 million).
(iv)
Changes in working capital and others include changes in working capital as stated in the cash flow statement, as well as share-based payments expense and non-cash bonuses.
(v)
Operating Free Cash Flow is EBITDA less cash capex (excluding spectrum and license costs) less change in working capital, other non-cash items (share-based payment expense and non-cash bonuses) and taxes paid.
(vi)
Segment assets include goodwill and other intangible assets.
(vii)
Including eliminations for Guatemala and Honduras as reported in the Latam segment.
(viii)
Restated as a result of classification of certain of our African operations as discontinued operations (see notes A.4. and E.4.).
Revenue from contracts with customers from continuing operations:
 
 
Twelve months ended December 31, 2019
 
Twelve months ended December 31, 2018
 
$ millions
Timing of revenue recognition
Latin America
Africa
Total Group
Latin America
Africa
Total Group
Mobile
Over time
1,747

261

2,007

1,701

280

1,981

Mobile Financial Services
Point in time
31

112

143

37

108

145

Cable and other fixed services
Over time
1,919

9

1,928

1,556

10

1,565

Other
Over time
51

1

52

42

1

43

Service Revenue

3,748

382

4,130

3,336

398

3,734

Telephone and equipment
Point in time
206

—

206

212

—

212

Revenue from contracts with customers
 
3,954

382

4,336

3,548

399

3,946

People
Number of permanent employees
 
2019
2018
2017
Continuing operations(i)
17,687

16,725

14,134

Joint ventures (Guatemala, Honduras and Ghana)
4,688

4,416

4,326

Discontinued operations
—

262

667

Total
22,375

21,403

19,127

(i)
Emtelco headcount are excluded from this disclosure and any internal reporting because their costs are classified as direct costs and not employee related costs.
 
Notes
2019
2018
2017
 
 
(US$ millions)
 
Wages and salaries
 
(358
)
(346
)
(308
)
Social security
 
(68
)
(60
)
(56
)
Share based compensation
B.4.1.
(27
)
(21
)
(22
)
Pension and other long-term benefit costs
B.4.2.
(4
)
(7
)
(8
)
Other employees related costs
 
(39
)
(67
)
(41
)
Total
 
(496
)
(500
)
(434
)
Share-based compensation
Millicom shares granted to management and key employees includes share-based compensation in the form of long-term share incentive plans. Since 2016, Millicom has two types of annual plans, a performance share plan and a deferred share plan. The different plans are further detailed below.
Cost of share based compensation
 
2019
2018
2017
 
(US$ millions)
 
2016 incentive plans
—

(4
)
(6
)
2017 incentive plans
(7
)
(8
)
(12
)
2018 incentive plans
(8
)
(11
)
—

2019 incentive plans
(14
)
—

—

Total share based compensation
(27
)
(21
)
(22
)

Deferred share plan (unchanged since 2014, except for vesting schedule)
Until 2018 deferred awards plan, participants were granted shares based on past performance, with 16.5% of the shares vesting on January 1 of each of year one and two, and the remaining 67% on 1 January of year three. Beginning with the 2019 plan, while all other guidelines remain the same, shares vest with 30% on January 1 of each of year one and two, and the remaining 40% on 1 January of year three. Vesting is conditional upon the participant remaining employed with Millicom at each vesting date. The cost of this long-term incentive plan, which is not conditional on performance conditions, is calculated as follows:
Fair value (share price) of Millicom’s shares at grant date x number of shares expected to vest.
Performance share plan (issued in 2015)
Under this plan, shares granted did vest in full in 2019, subject to performance conditions, 62.5% based on Absolute Total Shareholder Return (TSR) and 37.5% based on actual vs budgeted EBITDA minus CAPEX minus Change in Working Capital (Free Cash Flow). As the TSR measure is a market condition, the fair value of the shares in the performance share plan requires consideration of potential adjustments for future market-based conditions at grant date.
For this, a specific valuation had been performed at grant date based on the probability of the TSR conditions being met (and to which extent) and the expected payout based upon leaving conditions.
The Free Cash Flows (FCF) condition is a non-market measure which had been considered together with the leaving estimate and based initially on a 100% fulfillment expectation. The reference share price for 2015 performance share plan is the same share price as the share price for the deferred share plan.
Performance share plan (for plans issued in 2016 and 2017)
Shares granted under this performance share plan vest at the end of the three-year period, subject to performance conditions, 25% based on Positive Absolute Total Shareholder Return (Absolute TSR), 25% based on Relative Total Shareholder Return (Relative TSR) and 50% based on budgeted Earnings Before Interest Tax Depreciation and Amortization (EBITDA) minus Capital Expenditure (Capex) minus Change in Working Capital (CWC) (Free Cash Flow).
As the TSRs measures are market conditions, the fair value of the shares in the performance share plan requires consideration of potential adjustments for future market-based conditions at grant date.
For this, a specific valuation had been performed at grant date based on the probability of the TSR conditions being met (and to which extent) and the expected payout based upon leaving conditions.
The Free Cash Flows (FCF) condition is a non-market measure which had been considered together with the leaving estimate and based initially on a 100% fulfillment expectation. The reference share price for this condition is the same share price as the share price for the deferred share plan above.
Performance share plan (for plans issued from 2018)
Shares granted under this performance share plan vest at the end of the three-year period, subject to performance conditions, 25% based on Relative Total Shareholder Return (“Relative TSR”), 25% based on the achievement of the Service Revenue target measured on a 3-year CAGRs from year one to year three of the plan (“Service Revenue”) and 50% based on the achievement of the Operating Free Cash Flow (“Operating Free Cash Flow”) target measured on a 3-year CAGRs from year one to year three of the plan.
For the performance share plans, and in order to calculate the fair value of the TSR portion of those plans, it is necessary to make a number of assumptions which are set out below. The assumptions have been set based on an analysis of historical data as at grant date.

Assumptions and fair value of the shares under the TSR portion(s)
 
Risk-free
rate %
Dividend yield %
Share price volatility(i) %
Award term (years)
Share fair value (in US$)
Performance share plan 2019 (Relative TSR)
(0.24
)
3.01
26.58
2.93

49.79

Performance share plan 2018 (Relative TSR)
(0.39
)
3.21
30.27
2.93

57.70

Performance share plan 2017 (Relative TSR)
(0.40
)
3.80
22.50
2.92

27.06

Performance share plan 2017 (Absolute TSR)
(0.40
)
3.80
22.50
2.92

29.16

Performance share plan 2016 (Relative TSR)
(0.65
)
3.49
30.00
2.61

43.35

Performance share plan 2016 (Absolute TSR)
(0.65
)
3.49
30.00
2.61

45.94

Performance share plan 2015 (Absolute TSR)
(0.32
)
2.78
23.00
2.57

32.87

Executive share plan 2015 – Component A
(0.32
)
N/A
23.00
2.57

53.74

Executive share plan 2015 – Component B
(0.32
)
N/A
23.00
2.57

29.53

(i)
Historical volatility retained was determined on the basis of a three-year historic average.
The cost of the long-term incentive plans which are conditional on market conditions is calculated as follows:
Fair value (market value) of shares at grant date (as calculated above) x number of shares expected to vest.
The cost of these plans is recognized, together with a corresponding increase in equity (share compensation reserve), over the period in which the performance and/or employment conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award. Adjustments are made to the expense recorded for forfeitures, mainly due to management and employees leaving Millicom. Non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest.
No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. These are treated as vested, regardless of whether or not the market conditions are satisfied, provided that all other performance conditions are satisfied. Where the terms of an equity-settled award are modified, as a minimum an expense is recognized as if the terms had not been modified. In addition, an expense is recognized for any modification that increases the total fair value of the share based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.
Plan awards and shares expected to vest
 
2019 plans
2018 plans
2017 plans
2016 plans
 
Performance plan
Deferred plan
Performance plan
Deferred plan
Performance plan
Deferred plan
Performance plan
Deferred plan
 
 
 
(number of shares)
Initial shares granted
257,601

320,840

237,196

262,317

279,807

438,505

200,617

287,316

Additional shares granted(i)
—

20,131

—

3,290

2,868

29,406

—

—

Revision for forfeitures
(17,182
)
(9,198
)
(27,494
)
(26,860
)
(40,946
)
(88,437
)
(49,164
)
(78,253
)
Revision for cancellations
—

—

(4,728
)
—

—

—

—

—

Total before issuances
240,419

331,773

204,974

238,747

241,729

379,474

151,453

209,063

Shares issued in 2017
—

—

—

—

—

(2,686
)
(1,214
)
(1,733
)
Shares issued in 2018
—

—

(97
)
(18,747
)
(2,724
)
(99,399
)
(752
)
(43,579
)
Shares issued in 2019
(150
)
(24,294
)
(3,109
)
(54,971
)
(19,143
)
(82,486
)
(149,487
)
(163,751
)
Shares still expected to vest
240,269

307,479

201,768

165,029

219,862

194,903

—

—

Estimated cost over the vesting period (US$ millions)
11

18

12

14

10

20

8

12

(i)
Additional shares granted represent grants made for new joiners and/or as per CEO contractual arrangements.
Pension and other long-term employee benefit plans
Pension plans
The pension plans apply to employees who meet certain criteria (including years of service, age and participation in collective agreements).
Pension and other similar employee related obligations can result from either defined contribution plans or defined benefit plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. No further payment obligations exist once the contributions have been paid. The contributions are recognized as employee benefit expenses when they are due. Prepaid contributions are recognized as assets to the extent that a cash refund or a reduction in future payments is available.
Defined benefit pension plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the statement of financial position in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by independent actuaries. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows, using an appropriate discount rate based on maturities of the related pension liability.
Re-measurement of net defined benefit liabilities are recognized in other comprehensive income and not reclassified to the statement of income in subsequent years.
Past service costs are recognized in the statement of income on the earlier of the date of the plan amendment or curtailment, and the date that the Group recognizes related restructuring costs.
Net interest is calculated by applying the discount rate to the net defined benefit asset/liability.
Long-service plans
Long-service plans apply for Colombian subsidiary UNE employees with more than five years of service whereby additional bonuses are paid to employees that reach each incremental length of service milestone (from five to 40 years).
Termination plans
In addition, UNE has a number of employee defined benefit plans. The level of benefits provided under the plans depends on collective employment agreements and Colombian labor regulations. There are no defined assets related to the plans, and UNE make payments to settle obligations under the plans out of available cash balances.
At December 31, 2019, the defined benefit obligation liability amounted to $59 million (2018: $60 million) and payments expected in the plans in future years totals $106 million (2018: $111 million). The average duration of the defined benefit obligation at December 31, 2019 is 6 years (2018: 7 years). The termination plans apply to employees that joined UNE prior to December 30, 1996. The level of payments depends on the number of years in which the employee has worked before retirement or termination of their contract with UNE.
Except for the UNE pension plan described above, there are no other significant defined benefits plans in the Group.
Directors and executive management
The remuneration of the members of the Board of Directors comprises an annual fee and shares. Director remuneration is proposed by the Nomination Committee and approved by the shareholders at their Annual General Meeting (AGM).
Remuneration charge for the Board (gross of withholding tax)
 
2019
2018
2017
 
(US$ ’000)
Chairperson
366

169

233

Other members of the Board
1,557

774

889

Total (i)
1,923

943

1,122

(i)
Cash compensation converted from SEK to USD at exchange rates on payment dates for 2017 and 2018, in 2019 cash compensation was denominated in USD. Share based compensation based on the market value of Millicom shares on the corresponding AGM date (2019: in total 19,483 shares; 2018: in total 6,591 shares; 2017: in total 8,731 shares). Net remuneration comprised 73% in shares and 27% in cash (SEK) (2018: 51% in shares and 49% in cash; 2017: 52% in shares and 48% in cash).
Shares beneficially owned by the Directors
 
2019
2018
 
(number of shares)
Chairperson
5,814

8,554

Other members of the Board
32,279

15,333

Total (i)
38,093

23,887


The remuneration of executive management of Millicom comprises an annual base salary, an annual bonus, share based compensation, social security contributions, pension contributions and other benefits. Bonus and share based compensation plans (see note B.4.1.) are based on actual and future performance. Share based compensation is granted once a year by the Compensation Committee of the Board.
If the employment of Millicom’s senior executives is terminated, severance of up to 12 months’ salary is potentially payable.
The annual base salary and other benefits of the Chief Executive Officer (CEO) and the Executive Vice Presidents (Executive team) are proposed by the Compensation Committee and approved by the Board.
Remuneration charge for the Executive Team
 
CEO
CFO
Executive Team (8 members)(iii)
 
(US$ ’000)
2019
 
 
 
Base salary
1,167

654

3,498

Bonus
1,428

626

2,098

Pension
279

98

798

Other benefits
50

260

1,521

Termination benefits
—

—

863

Total before share based compensation
2,924

1,639

8,779

Share based compensation(i)(ii) in respect of 2019 LTIP
5,625

1,576

5,965

Total
8,549

3,215

14,743

Remuneration charge for the Executive Team
 
CEO
CFO
Executive Team (9 members)
 
(US$ ’000)
2018
 
 
 
Base salary
1,112

673

3,930

Bonus
1,492

557

2,445

Pension
247

101

962

Other benefits
66

63

805

Termination benefits
—

—

301

Total before share based compensation
2,918

1,393

8,444

Share based compensation(i)(ii) in respect of 2018 LTIP
5,027

1,567

4,957

Total
7,945

2,960

13,401



Remuneration charge for the Executive team
 
CEO
CFO
Executive team
(9 members)
 
(US$ ’000)
2017
 
 
 
Base salary
1,000

648

3,822

Bonus
707

455

1,590

Pension
150

97

628.5

Other benefits
64

15

1,192.5

Total before share based compensation
1,921

1,215

7,233

Share based compensation(i)(ii) in respect of 2017 LTIP
2,783

1,492

5,202

Total
4,704

2,707

12,435

(i)
See note B.4.1.
(ii)
Share awards of 102,122 and 135,480 were granted in 2019 under the 2019 LTIPs to the CEO, and Executive Team (2018: 80,264 and 112,472, respectively; 2017: 61,724 and 167,371, respectively).
(iii)
Other Executives’ compensation includes Daniel Loria, former CHRO and Rodrigo Diehl, EVP Strategy.

Share ownership and unvested share awards granted from Company equity plans to the Executive team
 
CEO
Executive team
Total
 
(number of shares)
2019
 
 
 
Share ownership (vested from equity plans and otherwise acquired)
190,577

136,306

326,883

Share awards not vested
236,211

334,193

570,404

2018
 
 
 
Share ownership (vested from equity plans and otherwise acquired)
122,310

84,782

207,092

Share awards not vested
172,485

339,726

512,211

Other non-operating (expenses) income, net
Non-operating items mainly comprise changes in fair value of derivatives and the impact of foreign exchange fluctuations on the results of the Group.
 
Year ended December 31,
 
2019
2018
2017
 
(US$ millions)
 
Change in fair value of derivatives (see note C.7.2.)
—

(1
)
(22
)
Change in fair value in investment in Jumia (C.7.3.)
(38
)
—

—

Change in fair value in investment in HT (C.7.3.)
312

—

—

Change in value of put option liability (C.7.4.)
(25
)
—

—

Exchange gains (losses), net
(32
)
(40
)
21

Other non-operating income (expenses), net
10

2

—

Total
227

(39
)
(2
)

Foreign exchange gains and losses
Transactions denominated in a currency other than the functional currency are translated into the functional currency using exchange rates prevailing at the transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions, and on translation of monetary assets and liabilities denominated in currencies other than the functional currency at year-end exchange rates, are recognized in the consolidated statement of income, except when deferred in equity as qualifying cash flow hedges.
Taxation
Income tax expense
Tax mainly comprises income taxes of subsidiaries and withholding taxes on intragroup dividends and royalties for use of Millicom trademarks and brands. Millicom operations are in jurisdictions with income tax rates of 10% to 35%levied on either revenue or profit before income tax (2018: 10% to 37%; 2017: 10% to 40%). Income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated statement of income.
Income tax charge
 
2019
2018
2017
 
(US$ millions)
Income tax (charge) credit
 
 
 
Withholding tax
(56
)
(64
)
(74
)
Other income tax relating to the current year
(88
)
(82
)
(81
)
Adjustments in respect of prior years
(7
)
1

(21
)
Total
(151
)
(145
)
(176
)
Deferred tax (charge) credit
 
 
 
Origination and reversal of temporary differences
58

32

15

Effect of change in tax rates
(8
)
(10
)
19

Tax income (expense) before valuation allowances
50

22

34

Effect of valuation allowances
(9
)
(8
)
(28
)
Total
41

14

6

Adjustments in respect of prior years
(10
)
19

8

 
31

33

14

Tax (charge) credit on continuing operations
(120
)
(112
)
(162
)
Tax (charge) credit on discontinuing operations
(2
)
(4
)
4

Total tax (charge) credit
(122
)
(116
)
(158
)

Reconciliation between the tax expense and tax at the weighted average statutory tax rate is as follows:
Income tax calculation
 
2019
2018
2017
 
Continuing operations
Discontinued operations
Total
Continuing operations
Discontinued operations
Total
Continuing operations
Discontinued operations
Total
 
(US$ millions)
Profit before tax
218

59

277

119

(29
)
90

171

56

227

Tax at the weighted average statutory rate
(37
)
(11
)
(48
)
(1
)
—

(1
)
(10
)
(12
)
(22
)
Effect of:
 
 
 
 
 
 
 
 
 
Items taxed at a different rate
(1
)
—

(1
)
7

—

7

(11
)
—

(11
)
Change in tax rates on deferred tax balances
(8
)
—

(8
)
(10
)
—

(10
)
19

—

19

Expenditure not deductible and income not taxable
(37
)
9

(28
)
(59
)
(2
)
(61
)
(64
)
5

(59
)
Unrelieved withholding tax
(56
)
—

(56
)
(64
)
—

(64
)
(73
)
—

(73
)
Accounting for associates and joint ventures
36

—

36

5

—

5

17

—

17

Movement in deferred tax on unremitted earnings
9

—

9

(2
)
—

(2
)
1

—

1

Unrecognized deferred tax assets
(20
)
—

(20
)
(8
)
(2
)
(10
)
(29
)
(12
)
(41
)
Recognition of previously unrecognized deferred tax assets
11

—

11

—

—

—

1

13

14

Adjustments in respect of prior years
(17
)
—

(17
)
20

—

20

(13
)
10

(3
)
Total tax (charge) credit
(120
)
(2
)
(122
)
(112
)
(4
)
(116
)
(162
)
4

(158
)
Weighted average statutory tax rate
17.0
%
 
17.3
%
0.8
%
 
1.1
%
5.8
%
 
9.7
%
Effective tax rate
55.0
%
 
44.0
%
94.1
%
 
128.9
%
94.7
%
 
69.6
%
Current tax assets and liabilities
Current tax assets and liabilities for current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rate and tax laws used to compute the amount are those enacted or substantively enacted by the statement of financial position date.
Deferred tax
Deferred tax is calculated using the liability method on temporary differences at the statement of financial position date between the tax base of assets and liabilities and their carrying amount for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting, nor taxable profit or loss.
Deferred tax assets are recognized for all temporary differences including unused tax credits and tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized, except where the deferred tax assets relate to deductible temporary differences from initial recognition of an asset or liability in a transaction that is not a business combination, and, at the time of the transaction, affects neither accounting, nor taxable profit or loss. It is probable that taxable profit will be available when there are sufficient taxable temporary differences relating to the same tax authority and the same taxable entity which are expected to reverse in the same period as the expected reversal of the deductible temporary difference.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to utilize them. Unrecognized deferred tax assets are reassessed at each statement of financial position date and are recognized to the extent it is probable that future taxable profit will enable the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rate expected to apply in the year when the assets are realized or liabilities settled, based on tax rates and tax laws that have been enacted or substantively enacted at the statement of financial position date. Deferred tax assets and deferred tax liabilities are offset where legally enforceable set off rights exist and the deferred taxes relate to the same taxable entity and the same taxation authority.
Deferred tax
 
Fixed assets
Unused tax losses
Unremitted earnings
Other
Offset
Total
 
(US$ millions)
Balance at December 31, 2017
32

52

(32
)
72

—

124

(Charge)/credit to income statement
(18
)
(3
)
(2
)
56

—

33

Change in scope
(192
)
—

—

8

—

(184
)
Accounting policy changes
—

—

—

4

—

4

Exchange differences
—

(5
)
—

(6
)
—

(11
)
Balance at December 31, 2018
(178
)
44

(34
)
134

—

(34
)
Deferred tax assets
76

44

—

134

(52
)
202

Deferred tax liabilities
(254
)
—

(34
)
—

52

(236
)
Balance at December 31, 2018
(178
)
44

(34
)
134

—

(34
)
(Charge)/credit to income statement
41

(15
)
8

(3
)
—

31

Change in scope
(82
)
5

—

4

—

(73
)
Transfers to assets held for sale
—

—

—

(3
)
—

(3
)
Exchange differences
2

—

—

(2
)
—

—

Balance at December 31, 2019
(217
)
34

(26
)
130

—

(79
)
Deferred tax assets
84

34

—

134

(52
)
200

Deferred tax liabilities
(301
)
—

(26
)
(4
)
52

(279
)
Balance at December 31, 2019
(217
)
34

(26
)
130

—

(79
)
Deferred tax assets have not been recognized in respect of the following deductible temporary differences:
 
Fixed assets
Unused tax losses
Other
Total
 
(US$ millions)
At December 31, 2019
92

4,705

126

4,923

At December 31, 2018
92

4,886

134

5,112


Unrecognized tax losses carryforward related to continuing operations expire as follows:
 
2019
2018
2017
 
(US$ millions)
Expiry:
 
 
 
Within one year
1

0

39

Within one to five years
2

3

494

After five years
493

493

—

No expiry
4,209

4,390

4,311

Total
4,705

4,886

4,844


With effect from 2017, Luxembourg tax losses incurred may be carried forward for a maximum of 17 years. Losses incurred before 2017 may be carried forward without limitation of time.
At December 31, 2019, Millicom had $697 million of unremitted earnings of Millicom operating subsidiaries for which no deferred tax liabilities were recognized (2018: $584 million; 2017: $842 million). Except for intragroup dividends to be paid out of 2019 profits in 2020 for which deferred tax of $26 million (2018: $34 million; 2017 $32 million) has been provided, it is anticipated that intragroup dividends paid in future periods will be made out of profits of future periods.
Earnings per share
Basic earnings (loss) per share are calculated by dividing net profit for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings (loss) per share are calculated by dividing the net profit for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year, plus the weighted average number of dilutive potential shares.
Net profit/(loss) used in the earnings (loss) per share computation
 
2019
2018
2017
 
(US$ millions)
Basic and Diluted
 
 
 
Net profit (loss) attributable to equity holders from continuing operations
93

23

28

Net profit (loss) attributable to equity holders from discontinuing operations
57

(33
)
59

Net profit attributable to all equity holders to determine the basic earnings (loss) per share
149

(10
)
87



Weighted average number of shares in the earnings (loss) per share computation
 
2019
2018
2017
 
(thousands of shares)
Weighted average number of ordinary shares (excluding treasury shares) for basic earnings (loss) per share
101,144

100,793

100,384

Potential incremental shares as a result of share options

—

—

Weighted average number of ordinary shares (excluding treasury shares) adjusted for the effect of dilution
101,144

100,793

100,384