Will Colombia's EPM be able to sell its stake in Tigo-Une?

In order for Colombian public utility EPM to sell its non-controlling stake in Tigo-Une, the telco it owns with Millicom, local political conflicts will have to be resolved that prevented the deal from being approved in 2022.

The scenario to obtain the green light for the sale this year is not too different from that in 2022, as political tensions resurfaced at the first hearing to discuss the legislative proposal.

Medellín mayor Federico Gutiérrez was greeted with insults by union groups present at the hearing, while there were also some clear signs of tension in the exchanges between council members.

This is the fourth time that EPM has tried to convince the Medellín city council to approve the sale of its telecommunications assets, after making thwarted attempts in 2021 and twice in 2022.

Gutiérrez wants to push through the sale to use the proceeds to invest in training, technological projects and a new solid waste model for the city, among other things. The funds would not go directly to Medellín city hall, but would be managed by EPM.

“He [the mayor] is telling this council to approve without an appraisal and without having an external assessment of the value of our stake in UNE. I believe that without an updated valuation of shares in UNE Telecomunicaciones, it is a legal risk for this council to approve the sale,” Juan Carlos Upegui Vanegas, a member of the opposition to Gutiérrez, said during the hearing.

According to figures published in the local press, EPM could raise around 1.6 trillion Colombian pesos (US$394 million) from the sale of its stake in Tigo-Une.

The state-owned company has so far preferred not to provide an estimated sale value.

Millicom has an agreement with Telefónica under which Millicom could acquire all of Telefónica's shares in Coltel for US$400mn. Millicom previously announced its interest in acquiring EPM's stake in Tigo-Une "in cash at a valuation multiple comparable to that implied by the acquisition of Coltel," it said.

The two deals are expected to involve a total value of around US$1bn.

“The resources remain in EPM's fund and wouldn't come to the district. These funds should also go to another asset within EPM's core business, generating not only social and environmental value, but also new business models for EPM,” said Gutiérrez.

EPM has warned that its stake in Tigo-Une represents a risk of being obliged to recapitalize the company in a highly competitive market context in which large sums of capital would be required to sustain the business.

In 2023, the company was at risk of needing capitalization of 600bn pesos. Finally, there was an agreement between the shareholders and EPM contributed half of the money.

Despite the fact that Tigo-Une has shown a recovery in its financial indicators, there is still a latent threat of requiring capitalization, EPM said in a press bulletin.

Between 2021 and 2023, Tigo-Une's losses amounted to 2.1tn pesos, according to EPM figures.