Fitch Ratings Maintains Unchanged Ratings for Millicom Amid Potential M&A Announcement

Strategic Insights -

The ratings for Millicom International Cellular S.A. (Millicom) and its subsidiaries, UNE EPM Telecomunicaciones S.A. (Tigo UNE) and Colombia Telecomunicaciones S.A. E.S.P. BIC (ColTel), have been left unchanged following the company's announcement of a potential merger with Telefonica. The proposed deal involves the acquisition of a 67.5% stake in ColTel, alongside the purchase of the remaining minority interests in the company and EPM's 50% stake in Tigo UNE. Millicom aims to fund the transactions with approximately USD1.0 billion in cash and assumed debt.

Key Takeaways:

  • Millicom's ratings remain unchanged following the potential M&A announcement with Telefonica.
  • The proposed transaction includes the acquisition of a 67.5% stake in ColTel, as well as the purchase of the remaining minority interests in the company and EPM's 50% stake in Tigo UNE.
  • Millicom expects to fund the transactions with approximately USD1.0 billion in cash and assumed debt.
  • The Colombian telecom market has become highly competitive, with pressure on postpaid mobile ARPUs and operating margins following the entry of WOM Colombia in 2021.
  • Tigo UNE and ColTel have shared their mobile networks since February 2024 and jointly participated in the 5G spectrum auction in December 2023.
  • The proposed merger of Tigo UNE and ColTel would create a strong second telecom operator in Colombia after Claro Colombia.

Statistics:

  • USD400 million: the approximate value of Telefonica's stake in ColTel.
  • 50%: Millicom's current stake in Tigo UNE.
  • 67.5%: Telefonica's stake in ColTel ahead of the proposed merger.
  • USD1.0 billion: the expected total funding for the transactions, including cash and assumed debt.
  • 2021: the year in which WOM Colombia entered the Colombian telecom market, increasing competition.
  • 2023: the year in which Tigo UNE and ColTel jointly participated in the 5G spectrum auction.
  • 2024: the year in which Tigo UNE and ColTel signed an agreement to share their mobile networks.

Sources:

  • [Source 1] Fitch Ratings website for the commentary on Millicom's rating outlook following the potential M&A announcement.
  • [Source 2] Millicom's official announcement on July 31 regarding the potential merger with Telefonica.
  • [Source 3] The Colombian telecom market overview from various industry reports.