Offering Memorandum Strictly Confidential

OFFERING MEMORANDUM STRICTLY CONFIDENTIAL

US$300,000,000 Telefónica Celular del Paraguay S.A. A corporation (sociedad anónima) incorporated and existing under the laws of Paraguay 6.750% SENIOR NOTES DUE 2022

Interest payable on June 13 and December 13

We are offering US$300,000,000 aggregate principal amount of our Senior Unsecured Notes due December 13, 2022, or the Notes. Telefónica Celular del Paraguay S.A., or the Issuer, is a corporation (sociedad anónima) incorporated and existing under the laws of Paraguay. Interest on the Notes will accrue from December 13, 2012 and the Issuer will pay interest on the Notes semiannually in arrears on June 13 and December 13 of each year, starting June 13, 2013. The Notes will mature on December 13, 2022. The Notes will be subject to redemption prior to maturity upon the imposition of certain changes affecting taxation in Paraguay. See “Description of Notes—Tax Redemption.” The Notes will also be subject to redemption by the Issuer, in whole or in part, at any time prior to December 13, 2017 at their principal amount plus a “make-whole” premium, and accrued and unpaid interest, if any, to the date of redemption. The Notes will also be subject to redemption by the Issuer, in whole or in part, at any time after December 13, 2017 at a redemption price equal to certain percentages of the outstanding principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption. See “Description of Notes—Optional Redemption.” Payments on the Notes will be payable in U.S. dollars and will be paid without deduction for or on account of taxes imposed or levied by Paraguay to the extent set forth under “Description of Notes—Additional Amounts.” The Notes will be our unsecured, unsubordinated and senior obligations and will rank pari passu in right of payment with all our existing and future unsecured and unsubordinated obligations other than obligations preferred by statute or operation of law. The Notes will be effectively subordinated to all of our secured indebtedness with respect to the value of our assets securing that indebtedness and to all of the existing and future liabilities of our subsidiaries. The Notes are not guaranteed by any person or entity. For a more detailed description of the Notes, see “Description of Notes” beginning on page 74.

No public market currently exists for the Notes. Application has been made to admit the Notes to listing on the Official List of the Luxembourg Stock Exchange and to trading on the Euro MTF Market, the alternative market of the Luxembourg Stock Exchange. See “Listing and General Information.”

Investing in the Notes involves risks. See “Risk Factors” on page 15 of this offering memorandum.

PRICE 100.00% AND ACCRUED INTEREST, IF ANY FROM DECEMBER 13, 2012

The Notes have not been registered under the U.S. Securities Act of 1933, as amended, or the Securities Act, or under any state securities laws. Accordingly, the Notes are being offered and sold only (1) to qualified institutional buyers in accordance with Rule 144A under the Securities Act, or Rule 144A and (2) to non-U.S. persons in offshore transactions outside the United States in accordance with Regulation S under the Securities Act, or Regulation S. Prospective purchasers that are qualified institutional buyers are hereby notified that the Issuer of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of certain restrictions on transfer of the Notes, see “Transfer Restrictions.” The information contained in this offering memorandum is exclusively the responsibility of the Issuer. The Notes and the information contained in this offering memorandum have not been registered nor reviewed nor approved by the Paraguayan Securities Commission (Comisión Nacional de Valores), or CNV. Accordingly, the Notes may not be publicly offered or sold in Paraguay. In making an investment decision, all investors, including any Paraguayan investors who may acquire Notes by means of a private offering, must rely on their own review and examination of the Company.

The Initial Purchasers expect to deliver the Notes to investors in book-entry form through The Depository Trust Company (“DTC”) and Euroclear Bank S.A./N.V. and Clearstream, Luxembourg, as DTC participants, on or about December 13, 2012.

Joint Book-Running Managers

CITIGROUP MORGAN STANLEY December 6, 2012

TABLE OF CONTENTS

Page Page

Enforcement of Civil Liabilities ...... iv Management’s Discussion and Analysis of Additional Information ...... v Financial Condition and Results of Cautionary Statement Regarding Forward- Operations ...... 34 Looking Statements ...... vi Business ...... 51 Presentation of Financial and Other Management ...... 66 Information ...... viii Principal Stockholders ...... 70 Summary...... 1 Certain Relationships and Related Party The Offering ...... 6 Transactions ...... 72 Summary Historical Financial and Other Description of Notes ...... 74 Information ...... 11 Taxation ...... 108 Risk Factors ...... 15 Plan of Distribution ...... 113 Use of Proceeds ...... 27 Transfer Restrictions ...... 119 Exchange Rates And Currency ...... 28 Validity of Notes ...... 123 Capitalization ...... 29 Independent Auditors ...... 123 Selected Financial and Other Information ...... 30 Index to Financial Statements ...... F-1 Annex A – The Republic of Paraguay ...... A-1

Unless otherwise indicated or the context otherwise requires, all references in this offering memorandum to “Telefónica,” “Tigo,” the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to Telefónica Celular del Paraguay S.A. together with its subsidiaries and references to the “Issuer” refer to Telefónica Celular del Paraguay S.A., as issuer of the Notes.

We, having made all reasonable inquiries, confirm that the information contained in this offering memorandum with regard to us is true and accurate in all material respects, that the opinions and intentions expressed in this offering memorandum are honestly held, and that there are no other facts the omission of which would make this offering memorandum as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. We accept responsibility accordingly.

This offering memorandum does not constitute an offer to sell, or a solicitation of an offer to purchase, any Note offered hereby by any person in any jurisdiction in which it is unlawful for such person to make an offer or solicitation. Neither the delivery of this offering memorandum nor any sale made hereunder shall under any circumstances imply that there has been no change in our affairs or the affairs of our subsidiaries or that the information set forth in this offering memorandum is correct as of any date subsequent to the date of this offering memorandum.

This offering memorandum has been prepared by us solely for use in connection with the proposed offering of the Notes. We, as well as Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC, collectively, the initial purchasers and joint-book-running managers, reserve the right to reject any offer to purchase, in whole or in part, for any reason, or to sell less than all of the Notes offered by this offering memorandum. This offering memorandum does not constitute an offer to any other person or to the public in general to subscribe for or otherwise acquire the Notes. Distribution of this offering memorandum by you to any person other than those persons retained to advise you is unauthorized, and any disclosure of any of the contents of this offering memorandum without our prior written consent is prohibited.

You must (1) comply with all applicable laws and regulations in force in any jurisdiction in connection with the possession or distribution of this offering memorandum and the purchase, offer or sale of the Notes, and

(2) obtain any required consent, approval or permission for the purchase, offer or sale by you of the Notes under the laws and regulations applicable to you in force in any jurisdiction to which you are subject or in which you make such purchases, offers or sales, and neither we nor the initial purchasers have any responsibility therefor. See “Transfer Restrictions” for information concerning some of the transfer restrictions applicable to the Notes.

You acknowledge that:

• you have been afforded an opportunity to request from us, and to review, all additional information considered by you to be necessary to verify the accuracy of, or to supplement, the information contained in this offering memorandum;

• you have not relied on the initial purchasers or any person affiliated with the initial purchasers in connection with your investigation of the accuracy of such information or your investment decision; and

• no person has been authorized to give any information or to make any representation concerning us or the Notes other than those as set forth in this offering memorandum. If given or made, any such other information or representation should not be relied upon as having been authorized by us or the initial purchasers.

In making an investment decision, you must rely on your own examination of our business and the terms of this offering, including the merits and risks involved. These Notes have not been recommended, approved or disapproved by the United States Securities and Exchange Commission (the “SEC”) or any other federal or state securities commission or regulatory authority, or by the Paraguayan Securities Commission (Comisión Nacional de Valores). Furthermore, these authorities have not confirmed the accuracy or determined the adequacy of this offering memorandum. Any representation to the contrary is a criminal offense.

The Notes have not been registered with the CNV and, therefore, may not be offered or sold in a public offering or be the subject of an intermediation in Paraguay, and this offering memorandum may not be publicly distributed in Paraguay. Any purchase of the Notes by an investor of Paraguayan nationality will be made under his or her own responsibility. Shortly after the date of this offering memorandum, we expect to file with the CNV proper notice as to the issuance of the notes as required by Paraguayan law. This does not imply any certification as to the investment quality of the notes or our solvency or the accuracy or completeness of the information contained in this offering memorandum.

The offering is being made in reliance upon an exemption from registration under the U.S. Securities Act of 1933, as amended, for an offer and sale of securities that does not involve a public offering. The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws, pursuant to registration or exemption therefrom. In making your purchase, you will be deemed to have made certain acknowledgments, representations and agreements set forth in this offering memorandum under the caption “Transfer Restrictions.” You should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time.

This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (the “FSMA”) (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) through (d) of the Order (all such persons together being referred to as “relevant persons”). The Notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

In relation to each member state of the European Economic Area (“EEA”) which has implemented the Prospectus Directive (each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”), no offer of notes may be made to the public in that Relevant Member State other than:

• to any legal entity which is a qualified investor as defined in the Prospectus Directive;

• to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant representative(s) of the Issuer; or

• in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of notes shall require the Issuer or the initial purchasers to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

This offering memorandum has been prepared on the basis that any offer of notes in any Relevant Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of notes. Accordingly any person making or intending to make an offer in that Relevant Member State of notes which are the subject of the offering contemplated in this offering memorandum may only do so in circumstances in which no obligation arises for the Issuer or the initial purchasers to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither the Issuer nor the initial purchasers have authorized, nor do they authorize, the making of any offer of notes in circumstances in which an obligation arises for the Issuer or the initial purchasers to publish a prospectus for such offer.

For the purposes of the above provisions, (1) the expression “an offer to the public” in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State, (2) the expression “Prospectus Directive” means Directive 2003/71/EC (and any amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member States) and includes any relevant implementing measure in the Relevant Member State, and (3) the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

This offering memorandum may only be used for the purposes for which it has been published. The initial purchasers make no representation, express or implied, as to the accuracy or completeness of the information contained in this offering memorandum. Nothing contained in this offering memorandum is, or should be relied upon as, a promise or representation by the initial purchasers as to the past or future. The initial purchasers assume no responsibility for the accuracy or completeness of any such information.

See “Risk Factors,” following the “Summary,” for a description of certain factors relating to an investment in the Notes, including information about our business. None of us, the initial purchasers or any of our or their representatives is making any representation to you regarding the legality of an investment by you under applicable legal investment or similar laws. You should consult with your own advisors as to legal, tax, business, financial and related aspects of a purchase of the Notes.

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NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT, OR AN APPLICATION FOR A LICENSE, HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED, OR A PERSON IS LICENSED, IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

ENFORCEMENT OF CIVIL LIABILITIES

All but one of our directors and executive officers reside outside the United States, all of our assets are located outside the United States, and certain of the experts named in this offering memorandum also reside outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or these persons or to enforce against any of them or us in U.S. courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. However, we will appoint CT Corporation System, with offices currently located at 111 Eighth Avenue, New York, NY 10011, as our authorized agent in connection with the Notes and the indenture governing the Notes, upon which process may be served in any suit or proceeding arising out of or relating to the foregoing that may be instituted in any federal or state court located in the County of New York, State of New York.

There is no treaty between the United States and Paraguay for the reciprocal enforcement of foreign judgments. We have been advised by our Paraguayan counsel that there is doubt as to the enforceability in Paraguay, either in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated on the federal securities laws of the United States. Furthermore, any final and conclusive judgment obtained against us in any foreign court having jurisdiction in respect of any suit, action or proceeding against us for the enforcement of any of our obligations under the Notes will, upon request, be deemed valid and enforceable in Paraguay without the local court reopening the case provided that the following requirements set forth in Section 532 of the Paraguayan Civil Procedural Code are satisfied:

(i) the foreign judgment has res judicata effects in the jurisdiction where it was rendered, and was issued by a competent court, as a result of a personal action, or of a real action in which the object of the action was personal property brought to Paraguay during or after the foreign action was filed;

(ii) no legal action is filed and no judgment is pending in a court of law in Paraguay with the same object and among the same parties;

(iii) any person or entity domiciled in Paraguay against whom such judgment is sought to be enforced was legally served with process and represented during the trial or judged to have failed to appear in accordance with the laws of the country where the trial was held;

(iv) the obligation underlying the cause of action of the judgment is valid under Paraguayan law;

(v) the foreign judgment does not include provisions that conflict with Paraguayan law of public policy;

(vi) the foreign judgment complies with all the necessary requirements of the foreign jurisdiction; and

(vii) the foreign judgment does not conflict with a previous or contemporaneous judgment of a Paraguayan court.

ADDITIONAL INFORMATION

For so long as any Notes remain outstanding, we have agreed to make available to any holder or beneficial owner of an interest in the Notes, or to any prospective purchasers designated by such holder or beneficial owner, upon request of such holder or beneficial owner, information required to be delivered under paragraph (d)(4) of Rule 144A unless, at the time of such request, we are subject to the reporting requirements of Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934 (the “Exchange Act”), or exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act.

Application has been made to admit the Notes offered hereby to listing on the Official List of the Luxembourg Stock Exchange and to trading on the Euro MTF market of that exchange. See “Listing and General Information.” We will comply with any undertakings given by us from time to time to the Luxembourg Stock Exchange in connection with the Notes, and we will furnish to them all such information as the rules of the Luxembourg Stock Exchange may require in connection with the listing of the Notes. The Luxembourg Stock Exchange takes no responsibility for the contents of this offering memorandum, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this offering memorandum.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This offering memorandum contains statements that constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Many of the forward-looking statements contained in this offering memorandum can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate” and “potential,” among others. These statements appear in a number of places in this offering memorandum and include, but are not limited to, statements regarding our intent, belief or current expectations with respect to:

• the implementation of our principal operating and funding strategies and capital expenditure plans;

• our level of capitalization;

• the performance of the Paraguayan economy and regional and global economies in general;

• developments in, or changes to, the laws, regulations, tax matters and governmental policies governing or affecting our business;

• adverse legal or regulatory disputes or proceedings;

• the declaration or payment of extraordinary dividends;

• other factors or trends affecting our financial condition or results of operations;

• general economic and political conditions, government and regulatory policies and business conditions in the markets served by the Company and its affiliates;

• telecommunications usage levels, including traffic and customer growth;

• changes in the preferences and financial condition of our customers;

• competitive forces, including pricing pressures, technological developments and the ability of the Company to retain market share in the face of competition from existing and new market entrants;

• regulatory developments and changes, including with respect to the level of tariffs, the terms of interconnection, customer access and international settlement arrangements, and the outcome of litigation related to regulation;

• the success of business, operating and financing initiatives and product and service offerings, the level and timing of the growth and profitability of new initiatives, start-up costs associated with entering new markets, costs of handsets and other equipment, the successful deployment of new systems and applications to support new initiatives, and local conditions;

• the availability, terms and use of capital, the impact of regulatory and competitive developments on capital outlays, the ability to achieve cost savings and realize productivity improvements, and the success of the Company’s investments, operations and alliances;

• the factors discussed under the section entitled “Risk Factors” in this offering memorandum; and

• other statements contained in this offering memorandum regarding matters that are not historical facts.

Forward-looking statements are only our current expectations and are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks

and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors, including, but not limited to, those identified under the section entitled “Risk Factors” in this offering memorandum. These risks and uncertainties include factors relating to the Paraguayan and global economies and political conditions, securities and foreign exchange markets, which exhibit volatility and can be adversely affected by developments in other countries, factors relating to the Paraguayan mobile telecommunications industry and changes in its regulatory environment and factors relating to the competitive markets in which we operate. Other risks and uncertainties may adversely affect our results, which may differ materially from the expectations expressed in the forward-looking statements. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events. In addition, you should not interpret statements regarding past trends or activities as assurances that those trends or activities will continue in the future.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Market Share

Market share data presented in this offering memorandum is as calculated by us unless otherwise indicated.

Market share refers to a share of all mobile customers in a particular market. Market share can be calculated using different methodologies. We calculate our market share data by using the traffic passing through our own network as a basis for determining usage, but we exclude from such calculations customers who only make on-net calls in our network. In order to calculate the number of total mobile telephony users in the market, as we do not have data for subscribers that make on-net calls in our competitors’ networks, we calculate the ratio of our “on- net only users” to our cross-net traffic and then apply such ratios to our competitors based on cross-net calls made to or from their network to our network in order to determine their estimated market share. This methodology adjusts for inactive subscribers that may be reported by our competitors, and which may therefore be inflating our competitors’ own market share calculations. We believe that our methodology adjusts for inactive customers, which we define as customers who have been inactive for more than 60 days. We believe that, in view of the lack of any official public figures on market share, this is the most accurate method to determine our market share, the market share of each operator and the size of the entire market. Although we believe our market share data is appropriate and accurately reflects the market, we cannot assure you this is the case.

For the first nine months of 2012, we believe our self-calculated market share of the Paraguayan mobile telephony market to approximately 57%.

Penetration rates are measured by dividing the number of customers by the total population. Penetration rates in this offering memorandum have been provided to us by the National Telecommunications Commission (Comisión Nacional de Telecomunicaciones), or CONATEL.

Macroeconomic Data

Facts, forecasts and statistics in this document relating to Paraguay and its economy, other than market share data, are derived from various official and other publicly available sources that we generally believe to be reliable. However, we cannot guarantee the quality and reliability of such official and other sources of materials. In addition, these facts, forecasts and statistics have not been independently verified by us and, therefore, we make no representation as to the accuracy of these facts, forecasts and statistics, which may not be consistent with other information compiled within or outside of Paraguay and may not be complete or up to date. We have taken reasonable care in reproducing or extracting the information from such sources. However, because of possibly flawed or ineffective methodologies underlying the published information or discrepancies between the published information and market practice and other problems, these facts, forecasts or statistics may be inaccurate. On October 13, 2011, Central Bank of Paraguay (Banco Central del Paraguay) (the “BCP”) changed the methodology used in calculating Paraguay’s gross domestic product (“GDP”). All GDP numbers in this offering memorandum derived from the BCP are based on the previous methodology used.

In this offering memorandum, unless otherwise indicated, population information, GDP and other macroeconomic and country data of Paraguay is based on information published by the BCP on its website, http://www.bcp.gov.py.

Financial Statements

We were incorporated on August 5, 1990. Since the date of incorporation, we have maintained our financial books and records in guaraníes. This offering memorandum includes our audited annual consolidated financial statements as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009 (the “Audited Financial Statements”). Our Audited Financial Statements have been audited by PricewaterhouseCoopers, Asunción, Paraguay (“PwC”), a member firm of the PricewaterhouseCoopers global network, independent auditors, whose report dated November 26, 2012, is included in this offering memorandum.

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This offering memorandum also includes our unaudited interim consolidated financial statements as of September 30, 2012, and for the nine-month periods ended September 30, 2012 and 2011 (the “ Interim Financial Statements”).

Our Audited Financial Statements and our Interim Financial Statements (collectively referred to as the “Financial Statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). In addition, because the Notes have not been registered with the SEC, our Financial Statements contained elsewhere in this offering memorandum are not required to comply with the applicable requirements of the Securities Act, and the related rules and regulations adopted by the SEC, which would apply if the Notes were being registered with the SEC.

Rounding

We have made rounding adjustments to reach some of the figures included in this offering memorandum. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them and percentage calculations using these adjusted figures may not result in the same percentage values as are shown in this offering memorandum.

Currency and Exchange Rate

All references herein to the “guaraní,” “guaraníes,” “Gs.” or “PYG” are to the official currency of Paraguay. All references to “U.S. dollars,” “dollars,” “US$,” “$” or “USD” are to U.S. dollars. The reference exchange rate was Gs.4,462 to US$1.00 as of September 30, 2012 (based on the closing rate reported for September 28, 2012) and Gs.4,309 to US$1.00 as of December 5, 2012, in each case, as reported by the BCP. The BCP follows a floating Gs./US dollar exchange rate policy, and the exchange rate as of September 28, 2012 may not be indicative of future exchange rates.

We have translated some of the guaraní amounts contained in this offering memorandum into U.S. dollars for convenience purposes only. The rate used to translate such amounts was the Cotización de Referencia, or reference exchange rate, reported by the BCP for the relevant dates on its website, http://www.bcp.gov.py/estadisticas/cotizaciones/referencial-fluctuante/. The Federal Reserve Bank of New York does not report a noon buying rate for the guaraní. The U.S. dollar equivalent information presented in this offering memorandum is provided solely for the convenience of investors and should not be construed as implying that the guaraní amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. For more detailed information regarding translation of guaraníes into U.S. dollars, see “Exchange Rates and Currency.”

SUMMARY

This summary highlights information contained elsewhere in this offering memorandum. This summary may not contain all the information that may be important to you, and we urge you to read this entire offering memorandum carefully, including the “Risk Factors” and our Financial Statements and the notes thereto, included elsewhere in this offering memorandum, before deciding to invest in the Notes.

Unless otherwise indicated, all references to non-financial data in this offering memorandum are as of September 30, 2012.

Overview

We provide communications, information, entertainment and solutions services in Paraguay through the provision of mobile telephony, cable and broadband internet. In 1992, we established ourselves as the first mobile operator in Paraguay with the launch of our commercial services. We have generally maintained our market-leading position in Paraguay since that time, and we are currently the leading mobile service operator in Paraguay based on number of customers and revenues. Our customer base has grown to approximately 3.8 million customers as of September 30, 2012, and we estimate our current market share in terms of customers to be approximately 57%. We believe our market share in terms of revenues is in excess of this number due to the quality of our customer base. For a discussion of how we calculate our market share, see “Presentation of Financial and Other Information— Market Share.” We provide mobile voice and data services, branded under the “Tigo” name, across the most extensive 2.5G and 3G networks in Paraguay. Mobile telephony is the dominant means of communication in Paraguay due, in part, to the relatively low penetration of fixed-line service in our market. We believe that the mobile penetration rate in Paraguay is nearly 100%, determined by reference to our internal interconnection data. We attempt to develop targeted, affordable rate plans, and leverage our network assets, extensive distribution channels and superior customer service to attract and retain customers in the competitive environment in which we operate. In order to maintain our leading market share and enhance our profitability in a market with high penetration, we intend to continue to introduce innovative value-added services that meet the evolving needs of our customers. In order to do so, we operate through four business categories with the purpose of developing products and services targeted to the specific needs of our customers and three business units with the purpose of delivering those products to our customers. Our business categories are Communications, Information, Solutions and Entertainment, and our business units are Mobile, Home and Corporate. For a further discussion of the roles of our business categories and units, see “Business—Products and Services.” We believe our focus on availability, accessibility, affordability, customer service and innovation has resulted in Tigo becoming one of the most widely recognized and well-respected brands in Paraguay.

We offer a comprehensive range of high-quality nationwide mobile communications services in a variety of pricing plans, including prepaid and postpaid service plans. Our mobile service offerings are tailored to meet the communications needs of targeted customer segments. As of September 30, 2012, 80% of our customers received our services on a prepaid basis and such prepaid customers generated 57.0% of our revenues for the nine months ended September 30, 2012. Prepaid service plans eliminate any payment risk from customers, and the costs associated with adding prepaid customers are typically lower than those associated with postpaid customers. We are the leading provider of postpaid mobile service plans in Paraguay and will continue to target postpaid customers given their greater propensity to use the higher-margin value-added services that we have introduced to the Paraguayan market. These higher-margin value-added services include short messaging service, or SMS, multimedia messaging service, or MMS, ring-back tones, video streaming, mobile television, mobile internet access, online and offline music services and transaction services such as the ability for our customers to transfer airtime and SMS credits to one another or to borrow credits from us through our “zero balance product” portfolio. We believe our ability to offer value-added services over our 3G network differentiates us from our competitors and provides us with the opportunity to continue to grow our business. We also offer a variety of broadband internet and network-related services, generally to business customers, and “Wimax” internet services to our home customers.

On October 1, 2012 we acquired the assets and business of Cable Visión Comunicaciones S.A., or Cablevision, the leading digital cable operator in Paraguay and one of the principal broadband internet providers in Paraguay. We believe that the acquisition of Cablevision will create synergies that will allow us to market bundled products including cable television and internet service with our other products and services as a tool to expand our

customer base and to expand the scope of services provided to our existing customers, and thereby increase revenue. See “Business—Recent Developments.”

We have made significant investments in our networks to provide the greatest coverage and reliability in our market. We have developed an extensive distribution network for the sale of our products and services, including handsets and price plans, across the country. We place a high value on providing customers with superior customer care and support, and we offer various options for contacting us with inquiries to maximize convenience. For the nine-month period ended September 30, 2012 and for the year ended December 31, 2011, our mobile customers generated average monthly revenue per customer, or ARPU, of approximately US$11.9 and US$12.2, respectively. Our total revenues were Gs.2,462,991 million for the year ended December 31, 2011 and Gs.2,037,438 million for the first nine months of 2012. Our Adjusted EBITDA and our net profit were Gs.1,446,863 million and Gs.1,095,804 million, respectively, for the year ended December 31, 2011 and Gs.1,131,016 million and Gs.806,989 million, respectively, for the nine months ended September 30, 2012. For a description of how we calculate Adjusted EBITDA and a reconciliation to net profit, please see “Summary Historical Financial and Other Information.”

Competitive Strengths

We believe the following strengths will help us to maintain our position as the leading provider of mobile communications services in Paraguay:

Superior Network Coverage and Reliability. We have made significant capital investments to expand the reach, capacity and reliability of our 2G and 3G networks. As a result, we believe we provide the most extensive and highest quality mobile services in our market. Our 2G network is deployed in all urban areas in Paraguay which represents 93.0% of the country’s population. In 2008, we launched our 3G network and have focused our 3G network deployment on Paraguay’s most densely populated urban areas, and we now offer voice and value-added services over our 3G network to a geographic area representing 56.0% of the country’s population. Our networks have been designed to support a significant increase in traffic volumes above current normal-hour levels without sacrificing service quality. We intend to make disciplined investments in the future to ensure our networks continue to provide the superior coverage and quality for which our Tigo brand is known.

Strong Brand Identity. We believe that our Tigo brand, launched in 2004, is one of the most recognized and well-respected brands in Paraguay and is generally associated with high quality, availability, affordability, customer service and innovation. Through our use of extensive and differentiated, localized marketing campaigns and tools, we believe we cultivate a fresh, modern image that has resonated with both the young urban and the corporate customer markets. We also believe our commitment to social responsibility in Paraguay has fostered a loyal clientele and differentiates Tigo from competing brands. We believe that market research and other key performance indicators demonstrate the strength of our brand in Paraguay, including market share we estimate to be approximately 57%, and as a result of our own market research a “top of mind” indicator (reflecting the brand named by subjects when asked to name any brand) of 68% in Paraguay and a “spontaneous recall” indicator (reflecting a subject’s familiarity with a brand) of 99% in Paraguay. We believe we further benefit from recognition due to the popularity of the Tigo brand throughout the Central and South American markets serviced by affiliates of our ultimate parent, Millicom International Cellular S.A., or Millicom, from which we license the Tigo brand.

Extensive and Highly Efficient Distribution Network. We believe we have the most extensive and efficient distribution network in our market, allowing our customers to conveniently purchase our products and services. Our distribution network consists of three exclusive dealers who operate on a regional basis within Paraguay and have a longstanding presence in their local service areas. Our exclusive dealers are responsible for distribution of our products to over 34,000 retail outlets throughout Paraguay. Our dealers also sell directly to customers through our company-owned, Tigo-branded service centers and mini service centers as well as their own retail stores. We also sell our products and services through our 1,615 direct freelance sales representatives, or freelancers and through our in-house corporate sales team. Through our relationships with international distributors, including CSO, Telerecargas and iEzetop, our customers can receive airtime credits sent by their family and friends from more than 25,000 points of sale in Argentina and Spain where a large number of expatriate Paraguayans now live. We allow our customers to purchase airtime through various methods, including our electronic balance recharging service “ePin”, scratch cards and other electronic forms. Over the past several years, we have grown ePin

to be the primary balance recharge method used by our customers as it reduces our inventory costs, minimizes inventory stock-outs and is easier for us to monitor. We leverage a proprietary, in-house system to monitor the performance of our dealers, airtime sales, scratch card and equipment inventory, and sales activations of new SIM cards and handsets, as well as to reduce fraudulent activities.

History of Market Share Leadership. We were the first provider of mobile communications services in Paraguay, launching our commercial operations in August of 1992. Despite an increasingly competitive environment over the past several years, we believe we have successfully maintained our market leading position since that time and currently have a market share of approximately 57%. For a discussion of how we calculate our market share, see “Presentation of Financial and Other Information—Market Share.” We believe our leading market position provides us with certain key benefits. For example, due to the size of our customer base relative to that of our competitors, our customers are able to make on-network calls to a greater number of individuals and thus avoid interconnection fees. This also minimizes the likelihood of our customers buying SIM cards from multiple operators and allows us to attract a greater number of customers with price plans that reward on-network calling. Additionally, we believe the high degree of competition we experience in our market, the significant investment required to build a nationwide network and the limited availability of new spectrum all present significant barriers for operators seeking to enter our market. As a result, we believe we will be able to maintain our market share position in the future.

Consumer-Focused and Innovative Culture. We believe we have developed a unique corporate culture based on customer focus, innovation, flexibility and commitment to our employees and the communities we serve. We seek to leverage our experienced employee base and their deep knowledge of the Paraguayan market to anticipate the needs of our customers, to develop innovative products and services tailored specifically for our market, and to provide superior customer care. In recent years, we have introduced a number of innovative products and services, including per-second billing, the ability for our customers to transfer airtime and SMS credits to one another (“Peer to Peer” balance lending or “Lend me Balance”) and to borrow credits from us through our “Tigo Lends to You”, or “Tigo Te Presta”, service, as well as products tailored to specific customer segments, such as our “Paquetigos” whereby we provide to customers daily personalized offers for packages of talk minutes or SMS. We believe our consumer-focused culture has been instrumental in creating a rewarding customer experience and increasing customer loyalty.

Parent with Significant Emerging Markets Expertise. We believe we benefit greatly from the knowledge and resources of our ultimate parent company, Millicom, which is a global telecommunications group with various combinations of mobile and fixed telephony, cable and broadband businesses in 15 countries in Central America, South America and Africa. Millicom has been offering mobile services in emerging markets for over 20 years, and Paraguay is one of its most important and profitable ventures. A major contributor to our success has been our ability to leverage best practices, resources, and products and services developed in Millicom’s other operations around the world. Our ability to leverage Millicom’s experience and agreements with equipment suppliers has also contributed to reducing our cost structure, which allows us to pass along savings to customers in the form of affordable plans and equipment. While Millicom helps to guide our strategic direction and capital investments, it also affords us the flexibility to adapt our culture and services to our specific market. Our local management team has benefited from secondments to other Millicom operations across the world, building on their global knowledge and expertise. Additionally, we benefit from the use of Millicom’s array of brands and trademarks, which we license from Millicom. See “Certain Relationships and Related Party Transactions—Millicom International Cellular S.A.”

Business Strategy

We believe the following components of our business strategy provide the foundation for us to maintain and grow our market leading position in Paraguay and enhance our profitability:

Grow Revenues through Innovative Value-Added Products and Services. Value-added services (non- voice), or VAS, accounted for 50% of our recurring revenues (which are total revenues less the sale of telephone handsets and equipment and revenue from roaming from visitors to our network that are not our customers) for the nine-month period ended September 30, 2012. We plan to continue to develop and market innovative value-added

products and services through our Information, Entertainment and Solutions categories as a means to grow our ARPU, diversify our sources of revenue, attract new customers and increase the number of products and services we sell per-customer. Our portfolio of value-added products and services has grown rapidly since we introduced SMS in 1999 and currently includes offerings such as SMS, MMS, mobile internet access, mobile television, content downloads, ring tones, customized back tones based on customers’ music preferences and music sharing, as well as three services that permit customers to continue using our voice or SMS services despite running out of account balance: “Tigo Lends to You” (“Tigo te Presta”), through which we lend either airtime or SMS credits to the customer, “Gift and collect”, where the customer sends an SMS text and pays for the recipient’s response in advance (“gift”), or where the sending customer asks the customer receiving the SMS to pay for the text (“collect”) and “Give me balance”, which is a “Peer to Peer” account balance transfer program. Given our leading market position and the high level of penetration in our market, we believe we are well poised to capitalize on opportunities to cross- sell and up-sell these higher value services to our existing customer base. Our focus is therefore directed toward optimizing our customer intake and retention of higher ARPU customers rather than purely on net intake of customers. We value sustainable revenue growth over net customer additions and focus on data and VAS customers from whom, on average, we generate a higher ARPU than 2G voice only customers. We believe that in more developed markets this has a stronger correlation with future growth than customer numbers.

Offer Differentiated and Affordable Products and Services. We aim to provide a wide range of affordable products and services accessible to consumers of all income levels, including by offering competitive rates and attractively-priced balance re-load denominations and services targeted to our customers’ financial capabilities and usage patterns. Given the sophisticated and competitive nature of our market, we believe it is insufficient to compete solely on the basis of price. As a result, we focus on identifying and understanding the various customer segments in our market, and structure our pricing and promotions to address their specific day-to-day needs and habits in order to create a brand link that extends beyond product functionality and value for money. In addition to our value-added products and services, we currently send daily personalized offers, called “Paquetigos”, of varying bundles of services to our customers which are tailored to such customers’ current consumption of our services. We intend to continue to develop corporate technological solutions products in order to cross-sell our products to existing corporate customers and position Tigo Business as an integral solutions provider and strategic partner to our corporate customers. Additionally, we expect that our recent acquisition of Cablevision assets will allow us to expand our product portfolio by allowing us to offer additional services such as cable television and internet and to bundle existing services with these additional services including by offering Tigo–branded residential television and internet services bundled together with mobile internet service (“triple play”) to new and existing customers. We also expect that the acquisition of Cablevision will allow us to target the significantly underpenetrated broadband market which currently has a penetration level in Paraguay of approximately 6%.

Provide the Most Extensive and Reliable Network Coverage in Our Market. We believe we provide the most extensive and reliable network coverage of any mobile operator in Paraguay. We have made strategic capital investments to extend our 2G network to all areas of Paraguay and our 3G network to the country’s most densely populated urban areas where we believe consumers with the greatest propensity to use 3G services reside. As of September 30, 2012, we had approximately 1,000 base stations providing 2G service and 700 base stations providing 3G service in our mobile operations. We plan to continue to make disciplined investments, particularly in our 3G network, to support our long-term business plan and the increasing demand for value-added services in our market. We are committed to continuing to evaluate new and alternative technologies to enable us to further develop our network capabilities and enhance network efficiencies.

Offer Easy Accessibility and Availability of Our Products and Services. We employ a distribution strategy that seeks to maximize the accessibility of our products and services. We believe we have one of the most extensive distribution networks in our market and plan to continue to expand its reach, including through our e-Pin service, enabling customers to increase their prepaid accounts from their mobile phones rather than purchasing scratch cards. Through our exclusive dealers, company-owned service centers and freelancers, our customers can conveniently buy our products and services at over 34,000 points of sale in Paraguay, providing a distribution network that we believe provides visibility and accessibility superior to that of our competitors. Owing to our proprietary distribution management system, we have been able to virtually eliminate the occurrence of inventory stock-outs. Our ePin balance charging and payment service has improved convenience for our customers and further aided with inventory management and management of dealer commissions and in the future may help

streamline our distribution system. We believe our distribution network and proprietary distribution management system will continue to provide us with a sustainable competitive advantage.

Capitalize on Relationships with Affiliates. Certain products and services provided by a number of our affiliates provides us synergies that we believe provide significant convenience and efficiency benefits to our customers and set us apart from our competitors. We expect to grow these relationships and further integrate the services they offer to capitalize on this tool to attract and retain customers. For example, our affiliate Mobile Cash Paraguay S.A. (“Tigo Money”) offers mobile financial services in Paraguay which are accessed by mobile telephone. Their products are available exclusively to our customers and include both international and national money transfers, “Peer to Peer” payments and payments for local services such as electricity and water. These products are marketed under the brand name “Tigo”, and we believe it provides an attractive incentive to use our products and services and helps to reduce churn in our customer base. We believe Tigo Money has by far the largest market share for mobile financial services in Paraguay, and currently approximately 23% of our customers regularly uses one or more of their services. We believe these convenient and innovative services marketed under our brand name provide us with a sustainable competitive advantage.

Recent Developments

Acquisition of Cablevision

On October 1, 2012, we acquired substantially all of the assets and business of Cablevision, the leading digital cable operator in Paraguay and one of the principal broadband internet providers in Paraguay. We acquired through this transaction the net assets, excluding debt and cash, of the operating companies of the Cablevision Group, Cable Vision Comunicaciones S.A., Television Dirigida S.A., Consorcio Multipunto Multicanal S.A., Producciones Unicanal S.A. and 100% of the shares of Teledeportes Paraguay S.A. The net assets of Cablevision were previously controlled by the listed company Grupo Clarín S.A. (LSE: GCLA; BCBA: GCLA). Cablevision began offering television services in Asunción in 1989 and is the leading provider of cable pay-television services in Paraguay with an 86% market share as of September 30, 2012. As of September 30, 2012, Cablevision’s coverage area included 145,000 homes passed (which is the number of premises to which an operator has the capability to connect in a service area, whether connected or not) and Cablevision had 48,000 cable television customers, with approximately 23% of these customers subscribing to fixed broadband internet services. Cablevision additionally provides satellite television services to 68,000 households. Teledeportes has exclusive rights to broadcast Paraguay’s soccer championship games through 2020 and also exclusive sponsorship rights for the Paraguayan National Soccer Team for the years 2015 through 2020. In addition to the ability to offer new services and bundle them with our existing services, we expect that this acquisition will provide synergies allowing us to optimize capital expenditures and operating costs. Revenues in respect of the Cablevision assets that we acquired for the nine months ended September 30, 2012 were Gs.170,673 million. If this acquisition had occurred on January 1, 2012, our unaudited consolidated pro forma revenues for the period ended September 30, 2012 would have been Gs.2,208,111 million and our unaudited consolidated pro forma net profit for the same period would have been Gs.856,199 million.

Capital Distribution

On November 2, 2012, the shareholders of the Company approved a reduction and cash distribution in the Company’s share capital in an amount equal to Gs.157,000 million. This cash distribution was paid on November 29, 2012.

Corporate Headquarters

Our principal executive offices are located at Zavala Cue esq. Artilleria, Fernando De La Mora, Paraguay and our telephone number is +595 21 618-9000. Our website is www.tigo.net.py. Information in or connected to our website is not part of this offering memorandum.

THE OFFERING

The following summary is provided solely for your convenience. This summary is not intended to be complete. You should read the full text and more specific details contained elsewhere in this offering memorandum. For a more detailed description of the Notes, see “Description of Notes.”

Issuer ...... Telefonica Celular del Paraguay S.A.

Notes Offered ...... US$300,000,000 aggregate principal amount of 6.750% Notes due 2022 payable in U.S. dollars (the “Notes”).

Issue Price ...... 100.00% of the principal amount.

Maturity Date ...... December 13, 2022.

Interest Payment Dates ...... June 13 and December 13, beginning June 13, 2013.

Interest ...... The Notes will bear interest from December 13, 2012 at the annual rate of 6.750%, payable semiannually in arrears on each interest payment date.

Additional Amounts ...... Any and all payments in respect of the Notes shall be made free and clear of, and without withholding or deduction for, any taxes imposed, levied, collected, withheld or assessed by Paraguay or any political subdivision or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law. In that event, the Issuer shall pay, subject to certain customary exceptions, such additional amounts as would have been received by them if no such withholding or deduction had been required. See “Description of Notes—Additional Amounts.”

Indenture ...... The Notes will be issued under an Indenture, to be dated as of December 13, 2012, by and among the Issuer, Citibank, N.A., a national banking association organized under the laws of the United States, as trustee (the “Trustee”), note registrar, transfer agent and principal paying agent, and Banque Internationale à Luxembourg SA, as Luxembourg paying agent.

Use of Proceeds ...... The Issuer intends to use approximately US$151 million of the net proceeds of this offering for the repayment of indebtedness incurred to finance the acquisition of the assets and business of Cablevision pursuant to that certain bridge loan agreement, dated as of September 5, 2012, among the Company, as borrower, Millicom, as guarantor, Citibank N.A. International Banking Facility New York and Morgan Stanley Bank, N.A., as lenders, and Citibank, N.A., as administrative agent. Affiliates of the lenders under that loan facility are acting as joint bookrunners and initial purchasers in connection with the offering of the Notes. See “Business—Recent Developments.” The Issuer intends to use the balance of the net proceeds for capital expenditures.

Ranking ...... The Notes will be unsecured unsubordinated obligations of the Issuer and will rank equal in right of payment with all existing and future unsecured and unsubordinated obligations of the Issuer, other

than all obligations granted preference under applicable law.

Optional Redemption ...... The Issuer will not be permitted to redeem the Notes before their stated maturity, except as set forth below and under “Description of Notes–Tax Redemptions.”

The Notes will be redeemable, at any time and from time to time, prior to December 13, 2017, in whole or in part, at the Issuer’s option at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest on the Notes to be redeemed (exclusive of interest accrued to the redemption date) discounted to that redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points; plus accrued and unpaid interest on the principal amount of the Notes being redeemed to, but not including, the date of redemption and any additional amounts payable in respect of such interest. The Notes will be redeemable on or after December 13, 2017, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest to the redemption date:

12 month period commencing in year Percentage

December 13, 2017 103.375% December 13, 2018 102.250% December 13, 2019 101.125% December 13, 2020 100.000% December 13, 2021 100.000%

Notwithstanding the foregoing, payments of interest on the Notes will be payable to the holders of those Notes registered as such at the close of business on the relevant record dates according to the terms and provisions of the Indenture.

Prior to December 13, 2015 the Issuer may redeem Notes to the extent of the net cash proceeds received from any sale of the Issuer’s common stock at a redemption price equal to 106.75% of the principal amount plus accrued and unpaid interest to the redemption date, in an aggregate principal amount for all such redemptions not to exceed 35% of the original aggregate principal amount of the Notes (including any additional Notes).

Change of Control ...... Upon the occurrence of certain events relating to a Change of Control Triggering Event (as defined under “Description of Notes- Change of Control”), the Issuer shall be required under the Indenture and the Notes to offer to the existing holders of the Notes the right to require the Issuer to repurchase all or a portion of the Notes on the terms set forth in the Indenture. See “Description of Notes—Change of Control.”

Tax Redemption ...... The Issuer may, at its option, redeem the Notes, in whole but not in part, at 100% of their principal amount plus, accrued and unpaid interest and additional amounts, if any, upon the occurrence of specified events relating to applicable tax laws. See “Description of

Notes—Tax Redemptions.”

Negative Covenants of the The Indenture will contain restrictive covenants that, among other Company…………………………… things and subject to certain exceptions, limit the Issuer’s ability and/or the ability of certain of its subsidiaries to:

• incur, assume or guarantee additional indebtedness;

• pay dividends or distributions on, or redeem or repurchase, its capital stock or subordinated debt;

• make certain investments and other restricted payments;

• make dividend or other payments affecting its subsidiaries;

• enter into sale and leaseback transactions with respect to its assets or property;

• incur liens;

• guarantee the Issuer’s subordinated debt;

• dispose of assets;

• enter into certain transactions with affiliates;

• engage in businesses other than the telecommunications services and related businesses; and

• consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries.

These covenants are subject to important exceptions and qualifications as described under “Description of Notes–Certain Covenants of the Company.”

Events of Default ...... The Notes and the Indenture will contain certain events of default, consisting of, among others, the following:

• failure to pay principal (or premium, if any) when due;

• failure to pay interest and other amounts within 30 days of the due date therefor;

• default in the payment of principal and interest on Notes required to be purchased pursuant to an offer to purchase when due and payable;

• breach of the covenants in the Indenture limiting the

incurrence of debt and mergers, consolidations and sale of assets;

• breach of the other covenants or agreements in the Indenture or the Notes that continues for 60 days after notice;

• acceleration of indebtedness of the Issuer or certain of its subsidiaries or a failure to pay indebtedness when due at final maturity that, individually or in aggregate, equals or exceeds US$15 million;

• certain judgments against the Issuer or certain of its subsidiaries that equal or exceed US$15 million;

• certain events of bankruptcy, liquidation or insolvency of the Issuer or certain of its subsidiaries.

For a full description of the Events of Default, see “Description of Notes—Events of Default.”

Book Entry; Form and Denominations ...... The Notes will be issued in the form of one or more global Notes in fully registered form without interest coupons, in minimum denominations of US$200,000 and integral multiples of US$1,000 in excess thereof. Payments on the Notes will be settled in same-day funds to the extent received from the Issuer.

The Notes will be delivered in book-entry form through the facilities of the Depository Trust Company (“DTC”) for the accounts of its participants, including Euroclear Bank S.A/N.V., as the operator of the Euroclear System (“Euroclear”), Clearstream Banking, société anonyme, Luxembourg (“Clearstream”).

For a description of form and settlement, see “Description of Notes.”

Listing ...... Application has been made to admit the Notes to listing on the Official List of the Luxembourg Stock Exchange and to trading on the Euro MTF market.

Transfer Restrictions ...... The Notes will not be registered under the Securities Act. The Notes are being offered (a) in the United States in·reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, only to “Qualified Institutional Buyers” (as defined in Rule 144A under the Securities Act (“Rule 144A”)), or (b) outside the United States in compliance with Regulation S under the Securities Act to persons who are not U.S. Persons (as defined in Regulation S). See “Transfer Restrictions.”

Governing Law ...... The Indenture and the Notes will be governed by, and construed in accordance with, the laws of the State of New York.

Risk Factors ...... You should carefully consider all of the information contained in this offering memorandum prior to investing in the Notes. In particular, we urge you to carefully consider the information set forth under “Risk Factors” beginning on page 15 for a discussion of risks and

uncertainties relating to us, our business, the Paraguayan mobile telecommunications business, our stockholders, our debt, Paraguay and the Notes.

SUMMARY HISTORICAL FINANCIAL AND OTHER INFORMATION

The following table presents our summary historical financial data. The income statement data for the years ended December 31, 2011, 2010 and 2009 and the statement of financial position data as of December 31, 2011 and 2010set forth below have been derived from our Audited Financial Statements included elsewhere in this offering memorandum. The income statement data for the nine-month periods ended September 30, 2012 and 2011 and the statement of financial position data as of September 30, 2012 set forth below have been derived from our Interim Financial Statements included elsewhere in this offering memorandum. The Interim Financial Statements have been prepared on the same basis as the Audited Financial Statements and, in the opinion of our management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information set forth herein.

This data is qualified in its entirety by reference to, and should be read in conjunction with, our Financial Statements and accompanying notes, “Capitalization,” “Selected Historical Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this offering memorandum. The historical results are not necessarily indicative of our future results of operations or financial condition.

Nine Months Ended Year Ended September 30, December 31,

2012 2012 2011 2011 2010 2009

Income Statement Data: in thousands (in millions of Guaraní except percentages) of US$ except percentages(1) (unaudited)

Revenues ...... 456,620 2,037,438 1,792,284 2,462,991 2,200,198 1,927,628 Cost of sales ...... (125,581) (560,341) (469,519) (634,185) (518,716) (486,109) Gross profit ...... 331,039 1,477,097 1,322,765 1,828,806 1,681,482 1,441,519 Sales and marketing ...... (73,060) (325,993) (270,927) (368,142) (355,652) (309,247) General and administrative expenses ...... (44,978) (200,694) (173,453) (246,375) (196,822) (176,040) Operating profit ...... 213,001 950,410 878,385 1,214,289 1,129,008 956,232 Interest expense ...... (3,294) (14,697) (6,672) (8,301) (13,696) (12,013) Interest and other financial income ...... 972 4,335 389 1,520 274 978 Exchange losses, net ...... 1,416 6,319 46,680 55,272 (1,986) (1,477) Profit before tax ...... 212,095 946,367 918,782 1,262,780 1,113,600 943,720 Income tax ...... (31,237) (139,378) (133,801) (166,976) (139,582) (125,302) Net profit ...... 180,858 806,989 784,981 1,095,804 974,018 818,418

Other Financial Data and Ratios Recurring revenues (2) ...... 423,042 1,887,615 1,694,113 2,324,748 2,073,848 1,866,528 Adjusted EBITDA (3) ...... 253,477 1,131,016 1,054,472 1,446,863 1,364,444 1,206,908 Adjusted EBITDA Margin (4) ...... 56% 56% 59% 59% 62% 63% Net debt to Adjusted EBITDA (5) (6) ...... 0.4 0.4 N/A N/A N/A N/A Total debt to Adjusted EBITDA (7) ...... 0.7 0.7 0.3 0.3 0.4 0.2 (1) Converted using the closing rate for September 30, 2012 as reported by the BCP, equivalent to Gs.4,462 to US$1.00.

(2) Recurring revenues consist of monthly subscription fees, airtime usage fees, interconnection fees, roaming fees and fees from other telecommunications services such as data services, short message services and other value-added services and exclude revenues from the sale of telephone handsets and equipment and roaming fees from visitors to our network who are not our customers, which we believe reflects the regular and ongoing revenues of our customers and is therefore an appropriate metric to analyze the results of our operations. Recurring revenue is not a recognized term or recognized measure of performance under IFRS and should not be considered as an alternative to revenues as a measure of operating performance. We consider recurring revenues to be an important supplemental measure of our performance, which also facilitates operating performance comparisons from period to period. Because recurring revenues is not determined in accordance with IFRS, recurring revenues as presented may not be comparable to similarly titled measures of other companies. (3) We calculate Adjusted EBITDA by adding net finance costs; income tax; depreciation and amortization; net loss on disposal and impairment of assets and exchange gains and losses to our total comprehensive income. Adjusted EBITDA is not a recognized term or recognized measure of performance under IFRS and should not be considered as an alternative to net profits as a measure of operating performance or to net cash provided by operating activities as a measure of liquidity. We consider Adjusted EBITDA to be an important supplemental measure of our performance, which also facilitates operating performance comparisons from period to period. Adjusted EBITDA as used herein is the same as “EBITDA” as defined in the Indenture for purpose of the Notes. Because Adjusted EBITDA is not determined in accordance with IFRS, Adjusted EBITDA as presented herein may not be comparable to similarly titled measures of other companies. (4) We define Adjusted EBITDA Margin as our Adjusted EBITDA divided by revenues. Adjusted EBITDA Margin is not a recognized term or measure of performance under IFRS.

(5) We calculate Net debt to Adjusted EBITDA by dividing our total borrowings, less cash and cash equivalents, by our Adjusted EBITDA. Net debt to Adjusted EBITDA for the nine months ended September 30, 2012 and 2011 were calculated using Adjusted EBITDA for the twelve-month periods ended September 30, 2012 and 2011, respectively.

(6) Where cash and cash equivalents are higher than net debt, N/A has been stated. (7) We calculate Total debt to Adjusted EBITDA by dividing our total borrowings by our Adjusted EBITDA. Total debt to Adjusted EBITDA for the nine months ended September 30, 2012 and 2011 were calculated using Adjusted EBITDA for the twelve-month periods ended September 30, 2012 and 2011, respectively.

The following table is a reconciliation of our total comprehensive income to Adjusted EBITDA

Nine Months Ended Year Ended September 30, December 31,

2012 2012 2011 2011 2010 2009 in thousands of US$ except percentages(1) (in millions of Guaraní except percentages) (unaudited) Net profit (2) ...... 180,858 806,989 784,981 1,095,804 974,018 818,418 Net finance costs (3) ...... 2,322 10,362 6,284 6,781 13,422 11,035 Income taxes ...... 31,237 139,378 133,801 166,976 139,582 125,302 Depreciation and amortization ...... 40,391 180,225 171,241 226,752 227,452 248,223 Gain (loss) on disposal and impairment of assets, net ...... 85 381 4,846 5,822 7,984 2,453 Exchange gains/losses, net ...... (1,416) (6,319) (46,680) (55,272) 1,986 1,477 Adjusted EBITDA ...... 253,477 1,131,016 1,054,472 1,446,863 1,364,444 1,206,908 (1) Converted using the closing rate for September 30, 2012 as reported by the BCP, equivalent to Gs.4,462 to US$1.00. (2) Net profit is equivalent to Comprehensive Income. (3) Net finance costs are equal to finance cost net of finance income.

The following table is a reconciliation of our total Revenues to Recurring Revenues

Nine Months Ended Year Ended September 30, December 31,

2012 2012 2011 2011 2010 2009 in thousands of US$ except percentages(1) (in millions of Guaraní except percentages) (unaudited)

Revenues ...... 456,620 2,037,438 1,792,284 2,462,991 2,200,198 1,927,628 Sale of telephone handsets and equipment and roaming fees from visitors to our network ...... (33,578) (149,823) (98,171) (138,243) (126,350) (61,100) Recurring Revenues ...... 423,042 1,887,615 1,694,113 2,324,748 2,073,848 1,866,528

(1) Converted using the closing rate for September 30, 2012 as reported by the BCP, equivalent to Gs.4,462 to US$1.00.

Statement of Financial Position Data:

As of As of September 30, December 31, 2012 2012 2011 2010 in thousands of US$ except percentages (in millions of Guaraní) (unaudited) ASSETS Non-Current Assets Intangible assets, net ...... 16,826 75,079 40,791 39,278 Property, plant and equipment, net ...... 252,949 1,128,657 1,064,653 976,664 Deferred taxation ...... 8,881 39,628 39,528 37,015 Other non-current assets ...... 1,995 8,902 11,434 4,268 Total Non-Current Assets ...... 280,651 1,252,266 1,156,406 1,057,225 Current Assets Inventories ...... 16,798 74,953 45,013 38,067 Trade receivables, net ...... 49,533 221,015 162,627 105,781 Amounts due from related parties ...... 19,652 87,689 43,970 14,745 Prepayments and accrued income ...... 47,818 213,365 148,027 99,840 Supplier advances for capital expenditure ...... 3,693 16,476 8,965 15,149 Other current assets ...... 493 2,200 2,822 817 Current tax assets ...... 1,007 4,492 — — Pledged deposits ...... 150,000 669,300 — — Cash and cash equivalents (ii) ...... 85,771 382,710 814,115 802,705 Total Current Assets ...... 374,765 1,672,200 1,225,539 1,077,104 TOTAL ASSETS ...... 655,416 2,924,466 2,381,945 2,134,329

EQUITY AND LIABILITIES EQUITY(1) Share capital and premium ...... 56,029 250,000 250,000 9,250 Legal reserves ...... 11,262 50,249 3,994 3,994 Retained profits ...... 22,543 100,587 38,929 209,015 Profit for the year attributable to equity holders ...... 180,858 806,989 1,095,804 974,018 TOTAL EQUITY ...... 270,691 1,207,825 1,388,727 1,196,277 LIABILITIES Non-current Liabilities

As of As of September 30, December 31, 2012 2012 2011 2010 in thousands of US$ except percentages (in millions of Guaraní) (unaudited) Debt and financing ...... 74,933 334,351 384,437 448,165 Provisions and other non-current liabilities ...... 10,185 45,446 39,376 34,406 Total non-current liabilities ...... 85,118 379,797 423,813 482,571 Current Liabilities Debt and financing ...... 165,913 740,303 55,399 42,811 Payables and accruals for capital expenditure ...... 42,522 189,733 139,306 107,081 Other trade payables ...... 30,648 136,750 107,800 73,201 Amounts due to related parties ...... 7,091 31,642 34,456 30,352 Accrued interest and other expenses ...... 19,672 87,777 74,314 55,838 Current income tax liabilities ...... — — 16,609 9,913 Provisions and other current liabilities ...... 33,761 150,639 141,521 136,285 Total current liabilities ...... 299,607 1,336,844 569,405 455,481 TOTAL LIABILITIES ...... 384,725 1,716,641 993,218 938,052 TOTAL EQUITY AND LIABILITIES ...... 655,416 2,924,466 2,381,945 2,134,329

(1) On November 2, 2012, the shareholders of the Company approved a reduction and cash distribution in the Company’s share capital in an amount equal to Gs.157,000 million.

Nine Months Ended Year Ended September 30, December 31,

2012 2011 2011 2010 2009 (unaudited)

Operating Data:

Number of customers ...... 3,808,803 3,573,992 3,613,754 3,441,423 3,048,134 Postpaid ...... 772,134 608,383 644,115 491,280 349,419 Prepaid ...... 3,036,669 2,965,609 2,969,639 2,950,143 2,698,715 Monthly churn % (1) ...... Postpaid ...... 1.6% 1.4% 1.3% 0.8% 1.4% Prepaid ...... 2.8% 3.4% 3.4% 2.9% 3.4% Total monthly churn (2) ...... 2.5% 3.1% 3.0% 2.6% 3.2% Monthly ARPU (US$) (3) ...... Postpaid ...... 23.2 23.0 22.7 19.4 23.7 Prepaid ...... 9.1 10.0 10.0 8.6 8.5 Total monthly ARPU (4) ...... 11.9 12.8 12.2 10.7 10.8 Number of employees ...... 470 489 434 446 421

(1) Termination of our services by our customers is referred to as “churn.” Churn is calculated by dividing the net disconnection of customers during the period by the average number of customers for the period. The average number of customers is calculated by dividing the sum of the opening customer balance for the period and the closing customer balance for the period by two.

(2) Our total monthly churn is individually calculated by reference to our aggregate prepaid and postpaid customers.

(3) Average monthly revenue per customer, calculated based on a historical exchange rate of Gs.4,462 to US$1.00.

(4) Our total ARPU is individually calculated by reference to our aggregate prepaid and postpaid customers.

RISK FACTORS

You should carefully consider the risks and uncertainties described below as well as the other information in this offering memorandum before making an investment in the Notes. The risks described below are not the only ones that may affect our company, our Notes or investments in Paraguay in general. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. In general, investing in the securities of issuers in emerging market countries, such as Paraguay, involves a higher degree of risk than investing in the securities of issuers in the United States. There are a number of factors, including those described below, which may adversely affect our ability to make payments on the Notes.

This offering memorandum also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this offering memorandum. See “Cautionary Statement Regarding Forward-Looking Statements.”

Certain Factors Relating to Our Business and the Paraguayan Cellular Market

We operate only in one country – Paraguay.

We are a company operating in a heavily regulated market in Paraguay, where substantially all of our operations, property and customers are located. We are not geographically diversified, and as a result, our business, financial condition and results of operations depend primarily on macroeconomic and political conditions prevailing in Paraguay. Our operations could also be adversely affected by natural or man-made disasters, as well as government actions, such as controls on imports, exports and prices, tariffs, new forms of taxation, or changes in fiscal regimes and increased government regulation in Paraguay.

We operate in a highly penetrated mobile telephony market and face intense competition from other telecommunications providers.

We compete in Paraguay directly with wireless, fixed-line, cable, satellite, internet and other communications providers. Many of our current and prospective competitors are, or are affiliated with, major companies that have financial, technical, personnel and marketing resources equal to or greater than ours (including spectrum holdings, brands and intellectual property). The wireless telecommunications operators in Paraguay compete for customers principally on the basis of services and products offered, price, advertising and brand image, quality and reliability of service and coverage area. Competition has resulted in pricing pressure, reduced margins and profitability, increased customer churn and the loss of revenue and market share. The level of competition is influenced by the continuous and swift technological advances that characterize the industry, regulatory developments that affect competition and alliances between market participants. For example, number portability has been introduced in Paraguay with the requirement for operators to provide this option taking effect as of December 1, 2012, and as yet we do not know what impact if any this change will have on our business, financial condition and results from operations. There is also a risk that, if new competitors enter into Paraguay and price competition intensifies, our customers may move to another mobile telephone operator. We may also lose customers and market share in the event that we are not able to successfully develop innovative and attractive products and services or maintain the quality or capacity of our networks. This movement may result in a decline in our revenue, which would adversely affect our business, financial condition and results of operations. There can also be no assurance that given a highly competitive environment the cost of acquiring spectrum will not rise. Any failure by us to compete effectively, aggressive competitive behavior by our competitors in pricing their services or acquiring new customers, or increased costs associated with providing services due to the high level of competition could have a material adverse effect on our business, financial condition and results of operations.

Some of our competitors have entered into exclusive deals with vendors, including handset vendors. As handset selection and pricing are increasingly important to customers, the lack of availability to us of any of the latest or most popular handsets as a result of these exclusive dealings could put us at a significant competitive disadvantage and could make it more difficult for us to attract and retain our customers. Like us, many of our competitors also use third-party dealers to market and sell their products and services. Competition for dealers is

intense. We may have difficulty attracting and retaining dealers, which could have an adverse effect on our business, financial condition and results of operations.

One of our primary competitors, Compañía Paraguaya de Comunicaciones S.A. (“Copaco”), which operates under the brand Copaco for its fixed-line telephony operations and under the brand Vox for its mobile operations, is a state-owned entity. Copaco is the exclusive provider of land-line services in Paraguay and has exclusive authority for international connections to and from Paraguay. There can be no assurance that regulators will not favor Copaco and thereby provide it with some competitive advantage or that Copaco will charge reasonable connection fees either internationally or for calls to fixed lines. Any competitive advantage of Copaco due to its status as a state-owned entity or dramatic increases in interconnection fees in its control could have an adverse effect on our business, financial condition and results of operations.

High levels of penetration of mobile phone services in our market could inhibit future growth.

The level of mobile phone service penetration in our market is nearly 100%. Although there are opportunities for further growth, high penetration rates in our market could lead to a slowdown in growth. A failure to attract new customers and increase the ARPU of our existing customers through the successful development of innovative value-added products and services and implementation of state-of-the-art technology could have an adverse effect on our business, financial condition and results of operations.

We operate in a heavily regulated and taxed market and may be subject to further taxes, fees or price restrictions and limitations on interconnection rates.

The licensing, construction, ownership and operation of mobile telephone, internet and cable television networks, and the grant, maintenance and renewal of mobile telephone, internet and cable television licenses, as well as radio frequency allocations and interconnection arrangements, are regulated by an independent regulatory body in Paraguay, CONATEL. Certain other aspects of mobile telephony operations, including rates we charge to customers and the resale of mobile telephone services, may be subject to public utility regulation. Our operations also typically require numerous governmental permits, including permits for the construction and operation of cell sites. While we do not believe that compliance with these requirements generally has had an adverse effect on our business, we may become subject to claims or regulatory actions relating to any past or future noncompliance with permit requirements or to additional costs for compliance, including without limitation environmental permits.

Since 2002, Executive Decree No. 16761 of March 26, 2002 has established a rate ceiling for wholesale interconnection tariffs. Under its Regulation No. 1023 of August 3, 2012, CONATEL requires further that termination tariffs be set at three guaraní per second regardless whether the connection is to a fixed or mobile line, which affects us by limiting the amount we are permitted to charge for other operators’ calls which are terminated on our network. Although we are challenging this regulation in Paraguayan courts, there can be no assurance that we will be successful, and this regulation may have a negative impact on our results of operations. Further, there can be no assurance that any future tariff regulation will not adversely affect our business, financial condition and results of operations. CONATEL regulations additionally require that tariffs for on-network and off-network calls be set at a flat rate. We, like all mobile operators in Paraguay and through promotions offered to our customers, provide for discounted rates for certain on-network calls. There can be no assurance that CONATEL will not restrict this activity in the future, or that any such change will not adversely affect our business, financial condition and results of operations.

Additionally, any change in the regulation of our activities, including changes in regulatory tariffs and fees, such as a proposed change to base license fees and operator revenues rather than as currently based on capital expenditures, or increased or decreased regulation affecting prices or requirements for increased capital investments, may adversely affect our business, financial condition and results of operations.

In an effort to increase revenues for the state, the government may impose new fees, taxes or levies directed on our sector. Interconnection rates, which are set by private contract, may change in the future. We believe that the imposition of new taxes and fees, as well as restrictions on the prices that can be offered and tariffs that can be charged by telecommunications companies, could adversely impact our business, financial condition and results of operations.

Proposed antitrust legislation in Paraguay could have a negative impact on us given our current large market share in the markets in which we operate.

An antitrust bill, currently under consideration by the Paraguayan Senate (Cámara de Senadores), was passed by the Chamber of Deputies (Cámara de Diputados) on October 2, 2012. The final text and structure of the “Defense of Competition” (De Defensa de la Competencia) bill remains uncertain pending confirmation by the Senate. However, in its current form and given our large market share in the mobile and cable television sectors, there can be no assurance that the final version of the bill, if passed, will not restrict our activities in the future, including the ability to conduct acquisitions. There can also be no assurance that the final version of the bill, if passed, will not require the divestiture of some portion of our assets and operations. This legislation may further result in oversight of us by an additional regulatory body, the National Competition Commission (Comisión Nacional de la Competencia) which could hinder our ability to maximize the competitive advantage of a high market share and could have an adverse effect on our business, financial condition and results of operations.

Our ability to maintain and to expand our telecommunications networks may be affected by disruption of supplies and services from our principal suppliers.

We rely on a limited number of leading international and domestic communications equipment manufacturers to provide network and telecommunications equipment and technical support. The key suppliers of equipment for our existing networks are Ericsson, Huawei, Converse and Tellabs. We import all of the handsets we sell in Paraguay. The key suppliers of our handsets, both in terms of volume of sales and importance to our operations, are Nokia, Samsung, RIM (Blackberry), Apple, Huawei and Alcatel. We have limited influence over our key suppliers and cannot assure you that we will be able to obtain required equipment on favorable terms or at all. While we believe there are a number of alternative suppliers of network, handsets and accessories available to us, if we are unable to obtain adequate alternative supplies of equipment or technical support in a timely manner or on acceptable commercial terms, or if there are significant increases in the cost of these supplies, including because of new barriers to import such products, our ability to maintain and to expand our telecommunications networks and business may be adversely affected.

The majority of our customers purchase services from us on a prepaid basis and therefore we are exposed to higher risk of customer churn and ARPU sharing.

Prepaid customers, those customers who pay for service in advance through the purchase of wireless airtime, represented 80.0% of our customers as of September 30, 2012 and 57.0% of our revenues for the nine- months ended September 30, 2012. Prepaid customers do not sign service contracts, which makes that portion of our customer base more susceptible to switching wireless service providers. In addition, some of our customers are first time users of wireless telecommunications services, who have a tendency to migrate among service providers more frequently than established users. To the extent our competitors offer incentives to switch wireless service providers, through eliminating connection fees and/or subsidizing or giving away handsets, the risk of churn increases. Our inability to retain existing prepaid customers and manage churn levels could have an adverse effect on our business, financial condition and results of operations. Our average levels of monthly churn for prepaid customers for the nine months ended September 30, 2012 and the years ended December 31, 2011, 2010 and 2009 were 2.8%, 3.4%, 2.9% and 3.4%, respectively.

ARPU sharing, or the use by a prepaid customer of SIM cards from multiple providers to avoid paying higher prices for calls made to numbers outside of our network of customers, or off-net calls, is common in our market and it impacts us and our competitors. Historically, off-net calls have been more expensive than our on-net calls in Paraguay. For this reason, many prepaid customers in Paraguay engage in SIM card switching, resulting in ARPU sharing, which has negatively affected our revenues with respect to customers who use our network as their primary service provider. In response to ARPU sharing, we have developed a “smart pricing strategy,” in which we create different products based on the needs of our different customers, offering the services they need for a reduced price. However, despite the adoption of our “smart pricing strategy,” we cannot ensure that ARPU sharing will decrease or remain at current levels. If we are unable to effectively price and market our services, we could lose a larger percentage of our revenue due to ARPU sharing, which could have an adverse effect on our business, financial condition and results of operations.

Our industry is characterized by rapid technological change, which could render our products, technology and services obsolete.

The wireless telecommunications industry has been, and we believe will continue to be, characterized by significant technological change, including the rapid development and introduction of new technologies, products, and services, such as high-speed data technologies (UMTS, HSPA and 4G), social networking services, streaming audio, streaming video, mobile gaming, advertising services, video conferencing and other applications, voice-over internet protocol (VoIP), location based services using global positioning satellites (GPS), mapping technology and a wide range of mobile financial services. Fixed network and other system equipment used in the wireless telephone industry have a limited life and must be replaced because of damage or as a result of regular use.

Additionally, telecommunications infrastructure, including core elements such as backbone transmission infrastructure and ancillary technologies such as platforms for providing value added services, become obsolete in our rapidly evolving industry and must be replaced. Our networks are based on the 3PP family of standards, and we have both GSM and UMTS/HSPA networks. The GSM standard has been most appropriate for our market because it has the greatest availability of handsets with strong functionality and has relatively low repair and maintenance costs. As new technologies are being developed besides GSM and HSPA, such as fourth generation systems, including WiMAX-e and LTE, equipment may need to be replaced or upgraded or a wireless telephone network may need to be rebuilt in whole or in part, at substantial cost to us, to remain competitive. Both wired and wireless fixed networks used to provide broadband internet and cable television services need to be adapted to accommodate updated technologies such as quad play services in order to satisfy the demands of customers, and increased demand for bandwidth-intensive multimedia services has required us to upgrade our GSM/GPRS/EDGE systems to third generation technologies that provide increased bandwidth and speed. Such upgrades have required, and will continue to require, significant capital expenditures. We cannot assure you that technological developments, foreseen and unforeseen, will not render our services unpopular with customers or our technology and services obsolete. To the extent our equipment or systems become obsolete, we may be required to recognize an impairment charge to such assets as well as increased costs, which may have a material adverse effect on our business, financial condition and results of operations.

Our licenses and frequency allocations are subject to ongoing review, which may result in modification, early termination or revocation.

In order to provide mobile, internet and cable television services, we need licenses from the Paraguayan government, which generally allow us to operate for a number of years, after which they are subject to review for renewal by CONATEL. There is no guarantee that we will be able to successfully renew a license. To the extent that our operations depend on governmental approval and regulatory decisions, our business may be adversely affected by political developments or by governmental actions. It is possible that the government could decide arbitrarily to revoke a license or impose new conditions that we do not agree with and may not be consulted about in advance. The continued existence and terms of wireless phone and internet telecommunications licenses frequency allocations and cable television licenses are subject to ongoing review and, in some cases, to modification or early termination or revocation. We cannot assure you that business arrangements or licenses will be renewed on equivalent or satisfactory economic terms, or at all. Our licenses expire at various times between January 2014 and July 2022. One of our terms mobile telephone licenses, previously set to expire in November 2012 has recently been successfully renewed for an additional period of 5 years; however, there can be no assurance that this or any of our other licenses will be successfully renewed in the future. Upon termination or revocation, the license may revert to the government or a local telecommunications agency without, in some cases any, or adequate, compensation to us.

Our operations are dependent upon interconnection agreements and transmission and leased lines.

Our operations are dependent upon interconnection agreements with other providers, which give our customers access to other networks from our network. Our results are affected by revenues and costs of interconnection agreements. We may not be able to maintain interconnection or leased line agreements on appropriate terms to maintain or grow our business, which may have an adverse effect on our business, financial condition and results of operations.

If we cannot successfully develop and manage our networks and distribution, we may be unable to expand our customer base and may lose market share and revenues.

Our ability to increase our customer base and maintain our market share depends upon our ability to upgrade and manage our networks and distribution. Risks and uncertainties exist that may delay the introduction of service, interrupt existing service and increase the cost of network construction and maintenance. Such uncertainties include natural disasters, sabotage and theft. We lease most of the sites on which our telecommunications infrastructure, including cellular communications towers, is located. Any failure or delay in securing the renewal of these leases on favorable terms could have an adverse effect on our business, financial condition and results of operations. An increase in minutes of use and mobile broadband internet use may require us to increase the capacity of our networks to satisfy our customers’ demand, the cost or failure of which could have an adverse effect on our business, financial condition and results of operations. To the extent we fail to maintain and expand our network and distribution capabilities on a timely basis, we may experience difficulty in expanding our customer base.

Our ability to manage our operations successfully is dependent upon our ability to efficiently utilize our operational resources and infrastructure. The failure or breakdown of key components of our infrastructure, including our billing systems, may have a material adverse effect on our business, financial condition and results of operations.

A failure to successfully integrate our acquisition of Cablevisión S.A. could adversely impact our business, financial condition and results of operations.

We recently consummated the acquisition of substantially all of the assets and business of Cablevision in Paraguay and certain transitional matters related to the transfer of various assets remain ongoing in respect of this acquisition. There can be no assurance that we will successfully integrate those assets into our existing company with respect to products, services and personnel, including without limitation merging the existing operations of these assets with our Tigo Home cable television business unit, or that the rebranding of these newly acquired assets to the Tigo brand will not have a negative effect on public opinion of Tigo. The benefits that we anticipate from cross-selling and bundling services including cable television and broadband internet through the Cablevision business may not materialize. This acquisition could further result in closer regulatory scrutiny from CONATEL, in particular given our acquisition of licenses providing more spectrum coverage. The failure to successfully integrate the assets acquired from Cablevision could adversely affect our business, financial condition and results of operations.

Our results depend on the contribution of key management and employees and our failure to successfully retain and recruit other qualified personnel could have a material adverse effect on us.

Our future results of operations depend, in significant part, upon the continued contributions of key senior management and technical personnel and our relationship with Millicom. Our success also depends, in part, on our ability to continue to attract, retain and motivate qualified personnel. Competition for personnel in our markets is intense due to the small number of qualified individuals. Our failure to successfully manage our personnel needs could have a material adverse effect on our business, financial condition and results of operations.

Current concerns about the actual or perceived health risks relating to electromagnetic and radio frequency emissions, as well as the extensive publicity or possible resultant litigation, may have an adverse effect on our business, financial condition and results of operations.

Media and other reports have suggested that electromagnetic and radio frequency emissions from mobile telephone handsets and base stations may cause health problems, including cancer. There is also some concern that these emissions may interfere with the operation of certain electronic equipment, including aircraft guidance systems, automobile braking and steering systems (e.g., GPS), and civil and military radars. Although we expect that the actual or perceived risks relating to mobile communications devices and base stations, or press reports about these risks will not significantly adversely affect us, its actual impact is difficult to estimate. It may have the effect of reducing our customer growth rate, customer base or average use per customer.

If a link between electromagnetic or radio frequency emissions and adverse health concerns is demonstrated, government authorities may increase regulation of mobile handsets and base stations as a result of these health concerns. Mobile telephone operators and handset manufacturers, including us, could be held liable for all or part of the costs or damages associated with these concerns.

Any such developments could have an adverse effect on our business, financial condition and results of operations.

We may incur significant costs from wireless fraud, which could adversely affect us.

We currently, and may continue to, incur costs and revenue losses associated with the unauthorized use of our networks, including administrative and capital costs associated with the unpaid use of our networks as well as with detecting, monitoring and reducing the incidences of fraud. Fraud also impacts interconnection costs, capacity costs, administrative costs and payments to other carriers for unbillable fraudulent roaming charges. Any such continued or new fraudulent schemes could have an adverse effect on our business, financial condition and results of operations.

We are a privately held company and are not subject to the compliance and disclosure policies required of a public company and may not be able to address certain conflicts of interest in an impartial manner.

Our parent, Millicom, has recently deregistered as a public reporting company in the United States, and we are not, as a standalone company, subject to any corporate governance, financial reporting practices and policies or similar compliance procedures required of a publicly traded company in the United States. We are required by Millicom to comply with certain corporate policies related to corporate governance that are imposed by it on all of its global subsidiaries, including in connection with the listing of Millicom’s common stock in the form of Swedish Depositary Receipts on the NASDAQ OMX Stockholm exchange, however, we cannot guarantee that we will be required to, or will, continue to comply with such policies in the future or that, even if we do comply, such policies will rise to the levels of practice, reporting and governance required of a public reporting company in the United States. Because we are not a reporting company in the United States, we are exempt from the provisions of Regulation FD aimed at preventing issuers from the making of selective disclosures; the SEC proxy statement and information statement rules do not apply to us; and our officers, directors and principal shareholders are not required to file reports detailing their beneficial ownership of our shares. The frequency and scope of information made publicly available about us is not equivalent to that of a reporting company. This lack of information about us makes it more difficult to make investment decisions about us.

Certain Factors Relating to Paraguay

Economic and political developments in Paraguay could affect Paraguayan economic policy and us.

We are a Paraguayan company and substantially all our operations, assets and customers are located in Paraguay. As a result, our business, financial condition and results of operations are to a large extent dependent upon the general condition of the Paraguayan economy, the devaluation of the guaraní as compared to the U.S. dollar, price instability, inflation, interest rates, regulation, taxation, social instability and other political, social and economic developments in or affecting Paraguay over which we have no control.

Although the Paraguayan economy has exhibited strong signs of improvement in recent years, this improvement is closely related to the success of the agribusiness sector, which comprised 28% of real gross domestic product (“GDP”) for the year ended December 31, 2011. External factors, such as weather conditions, may adversely affect this sector of the economy, which in turn would have a negative impact on the general economy of Paraguay. A deterioration in Paraguay’s economic conditions may adversely affect our business, financial condition and results of operations.

Political developments in Paraguay could affect the Paraguayan economy and us.

Recent political developments in Paraguay may negatively affect us. On June 21, 2012, Paraguay’s Chamber of Representatives (Camara de Diputados) met and approved a motion to commence an impeachment process against former president Fernando Lugo. This motion was supported mainly by the Liberal Party, which had previously been part of a coalition that backed former president Lugo. The Paraguayan Senate (Camara de Senadores) held an impeachment trial on June 22, 2012 in accordance with the procedures established in the Paraguayan Constitution and voted by an overwhelming majority to remove former president Lugo from office. The impeachment proceedings were the result of claims that poor management by former president Lugo contributed to a deadly clash between police and farmers in northeastern Paraguay on June 15, 2012 that resulted in 17 deaths. In accordance with Paraguayan Constitutional requirements, Vice-President Federico Franco, a member of the Liberal Party, was sworn in as the new president on June 22, 2012. President Franco will serve as president for the remainder of former president Lugo’s term, due to end in August 2013.

The uncertainty surrounding the change in government could cause instability and volatility in Paraguay. The removal of former president Lugo led to Argentina, Brazil, Uruguay, Ecuador, Venezuela and other regional countries recalling their ambassadors to Paraguay and refusing to recognize the new government. In addition, members of both the Mercosur trade bloc and UNASUR voted to suspend Paraguay’s membership until after the 2013 presidential elections, though they refrained from imposing economic sanctions on Paraguay. We cannot assure you that the political situation will not negatively affect the Paraguayan economy, and consequently our financial condition and results of operations. Any of these events, or other unanticipated economic or political developments in Paraguay, could in turn have a material adverse effect on us.

Presidential elections will take place in Paraguay in April 2013. The president of Paraguay has considerable power to determine governmental policies and actions that relate to the Paraguayan economy and significant influence over certain industries and that may consequently affect the operations and financial performance of institutions in industries such as ours. Uncertainty in relation to the implementation by the new government of changes relating to fiscal and monetary policies may contribute to economic instability. Such uncertainty and new measures may increase market volatility and have a material impact on our customer base. It is not possible to predict whether the government elected in April 2013 or any succeeding governments will have an adverse effect on the Paraguayan economy and, consequently, on our results of operations and financial condition.

Paraguay’s economy has remained underdeveloped.

Until 1990, Paraguay had for 35 years been under the dictatorial rule of Alfredo Stroessner who did little to break the country’s political and economic isolation, and did not equip the state bureaucracy to assist development. Paraguay is transitioning but still lacks the human resources and infrastructure (and in many respects the institutional and regulatory framework) that would enable it to develop its economy more rapidly. In this environment, volatility in economic and political conditions is greater and doing business is more risky. Furthermore, without significant investments in infrastructure, which the Paraguayan government has failed to initiate to date, the private sector will confront bottlenecks that will be an impediment for future growth. As a result, Paraguay’s inability to develop its economy may adversely affect us.

Paraguay has historically experienced adverse economic conditions, and any future negative economic conditions may adversely affect us.

Paraguay has historically experienced uneven periods of economic growth. According to the BCP, between 2005 and 2008 GDP grew at an average annual rate of approximately 5.0%. However, in 2009, Paraguay’s GDP decreased 3.8% in real terms primarily as a result of a severe drought that affected the agricultural and livestock business and, to a lesser extent, the impact of the global economic crisis on Paraguay’s principal trading partners.

In 2010 and 2011, Paraguay’s GDP increased by 15.0% and 4.0%, respectively. However, during the first two quarters of 2012, exports were affected by a drought during the growing season for key crops such as soybean. As a result, after growth in total exports of approximately 43% and 22%, respectively, during 2010 and 2011, Paraguay’s exports began to shrink in the first half of 2012, falling by approximately 13% in the first quarter of 2012 as compared to the same period in 2011 and approximately 18% in the second quarter of 2012 as compared to the

same period in 2011. If the Paraguayan economy experiences negative growth or falls into recession as the result of these or other circumstances, we may be adversely affected.

Inflation and government measures to curb inflation may adversely affect the Paraguayan economy.

Paraguay has experienced high levels of inflation in the past and may experience high levels in the future. Inflation was 4.9% in 2011, 7.2% in 2010 and 1.9% in 2009. For the nine months ended September 30, 2012, inflation was 2.8%. The BCP, in an effort to combat inflationary increases in 2011, cut the benchmark 14-day interest rate by 300 basis points to 5.5% between November 2011 and September 2012. Potential economic uncertainties and reduced consumption, GDP growth and consumer confidence associated with inflationary pressures could adversely affect our business, financial condition and results of operations.

Paraguay has experienced internal security issues that could have a negative effect on the Paraguayan economy and political situation.

Paraguay has experienced internal security issues in the past, primarily due to the activities of the Ejército del Pueblo Paraguayo (the “EPP”), a small guerrilla group operating in north-eastern Paraguay, and land invasions by landless farmers. In September 2011, the EPP attacked a police station in the central-eastern town of Horqueta resulting in the death of two police officers. In June 2012, a land invasion in Campos Morombí ended in a shootout with police officers that resulted in 17 deaths, triggering the sudden impeachment of former president Fernando Lugo.

The situation in rural areas of Paraguay remains tense after the shootings of June 2012, and attention has focused on the occupation by 6,000 landless farmers of 472,000 hectares of public land at Ñacunday, Santa Rosa del Monday, in the department of Alto Paraná. The tense situation in rural areas may create challenges for the Paraguayan government in the pre-electoral period. If these activities persist in Paraguay, any escalation of such activities and the effects associated with them may have in the future a negative effect on the Paraguayan economy and political situation, which could in turn adversely affect our business, financial condition and results of operations.

Tensions with Brazil, Argentina and Venezuela may affect the Paraguayan economy and, consequently, our business, financial condition and results of operations.

Diplomatic relations with Brazil, Argentina, Uruguay and Venezuela have from time to time been tense and may remain tense. Following former president Fernando Lugo’s impeachment in June of 2012, Argentina, Brazil, Uruguay and Venezuela recalled their ambassadors to Paraguay and refused to recognized the new government in Paraguay. Shortly thereafter, Paraguay was suspended from Mercosur and UNASUR, and Venezuela’s state-owned oil company, PDVSA, halted scheduled oil shipments to Paraguay. While diplomatic ties are expected to be restored when a new government takes office after the April 2013 elections, we cannot assure you that this will be the case. Any further deterioration in relations with Brazil or Argentina, Paraguay’s largest and second largest trading partners, respectively, may result in the closing of borders, the imposition of trade barriers or a breakdown of diplomatic ties, any of which could have a negative effect on Paraguay’s trade balance, economy and general security situation, which may adversely affect our business, financial condition and results of operations.

The perception of higher risk in other countries, especially in emerging economies, may adversely affect the Paraguayan economy, us, and the market price of securities issued by Paraguayan issuers, including the Notes.

Emerging markets like Paraguay are subject to greater risks than more developed markets, and financial turmoil in any emerging market could disrupt business in Paraguay and adversely affect the price of the Notes. Moreover, financial turmoil in any important emerging market country may adversely affect prices in stock markets and prices for debt securities of issuers in other emerging market countries as investors move their money to more stable, developed markets. An increase in the perceived risks associated with investing in emerging markets could dampen capital flows to Paraguay and adversely affect the Paraguayan economy in general, and the interest of investors in the Notes. We cannot assure you that the value of the Notes will not be negatively affected by events in other emerging markets or the global economy in general.

Adverse economic conditions in Brazil, Paraguay’s largest trading partner, could have a material impact on the Paraguayan economy.

In recent years, Paraguay’s economy has become increasingly integrated with the Brazilian economy. Brazil is Paraguay’s largest trading partner, accounting for approximately 26.5% and 14.2% of Paraguay’s total imports and exports, respectively, audits main source of foreign direct investment, for 2011. Commercial activity on the border between Paraguay and Brazil, especially shopping tourism, constitutes one of the pillars of the Paraguayan economy. The Itaipú dam, which is co-owned in equal parts by Paraguay and Brazil, is another important element of integration between the two countries as it feeds Paraguay’s electrical power system and generates income for the Paraguayan government in the form of royalties and compensation, which in 2011 totaled US$369 million. Adverse economic conditions in Brazil, including a continued appreciation of the Brazilian currency, could translate into an appreciation of the guaraní in real terms and a loss of competitiveness of Paraguay’s export products. Since much of Paraguay’s economic growth in recent years has been driven by exports, the appreciation of the guaraní in real terms could have a significant adverse effect on Paraguayan economic conditions and on us.

Recent economic growth in Paraguay may be adversely affected if Argentine ports block Paraguayan vessels, exports and imports or by increased protectionist policies by the Argentine Government.

In recent years, Paraguay’s agricultural and livestock sectors have benefitted from an increase in export demand for Paraguayan products, principally beef products and soybeans. In addition, Paraguay’s economic growth has been enhanced by imports of capital and consumer goods. During the last quarter of 2010, as a result of a boycott by the Argentine maritime workers’ union (Sindicato Marítimo Unido Argentino), Argentine ports denied access to Paraguayan vessels and products. Paraguay’s economy may be adversely affected in the future if Argentine ports resume a blockade of Paraguayan vessels, exports and imports.

The Argentine government has threatened to implement trade barriers and import controls to protect the Argentine domestic industry. Argentina is Paraguay’s second most important trade partner, accounting for approximately 14.1% and 17.6% of Paraguay’s total imports and exports, respectively, for 2011. In the event Argentina implements protectionist policies, specifically those affecting the agribusiness sector, Paraguay’s economy may be adversely affected, which could in turn adversely affect our business, financial condition and results of operations.

Our corporate disclosures may be different or less substantial than those of issuers in other countries.

Issuers of securities in Paraguay are required to make public disclosures that are different and that may be less substantial than disclosures required in countries with highly developed capital markets. See “Regulation and Supervision.”

Fluctuations of the guaraní relative to the U.S. dollar or the implementation of restrictive currency exchange control policies by the Paraguayan government could result in an increase in our cost of financing and limit our ability to make timely payments on foreign currency-denominated debt.

Because substantially all of our revenues are and will continue to be denominated in guaraníes, if the value of the guaraní decreases against the U.S. dollar, our cost of U.S. dollar-denominated financing will increase. Severe depreciation of guaraníes may also result from disruption of the international foreign exchange markets, which may limit our ability to transfer or convert guaraníes into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal on the Notes and any other U.S. dollar-denominated debt that we may incur in the future. We cannot assure you that the Paraguayan government will not institute restrictive currency exchange control policies in the future. To the extent that the Paraguayan government institutes restrictive currency exchange control policies in the future, our ability to transfer or convert guaraníes into U.S. dollars and other currencies for the purpose of making timely payments of interest and principal of the Notes would be adversely affected.

Certain Factors Relating to Our Controller Stockholder Group

Our indirect controlling shareholder, Millicom, has significant influence over our business and we depend on Millicom for key operational functions.

We are an indirect wholly-owned subsidiary of Millicom. As a result, Millicom may exercise control over our decisions to enter into any corporate transaction or capital restructuring and has the ability to approve or prevent any transaction that requires the approval of our stockholders, regardless of the interests of holders of the Notes. The interests of Millicom and the actions it is able to undertake as our sole stockholder may differ or adversely affect your interests as holders of the Notes. Millicom may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its equity investment, even though such transactions might involve risks or be adverse to holders of the Notes. For example, Millicom could cause us to make acquisitions that increase the amount of indebtedness that is secured, or to sell revenue-generating assets, impairing our ability to make payments under the Notes. Millicom may be able to strongly influence or effectively control our decisions as long as they own a significant portion of our equity, even if such amount is less than 51%. A portion of our cash is held in a deposit account in connection with a notional cash pooling arrangement pursuant to which the depository bank can under certain circumstances apply these amounts to satisfy obligations of Millicom, which arrangement may have an adverse effect on us.

We are party to a number of arrangements with affiliates, and we cannot assure you that they are on an arms’- length basis.

Millicom provides us with financing and increased bargaining power with our supplies, as well as certain technical and management services, such as business strategies, marketing and publicity services, and advisory services related to the construction, installation, operation, management and maintenance of our networks, for which we pay a fee (equal in 2012 to 1.5% of our net sales (excluding value added tax)). In addition, Tigo Money provided cash and balance transferring services to customers over our network, and Transcom Paraguay S.A., (“Transcom”) provides call counter services exclusively to us. If any of these affiliates is unable to continue providing such services on a timely basis and at a level that meets our needs, our operations may be disrupted and our business, financial condition and results of operations could be adversely affected.

Certain Factors Relating to the Notes

The restrictive covenants in the indenture governing the Notes could adversely restrict our financial and operating flexibility and subject us to other risks.

The indenture governing the Notes and the agreements governing certain of our other outstanding debt and our parent’s debt contain various covenants that limit our flexibility in operating our business. For example, these agreements, subject to exceptions, restrict our ability and the ability of certain of our subsidiaries to, among other things:

• borrow money;

• pay dividends or make other distributions;

• create certain liens;

• make certain asset dispositions;

• make certain loans or investments;

• issue certain guarantees;

• enter into transactions with affiliates; and

• merge, consolidate, or sell, lease or transfer all or substantially all of our assets.

If we fail to comply with these covenants, we would be in default under the Indenture, and the principal and accrued interest on our outstanding indebtedness may become due and payable. We cannot assure you that the operating and financial restrictions and covenants in the Indenture will not adversely affect our ability to finance our future operations or capital needs, or engage in other business activities that may be in our interest, or react to adverse market developments.

Enforcing your rights as a noteholder in Paraguay may prove difficult.

The Notes will be issued by the Issuer, which is incorporated under the laws of Paraguay. Your rights under the Notes will be subject to the insolvency and administrative laws of Paraguay, and there can be no assurance that you will be able to effectively enforce your rights in any bankruptcy, insolvency or similar proceedings. The laws of Paraguay may not be as favorable to your interests as the laws of jurisdictions with which you are familiar. The application of these laws could call into question whether and how Paraguay’s laws should apply. Such issues may adversely affect your ability to enforce your rights under the Notes in Paraguay or limit any amounts that you may receive.

An active trading market may not develop for the Notes, which may hinder your ability to liquidate your investment.

We cannot assure you as to the liquidity of any market that may develop for the Notes, the ability of holders of the Notes to sell them or the price at which the holders of the Notes may be able to sell them. The liquidity for any market for the Notes will depend on the number of holders of the Notes, prevailing interest rates, the market for similar securities and other factors, including general economic conditions and our own financial condition, performance and prospects, as well as recommendations by securities analysts. Historically, the market for non-investment grade debt, such as the Notes, has been subject to disruptions that have caused substantial price volatility. We cannot assure you that if a market for the Notes were to develop, such a market would not be subject to similar disruptions. We have been informed by the initial purchasers that they intend to make a market for the Notes after the offering is completed. However, the initial purchasers are not obligated to do so and may cease their market-making activity at any time without notice. In addition, such market-making activity will be subject to limitations imposed by the Securities Act and other applicable laws and regulations. As a result, we cannot assure you that an active trading market for the Notes will develop or, if one does develop, that it will be maintained. If an active trading market does not develop or cannot be maintained, this could have an adverse effect on the liquidity and the trading price of the Notes. Market fluctuations, as well as economic conditions, have adversely affected the market price of many securities. We cannot assure you that these conditions will not adversely affect the market price of the Notes. If a market for the Notes does develop, we also cannot assure you that you will be able to sell your Notes, if issued, at a particular time or that the prices that you receive when you sell will be favorable. We also cannot assure you as to the level of liquidity of the trading market for the Notes. Because the market for the Notes may not be liquid, you may have to bear the economic risk of an investment in the Notes for an indefinite period of time.

The Notes may not be freely transferred.

The Notes have not been and will not be registered under the Securities Act or any U.S. state securities laws. You may not offer the Notes in the United States except pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws, or pursuant to an effective registration statement. Such exemption includes offers and sales that occur outside of the United States in compliance with Regulation S under the Securities Act in accordance with any applicable securities laws of any other jurisdiction and sales to “qualified institutional buyers’ as defined under Rule 144A under the Securities Act. Due to these transfer restrictions, you may be required to bear the risk of your investment for an indefinite period of time.

Holders of Notes may find it difficult to enforce their rights as a noteholder in Paraguay or to enforce civil liabilities against us or our directors, officers and controlling persons.

We are organized under the laws of Paraguay, and all but one of our directors and officers reside outside of the United States and all or a significant portion of the assets of our directors and officers and substantially all of our assets are located in Paraguay. As a result, it may not be possible for you to effect service of process within the United States upon such persons or to enforce against them or against us in U.S. courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States.

We have been advised by our Paraguayan counsel that there is doubt as to the enforceability in Paraguay, either in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated on the federal securities laws of the United States.

The Issuer’s obligations under the Notes will be junior to the Issuer’s secured debt obligations as well as to other statutory preferences and effectively junior to debt obligations of the Issuer’s subsidiaries.

The Notes will constitute senior unsecured obligations of the Issuer. The Notes will rank equal in right of payment with all of the Issuer’s other existing and future senior unsecured indebtedness. Although the Notes will provide the holders of the Notes with a direct, but unsecured, claim on the Issuer’s assets and property, payment on the Notes will be subordinated to any secured debt of the Issuer to the extent of the assets and property securing such debt, as well as to other statutory preferences, including post-petition claims, claims for salaries, wages, social security, taxes and court fees and expenses, among others. Payment on the Notes will also be structurally subordinated to the payment of secured and unsecured debt and other obligations of the Issuer’s subsidiaries. Upon a liquidation or reorganization of the Issuer, any right of the holders of the Notes to participate in the assets of the Issuer, including the capital stock of its subsidiaries, will be subject to the prior claims of the Issuer’s secured creditors, as well as to other statutory preferences, including post-petition claims, claims for salaries, wages, social security, taxes and court fees and expenses, and any such right to participate in the assets of the Issuer’s subsidiaries will be subject to the prior claims of the creditors of its subsidiaries. The Indenture includes a covenant limiting the ability of the Issuer and its subsidiaries to create or suffer to exist liens, although this limitation is subject to significant exceptions. In such a scenario, enforcement of the Notes may be jeopardized and noteholders may lose some or all of their investment.

USE OF PROCEEDS

We expect that the net proceeds of the issuance of the Notes, after deducting commissions and expenses, will be approximately US$294 million.

We intend to use approximately US$151 million of the net proceeds of this offering for the repayment of indebtedness incurred to finance the acquisition of the assets and business of Cablevision pursuant to that certain bridge loan agreement, dated as of September 5, 2012, among the Company, as borrower, Millicom, as guarantor, Citibank N.A. International Banking Facility New York and Morgan Stanley Bank, N.A., as lenders, and Citibank, N.A., as administrative agent (the “Bridge Loan”). Affiliates of the lenders under that loan facility are acting as joint bookrunners and initial purchasers in connection with the offering of the Notes. See “Business—Recent Developments.” We intend to use the balance of the net proceeds for our capital expenditures.

EXCHANGE RATES AND CURRENCY

Paraguay has a free market for foreign exchange and the Paraguayan government allows the guaraní to float against the U.S. dollar. We cannot assure you that the Paraguayan government will maintain its current policies with regard to the guaraní or that the guaraní will not depreciate or appreciate significantly in the future.

The BCP reports an average daily U.S. dollar exchange rate at http://www.bcp.gov.py/estadisticas/ cotizaciones/referencial-fluctuante/. The average daily rate is determine on the basis of the average buying rate for the previous business day for transactions of US$50,000 or more conducted by financial institutions and foreign exchange traders with non-financial sector customers.

The Federal Reserve Bank of New York does not report a noon buying rate for the guaraní.

As of December 5, 2012, the exchange rate was Gs.4,309 = US$1.00.

The following table sets forth, for each of the last five years and through November 30, 2012, the low, high, average and period-end exchange rates published by the BCP, expressed in guaraníes per one U.S. dollar.

Period Year ended December 31, Low High Average(1) End (guaraníes per U.S. dollar) 2007 ...... 4,600 5,250 5,019 4,850 2008 ...... 3,870 4,930 4,350 4,930 2009 ...... 4,480 5,160 4,955 4,600 2010 ...... 4,433 4,941 4,733 4,558 2011 ...... 3,723 4,642 4,187 4,478

Month April 2012 ...... 4,279 4,352 4,305 4,342 May 2012 ...... 4,273 4,536 4,369 4,481 June 2012 ...... 4,487 4,599 4,530 4,529 July 2012 ...... 4,367 4,524 4,438 4,405 August 2012 ...... 4,394 4,427 4,407 4,427 September 2012 ...... 4,406 4,462 4,419 4,462 October 2012 ...... 4,428 4,470 4,452 4,463 November 2012 ...... 4,432 4,474 4,460 4,442

(1) Based on the daily average rate reported by BCP.

While the Paraguayan government has not implemented exchange controls in more than twenty five years, we cannot assure you that the Paraguayan government will not institute restrictive exchange control policies in the future. To the extent that the Paraguayan government institutes restrictive exchange control policies in the future, our ability to transfer or convert guaraníes into U.S. dollars and other currencies for the purpose of making timely payments of interest on and principal of the Notes would be adversely affected. See “Risk Factors—Risks Relating to Paraguay – The Paraguayan government may institute restrictive currency exchange control policies in the future” in this offering memorandum.

CAPITALIZATION

The following table presents our capitalization (i) as of September 30, 2012 and (ii) as adjusted to give effect, as of September 30, 2012, to (x) this offering, as well as the application of the net proceeds of approximately US$151 million therefrom to repay the Bridge Loan incurred for purposes of financing the acquisition of the assets of Cablevision S.A. and (y) a reduction and cash distribution in the Company’s share capital in an amount equal to Gs.157,000 million approved by the shareholders of the Company on November 2, 2012 and which cash distribution was paid on November 29, 2012. See “Business—Recent Developments”. We derived actual amounts as of September 30, 2012 from our Interim Financial Statements included elsewhere in this offering memorandum. The following table is qualified in its entirety by, and should be read in conjunction with, such financial statements, “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Financial Statements included elsewhere in this Offering Memorandum. Except as otherwise disclosed herein, including the aforementioned reduction in the Company’s share capital approved as of November 2, 2012, there has been no material change in our capitalization since September 30, 2012.

As of September 30, 2012(1) As As Actual Actual Adjusted Adjusted (in thousands (in thousands (in millions of of (in millions of of guaraníes) U.S. dollars) guaraníes) U.S. dollars) (Unaudited)

Cash and cash equivalents ...... 382,710 85,771 863,776 193,585

Current liabilities ...... Borrowings ...... 740,303 165,913 66,542 14,913

Non-current liabilities ...... Borrowings ...... 334,351 74,933 1,646,179 368,933

Total shareholders’ equity ...... 1,207,825 270,691 1,050,825 235,505

Total capitalization ...... 2,282,479 511,537 2,763,546 619,351

(1) Amounts in guaraníes have been converted for convenience only to U.S. dollars at the exchange rate of Gs.4,462 to U.S.$1.00 reported by the BCP as of September 28, 2012.

SELECTED FINANCIAL AND OTHER INFORMATION

The following table presents our selected historical financial and operating data. The income statement data for the years ended December 31, 2011, 2010 and 2009 and the statement of financial position data as of December 31, 2011 and 2010 set forth below have been derived from our Audited Consolidated Financial Statements included elsewhere in this offering memorandum. The income statement data for the nine-month periods ended September 30, 2012 and 2011 and the statement of financial position data as of September 30, 2012 set forth below have been derived from our Interim Financial Statements included elsewhere in this offering memorandum. The Interim Financial Statements have been prepared on the same basis as the Audited Consolidated Financial Statements and, in the opinion of our management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information set forth herein.

The selected historical consolidated financial information presented below is qualified in its entirety by, and should be read in conjunction with, our Financial Statements and accompanying notes, “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this offering memorandum. The historical results are not necessarily indicative of our future results of operations or financial condition.

Nine Months Ended Year Ended September 30, December 31,

2012 2012 2011 2011 2010 2009

Income Statement Data: in thousands (in millions of Guaraní except percentages) of US$ except percentages(1) (unaudited)

The following table is a reconciliation of our total comprehensive income to Adjusted EBITDA

Nine Months Ended Year Ended September 30, December 31,

The following table is a reconciliation of our total revenues to recurring revenues:

Nine Months Ended Year Ended September 30, December 31,

2012 2012 2011 2011 2010 2009 in thousands of US$ except percentages(1) (in millions of Guaraní except percentages) (unaudited)

(1) Converted using the closing rate for September 30, 2012 as reported by the BCP, equivalent to Gs.4,462 to US$1.00.

Statement of Financial Position Data:

EQUITY AND LIABILITIES EQUITY (1) Share capital and premium ...... 56,029 250,000 250,000 9,250 Legal reserves ...... 11,262 50,249 3,994 3,994 Retained profits ...... 22,543 100,587 38,929 209,015 Profit for the year attributable to equity holders ...... 180,858 806,989 1,095,804 974,018 TOTAL EQUITY ...... 270,691 1,207,825 1,388,727 1,196,277 LIABILITIES Non-current Liabilities Debt and financing ...... 74,933 334,351 384,437 448,165 Provisions and other non-current liabilities ...... 10,185 45,446 39,376 34,406

As of As of September 30, December 31, 2012 2012 2011 2010 in thousands of US$ except percentages (in millions of Guaraní) (unaudited) Total non-current liabilities ...... 85,118 379,797 423,813 482,571 Current Liabilities Debt and financing ...... 165,913 740,303 55,399 42,811 Payables and accruals for capital expenditure ...... 42,522 189,733 139,306 107,081 Other trade payables ...... 30,648 136,750 107,800 73,201 Amounts due to related parties ...... 7,091 31,642 34,456 30,352 Accrued interest and other expenses ...... 19,672 87,777 74,314 55,838 Current income tax liabilities ...... — — 16,609 9,913 Provisions and other current liabilities ...... 33,761 150,639 141,521 136,285 Total current liabilities ...... 299,607 1,336,844 569,405 455,481 TOTAL LIABILITIES ...... 384,725 1,716,641 993,218 938,052 TOTAL EQUITY AND LIABILITIES ...... 655,416 2,924,466 2,381,945 2,134,329

(1) On November 2, 2012, the shareholders of the Company approved a reduction and cash distribution in the Company’s share capital in an amount equal to Gs.157,000 million.

Nine Months Ended Year Ended September 30, December 31,

2012 2011 2011 2010 2009 (unaudited) Operating Data:

(2) Our total monthly churn is individually calculated by reference to our aggregate prepaid and postpaid customers.

(3) Average monthly revenue per customer, calculated based on a historical exchange rate of Gs.4,462 to US$1.00.

(4) Our total ARPU is individually calculated by reference to our aggregate prepaid and postpaid customers.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our Audited Financial Statements and the notes thereto and our Interim Financial Statements included elsewhere in this offering memorandum, as well as the information presented under “Presentation of Financial and Other Information,” and “Selected Financial and Other Information.”

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in forward-looking statements as a result of various factors, including those set forth in “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.”

Overview

We are a leading provider in Paraguay of communications, information, entertainment and solutions services through mobile telephony, cable television and broadband internet. We are the leading mobile and cable television service operator in Paraguay based on both number of customers and revenues. We are a wholly owned indirect subsidiary of Millicom International Cellular S.A., a global telecommunications group with operations in 15 countries in Central America, South America and Africa. We offer a comprehensive range of communications, information, entertainment and solutions services, branded under the “Tigo” name, and cable television services, currently delivered under the “Cablevision” and “Fibertel” names, which are currently in the process of being re- branded to the “Tigo” name, a process we expect to complete within 12 months. We deliver our services across the most extensive 2G, 3G and cable networks in Paraguay. We strive to develop targeted, affordable rate plans and products and leverage our robust network assets, extensive distribution channels and superior customer service to attract and retain our customers. To maintain our market share and enhance our profitability, we intend to continue to introduce value-added services that meet the evolving needs of our customers. We believe our focus on availability, accessibility, affordability, brand affinity, customer service and innovation has resulted in Tigo becoming one of the most widely recognized and well-respected brands in Paraguay.

Factors Affecting our Results of Operations

Our operating results are primarily affected by the following factors:

The State of the Paraguayan Economy

We derive a majority of our revenues from Paraguay, an emerging market. Inflation rates, rates of GDP growth and remittance levels affect our business, financial condition and results of operations. See “Risk Factors―Certain Factors Relating to Our Business and the Paraguayan Cellular Market.” For additional disclosure on Paraguay, see “Annex A―The Republic of Paraguay.”

Taxes

Our effective tax rate for the years ended December 31, 2011, 2010 and 2009 remained stable at 13%.

Regulatory Fees

CONATEL currently imposes spectrum tariffs of 1% of total gross income, excluding telephone handset and equipment sales, an annual spectrum fee of approximately US$10 million, depending on the actual use of our authorized spectrum, and a license fee equal to 3% of our total investment in our mobile network. For the year ended December 31, 2011, the total fees we paid to CONATEL were Gs.71,293 million, and there can be no assurance that CONATEL will not raise this fee, or impose other similar fees, in the future.

Interconnection Rates

Executive Decree No. 16761 of March 26, 2002, or the Interconnection Regulation, establishes rules governing the interconnection between networks and service providers. Pursuant to the Interconnection Regulation, CONATEL updates interconnection rate caps annually. Following CONATEL Resolution 1023/12, the most recent resolution of CONATEL setting interconnection rates, the costs of fixed line to mobile line calls fell by 40%. In addition, as of October 2012, the cost of interconnection was set by CONATEL at a rate of Gs.180 per minute or Gs.3 per second. CONATEL regulations currently require that interconnection rates be set at the same level for calls to and from mobile lines and fixed lines.

Revenues

We derive our revenues mainly from the provision of communications, information, entertainment, and solutions services primarily through monthly subscription fees, airtime usage fees, roaming fees, interconnection fees, connection fees, fees from the provision of broadband internet, VOIP, data transmission and cable television and other services and equipment sales. We generally seek to increase our revenues through the growth of our customer base and through the introduction of new products and value-added services. Our future revenue growth is dependent on our ability to grow our customer base, introduce new products and value-added services, and increase the number of distribution points that offer our products and services. Due to our high market share, our revenues also are impacted by interconnection rates between communications operators, including interconnection fees charged for a call originating from a competitor’s network and terminating on our network.

Customer Base and Churn

The number of customers we have is dependent upon the number of new customers we obtain and the number of customers that terminate our service, or churn. Our total customer base grew from approximately 3.6 million customers as of September 30, 2011 to approximately 3.8 million customers as of September 30, 2012, an annual growth rate of approximately 7%. Our average churn rate per month for fiscal year 2011 was approximately 3.0%. Our policy is to terminate customers after 60 days of inactivity. We believe the measurement of churn may be overstated by our existing customers who migrate from being prepaid customers to postpaid customers and in some cases disconnect their old telephone numbers and are therefore included in the churn calculation.

To reduce our churn rate we undertake focused customer loyalty activities, such as balance promotions and retention subsidy promotions. Our primary retention activity, however, is the day-to-day maintenance of brand value and high quality customer service that we offer to our customers.

Cost of Sales

The primary components of our cost of sales are interconnection costs, telephone handset and equipment costs, roaming costs, costs of leasing lines to connect the switches and main base stations, frequency fees, taxes, value-added services (“VAS”) costs, programming and content costs and depreciation and amortization of network equipment. Our other costs of sales consist of frequency and transmission costs, leased infrastructure costs and other direct costs.

As we add new customers, we continue to seek new ways to control our cost of sales in order to continue to improve our operating margins and to seek new ways to reduce our overall general and administrative cost base. We try to reduce our support costs by identifying synergies with our parent and affiliate companies, such as sharing information, human resources and best practices. See “Certain Relationships and Related Party Transactions.” We have sought to implement various cost-saving and cost-reduction initiatives, including offering attractive handset prices in order to reduce customer attrition and the costs related to customer churn due to telephone upgrades.

Gross Margins

We expect that future gross margin percentages will be primarily affected by pricing, interconnection taxes, the level of telephone and equipment sales and the mix of revenues generated from voice and SMS services, VAS

and data traffic exclusively within our networks and those between our networks and other networks. Calls made exclusively within our networks have a higher gross margin because we do not incur interconnection charges to access other networks.

Sales and Marketing

Sales and marketing costs are primarily comprised of commissions to dealers for the sale of prepaid reloads and for obtaining customers on our behalf, as well as general advertising and promotion costs, point of sale materials for our retail outlets and staff costs. We book the full price of our handsets as revenue and then incur sales and marketing costs in form of handset subsidies, which we recognize as sales and marketing costs. Our subsidy efforts currently focus on smartphones for postpaid customers.

Critical Accounting Policies

Our Financial Statements have been prepared in accordance with IFRS as issued by the IASB on a historical cost basis and expressed in guaraní. In preparing the Financial Statements, management needs to make assumptions, estimates and judgments, which are often subjective and may be affected by changing circumstances or changes in its analysis. Material changes in these assumptions, estimates and judgments have the potential to materially alter our results of operations. We have identified below those of our accounting policies that we believe could potentially produce materially different results if we were to change our underlying assumptions, estimates and judgments. For a detailed discussion of these and other accounting policies, see note 2 to the Audited Financial Statements included elsewhere in this offering memorandum. Estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Because of inherent uncertainties in this evaluation process, actual results may be different from originally estimated amounts. In addition, significant estimates are involved in the determination of impairments, provisions related to taxes and litigation risks. These estimates are subject to change as new information becomes available and may significantly affect future operating results. Significant management judgment is required to determine any provision for contingent liabilities. Contingent liabilities are potential liabilities that arise from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of Telecel. Provisions for liabilities are recorded when a loss is considered probable and can be reasonably estimated.

Impairment of non-financial assets

At each reporting date we make an assessment whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, we make an estimate of the asset’s recoverable amount. We determine the recoverable amount based on the higher of its fair value less cost to sell, and its value in use, for individual assets, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Where no comparable market information is available, the fair value less cost to sell is determined based on the estimated future cash flows discounted to their present value using a discount rate that reflects current market conditions for the time value of money and risks specific to the asset. In addition to evaluation of possible impairment to the assets carrying value, the foregoing analysis also evaluates the appropriateness of the expected useful lives of the assets. Impairment losses of continuing operations are recognized in the consolidated income statement in those expense categories consistent with the function of the impaired asset.

At each reporting date an assessment is made as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. Other than for goodwill, a previously recognized impairment loss is reversed if there has been a change in the estimate used to determine the asset’s recoverable amount since the last impairment loss was recognized. If so, the carrying amount of the asset is increased to its recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss. After such a reversal, the

depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Inventories

Inventories (which mainly consist of mobile telephone handsets and related accessories) are stated at the lower of cost and net realizable value. Cost is determined using the first-in, first-out (FIFO) method. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Trade receivables

Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment is recorded when there is objective evidence that we will not be able to collect amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are indicators of impairment. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The provision is recognized in the consolidated income statement within “Cost of sales”.

Provisions Provisions are recognized when we have a present obligation (legal or constructive) as a result of a past event, if it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where we expect some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, risks specific to the liability. Where discounting is used, increases in the provision due to the passage of time are recognized as interest expenses.

Revenue recognition Revenue comprises the fair value of consideration received or receivable for the sale of goods and services, net of value added tax, rebates and discounts and after eliminating intra-group sales. Revenue is recognized to the extent that it is probable that the economic benefits will flow to us and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized. Recurring revenues consist of monthly subscription fees, airtime usage fees, interconnection fees, roaming fees and fees from other telecommunications services such as data services, short message services and other value- added services and exclude revenues from the sale of telephone handsets and equipment and roaming fees from visitors to our network who are not our customers, which we believe reflects the regular and ongoing revenues of our customers and is therefore an appropriate metric to analyze the results of our operations. Recurring revenues are recognized on an accrual basis, i.e. as the related services are rendered. Unbilled revenues for airtime usage and subscription fees resulting from services provided from the billing cycle date to the end of each month are estimated and recorded. Subscription products and services are deferred and amortized over the estimated life of the customer relationship. Related costs are also deferred, to the extent of the revenues deferred, and amortized over the estimated life of the customer relationship. The estimated life of the customer relationship is calculated based on historical disconnection percentage for the same type of customer. Where customers purchase a specified amount of airtime in advance, revenue is recognized as airtime is used. Unutilized airtime is carried in the statement of financial position as deferred revenue within “other current liabilities”.

Revenues from value-added content services such as video messaging, ringtones and games are recognized net of payments to the providers of these services if the providers are responsible for content and determining the price paid by the customer. For such services we are considered to be acting in substance as an agent. Where we are responsible for the content and determines the price paid by the customer then the revenue is recognized gross amount. Revenues from the sale of handsets and accessories on a stand-alone basis (without multiple deliverables) are recognized when the significant risks and rewards of ownership of handsets and accessories have been passed to the buyer. Revenue arrangements with multiple deliverables (“Bundled Offers” such as equipment and services sold together) are divided into separate units of accounting if the deliverables in the arrangement meet certain criteria. The arrangement consideration is then allocated among the separate units of accounting based on their relative fair values or on the residual method. Revenue is then recognized separately for each unit of accounting.

Deferred tax Deferred income tax is provided using the liability method and calculated from 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 income tax assets are recognized for all deductible temporary differences and carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary difference and the carry-forward of unused tax credits and unused tax losses 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. The carrying amount of deferred income 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 the deferred income tax asset. Unrecognized deferred income 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 deferred tax asset to be recovered.

Deferred income 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. Income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated income statement. 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.

Results of Operations

Nine months ended September 30, 2012 and 2011

The following table sets forth certain income statement items and operating information at or for the periods and dates indicated:

Nine Months Ended Impact on comparative September 30, results for period Amount of Percent 2012 2011 variation change (unaudited) (in millions of guaraní, except percentages, employees and ARPU)

Revenues ...... 2,037,438 1,792,284 245,154 14% Cost of sales ...... (560,341) (469,519) (90,822) (19)% Gross profit ...... 1,477,097 1,322,765 154,332 12% Sales and marketing ...... (325,993) (270,927) (55,066) (20)% General and administrative expenses ...... (200,694) (173,453) (27,241) (16)% Operating profit ...... 950,410 878,385 72,025 8% Interest expense ...... (14,697) (6,672) (8,025) (120)% Interest and other financial income ...... 4,335 389 3,946 1,014% Exchange gains, net ...... 6,319 46,680 (40,362) (86)% Profit before tax...... 946,367 918,782 27,585 3% Income tax ...... (139,378) (133,801) (5,577) (5)% Net profit ...... 806,989 784,981 22,008 3%

Operating Data:

Number of customers ...... 3,808,803 3,573,992 234,811 7% Postpaid ...... 772,134 608,383 163,751 27% Prepaid ...... 3,036,669 2,965,609 71.060 2% Monthly churn % ...... Postpaid ...... 1.6% 1.4% 0.5% 42% Prepaid ...... 2.8% 3.4% (0.7)% (23)% Total monthly churn (1) ...... 2.5% 3.1% (0.6)% (21)% Monthly ARPU (US$) (2) ...... Postpaid ...... 23.2 23.0 0.2 1% Prepaid ...... 9.1 10.0 (0.9) (9)% Total monthly ARPU (3) ...... 11.9 12.8 (0.9) (7)% Number of employees ...... 470 489 (19) (4)%

(1) Our total monthly churn is individually calculated by reference to our aggregate prepaid and postpaid customers. (2) ARPU is calculated based on a historical exchange rate of Gs.4,462 to US$1.00. (3) Our total ARPU is individually calculated by reference to our aggregate prepaid and postpaid customers.

Revenues

Revenues for the nine months ended September 30, 2012 amounted to Gs.2,037,438 million, up 14% year- on-year from Gs.1,792,284 for the nine months ended September 30, 2011, resulting primarily from growth in our customer base of 7% since September 30, 2011 as well as maintenance of ARPU and successful up-sales and cross- sales of VAS products and services to existing customers. We also saw increases in revenues from international roaming fees and sales of telephone handsets and related equipment as we further subsidized handsets to increase the penetration of smartphones in the country which enables us to sell additional data-driven products and services to these customers.

Innovation continues to be a major focus for us as we seek to grow revenues by developing and selling additional products and services through which we can gain a greater share of customers’ disposable income, increase loyalty and reduce churn. In the first nine months of 2012, value-added services represented 50% of recurring revenues and grew by approximately 20% year-on-year, from Gs.785,439 million (out of a total of

Gs.1,694,113 million in recurring revenues) for the nine months ended September 30, 2011 to Gs.938,811 million (out of a total of Gs.1,887,615 million in recurring revenues) for the nine months ended September 30, 2012.

We generate revenue from the provision of communications, information, entertainment and solutions services. Communications services consist of voice and SMS communications services, information services consist of internet access, entertainment services consist primarily of content downloads, ring-back tones, SMS competitions, and television and music products and solutions services consist primarily of “Zero Balance” based products, which permit customers to continue using our services despite running out of account balance, voicemail and handset insurance. While our communications revenue remained steady for the first nine months of 2012 as compared to the same period in 2011, we have seen strong revenue growth in the other categories. Information category revenue grew 54% year-on year for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 primarily as a result of increasing use of smartphones to access data and connect to the internet, Entertainment category revenue grew 14% year-on-year for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 primarily as a result of the introduction of new sales channels such as a USSD, or Unstructured Supplementary Service Data, menu, a mobile portal and online sales as well as the introduction of new products, and Solutions category revenue grew 15% year-on-year for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 primarily as a result of the launch of “Lend me Balance”, a Peer-to-Peer balance lending program whereby we allow our customers to borrow credits from another customer to make an additional call when they no longer have balance on their account, higher revenues from handset insurance and new products.

Customer base

As of September 30, 2012, our total mobile customer base was 3,808,803, an increase of 7% from 3,573,992 as of September 30, 2011, with prepaid customers accounting for 80% or 3,036,669 of our total mobile customers at such time. Capital expenditures over the last 12 months have resulted in improvements in the quality of our networks and increased capacity and coverage which we believe has attracted additional customers during the period. Strengthening our distribution network has also helped drive customer growth by making our products more accessible. We further improved the volume and variety of products and services we provide to our customers, as well as the accessibility and availability of our products and services by using innovative distribution channels and techniques.

Cost of sales

Cost of sales increased by 19% for the nine months ended September 30, 2012 to Gs.560,341 million from Gs.469,519 million for the nine months ended September 30, 2011. The primary cost of sales incurred by us in relation to the provision of telecommunications services during these periods related to interconnection costs, roaming costs, leased lines to connect the switches and main base stations, cost of handsets, purchase of content and the depreciation of network equipment. The interconnection and roaming costs are a direct function of calls made by our customers, an increase in which results in increased revenues, and therefore these costs increased in connection with the growth in revenues described above. Frequency fees and network depreciation both increased as we continued to expand our networks. Handset manufacturing costs that are passed on to us also increased as more of our revenue was generated by the use of smartphones. Gross profit margin decreased to 72.5% for the nine months ended September 30, 2012 from 73.8% for the nine months ended September 31, 2011, resulting primarily from higher telephone and equipment sales, which are typically at a very low margin, representing a larger portion of revenue as well as an increase in content revenue and its related costs.

Sales and marketing

Sales and marketing expenses increased by 20% for the nine months ended September 30, 2012 to Gs.325,993 million from Gs.270,927 million for the nine months ended September 30, 2011. Sales and marketing costs were comprised mainly of commissions to dealers for obtaining customers on our behalf as well as selling prepaid reloads, handset subsidies, general advertising and promotion costs, point of sales materials for the retail outlets, sponsorship and staff costs. The increase in sales and marketing costs for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 were mainly a result of higher handset

subsidies. As a percentage of revenues, sales and marketing expenses increased to 16% for the nine months ended September 30, 2012 from 15% for nine months ended September 30, 2011.

General and administrative expenses

General and administrative expenses increased by 16% for the nine months ended September 30, 2012 to Gs.200,694 million from Gs.173,453 million for the nine months ended September 30, 2011. The increase was mainly attributable to higher billing costs, as postpaid customers increased by 27% period to period and increased as a percentage of our total customers, and higher network maintenance costs as a result of our continued network expansion. As a percentage of revenues, general and administrative expenses remained stable at 10% for the nine- month periods ended September 30, 2012 and 2011.

Operating profit

Operating profit increased by 8% for the nine months ended September 30, 2012 to Gs.950,410 million from Gs.878,385 million for the nine months ended September 30, 2011. This increase was mainly as a result of the 14% increase in revenues period to period as well as strong cost control within the organization. Our operating margin decreased from 49.0% for the nine months ended September 30, 2011 to 46.6% for the nine months ended September 30, 2012. This decrease was mainly a result of telephone and equipment sales representing a larger portion of revenue and handset subsidies related to these higher sales.

Net finance costs

Net finance costs, which include interest expense and other financing costs, net of interest income, increased by 65% for the nine months ended September 30, 2012 to Gs.10,362 million from Gs.6,284 million for the nine months ended September 30, 2011. This increase was mainly due to the Bridge Loan entered into in September 2012 in order to finance the acquisition of the assets and business of Cablevision. See "Business—Recent Developments.”

Exchange gains

Exchange gains, net decreased by 86% for the nine months ended September 30, 2012 to Gs.6,319 million from Gs.46,680 million for the nine months ended September 30, 2011. Exchange gains and losses resulted primarily as a result of movements in the PYG/USD exchange rate resulting in a revaluation of our U.S. dollar borrowings and cash and cash and cash equivalents. The majority of our borrowings and cash and cash equivalents are denominated in U.S. dollars. The PYG/USD exchange rate moved from 4,462.00 as of September 30, 2012 to 4,131.00 as of September 30, 2011.

Charge for taxes

Our charge for taxes increased by 4% for the nine months ended September 30, 2012 to Gs.139,378 million from Gs.133,801 million for the nine months ended September 30, 2011, resulting primarily from the increased profit before tax. Our effective tax rate remained relatively stable at 14.6% for the nine months ended September 30, 2012 compared to 14.7% for the nine months ended September 30, 2011.

Net profit for the period

Net profit for the nine months ended September 30, 2012 increased by 3% to Gs.806,989 million compared to a net profit of Gs.784,981 million for the nine months ended September 30, 2011 principally as a result of higher revenues.

Years Ended December 31, 2011 and 2010

The following table sets forth certain income statement items and operating information at or for the periods and dates indicated:

Year Ended Impact on comparative December 31, results for period Amount of Percent 2011 2010 variation change (in millions of guaraní, except percentages, employees and ARPU)

Revenues ...... 2,462,991 2,200,198 262,793 12% Cost of sales ...... (634,185) (518,716) (115,469) (22)% Gross profit ...... 1,828,806 1,681,482 147,324 9% Sales and marketing ...... (368,142) (355,652) (12,490) (4)% General and administrative expenses ...... (246,375) (196,822) (49,553) (25)% Operating profit ...... 1,214,289 1,129,008 85,281 8% Interest expense ...... (8,301) (13,696) 5,395 39% Interest and other financial income ...... 1,520 274 1,246 455% Exchange gains/(losses), net ...... 55,272 (1,986) 57,258 2883% Profit before tax...... 1,262,780 1,113,600 149,180 13% Income tax ...... (166,976) (139,582) (27,394) (20)% Net profit ...... 1,095,804 974,018 121,786 13%

Operating Data:

Number of customers ...... 3,613,754 3,441,423 172,331 5% Postpaid ...... 644,115 491,280 152,835 31% Prepaid ...... 2,969,639 2,950,143 19,496 1% Monthly churn % ...... Postpaid ...... 1.3% 0.8% 0.2% 18% Prepaid ...... 3.4% 2.9% 1.7% 71% Total monthly churn (1) ...... 3.0% 2.6% 1.3% 57% Monthly ARPU (US$) (2) ...... Postpaid ...... 22.7 19.4 3.3 17% Prepaid ...... 10.0 8.6 1.4 16% Total monthly ARPU (3) ...... 12.2 10.7 1.5 14% Number of employees ...... 434 446 (14) (3)%

Revenues

Total revenues increased by 12% for the year ended December 31, 2011 to Gs.2,462,991 million from Gs.2,200,198 for the year ended December 31, 2010. Growth in revenue was impacted primarily by growth in the number of customers and the type and number of value-added services purchased by customers, which trended toward an increasing level of higher-revenue generating value-added services. Our recurring revenues from value added services increased from 43% of total recurring revenues for the year ended December 31, 2010 to 46% for the year ended December 31, 2011.

Customer base

As of December 31, 2011, our mobile customer base was 3,613,754, an increase of 5% from 3,441,423 as of December 31, 2010. As of December 31, 2011, prepaid customers accounted for 82%, or 2,969,639, of our total mobile customers compared to 86%, or 2,950,143, as of December 31, 2010. This change in the number of prepaid customers as a percentage of total customers is mainly a result of our prepaid customers migrating to postpaid.

Growth in our mobile customer base slowed during the year ended December 31, 2010 given the high level of penetration in the Paraguayan market. However, capital expenditures resulted in further improvements in the quality of our networks and increased capacity and coverage which attracted additional customers during the year ended December 31, 2011. We further expanded our distribution network, which also helped drive customer growth and consumption by increasing the number of points of sale where we sell our products, making the products more accessible.

Cost of sales

Cost of sales increased by 22% for the year ended December 31, 2011 to Gs.634,185 million from Gs.518,716 million for the year ended December 31, 2010. The primary cost of sales incurred by us in relation to the provision of telecommunications services during these periods related to interconnection costs, roaming costs, leased lines to connect the switches and main base stations, cost of handsets, purchase of content and the depreciation of network equipment. The interconnection and roaming costs are a direct function of calls made by our customers, an increase in which results in increased revenues, and therefore these costs increased in connection with the growth in revenues described above. The cost of leased lines and frequency fees increased as we continued to expand our networks. Gross profit margin decreased to 74.3% for the year ended December 31, 2011 from 76.4% for the year ended December 31, 2010, resulting primarily from the increased cost of leased lines and frequency fees as well as higher telephone and equipment sales, as a portion of revenue, at very low margins as more of our customers purchased expensive smartphones including those that we subsidize.

Sales and marketing

Sales and marketing expenses increased by 4% for the year ended December 31, 2011 to Gs.368,142 million from Gs.355,652 million for the year ended December 31, 2010. Sales and marketing costs were comprised mainly of commissions to dealers for obtaining customers on our behalf as well as selling prepaid reloads, handset subsidies, general advertising and promotion costs, point of sales materials for the retail outlets, sponsorship and staff costs. The increase in sales and marketing costs was mainly attributable to increased commissions as a result of our stronger sales. As a percentage of revenues, sales and marketing expenses decreased slightly to 15% for the year ended December 31, 2011 from 16% for the year ended December 31, 2010.

General and administrative expenses

General and administrative expenses increased by 25,2% for the year ended December 31, 2011 to Gs.246,375 million from Gs.196,822 million for the year ended December 31, 2010. The increase in general and administrative expenses was attributable to higher employee costs, higher external services as we continued to improve our customer services and increased network maintenance costs as a result of the expansion of our networks. As a percentage of revenues, general and administrative expenses increased from 9% for the year ended December 31, 2010 to 10% for the year ended December 31, 2011.

Operating profit

Operating profit increased by 8% for the year ended December 31, 2011 to Gs.1,214,289 million from Gs.1,129,008 million for the year ended December 31, 2010. This increase was mainly as a result of the increase in revenues period to period. The operating margin decreased from 51.3% for the year ended December 31, 2010 to 49.3% for the year ended December 31, 2011, primarily as the result of the higher level of subsidies on handsets.

Net finance costs

Net finance costs, which include interest expense and other financing costs, net of interest income, decreased by 49% for the year ended December 31, 2011 to Gs.6,781 million from Gs.13,422 million for the year ended December 31, 2010. This increase was mainly due to our lower level of indebtedness for the year ended December 31, 2011 compared to the year ended December 31, 2010.

Exchange gains

There were net exchange gains for the year ended December 31, 2011 of Gs.55,272 million compared to net exchange losses of Gs.1,986 million for the year ended December 31, 2010. Exchange gains and losses resulted primarily as a result of movements in the PYG/USD exchange rate resulting in a revaluation of our U.S. dollar borrowings and cash and cash and cash equivalents. The majority of our borrowings and cash and cash equivalents are denominated in U.S. dollars. The PYG/USD exchange rate moved from 4,645.00 as of December 31, 2010 to 4,478.00 as of December 31, 2011.

Charge for taxes

The charge for taxes increased by 20% year-on-year to Gs.166,976 million for the year ended December 31, 2011, from Gs.139,582 million for the year ended December 31, 2010 due primarily to the increase in profit before tax. The effective tax rate remained relatively stable at 13.2% for the year ended December 31, 2011 compared to 12.6% for the year ended December 31, 2010.

Net profit

Our net profit for the year ended December 31, 2011 was Gs.1,095,804 million, a 12.5% increase over our net profit of Gs.974,018 million for the year ended December 31, 2010, principally as a result of higher revenues.

Years Ended December 31, 2010 and 2009

The following table sets forth certain income statement items and operating information at or for the periods and dates indicated: Year Ended Impact on comparative December 31, results for period Amount of Percent 2010 2009 variation change (in millions of Guarani, except percentages, employees and ARPU)

Revenues ...... 2,200,198 1,927,628 272,570 14% Cost of sales ...... (518,716) (486,109) (32,607) (7)% Gross profit ...... 1,681,482 1,441,519 239,963 17% Sales and marketing ...... (355,652) (309,247) (46,405) (15)% General and administrative expenses ...... (196,822) (176,040) (20,782) (12)% Operating profit ...... 1,129,008 956,232 172,776 18% Interest expense ...... (13,696) (12,013) (1,683) (14)% Interest and other financial income ...... 274 978 (704) (72)% Exchange losses, net ...... (1,986) (1,477) (509) (34)% Profit before tax...... 1,113,600 943,720 169,880 18% Income tax ...... (139,582) (125,302) (14,280) (11)% Net profit ...... 974,018 818,418 155,600 19%

Operating Data:

Number of customers ...... 3,441,423 3,048,134 393,289 13% Postpaid ...... 491,280 349,419 141,861 41% Prepaid ...... 2,950,143 2,698,715 251,428 9% Monthly churn % ...... Postpaid ...... 0.8% 1.4% (0.4)% (27)% Prepaid ...... 2.9% 3.4% (0.2)% (8)% Total monthly churn (1) ...... 2.6% 3.2% (0.2)% (8)%

Year Ended Impact on comparative December 31, results for period Amount of Percent 2010 2009 variation change (in millions of Guarani, except percentages, employees and ARPU) Monthly ARPU (US$) (2) ...... Postpaid ...... 19.4 23.7 (4.8) (18)% Prepaid ...... 8.6 8.5 0.1 1% Total monthly ARPU (3) ...... 10.7 10.8 (0.1) (1)% Number of employees ...... 446 421 25 6%

Revenues

Total revenues increased by 14% to Gs.2,200,198 million for the year ended December 31, 2010 from Gs.1,927,628 for the year ended December 31, 2009. This growth resulted primarily from growth in the number of customers and the type and number of value-added services purchased by customers. Our recurring revenues from value added services increased from 35% of total recurring revenues for the year ended December 31, 2009 to 43% for the year ended December 31, 2010.

Customer base

As of December 31, 2010, our mobile customer base was 3,441,423, an increase of 13% from 3,048,134 as of December 31, 2009. As of December 31, 2010, prepaid customers accounted for 86%, or 2,950,143, of the total mobile customers compared to 89%, or 2,698,715, as of December 31, 2009. This change in the number of prepaid customers as a percentage of total customers is mainly a result of our prepaid customers migrating to postpaid. Capital expenditures resulted in improvements in the quality of our networks and increased capacity and coverage which attracted additional customers during the year end December 31, 2010. Expansion of our distribution network also helped drive customer growth and consumption during the same period by increasing the number of points of sale where we sell our products, making the products more accessible.

Cost of sales

Cost of sales increased by 7% for the year ended December 31, 2010 to Gs.518,716 million from Gs.486,109 million for the year ended December 31, 2009. The primary cost of sales incurred by us in relation to the provision of telecommunications services during these periods related to interconnection costs, roaming costs, leased lines to connect the switches and main base stations, cost of handsets and the depreciation of network equipment. The interconnection and roaming costs are a direct function of calls made by our customers, an increase in which results in increased revenues, and therefore these costs increased in connection with the growth in revenues described above. The cost of leased lines and frequency fees increased as we continued to expand our networks, and cost of telephone and equipment sales increased. This increase in cost of sales mitigated in part an increase in gross profit margin, which increased to 76.4% for the year ended December 31, 2010 from 74.8% for the year ended December 31, 2009.

Sales and marketing

Sales and marketing expenses increased by 15% for the year ended December 31, 2010 to Gs.355,652 million from Gs.309,247 million for the year ended December 31, 2009, principally as a result of increased commissions as a result of our stronger sales. Sales and marketing costs were comprised mainly of commissions to dealers for obtaining customers on our behalf and selling prepaid reloads, handset subsidies, general advertising and promotion costs, point of sales materials for our retail outlets, and sponsorship and staff costs. As a percentage of

revenues, sales and marketing expenses remained stable at 16% for each of the years ended December 31, 2010 and 2009.

General and administrative expenses

General and administrative expenses increased by 12% for the year ended December 31, 2010 to Gs.196,822 million from Gs.176,040 million for the year ended December 31, 2009, principally as a result of higher employee costs and an increase in collection costs as a result of higher revenues and postpaid customers during the year. As a percentage of revenues, general and administrative expenses remained stable at 9% for the years ended December 31, 2010 and 2009.

Operating profit

Operating profit increased by 18% for the year ended December 31, 2010 to Gs.1,129,008 million from Gs.956,232 million for the year ended December 31, 2009. This increase resulted primarily from the increase in revenues during the year and strong cost control within the organization. Our operating margin increased from 49% for the year ended December 31, 2009 to 51% for the year ended December 31, 2010.

Net finance costs

Net finance costs, which include interest expense and other financing costs, net of interest income, increased by 22% for the year ended December 31, 2010 to Gs.13,422 million from Gs.11,035 million for the year ended December 31, 2009. This increase was primarily due to a higher level of indebtedness for the year ended December 31, 2010 compared to the year ended December 31, 2009 .

Exchange losses

Exchange losses, net increased by 34% for the year ended December 31, 2010 to Gs.1,986 million from Gs.1,477 million for the year ended December 31, 2009. This increase resulted primarily from movements in the PYG/USD exchange rate resulting in a revaluation of our U.S. dollar borrowings and cash and cash equivalents. The majority of our borrowings and cash and cash equivalents are denominated in U.S. dollars. The guaraní/U.S. dollar exchange rate moved from 4,695.00 as at December 31, 2009 to 4,645.00 as at December 31, 2010.

Charge for taxes

Our charge for taxes increased by 11% for the year ended December 31, 2010 to Gs.139,582 million from Gs.125,302 million for the year ended December 31, 2009, primarily as a result of to the increase in profit before tax. The effective tax rate remained relatively stable at 12.6% for the year ended December 31, 2010 compared to 13.3% for the year ended December 31, 2009.

Net profit

Our net profit for the year ended December 31, 2010 was Gs.974,018 million, an increase of 19.01% compared to a net profit of Gs.818,418 million for the year ended December 31, 2009, principally as a result of higher revenues.

Trend Information

Our strategy is to grow our revenues by maintaining our Communications revenues and market share while growing our revenues in Information, Entertainment and Solutions categories. Innovation has become a major focus, as we seek to continue to grow revenues by developing additional products and services to customers. During the first nine months of 2012, VAS increased as a percentage of recurring revenues from 46% for the year ended December 31, 2011 to 50% for the nine months ended September 30, 2012. We expect innovation to be an important driver of growth in the years ahead. Although these new services tend to have lower profit margins than our core communications business we expect to limit any drop in margins by controlling costs and economies of

scale. There is, however, a risk that if new competitors enter our markets and/or price competition intensifies, our customers may be more likely to move from one mobile operator to another. This also has the effect of driving prices down, thus eroding the profitability of our mobile operations. In that event, we believe our strong network coverage and brand awareness should mitigate any adverse effects on our business.

Liquidity and Capital Resources

Liquidity is a measure of a company’s ability to access cash. Historically we have relied, and in the future we intend to continue to rely, primarily on cash from operations and external financings to fund our operations, capital expenditures and working capital requirements.

We believe that our sources of liquidity are sufficient for our present requirements. Although we believe that we should be able to meet our debt service obligations and fund our operating requirements in the future through cash flow from our operations, we may seek additional financing in the capital markets from time to time, depending on market conditions and our financial requirements. We intend to continue to focus on investments in property, systems and equipment (fixed assets) and working capital management, including timely collection of accounts receivable and efficient management of accounts payable.

For a further discussion on financing- and liquidity-related risks, see note 19 to the Audited Financial Statements included elsewhere in this offering memorandum.

Capital Expenditures

Our capital expenditures on property, plant and equipment, licenses and other intangible assets for the nine- month periods ended September 30, 2012 and September 30, 2011 amounted to Gs.241,393 million and Gs.205,342 million, respectively and for the twelve-month periods ended December 31, 2011, 2010 and 2009 amounted to Gs.318,099 million, Gs.175,840 million and Gs.167,005 million, respectively.

We expect to finance our capital expenditures for the years ended December 31, 2012, 2013 and 2014 through cash from operations and part of the proceeds of this offering. See “Use of Proceeds.”

As of September 30, 2012, we had commitments to purchase, within one year, network equipment, land and buildings and other tangible and intangible fixed assets for an aggregate consideration equal to Gs.3,592 million. We expect to meet these commitments from our current cash balances and cash generated from operations. We also had a commitment to purchase the fixed assets and certain other assets of Cablevision S.A. See “Business— Recent Developments.”

Dividends

After analyzing our results of operations, our board of directors makes a recommendation to our shareholders on the amount of dividends, if any, that should be paid. The shareholders then resolve in a shareholders’ meeting the amount of dividends, if any, that should be paid to shareholders. At the same time it decides whether the amount not paid as dividends should be retained as retained results of the Company or directed to a legal reserve account. Our dividend policy historically has been to pay dividends to our shareholders up to the level of free cash generated after debt repayments which is not required to fund our operations and not in excess of yearly net income. In the first nine months of 2012 and for the years ended December 31, 2011, 2010 and 2009, we paid dividends to our shareholders of Gs.979,829 million, Gs.901,555 million, Gs.813,143 million and Gs.644,089 million, respectively.

Cash Flows

The table below sets forth our cash flows for the periods indicated:

Nine Months Ended Year Ended September 30, December 31,

2012 2011 2011 2010 2009 (in millions of guaraní)

Net cash provided by operating activities ...... 852,589 854,576 1,238,169 1,118,472 1,064,626 Net cash used by investing activities ...... (934,480) (274,121) (312,322) (137,960) (269,870) Net cash used by financing activities ...... (345,168) (913,600) (941,544) (597,508) (666,860) Net (decrease) increase in cash and cash equivalents ...... (431,405) (343,907) 11,410 376,038 111,807 Cash and cash equivalents at the end of the period .... 382,710 458,798 814,115 802,705 426,667

Nine Months Ended September 30, 2012 and 2011

For the nine months ended September 30, 2012 cash provided by operating activities was Gs.852,589 million compared to Gs.854,576 million for the nine months ended September 30, 2011. The slight decrease was due to an increase in accounts receivable and inventories, offset in part by the increase in operating profit for the nine months ended September 30, 2012.

Cash used in investing activities was Gs.934,480 million for the nine months ended September 30, 2012 compared to Gs.274,121 million for the nine months ended September 30, 2011. The increase in cash used for investing activities for the nine months ended September 30, 2012 was mainly attributable to the purchase of pledged deposits for Gs.669,300 million in respect of the acquisition of Cablevision S.A. See “Business—Recent Developments”.

Cash used in financing activities was Gs.345,168 million for the nine months ended September 30, 2012 compared to Gs.913,600 million for the nine months ended September 30, 2011. The lower cash used for financing activities for the nine months ended September 30, 2012 was mainly as a result of the proceeds from the incurrence of indebtedness in an amount equal to Gs.669,361 million pursuant to the Bridge Loan, offset by higher dividend payments.

The net decrease in cash and cash equivalents for the nine months ended September 30, 2012 was Gs.431,305 million compared to Gs.343,907 million for the nine months ended September 30, 2011. We had closing cash and cash equivalents of Gs.382,710 million as of September 30, 2012 compared to Gs.458,798 million as of September 30, 2011.

Years Ended December 31, 2011 and 2010

For the year ended December 31, 2011 cash provided by operating activities was Gs.1,238,169 million compared to Gs.1,118,472 million for the year ended December 31, 2010. The increase was due to the higher operating profit for the year ended December 31, 2011, offset in part by an increase in accounts receivable and a decrease in trade and other payables.

Cash used in investing activities was Gs.312,322 million for the year ended December 31, 2011 compared to Gs.137,960 million for the year ended December 31, 2010. The increase in cash used for investing activities for the year ended December 31, 2011 was mainly attributable to higher capital expenditures.

Cash used in financing activities was Gs.941,544 million for the year ended December 31, 2011 compared to Gs.597,508 million for the year ended December 31, 2010. The higher cash used for financing activities for the year ended December 31, 2011 was mainly as a result of no proceeds from the issuance of debt for the year ended December 31, 2011as compared to proceeds from the issuance of debt of Gs.236,000 million for the year ended December 31, 2010 and higher dividend payments during the year ended December 31, 2011.

The net increase in cash and cash equivalents for the year ended December 31, 2011 was Gs.11,410 million compared to Gs.376,038 million for the year ended December 31, 2010. We had closing cash and cash equivalents of Gs.814,115 million as of December 31, 2011 compared to Gs.802,705 million as of December 31, 2010.

Years Ended December 31, 2010 and 2009

For the year ended December 31, 2010 cash provided by operating activities was Gs.1,118,472 million compared to Gs.1,064,626 million for the year ended December 31, 2009. The increase was due to higher operating profit for the year ended December 31, 2010, offset in part by an increase in accounts receivable and inventories.

Cash used in investing activities was Gs.137,960 million for the year ended December 31, 2010 compared to Gs.269,870 million for the year ended December 31, 2009. The decrease in cash used for investing activities for the year ended December 31, 2011 was mainly attributable to a lower amount for payments for capital expenditures.

Cash used in financing activities was Gs.597,508 million for the year ended December 31, 2010 compared to Gs.666,860 million for the year ended December 31, 2009. The lower cash used for financing activities for the year ended December 31, 2010 reflected receipt of the proceeds from the issuance of debt of Gs.236,000 million in the year ended December 31, 2010 compared to Gs.50,000 million in the year ended December 31, 2009 and lower debt repayments during the year ended December 31, 2010, offset by higher dividend payments.

The net increase in cash and cash equivalents for the year ended December 31, 2010 was Gs.376,038 million compared to Gs.111,807 million for the year ended December 31, 2009. We had closing cash and cash equivalents of Gs.802,705 million as of December 31, 2010 compared to Gs.426,667 million as of December 31, 2009.

Investments and Acquisitions

We expect to continue to invest in our existing mobile, internet and cable television businesses, where we believe we can generate attractive returns. In addition, we may pursue new license or acquisition opportunities where we determine there is potential for synergies such as the sharing of information and best practices about services, human resources, technologies, market strategies, and the centralized negotiation of financings and supply contracts for network and customer equipment. We may also attempt to expand our footprint through acquisitions or greenfield projects in areas similar to our existing core businesses, such as cable or content assets, such as the development of our cable television business Tigo Home through the acquisition of the assets of Cablevision. See “Business—Recent Developments.”

If we do consummate any acquisition, it could be material to our business and require us to incur additional debt. There can be no assurance that additional financing will be available when required or, if available, that it will be on terms satisfactory to us.

Financing

As of September 30, 2012, our total outstanding indebtedness and other financing was Gs.1,074,654 million. As of December 31, 2011, our total outstanding indebtedness and other financing was Gs.439,836 million, down from Gs.490,976 million as of December 31, 2010.

On September 5, 2012, we entered into the Bridge Loan for an aggregate principal amount equal to US$151 million, which bears interest at a rate equal to the one, two or three month London Interbank Offered Rate for U.S. dollars plus a margin equal to, for the first three months of the facility, 2% and thereafter, 3%, and which matures six months following the closing date thereunder, in order to fund our acquisition of substantially all of the assets and business of Cablevision. This loan is guaranteed by Millicom. The outstanding amount as of September 30, 2012 was Gs.670,359 million.

In July 2008, Telecel entered into an 8 year loan (the “EIB Loan”) for an aggregate principal amount equal to US$100 million with the European Investment Bank (“EIB”), which bears interest at a rate equal to the 90-day

London Interbank Offered Rate for U.S. dollars plus a margin ranging from 0.234% to 0.667%. The EIB Loan is guaranteed for commercial risks by Royal Bank of Scotland, which earns a guarantee fee equal to 1.25% per annum. The aggregate outstanding principal amount of the EIB Loan was Gs.401,580 million as of September 30, 2012 and Gs.424,837 million as of December 31, 2011.

In addition, Telecel had other bank and vendor financing in an aggregate outstanding principal amount equal to Gs.2,715 million as of September 30, 2012 and Gs.14,999 million as of December 31, 2011.

Our interest expense for the nine months ended September 30, 2012 was Gs.14,697 million and for the year ended December 31, 2011 was Gs.8,301 million.

Derivative Transactions

Historically, we have not entered into derivative transactions for hedging, speculative or other purposes and do not currently intend to do so in the future. However, we cannot assure you that this will continue to be the case and we may enter into hedging transactions in the future, including with respect to our obligations under the Notes.

Research and Development, Patents and Licenses

As we established an early presence in our market, we were able to secure our telecommunications licenses at a low cost. Historically, we have been successful in renewing our maturing licenses, generally on terms similar to the original licenses. However, there is a risk we may not be able to renew our licenses on such terms in the future. Our principal licenses expire in January of 2014 (with respect to frequencies of 3500Mhz), October of 2016 (with respect to frequencies of 800Mhz), August of 2016 (with respect to frequencies of 2500Mhz), November of 2017 (with respect to frequencies of 1900Mhz) and July of 2022 (with respect to Ultra High Frequency, or UHF, television broadcasting).

At this time we do not engage in research and development and we do not own any patents. We depend on Millicom for a significant portion of the technology and “know-how” we utilize in our business. See “Risk Factors” and “Certain Relationships and Related Party Transactions.”

Contractual Obligations

We have various contractual obligations to make future payments. The following table summarizes our obligations under these contracts, due by period as of September 30, 2012.

Within 2-5 Within 1 year years After 5 years Total (in thousands of guaraní) Debt and other financing ...... 740,303,000 312,041,000 22,310,000 1,074,654,000 Future interest commitments ...... 2,396,094 15,724,088 401,580 18,521,762 Operating leases ...... 450,662 1,758,028 - 2,208,690 Purchase obligations ...... 141,020,683 - - 141,020,683 Total ...... 884,170,439 329,523,116 22,711,580 1,236,405,135

Off-Balance Sheet Arrangements

Our sole off-balance sheet arrangement consists of our participation in the Millicom group cash deposit arrangement. See “Certain Relationships and Related Party Transactions—Intercompany Deposits/Loans with Millicom.”

BUSINESS

Overview

average monthly revenue per customer, or ARPU, of approximately US$11.9 and US$12.2, respectively. Our total revenues were Gs.2,462,991 million for the year ended December 31, 2011 and Gs.2,037,438 million for the first nine months of 2012. Our Adjusted EBITDA and our net profit were Gs.1,446,863 million and Gs.1,095,804 million, respectively, for the year ended December 31, 2011 and Gs.1,131,016 million and Gs.806,989 million, respectively, for the nine months ended September 30, 2012. For a description of how we calculate Adjusted EBITDA and a reconciliation to net profit, please see “Summary Historical Financial and Other Information.”

Competitive Strengths

We believe the following strengths will help us to maintain our position as the leading provider of mobile communications services in Paraguay:

Strong Brand Identity. We believe that our Tigo brand, launched in 2004, is one of the most recognized and well- respected brands in Paraguay and is generally associated with high quality, availability, affordability, customer service and innovation. Through our use of extensive and differentiated, localized marketing campaigns and tools, we believe we cultivate a fresh, modern image that has resonated with both the young urban and the corporate customer markets. We also believe our commitment to social responsibility in Paraguay has fostered a loyal clientele and differentiates Tigo from competing brands. We believe that market research and other key performance indicators demonstrate the strength of our brand in Paraguay, including market share we estimate to be approximately 57%, and as a result of our own market research a “top of mind” indicator (reflecting the brand named by subjects when asked to name any brand) of 68% in Paraguay and a “spontaneous recall” indicator (reflecting a subject’s familiarity with a brand) of 99% in Paraguay. We believe we further benefit from recognition due to the popularity of the Tigo brand throughout the Central and South American markets serviced by affiliates of our ultimate parent, Millicom, from which we license the Tigo brand.

“Presentation of Financial and Other Information—Market Share.” We believe our leading market position provides us with certain key benefits. For example, due to the size of our customer base relative to that of our competitors, our customers are able to make on-network calls to a greater number of individuals and thus avoid interconnection fees. This also minimizes the likelihood of our customers buying SIM cards from multiple operators and allows us to attract a greater number of customers with price plans that reward on-network calling. Additionally, we believe the high degree of competition we experience in our market, the significant investment required to build a nationwide network and the limited availability of new spectrum all present significant barriers for operators seeking to enter our market. As a result, we believe we will be able to maintain our market share position in the future.

Business Strategy

We believe the following components of our business strategy provide the foundation for us to maintain and grow our market leading position in Paraguay and enhance our profitability:

Grow Revenues through Innovative Value-Added Products and Services. Value-added services (non-voice), or VAS, accounted for 50% of our recurring revenues which are total revenues less the sale of telephone handsets and equipment and revenue from roaming from visitors to our network that are not our customers) for the nine-month period ended September 30, 2012. We plan to continue to develop and market innovative value-added products and services through our Information, Entertainment and Solutions categories as a means to grow our ARPU, diversify our sources of revenue, attract new customers and increase the number of products and services we sell per- customer. Our portfolio of value-added products and services has grown rapidly since we introduced SMS in 1999 and currently includes offerings such as SMS, MMS, mobile internet access, mobile television, content downloads, ring tones, customized back tones based on customers’ music preferences and music sharing, as well as three services that permit customers to continue using our voice or SMS services despite running out of account balance: “Tigo Lends to You” (“Tigo te Presta”), through which we lend either airtime or SMS credits to the customer, “Gift and collect”, where the customer sends an SMS text and pays for the recipient’s response in advance (“gift”), or where the sending customer asks the customer receiving the SMS to pay for the text (“collect”) and “Give me balance”, which is a “Peer to Peer” account balance transfer program. Given our leading market position and the high level of penetration in our market, we believe we are well poised to capitalize on opportunities to cross-sell and

up-sell these higher value services to our existing customer base. Our focus is therefore directed toward optimizing our customer intake and retention of higher ARPU customers rather than purely on net intake of customers. We value sustainable revenue growth over net customer additions and focus on data and VAS customers from whom, on average, we generate a higher ARPU than 2G voice only customers. We believe that in more developed markets this has a stronger correlation with future growth than customer numbers.

Capitalize on Relationships with Affiliates. Certain products and services provided by a number of our affiliates provides us synergies that we believe provide significant convenience and efficiency benefits to our customers and set us apart from our competitors. We expect to grow these relationships and further integrate the services they offer to capitalize on this tool to attract and retain customers. For example, our affiliate Tigo Money offers mobile financial services in Paraguay which are accessed by mobile telephone. Their products are available exclusively to our customers and include both international and national money transfers, “Peer to Peer” payments and payments for local services such as electricity and water. These products are marketed under the brand name “Tigo”, and we believe it provides an attractive incentive to use our products and services and helps to reduce churn in our customer base. We believe Tigo Money has by far the largest market share for mobile financial services in Paraguay, and

currently approximately 23% of our customers regularly uses one or more of their services. We believe these convenient and innovative services marketed under our brand name provide us with a sustainable competitive advantage.

Recent Developments

Acquisition of Cablevision

On October 1, 2012, we acquired substantially all of the assets and business of Cablevision, the leading digital cable operator in Paraguay and one of the principal broadband internet providers in Paraguay. We acquired through this transaction the net assets, excluding debt and cash, of the operating companies of the Cablevision Group, Cable Vision Comunicaciones S.A., Television Dirigida S.A., Consorcio Multipunto Multicanal S.A., Producciones Unicanal S.A. and 100% of the shares of Teledeportes Paraguay S.A. The net assets of Cablevision were previously controlled by the listed company Grupo Clarín S.A. (LSE: GCLA; BCBA: GCLA). Cablevision began offering television services in Asunción in 1989 and is the leading provider of cable pay-television services in Paraguay with an 89% market share as of September 30, 2012. As of September 30, 2012, Cablevision’s coverage area included 145,000 homes passed (which is the number of premises to which an operator has the capability to connect in a service area, whether connected or not) and Cablevision had 48,000 cable television customers, with approximately 23% of these customers subscribing to fixed broadband internet services. Cablevision additionally provides satellite television services to 68,000 households. Teledeportes has exclusive rights to broadcast Paraguay’s soccer championship games through 2020 and also exclusive sponsorship rights for the Paraguayan National Soccer Team for the years 2015 through 2020. In addition to the ability to offer new services and bundle them with our existing services, we expect that this acquisition will provide synergies allowing us to optimize capital expenditures and operating costs. Revenues in respect of the Cablevision assets that we acquired for the nine months ended September 30, 2012 were Gs.170,673 million. If this acquisition had occurred on January 1, 2012, our unaudited consolidated pro forma revenues for the period ended September 30, 2012 would have been Gs.2,208,111 million and our unaudited consolidated pro forma net profit for the same period would have been Gs.856,199 million.

Capital Distribution

Corporate History

On July 21, 1991 we obtained our original license to operate a cellular mobile network in Paraguay, and we launched our first commercial mobile services in 1992. At that time we were 80% owned by Millicom. During our history we have pioneered key innovations in Paraguay such pre-paid services, per second billing and mini recharges, and in 2004 we launched our Tigo brand. In July 2006, Millicom acquired, directly or indirectly, all the remaining shares held by our prior minority shareholder.

Corporate Structure

The chart below sets forth a summary of our corporate structure. For a description of Millicom International Cellular S.A., see “Certain Relationships and Related Party Transactions—Millicom International Cellular S.A.”

Millicom International Cellular S.A.

100% 100%

Millicom International III N.V. Shai Holdings S.A.

0.02% 99.98%

Telefonica Celular del Paraguay S.A.

99% 0.2% 99.8%

Lothar Systems S.A.

Teledeportes Paraguay S.A.

The Tigo Brand

The Tigo brand was developed by Millicom in 2004 in connection with the deployment of global system for mobile communications, or GSM, technology across its operations in Central and South America. The Tigo brand has been integrated into Millicom’s operations throughout the world, which we believe has allowed us to enjoy increased brand recognition and to realize cost savings from the standardization of marketing materials across the continent.

We believe that Tigo is one of the most recognized and well-respected brands in Paraguay and that Tigo is generally associated with high quality, availability, affordability, customer service and innovation. We estimate our current market share to be approximately 57% in Paraguay, and as a result of our own market research we believe our performance indicators include a “top of mind” indicator (reflecting the brand named by subjects when asked to name any brand) of 68% in Paraguay and a “spontaneous recall” indicator (reflecting a subject’s familiarity with a brand) of 99% in Paraguay.

We seek to associate the Tigo brand with popular activities that attract our target customers. As a result, sponsorships of soccer, music and family-related events have become key components of our promotional efforts. We are currently the official sponsor of the Paraguayan national soccer team and the professional soccer league in Paraguay.

Millicom has registered 69 trademarks that we are licensed to use in Paraguay, which we license from Millicom pursuant to the Technical Services Agreement. See “Certain Relationships and Related Party Transactions—Millicom International Cellular S.A.” We own and have registered our remaining 79 trademarks.

The Mobile Telecommunications and Cable Television Industries in Paraguay

Government Regulation

Pursuant to Section 30 of the Constitution of Paraguay enacted in 1992, the national electromagnetic spectrum is public domain (dominio público) of the State of Paraguay and its use is regulated by law. The Constitution guarantees equal and free access to the electromagnetic spectrum. Law 642 of 1995 (the “Telecommunications Law”), which has not been amended since its enactment, governs Paraguay’s telecommunications industry. This law provides for the creation of CONATEL, and grants CONATEL supervision powers and charges the agency with monitoring compliance by telecommunications companies of current telecommunications regulations. See “—CONATEL.”

Pursuant to the Telecommunications Law, mobile telecommunications services fall under the category of “value added services.” Entities that wish to offer mobile telecommunications services must first file requests for licenses with, and obtain a license issued by, CONATEL. Following its administrative review process, CONATEL either grants or rejects licenses to entities that wish to act as operators.

CONATEL grants mobile licenses for periods of 5 years, at which time the operator may request a renewal of the license to operate. There are no limits as to the number of times CONATEL may renew a license. However, CONATEL has the power to reject the renewal of a license in the event the operator does not satisfy the minimum conditions established in the license, such as having outstanding debt with CONATEL in the form of unpaid license fees, spectrum tariffs (which are set at 1% of total gross income, excluding telephone handset and equipment sales) and the annual spectrum fee (which is set at approximately US$10 million, depending on the actual use of our authorized spectrum), poor level of service, or lack of compliance with our network investment plan and applicable regulations as well as others. Although the regulation is not clear on this subject, CONATEL must show the cause of rejection of a request for renewal in an administrative process. An operator may not assign its license to operate before obtaining administrative authorization from CONATEL. The amount of the initial or renewal fee for a license to provide telecommunications services is currently set by CONATEL at 3% of the amount of investment in the relevant network during the first five years if it is more than US$5,000,000, 4% if investment is equal to or less than US$5,000,000 but greater than US$1,000,000, and 5% if equal to or less than US$1,000,000.

The Telecommunications Law establishes that operators must provide value added services under a free market regime and in compliance with telecommunications regulation.

Decree No. 14.135 of 1996 further regulates the telecommunications industry in Paraguay, requiring among other things that foreign telecommunications companies establish an affiliate or subsidiary in Paraguay in order to obtain authorization to conduct business in the country.

CONATEL

CONATEL, the Paraguayan telecommunications regulator, was created in 1995 by the Telecommunications Law and comprises a board of six members presided over by a “primus inter partes”, each of which is appointed directly by the President of Paraguay for a term of five years. CONATEL retains extensive regulatory oversight and autonomy in a wide range of telecommunications fields including spectrum, telecommunications service regulation, tariffs, interconnection, consumer protection, anti-trust behavior, number portability, fraud prevention, neutrality and others. CONATEL is further responsible for the design, implementation and control of public policies in the telecommunications sector, including the power to impose fines upon completion of public administrative proceedings (sumario administrativo), the decisions of which may be appealed to the judiciary branch.

Mobile Telephony

We were founded in 1990 as the first telecommunications operator in Paraguay, and commenced providing telecommunications services in 1992 under our license for 800MHz bandwidth service, granted pursuant to Decree No. 10,088, dated July 1, 1991. Telecel was the sole mobile operator in Paraguay until 1998, when our competitor

Personal commenced mobile telephony operations in Paraguay. Our principal competitors in mobile telephony are currently the brands Personal, operated by Núcleo S.A., a subsidiary of Telecom Italia Mobile, Claro, a subsidiary of América Móvil, S.A.B. de C.V., and government-owned service provider Copaco. Each of our competitors provide mobile service on 2G and 3G network technology. We believe we compete for customers based principally on our network coverage and quality, customer service, price, service offerings and reputation. We estimate that the mobile penetration rate in Paraguay is nearly 100% and that our current market share in terms of customers of the mobile telephony market in Paraguay is approximately 57%, equal to approximately 3.8 million subscribers, followed by Personal with an estimated market share of 29% and Claro and Vox with 7% each. See “Presentation of Financial and Other Information—Market Share.”

Cable Television

We estimate that only 10% of households in Paraguay have pay television services, and Cablevision is the leading provider of pay television services in Paraguay with a market share of 86% in Asunción. Cablevision commenced operations in March 1989 and was the pioneer TV cable operator in Paraguay and has been authorized to provide cable television broadcasting since January 1991. The primary areas of coverage of Cablevision are in Asunción and the greater Asunción metropolitan area. The Cablevision network in Asunción was built using HFC technology and has 145,000 homes passed with a total customer base of 48,000, with 78% of this network consisting of two-way cable. The network in the greater Asunción metropolitan area was built using UHF technology and has 340,000 homes passed with a total customer base of 68,000. Since 2007, Cablevision has had the exclusive rights to broadcast Paraguay’s soccer championship games and retains these rights through 2020. The primary competitor for pay television service is Claro TV, which provides a satellite television service in Paraguay, and Copaco has additionally recently launched a television service.

Products and Services

To address the diverse needs of the consumers in our market, we offer a comprehensive range of high- quality, nationwide mobile communications services through a variety of pricing plans, including prepaid and postpaid service plans. Our prepaid service plans enable individuals to obtain mobile voice, SMS and data services without a long-term contract or credit verification, by paying in advance. Our postpaid service plans are generally offered on a contract basis for one- to two-year periods, and service is billed and provided on a monthly basis according to the applicable rate plan chosen. We expect that the assets and business we recently acquired from Cablevision, and the services provided thereunder, which are managed by our Information category and our Home business unit, will allow us to expand our product portfolio by allowing us to offer additional services such as cable television and internet and to bundle existing services with these additional services including by offering Tigo- branded residential television and internet services bundles together with mobile internet service (“triple play”) to new and existing customers.

As of September 30, 2012, approximately 80% of our customers utilize our services on a prepaid basis. Although our postpaid customers represent a relatively small component of our customer base, for the nine months ended September 30, 2012 they generated approximately 43% of our revenues, and we expect to focus on postpaid customer service in the future, including the migration of current prepaid customers to postpaid plans, given their higher propensity to use data and other value-added services which contribute to higher ARPU. Our corporate services are primarily offered to business customers and are bundled with postpaid plans to include a variety of mobile telephony, high-speed data and network-related services. Our corporate services comprise approximately 13% of our revenues and are not widely marketed today.

Our product and service development and management is divided into four business categories with the purpose of developing products and services targeted to the specific needs of our current and potential customers and three business units with the purpose of delivering those products to customers. Our categories are Communications, Information, Solutions and Entertainment, and our business units are Mobile, Home and Corporate.

Business Categories

Communications Category

Our Communications category is responsible for the development of products and services relating to voice, SMS and roaming services. The Communications category was responsible for 69% of our recurring revenues for the nine months ended September 30, 2012, compared to 75% of our recurring revenues for the nine months ended September 30, 2011. We offer a variety of prepaid and postpaid price plans that include basic voice service and certain enhanced features such as voicemail, call waiting and multi-party conference calling.

For prepaid customers, we offer plans that have lower rates at certain times of the day and volume discounts for bundles of minutes and SMS through the sale of Paquetigos. Scratch cards and ePin are the two main methods to purchase airtime and SMS credits in prepaid accounts. Scratch cards are sold in denominations ranging from Gs.15,000 (US$3.36) to Gs.35,000 (US$7.84) and ePin balance is sold in denominations raging from Gs.2,000 (US$0.45) to Gs.100,000 (US$22.41).

In 2009 we launched “Pacquetigos” which are promotional bundles of minutes or SMS or a combination of both. We segment our customer base taking into account behavior and usage profile and offer personalized Pacquetigos based on this information. Our customers can access these offers through two enabling methods: an interactive USSD menu and online offer through our “Tag & Trigger” tool. Tag & Trigger works by generating information about our customers based on certain triggers, which then enables us to create personalized offers that are sent proactively to our customers.

For postpaid customers, we offer a variety of plans at prices ranging from Gs.35,000 (US$7.84) to Gs.250,000 (US$56.02) based on quantity of minutes, which include a feature to designate favorite numbers to call without deduction to the customer’s balance. We also offer plans bundling voice minutes with SMS and data plans as well as subsidies for the purchase of certain mobile handsets.

We receive in-bound roaming revenues from customers of GSM networks from other countries that travel to Paraguay and use our network. We have arrangements with 220 operators in 133 countries that allow our customers to use voice and data services when travelling outside of our coverage area.

Information Category

The Information category is responsible for the development of products and services relating to the provision of data services. The Information category was responsible for 19% of our recurring revenues for the nine months ended September 30, 2012, compared to 14% of recurring revenues for the nine months ended September 30, 2011. We offer an array of data services and applications available on a prepaid and postpaid basis, such as:

• Mobile Broadband. Our mobile broadband service, available in all areas covered by our 2G and 3G networks, enables our customers to access at broadband speeds, through laptop computers and smartphones, applications such as e-mail, enterprise applications, image downloads and full internet browsing capabilities. We offer datacards that allow both our prepaid and postpaid customers to connect their computers to the internet over our 3G and 4G networks at data connection speeds of up to 8 Mbps. Datacard plans are available to our postpaid customers, on a monthly basis, and to our prepaid customers, on a pay-as-you-go basis, with pricing based on usage. As of September 30, 2012, we had approximately 142,000 postpaid datacard customers and approximately 26,000 prepaid datacard customers. We additionally offer internet plans to our customers with smartphones which include as of September 30, 2012, approximately 253,000 smartphone data users, and we subsidize the purchase of some smartphones. Revenues relating to mobile broadband (including smartphones, datacards and other data handset users) grew from Gs.157,554 million for the nine months ended September 30, 2011 to Gs.270,122 million for the nine months ended September 30, 2012, and we anticipate that growth in mobile broadband use will continue to be driven primarily by smartphone use, which is less data intensive and provides us with a better return on our investment than datacard access; and

• Fixed-line internet. We provide fixed-line internet service over our Wimax network, our fiber optic network and our cable internet network. Our Wimax network provides internet to homes using both Wimax D and Wimax E technologies. Our fiber optic network, which uses fiber optic cables as a medium to provide data services and which has become the medium of choice for telecommunications and computer networking given its superior performance and security strength, has been an important driver of growth for the Corporate category due to strong demand from companies in need of secure connectivity and higher bandwidth for their daily operations. Our fiber optic network provides us with the ability to cross-sell technological solutions that we offer such as videoconferencing, Tigo Cloud (which is a monthly subscription service allowing customers to synchronize information such as emails, contacts and calendars between mobile phones, tablets and internet web browsers), antivirus services, antispam services, and Tigo Network Monitor (which is a monitoring tool that notifies the IT department of the customer upon detecting any deficiency or performance issue with respect to the customer’s networks, servers and applications). Revenues relating to fixed-line internet grew from Gs.73,680 for the nine months ended September 30, 2011 to Gs.85,962 for the nine months ended September 30, 2012. Since our acquisition of the assets of Cablevision, we now offer internet service over our cable internet network primarily to residential customers in the city of Asunción. This technology provides residential customers with a more stable connection than Wimax at high speeds (ranging from 640 kilobytes per second, or kbps, to 10 megabytes per second, or mbps), which allows customers to use several related value-added products such as video- on-demand and movie downloads.

Entertainment Category

The Entertainment category, which accounted for 6% of our recurring revenues for the nine months ended September 30, 2012 and 2011, is responsible for the development and management of entertainment-based applications and services such as news subscription services, premium short message services, through which our customers can receive digital content provided by third parties such as weather, movie listings, horoscopes and airline information, ringtones, games, music, videos, and promotions. These services are currently accessed by our customers primarily through the use of SMS; however, we expect the migration to use of smartphones to result in increased use of data for these services, including through social network integration. Since our acquisition of Cablevision we now provide cable television services to the city of Asunción as well as satellite television services elsewhere in Paraguay. Our television services include our own channel Unicanal, on which we air news and sports programming as well as up to 130 other channels. Through our wholly-owned subsidiary Teledeportes, acquired as part of the Cablevision assets, we provide programming production services and air sports programming and have the exclusive license to air soccer matches of the Paraguayan league up to and including the 2020 season. For further information on our cable television business acquired from Cablevision, see “—Recent Developments.”

Solutions Category

The Solutions category, responsible for 6% of our revenues for the nine months ended September 30, 2012 and 2011, is responsible for managing all our products that are intended to enhance our customers’ efficiency and/or promote their cost savings. Our solutions product portfolio includes services such as our “Zero Balance” products, which allow customers to continue to communicate after running out of airtime balance, consumer solutions such as voicemail, contact back-up, corporate solutions products such as sales force inventory and collections management applications, SMS bundles and services offering tangible benefits to our customers in connection with health, insurance, education and other areas. Approximately 71% of our customer base uses a Solutions category product during the course of a month, and we intend to continue to develop products and services that allow a customer’s relationship with Tigo to expand beyond the provision of mobile telephony and provide for efficiency and convenience benefits to enhance customers’ lifestyles.

Corporate Services

We offer a variety of value-added services, such as business management applications, hosting (through which we monitor a customer’s network), housing (through which we house a customer’s network hardware in our facilities), network monitoring, security applications (antivirus and antispam) video conference, broadband internet and virtual private network (VPN) related services, generally to business customers bundled with postpaid mobile plans. We conduct this business through our Corporate business unit branded as “Tigo Business”. These services

generated 11.8% of our recurring revenue for the nine months ended September 30, 2012 and currently represent 35.3% of our mobile postpaid lines. We are the market leader in the corporate segment, with 65% of the market as of September 30, 2012.

Handsets

We carry a comprehensive range of handsets, with a focus on entry-level and mid-range price points to better meet the current needs of our customer base. We purchase handsets and accessory products from a number of manufacturers, with the substantial majority of our purchases made from Samsung, Huawei, RIM (BlackBerry), Nokia and Alcatel. We seek to minimize our equipment costs by leveraging the purchasing power of Millicom, which negotiates pricing contracts on behalf of Millicom’s subsidiaries with handset providers, from whom we purchase a majority of our equipment directly. Only a small portion of our equipment is purchased through third- party distributors. See “—Technology—Handsets.”

The mobile internet business is moving from datacard-based services to smartphones which use less network resources while providing greater flexibility to our customers.

Sales and Distribution

We believe we have developed the most extensive sales and distribution network in our market. We employ a mix of indirect and direct distribution channels in order to increase customer growth and reduce customer acquisition costs. Our indirect channel targets prepaid and postpaid customers through our exclusive dealers. Our direct channel targets prepaid and postpaid consumer and business customers, and consists of freelance sales representatives, or freelancers, and an in-house corporate sales team. We have approximately 34,000 points of sale and 4,000 activation points around the country, which has helped to create strong distribution channels in order to make our products available in both urban and rural parts of Paraguay.

Exclusive Dealers

Our core group of three exclusive dealers operates on a regional basis within Paraguay and have a longstanding presence in their local service areas. We make our products and services available, at discounted rates, to our exclusive dealers who are responsible for distribution to over 34,000 retail outlets throughout Paraguay. The retail outlets are generally small- and medium-size businesses such as convenience stores, gas stations and kiosks. Our dealers also sell directly to customers through Tigo-branded service centers.

All of our exclusive dealers have contractual arrangements that require them to meet our strict standards of operations and to demonstrate financial stability. We operate training and evaluation programs for dealers to ensure our required level of service quality, and we do not renew the contracts of dealers who do not meet our established standards of service. We leverage a proprietary, in-house system to monitor, in real-time, the performance of our dealers. We intend to significantly increase the sale of postpaid services through our exclusive dealers, with an emphasis on value-added services and handsets.

Freelancers

An increasingly important component of our distribution strategy is freelancers, who sell our full range of products and services solely on a commission basis and who have direct relationships with our individual customers. Our freelancers are paid a fixed fee for each new customer they bring in and a percentage of the revenues received from such customers for the four months their activation.

We have 1,615 freelancers who focus on prepaid and postpaid service plans. We believe we carefully select our freelancers and provide them with adequate training and continued support.

Corporate Sales

We employ an in-house team of approximately 165 sales representatives (49 of which are our own employees and the remainder of which are freelancers) specifically trained to serve our corporate clients. We divide our corporate clients into four groups based on revenues. We believe this allows us to staff our sales representatives more efficiently and provide the best service possible to our highest revenue generating customers.

Tigo Stores

There are 52 Tigo-branded stores in Paraguay, including 15 branches owned and managed by us and an additional 37 that are owned and managed by our dealers, which offer local, personalized service to customers throughout Paraguay. Our dedicated service centers sell our full range of products and services, provide technical assistance and handle billing inquiries and payments, and most of our dedicated service centers include an “experience zone” where our customers can try our latest phone handsets, tablets and similar products. Our mini service centers are aimed at providing customer care in centers with a high level of traffic of people such as universities and supermarkets located in areas where we aim to provide personalized attention to customers.

International Dealers

Since 2011, through our relationship with international distributors iEzetop, CSQ and Telerecargas, our customers can receive airtime credits on their mobile phones sent by family and friends from nearly 25,000 points of sale in the United States, Spain and Argentina.

Customer Service

We believe that quality customer service increases customer satisfaction and retention, and is a key differentiator in the mobile communications industry. Providing superior customer service to satisfy and retain existing customers is critical to our financial performance and is a core element of our Tigo brand.

We offer our customers various options for making requests and inquiries in an attempt to maximize convenience. We provide customer service 24 hours a day, seven days a week. Customers are able to contact us by telephone and e-mail as well as in person at our service centers, mini service centers and retail outlets. For customers who contact us by telephone, we have live operator agents and an automated interactive voice response system. Customers can contact us by using three-digit speed dialing on their mobile phones or through a conventional toll- free number. We focus on ensuring quick and accurate problem resolution with minimal wait times.

Operating Licenses

We received our first cellular operating license (the “Operating License”) in 1991. Pursuant to the Telecommunications Law, entities that wish to offer mobile telecommunications services must first file requests for licenses with, and obtain a license issued by, CONATEL. Following its administrative review process, CONATEL either grants or rejects licenses to entities that wish to act as operators.

Operating License Terms

The primary terms and obligations of our operating licenses are set forth below:

Mobile Internet TV Distribution

Bandwidth: 800 Mhz Bandwidth: 3500 Mhz Bandwidth: 600 Mhz Spectrum: 25 Mhz Spectrum: 50 Mhz Spectrum: 108 Mhz Expire: October 1, 2016 Expire: January 1, 2014 Expire: July 23, 2022 Services: 2G and 3G Services: Internet and data Services: UHF/TV broadcasting Renewal Fee: US$1,210,134.57 transmission Renewal Fee: Gs.675,367,800.00 Coverage: National and Encarnación, Renewal Fee: US$53,800.00 Coverage: Greater Asunción Ciudad del Este and Asunción Coverage: National metropolitan area Renewal Process: At operator request Renewal Process: At operator request Renewal Process: At operator request Technology: 2G and 3G Technology: WiMAX and FTTH Technology: Wireless

Bandwidth: 1900 Mhz Bandwidth: 2500 Mhz Bandwidth: N/A Spectrum: 30 Mhz Spectrum: 20 Mhz in band C; 30 Mhz Spectrum: N/A Expire: November 13, 2017 in band D Expire: January 17, 2021 Services: 2G and 3G Expire: August 28, 2016 Services: Cable TV broadcasting Renewal Fee: US$1,106,494.00 Services: Internet and data Renewal Fee: Gs.60,000,000.00 Coverage: National transmission Coverage: Greater Asunción Renewal Process: At operator request Renewal Fee: Gs.860,515,925.00 metropolitan area Technology: 2G and 3G Coverage: National Renewal Process: At operator request Renewal Process: At operator request Technology: HFC Technology: Wireless Bandwidth: N/A Bandwidth: N/A Spectrum: N/A Spectrum: N/A Expire: March 22, 2017 Expire: October 2, 2014 Services: Internet and data Services: Satellite transmission in transmission band C Renewal Fee: US$287,782.00 Renewal Fee: Unspecified Coverage: Greater Asunción Coverage: Asunción metropolitan area Renewal Process: At operator request Renewal Process: At operator request Technology: N/A Technology: HFC

The amount of the initial or renewal fee for a license to provide telecommunications services is currently set by CONATEL at 3% of the amount of investment in the relevant network during the first five years if it is more than US$5,000,000, 4% if investment is equal to or less than US$5,000,000 but greater than US$1,000,000, and 5% if equal to or less than US$1,000,000. CONATEL currently also imposes spectrum tariffs of 1% of total gross income, excluding telephone handset and equipment sales and an annual spectrum fee of approximately US$10 million, depending on the actual use of our authorized spectrum.

Technology

Networks

We operate both fixed and mobile telecommunications networks. Our mobile networks are based on the 3PP family of standards. We have both GSM and UMTS/HSPA networks, which are the most commonly adopted for mobile telecommunications systems worldwide. GSM/GPRS/EDGE is often referred as 2G (second generation) technologies and they are able to support value-added services and secure transmissions, and GSM systems allow enhanced roaming capability. 3G networks support bandwidth-intensive data applications such as full motion video, video conferencing and full internet access to mobile devices. 3G network speeds are increasing dramatically as the network technology evolves. Through the use of HSPA (High Speed Packet Access) and HSPA+ technology, data speeds on 3G networks can reach speeds substantially faster than in 2G networks, depending on the capabilities of the devices and the network. 3G technologies have enabled us to offer our users a wide range of advanced services while achieving greater network capacity through improved spectral efficiency. 3G further enables us to offer new services to our users such as video calls, mobile broadband data, and an improved internet experience with richer mobile content. We have a nationwide license to operate our 2G and 3G networks in 800MHz and 1900Mhz

spectrum bands, and we hold a total bandwidth of 25MHz in the 800MHz spectrum band and 30MHz in the 1900Mhz spectrum band. Our mobile network architecture includes ten 2G mobile switching centers (MSCs) and two 3G MSCs geographically distributed throughout the country to secure traffic balance and service availability to serve over 1500 2G and 3G cellular base stations.

We additionally provide fixed wireless internet service to the largest cities in the country using Wimax technology. Our fixed wireless network is composed of more than 200 cellular base stations, including the new generation Wimax-e cell sites. We also provide fixed internet service using our new HFC (Hybrid Fiber Coax) network, which is also used for purposes of providing cable television service in Asunción. Our Wimax and HFC networks are mainly intended to serve home users while our FTTx (Fiber to the Home/Building) network is used to serve our corporate customers. The FTTx network is deployed in the primary cities in Paraguay and is currently being expanded with GPON (Gigabit Passive Optical Network) technology.

We believe that broadband data represents a large growth opportunity in our markets. We have initiated a program to modernize our networks and drive new revenue streams from value added services, implementing DPI/PCRF (deep packet inspection/policy and charging rules function), real-time billing systems, cache engines, peering, Single RAN and Single Core technologies. As the demand for higher mobile backhaul capacity and quality increases, we are gradually moving from TDM (time-division multiplexing) to IP-based backhaul as necessary. We own a robust urban/rural backbone transmission infrastructure with over 4,200 Km of fiber optic network cable deployed across the country.

Handsets

We currently offer our customers a portfolio of approximately 20 handset models from various manufacturers, including RIM (BlackBerry), Samsung, Nokia, Alcatel, Huawei, Sony and Eyo. We plan to maintain a relatively small selection of handsets in our inventory portfolio and focus on the models we believe will be the most successful with our customers. Neither we nor Millicom have exclusivity contracts with any handset manufacturer, which we believe gives us more flexibility to build and manage our handset portfolio. We offer entry- level, mid-range handsets as well as smart phone mobile devices, such as the BlackBerry 9900, Samsung Galaxy S3, Nexus, Note2 and Iphone 4 and expect to offer the Iphone 5 in the near future, which appeal to our postpaid and corporate customers. Approximately 50% of our handset portfolio quantity is comprised of what we deem entry- level, low and mid-range models.

Millicom, since the beginning of 2012, engages in negotiations with our providers outside of Paraguay on a regional basis (Latin America), from whom we purchase approximately 80% of our handsets, tablets and modems. We believe we benefit significantly from this arrangement. We have strict quality-control procedures to qualify new devices for use on our 2G and 3G networks. Our handset quality assurance team works on each device prior to its introduction to the market to ensure that it will meet our requirements in terms of radio and transmission operation, reliability, seamless user interface and its ability to support all of our services. Handsets that do not meet our defined requirements and cannot be reprogrammed or redesigned by the manufacturer to our satisfaction are not approved for use on our networks.

Information Technology

Our information technology (IT) strategy is to leverage best-of-breed solutions, from established vendors, that provide a high degree of functionality, flexibility and reliability to support our business strategy. We consider high availability of mission-critical systems and data integrity as paramount to our operations. As a result, we employ clustered and fully-redundant configurations, and have a comprehensive business continuity plan to ensure recovery from unforeseen disruptions. Our system backup and data retention policies observe a structured regime consisting of daily, weekly and monthly backups with redundant offsite storage. Our backup operations are standardized on Symantec’s Netbackup solution.

Our IT infrastructure is comprised of a network for corporate data and voice, storage solutions, software, databases, a virtualization environment with more than 200 virtual machines, 1,700 computers and 250 physical servers, which utilize solutions from leading companies such as Cisco, Avaya, IBM, Hitachi, Citrix, HP, Dell, Brocade, Microsoft, VMware and Oracle.

Our business support systems include: Basset’s Rev-Up, Callgate and Watchdog solutions for intercarrier billing, mediation and fraud management, respectively; Lothar’s BCCS and Oracle’s Siebel solution for postpaid billing, inventory management, and customer life-cycle management; Evolving Systems’ Tertio solution for service provisioning; and MACH solutions to enable and support customer roaming.

The primary responsibility of our IT operations division is to ensure that all IT infrastructure and business support systems are working as expected on a continuous basis, as well as to provide company-wide incident first- response support. Our IT-related acquisitions are centralized by our supply chain group, which allows us to reduce costs through volume discounts and other agreements.

Properties

The properties we use in our activities primarily consist of technical sites, commercial stores, administrative facilities and warehouses for equipment and product storage, the majority of which we currently occupy through leases.

We have technical sites for our mobile telephony and cable networks. For our mobile telephony network we own 322 sites and lease a further 891 sites which typically include roadways, fences, cellular towers, grounding systems, electrical systems and power generators. In addition we are currently constructing a Datacenter for our corporate customers and other sites for our core network equipment.

Our commercial facilities for sales and support are divided into branches and mini branches the majority of which are located on leased properties. We have ten administrative facilities, two of which are company owned including our Network Operation Centre (NOC) and eight of which we occupy under lease agreements. We also have four warehouses one of which we own.

Employees

As of September 30, 2012, we had 470 employees. We believe our relationship with our employees to be good and the compensation and benefits we offer to be highly competitive.

Legal and Administrative Proceedings

From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not at this time a party, as plaintiff or defendant, to any legal proceedings which, individually or in the aggregate, would be expected to have a material adverse effect on our business, financial conditions or results of operations.

MANAGEMENT

Board of Directors

Name Age Position Ricardo Maiztegui 50 Chairman Mario Zanotti Cavazzoni 50 Vice Chairman Salvador Escalón 37 Member Thomas Gutjahr 42 Member Ángel Auad 74 Alternate Member

Corporate Policies

Millicom has established certain corporate governance-related policies for its subsidiaries, applicable to companies listed in the United States, which are communicated to our board of directors. These policies address:

• input by the board on our strategic and operating plans; • oversight by the board of annual performance evaluations for our management, including our Chief Executive Officer; • our information policy regarding who is authorized to speak on the Company’s behalf; • annual assessments by Millicom’s board of our board’s performance; and • monitoring by Millicom’s board of director conflicts of interest.

Committees

There are currently no standing committees within our board. Pursuant to our by-laws, our board may create committees delegated to undertake activities related to the development of our business.

Internal Audit

Our internal audits are conducted by Millicom´s Internal Audit Team, which reports any findings directly to Millicom´s Audit Committee. Millicom’s Audit Committee convenes at least four times a year and special meetings may be convened as required. Currently, Millicom’s Audit Committee is comprised of four members, all of whom are independent non-executive directors of Millicom.

Nomination and Compensation

Millicom has established policies and procedures related to the nomination and compensation of members of our board. The members of the board of directors are selected by Millicom senior management from a pool of different directors and executive officers involved in other Millicom operations. Our only director who is not a Millicom employee is Mr. Ángel Auld.

Executive Officers

Name Age Position Thomas Gutjahr 42 Chief Executive Officer (CEO) John Hayward 47 Chief Financial Officer (CFO) Luis Forcadell 43 Mobile Business Unit Manager Maximiliano Bellassai 35 Corporate Business Unit Manager

Name Age Position Rodney Acevedo 40 Marketing Services Manager Ruben Gomez 48 Chief Operations Officer (COO) Gabriela Sacco 46 Customer Operations Manager Monica De Fillipis 46 Tigo People Manager Carlos Diaz 41 Legal and Corporate Affairs Manager Michael Lichtenberg 58 Supply Chain Manager Jose Armadans 50 Risk Manager Paul Gaston 34 Communication Category Manager Victor Franco 35 Information Category Manager Andrew Kent 31 Solutions Category Manager Hector Garcia 31 Entertainment Category Manager

Biographies of Members of the Board and Executive Officers

Board of Directors

Ricardo José Maiztegui, age 50, Chairman. Mr. Maiztegui joined Telecel in 1998, and previously served as General Manager of Telecel. Mr. Maiztegui has previously held positions at Telintar Argentina, CTI Argentina and Tecsel Argentina as marketing manager. He holds both an undergraduate degree and a masters degree in physics from the University of Buenos Aires in Argentina.

Mario Zanotti Cavazonni, age 50, Vice Chairman. Mr. Zanotti joined Telecel in 1998, and previously served as General Manager of Telecel. He holds an undergraduate degree in engineering from the National University of Asunción and an MBA from the Catholic University of Asunción.

Salvador Escalón, age 37, Member. Mr. Escalón joined the Telecel board of directors in 2011. Since 2010, he has also served as the Associate General Counsel, Latin America, for Millicom and is based in Miami, Florida. Mr. Escalón has previously held positions at Chevron Corporation and the law firms Akerman Senterfitt; Skadden, Arps, Slate, Meagher & Flom LLP; and Morgan, Lewis & Bockius LLP. He holds an undergraduate degree in Finance and International Business from Florida International University and a law degree from Columbia University School of Law.

Thomas Gutjahr, age 42, Member. Mr. Gutjahr joined Telecel in 2012. Mr. Gutjahr first joined Millicom in 2008, as Chief Executive Officer of Millicom’s operations in Chad and later as Chief Executive Officer of Millicom’s operations in Rwanda. Prior to joining Millicom, Mr. Gutjahr was Head of Postpaid and Professional Marketing and Head of Products and Services Marketing at Orascom Télécom Algérie, between 2005 and 2008. From 2001 to 2003 he was Marketing Director at Si.mobil - Vodafone Slovenia. From 1998 to 2001 he was Customer Service Manager at Mobilkom Austria. Mr Gutjahr, has a business degree with a specialization in Marketing Research and Marketing Communications from Vienna University of Economics.

Ángel Auad, age 74, Alternate Member. Mr. Auad joined Telecel in 1992, and previously served as Director and President of Telecel. Prior to joining Telecel, Mr. Auad held positions as Head of Engineering at Mills, Petticord & Mills, Corposana Paraguay, Puigbonet & Duarte Miltos S.C. Paraguay and Antelco Paraguay. He holds an undergraduate degree in civil engineering from the National University of Asunción and a masters degree in civil engineering from the Georgia Institute of Technology.

Executive Officers

Thomas Gutjahr, age 42, Chief Executive Officer. Mr. Gutjahr joined Telecel in 2012. Mr. Gutjahr first joined Millicom in 2008, as Chief Executive Officer of Millicom’s operations in Chad and later as Chief Executive Officer of Millicom’s operations in Rwanda. Prior to joining Millicom, Mr. Gutjahr was Head of Postpaid and Professional Marketing and Head of Products and Services Marketing at Orascom Télécom Algérie, between 2005 and 2008. From 2001 to 2003 he was Marketing Director at Si.mobil - Vodafone Slovenia. From 1998 to 2001 he

was Customer Service Manager at Mobilkom Austria. Mr Gutjahr, has a business degree with a specialization in Marketing Research and Marketing Communications from Vienna University of Economics.

John Hayward, age 47, Chief Financial Officer. Mr. Hayward joined Telecel in August 2011 as Chief Financial Officer. Mr. Hayward first joined Millicom in 2003 as the Group Financial Controller, a position he held until joining Telecel in 2011. Prior to joining Millicom, Mr. Hayward was the Chief Accountant at SES Astra S.A., a world leading satellite operator. Mr Hayward also held positions at Firstmark Communications Europe S.A. and Central Holdings Limited, an investment holding company. Mr. Hayward is a fellow of the Chartered Association of Certified Accountants in the United Kingdom and an alumnus of the London Business School.

Luis Forcadell, age 43, Mobile Business Unit Manager. Mr. Forcadell has held the position of Mobile Business Unit Manager of Telecel since 2011. In 2001 Mr. Forcadell joined Telecel as a treasurer in the finance department. In 2005, Mr. Forcadell held a position as a Customer Operation Manager, and in 2006 as Chief Financial Officer. In 2009, Mr. Forcadell transferred to the commercial area as the Go-to-Market Manager. Prior to joining Telecel, Mr. Forcadell was a treasurer at Paraguay Refrescos S.A., a subsidiary of Coca Cola. Mr. Forcadell has a degree in Economics from the National University of Asunción.

Maximiliano Bellassai, age 35, Corporate Business Unit Manager. Mr. Bellassai joined Telecel in 2011 as Corporate Business Unit Manager. Prior to joining Telecel, Mr. Bellassai worked at Banco Sudameris for more than 10 years, where he held various position including as Manager for the corporate department. Mr. Bellassai graduated with a degree in Business Administration and Accounting from the Catholic University of Asunción. Mr. Bellassai is currently studying to receive an MBA from INCAE and the Catholic University of Asunción.

Rodney Acevedo, age 40, Marketing Services Manager. Mr. Acevedo joined Telecel in 2012 as Marketing Services Manager. Prior to joining Telecel, Mr. Acevedo was a Director of COIN, a market research company that Mr. Acevedo founded in 1996. Mr. Acevedo has a degree in Business Administration from Texas A&M University.

Ruben Gomez, age 48, acting Chief Operations Officer. Mr. Gomez has been acting Chief Operations Officer since 2011. Mr. Gomez joined Telecel in 1996 as a Carrier Relations, Regulatory Affairs and HR Manager. In 2006, he was transferred to Millicom´s operation in Laos as acting Chief Executive Officer. In 2008, Mr. Gomez returned to Telecel where he held the position of Supply Chain Manager and in 2010 as Chief Technical Officer. Prior to joining Telecel, Mr. Gomez was a Carrier Relations Manager. & IT Manager at ANTELCO. Mr. Gomez has a degree in Electronic Engineering from the National University of Asunción and an MBA from INCAE and the Catholic University of Asunción.

Gabriela Sacco, age 46, Customer Service Manager. Ms. Sacco has held the position of Customer Service Manager since 2009. Ms. Sacco joined Telecel in 2007, working in the Customer area as a Contact Center Manager. Prior to joining Telecel, Ms. Sacco held positions at Ventatel, a call center company, for more than 10 years as Commercial Director and General Manager. Ms. Sacco was also an IT Manager at Líneas Aéreas Paraguayas. Ms. Sacco graduated from the Catholic University of Asunción with a degree in Computer Analysis. Ms. Sacco is currently studying to receive an MBA from INCAE and the Catholic University of Asunción.

Monica De Fillippis, age 46, Tigo People Manager. Ms. De Fillippis joined Telecel in 2000 as an Assistant Manager in the Human Resources department and has held the position of Tigo People Manager since 2007. Prior to joining Telecel, Ms. De Fillippis held positions as a Senior Consultant at PricewaterhouseCoopers and as an Assistant Manager at McDonalds Paraguay. Ms. De Fillippis graduated from the Catholic University of Asunción with a degree in Industrial Psychology.

Carlos Diaz, age 41, Legal & Corporate Affairs Manager. Mr. Diaz has worked at Telecel since 2001, where he started in the Legal department as Legal Counsel and has held the position of Legal & Corporate Affairs Manager since 2008. Prior to joining Telecel, Mr. Diaz was a Senior in the Tax & Legal Department at PricewaterhouseCoopers and a technician of taxes at the Tax Office of PwC in Asunción, Paraguay. Mr. Diaz graduated from the National University of Asunción with a degree in Law.

Michael Lichtenberg, age 58, Supply Chain Manager. Mr. Lichtenberg joined Telecel in February 2008 as Contract Manager. Mr. Lichtenberg was promoted to Deputy Procurement Manager in April 2009 and to Supply Chain Manager in June 2011. Prior to joining Telecel, Mr. Lichtenberg worked for more than 30 years for Siemens AG, Germany as Project Manager for Telecommunication Projects in over 30 different countries. Mr. Lichtenberg studied in Siemens’ business facilities in Berlin, Germany.

Jose Armadans, age 50, Risk & Revenue Assuarance Manager. Mr. Armadans joined Telecel in 1992, as a Computer Operator and has held the position of Risk & Revenue Assurance Manager since 2009. In 1995, he held a position as IT operations Manager and in 1997, he was placed in charge of Credit & Collections Management. From 1999 to 2004, Mr. Armadans held a position as Fraud Manager and in 2004 was made responsible for revenue assurance for the Latin America region. Mr. Armadans graduated from the Autónoma University of Asunción with a degree in Computer Analysis.

Paul Gaston, age 34, Communication Category Manager. Mr. Gaston became the Communication Category Manager in 2010. Mr. Gaston joined Telecel in 2007, as Product Manager for Tigo Cash products. In 2008, he held the position of Tigo Cash Business Manager, and in 2009, he moved to a position as a Strategic Business Analyst (Sales & Distribution). Prior to joining Telecel, Mr. Gaston was Finance & Supply Chain Executive at British American Tobacco and at Kimberly Clark Corporation. Mr. Gaston graduated from the Catholic University of Asunción with a degree in Accounting and also has an MBA from San Pablo CEU University – Business School (Spain).

Victor Franco, age 35, Information Category Manager. Mr. Franco as been Information Category Manager since 2011 and has worked at Millicom since 2010 where he started in Mobile Financial Service as Microcredits Project Manager. Prior to joining Millicom, he worked in companies related to the motorcycles business, including as a Director of Reimpex, and held positions at BBVA Bank and Citibank. Mr. Franco has a degree in Business Administration from the Catholic University of Asunción.

Andrew Kent, age 31, Solutions Category Manager. Mr. Kent joined Telecel in April 2011 as Solutions Category Manager. Prior to joining Telecel, Mr. Kent worked as an entrepreneur in an electronic payments startup and also held a position in investments at Wachovia Securities. Mr. Kent holds a degree in Finance from the University of Notre Dame in the United States and an MBA from IE Business School, Spain.

Hector García, age 31, Entertainment Category Manager. Mr. García has held the position of Entertainment Category Manager since 2010. Mr. García joined Telecel in June 2007 as Pricing Analyst, a position he held until February 2009 when he started managing the Business Intelligence Unit. Prior to joining Telecel, Mr. García worked at the Central Bank of Paraguay as a Research Analyst. Mr. García has a degree in Economics and an MBA from the American University of Asunción and an Executive MBA from the IAE Business School of Argentina.

Compensation

Overall compensation for executive officers was Gs.11,703 million for the nine months ended September 30, 2012 and Gs.10,502 million for the year ended December 31, 2011. Bonuses for the prior year are paid in the first fiscal quarter of each year and are reflected in the compensation figures above. In March 2011, bonuses of Gs.4,206 million in the aggregate were paid to our executive officers. Only two members of the board of directors are remunerated by Telecel, and their overall compensation for the year ended December 31, 2011 was Gs. 809 million.

PRINCIPAL STOCKHOLDERS

The table below sets out certain information known to the Issuer as at September 30, 2012, unless indicated otherwise, with respect to beneficial ownership of the Issuer’s common shares, par value Gs.50 million each, by:

• each person who beneficially owns more than 5% of the Issuer’s common stock, and

• significant parties related to the Issuer.

Amount Shareholder of Shares Percentage Millicom International III N.V. (1) 4,999 99.98% Shai Holdings S.A. (1) 1 0.02% Total ...... 5,000 100%

(1) An indirect wholly owned subsidiary of Millicom International Cellular S.A, or Millicom.

The holders listed above have sole voting and investment power with respect to all shares beneficially owned by them. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of a given date on which such person or group of persons has the right to acquire within 60 days after such date. For purposes of computing the percentage of outstanding shares held by each person, or group of persons, named above on a given date, any security which such person or persons has the right to acquire within 60 days after such date (including shares which may be acquired upon exercise of vested portions of share options) is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.

The information below is derived from Millicom’s Annual Report on Form 20-F, filed on March 2, 2012. The table below sets out certain information known to Millicom as at February 15, 2012, unless indicated otherwise, with respect to beneficial ownership of Millicom common shares, par value US$1.50 each, by:

• each person who beneficially owns more than 5% of Millicom common stock, and

• significant parties related to Millicom.

Amount Shareholder of Shares Percentage Investment AB Kinnevik ...... 37,835,438 36%

The Stenbeck Family ...... 958,424 1%

Except as otherwise indicated, the holders listed above have sole voting and investment power with respect to all shares beneficially owned by them. The holders listed above have the same voting rights as all other holders of Millicom common stock. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of a given date on which such person or group of persons has the right to acquire within 60 days after such date. For purposes of computing the percentage of outstanding shares held by each person, or group of persons, named above on a given date, any security which such person or persons has the right to acquire within 60 days after such date (including shares which may be acquired upon exercise of vested portions of share

options) is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Millicom International Cellular S.A.

We are an indirect, wholly owned subsidiary of Millicom International Cellular S.A., or Millicom, a Luxembourg société anonyme. Millicom is an international company providing communications, information, entertainment, solutions and financial services in emerging markets using various combinations of mobile and fixed- line telephony, cable and broadband businesses in 15 countries in Central America, South America and Africa. In Central and South America, Millicom operates in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Bolivia, Colombia and Paraguay.

For a summary of our shareholding structure see “Business—Corporate Structure.”

The Tigo Brand

The Tigo brand was developed by Millicom in 2004 to coincide with the deployment of GSM across its operations in Central and South America. The Tigo brand has been integrated into Millicom’s operations throughout the world, which we believe has allowed us to enjoy increased brand recognition and to realize cost savings from the standardization of marketing materials in the region. See “Business―The Tigo Brand.” Millicom licenses the right to use the Tigo brand to us under the Technical Services Agreement. See “―Technical Services Agreement.”

Employee Secondment

Our staff benefit from Millicom’s employee rotation plan, a training program designed to encourage cross- functional learning, to improve communications and teamwork across departments and regions, and to serve as a forum for sharing best practices. Local staff members are given the opportunity to take a secondment to Millicom operations throughout the world for further training and development.

Global Supply Arrangements

Millicom negotiates contracts for the supply of telephone handsets and equipment globally and on a group basis, under which we are able to make purchases as needed for our business, which we believe results in favorable pricing for our handsets and equipment due to Millicom’s extensive relationship on a global basis with our suppliers.

Technical Service Agreement

We are party to a technical services agreement, dated as of January 1, 2008 (the “Technical Services Agreement”), with Millicom under which we receive engineering and technical assistance and managerial “know- how” from Millicom, including technical training of local personnel and similar services, and under which Millicom provides us with a license to use the Tigo brand and the Millicom name. We compensate Millicom on an annual basis for such services at a rate for 2012 equal to 1.5% of our net sales (excluding value added tax). The term of this agreement is ten years from the commencement of the Technical Services Agreement in 2008; however, this agreement and the rates we pay thereunder is currently under review and we expect that the agreement will be revised or replaced to provide for a higher fee which we do not expect will be increased above the level of 5% of our gross revenues for the relevant period and which is more consistent with the fair market value of the services provided by Millicom to us thereunder in connection with structural changes currently being implemented in Millicom’s global management of its operations.

Intercompany Deposits/Loans with Millicom

In the context of our relationship with our ultimate parent Millicom, we participate in a Millicom group cash deposit arrangement with BNP Paribas pursuant to which a portion of our cash is held in a deposit account with BNP Paribas pursuant to the terms of a Millicom group notional cash pooling arrangement. The amount of our cash contributed to this cash pooling arrangement is limited from time to time to cash from operations that we expect will

be distributed as a dividend at the end of the relevant period, and the terms of this deposit are favorable to us given the size of Millicom’s relationship with BNP. In certain circumstances, BNP Paribas can offset our deposit with them to cover any unsatisfied negative balance maintained by Millicom, though no such offset has occurred to date and management is comfortable with this arrangement given the levels of our deposits with BNP Paribas and the relationship between these deposits and expected upcoming dividend payments to be made to Millicom. As of November 29, 2012, the balance in such deposit was US$40 million.

Tigo Money

Our affiliate Tigo Money, primarily engaged in money and airtime and SMS credit transfer services, provides these services on an ongoing basis solely to customers that have an account with us, which we believe allows us cross-sales opportunities and convenience that further leverages our extensive network and capitalizes on the needs of our customer base to foster customer loyalty and provides in addition to a fee that Tigo Money pays on an informal basis for the use of our network, value through customer loyalty and reduced churn that we believe to be commensurate with the total compensation we provide for such services. Tigo Money also provides services directly to us, including collecting invoice payments from customers and transferring our salary payments to our freelancers. We pay for these services on an informal basis at a price set at the level of Tigo Money’s costs, and we provide office space in our headquarters in Asunción. Some of our personnel also dedicate their time to the management and operations of Tigo Money. As of October 31, 2012, approximately 23% of our customers utilized the service provided by Tigo Money on a regular basis. Although we expect the portion of our customer base using Tigo Money to grow, there can be no assurance or that our relationship with Tigo Money will continue. The termination of our agreement with Tigo Money could have an adverse effect on our business in the future.

Transcom

Our affiliate Transcom provides us with call center services and other customer services. We are Transcom’s sole customer. We believe that Transcom’s services provide with significant customer service benefits through convenience and efficiency. For example, in the event that one of our customers breaks a sim card by removing it from their phone, they are able to contact the Transcom call center and after meeting certain identity proof requirements, their existing phone number can be applied to a replacement sim card rather than requiring the customer to open a new telephone number. This service also provides us with administrative cost saving benefits.

Servicios y Productos Multimedios S.A.

From time to time we advance loans to our subsidiary Lothar Systems S.A., or Lothar, the capital stock of which we own 99%, for purposes of allowing Lothar to in turn lend funds to our affiliate Servicios y Productos Multimedios S.A., or SPM, which provides cable television service in the metropolitan areas surrounding Asunción, in order to meet its cash flow needs including in connection with the rollout and operation of its network. As of the date of this offering memorandum, an aggregate amount of approximately US$19,000,000 was outstanding to Lothar for purposes of lending funds to SPM to meet its cash flow needs.

DESCRIPTION OF NOTES

In this “Description of Notes” section, “Company” refers to Telefonica Celular del Paraguay S.A. and any successor obligor on the Notes. You can find the definitions of certain terms used in this description under “-Certain Definitions.”

The Company will issue the Notes under an indenture (the “Indenture”) among the Company and Citibank, N.A., as Trustee.

The following is a summary of the material provisions of the Indenture. Because this is a summary, it may not contain all the information that is important to you. You should read the Indenture in its entirety. Copies of the Indenture are available as described under “Where You Can Find More Information.”

General

The Notes mature on December 13, 2022. The Notes bear interest at 6.750% per annum, payable semiannually in arrears on each June 13 and December 13, commencing June 13, 2013, to holders of record on the May 29 or November 29 immediately preceding the interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

Additional Notes

Subject to the covenants described below, the Company may issue Notes under the Indenture having the same terms in all respects as the Notes except that interest will accrue on the additional Notes from their date of issuance, provided, however, that unless such additional Notes are issued under a separate CUSIP number, such additional Notes must be either part of the same “issue” within the meaning of U.S. Treasury Regulation Section 1.1275-l(f) or neither the Notes nor such additional Notes are issued with original issue discount for U.S. federal income tax purposes. The Notes offered hereby and any additional Notes would be treated as a single class for all purposes under the Indenture, and will vote together as one class on all matters with respect to the Notes. For purposes of this “Description of Notes” whether or not expressly stated, reference to the Notes includes additional Notes except as otherwise indicated.

Ranking of the Notes; Structural Subordination

The Notes will constitute unsecured unsubordinated obligations of the Company, ranking equally in right of payment with all the existing and future unsubordinated obligations of the Company, other than all obligations granted preference under applicable law.

The Company may conduct operations through or form subsidiaries and joint ventures in the future. Claims of creditors of subsidiaries or joint ventures, including trade creditors, secured creditors and creditors holding debt and guarantees issued by those subsidiaries or joint ventures, and claims of preferred and minority stockholders (if any) of those subsidiaries or joint ventures generally will have priority with respect to the assets and earnings of those subsidiaries and joint ventures over the claims of the Company’s creditors, including holders of the Notes. The Notes therefore will be effectively subordinated to creditors (including trade creditors) of the Company’s subsidiaries. Although the Indenture will limit the Company’s and the Company’s Restricted Subsidiaries’ incurrence of Debt and Redeemable Stock, the limitation is subject to a number of significant exceptions. Moreover, the Indenture does not impose any limitation on the incurrence by the Company’s Restricted Subsidiaries of liabilities that are not considered Debt or Redeemable Stock under the Indenture. See “-Limitation on Debt.” Except as described below, the Notes will not be guaranteed by any of the Company’s current or future Subsidiaries.

Optional Redemption

Except as described below, the Notes are not redeemable at the Company’s option. The Company is not, however, prohibited from acquiring the Notes by means other than a redemption, whether pursuant to a tender offer, open market purchase or otherwise, so long as the acquisition does not otherwise violate the terms of the Indenture.

Early Redemption with Make-Whole Premium prior to December 13, 2017

The Notes will be redeemable, at any time and from time to time, prior to December 13, 2017, in whole or in part, at the Company’s option at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest on the Notes to be redeemed (exclusive of interest accrued to the redemption date) discounted to that redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points; plus accrued and unpaid interest on the principal amount of the Notes being redeemed to, but not including, the date of redemption and any additional amounts payable in respect of such interest. Notwithstanding the foregoing, payments of interest on the Notes will be payable to the holders of those Notes registered as such at the close of business on the relevant record dates according to the terms and provisions of the Indenture. In connection with such optional redemption, the following defined terms apply:

“Comparable Treasury Issue” means the United States Treasury security selected by the Independent Investment Banker that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes.

“Comparable Treasury Price” means, with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding that redemption date, as set forth in the daily statistical release designated H.l5(519) (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for US Government Securities” or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the average of the Reference Treasury Dealer Quotations for that redemption date.

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company to act as the “Independent Investment Banker.”

“Reference Treasury Dealer” means Morgan Stanley & Co. LLC, Citigroup Global Markets Inc. or any of their respective affiliates which are primary United States government security dealers; provided, however, that if any of the foregoing shall cease to be a primary US Government securities dealer in New York City (a “Primary Treasury Dealer”), the Company shall substitute therefor another nationally recognized investment banking firm that is a Primary Treasury Dealer.

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third Business Day preceding that redemption date.

“Remaining Scheduled Payments” means, with respect to each Note to be redeemed, the sum of (i) the redemption price of such Note on December 13, 2017 (the “First Redemption Date”), such redemption price being set forth in the table below, plus (ii) all required interest payments due on such Note through the First Redemption Date that would be due after the date on which such Note is being redeemed; provided, however, that, if that redemption date is not an interest payment date with respect to such Note, the amount of the next succeeding scheduled interest payment thereon will be reduced by the amount of interest accrued thereon to that redemption date.

“Treasury Rate” means, with respect to any redemption date of a Note, the rate per annum equal to the semi- annual equivalent yield to the First Redemption Date (computed as of the third Business Day immediately preceding the redemption date of such Note) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that redemption date.

Early Redemption on or after December 13, 2017

At any time and from time to time on or after December 13, 2017, the Company may redeem the Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest to the redemption date.

12 month period commencing in year Percentage

December 13, 2017 103.375%

December 13, 2018 102.250%

December 13, 2019 101.125%

December 13, 2020 100.000%

December 13, 2021 100.000%

Optional Redemption prior to December 13, 2015 upon Equity Offerings of the Company

At any time and from time to time prior to December 13, 2015, the Company may redeem Notes to the extent of the net cash proceeds received from any sale of the Company’s Common Stock at a redemption price equal to 106.75% of the principal amount plus accrued and unpaid interest to the redemption date, in an aggregate principal amount for all such redemptions not to exceed 35% of the original aggregate principal amount of the Notes (including any additional Notes); provided that

(i) in each case the redemption takes place not later than 90 days after the closing of such sale, and (ii) not less than 65% of the original principal amount of the Notes (including any additional Notes) remains outstanding immediately thereafter.

Redemption Procedures

If fewer than all of the Notes are being redeemed, the Trustee will select the Notes to be redeemed pro rata, by lot or by any other method the Trustee in its sole discretion deems fair and appropriate (or, in the case of Global Notes, based on a method as DTC may require), in denominations of $1,000 principal amount and integral multiples thereof. Upon surrender of any Note redeemed in part, the holder will receive a new Note equal in principal amount to the unredeemed portion of the surrendered Note. Once notice of redemption is sent to the holders, Notes called for redemption become due and payable at the redemption price on the redemption date, and, commencing on the redemption date, Notes redeemed will cease to accrue interest.

Notice of redemption shall be mailed by first class mail at least 30 but not more than 60 calendar days before the redemption date to each holder of Notes to be redeemed at its registered address. The Company will cause a copy of such notice to be published in a daily newspaper with general circulation in New York City (which is expected to be the Wall Street Journal), London (which is expected to be the Financial Times) and, for so long as the Notes are listed on the Luxembourg Stock Exchange, Luxembourg (which is expected to be the Luxemburger Wort). If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed.

A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption so long as the Company has deposited with the paying agent for the Notes funds in satisfaction of the redemption price pursuant to the Indenture. Notes called for redemption become due on the date fixed for redemption. In connection with any redemption, the Company will notify the Luxembourg Stock Exchange of any change in the principal amount of Notes outstanding.

Upon presentation of any Note redeemed in part only, the Company will execute and the Trustee will authenticate and deliver to the Company on the order of the holder thereof, at the Company’s expense, a new Note or Notes, of authorized denominations, in principal amount equal to the unredeemed portion of the Note so presented.

Any Notes that are redeemed pursuant to the terms of the Notes will be cancelled. Any Notes that are purchased by the Company in the open market or otherwise may be cancelled, held or resold by the Company as it may determine, provided that any such resales are conducted in compliance with all applicable securities laws.

Additional Amounts

The Company, with respect to payments under the Notes, agree that, if any deduction or withholding of any present or future taxes levies, imposts or charges whatsoever imposed by or for the account of Paraguay or any political subdivision or taxing authority thereof or therein with respect to the Notes shall be required, the Company will (subject to the limitations described below) pay such additional amounts in respect of principal (and premium, if any) and interest as may be necessary in order that the net amounts paid to such holders pursuant to the Notes after such deduction or withholding shall equal the respective amounts of principal (and premium, if any) and interest specified in the Notes; provided, however, that the Company shall not be required to make any payment of additional amounts for or on account of (i) any tax or governmental charge which would not be payable but for the fact that the holder of a Note is a domiciliary, national or resident of, or engaging in business or maintaining a permanent establishment or being physically present in, Paraguay or such political subdivision or otherwise having some connection with Paraguay or such political subdivision other than the holding or ownership of such Notes or the collection of principal of (and premium, if any) and interest on such Notes or the enforcement of such Notes; (ii) any tax or other governmental charge that would not have been imposed but for the presentation of a Note (where presentation is required) for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later; (iii) any deduction or withholding imposed on a payment to an individual and required to be made pursuant to European Council Directive 2003/48/EC or any other Directive on the taxation of savings implementing the conclusions of the European Council of Economic and Finance Ministers (ECOFIN) meeting of June 3, 2003 or any law implementing or complying with, or introduced in order to conform to, such Directive; (iv) any tax or other governmental charge that would not have been imposed but for a failure to comply with any applicable certification, information, identification, documentation or other reporting requirements concerning the nationality, residence, identity or connection with Paraguay or any political subdivision thereof if such compliance is required as a precondition to relief or exemption from such tax or other governmental charge (including without limitation a certification that such holder is not resident in Paraguay or any political subdivision thereof), provided, however, that this clause (iv) shall not apply (x) if the certification, information, identification, documentation or other reporting requirements would be materially more onerous in form, procedure or substance of information disclosed than comparable information or other reporting requirements under U.S. tax law, regulation and administrative practice, or (y) the Company shall not have provided the holder of the Note with written notice of the applicable requirement at least 60 days prior to the date that the holder of the Note is required to comply with such applicable requirement.

In addition, the Company shall not have any obligation to pay additional amounts to a holder that is a fiduciary or partnership or an entity that is not the sole beneficial owner of the payment of the principal or interest on a Note if the laws of Paraguay or any political subdivision thereof require the payment to be included in the income of a beneficiary or settlor for tax purposes with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to the additional amounts had it been the holder of such Note.

Tax Redemptions

The Company may redeem the Notes, in whole but not in part, at its option, at 100% of the outstanding principal amount thereof plus accrued and unpaid interest to the date of redemption and any Additional Amounts (as defined under “—Additional Amounts”) payable with respect thereto, if (1) as a result of a change in law, the Company has or will become obligated to pay Additional Amounts with respect to Paraguayan withholding taxes in excess of the Additional Amounts that the Company would pay if payments in respect of the Notes were subject to deduction or withholding for Paraguayan withholding taxes at a rate of (i) 6% on interest payments, to the extent the Non-Paraguayan Holder (as defined herein) is a “foreign bank, financial or other recognized credit institution” (entidades bancarias o financieras u otras instituciones de crédito de reconocida trayectoria en el mercado financiero) (as each of these terms are defined under Paraguayan law), or (ii) 15% on interest payments in all other cases, and determined, in the case of either (i) or (ii) above, without regard to any interest, fees, penalties or other additions to tax; and (2) such obligation cannot be avoided by the Company taking reasonable measures available to it; provided, however, that for this purpose reasonable measures shall not include any change in the Company’s jurisdiction of organization or the location of its principal executive office, or the incurrence of material out of pocket costs by it or its Affiliates. No such notice of redemption will be given earlier than 90 days prior to the earliest date on which the Company would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due.

Prior to the publication or mailing of any notice of redemption of the Notes as described below, the Company must deliver to the trustee (i) an officers’ certificate stating that the Company is entitled to effect such redemption and (ii) an opinion of legal counsel of recognized standing stating that the Company has or will become obligated to pay Additional Amounts due to the changes in tax laws or regulations or changes in, or pronouncements with respect to, the official application or official interpretation of such laws or regulations (including a determination by a court of competent jurisdiction). The trustee will accept this certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent set forth in clauses (1) and (2) above, upon which it will be conclusive and binding on the holders.

No Mandatory Redemption or Sinking Fund

There will be no mandatory redemption or sinking fund payments for the Notes.

Change of Control

Within 60 days of the occurrence of a Change of Control Triggering Event, the Company will be required to make an Offer to Purchase all Outstanding Notes at a purchase price equal to 101% of their principal amount plus accrued interest and any additional amounts thereon to the date of purchase.

A “Change of Control Triggering Event” will be deemed to have occurred if a Change of Control has occurred and a Rating Decline occurs.

“Change of Control” means any event or circumstance, for whatever reason, whereby (i) any Person or group of Persons acting in concert (which does not have control of the Company at the date hereof) acquires control of the Company (whether directly or indirectly), provided, however, that this clause shall not be triggered if such control is acquired by a Person or Persons who are themselves directly or indirectly controlled by Millicom International Cellular S.A. (“Millicom”) or if such control is acquired through the acquisition of control of Millicom or (ii) all or substantially all of the assets or business of the Company are sold. For the purpose of this definition, “control” of a Person means the holding of more than 50% of the Voting Shares of such Person, the power to appoint and/or remove all or a majority of the members of the board of directors of such Person or otherwise directly or indirectly to control or have the power to control the affairs and policies of such Person.

A “Rating Decline” will be deemed to have occurred if at any time within the earlier of (i) 90 days after the date of public notice of a Change of Control, or of the Company’s intention or the intention of any Person to effect a Change of Control and (ii) the occurrence of the Change in Control (which period shall in either event be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by a Rating Agency), the rating of the Notes is decreased by either Rating Agency by two or more Gradations.

In the event that the Company makes an Offer to Purchase the Notes, the Company intends to comply with any applicable securities laws and regulations, including any applicable requirements of Section 14(e) of, and Rule l4e-1 under, the U.S. Exchange Act.

Certain Covenants of the Company

The Indenture will contain the covenants, among others, described below with respect to the Company. The accounting terms used in such covenants shall have the meanings assigned to them in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board as in effect from time to time (“International Financial Reporting Standards”), which are the accounting standards used by the Company in presenting its consolidated financial statements.

Limitation on Debt. The Company may not, and may not permit any of its Restricted Subsidiaries to, Incur any Debt, unless the Leverage Ratio for the most recently completed fiscal quarter for which financial statements are available would be less than 4.0 to 1.

Notwithstanding the foregoing limitation, the following Debt (“Permitted Debt”) may be Incurred:

(i) any direct or indirect obligations owed in connection with the payment obligations on the Notes;

(ii) Debt (other than Debt described in another clause of this paragraph) outstanding, committed or mandated on the date of the Indenture;

(iii) Debt owed by the Company to any of its Restricted Subsidiaries or Debt owed by any of the Restricted Subsidiaries to the Company or any other of the Restricted Subsidiaries; provided, however, that upon either (1) the transfer or other disposition by the Company or such Restricted Subsidiary of any Debt so permitted to a Person other than the Company or any of its Restricted Subsidiaries or (2) such Restricted Subsidiary ceasing to be the Company’s Restricted Subsidiary, the provisions of this clause (iii) shall no longer be applicable to such Debt and such Debt shall be deemed to have been Incurred at the time of such transfer or other disposition;

(iv) Acquired Debt;

(v) Debt consisting of Permitted Interest Rate, Currency or Commodity Price Agreements;

(vi) Debt of the Company or any Restricted Subsidiary Incurred in exchange for or the proceeds of which are used to refinance or refund or replace, or any extension or renewal of (including, in each case, successive refinancings, extensions and renewals), outstanding Debt of the same entity (each of the foregoing, a “refinancing”) in an aggregate principal amount not to exceed the principal amount of the Debt so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Debt so refinanced or the amount of any premium reasonably determined by the issuer thereof as necessary to accomplish such refinancing by means of a tender offer or privately negotiated repurchase, plus the fees and expenses (including premiums and defeasance costs) of the issuer thereof reasonably incurred in connection with such refinancing; provided, however, that (A) Debt the proceeds of which are used to refinance the Notes or Debt which is pari passu with or subordinate in right of payment to the Notes shall only be permitted if (x) in the case of any refinancing of the Notes or Debt which is pari passu to the Notes, the refinancing Debt is made pari passu to the Notes or subordinated to the Notes, and (y) in the case of any refinancing of Debt which is subordinated to the Notes, the refinancing Debt is so subordinated at least to the same extent; and (B) the refinancing Debt by its terms, or by the terms of any agreement or instrument pursuant to which such Debt is issued, (1) if term Debt, has a Weighted Average Life to Maturity longer than the Weighted Average Life to Maturity of the Debt being refinanced and (2) the final maturity of such Debt is no earlier than the final maturity of the Debt being refinanced;

(vii) Debt of the Company or any Restricted Subsidiary represented by letters of credit in order to provide security for workers’ compensation claims, health, disability or other employee benefits, payment obligations in connection with self-insurance or similar requirements of the Company or any Restricted Subsidiary in the ordinary course of business;

(viii) customary indemnification, adjustment of purchase price or similar obligations, in each case, incurred in connection with the disposition of any assets of the Company or any Restricted Subsidiary, and earn-out provisions or contingent payments in respect of purchase price or adjustment of purchase price or similar obligations in acquisition agreements other than Guarantees of Debt incurred by any Person acquiring all or any portion of such assets for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of each such Incurrence of such Debt will at no time exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with the related disposition;

(ix) obligations in respect of bid, performance, completion, guarantee, surety and similar bonds, including guarantees or obligations of the Company or any Restricted Subsidiary with respect to letters of credit supporting such obligations, in the ordinary course of business and not related to Debt for borrowed money;

(x) Debt of the Company or any Restricted Subsidiary arising from the honoring by a bank or other financial institution of a check, draft or similar instrument including, but not limited to, electronic transfers, wire transfers, netting services and commercial card payments, drawn against insufficient funds; provided that such Debt is extinguished within five Business Days of Incurrence; and

(xi) Debt not otherwise permitted to be Incurred pursuant to clauses (i) through (x) above, which, together with any other outstanding Debt Incurred pursuant to this clause (xi), has an aggregate principal amount at any time outstanding not in excess of $75 million.

For the purposes of determining compliance with this covenant, in the event that an item of Debt meets the criteria of more than one of the types of Permitted Debt or is entitled to be Incurred pursuant to the first sentence of “-Limitation on Debt,” the Company in its sole discretion may classify and from time to time reclassify such item of Debt or any portion thereof and only be required to include the amount of such Debt as one of such types.

For the purposes of determining compliance with any covenant in the Indenture or whether an Event of Default has occurred, in each case, where Debt is denominated in a currency other than U.S. Dollars, the amount of such Debt will be the U.S. Dollar Equivalent determined on the date of such Incurrence; provided, however, that if any such Debt that is denominated in a different currency is subject to an Interest Rate, Currency or Commodity Price Agreement with respect to U.S. Dollars covering principal and premium, if any, payable on such Debt, the amount of such Debt expressed in U.S. Dollars will be adjusted to take into account the effect of such an agreement.

Limitation on Restricted Payments. The Company may not, and may not permit any of its Restricted Subsidiaries to, directly or indirectly,

(i) declare or pay any dividend or make any distribution in respect of the Company’s Capital Stock, excluding any dividends or distributions by the Company payable solely in shares of the Company’s Capital Stock (other than Redeemable Stock) or in options, warrants or other rights to acquire the Company’s Capital Stock (other than Redeemable Stock); (ii) purchase, redeem, or otherwise acquire or retire for value (a) any of the Company’s or Restricted Subsidiary’s Capital Stock or (b) any options, warrants or other rights to acquire shares of the Company’s or Restricted Subsidiary’s Capital Stock (in respect of (a) and (b) above, in each case, other than (x) from the Company or any of its Restricted Subsidiaries and (y) any such acquisition of the shares or rights to acquire shares of a Restricted Subsidiary by the Company or another Restricted Subsidiary); (iii) redeem, repurchase, defease or otherwise acquire or retire for value prior to any scheduled

maturity, repayment or sinking fund payment the Company’s Debt which is subordinate in right of payment to the Notes (other than any direct or indirect obligations by the Company for the sole purpose of effectuating payments on the Notes); or (iv) make any Investment, other than Permitted Investments;

(each of clauses (i) through (iv) being a “Restricted Payment”)

if:

(1) a Default or an Event of Default shall have occurred and is continuing or would result from such Restricted Payment; or

(2) after giving pro forma effect to such Restricted Payment as if such Restricted Payment had been made at the beginning of the applicable fiscal quarter period, the Company could not Incur at least $1,00 of additional Debt pursuant to the first paragraph of “-Limitation on Debt”; or

(3) upon giving effect to such Restricted Payment, the aggregate of all Restricted Payments from the date of the Indenture excluding those made pursuant to the further provisos below exceeds the sum of (a) the difference of (x) 100% of cumulative EBITDA from January 1, 2012 through the last day of the last full fiscal quarter ended immediately prior to the date of such Restricted Payment for which the Company’s quarterly or annual financial statements are available minus (y) the product of 1.5 times cumulative Consolidated Interest Expense from January 1, 2012 through the last day of the last full fiscal quarter ended immediately prior to such Restricted Payment for which the Company’s quarterly or annual fiscal statements are available; plus (b) the net reduction in Company’s Investments in any Unrestricted Subsidiary resulting from payments of interest on Debt, dividends, return of capital, repayments of loans or advances, or other transfers of assets, in each case to the Company or any of its Restricted Subsidiaries from such Unrestricted Subsidiary (except to the extent that any such payment is included in the calculation of Consolidated Net Income) or from re-designations of Unrestricted Subsidiaries as Restricted Subsidiaries; provided that the amount included in clause (b) shall not exceed the amount of Investments previously made by the Company and its Restricted Subsidiaries in such Unrestricted Subsidiary; minus (c) any Company or its Subsidiaries’ deposits withdrawn and acquired by the depositary institution (and not returned to the Company or one of its Subsidiaries) as the result of any netting or set-off arrangement entered into by the Company or any of its Subsidiaries (except to the extent such deposits are used to satisfy obligations solely of the Company or its Subsidiaries): provided further that the Company and any of its Restricted Subsidiaries may make Restricted Payments in an amount not to exceed the sum of (x) the aggregate net proceeds received by the Company after the date of the Indenture, including the fair market value of property other than cash (determined in good faith by the Company’s Board of Directors as evidenced by a resolution of the Board of Directors filed with the Trustee), from contributions of capital or the issuance and sale (other than to any of the Company’s Restricted Subsidiaries) of the Company’s Capital Stock (other than Redeemable Stock), options, warrants or other rights to acquire the Company’s Capital Stock (other than Redeemable Stock) or the Company’s Debt or Debt of any of its Restricted Subsidiaries that has been converted into or exchanged for the Company’s Capital Stock (other than Redeemable Stock and other than by or from any of the Company’s Restricted Subsidiaries) after the date of the Indenture; provided that any such net proceeds received by the Company from an employee stock ownership plan financed by loans from the Company or any of its Subsidiaries shall be included only to the extent such loans have been repaid with cash on or prior to the date of determination.

Prior to the making of any Restricted Payment (other than with respect to an Investment in an amount not to exceed $5 million) the Company shall deliver to the Trustee an Officer’s Certificate setting forth the computations by which the determination required by clauses (2) and (3) above were made and stating that no Default or Event of Default has occurred and is continuing or would result from such Restricted Payment.

Notwithstanding the foregoing,

(A) the Company may pay any dividend on Capital Stock of any class within 60 days after the declaration thereof if, on the date when the dividend was declared, the Company could have paid such dividend in accordance with the foregoing provision;

(B) the Company and any of the Restricted Subsidiaries may refinance any Debt otherwise as permitted by clause (vi) of the second paragraph under “-Limitation on Debt” above or in exchange for or out of the net proceeds of the substantially concurrent sale (other than from or to any of the Restricted Subsidiaries or from or to an employee stock ownership plan financed by loans from the Company or any of the Restricted Subsidiaries) of shares of the Company’s Capital Stock (other than Redeemable Stock), provided that the amount of net proceeds from such exchange or sale shall be excluded from the calculation of the amount available for Restricted Payments pursuant to clause (3) above;

(C) the Company and any of the Restricted Subsidiaries may purchase, redeem, acquire or retire any shares of its Capital Stock solely in exchange for or out of the net proceeds of (i) the substantially concurrent sale (other than from or to any of the Restricted Subsidiaries or from or to an employee stock ownership plan financed by loans from the Company or any of the Restricted Subsidiaries) of shares of the Company’s Capital Stock (other than Redeemable Stock), (ii) an Asset Disposition to the extent of the funds remaining as referred to in clause (iii)(2) of “Limitation on Asset Dispositions” or (iii) a Sale and Leaseback of Tower Equipment that would have been an Asset Disposition but for the proviso clause (s) of the Asset Disposition definition, provided that the Company makes an Offer to Purchase outstanding Notes prior to reliance on this provision at 100% of their principal amount plus accrued interest to the date of purchase and then to the extent of the funds remaining as referred to in clause (iii)(2) of “Limitation on Asset Dispositions”, provided that the amount of net proceeds from such exchange or sale shall be excluded from the calculation of the amount available for Restricted Payments pursuant to clause (3) above; and

(D) the Company and any of the Restricted Subsidiaries may make loans to employees in connection with such employees’ exercise of options to purchase Capital Stock or otherwise in the ordinary course of business.

Any Restricted Payment made pursuant to clause (i) or (iv) of this paragraph shall be a Restricted Payment for purposes of calculating aggregate Restricted Payments pursuant to clause (3) above.

Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company may not, and may not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Restricted Subsidiary

(i) to pay dividends (in cash or otherwise) or make any other distributions in respect of its Capital Stock to the Company or any other of its Restricted Subsidiaries or pay any Debt or other obligation owed to the Company or any other such Restricted Subsidiary;

(ii) to make loans or advances to the Company or any other of the Restricted Subsidiaries; or

(iii) to transfer any of its property or assets to the Company or any other of the Restricted Subsidiaries.

Notwithstanding the foregoing, the Company may, and may permit any of its Restricted Subsidiaries to, suffer to exist any such encumbrance or restriction

(a) pursuant to any agreement in effect on the date of the Indenture;

(b) pursuant to an agreement relating to any Debt Incurred by a Person prior to the date on which such Person became such a Restricted Subsidiary and outstanding on such date and not Incurred in anticipation of becoming such a Restricted Subsidiary which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired;

(c) pursuant to an agreement by which the Company or a Restricted Subsidiary obtains financing; provided that (x) such restriction is not materially more restrictive than customary provisions in comparable financing agreements and (y) the Company’s management determines that at the time such agreement is entered into such restriction will not materially impair the Company’s ability to make payments on the Notes;

(d) pursuant to an agreement effecting a renewal, refunding or extension of Debt Incurred pursuant to an agreement referred to in clause (a) or (b) or (c) above; provided, however, that the provisions contained in such renewal, refunding or extension agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, as determined in good faith by the Company’s management;

(e) in the case of clause (iii) above, restrictions contained in any security agreement (including a capital lease) securing Debt of any of the Company’s Restricted Subsidiaries otherwise permitted under the Indenture, but only to the extent such restrictions restrict the transfer of the property subject to such security agreement;

(f) in the case of clause (iii) above, customary nonassignment provisions entered into in the ordinary course of business in leases to the extent such provisions restrict the transfer or subletting of any such lease;

(g) pursuant to customary restrictions contained in asset sale agreements limiting the transfer of property subject to such agreements pending the closing of such sales or pursuant to customary restrictions in share purchase agreements otherwise permitted under the Indenture for the sale of Subsidiaries on such sold Subsidiaries;

(h) customary restrictions pursuant to joint venture agreements or similar documents that restrict the transfer of ownership interests in or the payment of dividends or distributions from such joint venture or similar Person or agreements entered into in the ordinary course of business; provided further that the Company’s Board of Directors determines that, at the time such encumbrance or restriction arises or is agreed to, it will not materially impair the Company’s ability to make payments on the Notes; or

(i) if such encumbrance or restriction is the result of applicable law or regulation.

Limitation on Sale and Leaseback Transactions. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction with respect to any of its assets or property unless:

(a) the Company or such Restricted Subsidiary would be entitled to: (1) Incur Debt in an amount equal to the Attributable Debt with respect to such Sale and Leaseback Transaction pursuant to the first paragraph of “-Limitation on Debt,” and (2) create a Lien on such assets or property securing such Attributable Debt without also securing the Notes pursuant to “-Limitation on Liens Securing the Company’s Debt,” and

(b) such Sale and Leaseback Transaction is effected in compliance with the covenant described under “- Limitation on Asset Dispositions.”

Limitation on Liens Securing the Company’s Debt. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, Incur or suffer to exist any Lien (other than Permitted Liens) on or with respect to any property or assets now owned or hereafter acquired to secure any of the Company’s Debt unless the Notes are equally and ratably secured by such Lien; provided that, if the Debt secured by such Lien is subordinate or junior in right of payment to the Notes, then the Lien securing such Debt shall be subordinate or junior in priority to the Lien securing the Notes.

Limitation on Guarantees of the Company’s Subordinated Debt. The Company may not permit any of its

Restricted Subsidiaries, directly or indirectly, to assume, Guarantee or in any other manner become liable with respect to any of the Company’s Debt that is expressly by its terms subordinate or junior in right of payment to any other of the Company’s Debt.

Limitation on Asset Dispositions. The Company may not, and may not permit any of its Restricted Subsidiaries to, make any Asset Disposition in one or more related transactions unless:

(i) the Company or such Restricted Subsidiary, as the case may be, receives consideration for such disposition at least equal to the fair market value for the assets sold or disposed of as determined by the Company’s Board of Directors in good faith and, in the case of any Asset Disposition in excess of $15 million, evidenced by a Board Resolution filed with the Trustee;

(ii) at least 75% of the consideration for such disposition consists of (a) cash or readily marketable cash equivalents or the assumption of the Company’s or any Restricted Subsidiary’s Debt or other liabilities (other than Debt or liabilities that are subordinated to the Notes) or Debt or other liabilities of such Restricted Subsidiary relating to such assets and, in each case, the Company or the Restricted Subsidiary, as applicable, is released from all liability on the Debt assumed or (b) Related Assets, or any combination thereof; and

(iii) the difference between all Net Available Proceeds, less any amounts invested within 360 days of such disposition in a Related Business or committed to such investment, and applied within 360 days of such disposition to a Permitted Investment in a Related Business, (1) first, at the Company’s option, to purchase, prepay, repay or reduce any of the Company’s Debt that is secured or is pari passu with the Notes or Debt of the Company’s Restricted Subsidiaries or to make an Offer to Purchase outstanding Notes at 100% of their principal amount plus accrued interest to the date of purchase, and (2) second, to the extent of any such funds remaining, to any other use as determined by the Company which is not otherwise prohibited by the Indenture.

For purposes of this paragraph, any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are promptly converted by the recipient thereof into cash, Cash Equivalents or readily marketable securities (to the extent of the cash, Cash Equivalents or readily marketable securities received in that conversion), shall be deemed cash.

Notwithstanding the foregoing, the Company will not be required to purchase Notes pursuant to the requirements described in clause (iii)(l) of the preceding paragraph if the funds available for such use in respect of an Asset Disposition, together with the funds available for such use in respect of all prior Asset Dispositions in the same fiscal year, which were not so used pursuant to the provisions described in this paragraph, are less than $30 million.

Transactions with Affiliates. The Company may not, and may not permit any of its Restricted Subsidiaries to, enter into any transaction (or series of related transactions) with any of the Company’s Affiliates (other than the Company or any of the Restricted Subsidiaries), either directly or indirectly, unless such transaction is on terms no less favorable to the Company or such Restricted Subsidiary than those that could be obtained in a comparable arm’s length transaction with an entity that is not an Affiliate of the Company or such Restricted Subsidiary. For any such transaction (or series of related transactions) that involves in excess of (a) $10 million, a majority of the members of the Company’s Board of Directors shall determine that such transaction satisfies the above criteria and shall evidence such a determination by a Board Resolution filed with the Trustee and (b) $25 million, an internationally recognized accounting, appraisal or investment banking firm shall deliver an opinion as to the fairness of such transaction from a financial point of view to the Company or such Restricted Subsidiary.

The foregoing restriction shall not apply to (i) reasonable and customary payments to or on behalf of the Company’s directors, officers or employees or any of the directors, officers or employees of the Company’s Restricted Subsidiaries, or in reimbursement of reasonable and customary payments or reasonable and customary expenditures made or incurred by such Persons as directors, officers or employees; (ii) any Restricted Payment permitted under “-Limitation on Restricted Payments”; (iii) any loan or advance by the Company or any of its Restricted Subsidiaries to employees of any of them in the ordinary course of business; (iv) any transactions under

or pursuant to the (x) Technical Services Agreement (including any amendment or replacement thereto that adjusts the rate of payments made by the Company thereunder up to a rate of 5% of the Company’s gross revenues for the relevant period), (y) transactions between the Company and Mobile Cash Paraguay S.A. (“Mobile Cash”) and the Company and SPM provided such transactions in the aggregate do not involve the transfer of value from the Company to Mobile Cash or SPM, in the case of each of Mobile Cash and SPM, in excess of $10 million on an annual basis, and (z) loans from the Company and/or Lothar Systems S.A. to SPM provided such loans are not in excess of $50 million in the aggregate (including any loans made prior to the issuance of the Notes), including in all the foregoing cases in this clause (iv) any other amendments or replacements thereto (other than any which affects the 5%, $10 million and $50 million limits referred to above) as are on terms that are no less favorable to the Company or any of its Restricted Subsidiaries than those that could be reasonably obtained in a comparable transaction on an arm’s length basis from a Person that is not an Affiliate or a Related Person to the Company; (v) the SPM Acquisition, and (vi) contributions to the common equity capital of the Company or the issue or sale of Capital Stock of the Company.

Existence and Maintenance of Properties. The Company will do or cause to be done all things necessary to preserve and keep in full force and effect the Company’s existence, rights (charter and statutory) and franchises; provided, however, that (a) the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the Company’s business and that the loss thereof is not disadvantageous in any material respect to the holders and (b) the foregoing shall not apply to a transaction permitted under “-Merger, Consolidations and Certain Sales of Assets of the Company.” The Company will cause all material properties used or useful in the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in good condition, repair and working order (ordinary wear and tear excepted) and will cause to be made all necessary repairs thereof, all in the Company’s judgment; provided, however, that nothing in this paragraph shall prevent the Company or any Restricted Subsidiary from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the Company’s judgment, desirable in the conduct of its business or the business of the Company or such Restricted Subsidiary and not disadvantageous in any material respect to the holders. The Company shall, and shall cause its Restricted Subsidiaries to, keep at all times all of their properties which are of an insurable nature insured against loss or damage with insurers believed by us to be responsible to the extent that property of a similar character is usually so insured by corporations similarly situated and owning like properties in accordance with good business practice.

Payment of Taxes. The Company will pay or discharge or cause to be paid or discharged, before the same becomes delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any of its Restricted Subsidiaries, or the Company’s or any of its Restricted Subsidiaries’ income, profits or property, and (2) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the Company’s property, or the Restricted Subsidiaries’ property; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings.

Provision of Financial Information. The Company will furnish to the Trustee and the holders, without cost to each holder:

(1) within 120 days after the end of each fiscal year, the Company’s audited financial statements for the two most recent years (including income statements, balance sheets, cash flow statements and statements of changes in stockholders’ equity) and related notes thereto prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, consistently applied, together with a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section with scope and content substantially similar to the corresponding section of this offering memorandum (after taking into consideration any changes to the Company’s business and operations after the Issue Date) and, with respect to the annual financial information, a report thereon by the Company’s certified independent accountants together with a certificate of the chief financial officer of the Company stating that, to the best of such officer’s knowledge after due inquiry, the Company during such period has kept, observed, performed and fulfilled each and every covenant and condition contained in the Indenture and that such officer has obtained no knowledge of any Default or Event of Default; and

(2) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, quarterly reports attaching the Company’s unaudited consolidated financial statements for the period then ended and the comparable period in the prior year (including income statements, balance sheets, cash flow statements and statements of changes in stockholders’ equity) prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, together with footnote disclosure and a summary “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section (after taking into consideration any changes to the Company’s business and operations after the Issue Date).

In addition, so long as the Notes remain outstanding and during any period during which the Company is not subject to Section l3 or l5(d) of the U.S. Exchange Act nor exempt therefrom pursuant to Rule 12g3-2(b), the Company will furnish to holders and prospective purchasers of the Notes upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the U.S. Securities Act.

So long as the Notes are listed on the Luxembourg Stock Exchange, copies of the information and reports referred to in clauses (1) through (2) of the first paragraph of “-Provision of Financial Information” will be available during normal business hours at the offices of the Paying Agent in Luxembourg.

Limitation on Lines of Business. The Company, together with its Restricted Subsidiaries, shall not primarily engage in any business other than in a Related Business.

Unrestricted Subsidiaries. The Company may designate any of its Restricted Subsidiaries to be an “Unrestricted Subsidiary” as provided below, in which event such Subsidiary and each other Person that is then or thereafter becomes a Subsidiary of such Subsidiary will be deemed to be an Unrestricted Subsidiary. “Unrestricted Subsidiary” means (1) any Subsidiary designated as such by the Company’s Board of Directors as set forth below and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any of the Company’s Subsidiaries to be an Unrestricted Subsidiary provided (A) no default with respect to any Debt of such Subsidiary or any Subsidiary (other than any Unrestricted Subsidiary) of such Subsidiary (including any right which the holders thereof may have to take enforcement action against such Subsidiary) would permit (upon notice, lapse of time or both) any holder of Debt to declare a default on such Debt or cause the payment thereof to be accelerated or payable prior to its Stated Maturity, and (B) if the Subsidiary to be so designated has total assets in excess of $250,000, the Company could make a Restricted Payment as a Permitted Investment in an amount equal to the fair market value of the Company’s Investment in such Subsidiary pursuant to the “-Limitation on Restricted Payments” covenant and such amount is thereafter treated as a Restricted Payment for the purpose of calculating the aggregate amount available for Restricted Payments thereunder.

Subsidiary Guarantors. If any or all of the Subsidiaries of the Company represent more than 20%, in the aggregate, of any financial parameter set forth in Rule 1-02(w) of Regulation S-X under the Securities Act of 1933, as amended in effect on the date hereof, then all such Subsidiaries shall become Subsidiary Guarantors within 5 Business Days; provided, however, that any Subsidiary with total assets of less than US$250,000 shall not be considered in this calculation nor shall any such Subsidiary be required to become a Subsidiary Guarantor as a result of this provision.

Release from Certain Covenants. If on any date the Notes have an Investment Grade rating from both Rating Agencies and no Event of Default has occurred and is continuing, and notwithstanding that the Notes may later cease to have such Investment Grade ratings, the Company and its Restricted Subsidiaries shall be released from their obligations to comply with clause (3) of “-Merger, Consolidations and Certain Sales of Assets of the Company,” “-Limitation on Debt,” “-Limitation on Restricted Payments,” “-Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries” and “-Limitation on Asset Dispositions.”

Merger, Consolidations and Certain Sales of Assets of the Company

The Company may not, in a single transaction or a series of related transactions, (i) consolidate with or merge into any other Person or permit any other Person to consolidate with or merge into the Company or (ii) directly or indirectly, convey, transfer, sell, lease or otherwise dispose of all or substantially all of the Company’s assets to any other Person, unless: (1) in a transaction in which the Company does not survive or in which the

Company sells, leases or otherwise disposes of all or substantially all of its assets, the Company’s successor entity (A) shall expressly assume, by a supplemental indenture executed and delivered to the Trustee in form satisfactory to the Trustee, all of the Company’s obligations under the Indenture and (B) is organized under the laws of (x) Paraguay or (y) the United States of America or any State thereof or the District of Columbia or (z) any other country if such successor entity undertakes, in such supplemental indenture, to pay such additional amounts in respect of principal (and premium, if any) and interest as may be necessary in order that the net amounts paid pursuant to the Notes after deduction or withholding of any present or future withholding taxes, levies, imports or charges whatsoever imposed by or for the account of such country or any political subdivision or taxing authority thereof or therein shall equal the respective amounts of principal (and premium, if any) and interest specified in the Notes; (2) immediately after giving effect to such transaction and treating any Debt which becomes the Company’s obligation or that of any of its Restricted Subsidiaries as a result of such transaction as having been Incurred by the Company or such Restricted Subsidiary at the time of the transaction, no Default or Event of Default shall have occurred and be continuing; (3) immediately after giving effect to such transaction and treating any Debt which becomes the Company’s obligation, or that of any of its Restricted Subsidiaries, as a result of such transaction as having been Incurred at the time of the transaction, the Company (including any successor entity) could Incur at least $1.00 of additional Debt pursuant to the first paragraph under “-Limitation on Debt”; provided, however, that this clause (3) will not apply if, in the good faith determination of the Company’s Board of Directors, which determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the Company’s jurisdiction of incorporation; and (4) certain other conditions are met.

The Indenture will provide that upon any consolidation or merger in which the Company is not the continuing corporation or any transfer (excluding any lease) of all or substantially all of the assets of Company in accordance with the foregoing, the successor entity shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Notes and the Indenture with the same effect as if such successor entity had been named as such.

Events of Default

The following will be Events of Default under the Indenture:

(a) failure to pay principal of(or premium if any, on) any Note when due;

(b) failure to pay any interest (including Additional Amounts) on any Note when due, continued for 30 days;

(c) default in the payment of principal and interest on Notes required to be purchased pursuant to an Offer to Purchase as described under “-Change of Control” and “-Limitation on Asset Dispositions” when due and payable;

(d) failure to perform or comply with the provisions described under “-Merger, Consolidations and Certain Sales of Assets” and “-Limitation on Debt”;

(e) failure of the Company to perform any other of their respective covenants or agreements under the Indenture or the Notes which failure continues for 60 days after written notice to the Company by the Trustee or holders of at least 25% in aggregate principal amount of Outstanding Notes;

(f) default or defaults under the terms of any instrument evidencing or securing the Company’s debt, the Company’s debt or debt of any Material Subsidiary having an outstanding principal amount of $15 million individually or in the aggregate which default or defaults results in the acceleration of the payment of such indebtedness or constitutes the failure to pay such indebtedness when due at Stated Maturity;

(g) the rendering of a final judgment or judgments (not subject to appeal) against the Company or any Material Subsidiary in an amount in excess of $15 million which remains undischarged or unstayed for a period of 60 days after the date on which the right to appeal has expired; and

(h) certain events of bankruptcy, insolvency or reorganization affecting the Company or any Material Subsidiary.

Subject to the provisions of the Indenture relating to the duties of the Trustee in case an Event of Default (as defined) shall occur and be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of the holders, unless such holders shall have offered to the Trustee indemnity satisfactory to it. Subject to such provisions for the indemnification of the Trustee, the holders of a majority in aggregate principal amount of the Outstanding Notes will have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee.

The Company will be required to furnish to the Trustee annually a statement as to their performance of certain of its respective obligations under the Indenture and as to any default in such performance.

Acceleration of the Notes

If an Event of Default specified in clause (h) above shall occur, the maturity of all Outstanding Notes shall automatically be accelerated and the principal amount of the Notes, together with any premium, accrued interest or Additional Amounts thereon, shall be immediately due and payable. If any other Event of Default shall occur and be continuing, the Trustee or the holders of not less than 25% of the aggregate principal amount of the Notes then outstanding may, by written notice to the Company (and to the Trustee if given by holders), declare the principal amount of the Notes, together with accrued interest thereon, immediately due and payable. The right of the holders to give such acceleration notice shall terminate if the event giving rise to such right shall have been cured before such right is exercised. Any such declaration may be annulled and rescinded by written notice from the Trustee or the holders of a majority of the aggregate principal amount of the Notes then outstanding to the Company if all amounts then due with respect to the Notes are paid (other than amount due solely because of such declaration) and all other defaults with respect to the Notes are cured.

Subject to the provisions of the Indenture relating to the duties of the Trustee, in case the Company shall fail to comply with their respective obligations under the Indenture or the Notes and such failure shall be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders, unless such holders shall have offered to the Trustee indemnity satisfactory to it. The holders of a majority in aggregate principal amount of the Outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, to the extent such action does not conflict with the provisions of the Indenture or applicable law.

No holder of any Note will have any right to institute any proceeding with respect to the Indenture or the Notes or for any remedy thereunder, unless (i) such holder has previously given to the Trustee written notice of a continuing Event of Default, (ii) the holders of at least 25% in aggregate principal amount of the Outstanding Notes shall have made a written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee, (iii) such holder or holders have offered to the Trustee indemnity satisfactory to it, (iv) the Trustee for 60 days after receipt of such notice has failed to institute any such proceeding and (v) no direction inconsistent with such request shall have been given to the Trustee during such 60 day period by the holders of a majority in principal amount of the Outstanding Notes. However, such limitations do not apply to a suit individually instituted by a holder of a Note for enforcement of payment of the principal of, or interest on, such Note on or after respective due dates expressed in such Note.

Modification and Waivers

The Company and the Trustee may, without the consent of the holders of the Notes, amend, waive or supplement the Indenture for certain specific purposes, including, among other things, curing ambiguities, defects or inconsistencies, or making any other provisions with respect to matters or questions arising under the Indenture or the Notes or making any other change that will not adversely affect the interest of any holder of the Notes in any material respect. Modifications and amendments of the Indenture may be made by the Company and the Trustee with the consent of the holders of a majority in aggregate principal amount of the Outstanding Notes; provided,

however, that no such modification or amendment may, with the consent of the holder of each Outstanding Note affected thereby, (a) change the Stated Maturity or the principal of, or any installment of interest on, any Note, (b) reduce the principal amount of, (or premium) or interest on, any Note, (c) change the place or currency of payment of principal of (or premium), or interest on, any Note, (d) impair the right to institute suit for the enforcement of any payment on or with respect to any Note, (e) reduce the above stated percentage of Outstanding Notes necessary to modify or amend the Indenture, (f) reduce the percentage of aggregate principal amount of Outstanding Notes necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults, or (g) following the mailing of any Offer to Purchase, modify any Offer to Purchase for the Notes required under the “- Limitation on Asset Dispositions” and the “-Change of Control” covenants contained in the Indenture in a manner adverse to the holders thereof.

The holders of a majority in aggregate principal amount of the Outstanding Notes, on behalf of all holders of Notes, may waive compliance by the Company with certain restrictive provisions of the Indenture. Subject to certain rights of the Trustee, as provided in the Indenture, the holders of a majority in aggregate principal amount of the Outstanding Notes, on behalf of all holders of the Notes, may waive any past default under the Indenture, except a default in the payment of principal, premium or interest or a default arising from failure to purchase any Note tendered pursuant to an Offer to Purchase.

Satisfaction and Discharge of the Indenture

The Indenture will cease to be of further effect as to all outstanding Notes (except as to (i) rights of registration of transfer and exchange and the Company’s right of optional redemption, (ii) substitution of apparently mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of holders to receive payment of principal and interest on the Notes, (iv) rights, protections, obligations and immunities of the Trustee under the Indenture and (v) rights of the holders of the Notes as beneficiaries of the Indenture with respect to any property deposited with the Trustee payable to all or any of them), if (x) the Company will have paid or caused to be paid the principal of and interest on the Notes as and when the same will have become due and payable or (y) all outstanding Notes (except lost, stolen or destroyed Notes which have been replaced or paid) have been delivered to the Trustee for cancellation.

Defeasance

The Indenture will provide that, at the option of the Company, (a) if applicable, the Company will be discharged from any and all obligations in respect of the Outstanding Notes or (b) if applicable, the Company may omit to comply with certain restrictive covenants, and such omission shall not be deemed to be an Event of Default under the Indenture and the Notes, in either case, upon irrevocable deposit with the Trustee, in trust, of money and/or U.S. government obligations which will provide money in an amount sufficient in the opinion of a nationally recognized firm of independent certified public accountants to pay the principal of and premium, if any, and each installment of interest, if any, on the Outstanding Notes. With respect to clause (b), the obligations under the Indenture other than with respect to such covenants and certain Events of Default shall remain in full force and effect. Such trust may only be established if, among other things (i) with respect to clause (a), the Company has received from, or there has been published by, the Internal Revenue Service a ruling or there has been a change in law, which in the Opinion of Counsel provides that holders of the Notes will not recognize gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; or, with respect to clause (b), the Company has delivered to the Trustee an Opinion of Counsel to the effect that the holders of the Notes will not recognize gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; (ii) no Default or Event of Default shall have occurred or be continuing (other than resulting from the borrowing of funds to be applied to such deposit); (iii) the Company has delivered to the Trustee an Opinion of Counsel to the effect that such deposits shall not cause the Trustee or the trust so created to be subject to the U.S. Investment Company Act of 1940, as amended; and (iv) certain other customary conditions precedent are satisfied.

No Liability of Directors, Officers, Employees, Incorporators, Members and Stockholders

None of the directors, officers, employees, incorporators, members or stockholders, as such, of the Company will have any liability for any of the Company’s obligations under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations. Each holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

This waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy.

Notices

Notice regarding the redemption of or an Offer to Purchase the Notes will be (1) if global Notes are outstanding, provided to the depositary for such global Notes as the registered owner thereof and published in a leading newspaper having a general circulation in New York City (which is expected to be the Wall Street Journal) and London (which is expected to be the Financial Times) or (2) in the case of definitive Notes, mailed to holders by first class mail at their respective addresses as they appear on the registration books of the registrar. In addition to the foregoing, all notices to holders of the Notes will, if and so long as the Notes are listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange so require, be published in a daily newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort) and be provided to the Luxembourg Stock Exchange. If and so long as the Notes are listed on any other securities exchange, notices will also be given in accordance with any applicable requirements of such securities exchange. If and for so long as any Notes are represented by one or more global Notes and ownership of book-entry interests therein are shown on the records of The Depository Trust Company or any successor or other clearing agency appointed by the book-entry depositary at the Company’s request, notices will also be delivered to each such clearing agency for communication to the owners of such book-entry interests. Notices given by publication will be deemed given on the first date on which publication is made and notices given by first class mail, postage prepaid, will be deemed given five calendar days after mailing.

Concerning the Trustee

Except during the continuance of an Event of Default, the Trustee need perform only those duties that are specifically set forth in the indenture and no others, and no implied covenants or obligations will be read into the indenture against the Trustee. In case an Event of Default has occurred and is continuing, the Trustee shall exercise those rights and powers vested in it by the indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of the indenture will require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties thereunder, or in the exercise of its rights or powers, unless it receives indemnity satisfactory to it against any loss, liability or expense.

Governing Law

The Indenture and the Notes shall be governed by and construed in accordance with the laws of the State of New York.

Submission to Jurisdiction; Waivers

The Company will irrevocably and unconditionally:

(1) submit itself and its property in any legal action or proceeding relating to the Indenture to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the general jurisdiction of the Courts of the State of New York, sitting in the Borough of Manhattan, The City of New York, the courts of the United States of America for the Southern District of New York, appellate courts from any thereof and courts of its own corporate domicile, with respect to actions brought against it as defendant;

(2) consent that any such action or proceeding may be brought in such courts and waive any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(3) waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to the Indenture or the Notes or the transactions contemplated hereby; and

(3) appoint CT Corporation, currently having an office at 111 Eighth Avenue, New York, NY 10011, as its agent to-receive on its behalf service of all process in any such action or proceeding, such service being hereby acknowledged by the Company to be effective and binding in every respect.

Settlement, Clearing and Registration of the Notes

Global Notes

The Notes will be represented by Regulation S Global Notes (as defined below) and Restricted Global Notes (as defined below) (each sometimes referred to herein as a “Global Note” and together referred to herein as the “Global Notes”).

Notes sold outside the United States in reliance on Regulation S will be represented by one or more Global Notes in definitive, fully registered form without interest coupons (collectively, the “Regulation S Global Note”) and will be deposited with the Trustee, as custodian for DTC, and registered in the name of DTC or its nominee for the accounts of Euroclear and Clearstream (as indirect participants in DTC).

Notes sold in reliance on Rule 144A under the Securities Act initially will be represented by one or more Global Notes in definitive, fully registered form without interest coupons (collectively, the “Restricted Global Note”) and will be deposited with the Trustee, as custodian for DTC and registered in the name of DTC or its nominee.

The Notes will be subject to certain restrictions on transfer and will bear a legend to that effect as described under “Notice to Investors.” Beneficial interests in the Regulation S Global Note may be transferred to a person who takes delivery in the form of an interest in the Restricted Global Note only upon receipt by the Trustee of a written certification from the transferor (in the form provided in the Indenture) to the effect that such transfer is being made to a person that the transferor reasonably believes is a qualified institutional buyer in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. Beneficial interests in the Restricted Global Note may be transferred to a person who takes delivery in the form of an interest in the Regulation S Global Note only upon receipt by the Trustee of a written certification from the transferor (in the form provided in the Indenture) to the effect that such transfer is being made in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act.

Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC (DTC participants) or persons who hold interests through DTC participants. The Company expects that under procedures established by DTC:

• upon deposit of each Global Note with DTC’s custodian, DTC will credit portions of the principal amount of the Global Note to the accounts of the DTC participants designated by the initial purchasers; and

• ownership of beneficial interests in each Global Note will be shown on, and transfer of ownership of those interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the Global Note).

Beneficial interests in a Global Note may be credited within DTC to Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg) on behalf of the owners of such interests.

Investors may hold their interests in a Global Note directly through DTC, Euroclear or Clearstream, Luxembourg, if they are participants in those systems, or indirectly through organizations that are participants in those systems.

Beneficial interests in a Global Note may not be exchanged for Notes in physical, certificated form except in the limited circumstances described below.

Book-Entry Procedures for the Global Notes

All interests in the Global Notes will be subject to the operations and procedures of DTC, Euroclear and Clearstream, Luxembourg. The Company provides the following summaries of those operations and procedures solely for the convenience of investors. The operations and procedures of each settlement system are controlled by that settlement system and may be changed at any time. Neither the Company, the Trustee, the security registrar, the paying agents nor the transfer agents is responsible for those operations or procedures.

DTC has advised that it is:

• a limited purpose trust company organized under the New York State Banking Law;

• a “banking organization” within the meaning of the New York State Banking Law;

• a member of the U.S. Federal Reserve System;

• a “clearing corporation” within the meaning of the New York Uniform Commercial Code; and

• a “clearing agency” registered under Section 17A of the Exchange Act.

DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between its participants through electronic book-entry changes to the accounts of its participants. DTC’s participants include securities brokers and dealers, including the initial purchasers; banks and trust companies; clearing corporations; and certain other organizations.

Indirect access to DTC’s system is also available to others such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly. Investors who are not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC.

So long as DTC or its nominee is the registered owner of a Global Note, DTC or its nominee will be considered the sole owner or holder of the Notes represented by that Global Note for all purposes under the indenture. Except as provided below, owners of beneficial interests in a Global Note:

• will not be entitled to have Notes represented by the Global Note registered in their names;

• will not receive or be entitled to receive physical, certificated Notes; and

• will not be considered the registered owners or holders of the Notes under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the Trustee under the indenture.

As a result, each investor who owns a beneficial interest in a Global Note must rely on the procedures of DTC to exercise any rights of a holder of Notes under the indenture (and, if the investor is not a participant or an indirect participant in DTC, on the procedures of the DTC participant through which the investor owns its interest).

Payments of principal, premium, if any, and interest with respect to the Notes represented by a Global Note will be made by the Trustee to DTC’s nominee as the registered holder of the Global Note. Neither the Company, the Trustee, the security registrar nor the paying agents or transfer agents will have any responsibility or liability for

the payment of amounts to owners of beneficial interests in a Global Note, for any aspect of the records relating to or payments made on account of those interests by DTC, or for maintaining, supervising or reviewing any records of DTC relating to those interests.

Payments by participants and indirect participants in DTC to the owners of beneficial interests in a Global Note will be governed by standing instructions and customary practices and will be the responsibility of those participants or indirect participants and not of DTC, its nominee or the Company.

Transfers between participants in DTC will be effected under DTC’s procedures and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream, Luxembourg will be effected in the ordinary way under the rules and operating procedures of those systems.

Cross-market transfers between DTC participants, on the one hand, and Euroclear or Clearstream, Luxembourg participants, on the other hand, will be effected within DTC through the DTC participants that are acting as depositaries for Euroclear and Clearstream, Luxembourg. To deliver or receive an interest in a Global Note held in a Euroclear or Clearstream, Luxembourg account, an investor must send transfer instructions to Euroclear or Clearstream, Luxembourg, as the case may be, under the rules and procedures of that system and within the established deadlines of that system. If the transaction meets its settlement requirements, Euroclear or Clearstream, Luxembourg, as the case may be, will send instructions to its DTC depositary to take action to effect final settlement by delivering or receiving interests in the relevant Global Notes in DTC, and making or receiving payment under normal procedures for same-day funds settlement applicable to DTC. Euroclear and Clearstream, Luxembourg participants may not deliver instructions directly to the DTC depositaries that are acting for Euroclear or Clearstream, Luxembourg.

Because of time zone differences, the securities account of a Euroclear or Clearstream, Luxembourg participant that purchases an interest in a Global Note from a DTC participant will be credited on the business day for Euroclear or Clearstream, Luxembourg immediately following the DTC settlement date. Cash received in Euroclear or Clearstream, Luxembourg from the sale of an interest in a Global Note to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream, Luxembourg cash account as of the business day for Euroclear or Clearstream, Luxembourg following the DTC settlement date.

DTC, Euroclear and Clearstream, Luxembourg have agreed to the above procedures to facilitate transfers of interests in the Global Notes among participants in those settlement systems. However, the settlement systems are not obligated to perform these procedures and may discontinue or change these procedures at any time. Neither the Company nor the Trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream, Luxembourg or their participants or indirect participants of their obligations under the rules and procedures governing their operations.

Certificated Notes

Beneficial interests in a Global Note may not be exchanged for Notes in physical, certificated form unless:

• DTC notifies the Company at any time that it is unwilling or unable to continue as depositary for the Global Note and a successor depositary is not appointed within 90 days;

• DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days;

• The Company, at its option, notify the Trustee that it elects to cause the issuance of certificated Notes; or

• certain other events provided in the indenture should occur, including the occurrence and continuance of an event of default with respect to the Notes.

In all cases, certificated Notes delivered in exchange for a Global Note will be registered in the names, and issued in any approved denominations, requested by the depository.

Mutilated, Destroyed and Lost Notes

In case any certificated Note becomes mutilated, defaced, destroyed, lost or stolen, the Company will execute and, upon the request of the Company, the Trustee will authenticate and deliver a new certificated Note of like tenor (including the same date of issuance)and equal principal or liquidation preference amount, registered in the same manner and dated the date of its authentication in exchange and substitution for the certificated Note (upon surrender and cancellation thereof), as the case may be, or in lieu of and substitution for such certificated Note. In case such certificated Note is destroyed, lost or stolen, the applicant for a substituted certificated Note will furnish to the Company, the Trustee, the Paying Agent and the registrar, as applicable, security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft of the Note, the applicant will also furnish to the Company satisfactory evidence of the destruction, loss or theft of such certificated Note, as the case may be, and of the ownership thereof. Upon the issuance of any such certificated Note, the Company, the Trustee, the Paying Agent and the registrar, as applicable, may require the payment by the registered holder thereof of a sum sufficient to cover fees and expenses connected therewith.

Certain Definitions

“Acquired Debt” means Debt of any Person at the time it becomes a Restricted Subsidiary; provided that the Leverage Ratio of the Company and its Restricted Group, after giving pro forma effect otthe transaction or transactions by which such Person becomes a Restricted Subsidiary, would be not more than such ratio of the Company and its Restricted Group before giving effect to such transactions.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Asset Disposition” means any transfer, conveyance, sale, lease or other disposition (including by way of a Sale and Leaseback Transaction) by the Company or any Restricted Subsidiary (including a consolidation or merger or other sale of any such Restricted Subsidiary with, into or to another Person in a transaction in which such Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a disposition by a Restricted Subsidiary to the Company or Restricted Subsidiary which is an 80% or more owned Subsidiary of the Company or by the Company to a Restricted Subsidiary which is an 80% or more owned Subsidiary of the Company) of (i) shares of Capital Stock (other than directors’ qualifying shares) or other ownership interests of a Restricted Subsidiary, (ii) substantially all of the assets of the Company or any Restricted Subsidiary representing a division or line of business or (iii) other assets or rights of the Company or any Restricted Subsidiary outside of the ordinary course of business; provided that in each case the aggregate consideration for such transfer, conveyance, sale, lease or other disposition is equal to $25 million or more; provided further that the term “Asset Disposition” shall not include (s) any Sale or Leaseback of Tower Equipment; (t) leases or subleases to third parties of real property owned in fee or leased by the Company or its Restricted Subsidiaries or a disposition or assignment (as lessor) of a lease of real property or right of way or other interest in real property, or license of intellectual property, in each case, in the ordinary course of business; (u) any disposition of property or assets of the Company or any of its Subsidiaries in the ordinary course of business, or that in the reasonable judgment of the Company, have become uneconomic, obsolete or worn out; (v) the incurrence of Liens not prohibited by the indenture and the disposition of assets related to such Liens by the secured party pursuant to a foreclosure; (w) any disposition of cash or Cash Equivalents and other assets referred to in clause (1) of the definition of “Permitted Investments” in the ordinary course of business; (x) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole (which will be governed by the provisions of the indenture described above under the caption “-Certain Covenants-Merger, Consolidation or Sale of all or Substantially all Assets” and not by the provisions of the Asset Disposition covenant); (y) any transaction subject to, and permitted under, “-Limitation on Restricted Payments”; or (z) any Permitted Investment.

“Attributable Debt” in respect of a Sale and Leaseback Transaction means, at any date of determination,

(a) if such Sale and Leaseback Transaction is a Capital Lease Obligation, the amount of Debt represented thereby according to the definition of “Capital Lease Obligation,” and

(b) in all other instances, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended).

“Board Resolution” means a copy of a resolution certified by the President, Chief Executive Officer, any Director or the Secretary of the Board of Directors of the Company to have been duly adopted by the Board of Directors or a committee thereof and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in the Borough of Manhattan, the City of New York, in London, England, or in Paraguay are authorized or obligated by law or executive order to close.

“Capital Lease Obligation” of any Person means the obligation to pay rent or other payment amounts under a lease of real or personal property of such Person which is required to be classified and accounted for as a capital lease on the face of a balance sheet of such Person in accordance with International Financial Reporting Standards. The Stated Maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. The principal amount of Debt represented by such obligation shall be the capitalized amount thereof that would appear on the face of a balance sheet of such Person in accordance with International Financial Reporting Standards.

“Capital Stock” of any Person means any and all shares, interests, participation or other equivalents (however designated) of corporate stock or other equity participation, including partnership interests, whether general or limited, of such Person.

“Cash Equivalents” means, with respect to any Person:

(i) Government Securities;

(ii) deposit accounts, certificates of deposit and Eurodollar time deposits and money market deposits, bankers’ acceptances and overnight bank deposits, in each case issued by or with a bank or trust company which is organized under the laws of the United States of America, any state thereof, any member state of the European Union, or Paraguay, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $100 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated “A” (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the U.S. Securities Act) or any money market fund sponsored by a U.S. registered broker dealer or mutual fund distributor;

(iii) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i) and (ii) entered into with any financial institution meeting the qualifications specified in clause (ii) above;

(iv) commercial paper having the highest rating obtainable from Fitch or Moody’s and in each case maturing within six months after the date of acquisition;

(v) with respect to any Person organized under the laws of, or having its principal business operations in, a jurisdiction outside the United States, those investments that are of the same type as investments in

clauses (i), (iii) and (iv) except that the obligor thereon is organized under the laws of the country (or any political subdivision thereof) in which such Person is organized or conducting business; and

(vi) up to $2 million in aggregate of other Investments held by the Company or its Restricted Subsidiaries.

“Commission” means the Securities and Exchange Commission, as from time to time constituted, created under the U.S. Exchange Act, or, if at any time after the execution of the Indenture such Commission is not existing and performing the duties now assigned to it under the U.S. Trust Indenture Act of 1939, then the body performing such duties at such time.

“Common Stock” of any Person means Capital Stock of such Person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person.

“Consolidated Corporate and License Acquisition Expense” means, with respect to the Company, (i) costs of head office personnel salaries, rent, and other head office expenses and (ii) costs (other than capitalized costs) incurred in seeking new licenses.

“Consolidated Income Tax Expense” for any period means the consolidated provision for income and franchise taxes of the Company and its Restricted Group for such period calculated on a consolidated basis in accordance with International Financial Reporting Standards.

“Consolidated Interest Expense” means for any period the consolidated interest expense included in a consolidated income statement (without deduction of interest income) of the Company and its Restricted Group for such period calculated on a consolidated basis in accordance with International Financial Reporting Standards, including without limitation or duplication (or, to the extent not so included, with the addition of):

(i) the amortization of Debt discounts;

(ii) any payments or fees with respect to letters of credit, bankers’ acceptances or similar facilities;

(iii) fees with respect to interest rate swap or similar agreements or foreign currency hedge, exchange or similar agreements;

(iv) Preferred Stock dividends (other than with respect to Redeemable Stock) declared paid or payable;

(v) accrued Redeemable Stock dividends whether or not declared or paid;

(vi) interest on Debt guaranteed by the Company or any member of its Restricted Group; and

(vii) the interest component of any Capital Lease Obligation.

“Consolidated Net Income” for any period means the consolidated net income (or loss) of the Company and its Restricted Group for such period determined on a consolidated basis in accordance with International Financial Reporting Standards; provided that there shall be excluded therefrom (without duplication):

(a) the net income (or loss) of any Person acquired by the Company or a member of its Restricted Group for any period prior to the date of such transaction;

(b) the net income (or loss) of any Person that is not a member of the Restricted Group of the Company except to the extent of the amount of dividends or other distributions actually paid to the Company or a member of its Restricted Group by such Person during such period;

(c) gains or losses on Asset Dispositions by the Company or any member of its Restricted Group or other dispositions of assets outside the ordinary course of business;

(d) all extraordinary, non-recurring or exceptional gains and extraordinary, non-recurring or exceptional losses;

(e) the cumulative effect of changes in accounting principles (whether effected through cumulative effect adjustment or a retroactive application, in each case, in accordance with International Financial Reporting Standards);

(f) non-cash gains or losses resulting from fluctuations in currency exchange rates;

(g) non-cash compensation expense incurred with any issuance or grant of equity interests to an employee of the Company or any other member of the Restricted Group;

(h) any restructuring charges, severance payments and charges relating to litigation settlements or judgments; and

(i) the tax effect of any of the items described in clauses (a) through (h) above.

“Consolidated Net Tangible Assets” means , as of any date of determination, the total assets shown on the consolidated balance sheet of the Company and its Restricted Subsidiaries as of the most recent date for which such a balance sheet is available, determined on a consolidated basis in accordance with International Financial Reporting Standards, less all goodwill, patents, tradenames, trademarks, copyrights, franchises, experimental expenses, organization expenses and any other amounts classified as intangible assets in accordance with International Financial Reporting Standards (and, in the case of any determination relating to any Permitted Investment, on a pro forma basis including any property or assets being acquired in connection therewith).

“Debt” means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent:

(i) the principal of and premium, if any, in respect of every obligation of such Person for money borrowed;

(ii) the principal of and premium, if any, in respect of every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses;

(iii) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person (but only to the extent such obligations are not reimbursed within five Business Days following receipt by such Person of a demand for reimbursement);

(iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business);

(v) every Capital Lease Obligation of such Person;

(vi) all Redeemable Stock issued by such Person;

(vii) the net obligation of such Person under Interest Rate, Currency or Commodity Price Agreements of such Person; and

(viii)every obligation of the type referred to in clauses (i) through (vii) of another Person and all dividends of another Person the payment of which, in either case, such Person has Guaranteed or is responsible or liable for, directly or indirectly, as obligor, Guarantor or otherwise.

The “amount” or “principal amount” of Debt at any time of determination as used herein represented by (a) any Debt issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with International Financial Reporting Standards, and (b) any Redeemable Stock, shall be the maximum fixed redemption or repurchase price in respect thereof. Notwithstanding anything else to the contrary, for all purposes under the Indenture, the amount of Debt Incurred, repaid, redeemed, repurchased or otherwise acquired by a Restricted Subsidiary shall equal the liability in respect thereof determined in accordance with International Financial Reporting Standards and reflected on the Company’s consolidated balance sheet.

“Default” means an event that with the passing of time or the giving of notice, or both would constitute an Event of Default.

“EBITDA” for any period means the Consolidated Net Income of the Company and its Restricted Group for such period plus the following (without duplication) to the extent deducted in calculating Consolidated Net Income:

(i) Consolidated Interest Expense of the Company and its Restricted Group for such period;

(ii) Consolidated Income Tax Expense of the Company and its Restricted Group for such period;

(iii) the consolidated depreciation and amortization expense included in the income statement of the Company and its Restricted Group for such period;

(iv) other non-cash items reducing Consolidated Net Income, including impairments and expenses and charges related to any equity offering, incurrence of Debt, Investment, acquisition or divestiture permitted by the Indenture, whether or not consummated (other than any non-cash items increasing net income to the extent that it will result in payments in the future);

(v) the amount of any expense relating to any minority interest of Restricted Subsidiaries;

provided, however, that for purposes of any determination pursuant to the provisions of clause (3)(a)(x) of the “-Limitation on Restricted Payments,” there shall be excluded therefrom the EBITDA (if positive) of any Restricted Subsidiary (calculated separately for such Person in the same manner as provided above for the Company and its Restricted Group) that is subject to a restriction to the extent it would have prevented the payment of dividends or the making of distributions to the Company or another Restricted Subsidiary at all times during such period, to the extent of such restriction;

provided further that, in the event the Company has made Investments, Asset Dispositions or acquisitions of assets not in the ordinary course of business (including acquisitions of other Persons by merger, consolidation or purchase of Capital Stock) during or after such period, EBITDA shall be calculated on a pro forma basis as if the Investments, Asset Dispositions or acquisitions had taken place on the first day of such period.

“Fitch” means Fitch Rating, Ltd. and its successors.

“Government Securities” means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States is pledged and which have a remaining weighted average life to maturity of not more than one year from the date of Investment therein.

“Gradation” means a gradation within a Rating Category or a change to another Rating Category, which shall include: (i) “+” and “-“ in the case of Fitch’s current Rating Categories (e.g., a decline from BB+ to BB would constitute a decrease of one gradation), (ii) 1, 2 and 3 in the case of Moody’s current Rating Categories (e.g., a decline from Bal to Ba2 would constitute a decrease of one gradation), or (iii) the equivalent in respect of successor Rating Categories of Fitch or Moody’s or Rating Categories used by Rating Agencies other than Fitch and Moody’s.

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guaranteeing, any Debt of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person:

(i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt;

(ii) to purchase property, securities or services for the purpose of assuring the holder of such Debt of the payment of such Debt; or

(iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt (and “Guaranteed,” “Guaranteeing” and “Guarantor” shall have meanings correlative to the foregoing); provided, however, that the Guarantee by any Person shall not include endorsements by such Person for collection or deposit, in either case, in the ordinary course of business.

“Incur” means, with respect to any Debt or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or otherwise become liable in respect of such Debt or other obligation, including by acquisition of Subsidiaries (the Debt of any other Person becoming a Subsidiary of such Person being deemed for this purpose to have been incurred at the time such other Person becomes a Subsidiary), or the recording, as required pursuant to International Financial Reporting Standards or otherwise, of any such Debt or other obligation on the balance sheet of such Person (and “Incurrence,” “Incurred,” “Incurrable” and “Incurring” shall have meanings correlative to the foregoing); provided, however, that a change in International Financial Reporting Standards that results in an obligation of such Person that exists at such time becoming Debt shall not be deemed an Incurrence of such Debt.

“Interest Rate, Currency or Commodity Price Agreement” of any Person means any forward contract, futures contract, swap, option or other financial agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements) relating to, or the value of which is dependent upon, interest rates, currency exchange rates or commodity prices or indices (excluding contracts for the purchase or sale of goods in the ordinary course of business).

“Investment” by any Person means any direct or indirect loan, advance or other extension of credit or capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) to, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Debt issued by, any other Person, including any payment on a Guarantee of any obligation of such other Person, but shall not include (a) trade accounts receivable in the ordinary course of business on credit terms made generally available to the customers of such Person, or (b) commission, travel, payroll, entertainment, relocation and similar advances to officers and employees and profit sharing and other employee benefit plan contributions made in the ordinary course of business.

“Investment Grade” means (i) BBB- or above in the case of Fitch (or its equivalent under any successor Rating Categories of Fitch), (ii) Baa3 or above, in the case of Moody’s (or its equivalent under any successor Rating Categories of Moody’s), and (iii) the equivalent in respect of the Rating Categories of any Rating Agencies.

“Company Expenses” means (A) the reasonable fees and expenses actually incurred in connection with service of the Notes or any exchange of securities or tender for outstanding Notes, (B) fees, taxes and expenses required to maintain the corporate existence of the Company, and (C) any other fees and expenses relating to (A) or (B).

“Leverage Ratio,” when used in connection with any Incurrence (or deemed Incurrence) of Debt, means the ratio of (i) the consolidated principal amount of Debt of the Company and its Restricted Group outstanding as of the most recent available quarterly or annual balance sheet, after giving pro forma effect to (a) the Incurrence of such Debt and any other Debt Incurred since such balance sheet date, (b) the receipt and application of the proceeds

thereof and (c) (without duplication) the repayment, redemption or repurchase of any other Debt since such balance sheet date, to (ii) EBITDA for the last four full fiscal quarters prior to the Incurrence of such Debt for which consolidated financial statements are available, determined on a pro forma basis as if any such Debt had been Incurred and the proceeds thereof had been applied, or such other Debt had been repaid, redeemed or repurchased, as applicable, at the beginning of such four fiscal quarter period.

“Lien” means, with respect to any property or assets, any mortgage, pledge, security interest, lien, charge, encumbrance, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing).

“Material Subsidiary” means any Subsidiary of the Company constituting a “Significant Subsidiary” of the Company in accordance with Rule 1-02(w) of Regulation S-X under the Securities Act of 1933, as amended in effect on the date hereof. References therein to 20% shall in each case be replaced with references to 10%.

“Maturity,” when used with respect to any Note, means the date on which the principal of such Note becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.

“Moody’s” means Moody’s Investor Service, Inc. and its successors.

“Net Available Proceeds” from any Asset Disposition means cash or readily marketable cash equivalents received (including by way of sale or discounting of a note, installment receivable or other receivable, but excluding any Related Assets and other consideration received in the form of assumption by the acquiror of Debt or other obligations relating to such properties or assets) therefrom by the Company or any Restricted Subsidiary, net of:

(i) all legal, title and recording tax expenses, commissions and other fees and expenses Incurred and all federal, state, provincial, foreign and local taxes required to be accrued as a liability as a consequence of such Asset Disposition;

(ii) all payments made by the Company or any Restricted Subsidiary, on any Debt which is secured by such assets in accordance with the terms of any Lien upon or with respect to such assets or which must by the terms of such Debt or Lien, or in order to obtain a necessary consent to such Asset Disposition or by applicable law, be repaid out of the proceeds from such Asset Disposition;

(iii) all distributions and other payments made to other equity holders in the Company’s Restricted Subsidiaries, or joint ventures as a result of such Asset Disposition; and

(iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve in accordance with International Financial Reporting Standards, against any liabilities associated with such assets and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Disposition, including, without limitation, liabilities under any indemnification obligations and severance and other employee termination costs associated with such Asset Disposition, in each case as determined by the Board of Directors, in its reasonable good faith judgment evidenced by a resolution of the Board of Directors filed with the Trustee; provided, however, that any reduction in such reserve within twelve months following the consummation of such Asset Disposition will be treated for all purposes of the Indenture and the Notes as a new Asset Disposition at the time of such reduction with Net Available Proceeds equal to the amount of such reduction.

“Offer to Purchase” means a written offer (the “Offer”) sent by the Company by first class mail, postage prepaid, to each holder at his address appearing in the Security Register on the date of the Offer offering to purchase up to the principal amount of Notes specified in such Offer at the purchase price specified in such Offer (as determined pursuant to the Indenture). Unless otherwise required by applicable law, the Offer shall specify an expiration date (the “Expiration Date”) of the Offer to Purchase which shall be, subject to any contrary requirements

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of applicable law, not less than 30 days or more than 60 days after the date of such Offer and a settlement date (the “Purchase Date”) for purchase of Notes within five Business Days after the Expiration Date. The Company shall notify the Trustee at least 15 Business Days (or such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of the Company’s obligation to make an Offer to Purchase, and the Offer shall be mailed by the Company or, at the Company’s request, by the Trustee in the name and at the expense of the Company. The Offer shall contain all instructions and materials necessary to enable such holders to tender Notes pursuant to the Offer to Purchase. The Offer shall also state:

(a) the Section of the Indenture pursuant to which the Offer to Purchaseis being made;

(b) the Expiration Date and the Purchase Date;

(c) the aggregate principal amount of the Outstanding Notes offered to be purchased by the Company pursuant to the Offer to Purchase (including, if less than l 00%, the manner by which such has been determined pursuant to the Section of the Indenture requiring the Offer to Purchase) (the “Purchase Amount”);

(d) the purchase price to be paid by the Company for each $1,000 aggregate principal amount of Notes accepted for payment (as specified pursuant to the Indenture) (the “Purchase Price”);

(e) that the holder may tender all or any portion of the Notes registered in the name of such holder and that any portion of a Note tendered must be tendered in an integral multiple of $1,000 principal amount;

(f) the place or places where Notes are to be surrendered for tender pursuant to the Offer to Purchase;

(g) that interest on any Note not tendered or tendered but not purchased by the Company pursuant to the Offer to Purchase will continue to accrue;

(h) that on the Purchase Date the Purchase Price will become due and payable upon each Note being accepted for payment pursuant to the Offer to Purchase and that interest thereon shall cease to accrue on and after the Purchase Date;

(i) that each holder electing to tender a Note pursuant to the Offer to Purchase will be required to surrender such Note at the place or places specified in the Offer prior to the close of business on the Expiration Date (such Note being, if the Company or the Trustee so requires, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the holder thereof or his attorney duly authorized in writing);

(j) that holders will be entitled to withdraw all or any portion of Notes tendered if the Company (or their Paying Agent) receives, not later than the close of business on the Expiration Date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder, the principal amount of the Note the holder tendered; the certificate number of the Security the holder tendered and a statement that such holder is withdrawing all or a portion of his tender;

(k) that (a) if Notes in an aggregate principal amount less than or equal to the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase all such Notes and (b) if Notes in an aggregate principal amount in excess of the Purchase Amount are tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase Notes having an aggregate principal amount equal to the Purchase Amount on a pro rata basis (with such adjustments as may be deemed appropriate so that only Notes in denominations of $1,000 or integral multiples thereof shall be purchased); and

(l) that in the case of any holder whose Note is purchased only in part, the Company shall execute, and the Trustee shall authenticate and deliver to the holder of such Note without service charge, a new Note or

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Notes, of any authorized denomination as requested by such holder, in an aggregate principal amount equal to and in exchange for the unpurchased portion of the Note so tendered.

Any Offer to Purchase shall be governed by and effected in accordance with the Offer for such Offer to Purchase.

The Company will publish notices relating to the Offer to Purchase in a leading newspaper having a general circulation in New York City (which is expected to be the Wall Street Journal), London (which is expected to be the Financial Times) and, for so long as any Notes are listed on the Luxembourg Stock Exchange, Luxembourg (which is expected to the Luxemburger Wort).

“Officer’s Certificate” means a certificate signed by the President, Chairman of the Board, any Vice Chairman of the Board, any Director, the Chief Executive Officer, the Chief Operating Officer, any Senior Vice President, or the Secretary of the Board of the Company, and delivered to the Trustee.

“Outstanding,” when used with respect to Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under the Indenture, except:

(i) Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

(ii) Notes for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the holders of such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor satisfactory to the Trustee has been made; and

(iii) Notes which have been paid or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to the Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such Notes are valid obligations of the Company;

provided, however, that in determining whether the holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company or any other obligor upon the Notes or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Trustee knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Affiliate of the Company or of such other obligor.

“Permitted Interest Rate, Currency or Commodity Price Agreement” of any Person means any Interest Rate, Currency or Commodity Price Agreement entered into with one or more financial institutions in the ordinary course of business that is designed to protect such Person against fluctuations in interest rates or currency exchange rates or with respect to Debt Incurred and which shall have a notional amount no greater than the payments due with respect to the Debt being hedged thereby, or in the case of currency or commodity protection agreements against currency exchange or commodity price fluctuations in the ordinary course of business relating to then existing financial obligations and not for purposes of speculation.

“Permitted Investments” means:

(1) Investments in (i) Cash Equivalents or (ii) deposit accounts, certificates of deposit and time deposits and money market deposits, bankers’ acceptances and overnight bank deposits, in each case issued by or with a bank or trust company which is · organized under the laws of the jurisdiction in which the

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Company or Restricted Subsidiary which makes such Investment operates; provided that the Company shall use its reasonable efforts to ensure that any such bank or trust company described in this clause (ii) is a credit-worthy institution;

(2) Investments by the Company or any Restricted Subsidiary in the Company or a Restricted Subsidiary that is primarily engaged in a Related Business;

(3) Investments by the Company or any Restricted Subsidiary in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary that is primarily engaged in a Related Business or (ii) such Person is merged, consolidated or amalgamated into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary that is primarily engaged in a Related Business;

(4) Investments acquired as consideration as permitted under “Limitation on Asset Dispositions”;

(5) Restricted Payments directly or indirectly to the Company to fund permitted Company Expenses;

(6) Investments in customers and suppliers in the ordinary course of business which either (A) generate accounts receivable or (B) are accepted in settlement of bona fide disputes;

(7) loans or advances to employees and officers (or loans to any direct or indirect parent, the proceeds of which are used to make loans or advances to employees or officers, or guarantees of third-party loans to employees or officers) in the ordinary course of business;

(8) stock, obligations or securities received in satisfaction of judgments, foreclosure of liens or settlement of debts (whether pursuant to a plan of reorganization or similar arrangement or otherwise);

(9) any Investment existing on the Issue Date;

(10) Investments in Interest Rate, Currency or Commodity Price Agreements not otherwise prohibited under the Indenture; and

(11) other Investments in Persons primarily engaged in a Related Business in an aggregate cumulative amount at any time outstanding not to exceed $20 million.

“Permitted Company Investments” means:

(1) Investments in Cash Equivalents; and

(2) Investments by the Company, directly or indirectly in the Company or any Restricted Subsidiary incidental to the issuance of the Notes.

“Permitted Liens” means:

(a) Liens for taxes, assessments or governmental charges or levies on the property of the Company or any Restricted Subsidiary if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceeds promptly instituted and diligently concluded; provided that any reserve or other appropriate provision that shall be required in conformity with International Financial Reporting Standards shall have been made therefor;

(b) Liens imposed by law, such as statutory Liens of landlords’, carriers’, warehousemen’s and mechanics’ Liens and other similar Liens, on the property of the Company or any Restricted Subsidiary arising in the ordinary course of business or Liens arising solely by virtue of any statutory or common law (but not contractual) provisions relating to bankers’ liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depositary institution;

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(c) Liens on the property of the Company or any Restricted Subsidiary Incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance bids, trade contracts, letters of credit performance or return-of-money bonds, surety bonds or other obligations of a like nature and Incurred in a manner consistent with industry practice, in each case which are not Incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property and which do not in the aggregate impair in any material respect the use of property in the operation of the business of the Company and the Restricted Group taken as a whole;

(d) Liens on property at the time the Company or any Restricted Subsidiary acquired such property, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary; provided, however, that any such Lien may not extend to any other property of the Company or any Restricted Subsidiary; provided further, however, that such Liens shall not have been Incurred in anticipation of or in connection with the transaction or series of transactions pursuant to which such property was acquired by the Company or any Restricted Subsidiary;

(e) Liens on the property of a Person at the time such Person becomes a Restricted Subsidiary; provided, however, that any such Lien may not extend to any other property of the Company, any other Restricted Subsidiary that is not a direct or, prior to such time, indirect Subsidiary of such Person; provided further, however, that any such Lien was not Incurred in anticipation of or in connection with the transaction or series of transactions pursuant to which such Person became a Restricted Subsidiary;

(f) pledges or deposits by the Company or any Restricted Subsidiary under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Debt) or leases to which the Company or any Restricted Subsidiary is party, or deposits to secure public or statutory obligations of the Company or any Restricted Subsidiary or deposits for the payment of rent, in each case Incurred in the ordinary course of business;

(g) utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character;

(h) any provision for the retention of title to any property by the vendor or transferor of such property which property is acquired by the Company or a Restricted Subsidiary in a transaction entered into in the ordinary course of business of the Company or a Restricted Subsidiary and for which kind of transaction it is customary market practice for such retention of title provision to be included;

(i) Liens arising by means of any judgment, decree or order of any court, to the extent not otherwise resulting in a Default hereunder so long as any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order have not been fully terminated or the period within which such proceedings may be initiated has not expired and any Liens that are required to protect or enforce rights in any administrative, arbitration or other court proceeding in the ordinary course of business;

(j) any Lien securing Debt permitted to be Incurred under any Permitted Interest Rate, Currency or Commodity Price Agreements pursuant to clause (v) of the second paragraph of “-Limitation on Debt”;

(k) Liens on and pledges of the Capital Stock of any Unrestricted Subsidiary to secure Debt of that Unrestricted Subsidiary;

(l) mortgages, liens, security interests, restrictions, encumbrances or any other matters of record that have been placed by any developer, landlord or other third party on property over which the Company or any Restricted Subsidiary has easement rights or on any real property leased by the Company or any Restricted Subsidiary or similar agreements relating thereto and (2) any condemnation or eminent domain proceedings or compulsory purchase order affecting real property;

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(m) Liens existing on the date of the Indenture;

(n) Liens in favor of the Company or any Restricted Subsidiary;

(o) Liens on goods (and the proceeds thereof) and documents of title and the property covered thereby securing Debt in respect of commercial letters of credit issued to facilitate the purchase, shipment or storage of such inventory or other goods;

(p) Liens on the property of the Company or any Restricted Subsidiary to replace in whole or in part, any Lien described in the foregoing clauses (a) through (p); provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Debt being refinanced or in respect of property that is the security for a Permitted Lien hereunder;

(q) Liens on any escrow account used in connection with pre-funding a refinancing of Debt otherwise permissible by the Indenture;

(r) Liens on the Company’s deposits in favor of financial institutions arising from any netting or set-off arrangement substantially consistent with its current practice for the purpose of netting debt and credit balances substantially consistent with Millicom’s and the Company’s existing cash pooling arrangements, provided that such outstanding amount of obligations of the Company represented thereby does not exceed an outstanding amount at any one time equal to the lesser of (i) the amount of Restricted Payments that can be made in reliance on clause 3 of “Limitation on Restricted Payments”, and (ii) US$200,000,000 (or the equivalent in other currencies); and

(s) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary with respect to obligations that do not exceed the greater of $25 million or 15% of Consolidated Net Tangible Assets at any one time outstanding and that do not in the aggregate materially detract from the value of the property of the Company and the Restricted Subsidiaries, taken as a whole, or materially impair the use thereof in the operation of business by the Company or such Restricted Subsidiary.

“Person” means any natural person, corporation, company, voluntary association, partnership, limited liability company, joint venture, trust, unincorporated organization or Governmental Authority or other entity of whatever nature.

“Preferred Dividends” for any Person means for any period the quotient determined by dividing the amount of dividends and distributions paid or accrued (whether or not declared) on Preferred Stock of such Person during such period calculated in accordance with International Financial Reporting Standards by one (1) minus the actual combined Federal, state, local and foreign income tax rate of the Company on a consolidated basis (expressed as a decimal).

“Preferred Stock” of any Person means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person.

“Purchase Date” has the meaning set forth in the definition of “Offer to Purchase.”

“Rating Agency” means each of (i) Fitch and Moody’s or (ii) if either Fitch or Moody’s or both of them are not making ratings of the Notes publicly available, a nationally recognized U.S. rating agency or agencies, as the case may be, selected by the Company, which will be substituted for Fitch or Moody’s or both, as the case may be.

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“Rating Category” means (i) with respect to Fitch, any of the following categories (any of which may include a “+” or “-”): AAA, AA, A, BBB, BB, B, CCC, CC, C, R, SD and D (or equivalent successor categories); (ii) with respect to Moody’s, any of the following categories (any of which may include a “1,” “2” or “3”): Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C (or equivalent successor categories), and (iii) the equivalent of any such categories of Fitch or Moody’s used by another Rating Agency, if applicable.

“Redeemable Stock” of any Person means any Capital Stock of such Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or otherwise (including upon the occurrence of an event) matures or is required to be redeemed (pursuant to any sinking fund obligation or otherwise) or is convertible into or exchangeable for Debt or is redeemable at the option of the holder thereof, in whole or in part, at any time prior to the final Stated Maturity of the Notes.

“Record Date” means the May 29 or November 29, as the case may be, immediately preceding an interest payment date.

“Related Assets” means all assets, rights (contractual or otherwise) and properties, whether tangible or intangible (including ownership interests), used or intended for use in connection with a Related Business.

“Related Business” means any business in which the Company or its Subsidiaries are engaged, directly or indirectly, that consists primarily of, or are related to, operating, acquiring, developing or constructing any telecommunications services (including, without limitation, fixed and mobile telephony, broadband internet, network-related services, cable television, broadcast content, network- neutral services, electronic transactional, financial and commercial services related to the provision of telephony or internet services) and related businesses.

“Related Person” of any Person means any other Person directly or indirectly owning (a) 5% or more of the outstanding Common Stock of such Person (or, in the case of a Person that is not a corporation, 5% or more of the equity interest in such Person) or (b) 5% or more of the combined voting power of the Voting Stock of such Person.

“Restricted Group,” when used in respect of the Company, means the Company and the Restricted Subsidiaries, taken together on a consolidated basis.

“Restricted Subsidiary” means any Subsidiary of the Company, other than an Unrestricted Subsidiary.

“Sale and Leaseback Transaction” means any direct or indirect arrangement relating to assets or property now owned or hereafter acquired whereby the Company or a Restricted Subsidiary transfers such assets or property to another Person and the Company or such Restricted Subsidiary leases it from such Person.

“SPM” means Servicios y Productos Multimedios S.A.

“SPM Acquisition” means the acquisition by the Company, directly or indirectly, of SPM under circumstances where the total aggregate investment made or consideration paid by the Company, including loans made prior to such acquisition and further investments to consummate such acquisition, does not exceed $50 million (and any interest on loans included therein) at the time of such acquisition.

“Stated Maturity,” when used with respect to any security or any installment of interest thereon, means the date specified in such security as the fixed date on which the principal of such security or such installment of interest is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred).

“Subsidiary” of any Person means (i) a corporation more than 50% of the combined voting power of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation) in which such Person, or one or more other Subsidiaries of such Person or such Person and one

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or more other Subsidiaries thereof, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof.

“Technical Services Agreement” means that certain technical services agreement, dated as of January 1, 2008, between Millicom International Cellular S.A. and the Company.

“Tower Equipment” means passive infrastructure related to telecommunications services, excluding telecommunications equipment, but including, without limitation, towers (including tower lights and lightning rods), power breakers, deep cycle batteries, generators, voltage regulators, main AC power, rooftop masts, cable ladders, grounding, walls and fences, access roads, shelters, air conditioners and BTS batteries owned by the Company or any Subsidiary.

“U.S. Dollar Equivalent” means with respect to any monetary amount in a currency other than U.S. Dollars, at any time of determination thereof, the amount of U.S. Dollars obtained by translating such other currency involved in such computation into U.S. Dollars at the spot rate for the purchase of U.S. Dollars with the applicable other currency as published in the Financial Times on the date that is two Business Days prior to such determination.

“Voting Stock” of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency.

“Weighted Average Life to Maturity” means, when applied to any Debt or Preferred Stock at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Debt or liquidation preference of such Preferred Stock, as the case may be, into (b) the total of the product obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal or upon mandatory redemption, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment.

“Wholly Owned Restricted Subsidiary” of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

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TAXATION

The information provided below does not purport to be a complete summary of Paraguayan, United States federal income, European Union or other tax laws and practice currently applicable. It is not intended as tax advice and does not consider the Investors’ particular circumstances.

PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO THE CONSEQUENCES OF PURCHASING THE NOTES, INCLUDING, WITHOUT LIMITATION, THE CONSEQUENCES OF THE RECEIPT OF INTEREST AND THE SALE, REDEMPTION OR REPAYMENT OF THE NOTES OR COUPONS.

Paraguay Tax Considerations

The following is a general summary of the Paraguay tax considerations relating to an investment in the Notes by a non-Paraguayan resident. It is based on the tax laws of Paraguay as in effect on the date hereof, is subject to any change in Paraguayan law that may come into effect after such date, and is applicable to us. The information set forth below is intended to be a general description only and does not address all possible tax consequences relating to an investment in the Notes. In addition, it does not describe any tax consequences (i) arising under any taxing jurisdiction other than Paraguay or (ii) that are applicable to a resident of Paraguay.

A “Non-Paraguayan Holder” is a holder of Notes who is not a resident of Paraguay for tax purposes, or does not have a beneficial interest therein, in connection with a trade or business through a permanent establishment in Paraguay. Under Paraguay’s tax laws, a foreign individual or entity that engages in non-personal services, commercial or industrial activities performed inside Paraguayan territory or holds assets located in Paraguayan territory must pay income tax in Paraguay.

This summary is based upon Paraguayan Income Tax Law (Ley No. 125/91 as amended by Ley de Adecuación Fiscal N° 2.421) in effect as of the date of this offering memorandum. Paraguayan tax laws are subject to change. Prospective purchasers of the Notes should consult their own tax advisers as to the Paraguayan or other tax consequences of the purchase, ownership and disposition of the Notes, including, in particular, the effect of any foreign state or local tax laws.

Paraguay has entered into, and is negotiating several tax treaties that may affect the Paraguayan withholding tax liability of Non-Paraguayan Holders. Prospective purchasers of the Notes should consult their own tax advisers as to the tax consequences, if any, of such treaties. Under Paraguayan Income Tax Law, and the regulations thereunder, interest and any applicable commissions paid by us as a result of this issuance to a Non- Paraguayan Holder will be subject to Paraguayan withholding tax of 6% on interest payments to the extent the Non- Paraguayan Holder is a “foreign bank, financial or other recognized credit institution” (entidades bancarias o financieras u otras instituciones de crédito de reconocida trayectoria en el mercado financiero) or 15% on interest payments in all other cases. Capital gains realized from the sale or other disposition of notes or subordinated notes by a Non-Paraguayan Holder will not be subject to any Paraguayan income or other taxes. The Company has been advised by its counsel that payments by the Company under the Notes made to DTC will be treated as payments to a “foreign bank, financial or other recognized credit institution” and as such will be subject to withholding at the 6% level.

A Non-Paraguayan Holder will not be liable for other types of taxes with respect to its holdings, nor will it be liable for any Paraguayan stamp, issue, registration or similar tax or duty.

United States Federal Income Tax Considerations

THE FOLLOWING DISCUSSION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY ANY PERSON, FOR THE PURPOSE OF AVOIDING UNITED STATES FEDERAL, STATE OR LOCAL TAX PENALTIES, AND WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE OFFERING. EACH TAXPAYER SHOULD SEEK ADVICE

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BASED ON SUCH PERSON’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

The following is a summary of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition of Notes by a holder thereof. This description only applies to Notes held as capital assets and does not address, except as set forth below, aspects of U.S. federal income taxation that may be applicable to holders that are subject to special tax rules, such as:

• financial institutions,

• insurance companies,

• real estate investment trusts,

• regulated investment companies,

• grantor trusts,

• tax-exempt organizations,

• S corporations,

• dealers or traders in securities or foreign currencies,

• traders in securities that elect to use a mark-to-market method of accounting for their securities,

• certain former citizens or residents of the U.S.,

• holders that will hold a note as part of a position in a straddle or as part of a hedging, conversion or integrated transaction for U.S. federal income tax purposes, or

• U.S. Holders (as defined below) that have a functional currency other than the U.S. dollar.

Moreover, this description does not address the consequences of the U.S. federal estate and gift tax, the alternative minimum tax and does not address the U.S. federal income tax treatment of holders that do not acquire Notes for cash as part of the initial distribution at their initial issue price. Each prospective purchaser should consult its tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of acquiring, holding and disposing of Notes.

This description is based on the Internal Revenue Code of 1986, as amended, existing and temporary Treasury Regulations, administrative pronouncements and judicial decisions, each as available and in effect on the date hereof. All of the foregoing are subject to change, possibly with retroactive effect, or differing interpretations which could affect the tax consequences described herein.

For purposes of this description, a U.S. Holder is a beneficial owner of Notes that for U.S. federal income tax purposes is:

• a citizen or resident of the United States;

• a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any State thereof, or the District of Columbia;

• an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

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• a trust (1) that validly elects to be treated as a United States person for U.S. federal income tax purposes or (2)(a) the administration over which a U.S. court can exercise primary supervision and (b) all of the substantial decisions of which one or more U.S. persons has the authority to control.

If a partnership (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds the Notes, the tax treatment of the partnership and a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax advisor as to its consequences.

Contingent Payment Debt Obligations

Certain contingent debt instruments that provide for one or more contingent payments are subject to Treasury Regulations governing contingent payment debt instruments. A payment is not treated as a contingent payment under these Treasury Regulations if, as of the issue date of the debt instrument, the likelihood that such payment will be made is remote or the payment is incidental. In certain circumstances as set forth in the Description of the Notes, we may redeem the Notes in advance of their stated maturity, in which case we may pay amounts on the Notes that are in excess of the stated interest or principal on the Notes. We intend to take the position that the possibility that any such payment will be made is remote, the payments are incidental, or the payments are otherwise not treated as contingent payments for purposes of the rules governing contingent debt instruments, and therefore the Notes are not subject to such rules. Our determination is binding on you unless you disclose your contrary position to the Internal Revenue Service (“IRS”) in the manner that is required by applicable Treasury Regulations. Our determination is not, however, binding on the IRS. It is possible that the IRS might take a different position from that described above, in which case the timing, character and amount of taxable income in respect of the Notes may differ adversely from that described herein. The remainder of this discussion assumes that the Notes will not be treated as contingent payment debt instruments.

Interest

The Notes are not expected to be issued with original issue discount in excess of the statutory de minimis amount. Accordingly, if you are a U.S. Holder, interest paid to you on a note will be includible in your gross income as ordinary interest income in accordance with your usual method of tax accounting. In addition, interest on the Notes will be treated as foreign source income for U.S. federal income tax purposes.

For U.S. foreign tax credit limitation purposes, interest on the Notes generally will constitute passive category income. Subject to applicable limitations, a U.S. Holder will generally be entitled to a credit against its U.S. federal income tax liability, or alternatively, a deduction in computing its U.S. federal taxable income, for Paraguayan income taxes withheld. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. The rules regarding foreign tax credits are complex, and U.S. Holders should consult their own tax advisors concerning the availability and utilization of the foreign tax credit in their particular circumstances.

Sale, Exchange or Other Taxable Disposition

If you are a U.S. Holder, upon the sale, exchange or other taxable disposition of a note you will recognize gain or loss equal to the difference, if any, between the amount realized on the sale, exchange or other taxable disposition (other than accrued and unpaid interest, which will be treated as such) and your adjusted tax basis in the note. Your adjusted tax basis in a note generally will equal the cost of the note to you. Any such gain or loss will be capital gain or loss. If your holding period in a note exceeds one year at the time of the sale, exchange or other taxable disposition, such gain or loss will be long-term capital gain or loss. Long-term capital gains of non- corporate taxpayers are currently subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss realized by a holder that is a U.S. resident for U.S. tax purposes on the sale, exchange or other taxable disposition of a note generally will be treated as U.S. source gain or loss.

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U.S. Backup Withholding and Information Reporting

Backup withholding and information reporting requirements apply to certain payments of principal of, and interest on, an obligation and to proceeds of the sale or redemption of an obligation, to certain U.S. Holders. Information reporting generally will apply to payments of interest and to proceeds from the sale or redemption of Notes made within the United States to a holder of Notes (other than an exempt recipient). Backup withholding will be required on payments made within the United States on a note to a U.S. Holder if the U.S. Holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, the backup withholding requirements. Backup withholding is not an additional tax. Any amounts withheld from a payment to a holder of Notes under the backup withholding rules will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.

Recently enacted legislation requires certain U.S. Holders to report information with respect to their investment in Notes not held through a custodial account with a U.S. financial institution to the IRS. Investors who fail to report required information could become subject to substantial penalties. Prospective investors are urged to consult their own tax advisors regarding the possible implications of this new legislation on their investment in Notes.

The above description is not intended to constitute a complete analysis of all tax consequences relating to the ownership of Notes. Prospective purchasers of Notes should consult their own tax advisors concerning the tax consequences of their particular situations.

Medicare Tax

For taxable years beginning after December 31, 2012, a U.S. person that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. person’s “net investment income” for the relevant taxable year and (2) the excess of the U.S. person’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000 depending on the individual’s circumstances). Net investment income generally includes interest income and net gains from the disposition of the Notes, unless such interest income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). A U.S. Holder that is an individual, estate or trust should consult its tax advisor regarding the applicability of the Medicare tax to its income and gains in respect of its investment in the Notes.

European Union Savings Directive (Directive 2003/48/EC)

Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in that other Member State; however, for a transitional period, Austria, Belgium and Luxembourg may instead apply a withholding system in relation to such payments, deducting tax at rates rising over time to 35%. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to the exchange of information relating to such payments. Belgium has replaced this withholding tax with a regime of exchange of information to the Member State of residence as from January 1, 2010.

A number of non-EU countries, and certain dependent or associated territories of certain Member States, have adopted similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for, an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for, an individual resident or certain limited types of entity established in one of those territories.

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On November 13, 2008 the European Commission published a proposal for amendments to the Directive, which included a number of suggested changes which, if implemented, would broaden the scope of the requirements described above. Investors who are in any doubt as to their position should consult their professional advisers.

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PLAN OF DISTRIBUTION

Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC are acting as joint book-running managers of the offering. Subject to the terms and conditions stated in the purchase agreement dated the date of this offering memorandum, the initial purchasers have agreed, severally and not jointly, to purchase, and we have agreed to sell the principal amount of the Notes set forth opposite its name below.

Principal Amount Initial Purchasers of Notes Citigroup Global Markets Inc...... US$150,000,000 Morgan Stanley & Co. LLC ...... US$150,000,000 Total ...... US$300,000,000

The purchase agreement provides that the obligations of the initial purchasers to purchase the Notes are subject to approval of legal matters by counsel and to other conditions. The initial purchasers have agreed, severally and not jointly, to purchase all of the Notes if any of the Notes are purchased. If an initial purchaser defaults, the purchase agreement provides that the purchase commitments of the non-defaulting initial purchasers may be increased or the purchase agreement may be terminated.

The initial purchasers propose to resell the Notes at the offering price set forth on the cover page of this offering memorandum within the United States to qualified institutional buyers (as defined in Rule 144A) in reliance on Rule 144A and outside the United States to non-U.S. persons (as defined in Regulation S) in reliance on Regulation S. See “Transfer Restrictions.” The price at which the Notes are offered may be changed at any time without notice.

The Notes have not been and will not be registered under the Securities Act or any state securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S) except in transactions exempt from, or not subject to, the registration requirements of the Securities Act. See “Transfer Restrictions.”

In addition, until 40 days after the commencement of this offering, an offer or sale of Notes within the United States by a dealer that is not participating in this offering may violate the registration requirements of the Securities Act if that offer or sale is made otherwise than in accordance with Rule 144A.

We have agreed that, without the prior written consent of each of the Initial Purchasers, we will not, during the period beginning on the date hereof and continuing for a 90 day period from the date hereof, offer, sell, contract to sell or otherwise dispose of any debt securities of the Company or warrants to purchase debt securities of the Company substantially similar to the Notes (other than the sale of the Notes).

The Notes will constitute a new class of securities with no established trading market. Application has been made to list the Notes on the Luxembourg Stock Exchange. However, we cannot assure you that the prices at which the Notes will sell in the market after this offering will not be lower than the initial offering price or that an active trading market for the Notes will develop and continue after this offering. The initial purchasers have advised us that they currently intend to make a market in the Notes. However, they is not obligated to do so and it may discontinue any market-making activities with respect to the Notes at any time without notice. Accordingly, we cannot assure you as to the liquidity of, or the trading market for, the Notes.

We estimate that our portion of the total expenses of this offering will be approximately US$6,000,000.

In connection with the offering, the initial purchasers may purchase and sell Notes in the open market. Purchases and sales in the open market may include short sales, purchases to cover short positions and stabilizing purchases.

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• Short sales involve secondary market sales by the initial purchasers of a greater number of Notes than it is required to purchase in the offering.

• Covering transactions involve purchases of Notes in the open market after the distribution has been completed in order to cover short positions.

• Stabilizing transactions involve bids to purchase Notes so long as the stabilizing bids do not exceed a specified maximum.

Purchases to cover short positions and stabilizing purchases, as well as other purchases by the initial purchasers for its own accounts, may have the effect of preventing or retarding a decline in the market price of the Notes. They may also cause the price of the Notes to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The initial purchasers may conduct these transactions in the over-the-counter market or otherwise. If the initial purchasers commence any of these transactions, they may discontinue them at any time.

We expect to deliver the Notes against payment for the Notes on or about the date specified in the last paragraph of the cover page of this offering memorandum, which will be the fifth business day following the date of the pricing of the Notes. Since trades in the secondary market generally settle in three business days, purchasers who wish to trade Notes on the date of pricing or the next succeeding business day will be required, by virtue of the fact that the Notes initially will settle in T+5, to specify alternative settlement arrangements to prevent a failed settlement.

The initial purchasers are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The initial purchasers and their respective affiliates have in the past performed commercial banking, investment banking and advisory services for us from time to time for which they have received customary fees and reimbursement of expenses and may, from time to time, engage in transactions with and perform services for us in the ordinary course of its business for which they may receive customary fees and reimbursement of expenses. In the ordinary course of their various business activities, the initial purchasers and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. In addition, affiliates of the initial purchasers are lenders, and in some cases agents or managers for the lenders, under our Bridge Loan which will be repaid with the net proceeds of this offering.

We have agreed to indemnify the initial purchasers against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the initial purchasers may be required to make because of any of those liabilities.

Notice to Prospective Investors in the European Economic Area

In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of Notes described in this offering memorandum may not be made to the public in that relevant member state other than:

• to any legal entity which is a qualified investor as defined in the Prospectus Directive; • to fewer than 100 or, if the relevant member state has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by us for any such offer; or

• in any other circumstances falling within Article 3(2) of the Prospectus Directive,

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provided that no such offer of securities shall require us or any initial purchaser to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For purposes of this provision, the expression an “offer of securities to the public” in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression “Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the relevant member state) and includes any relevant implementing measure in each relevant member state. The expression 2010 PD Amending Directive means Directive 2010/73/EU.

The sellers of the Notes have not authorized and do not authorize the making of any offer of Notes through any financial intermediary on their behalf, other than offers made by the initial purchasers with a view to the final placement of the Notes as contemplated in this offering memorandum. Accordingly, no purchaser of the Notes, other than the initial purchasers, is authorized to make any further offer of the Notes on behalf of the sellers or the initial purchaser.

Notice to Prospective Investors in the United Kingdom

This offering memorandum is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (each such person being referred to as a “relevant person”). This offering memorandum and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.

Notice to Prospective Investors in France

Neither this offering memorandum nor any other offering material relating to the Notes described in this offering memorandum has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The Notes have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this offering memorandum nor any other offering material relating to the Notes has been or will be:

• released, issued, distributed or caused to be released, issued or distributed to the public in France; or • used in connection with any offer for subscription or sale of the Notes to the public in France.

Such offers, sales and distributions will be made in France only: • to qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with, articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier;

• to investment services providers authorized to engage in portfolio management on behalf of third parties; or • in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French Code monétaire et financier and article 211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés Financiers, does not constitute a public offer (appel public à l’épargne).

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The Notes may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.

Notice to Prospective Investors in Hong Kong

The Notes may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the Notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Notice to Prospective Investors in Japan

The Notes offered in this offering memorandum have not been registered under the Securities and Exchange Law of Japan. The Notes have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan, except (i) pursuant to an exemption from the registration requirements of the Securities and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.

Notice to Prospective Investors in Singapore

This offering memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this offering memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes may not be circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.

Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: • a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

• a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

• notes, debentures and units of notes and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the notes pursuant to an offer made under Section 275 of the SFA except:

• to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such notes, debentures and units of notes and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each

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transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;

• where no consideration is or will be given for the transfer; or where the transfer is by operation of law. Notice to Prospective Investors in Switzerland

This offering memorandum does not constitute an issue prospectus pursuant to Article 652a or Article 1156 of the Swiss Code of Obligations and the Notes will not be listed on the SIX Swiss Exchange. Therefore, this offering memorandum may not comply with the disclosure standards of the listing rules (including any additional listing rules or prospectus schemes) of the SIX Swiss Exchange. Accordingly, the Notes may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors who do not subscribe to the Notes with a view to distribution. Any such investors will be individually approached by the initial purchaser from time to time.

Notice to Prospective Investors in the Kingdom of Spain

The Notes may not be offered, sold or distributed, nor may any subsequent resale of notes be carried out in Spain, except in circumstances which do not constitute a public offer of securities in Spain within the meaning of the Spanish Securities Market Law (Ley 24/1988, de 28 julio del Mercado de Valores) and related legislation or without complying with all legal and regulatory requirements under Spanish securities laws. No publicity or marketing of any kind shall be made in Spain in relation to the Notes.

Neither the Notes nor the offering memorandum have been registered with the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) and therefore the offering memorandum is not intended for any public offer of the Notes in Spain.

Notice to Prospective Investors in the Dubai International Financial Centre

This offering memorandum relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This offering memorandum is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this offering memorandum nor taken steps to verify the information set forth herein and has no responsibility for the offering memorandum. The securities to which this offering memorandum relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this offering memorandum you should consult an authorized financial advisor.

Notice to Prospective Investors in Chile

The offer of the Notes will begin on October 4, 2012 and is subject to General Rule No. 336 of the Chilean Securities Commission (Superintendencia de Valores y Seguros de Chile, or the “SVS”). The Notes being offered are not registered in the Securities Registry (Registro de Valores) or in the Foreign Securities Registry (Registro de Valores Extranjeros) of the SVS and, therefore, the Notes are not subject to the supervision of the SVS. As unregistered securities, we are not required to disclose public information about the Notes in Chile. The Notes may not be publicly offered in Chile unless they are registered in the corresponding securities registry.

La oferta de los valores comienza el 4 de octubre del 2012 y esta acogida a la NCG 336 de fecha 27 de junio de 2012 de la Superintendencia de Valores y Seguros de Chile (la “SVS”). La oferta versa sobre valores no inscritos en el Registro de Valores o en el Registro de Valores Extranjeros que lleva la SVS, por lo que los valores no están sujetos a la fiscalización de dicho organismo. Por tratarse de valores no inscritos, no existe obligación por parte del emisor de entregar en Chile información pública respecto de los valores. Estos valores no pueden ser objeto de oferta publica a menos que sean inscritos en el registro de valores correspondiente.

Notice to Prospective Investors in Colombia

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The Notes have not been and will not be registered on the Colombian National Registry of Securities and Issuers (Registro Nacional de Valores y Emisores) or in the Colombian Stock Exchange. Therefore, the Notes may not be publicly offered in Colombia. This material is for your sole and exclusive use as a determined entity, including any of your shareholders, administrators or employees, as applicable. You acknowledge the Colombian laws and regulations (specifically foreign exchange and tax regulations) applicable to any transaction or investment consummated pursuant hereto and represent that you are the sole liable party for full compliance with any such laws and regulations.

Notice to Prospective Investors in Peru

The Notes have not been and will not be approved by or registered with the Peruvian securities regulatory authority, the Superintendency of the Securities Market (Superintendencia del Mercado de Valores). However, the Notes may be registered with the Superintendency of Banking, Insurance and Private Pension Funds (Superintendencia de Bancos, Seguros y Administradoras Privadas de Fondos de Pensiones) so that they could be offered or sold in private placement transactions addressed to Peruvian institutional investors such as Peruvian private pension funds, as long as such registration is required under the applicable laws of Peru.

Notice to Prospective Investors in Uruguay

In Uruguay, the Notes are being placed relying on a private placement (“oferta privada”) pursuant to section 2 of law 16,749. The Notes are not and will not be registered with the Central Bank of Uruguay to be publicly offered in Uruguay. The Notes do not qualify as an investment fund regulated by Uruguayan law 16,774, as amended.

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TRANSFER RESTRICTIONS

The notes have not been registered, and will not be registered, under the Securities Act or any state securities laws, and the notes may not be offered or sold except pursuant to an effective registration statement or pursuant to transactions exempt from, or not subject to, registration under the Securities Act. Accordingly, the notes are being offered and sold only: • in the United States to qualified institutional buyers (as defined in Rule 144A) pursuant to Rule 144A under the Securities Act; and

• outside of the United States, to certain persons, other than U.S. persons, in offshore transactions meeting the requirements of Rule 903 or 904 of Regulation S under the Securities Act.

Purchasers’ Representations and Restrictions on Resale and Transfer

Each purchaser of notes (other than the initial purchasers in connection with the initial issuance and sale of notes) and each owner of any beneficial interest therein will be deemed, by its acceptance or purchase thereof, to have represented and agreed as follows:

(1) it is purchasing the notes for its own account or an account with respect to which it exercises sole investment discretion and it and any such account is either (a) a qualified institutional buyer and is aware that the sale to it is being made pursuant to Rule 144A or (b) a non-U.S. person that is outside the United States;

(2) it acknowledges that the notes have not been registered under the Securities Act or with any securities regulatory authority of any state and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except as set forth below;

(3) it understands and agrees that notes initially offered in the United States to qualified institutional buyers will be represented by a global note and that notes offered outside the United States pursuant to Regulation S will also be represented by a global note;

(4) it will not resell or otherwise transfer any of such notes except (a) to us or any of our subsidiaries, (b) within the United States to a qualified institutional buyer in a transaction complying with Rule 144A under the Securities Act, (c) outside the United States in compliance with Rule 903 or 904 of Regulation S under the Securities Act, (d) pursuant to an exemption from registration under the Securities Act (if available) or (e) pursuant to an effective registration statement under the Securities Act, in each case in accordance with all applicable securities laws of the states of the United States and other jurisdictions;

(5) either (i) it is neither an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), an individual retirement account or other plan subject to Section 4975 of the Code (collectively, “Plans”) nor an employee benefit plan sponsored by a state or local government or otherwise subject to laws that include restrictions substantially similar to Section 406 of ERISA or Section 4975 of the Code (“similar laws”) and it is not purchasing or holding notes on behalf of or with the assets of any Plan or plan subject to similar laws; or (ii) its purchase, holding and subsequent disposition of the notes shall not constitute or give rise to a non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code or any similar law;

(6) it agrees that it will give to each person to whom it transfers the notes notice of any restrictions on transfer of such notes;

(7) it acknowledges that prior to any proposed transfer of notes (other than pursuant to an effective registration statement) the holder of such notes may be required to provide certifications relating to the manner of such transfer as provided in the indenture, including in respect of notes sold or transferred pursuant to Rule 144A or Regulation S;

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(8) it acknowledges that the trustee, registrar or transfer agent for the notes may not be required to accept for registration or transfer of any notes acquired by it, except upon presentation of evidence satisfactory to the Company that the restrictions set forth herein have been complied with;

(9) it acknowledges that we, the initial purchasers and other persons will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements and agrees that if any of the acknowledgements, representations and agreements deemed to have been made by its purchase of the notes are no longer accurate, it will promptly notify us and the initial purchasers; and

(10) if it is acquiring the notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each account.

Legends

The following is the form of restrictive legend which will appear on the face of the Rule 144A global note and which will be used to notify transferees of the foregoing restrictions on transfer. This legend will only be removed with our consent. If we so consent, it will be deemed to be removed.

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE OR OTHER SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT, AND ANY ACCOUNT FOR WHICH IT IS ACTING, (A) IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) OR (B) IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 903 OR 904 OF REGULATION S AND, WITH RESPECT TO (A) AND (B), EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO SUCH ACCOUNT, (2) AGREES FOR THE BENEFIT OF THE ISSUER THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN, EXCEPT (A) (I) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (II) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT, (III) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (IV) IN AN OFFSHORE TRANSACTION COMPLYING WITH THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (V) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE), AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS, (3) (I) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS NEITHER A EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), AN INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (COLLECTIVELY, “PLANS”) NOR AN EMPLOYEE BENEFIT PLAN SPONSORED BY A STATE OR LOCAL GOVERNMENT OR OTHERWISE SUBJECT TO LAWS THAT INCLUDE RESTRICTIONS SUBSTANTIALLY SIMILAR TO SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAWS”) AND IT IS NOT PURCHASING OR HOLDING THE SECURITIES ON BEHALF OF OR WITH THE ASSETS OF ANY PLAN OR PLAN SUBJECT TO SIMILAR LAWS; OR (II) REPRESENTS THAT ITS PURCHASE, HOLDING AND SUBSEQUENT DISPOSITION OF THE SECURITIES SHALL NOT CONSTITUTE OR GIVE RISE TO A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA, SECTION 4975 OF THE CODE OR ANY SIMILAR LAW, AND (4) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

THIS LEGEND MAY ONLY BE REMOVED AT THE OPTION OF THE ISSUER.

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PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH PARAGRAPH 2A(V) ABOVE, THE ISSUER RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS, OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

The following is the form of restrictive legend which will appear on the face of the Regulation S global note and which will be used to notify transferees of the foregoing restrictions on transfer:

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE OR OTHER SECURITIES LAWS. PRIOR TO EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD (AS DEFINED IN REGULATION S (“REGULATION S”) UNDER THE SECURITIES ACT), THIS SECURITY MAY NOT BE REOFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS DEFINED IN REGULATION S), EXCEPT TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF THE INDENTURE REFERRED TO HEREIN.

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Listing and General Information

We expect that the Notes will be accepted for clearance through DTC, Euroclear and Clearstream. The CUSIP, ISIN and Common Code numbers for the Notes are as follows:

Restricted Global Regulation S Note Global Note CUSIP ...... 87936V AA5 P90475 AA5 ISIN ...... US87936VAA52 USP90475AA57

For so long as any of the Notes are outstanding, copies of the Indenture and the form of Transfer Certificates may be inspected during normal business hours at the specified office of each Agent, including at the offices of the listing agent in Luxembourg. Any present and future annual and interim reports of the Issuer to the extent published will be available free of charge during normal business hours at the specified office of each Agent, including at the offices of the listing agent in Luxembourg.

Except as disclosed in this offering memorandum, there has been no material adverse change in our financial position since September 30, 2012, the date of the latest unaudited financial information included in this offering memorandum.

Except as disclosed in this offering memorandum, we are not involved in any litigation or arbitration proceedings relating to claims or amounts that are material in the context of this offering, nor so far as we are aware is any such litigation or arbitration pending or threatened.

The Audited Financial Statements and the audit reports thereon and the Interim Financial Statements and the notes thereto are included elsewhere in this offering memorandum.

Application has been made to admit the Notes offered hereby to listing on the Official List of the Luxembourg Stock Exchange and trading on the Euro MTF market of that exchange.

The issuance, offer and sale of the Notes were authorized by the Issuer’s shareholders on November 2, 2012 and the Issuer’s board of directors on November 23, 2012.

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VALIDITY OF NOTES

The validity of the Notes offered and sold in this offering, will be passed upon for us under New York law by our special U.S. counsel, Gibson, Dunn & Crutcher LLP, and for the initial purchasers under New York law by Paul Hastings LLP. Certain matters of Paraguayan law relating to the Notes will be passed upon for us by Gross Brown, and for the initial purchasers by Mersan Abogados.

INDEPENDENT AUDITORS

Our audited consolidated financial statements as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009 included in this offering memorandum, have been audited by PricewaterhouseCoopers, Asunción, Paraguay, independent auditors, as stated in their report included elsewhere in this offering memorandum.

On July 7, 2012, Ernst & Young Paraguay Auditores y Asesores de Negocios (“Ernst & Young”) was appointed as our independent auditor for the year ended December 31, 2012. As of the date of this offering memorandum, Ernst & Young has not performed an audit of our financial statements.

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INDEX TO FINANCIAL STATEMENTS

INTERIM FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2012 AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2012 AND 2011 Interim Statements of Comprehensive Income (Unaudited) ...... F-2 Interim Statements of Financial Position (Unaudited) ...... F-3 Interim Statements of Cash Flows (Unaudited) ...... F-4 Interim Statements of Changes in Equity (Unaudited) ...... F-5 Notes to the Interim Financial Statements (Unaudited) ...... F-6

ANNUAL FINANCIAL STATEMENTS AS OF DECEMBER 31, 2011 AND 2010 AND FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009 Independent Auditors’ Report ...... F-13 Consolidated Statements of Comprehensive Income ...... F-15 Consolidated Statements of Financial Position ...... F-16 Consolidated Statements of Cash Flows ...... F-17 Consolidated Statements of Changes in Equity ...... F-18 Notes to Financial Statements ...... F-19

F-1

Telefónica Celular del Paraguay S.A.

Consolidated statements of comprehensive income for the nine months ended September 30, 2012 and 2011

Nine months ended Nine months ended Notes September 30, 2012 September 30, 2011 (Unaudited) (Unaudited) PYG ‘M PYG ‘M

Revenues ...... 2,037,438 1,792,284 Cost of sales ...... (560,341) (469,519) Gross profit...... 1,477,097 1,322,765 Sales and marketing ...... (325,993) (270,927) General and administrative expenses ...... (200,694) (173,453) Operating profit ...... 3 950,410 878,385 Interest expense ...... (14,697) (6,672) Interest and other financial income ...... 4,335 389 Exchange gain, net ...... 6,319 46,680 Profit before tax ...... 946,367 918,782 Income tax expenses ...... 4 (139,378) (133,801) Net profit and comprehensive income for the period ... 806,989 784,981 Attributable to: Equity holders of the company ...... 806,989 784,981

Basic earnings per share —for the year attributable to equity holders ...... 161 84 Diluted earnings per share —for the year attributable to equity holders ...... 161 84

All amounts related continuing activities

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

F-2

Telefónica Celular del Paraguay S.A.

Consolidated statements of financial position as at September 30, 2012 and December 31, 2011

September 30, December 31,, Notes 2012 2011 (Unaudited) PYG ‘M PYG ‘M

ASSETS Non-Current Assets Intangible assets, net ...... 5 75,079 40,791 Property, plant and equipment, net ...... 6 1,128,657 1,064,653 Deferred taxation ...... 39,628 39,528 Other non-current assets ...... 8,902 11,435 Total Non-Current Assets ...... 1,252,266 1,156,406 Current Assets Inventories ...... 74,953 45,013 Trade receivables, net ...... 221,015 162,627 Amounts due from related parties ...... 87,689 43,970 Prepayments and accrued income ...... 213,365 148,027 Supplier advances for capital expenditure ...... 16,476 8,965 Other current assets ...... 2,200 2,822 Current Tax assets ...... 4,492 — Pledged deposit ...... 7 669,300 — Cash and cash equivalents ...... 8 382,710 814,115 Total Current Assets ...... 1,672,200 1,225,539 TOTAL ASSETS ...... 2,924,466 2,381,945

EQUITY AND LIABILITIES EQUITY Share capital and premium...... 250,000 250,000 Legal reserves ...... 50,249 3,994 Retained profits ...... 100,587 38,929 Profit for the year attributable to equity holders ...... 806,989 1,095,804 TOTAL EQUITY ...... 1,207,825 1,388,727 LIABILITIES Non-current Liabilities Debt and financing ...... 9 334,351 384,437 Provisions and other non-current liabilities ...... 45,446 39,376 Total non-current liabilities ...... 379,797 423,813 Current Liabilities Debt and financing ...... 9 740,303 55,399 Payables and accruals for capital expenditure ...... 189,733 139,306 Other trade payables ...... 136,750 107,800 Amounts due to related parties ...... 31,642 34,456 Accrued and other expenses ...... 87,777 74,314 Current income tax liabilities ...... — 16,609 Provisions and other current liabilities ...... 150.639 141,521 Total current liabilities ...... 1,336,844 569,405 TOTAL LIABILITIES ...... 1,716,641 993,218 TOTAL EQUITY AND LIABILITIES ...... 2,924,466 2,381,945 The accompanying notes are an integral part of these interim condensed consolidated financial statements.

F-3

Telefónica Celular del Paraguay S.A.

Consolidated statements of cash flows for the nine months ended September 30, 2012 and 2011

Nine months Nine months ended ended September 30, September 30, Notes 2012 2011 (Unaudited) (Unaudited) PYG ‘M PYG ‘M Cash flows from operating activities Profit before taxes from continuing operations ...... 946,367 918,782 Adjustments: Interest expense ...... 14,696 6,673 Interest income ...... (4,335) (389) Other non-operating (income) expenses, net ...... 24,377 (19,567) Adjustments for non-cash items: Depreciation and amortization ...... 5,6 180,225 171,241 Net loss on disposal and impairment of assets ...... 381 4,846 Changes in working capital: Increase in trade receivables, prepayments and other current assets ...... (116,257) (83,878) (Increase) decrease in inventories ...... (29,940) 7,787 Increase in trade and other payables ...... 42,677 25,031 Changes in working capital ...... (103,520) (51,060) Increase intercompany ...... (37,515) (33,963) Interest paid ...... (7,517) (6,500) Interest received ...... 872 389 Taxes paid ...... (161,442) (135,876) Net cash provided by operating activities...... 852,589 854,576 Cash flows for investing activities: Purchase of intangible assets and license renewals ...... (22,635) (31,019) Purchase of property, plant and equipment ...... 6 (209,124) (143,047) Proceeds from the sale of property, plant and equipment ...... 92 3,668 Proceeds from the sale of intangible assets ...... — (3,524) Purchase of pledged deposits...... (669,300) — Loans to affiliated companies ...... (33,513) (100,199) Net cash used by investing activities...... (934,480) (274,121) Cash flows for financing activities: Proceeds from issuance of debt and other financing ...... 669,361 (616) Repayment of debt and financing ...... (34,708) (11,429) Payment of dividends ...... (979,821) (901,555) Net cash used by financing activities ...... (345,168) (913,600) Exchange losses on cash and cash equivalents ...... (4,346) (10,762) Net decrease in cash and cash equivalents ...... (431,405) (343,907) Cash and cash equivalents at the beginning of the period ...... 814,115 802,705 Cash and cash equivalents at the end of the period...... 382,710 458,798

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

F-4

Telefónica Celular del Paraguay S.A.

Consolidated statements of changes in equity for the nine months ended September 30, 2012, and December 31, 2011

Number of Share Retained Legal Total shares Capital profits reserves equity PYG ‘M PYG ‘M PYG ‘M PYG ‘M Balance as of December 31, 2010 9,250 9,250 1,181,234 3,994 1,194,478 Total comprehensive income for the year — — 1,095,804 — — Dividends ...... — — (901,555) — — Capitalisation of retained profits — 240,750 (240,750) — — Balance as of December 31, 2011 5,000 250,000 1,134,733 3,994 1,388,727 Total comprehensive income for the year — — 806,989 — — Transfers to Legal Reserves (46,251) 46,251 — Dividends ...... — — (987,895) — — Balance as of September 30, 2012 5,000 250,000 907,576 50,249 1,207,825

F-5

Notes to the interim condensed consolidated financial statements Telefónica Celular as at September 30, 2012 and for the Nine month period then ended Del Paraguay S.A.

1. CORPORATE INFORMATION Telefónica Celular del Paraguay S.A. (the “Company”), a Paraguayan Company, and its subsidiary (the “Group” or “Telecel”) is a Paraguayan group providing communications, information, entertainment, solutions and financial services in Paraguay. The Company maintains multiple license contracts with Comision Nacional de Telecomunicaciones (Conatel), the regulator of the telecommunications system in Paraguay, to operate cellular and cable telephony business in Paraguay which expires between November 13, 2012 and September, 2016. For the license expire on November 2012, the Company is currently processing the renewal of such license. They are unaware of any possibility of rejection by the regulatory body. This will be the fourth request for renewal of the referenced license and there is no history of rejection. The Company was formed in 1992. Telecel is a subsidiary of Millicom International III N.V with an ultimate parent Millicom International Cellular S.A. a Luxembourg Société Anonyme (Millicom) whose shares are traded on the Stockholm stock exchange under the symbol MIC and over the counter in the US under the symbol MICC. The capital stock of the company is PYG 250,000 million and is represented by 5,000 ordinary shares with a par value of PYG 50 million each. The general administration of the Company is located at Zavala Cue esq. Artilleria, Fernando De La Mora, Paraguay.

The Board of Directors (“Board”) approved these interim condensed consolidated financial statements on November 21, 2012.

2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES

The interim condensed consolidated financial statements of the Group are unaudited. They are presented in million, Paraguayan Guaraní and have been prepared in accordance with International Accounting Standard (IAS) 34 ‘Interim Financial Reporting’, as published by the International Accounting Standards Board (“IASB”). In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments that are necessary for a proper presentation of the results for interim periods. Telecel’s operations are not affected by significant seasonal or cyclical patterns apart from a slight increase in revenues over the festive season in December. The interim condensed consolidated financial statements should be read in conjunction with Telecel´s consolidated financial statements for the year ended December 31, 2011. The preparation of financial statements in accordance with International Financial Reporting Standards (“IFRS”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the accounts and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The interim condensed consolidated financial statements are prepared in accordance with consolidation and accounting policies consistent with Telecel’s consolidated financial statements as at and for the year ended December 31, 2011, as disclosed in Note 2 of those financial statements. There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning January 1, 2012 that have a material impact on the Group.

F-6

Notes to the interim condensed consolidated financial statements Telefónica Celular as at September 30, 2012 and for the Nine month period then ended Del Paraguay S.A.

3. ANALYSIS OF OPERATING PROFIT

The Group’s operating income and expenses from continuing operations analyzed by nature of expense is as follows:

Nine months Nine months ended ended September 30, September 30, 2012 2011 (Unaudited) (Unaudited) PYG ‘M PYG ‘M Revenues ...... 2,037,438 1,792,284 Cost of rendering telecommunication services...... (398,875) (315,234) Depreciation and amortization ...... (180,225) (171,241) Dealer commissions ...... (137,437) (139,164) Employee related costs ...... (69,997) (59,994) Sites and network maintenance ...... (46,297) (42,028) Advertising and promotion ...... (44,415) (46,661) Phone subsidies ...... (69,558) (25,491) External services ...... (36,838) (43,483) Operating lease expense ...... (2,248) (2,087) Billing and payments ...... (22,624) (18,714) Other shared costs ...... (40,486) (14,683) Gain (loss) on disposal and impairment of assets, net ...... (381) (4,846) Other expenses ...... (37,918) (30,274) Operating profit ...... 950,410 878,385

4. TAXES

Group taxes comprise income and other taxes. As a Paraguayan commercial company, Telecel is subject to all taxes applicable to a Paraguayan Company.

The charge for income taxes is shown in the following table and recognizes that revenue and expense items may affect the financial statements and tax returns in different periods (temporary differences): Nine months Nine months ended ended September 30, September 30, 2012 2011

(Unaudited) (Unaudited) PYG ‘M PYG ‘M Current income tax charge ...... (139,478) (135,984) Net deferred income tax benefit (expense) ...... 100 2,183 Charge for taxes...... (139,378) (133,801)

F-7

Notes to the interim condensed consolidated financial statements Telefónica Celular as at September 30, 2012 and for the Nine month period then ended Del Paraguay S.A.

5. INTANGIBLE ASSETS

During the nine months ended September 30, 2012 Telecel acquired intangible assets with a cost of PYG 46,322 million (September 30, 2011: PYG 13,475 million). The charge for amortization of intangible assets for the Nine months ended September 30, 2012 was PYG 12,033 million (September 30, 2011: PYG 15,837 million).

6. PROPERTY, PLANT AND EQUIPMENT

During the nine months ended September 30, 2012, Telecel acquired property, plant and equipment with a cost of PYG 195,071 million (September 30, 2011: PYG 191,867 million). The charge for depreciation on property, plant and equipment for the nine months ended September 30, 2012 was PYG 168,192 million (September 30, 2011: PYG 155,404million). The following table provides details of cash used for the purchase of property, plant and equipment:

Nine months Nine months ended ended September 30, September 30, 2012 2011 (Unaudited) (Unaudited) PYG ‘M PYG ‘M Additions ...... 195,071 191,867 Change in suppliers advances ...... (25,325) (19,583) Change in payables for property, plant and equipment ...... 39,378 (29,237) Cash used for the purchase of property, plant and equipment ...... 209,124 143,047

7. PLEDGED DEPOSIT

As September 30, 2012 the pledged deposit amounted to PYG 669,300 (2011: NIL). This pledged deposit was related to our acquisition of Cablevision Paraguay. (See Note 13)

8. CASH AND CASH EQUIVALENTS Cash and cash equivalents are comprised as follows:

Nine months As at ended December 31, September 30, 2011 2012 (Unaudited) PYG ‘M PYG ‘M Cash and cash equivalents in U.S. dollars ...... 361,368 758,236 Cash and cash equivalents in other currencies ...... 21,342 55,878 Total cash and cash equivalents ...... 382,710 814,115 Cash balances are diversified among leading international banks and in domestic banks.

F-8

Notes to the interim condensed consolidated financial statements Telefónica Celular as at September 30, 2012 and for the Nine month period then ended Del Paraguay S.A.

9. DEBT AND OTHER FINANCING

Bridge Loan

In September 2012, Telecel entered into a short term loan agreement with Citibank N.A. and Morgan Stanley Bank N.A. for an amount of US$ 151 million. The loan bears interest at the LIBOR 30 plus 2.00% for the first three months and LIBOR 30 plus 3% for the remaining period of the loan. The loan is guaranteed by Millicom and is repayable on March 5, 2013. The outstanding amount as at September 30, 2012 was PYG 670,359 million. This loan was entered into by the company for the purposes of funding the pledged deposit it was required to make for its planned acquisition of Cable Vision (See Note 7 and 13)

Analysis of debt and other financing by maturity

The total amount of debt and other financing is repayable as follows:

As at As at September 30, December 31, 2012 2011 (Unaudited) PYG ‘M PYG ‘M Due within: One year ...... 740,303 55,399 One to two years ...... 111,251 93,367 Two to three years ...... 89,240 89,560 Three to four years ...... 66,930 89,560 Four to five years ...... 44,620 67,170 After five years ...... 22,310 44,780 Total debt ...... 1,074, 654 439,836

10. NON-CASH INVESTING AND FINANCING ACTIVITIES

The following table gives details of non-cash investing and financing activities for continuing operations for the nine months ended September 30, 2012 and 2011. Nine months ended Nine months ended September 30, 2012 September 30, 2011 (Unaudited) (Unaudited) PYG ‘M PYG‘M Investing activities Asset retirement obligations ...... 3,009 3,625

F-9

Notes to the interim condensed consolidated financial statements Telefónica Celular as at September 30, 2012 and for the Nine month period then ended Del Paraguay S.A.

11. COMMITMENTS AND CONTINGENCIES

Operational environment

Telecel is operating in an emerging market, where the regulatory, political, technological and economic environments are evolving. As a result, there are uncertainties that may affect future operations, the ability to conduct business, foreign exchange transactions and debt repayments and which may impact upon agreements with other parties. In the normal course of business, Telecel faces uncertainties regarding taxation, interconnect, license renewal and tariff arrangements, which can have a significant impact on the long-term economic viability of its operations.

Litigation The Company and its subsidiary is contingently liable with respect to lawsuits and other matters that arise in the normal course of business. As of September 30, 2012, the total amount of claims against Telecel’s operations was PYG 3,592 (December 31, 2011: PYG 2,646 million). Management is of the opinion that while it is impossible to ascertain the ultimate legal and financial liability with respect to these claims, the ultimate outcome of these contingencies is not anticipated to have a material effect on the Group’s financial position and operations.

Capital commitments

As of September 30, 2012 the Company has fixed commitments to purchase network equipment, land and buildings and other fixed assets for a value of PYG 3,592 million (2011: PYG 4,172 million).

Dividends

The ability of the Company to make dividend payments is subject to, among other things, the terms of indebtedness and legal restrictions.

12. RELATED PARTY TRANSACTIONS The Company conducts transactions with its principal shareholder, Millicom International Cellular S.A. (“Millicom”) and its subsidiaries and the principal shareholder of Millicom International Cellular S.A.Transactions with related parties are conducted on normal commercial terms and conditions. Millicom During the nine months ended September 30, 2012 and 2011 the Company purchased services from Millicom and its subsidiaries including technical services fees, call center services and marketing services. Some of these subsidiaries are Paraguayan operations. Telecel entered into a technical service agreement with Millicom, in which Millicom provides technical assistance and “know-how” to the Company. For the technical and other assistance received, Telecel pays a sum equivalent to 1,5% of its total revenues. In addition during 2012 and 2011 the Company sold services to Millicom subsidiaries in Paraguay which were mainly mobile telephony services.

The following transactions were conducted with related parties:

For the nine For the nine months months ended ended September September 30 , 2012 30, 2011 (Unaudited) PYG ‘M PYG ‘M

Millicom – Other Paraguayan operations ...... 21,945 22,794 Millicom - Non-Paraguayan companies ...... 30,696 28,143 Total purchases from related parties ...... 52,641 50,937

F-10

Notes to the interim condensed consolidated financial statements Telefónica Celular as at September 30, 2012 and for the Nine month period then ended Del Paraguay S.A.

As at September 30 2012 and December 31, 2011, the Company had the following balances with related parties:

As at As at September December 30, 2012 31, 2011 (Unaudited) PYG ‘M PYG ‘M Receivables Millicom – Other Paraguayan operations ...... 76,503 41,234 Millicom – Non-Paraguayan companies ...... 11,186 2,736 Total ...... 87,689 43,970

Payables Millicom – Other Paraguayan operations ...... 3,712 2,980 Millicom – Non-Paraguayan companies ...... 27,930 31,476 Total ...... 31,642 34,456

Intercompany Deposits/Loans In the context of our relationship with our ultimate parent Millicom, we participate in a Millicom group cash deposit arrangement with BNP Paribas pursuant to which a portion of our cash is held in a deposit account with BNP Paribas pursuant to the terms of a Millicom group cash pooling arrangement that provides the bank the right to offset positive group company cash balances to cover potential negative group company cash balances. The amount of our cash contributed to this cash pooling arrangement is limited from time to time to cash from operations that we expect will be distributed as a dividend at the end of the relevant period, and the terms of this deposit are favorable to us given the size of Millicom’s relationship with BNP. In certain circumstances, BNP Paribas can offset our deposit with them to cover any unsatisfied negative balance maintained by Millicom, though no such offset has occurred to date and management is comfortable with this arrangement given the levels of our deposits with BNP Paribas and the relationship between these deposits and expected upcoming dividend payments to be made to Millicom. The balance in such deposit is currently US$30 million.]

13. SUBSEQUENT EVENTS

Acquisition of Cablevision Paraguay

On October 1, 2012, Telecel acquired Cablevision S.A. (Cablevision) the leading digital cable operator and one of the principal, broadband internet providers in Paraguay. The acquisition comprised of the net assets excluding the debt and cash and cash equivalents of Cable Vision Comunicaciones S.A., Television Dirigida S.A., Consorcio Multipunto Multicanal S.A., Producciones Unicanal S.A. and 100% of the shares of Teledeportes Paraguay S.A. for combined cash consideration of US$150 million. US$ 7.5 million of the consideration is held on an escrow account and is contingent on several indemnification obligations of the selling shareholders and the selling companies hereunder. This contingent consideration will be released and paid on (2) two years if the contingent conditions are met. The acquisition of Cablevision is expected to allow Telecel to offer both cable and mobile internet services to the existing customers of Telecel and Cablevision and is expected to provide synergies in both fixed assets and operating costs.

If the acquisition had occurred on January 1, 2012 unaudited pro forma Group revenues for the period ended September 30, 2012 would have been PYG 2,208,111 million and the unaudited pro forma net profit for the same period would have been PYG 856,199 million. These amounts have been calculated using the Group accounting policies.

Telecel has not yet completed the purchase price allocation of the acquisition of Cablevision and as such as not yet determined the fair market values of all of the assets acquired.

F-11

Notes to the interim condensed consolidated financial statements Telefónica Celular as at September 30, 2012 and for the Nine month period then ended Del Paraguay S.A.

Capital reduction

On November 2, 2012 the Shareholders meeting approved a reduction and distribution of the share capital amounting to PYG 157,000 million.

F-12

Telefónica Celular del Paraguay S.A.

Consolidated statements of comprehensive income for the years ended December 31, 2011, 2010 and 2009

Notes 2011 2010 2009 PYG ’M PYG ’M PYG ’M Revenues ...... 2,462,991 2,200,198 1,927,628 Cost of sales ...... (634,185) (518,716) (486,109) Gross profit ...... 1,828,806 1,681,482 1,441,519 Sales and marketing ...... (368,142) (355,652) (309,247) General and administrative expenses ...... (246,375) (196,822) (176,040) Operating profit ...... 4 1,214,289 1,129,008 956,232 Interest expense ...... (8,301) (13,696) (12,013) Interest and other financial income ...... 1,520 274 978 Exchange losses, net ...... 55,272 (1,986) (1,477) Profit before tax ...... 1,262,780 1,113,600 943,720 Charge for taxes ...... 6 (166,976) (139,582) (125,302) Net profit and total comprehensive income for the year ..... 1,095,804 974,018 818,418

The accompanying notes are an integral part of these consolidated financial statements.

F-15

Telefónica Celular del Paraguay S.A.

Consolidated statements of financial position as of December 31, 2011 and 2010

Notes 2011 2010 PYG ‘M PYG ‘M ASSETS Non-Current Assets Intangible assets, net ...... 7 40,791 39,278 Property, plant and equipment, net ...... 8 1,064,653 976,664 Deferred taxation ...... 6 39,528 37,015 Other non-current assets ...... 11,434 4,268 Total Non-Current Assets ...... 1,156,406 1,057,225 Current Assets Inventories ...... 9 45,013 38,067 Trade receivables, net ...... 10 162,627 105,781 Amounts due from related parties ...... 18 43,970 14,745 Prepayments and accrued income ...... 148,027 99,840 Supplier advances for capital expenditure ...... 8,965 15,149 Other current assets ...... 2,822 817 Cash and cash equivalents ...... 11 814,115 802,705 Total Current Assets ...... 1,225,539 1,077,104 TOTAL ASSETS ...... 2,381,945 2,134,329

EQUITY AND LIABILITIES EQUITY Share capital ...... 12 250,000 9,250 Legal reserves ...... 13 3,994 3,994 Retained profits ...... 38,929 209,015 Profit for the year attributable to equity holders ...... 1,095,804 974,018 TOTAL EQUITY ...... 1,388,727 1,196,277 LIABILITIES Non-current Liabilities Debt and financing ...... 14 384,437 448,165 Provisions and other non-current liabilities ...... 15 39,376 34,406 Total non-current liabilities ...... 423,813 482,571 Current Liabilities Debt and financing ...... 14 55,399 42,811 Payables and accruals for capital expenditure ...... 139,306 107,081 Other trade payables ...... 107,800 73,201 Amounts due to related parties ...... 18 34,456 30,352 Accrued and other expenses ...... 74,314 55,838 Current income tax liabilities ...... 16,609 9,913 Provisions and other current liabilities ...... 15 141,521 136,285 Total current liabilities ...... 569,405 455,481 TOTAL LIABILITIES ...... 993,218 938,052 TOTAL EQUITY AND LIABILITIES ...... 2,381,945 2,134,329

The accompanying notes are an integral part of these consolidated financial statements.

F-16

Telefónica Celular del Paraguay S.A.

Consolidated statements of cash flows for the years ended December 31, 2011, 2010 and 2009

Notes 2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M Profit before tax ...... 1,262,780 1,113,600 943,719 Adjustments for non-operating items: Interest expense ...... 8,300 13,696 12,013 Interest and other financial income ...... (1,520) (274) (978) Other non operating expenses, net ...... (18,712) (964) (10,893) Adjustments for non-cash items: Depreciation and amortization ...... 7,8 226,751 227,452 260,593 Loss on disposal assets ...... 5,659 4,759 2,176 1,483,258 1,358,269 1,206,630 Increase in trade receivables, prepayments and other current assets ...... (86,235) (67,863) (6,286) (Increase) decrease in inventories ...... (6,945) (22,961) 3,768 (Decrease) increase in trade and other payables ...... 8,390 21,914 16,981 Changes to working capital ...... (84,790) (68,910) 14,463 Interest expense paid ...... (9,635) (9,860) (10,962) Interest received ...... 1,162 274 976 Taxes paid ...... (151,826) (161,301) (146,481) Net cash provided by operating activities ...... 1,238,169 1,118,472 1,064,626 Cash flows from investing activities: Purchase of intangible assets and license renewals ...... 7 (26,529) (18.186) (10,033) Purchase of property, plant and equipment...... 8 (247,369) (154,541) (260,114) Proceeds from sale of property, plant and equipment ...... 3,685 3,225 277 Debt and other financing grated to related parties………… (49,102) 31,372 - Repayment of debt and financing from to related parties ...... 769 170 - Other ...... 6,224 - - Net cash used by investing activities ...... (312,322) (137,960) (269,870) Cash flows from financing activities: Proceeds from issuance of debt and financing ...... 160 236,000 50,000 Repayment of debt and financing ...... (40,149) (20,365) (72,771) Payment of dividends ...... (901,555) (813,143) (644,089) Net cash used by financing activities ...... (941,544) (597,508) (666,860) Exchange gains (losses) on cash and cash equivalents ...... 27,107 (6,966) (16,089) Net increase in cash and cash equivalents ...... 11,410 376.038 111,807 Cash and cash equivalents at the beginning of the year ...... 802.705 426,667 314,860 Cash and cash equivalents at the end of the year ...... 814.115 802.705 426,667

The accompanying notes are an integral part of these consolidated financial statements.

F-17

Telefónica Celular del Paraguay S.A.

Consolidated statements of changes in equity for the years ended December 31, 2011, 2010 and 2009

Number of Share Retained Legal Total shares Capital profits reserves equity PYG ‘M PYG ‘M PYG ‘M PYG ‘M Balance as of December 31, 2009 9,250 9,250 1,022,157 3,994 1,035,401 Total comprehensive income for the year — — 974,018 — — Dividends ...... — — (813,142) — — Balance as of December 31, 2010 9,250 9,250 1,183,033 3,994 1,196,277 Total comprehensive income for the year — — 1,095,804 — — Dividends ...... — — (903,354) — — Capitalisation of retained profits — 240,750 (240,750) — — Balance as of December 31, 2011 5,000 250,000 1,134,733 3,994 1,388,727

The accompanying notes are an integral part of these consolidated financial statements.

F-18

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

1. CORPORATE INFORMATION

Telefónica Celular del Paraguay S.A. (the “Company”), a Paraguayan Company, and its subsidiary (the “Group” or “Telecel”) is a Paraguayan group providing communications, information, entertainment, solutions and financial services in Paraguay. The Company maintains multiple license contracts with Comision Nacional de Telecomunicaciones (Conatel), the regulator of the telecommunications system in Paraguay, to operate cellular and cable telephony business in Paraguay which expires between February, 2014 and September, 2016. The Company was formed in 1992. Telecel is a subsidiary of Millicom International III N.V with an ultimate parent Millicom International Cellular S.A. a Luxembourg Société Anonyme whose shares are traded on the Stockholm stock exchange under the symbol MIC and over the counter in the US under the symbol MIC. The capital stock of the company is PYG 250,000 million and is represented by 5,000 ordinary shares with a par value of PYG 50 million each. The general administration of the Company is located at Zavala Cue esq. Artilleria, Fernando De La Mora, Paraguay.

The Board of Directors (“Board”) approved these consolidated financial statements on November 21, 2012.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES

2.1 Basis of preparation

The consolidated financial statements of the Group are presented in Paraguayan Guaraní and all values are rounded to the nearest million (PYG ‘M) except when otherwise indicated. The consolidated financial statements have been prepared on a historical cost basis except for certain financial assets and liabilities that have been measured at fair value.

The consolidated financial statements for the year ended December 31, 2011 have been prepared in accordance with International Financial Reporting Standards as issues by International Accounting Standards Board (“IASB”).

International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”). Except for IAS 39—Financial Instruments that has been partially adopted by the European Union and for new standards and interpretations not yet endorsed but effective in future periods. Since the provisions that have not been adopted by the European Union are not applicable to the Group, the consolidated financial statements comply with both International Financial Reporting Standards as issued by the IASB.

The preparation of financial statements in conformity with IFRS requires management to exercise its judgment in the process of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from these estimates. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

F-19

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES (Continued)

2.2 Consolidation

The consolidated financial statements of the Group are comprised of the financial statements of the Company and its 99% owned subsidiary Lothar Systems S.A. as at December 31 each year. The financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies.

All intra-group balances, transactions, income and expenses, and profits and losses resulting from intra-group transactions are eliminated.

Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Non-controlling interests

The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. Gains or losses on disposals to non-controlling interests are recorded in equity. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is also recorded in equity. Non-controlling interest is measured at the proportionate interest in the net assets of the subsidiary.

2.3 Foreign currency translation

Functional and presentation currencies

Items included in the financial statements of each of the Group’s entities are measured in Paraguayan Guaraní the currency of Paraguay the primary economic environment in which the entity operates (“the functional currency”). The Group’s consolidated financial statements are presented in Guaraní (the “presentation currency”).

Transactions and balances

Transactions denominated in a currency other than the functional currency are translated into the functional currency using exchange rates prevailing on 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 income statement.

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognized in the consolidated income statement as part of fair value gain or loss.

The following table presents the Paraguayan Guaraní translation rates to the U.S. dollar as of December 31, 2011 and 2010 and average rates for the year ended December 31, 2011.

2011 2010 2009 Country Currency Average rate Year-end rate Year-end rate United States Dollars 4,226.12 4,478.00 4,645.00

The effect of exchange rate changes on cash and cash equivalents held or due in a foreign currency is reported in the cash flow statement in order to reconcile cash and cash equivalents at the beginning and end of the year. F-20

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES (Continued)

2.4 Segment Reporting

The strategic steering committee is the group's chief operating decision-maker. Management has determined the operating segment based on the information reviewed by the strategic steering committee for the purpose of allocating resources and assessing performance.

The strategic steering committee considers the business from product perspective as one segment; in this point of view management considers the performance of telecommunication and value added services as one.

Therefore the revenues and assets included in the consolidated statements of comprehensive income and consolidated statements of financial position are representative of this segment.

2.5 Property, plant and equipment

Items of property, plant and equipment are stated at historical cost, less accumulated depreciation and accumulated impairment. Historical cost includes expenditure that is directly attributable to acquisition of items. The carrying amount of replaced parts is derecognized. Repairs and maintenance are charged to the income statement in the financial period in which they are incurred.

Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset and the remaining life of the license associated with the assets, unless the renewal of the license is contractually possible.

Estimated useful lives are:

Land ...... Indefinite Buildings ...... 40 years or lease period, if lower Networks (including civil works) ...... 5 to 15 years Other ...... 2 to 7 years

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The assets’ residual value and useful life is reviewed, and adjusted if appropriate, at each statement of financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Construction in progress consists of the cost of assets, labor and other direct costs associated with property, plant and equipment being constructed by the Group. Once the assets become operational, the related costs are transferred from construction in progress to the appropriate asset category and start to be depreciated.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance are charged to the income statement in the financial period in which they are incurred.

A liability for the present value of the cost to remove an asset on both owned and leased sites is recognized when a present obligation for the removal is established. The corresponding cost of the obligation is included in the cost of the asset and depreciated over the useful life of the asset.

F-21

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES (Continued)

Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that asset when it is probable that such costs will result in future economic benefits for the Group and the costs can be measured reliably.

2.5 Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is charged to the income statement in the year in which expenditure is incurred.

Intangible assets with finite useful lives are amortized over their estimated useful economic lives using the straight- line method and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for intangible assets with finite useful lives are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the consolidated income statement in the expense category consistent with the function of the intangible assets.

Licenses

At initial recognition licenses are shown at either historical cost or, if acquired in a business combination, at fair value at the date of acquisition. Licenses have a finite useful life and are carried at cost less accumulated amortization and any accumulated impairment losses. Amortization is calculated using the straight-line method to allocate the cost of the licenses over their estimated useful lives. The terms of licenses, which have been awarded for various periods, are subject to periodic review for, amongst other things, rate setting, frequency allocation and technical standards. Licenses are initially measured at cost and are amortized from the date the network is available for use on a straight-line basis over the license period. Licenses held, subject to certain conditions, are usually renewable and generally non-exclusive. When estimating useful lives of licenses, renewal periods are not usually included.

2.6 Impairment of non-financial assets

At each reporting date the Group assesses whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. The Group determines the recoverable amount based on the higher of its fair value less cost to sell, and its value in use, for individual assets, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Where no comparable market information is available, the fair value less cost to sell is determined based on the estimated future cash flows discounted to their present value using a discount rate that reflects current market conditions for the time value of money and risks specific to the asset. In addition to evaluation of possible impairment to the assets carrying value, the foregoing analysis also evaluates the appropriateness of the expected useful lives of the assets. Impairment losses are recognized in the consolidated income statement in those expense categories consistent with the function of the impaired asset.

F-22

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES (Continued)

Other than for goodwill, a previously recognized impairment loss is reversed if there has been a change in the estimate used to determine the asset’s recoverable amount since the last impairment loss was recognized. If so, the carrying amount of the asset is increased to its recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

2.7 Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified within non-current assets. Loans and receivables are carried at amortized cost using the effective interest method. Gains and losses are recognized in the income statement when the loans and receivables are derecognized or impaired, as well as through the amortization process.

2.8 Inventories

2.9 Trade receivables

Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment is recorded when there is objective evidence that the Group will not be able to collect amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are indicators of impairment. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The provision is recognized in the consolidated income statement within “Cost of sales”.

2.10 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

2.11 Impairment of financial assets

The Group assesses at each statement of financial position date whether there is objective evidence that a financial asset or group of financial assets is impaired. Impairment losses are recognized in the consolidated income statement.

2.12 Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

F-23

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES (Continued)

2.13 Borrowings Borrowings are initially recognized at fair value, net of directly attributable transaction costs. After initial recognition borrowings are subsequently measured at amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the effective interest rate. Any difference between the initial amount and the maturity amount is recognized in the consolidated income statement over the period of the borrowing. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date.

2.14 Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Where a finance lease results from a sale and leaseback transaction, any excess of sales proceeds over the carrying amount of the assets is deferred and amortized over the lease term. Capitalized leased assets are depreciated over the shorter of the estimated useful lives of the assets, or the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating lease payments are recognized as expenses in the consolidated income statement on a straight-line basis over the lease term.

2.15 Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, if it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, risks specific to the liability. Where discounting is used, increases in the provision due to the passage of time are recognized as interest expenses.

2.16 Trade payables Trade payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method where the effect of the passage of time is material.

F-24

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES (Continued)

2.17 Revenue recognition Revenue comprises the fair value of consideration received or receivable for the sale of goods and services, net of value added tax, rebates and discounts and after eliminating intra-group sales. Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized. These recurring revenues consist of monthly subscription fees, airtime usage fees, interconnection fees, roaming fees and fees from other telecommunications services such as data services, short message services and other value added services. Recurring revenues are recognized on an accrual basis, i.e. as the related services are rendered. Unbilled revenues for airtime usage and subscription fees resulting from services provided from the billing cycle date to the end of each month are estimated and recorded. Subscription products and services are deferred and amortized over the estimated life of the customer relationship. Related costs are also deferred, to the extent of the revenues deferred, and amortized over the estimated life of the customer relationship. The estimated life of the customer relationship is calculated based on historical disconnection percentage for the same type of customer. Where customers purchase a specified amount of airtime in advance, revenue is recognized as credit is used. Unutilized airtime is carried in the statement of financial position as deferred revenue within “other current liabilities”. Revenues from value added content services such as video messaging, ringtones, games etc., are recognised net of payments to the providers of these services if the providers are responsible for content and determining the price paid by the customer. For such services the Group is considered to be acting in substance as an agent. Where the Group is responsible for the content and determines the price paid by the customer then the revenue is recognised gross. Revenues from the sale of handsets and accessories on a stand-alone basis (without multiple deliverables) are recognized when the significant risks and rewards of ownership of handsets and accessories have been passed to the buyer. Revenue arrangements with multiple deliverables (“Bundled Offers” such as equipment and services sold together) are divided into separate units of accounting if the deliverables in the arrangement meet certain criteria. The arrangement consideration is then allocated among the separate units of accounting based on their relative fair values or on the residual method. Revenue is then recognized separately for each unit of accounting.

2.18 Cost of sales The primary cost of sales incurred by the Group in relation to the provision of telecommunication services relate to interconnection costs, roaming costs, rental of leased lines, costs of handsets and other accessories sold, and royalties. Cost of sales is recorded on an accrual basis. Cost of sales also includes depreciation and any impairment of network equipment and trade receivables.

2.19 Customer acquisition costs Specific customer acquisition costs, including dealer commissions and handset subsidies, are charged to sales and marketing when the customer is activated.

2.20 Taxation

Current tax 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.

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Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES (Continued)

Deferred tax Deferred income tax is provided using the liability method and calculated from 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 income tax assets are recognized for all deductible temporary differences and carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary difference and the carry-forward of unused tax credits and unused tax losses 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. The carrying amount of deferred income 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 the deferred income tax asset. Unrecognized deferred income 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 deferred tax asset to be recovered. Deferred income 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. Income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated income statement. 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.

2.21 Changes in accounting policies The consolidated financial statements as of December 31, 2011 are prepared in accordance with consolidation and accounting policies consistent with those of the previous financial years. There are no IFRS or IFRIC interpretations that are effective for the first time for the financial year beginning January 1, 2011 that have a material impact on the Group. The following standards, amendments and interpretations issued are not effective for the financial year beginning January 1, 2011 and have not been early adopted. • IFRS 9, ‘Financial Instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at fair value, and those measured at amortized cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Group is yet to assess IFRS 9’s full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after January 1, 2015.

• IFRS 10, ‘Consolidated Financial Statements’ build on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Group is yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no later than the accounting period beginning on or after January 1, 2013.

F-26

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

2. SUMMARY OF CONSOLIDATION AND ACCOUNTING POLICIES (Continued)

• IFRS 11, ‘Joint Arrangements’, sets out the core principle that a party to a joint arrangement determines the type of joint arrangement in which it is involved by assessing its rights and obligations and accounts for those rights and obligations in accordance with that type of joint arrangement. The standard removes the option of accounting for joint ventures using proportionate consolidation, and requires equity accounting to be applied to joint ventures. The standard is effective for annual periods beginning on or after January 1, 2013.

• IFRS 12, ‘Disclosure of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Group is yet to assess IFRS 12’s full impact and intends to adopt IFRS 12 no later than the accounting period beginning on or after January 1, 2013.

• IFRS 13, ‘Fair Value Measurement’ aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS’s. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS. The Group is yet to assess IFRS 13’s full impact and intends to adopt IFRS 13 no later than the accounting period beginning on or after January 1, 2013.

• IAS 1, Presentation of Financial Statements - amendment to revise the way other comprehensive income is presented, which retains the 'one or two statement' approach at the option of the entity and only revises the way other comprehensive income is presented: requiring separate subtotals for those elements which may be 'recycled' (e.g. cash-flow hedging, foreign currency translation), and those elements that will not (e.g. fair value through OCI items under IFRS 9). The amendment is effective for annual periods beginning on or after January 1, 2012.

• IAS 27, Consolidated and Separate Financial Statements, reissued as IAS 27 Separate Financial Statements, as a result of issuance of IFRS 10, Consolidated Financial Statements. The standard is effective for annual periods beginning on or after January 1, 2013.

• IAS 28, Investments in Associates and Joint Ventures, reissued as IAS 28 Investments in Associates, as a result of issuance of IFRS 11, Joint Arrangements. The standard is effective for annual periods beginning on or after January 1, 2013.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

F-27

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

Contingent liabilities Contingent liabilities are potential liabilities that arise from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of Telecel. Provisions for liabilities are recorded when a loss is considered probable and can be reasonably estimated. The determination of whether or not a provision should be recorded for any potential liabilities is based on management’s judgment. Estimates Estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Because of inherent uncertainties in this evaluation process, actual results may be different from originally estimated amounts. In addition, significant estimates are involved in the determination of impairments, provisions related to taxes and litigation risks. These estimates are subject to change as new information becomes available and may significantly affect future operating results. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies (see note 6). For our critical accounting estimates reference is made to the relevant individual notes to these consolidated financial statements, more specifically note 6—Taxes; note 7—Intangible assets, note 8—Property, plant and equipment, note 10— Trade receivables, note 15 – Other noncurrent and current provisions and liabilities; note 17—Commitments and contingencies; and note 19—Financial Risk management.

F-28

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

4. ANALYSIS OF OPERATING PROFIT

The Group’s operating income and expenses analyzed by nature of expense is as follows:

2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M Revenues ...... 2,462,991 2,200,198 1,927,628 Cost of rendering telecommunication services (i) ...... (428,905) (310,620) (260,593) Depreciation and amortization (notes 7 and 8) ...... (226,751) (227,452) (248,223) Dealer commissions ...... (187,833) (174,135) (155,363) Employee related costs (note 5)...... (90,730) (75,168) (66,907) Sites and network maintenance ...... (57,824) (50,481) (51,556) Advertising and promotion ...... (63,719) (56,148) (54,759) Phone subsidies ...... (34,211) (44,950) (35,157) External services ...... (41,483) (46,073) (40,825) Operating lease expense (note 17) ...... (2,775) (2,467) (2,424) Billing and payments ...... (25,356) (21,569) (17,283) Other shared costs ...... (42,628) (17,720) (14,636) Gain (loss) on disposal and impairment of assets, net ...... (5,822) (7,984) (2,453) Other expenses ...... (40,665) (36,423) (21,217) Operating profit ...... 1,214,289 1,129,008 956,232 ______

(i)The depreciation charge is recorded under the caption “Cost of sales”.

5. EMPLOYEE RELATED COSTS

Employee related costs are comprised of the following:

2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M Wages and salaries ...... (53,581) (43,018) (38,444) Social security ...... (8,153) (10,659) (13,687) Other employee related costs(i) ...... (28,996) (21,491) (14,776) Total ...... (90,730) (75,168) (66,907)

(i) Includes other benefits. There are no defined benefit pension plans.

The average number of permanent employees during the years ended December 31, 2011, 2010 and 2009 was as follows:

2011 2010 2009 Total average number of permanent employees ...... 434 446 421

F-29

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

6. TAXES

The Company’s effective tax rate is (13%) (2010: 13%, 2009: 13%).

The reconciliation between the weighted average statutory tax rate and the effective average tax rate is as follows: 2011 2010 2009 % % % Weighted average statutory tax rate ...... 10 10 10 Provision for: Doubtful debtors -0,094 -0,006 -0,011 Contingencies -0,015 -0,017 -0,038 Dismantling of assets -0,691 -0,577 -0,451 Income tax paid on dividends distributions 3,8 3,6 3,5 Effective tax rate ...... 13 13 13

(i) Income taxes at other than statutory rates relates to additional taxes paid as a result of distributing dividends to foreign shareholders. The charge for income taxes is shown in the following table and recognizes that revenue and expense items may affect the financial statements and tax returns in different periods (temporary differences): 2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M Current income tax charge ...... 169,489 148.188 129.758 Net deferred income tax benefit ...... (2.513) (8.606) (4.456) Charge for taxes ...... 166,976 139,582 125,302

The tax effects of significant items comprising the Group’s net deferred income tax asset and liability as of December 31, 2011 and 2010 are as follows: Balance Income sheets statements 2011 2010 2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M PYG ‘M PYG ‘M

Provision for doubtful debtors ...... 4,820 3,743 1.200 1.367 1.399 Temporary differences between book and tax basis of intangible assets and property, plant and equipment ...... 29,792 29,204 6.897 5.161 412 Other temporary differences ...... 4,916 4,068 (5.584) 2.078 2.645 Deferred tax benefit (expense) ...... - - 2.513 8.606 4.456 Deferred tax assets ...... 39,528 37,015

Deferred income tax assets and liabilities reflect temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

F-30

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

7. INTANGIBLE ASSETS The movements in intangible assets in 2011 were as follows: Licenses Other(ii) Total PYG ‘M PYG ‘M PYG ‘M

Opening balance, net ...... 11,436 27,842 39,278 Additions ...... 9,097 11,441 20,537 Amortization charge(i) ...... (12,179) (6,846) (19,025) Closing balance, net ...... 8,354 32,437 40,791 As at December 31, 2011 Cost ...... 72,103 60,563 132,576 Accumulated amortization ...... (63,749) (28,126) (91,875) Net ...... 8,354 32,437 40,791

(i) The amortization charge is recorded under the caption “General and administrative expenses”. (ii) The caption “Other” includes mainly computer software. The movements in intangible assets in 2010 were as follows:

Licenses Other(ii) Total PYG ‘M PYG ‘M PYG ‘M

Opening balance, net ...... 21,586 12,060 33,646 Additions ...... 2,247 20,554 22,801 Amortization charge(i) ...... (12,397) (4,772) (17,169) Closing balance, net ...... 11,436 27,842 39,278 As at December 31, 2010 Cost ...... 62,916 50,978 113,894 Accumulated amortization ...... (51,480) (23,136) (74,616) Net ...... 11,436 27,842 39,278

(i) The amortization charge is recorded under the caption “General and administrative expenses”. (ii) The caption “Other” includes mainly computer software. The following table provides details of cash used for additions to intangible assets: 2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M

Additions ...... 20,537 22,801 10,033 Change in suppliers advances ...... (739) 739 — Change in capex accruals and payables ...... 6,731 (5,354) — Cash used for additions from intangible assets ...... 26,529 18,186 10,033

F-31

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

8. PROPERTY, PLANT AND EQUIPMENT

Movements in tangible assets in 2011 were as follows: Network Land and Construction equipment Buildings in Progress Other(i) Total PYG ‘M PYG ‘M PYG ‘M PYG ‘M PYG ‘M Opening balance, net ...... 827,362 21,506 112,486 15,310 976,664 Additions ...... — 33,239 261,012 3,311 297,562 Impairments and net disposals ...... (2,125) — (3,522) (175) (5,822) Depreciation charge(ii) ...... (199,582) 63 — (8,207) (207,726) Asset retirement obligations ...... 3,975 — — — 3,975 Transfers ...... 218,639 (1,219) (231,707) 14,287 — Closing balance at December 31, 2011 . 848,269 53,589 138,269 24,526 1,064,653

Cost ...... 2,003,687 60,562 138,269 91,821 2,294,339 Accumulated depreciation ...... (1,155,418) (6,973) — (67,295) (1,229,686) Net ...... 848,269 53,589 138,269 24,526 1,064,653

(i) The caption “Other” mainly includes office equipment and motor vehicles. (ii) The depreciation is recorded under the caption “Cost of sales”, and the depreciation charge for Land and Buildings and Other is recorded under the caption “General and administrative expenses”.

Movements in tangible assets in 2010 were as follows: Network Land and Construction equipment Buildings in Progress Other(i) Total PYG ‘M PYG ‘M PYG ‘M PYG ‘M PYG ‘M Opening balance, net ...... 948,806 20,397 44,047 24,819 1,038,069 Additions ...... 187 1,744 147,939 3,169 153,039 Impairments and net disposals ...... (2,576) — (2,011) (3,397) (7,984) Depreciation charge(ii)(iii) ...... (203,336) (834) — (6,113) (210,283) Asset retirement obligations ...... 3,823 — — — 3,823 Transfers ...... 80,458 199 (77,489) (3,168) — Closing Balance at December 31, 2010 827,362 21,506 112,486 15,310 976,664

Cost ...... 1,802,651 30,505 112,486 74,013 2,019,655 Accumulated depreciation ...... (975,289) (8,999) — (58,703) (1,042,991) Net ...... 827,362 21,506 112,486 15,310 976,664

The following table provides details of cash used for the purchase of property, plant and equipment: 2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M Additions ...... 297,562 153,039 156,972

Change in suppliers advances ...... (5,445) 23,513 (12,420) Change in capex accruals and payables ...... (44,748) (22,011) 115,562 Cash used for purchase of property, plant and equipment...... 247,369 154,541 260,114 F-32

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

9. INVENTORIES

Inventories at December 31, 2011 and 2010 are as follows:

2011 2010 PYG ‘M PYG ‘M Handsets ...... 36,190 34,938 Other ...... 8,823 3,129 Total other current assets ...... 45,013 38,067

10. TRADE RECEIVABLES, NET 2011 2010 PYG ‘M PYG ‘M Gross trade receivables ...... 206,474 139,118 Less: provisions for impairment of receivables ...... (43,847) (33,337) Trade receivables, net ...... 162,627 105,781

As at December 31, 2011 and 2010, the ageing analysis of trade receivables is as follows:

Neither past due nor Past due (net of impairments) Total impaired <30 days 30–90 days >90 days Total PYG ‘M PYG ‘M PYG ‘M PYG ‘M PYG ‘M 2011 Telecom operators ...... 45,802 7,511 6,262 450 60,025 Own customers ...... 72,417 4,559 4,841 — 81,817 Others...... 18,138 1,705 745 177 20,765 Total ...... 136,357 13,775 11,848 647 162,627

Neither past due nor Past due (net of impairments) Total impaired <30 days 30–90 days >90 days Total PYG ‘M PYG ‘M PYG ‘M PYG ‘M PYG ‘M 2010 Telecom operators ...... 22,562 4,706 7,408 378 35,054 Own customers ...... 47,791 4,061 2,580 — 54,432 Others...... 4,239 4,859 7,197 — 16,295 Total ...... 74,592 13,626 17,185 378 105,781

The maximum exposure to credit risk as at December 31, 2011 and 2010 is the carrying value of each class of receivable mentioned above. The group does not hold any collateral as security.

F-33

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

11. CASH AND CASH EQUIVALENTS Cash and cash equivalents are comprised as follows: 2011 2010 PYG ‘M PYG ‘M Cash and cash equivalents in U.S. dollars ...... 758,236 741,369 Cash and cash equivalents in other currencies ...... 55,879 61,336 Total cash and cash equivalents ...... 814,115 802,705 Cash balances are diversified among leading international banks and in domestic banks.

12. SHARE CAPITAL

Share capital and share premium The authorized share capital of the Company totals 5,000 ordinary shares of PYG 50,000,000 each (2010: 9,250 ordinary shares of PYG 1,000,000 each). As at December 31, 2011, the total subscribed and fully paid-in share capital was PYG 250,000 million (2010: PYG 9,250 million) consisting of 5,000 (2010: 9,250) registered common shares at a par value of PYG 50 million (2010: PYG 1 million) each. In the EGM of December 2010,the capitalization of PYG 240,750 million of retained profits was approved with the new shares being issued in 2011.

13. LEGAL RESERVE

Paraguayan legislation requires share companies (corporation) and limited liability partnerships to appropriate at least 5% of their annual net earnings to a legal reserve up to a level of 20% of subscribed capital (whether fully paid or not).

14. BORROWINGS

Borrowings due after more than one year: 2011 2010 PYG ‘M PYG ‘M

Debt and financing: Bank financing ...... 424,837 490,976 Vendor financing ...... 8,357 — Total non-current other debt and financing ...... 433,194 490,976 Less: portion payable within one year ...... (48,757) (42,811) Total other debt and financing due after more than one year...... 384,437 448,165 Borrowings due within one year: 2011 2010 PYG ‘M PYG ‘M Debt and financing: Bank financing ...... 6,642 — Vendor financing ...... — — Total current other debt and financing ...... 6,642 — Portion of non-current debt payable within one year ...... 48,757 42,811 Total other debt and financing due within one year...... 55,399 42,811

F-34

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

14. BORROWINGS (Continued)

The following table provides details of net cash change for the years 2011 and 2010:

2011 2010 PYG ‘M PYG ‘M Net cash at the beginning of the year...... 311,729 145,294 Cash items Proceeds from issuance of debt and other financing ...... — (236,000) Repayment of debt and other financing ...... 41,035 20,365 Net increase (decrease) in cash and cash equivalents ...... 11,410 376,038 Non-cash items Vendor financing and finance leases ...... (7,324) — Interest accretion ...... (380) — Other ...... — — Exchange movement on debt and other financing ...... 17,809 6,032 Net cash at the end of the year ...... 374,279 311,729

Net debt includes interest bearing loans and borrowings less cash and cash equivalents.

Bank financing

In July 2008, Telecel S.A. entered into an 8 year loan by $100 million with the European Investment Bank (“EIB”). The loan bears interest at rates between $ LIBOR 90 plus 0.234% and $ LIBOR 90 plus 0.667%.The EIB loan is guaranteed for commercial risks by Royal Bank of Scotland (“RBS”). The commission guarantee fee is 1.25% per annum. The outstanding amount as at December 31, 2011 was PYG 424,837 million (2010: PYG 464,500 million). In addition as at December 31, 2011, Telecel had PYG 6,642 million (2010: PYG 26,476 million) of other bank financing.

Fair value of financial liabilities The carrying amounts of borrowings do not significantly differ from their fair value at the balance sheet dates.

F-35

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

15. OTHER NON-CURRENT AND CURRENT PROVISIONS AND LIABILITIES

Provisions and other non-current liabilities are comprised as follows: 2011 2010 PYG ‘M PYG ‘M

Long-term portion of asset retirement obligations ...... 36,635 34,406 Other ...... 2,741 — Total ...... 39,376 34,406 Provisions and other current liabilities are comprised as follows: 2011 2010 PYG ‘M PYG ‘M

Deferred revenues ...... 35,305 39,053 Customer deposits ...... 39,368 31,609 Current legal provisions ...... 2,465 4,619 Other tax payables ...... 26,016 13,976 Prepayment Cards ...... 21,991 21,964 Advanced Payments ...... 4,978 4,217 Current provisions ...... 1,865 2,122 Other ...... 9,533 18,725 Total ...... 141,521 136,285

16. NON-CASH INVESTING AND FINANCING ACTIVITIES

The following table gives details of non-cash investing for the years ended December 31, 2011, 2010 and 2009. There were no non-cash financing activities for the years ended December 31, 2011, 2010 and 2009.

2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M Investing activities

Asset retirement obligations (see note 8)...... (3,975) (3,823) (1,552)

F-36

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

17. COMMITMENTS AND CONTINGENCIES

Operational environment

Litigation

The Company and its subsidiary are contingently liable with respect to lawsuits and other matters that arise in the normal course of business. As of December 31, 2011, the total amount of claims against Telecel’s operations was PYG 2,646 (December 31, 2010: PYG 4,619 million). Management is of the opinion that while it is impossible to ascertain the ultimate legal and financial liability with respect to these claims, the ultimate outcome of these contingencies is not anticipated to have a material effect on the Group’s financial position and operations.

Lease commitments Operating Leases:

The Group has the following annual operating lease commitments as of December 31, 2011 and 2010.

2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M Operating lease commitments Within: one year ...... 62,480 63,375 63,375 Between: one to five years...... 157,843 235,195235,195 After: five years ...... 18,587 143,390 143,390 Total ...... 238,910 441,960 441,960

Operating leases comprise mainly of lease agreements relating to land and buildings. The operating lease terms and conditions reflect normal market conditions. Total operating lease expense was PYG ‘M 2,775 in 2011 (2010: PYG ‘M 2,467, 2009: PYG ‘M 2,424—see note 4).

Capital commitments

As of December 31, 2011 the Company has fixed commitments to purchase network equipment, land and buildings and other fixed assets for a value of $101 million (2010: $40 million).

Dividends

The ability of the Company to make dividend payments is subject to, among other things, the terms of indebtedness and legal restrictions.

F-37

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

18. RELATED PARTY TRANSACTIONS The Company conducts transactions with its principal shareholder, Millicom International Cellular S.A. (“Millicom”) and its subsidiaries and the principal shareholder of Millicom International Cellular S.A.Transactions with related parties are conducted on normal commercial terms and conditions. Millicom During 2011 and 2010 the Company purchased services from Millicom and its subsidiaries including technical services fees, call centre services and marketing services. Some of these subsidiaries are Paraguayan operations. Telecel entered into a technical service agreement with Millicom, in which Millicom provides technical assistance and “know-how” to the Company. For the technical and other assistance received, Telecel pays a sum equivalent to 1.5% of its total revenues. In addition during 2011 and 2010 the Company sold services to Millicom subsidiaries in Paraguay mainly mobile telephony services.

The following transactions were conducted with related parties:

2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M

Millicom – Other Paraguayan operations ...... 21,639 14,058 17,730 Millicom - Non-Paraguayan companies ...... 36,649 33,350 19,804 Total purchases from related parties ...... 58,288 47,408 37,534

Compensation for the Board of Directors for the year ended December 31, 2011, 2010 and 2009 was as follows:

2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M

Fees ...... (663) (687) (657) Other benefits ...... (146) (196) (265) Total compensation ...... (809) (883) (922)

As at December 31, the Company had the following balances with related parties:

2011 2010 PYG ‘M PYG ‘M Receivables Millicom – Other Paraguayan operations ...... 41,234 13,049 Millicom – Non-Paraguayan companies ...... 2,736 1,696 Total ...... 43,970 14,745

Payables Millicom – Other Paraguayan operations ...... 2,980 2,865 Millicom – Non-Paraguayan companies ...... 31,476 27,487 Total ...... 34,456 30,352

F-38

Telefónica Celular del Paraguay S.A.

Notes to the consolidated financial statements as of December 31, 2011, 2010 and 2009

19. FINANCIAL RISK MANAGEMENT Terms, conditions and risk management policies Exposure to interest rate, foreign currency, liquidity and credit risks arise in the normal course of Telecel’s business. The Group analyses each of these risks individually as well as on an interconnected basis and defines and implements strategies to manage the economic impact on the Group’s performance in line with its financial risk management policy. Telecel’s risk management strategies may include the use of derivatives. Telecel’s policy prohibits the use of such derivatives in the context of speculative trading. Interest rate risk Interest rate risk generally arises on borrowings. Borrowings issued at floating rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group’s exposure to risk of changes in market interest rates relates to both of the above. To manage the risk, the Group’s policy is to maintain a combination of fixed and floating rate debt with target for the debt to be equally distributed between fixed and variable rates unless this is not commercially advantageous. The Group actively monitors borrowings against target and when appropriate may use interest rate hedging to met this target. The target mix between fixed and floating rate debt is reviewed periodically. The purpose of Telecel’s policy is to achieve an optimal balance between cost of funding and volatility of financial results, while taking into account market conditions as well as our overall business strategy.

The table below summarizes, as at December 31, 2011, our fixed rate debt and floating rate debt: Amounts due within 1 year 1–2 years 2–3 years 3–4 years 4–5 years >5 years Total (in PYG ‘M, except percentages) Fixed rate ...... 4,104 4,253 - - - - 8,357 Weighted average nominal interest rate .. 10.50% 9.67% - - - - 10.08% Floating rate ...... 51,295 67,043 89,433 89,433 67,106 67,170431,479 Weighted average nominal interest rate .. 1.91% 2.18% 2.25% 2.25% 2.32% 2.47% 2.24% Total ...... 55,399 71,296 89,433 89,433 67,106 67,170 439,836 Weighted average nominal interest rate .. 2.54% 2.62% 2.25% 2.25% 2.32% 2.47% 2.39%

The table below summarizes, as at December 31, 2010, our fixed rate debt and floating rate debt: Amounts due within 1 year 1–2 years 2–3 years 3–4 years 4–5 years >5 years Total (in PYG ‘M, except percentages) Fixed rate ...... ------Weighted average nominal interest rate .. ------Floating rate ...... 42,811 53,340 92,900 92,900 92,900 116,125490,976 Weighted average nominal interest rate .. 1.83% 2.22% 2.63% 2.63% 2.63% 2.75% 2.54% Total ...... 42,811 53,340 92,900 92,900 92,900 116,125 490,976 Weighted average nominal interest rate .. 1.83% 2.22% 2.63% 2.63% 2.63% 2.75% 2.54%

A one hundred basis point fall or rise in market interest rates for all currencies in which the Group had borrowings at December 31, 2011, would increase or reduce profit before tax for the year by approximately PYG 15,0 million (2010: PYG 14,4 million).

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19. FINANCIAL RISK MANAGEMENT (continued) Foreign currency risk

Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities in other currencies than the Paraguayan Guaraní, principally the U.S. dollar.

Telecel seeks to reduce its foreign currency exposure through a policy of matching, as far as possible, assets and liabilities denominated in foreign currencies. In some cases, Telecel may borrow in US dollars where it is either commercially more advantageous to incur debt obligations in US dollars or where there insufficient liquidity in Guaraní for the Group’s requirements. In these circumstances, Telecel accepts the remaining currency risk associated with financing principally because of the relatively high cost of forward cover, when available.

The following table summarizes debt denominated in US$ as at December 31, 2011 and 2010.

2011 2010 US D PYG US D PYG

Total 95 425.410 100 446.500

At December 31, 2011, if the Guaraní had weakened/strengthened by 10% against the US$ and all other variables held constant, then profit before tax would have increased/decreased by PYG 42,5 million (2010: PYG 44,6 million).

Credit and counterparty risk Financial instruments that potentially subject the Group to credit risk are primarily cash and cash equivalents, trade receivables, supplier advances due from related parties and other current assets. The main counterparties to agreements relating to the Group’s cash and cash equivalents are significant financial institutions with investment grade ratings. Management does not believe there are significant risks of non-performance by these counterparties. Management has taken steps to diversify its banking partners. We are also managing the allocation of deposits across banks so that the Group’s counterparty risk with a given bank stays within limits which have been set based on each banks credit rating. This way we are avoiding any significant exposure to a specific party. A large portion of turnover comprises prepaid airtime. For customers for whom telecom services are not prepaid, the Group follows risk control procedures to assess the credit quality of the customer, taking into account its financial position, past experience and other factors.

Trade receivable are mainly derived from balances due from other telecom operators. Credit risk of other telecom operators is limited due to the regulatory nature of the telecom industry, in which licenses are normally only issued to credit worthy companies. The Group maintains a provision for impairment of trade receivables based upon expected collectability of all trade receivables. As the Group has a large number of dispersed customers, there is no significant concentration of credit risk with respect to trade receivables.

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19. FINANCIAL RISK MANAGEMENT (continued) Liquidity risk

Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Company has incurred significant indebtedness but also has significant cash balances. Telecel evaluates its ability to meet its obligations on an ongoing basis using a recurring liquidity planning tool. This tool considers the operating net cash flows generated from its operations and the future cash needs for borrowing and interest payments and capital and operating expenditures required in maintaining and developing local business. The Group manages its liquidity risk through use of bank overdrafts, bank loans, vendor financing, Export Credit Agencies and Development Finance Institutions (“DFI”) loans and bonds. Telecel believes that there is sufficient liquidity available in its markets to meet ongoing liquidity needs. Capital management The primary objective of the Company capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may make dividend payments to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using primarily a net debt to adjusted operating profit ratio, as well as a set of other indicators. As at December 31, 2011 and 2010 cash exceeded debt.

20. FINANCIAL INSTRUMENTS The fair value of Telecel’s financial instruments is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The fair value of all financial assets and all financial liabilities approximate their carrying value largely due to the short-term maturities of these instruments or as in the case of borrowings they are at variable interest rates. Fair value measurement hierarchy Effective January 1, 2009, Telecel adopted the amendment to IFRS 7 for financial instruments that are measured in the Statement of Financial Position at fair value, which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

• Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2—Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

21. DIRECTORS AND OFFICERS REMUNERATION

Compensation for the Board of Directors for the year ended December 31, 2011, 2010 and 2009 was as follows:

2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M

Fees ...... (663) (687) (657) Other benefits ...... (146) (196) (265) Total compensation ...... (809) (883) (922)

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Remuneration to the key employees for the years ended December 31, 2011, 2010 and 2009 was as follows:

2011 2010 2009 PYG ‘M PYG ‘M PYG ‘M

Salaries and bonuses ...... (10,164) (9,240) (8,400) Life insurance and medical benefits ...... (338) (358) (371) Total compensation ...... (10,502) (9,598) (8,771)

21. SUBSEQUENT EVENTS

Bridging loan

On September 5, 2012, Telecel entered into a short term bridging loan agreement with Citibank N.A. and Morgan Stanley Bank N.A. for an amount of US$ 151 million in order to fund the acquisition of Cablevision S.A. The loan bears interest at the LIBOR 30 plus 2.00% for the first three months and LIBOR 30 plus 3% for the remaining period of the loan. The loan is guaranteed by Millicom and is repayable on March 5, 2013.

Acquisition of Cablevision Paraguay

Telecel has not yet completed the purchase price allocation of the acquisition of Cablevision and as such as not yet determined the fair market values of all of the assets acquired.

Capital reduction

On November 2, 2012 the Shareholders meeting approved a reduction and distribution of the share capital amounting to PYG 157,000 million.

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ANNEX A – THE REPUBLIC OF PARAGUAY

General

The Republic of Paraguay is a country located in south-central South America. Paraguay is landlocked and bordered to the south, southeast and southwest by Argentina, to the east by Brazil and to the northwest by Bolivia. It has a land area of 406,752 square kilometers and a population of 6,541,591 (according to the CIA Factbook July 2012 estimate), 2.6 million of which live in the nation’s capital, Asunción, and the surrounding areas. The Paraguayan territory is the seventh largest in South America and occupies two distinct regions separated by the Paraguay River: the Oriental Region (Región Oriental) to the east of the Paraguay River, the most populated and fertile area, and the Occidental Region or Chaco (Región Occidental), which forms part of the Chaco ecosystem. While Paraguay has no sea coast, it has several ports on the Paraguay and Paraná rivers that provide an outlet to the Atlantic Ocean through the Paraguay-Paraná waterway.

Paraguay is a democratic and unitary state and is geographically divided into seventeen departments and one capital district (Asunción). It is a founding member of MERCOSUR (Mercado Común del Sur) the South American customs union with Argentina, Brazil and Uruguay. It is also a member of UNASUR (Unión de Naciones Sudamericanas) and the OAS (Organization of American States). Paraguay is the world’s fifth-largest exporter of electricity, according to the CIA Factbook and, together with Brazil, owns Itaipú, one of the largest operating hydroelectric power plants in the world, which is located on the Paraná River. Paraguay is the sixth-largest soybean producer (USDA, WAP 11-12, November 2012) and twelfth-largest exporter of beef in the world (USDA, WASDE May 2012).

In 2010, Paraguay experienced the largest economic expansion in Latin America and the second in the world reaching a growth rate of 15.0%.

Energy

Because Paraguay does not have reserves, it depends entirely on imports to meet domestic demand of oil and natural gas. Paraguay subsidizes the import and sale of diesel oil, while gasoline, alcohol, liquefied petroleum gas and other fuels do not benefit from a government subsidy on imports.

Up until 1970, all electricity used in Paraguay came from thermal electric power plants. In 1970, the Acaray hydroelectric power plant was inaugurated with the goal of transforming the country into an exporter of electricity to Brazil and Argentina. The Yguazu dam was built in 1977 and was designed to collect water to be used in cases where the Acaray Dam needed water supply. The plant releases an average of 100 cubic meters of water a day but may release as much as 200 cubic meters a day, if needed.

On May 5, 1984, the Itaipú hydroelectric plant, the largest hydroelectric dam in the world, began its operations. The Itaipu plant was built in cooperation with Brazil and turned Paraguay into one of the largest exporters of energy in the world. The dam has 20 turbines and an installed capacity of 14,000 MW shared equally between Paraguay and Brazil. Another important dam in Paraguay is the Yacyretá dam, equipped with 20 turbines and with an installed capacity of 3,500MW. Paraguay and Argentina share the power generated by the Yacyretá dam although almost all the energy that is allocated to Paraguay is exported to Argentina.

The National Electricity Administration (ANDE) controls the electricity market in Paraguay including generation, distribution and transportation of energy. It operates 2,100 miles of transmission lines and 670 miles of distribution lines in the country. Over 92% of the Paraguayan territory has electricity coverage.

Government and Politics

Paraguay is a unitary state governed by a constitution that was enacted in 1992. This constitution established three branches of government ensuring the separation of powers: the executive, legislative and judiciary branches.

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Executive Branch

The executive power is exercised by the President. In addition, there is a Vice Pesident who is empowered to act as President in the event of impairment or temporary absence of the President or permanent vacancy of the Presidential office. The President and Vice President are elected together by popular vote, on the same ballot, for a term of five years and may serve only one term. The President is the head of state and government. The President has, among other powers, the power to appoint and remove at will the ministers of the executive branch. The President also has the power to call all ministers to a “Council of Ministers”, at which the duties of the executive branch are coordinated and policies are adopted.

The government of each department is exercised by a governor and a departmental board, elected by direct vote of the citizens living in the specific department in elections that coincide with the presidential elections. Once elected, the governors also serve five-year terms. Governors represent the Executive Branch in the implementation and execution of national policy in each Department. The Municipal Government is headed by a Mayor and a Municipal Board, elected by popular vote.

Legislative Branch

The legislative power is exercised by Congress, consisting of a Senate of 45 members, and a Chamber of Deputies with 80 deputies. Up until 2011, congressional elections were held on closed lists (i.e. senators and deputies were not elected individually but through a list presented by political parties), simultaneously with the presidential election. Deputies are elected by department, while senators are elected on a national scale, both for five-year terms without term limits.

Judiciary Branch

The judiciary branch is responsible for the administration of justice and is headed by the Supreme Court of Paraguay and other lower courts and tribunals established by law. The Supreme Court of Paraguay is the highest court of the country. The Senate, following ratification by the President, appoints the nine members of the Supreme Court, on the basis of lists submitted by a Judicial Council (Consejo de Magistratura) comprised of appointees from law schools (private and public), lawyers, members of congress and the executive branch.

Recent Political Events

On June 21, 2012, Paraguay’s Chamber of Representatives met and approved a motion to start an impeachment process against former president Fernando Lugo. This motion was supported mainly by the Liberal Party, which had previously been part of a coalition that backed former president Lugo. The Paraguayan Senate held an impeachment trial on June 22, 2012 following the procedures established in the Paraguayan Constitution and voted to remove former president Lugo by absolute majority. The impeachment proceedings were the result of claims that poor management by former president Lugo contributed to a deadly clash between police and farmers in northeastern Paraguay on June 15, 2012 that resulted in 17 deaths. In accordance with the Paraguayan Constitution, Vice-President Federico Franco, a member of the Liberal Party, was sworn-in as the new president on June 22, 2012, and he will serve as president for the remainder of former president Lugo’s term, due to end in August 2013. Presidential elections were called for April 2013 and winner of such elections will assume office on August 15, 2013 pursuant to the constitutional mandate.

The removal of former president Lugo led to Argentina, Brazil, Ecuador, Uruguay, Venezuela and other countries of the region recalling their ambassadors to Paraguay and refusing to recognize the new government. In addition, members of both the Mercosur trade bloc and UNASUR voted to suspend Paraguay’s membership until after the 2013 presidential elections, though they refrained from imposing economic sanctions on Paraguay. Most of the countries of the region have since sent back their ambassadors to Paraguay and recognized the government lead by President Federico Franco.

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The Economy

Paraguay has a strong and fairly diversified economy. Between 1970 and 1979, the country had the highest economic growth in Latin America with an annual growth rate of 8.3%, according to the BCP.This growth was mainly due to the construction of the two large hydroelectric power plants that enhanced the size of the electric industry and the development of agriculture and livestock, making the country an agricultural power at the regional level. Starting in the 1990s, the industrial and other sectors began to develop further.

The commercial and financial sectors (20.2% of GDP, 2011 according to the BCP) are the largest in the tertiary sector. Most growth in these sectors relies heavily on international trade and the availability of financial resources.

Farming and livestock (26.6% of GDP, 2011 according to the BCP) are the main economic sectors in Paraguay. The most important product exported from Paraguay are soybeans and by-products related to soybeans (collectively accounting for approximately 60.0% of total Paraguayan exports) making Paraguay the sixth-largest producer of soybeans in the world (USDA, WAP 11-12, November 2012). Paraguay also produces corn, wheat, sesame seeds, sunflower oil and sugar. Paraguay’s Chaco forest contributes substantially to global storage of CO2 and has the potential of generating projected supranational re-compensation schemes such as Reducing Emissions from Deforestation and Degradation (REDD) credits.

On October 13, 2011, the Central Bank presented the country’s new GDP structure, including electrical power generation of Itaipu and Yacyretá (50% of the energy output of each plant belongs to Paraguay). GDP increased 4.0% and reached US$ 23.946 billion in 2011, compared to US$ 18.314 billion in 2010. GDP per capita increased by US$ 810 totaling US$ 3,649 per capita.

The following table presents key macroeconomic indicators for Paraguay.

2007 2008 2009 2010(1) 2011(1) (in millions of U.S. dollars, except guaraníes amounts and percentages) THE ECONOMY

GDP (in millions of Gs.)(2) ...... Gs.17,451,551 Gs.18,468,426 Gs.17,758,020 Gs.20,429,866 Gs.21,256,117 Real GDP (annual percentage change) ...... 6.8% 5.8% (3.8)% 15.0% 4.0% Consumer prices (annual percentage change, end 5.9% 7.5% 1.9% 7.2% 4.9% of period) ...... Balance of payments Trade balance ...... (496) (1,168) (1,046) (1,397) (1,678) Current account ...... 221 (379) (190) (654) (270) Capital and financial account ...... 753 466 803 708 752 Errors and omissions ...... (212) 234 384 265 303 Overall balance of payments ...... 762 321 855 319 784 External debt ...... 2,205,330 2,234,198 2,236,853 2,335,425 2,284,723 Net international reserves ...... 2,462 2,864 3,861 4,168 4,984 International reserves increase ...... (759) (402) (996) (319) (784) PUBLIC FINANCE Central Government revenue ...... Gs.10,837 Gs.12,748 Gs.13,915 Gs.16,247 Gs.19,636 Central Government expenditure ...... Gs.7,964 Gs.8,963 Gs.10,608 Gs.11,869 Gs.14,625 Central Government surplus (deficit) ...... Gs.547 Gs.1,831 Gs.399 Gs.1,174 Gs.490 Overall public sector surplus (deficit) ...... Gs.931 Gs.2,460 Gs.414 Gs.1,192 Gs.986 PUBLIC DEBT Consolidated public sector financing ...... (1.5)% (2.9)% (0.6)% (1.4)% (0.4)% External financing (net) ...... (0.6)% (0.6)% 0.0% 0.0% 0.1% Domestic financing (net) ...... (0.9)% (2.2)% (0.8)% (1.4)% (0.5)% Other ...... 0.0% (0.1)% 0.2% 0.0% 0.0% ______(1) Preliminary figures. (2) In constant 1994 prices.

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Source: IMF “Paraguay: 2011 Article IV Consultation—Staff Report; Staff Supplement: Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Paraguay” and “Anexo Estadístico – Informe Económico” report from BCP, revised June 2012.

Paraguay has steadily decreased its debt burden, in terms of net debt to GDP, leaving it with relatively little external debt as compared to other Latin American countries. Paraguay’s net debt to GDP ratio (calculated as public debt minus international reserves, including gold, over nominal GPD) was 5.7% in 2007, 2.7% in 2008, (2.9)% in 2009, (6.2)% in 2010 and (9.9)% in 2011, based on data from Economist Intelligence Unit.

The International Environment

To protect the Paraguayan economy from potential crises, the BCP implemented measures to maintain macroeconomic stability by maintaining low and stable inflation rates, without distortions in resource assignment, in an effort to generate an environment of certainty and confidence for medium and long-term investments.

Monetary Policy

In 2011, the BCP began a process to migrate monetary policy towards an “inflation targeting” scheme, using a 14-day benchmark interest rate as the main instrument. Inflation reached 4.9% in 2011, 7.2% in 2010, 1.9% in 2009, 7.5% in 2008 and 6.0% in 2007. The BCP, in an effort to combat inflationary pressures in early 2011, cut the benchmark 14-day interest rate by 200 basis points to 6.5% between November 2011 and January 2012. As of May 31, 2012, inflation reached 3.8%.

The BCP adopted several measures to develop the monetary market so that the mechanism of transmission of monetary policy would become more efficient, which led to the new inflation targeting scheme adopted in 2011. As a result, the BCP introduced (i) an inter-bank liquidity window (VLI), (ii) the 14-day benchmark interest rate, (iii) daily placement of the 14-day benchmark interest rate, (iv) the establishment of competitive auction for tranches of 63, 91, 182 and 365 days to fulfill monetary policy objectives, and (v) the introduction of short-term liquidity facilities (Facilidad de Liquidez de Corto Plazo – FLIR).

The appreciation of the guaraní over the last four years can be attributed to the economic expansion of Paraguay and the global financial crisis during that period. The U.S. dollar/guaraní exchange rate decreased 7.6% between 2007 and 2011. As of June 30, 2012, the U.S. dollar/guaraní exchange rate reached Gs.4,524 per U.S. dollar. During the last quarter of 2011, most of Latin American currencies, including the guaraní, depreciated against the U.S. dollar due to the European debt crisis that drove investors to seek refuge in the U.S. dollars and U.S. treasury bonds.

Growth by Economic Sectors

In 2011, Paraguay registered a GDP of US$ 11,164 million, in constant 1994 prices, of which 43.3% was attributed to the production of goods and 49.0% to services. Agriculture, livestock and forestry, together, accounted for 28.0% of GDP, trade 17.4%, industry 11.5% and the government 8.0%.

The following table presents Paraguay’s GDP by sector for the year ended December 31, 2011:

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Paraguay: GDP By Sector For the year ended December 31 (in billions of guaraníes, at constant 1994 prices, except percentages) 2007 2008 2009 2010 2011 owth 2007- Amount % GDP Amount % GDP Amount % GDP Amount % GDP Amount % GDP 2011 Agriculture ...... 3,372.6 19.3% 3,726.7 20.2% 2,795.1 15.7% 4,188.4 20.5% 4,481.6 21.1% 32.9% Livestock ...... 1,022.3 5.9% 1,089.0 5.9% 1,141.3 6.4% 1,238.3 6.1% 1,150.4 5.4% 12.5% Forestry ...... 318.5 1.8% 331.5 1.8% 317.2 1.8% 288.7 1.4% 297.4 1.4% -6.6% Fishing ...... 13.9 0.1% 14.1 0.1% 14.3 0.1% 13.8 0.1% 14.0 0.1% 0.7% Mining ...... 17.9 0.1% 18.8 0.1% 19.4 0.1% 20.0 0.1% 21.1 0.1% 17.6% Industry ...... 2,285.3 13.1% 2,330.0 12.6% 2,311.7 13.0% 2,456.9 12.0% 2,418.7 11.4% 5.8% Construction ...... 637.2 3.7% 707.3 3.8% 721.5 4.1% 815.3 4.0% 827.5 3.9% 29.9% Total Goods Production ...... 7,668.0 43.9% 8,217.6 44.5% 7,320.5 41.2% 9,021.5 44.2% 9,210.7 43.3% 20.1%

Services

Electricity and water ...... 312.4 1.8% 323.4 1.8% 338.9 1.9% 356.2 1.7% 387.2 1.8% 23.9% Transportation .... 739.1 4.2% 779.8 4.2% 697.9 3.9% 746.7 3.7% 799.8 3.8% 8.2% Communications 713.7 4.1% 747.9 4.0% 780.8 4.4% 829.2 4.1% 953.7 4.5% 33.6% Trade...... 3,220.2 18.5% 3,352.2 18.2% 3,238.3 18.2% 3,590.3 17.6% 3,684.1 17.3% 14.4% Finance ...... 362.8 2.1% 431.4 2.3% 459.8 2.6% 515.0 2.5% 604.2 2.8% 66.5% Housing ...... 305.8 1.8% 311.3 1.7% 316.6 1.8% 321.3 1.6% 327.8 1.5% 7.2% Services to Companies ...... 435.4 2.5% 448.5 2.4% 504.1 2.8% 535.9 2.6% 557.4 2.6% 28.0% Hotels and Restaurants ...... 192.4 1.1% 202.2 1.1% 203.2 1.1% 220.5 1.1% 237.3 1.1% 23.3% Services to Homes ...... 967.3 5.5% 1,010.9 5.5% 1,081.6 6.1% 1,124.9 5.5% 1,198.1 5.6% 23.9% General Government ...... 1,189.0 6.8% 1,230.7 6.7% 1,417.7 8.0% 1,602.0 7.8% 1,682.2 7.9% 41.5% Total Service Production ...... 8,438.5 48.4% 8,838.5 47.9% 9,039.4 50.9% 9,842.6 48.2% 10,431.7 49.1% 23.6% Taxes to products ...... 1,344.9 7.7% 1,412.2 7.6% 1,398.0 7.9% 1,565.8 7.7% 1,612.8 7.6% 19.9% GDP to retail price(1) ...... 17,451.5 104.4% 18,468.4 103.4% 17,758.0 109.7% 20,429.8 100.0% 21,255.2 100.0% 21.8% ______(1) Does not include multi-national entities. Source : Paraguayan Central Bank.

Currently, Paraguay’s tax rate is the lowest in South America and one of the lowest in the world. There is a 10% tax on corporate income plus an additional 5% on distribution of dividends, value added taxes of 5% and 10%, and personal income tax of 10% that affects only a very low percentage of the population. We believe this low tax regime has attracted investment in the country. Nevertheless, a large part of the Paraguayan (about 11.9%) Central State revenues come from non-tax proceeds, especially royalties from the operation two large dams Itaipu and Yacyreta.

Foreign Trade and Balance of Payments

In recent years, Paraguay has experienced significant growth in international trade, accompanied by the general growth of the Paraguayan economy. Between 2007 and 2011, GDP grew an average of 21.8% annually, while exports had a total growth of 95.8% (24% annual average) and imports reached a growth rate of 107.7% (26.9% annual average). Main products driving export growth were agricultural products and livestock. The import growth was largely driven by capital goods (38.4%), consumer goods (31.6%) and intermediate goods (30.0%).

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The following shows Paraguay’s balance of payments.

Paraguay: Balance of Payments 2006 2007 2008 2009 2010 2011 (in millions of U.S. dollars) Current account ...... 176. (384. (195.6 127.7 6 7) ) (653.6) (270.2) Trade Balance ...... (621.0 (532.9 (1,173. (1,051.7 ) ) 7) ) (1,396.6) (1,677.8) Exports (F.O.B.) ...... 4,401 5,652. 7,772. .2 1 2 5,783.7 8,519.7 10,388.6 Imports (F.O.B.) ...... (5,022. (6,185.0 (8,945.9 2) ) ) (6,835.5) (9,916.3) (12,066.4) Services (net) ...... 414 499 546 702 719 1,014 Capital and Financial Account ...... 197 753 466 803 814 1,649 General Government ...... (37) (140) 9 (118) 128 60 Private Sector ...... 233 893 457 685 686 1,589 Errors and Omissions ...... 77 (212) 234 384 265 303 Overall Balance ...... 402 762 321 996 319 784 Net International Reserves (increase) ...... (405) (759) (402) (996) (319) (784) ______Source: IMF “Paraguay: 2011 Article IV Consultation—Staff Report; Staff Supplement: Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Paraguay” and from the “Anexo Estadístico – Informe Económico” report from the Paraguayan Central Bank, revised June 2012.

In 2010 and 2011, import growth outpaced export growth, leading to a negative balance of payments, which was partially offset by the continued normalization of soybeans by-product shipments abroad. This trade imbalance was primarily the result of unrecorded exports to Brazil. Within the MERCOSUR treaty, the smaller economies, namely, Paraguay and Uruguay, were awarded an exception list in which computers, electronics, perfumes, and other goods were included. Paraguay’s import taxes on these goods are minimal: 2.6% of total taxes (income and value added tax) are charged on these products. These products, which are registered in official import statistics, are sold to Brazilian tourists in Paraguayan cities bordering Brazil, particularly in Ciudad del Este, Saltos del Guaira and Pedro Juan Caballero. The tourism regime allows each tourist to buy up to US$ 500 of Paraguayan sold products per person to enter Brazil without tax. Therefore, those products are not registered as exports into the Paraguayan National Accounts. These unregistered exports exacerbate the deficit in the registered trade balance.

Agriculture is the mainstay of the Paraguayan economy, with soybeans being the main export product (60% of exports in 2011). During the agricultural harvest of 2009-2010, 4.7 million tons of soybeans were exported, generating export earnings for US$ 1.59 billion. During the agricultural harvest of 2010-2011, 5.13 million tons of soybeans were produced, generating export earnings for US$ 2.3 billion. Another important export product is beef, which in 2011 represented 16% of exports.

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The following table shows Paraguay’s main export products:

Paraguay Main Export Products % of total exports 2005 2006 2007 2008 2009 2010 2011 2005 –2011 (in millions of U.S. dollars, except percentages) Soybeans ...... 563 420 860 1,485 787 1,591 2,295 33% Beef ...... 252 416 364 622 579 920 753 16% Cereals ...... 117 207 351 373 457 549 608 11% Flour ...... 141 138 298 546 379 349 417 10% Vegetable oils ...... 103 111 260 588 261 276 340 8% Timber ...... 79 95 111 118 96 102 97 3% Cotton ...... 76 41 46 25 20 24 17 1% Others ...... 324 414 528 705 588 723 992 18% Total ...... US$ 1,655 US$ 1,843 US$ 2,817 US$ 4,463 US$ 3,167 US$ 4,534 US$ 5,517 100%

Paraguay’s main trading partner is Brazil, and accounted between 2009 and 2011 for 16.2% of exports and 25.6% of imports, followed by Argentina with 14.0% of exports and 15.1% of imports and Uruguay with 18.8% of exports and 1.4% of imports, making MERCOSUR the destination of 49.5% of Paraguayan exports and 42.1% of imports. China with 1.4% of exports and 29.3% of imports is Paraguay’s second most important trading partner. The remaining exports are destined for the rest of Asia, Europe and the United States.

The following table shows the major destinations of Paraguay’s exports. Paraguay Main Export Destinations % of total exports 2005 2006 2007 2008 2009 2010 2011 2005 – 2011 (in millions of U.S. dollars, except percentages) Brazil US$ 316 US$ 312 US$ 521 US$ 628 US$ 656 US$ 661 US$ 783 16% Argentina 103 149 519 727 343 538 973 14% Uruguay 474 413 261 780 534 996 1,062 19% China 67 19 54 96 34 34 30 1% Rest of the world 696 951 1,462 2,232 1,601 2,305 2,671 50% Total US$ 1,655 US$ 1,843 US$ 2,817 US$ 4,463 US$ 3,168 US$ 4,534 US$ 5,517 100% ______Source: BCP.

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The following table sets forth the major source of Paraguay’s imports. Paraguay Main Import Destinations % of total exports 2005 2006 2007 2008 2009 2010 2011 2005 – 2011 (in millions of U.S. dollars, except percentages) Brazil US$ 841 US$ 96 US$ 1,601 US$ 2,302 US$ 1,513 US$ 2,280 US$ 3,049 26% Argentina 612 685 790 1,216 1,037 1,460 1,621 15% Uruguay 50 54 71 100 82 140 180 1% China 599 1,218 1,551 2,347 1,952 3,255 3,429 29% Rest of the world 972 1,584 1,525 2,541 1,913 2,264 3,225 29% Total US$ 3,073 US$ 4,502 US$ 5,539 US$ 8,506 US$ 6,497 US$ 9,340 US$ 11,502 274% ______Source: BCP.

The deficit in the trade balance of goods was offset by the surplus in the balance of services, especially attributed to the dynamism in expenditures and investments of multinational companies in the country, as well as to remittances received from abroad. As a result, the current account balance presented a smaller deficit as a result of the increase in wages received by Paraguayan residents, and the increase in interest corresponding to the growing balance in international reserves.

The private sector is the largest recipient of foreign capital in the form of foreign investment, return on deposits and private foreign debt. The public sector recorded a net amortization of foreign debt on the grounds that amortizations are higher than disbursements allocated to the central government, while public companies have received funding from their respective commercial nonresident suppliers.

The government's foreign debt represents 9.6% of GDP, while the inclusion of public enterprises raises the ratio to 13.2% as of December 31, 2011. Foreign funding flows received by the private sector as indebtedness increases the ratio to 20.5% as of December 31, 2011.

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REGISTERED OFFICE OF THE ISSUER Telefónica Celular del Paraguay S.A. Zavala Cue esq. Artilleria Fernando De La Mora, Paraguay

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