Millicom ‘not in M&A’ mode in Latin America

Luxembourg-headquartered Millicom, which is an important player in the telecoms sector in Central America and Spanish-speaking South America, is not targeting new acquisitions in the region in the foreseeable future, and instead is focusing on organic growth.

“We are not in M&A mode. We’re in an operating moment,” CEO Mauricio Ramos (pictured) told investors in an earnings call, caveating, though, that minor deals might be necessary to protect the company's market share.

Last November, in what was probably the largest regional telecom M&A operation of 2021, Millicom bought the remaining 45% share in its Tigo Guatemala JV from Miffin Associates for US$2.2bn.

The Millicom group recently concluded its exit from Africa, with the sale of its operations in Tanzania, to focus on Latin America, where it operates in nine countries.

Ramos was referring to a potential Millicom interest in Jamaica-based Digicel's assets in Panama. However, “our focus in Panama is largely organic. We don't want to get distracted” by acquisitions, the CEO said.

Digicel Panama, the smallest of the nationwide players in that market, announced earlier this month it was leaving the country, requesting the liquidation of its assets after the approval of the merger of Liberty Latin America's Cable & Wireless Panama (CWP) with América Móvil's Claro Panama.

According to the Digicel Group, Panama is a market that does not guarantee healthy competition and has a regulatory entity that did not make the adjustments needed by a third and smaller competitor.

With the purchase of Claro and the announced exit of Digicel, the Panama market would be whittled down from four competitors to two large players: CWP and Millicom’s Tigo.

This week, Panama’s cabinet announced it was taking "control of the concessionaire [Digicel Panama]" through the public services authority (ASEP) "with the purpose of guaranteeing the continuity of the job positions and the personal communications service."

According to Ramos, a telecom market with two nationwide players is ideal for most Latin American countries, most notably smaller ones such as Panama and Bolivia.

In Bolivia, the Trilogy International fund announced last month the sale of its 71.5% stake in NuevaTel, which operates under the Viva brand, to the Balesia group.

Viva competes against Tigo Bolivia, a subsidiary of Millicom, which has a much stronger business and financial profile, and with state-run telco and market leader Entel.

Although the fate of Viva under Balesia is not clear, Ramos believes that the Bolivia is also heading towards being a two-player market. Millicom is not pursuing any acquisitions there at the moment.

Unlike Digicel, Ramos said Millicom sees the Panamanian market as having an adequate regulatory framework, with “really good spectrum policy” in pricing and parity.

The CEO also said Millicom is in the process of buying spectrum in the AWS band in Panama, after authorities approved the awarding of the frequency and the spectrum pricing.

OUTLOOK

In the call, Ramos confirmed previously disclosed capex guidance of US$1bn per year on average in Latin America for this and the next two years.

In 2021, Millicom surpassed US$1bn in capex, with the figure ending the year at US$1.11bn, an 18% increase over 2020.

For the first quarter of 2022, Millicom's capex amounted to US$199mn, up 65.5%.

The CEO also said the company is on track with its 12-24 month plan to spin off its infrastructure and mobile financial services (Tigo Money) businesses, having already hired financial, legal and technical advisors.

The Tigo Money service is also due to be launched in Panama later this year.

PERFORMANCE

Millicom's total Q1 revenue increased 40.9% year-on-year to US$1.41bn.

The company ended March with nearly 40mn mobile subscribers (up 5.4%), 19.3mn of which were 4G customers, and 12.2mn homes-passed (up 5%), of which 12.0mn were hybrid fiber coaxial cable or full fiber-to-the-home (FTTH) cable. 

The fixed business was driven by Colombia, Guatemala and Bolivia, while mobile operations did particularly well in El Salvador and Nicaragua.

In Guatemala, traditionally one of the best-performing subsidiaries for Millicom, performance in Q1 was hampered by the global chipset shortage, according to Ramos.

Millicom is also facing a challenging competitive mobile environment in Paraguay, where to compensate it is doubling down on its fixed business, and “challenging mobile pricing moments” in Bolivia.

In Colombia, where the group now has spectrum in the 700MHz band, the scenario is even more competitive, with four strong mobile players – Claro, Movistar, Tigo and WOM.

Without providing details, Ramos said Tigo Colombia is preparing to enter the fixed-line market in Bogotá through the use of third-party fiber infrastructure.

Earlier this month, Ximena Mora Méndez, the CEO of ON Net Fibra Colombia – the recently launched wholesale fiber JV between Telefónica and KKR in the country – told BNamericas that the group was in talks with 15 potential clients, including large operators.