S&P rates Millicom notes B-

Standard & Poor's assigned a B- rating to Millicom International Cellular SA's proposed $550 million notes.

S&P said the proposed notes will make up part of Millicom's debt restructuring and the proceeds will be used to refinance existing debt, thereby improving the company's overall maturity profile.

Significant exposure to foreign exchange risk is a key ratings risk as Millicom operates in certain markets that historically have been susceptible to currency volatility and most of the company's debt is denominated in U.S. dollars, S&P added. This can affect cash flow generation and the ability of the company to upstream cash to the parent level necessary to service debt.

Cash upstreaming can also potentially be impaired by market-specific sovereign risk or disagreements with joint-venture partners or regulatory issues. The renewal in 2005 of a business cooperation agreement with the Vietnamese government will be key for Millicom, given that the company's Vietnamese operations currently contribute in excess of 20% of consolidated EBITDA.

Millicom is also exposed to strong competition in markets in which the purchasing power of customers is low on a GDP-per-capita basis compared with more developed markets, S&P added. In addition, competitive risks might arise in certain markets in which Millicom's operations are expected to migrate to a GSM platform, although provision of GSM services should be a positive factor in the long term.

These risks are, however, mitigated by strong growth prospects in markets in which Millicom has a presence, due to the current low levels of penetration and the diversification of risk across 15 emerging market countries in Asia, Latin America, and Africa.

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