Thursday, 23 May 2019

Millicom targets Leadership Position in Central America with acquisition of Telefónica Subsidiaries

Millicom announced last week that it has closed the acquisition of Telefonía Celular de Nicaragua, S.A., the number one mobile operator in the country, adding to its existing cable operation of TIGO Nicaragua. This is the first transaction to close since Millicom announced in February an agreement to acquire three subsidiaries of Telefónica in Central America in Panama, Costa Rica and Nicaragua.

Telefonía Celular de Nicaragua, S.A. adds approximately 4 million mobile customers to TIGO with a 4G network accessible to 51% of the population in Nicaragua. The transaction accelerates the execution of Millicom’s fixed-mobile convergence strategy, it helps consolidate the company’s leadership position in Central America, and it diversifies and balances the geographic footprint of the company in its mission to build digital highways that connect more users and develop communities throughout the region.

For people who are not aware, Central America consists of 7 countries, Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. Of these, Millicom is present in 5 of them with their brand Tigo.

This transaction in Panama, Costa Rica and Nicaragua will allow Millicom to accelerate its Fixed Mobile Convergence (FMC) strategy.

In Panama, after the acquisition:

  • #1 mobile operator in a four-player market with 1.6 million customers
  • 4G network covers 74% of population
  • Revenue and Adjusted EBITDA CAGRs of approximately 4% and 7%, respectively, in 2015-2018, in US dollar terms
  • 2018 revenue of $223 million and Adjusted EBITDA of $90 million, resulting in a margin near 41%
  • Dollarized economy and investment grade country increasing Millicom’s US dollar revenue sources

In Costa Rica, after the acquisition:

  • #2 mobile operator in a three-player market with 2.4 million customers
  • 4G network covers 85% of population
  • Revenue CAGR of approximately 13% in 2015-2018, in US dollar terms, drove much faster EBITDA growth over the period
  • 2018 revenue of $253 million and EBITDA of $60 million, resulting in a margin near 24%

In Nicaragua, after the acquisition:

  • #1 mobile operator in a two-player market with 4.7 million customers
  • 4G network covers 51% of the population
  • Revenue has declined at a 2.5% CAGR in US dollar terms in 2015-2018, due in part to a weaker currency and to slower overall economic activity
  • 2018 revenue of $232 million, nearly 50% of which are denominated in US dollars, and Adjusted EBITDA of $92 million, resulting in a margin near 40%

Finally, with regards to Spectrum the three countries:
Reasonable amount of spectrum is available for existing 3G & 4G services. Our assumption is that these will increase with arrival of 5G in these countries.

Source.

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