Millicom, UNE EPM, and ColTel’s ratings unchanged following acquisition announcement

Press Release

By Fitch Ratings

The ratings for Millicom International Cellular S.A. (Millicom), UNE EPM Telecomunicaciones S.A. (Tigo UNE), and Colombia Telecomunicaciones S.A. E.S.P. BIC (ColTel) are unchanged following Millicom’s announcement of potential M&A, according to Fitch Ratings. The company announced on July 31 that it had entered into a non-binding memorandum of understanding with Telefonica for a possible merger of ColTel and Tigo UNE.

The proposed transaction includes approximately USD400 million for Telefonica’s stake in ColTel. Millicom would also acquire the remaining minority interests in ColTel and EPM’s 50% stake in Tigo UNE. Millicom expects to fund each of the transactions with cash and assumed debt with total funding of approximately USD1.0 billion.

The deal is in the early stages, and definitive agreements with each party, antitrust approvals and other closing agreements are still pending. There is no guarantee that the transaction will be consummated, and Fitch will continue to monitor the situation as more details emerge. Millicom currently holds a 50% stake in Tigo UNE alongside partner EPM, while Telefonica owns a 67.5% stake in ColTel with the remainder primarily owned by the Colombian government.

The proposed merger of Tigo UNE and ColTel would create a strong #2 telecom operator in Colombia after Claro Colombia. The Colombian telecom market has become highly competitive, with particular pressure on postpaid mobile ARPUs and operating margins across the industry following the entry of WOM Colombia into the market in 2021. In February 2024, Tigo UNE and ColTel signed an agreement to share their mobile networks, and they jointly participated in Colombia’s 5G spectrum auction in December 2023.