From target to buyer: Millicom bets on Colombia acquisitions

After rejecting a buyout bid from Atlas, Latin American-focused telecom group Millicom is now betting on acquisitions itself, specifically in Colombia.

The Luxembourg-headquartered company signed a non-binding agreement with Telefónica for the potential takeover of the Spanish group’s Colombian carrier Coltel for US$400mn in cash, according to a Millicom statement.

Under the deal, Millicom – which operates as Tigo – also intends to buy La Nación’s stake and other minority interests in Coltel for cash at the same purchase price per share offered to Telefónica, it said.

The plan is to combine Coltel and TigoUne, which is a JV between Millicom and Medellín-based public utility EPM. Millicom owns 50% of TigoUne and EPM the other 50%.

Millicom also intends to acquire EPM’s stake in TigoUne “for cash at a comparable valuation multiple as the one implied by the Coltel acquisition," it said.

The operations should add up to around US$1bn in value, according to the Millicom release. The company intends to fund that with cash and debt over the following 18 months.

“The transaction remains subject to negotiation and signature of definitive agreements with all parties involved, including Telefónica, La Nación and EPM, as well as receipt of regulatory and antitrust approvals and satisfaction of other closing conditions,” Millicom said.

“There is no certainty the transaction will ultimately be consummated."

MARKET SHAKE-UP

If the deal goes through, the competitive Colombian market will be reduced to three from four main players, potentially narrowing down to two – Millicom and América Móvil (Claro).

WOM, the third local player, is currently in bankruptcy protection, as is its sister company WOM Chile.

The proposed combined company "would rejuvenate Colombia's telecom sector by forming a robust telecom entity with the necessary scale and financial capacity to support the significant network and spectrum investments required to achieve Colombia's ambitious digital inclusion objectives," Millicom said.

TRACK RECORD 

In 2019, Millicom purchased the subsidiaries of Telefónica in Panama and Nicaragua – and nearly that of Costa Rica – as part of the Madrid-based telco’s HispAm divestment push.

Now, Telefónica has all its Central American operations sold to various buyers.

For Telefónica, the Colombian deal with Millicom would mean its exit from a difficult mobile market, but not necessarily from Colombia as a whole.

The telco still has an important fixed-line operation in the country, which was not mentioned in the release, namely the neutral fiber network On Net Fibra. 

All Millicom said about the fixed segment was that the "strengthened operator would bolster the digitalization of Colombia, ensure broader access to modern digital services across the country and advance the deployment of both fiber and 5G technologies across the country."

In 2021, Telefónica sold part of its fiber network in Colombia to US infra fund KKR to create the neutral network JV. The format followed the model the two had implemented in Chile, where KKR and Telefónica teamed up to create On Net Fibra Chile.

Last year, the model was replicated again in Peru, with the partial sale of Telefónica’s fiber business to KKR for the creation of On Net Fibra Peru.

It is unclear what the situation of On Net Fibra Colombia will be after the sale of Coltel, whether Millicom will for example replace Telefónica as KKR’s new partner in the JV. KKR is not mentioned in the statement.

In January this year, KKR reached an agreement to acquire 1,100 wireless towers from Millicom’s Tigo Colombia subsidiary.