Author Topic: TIGO - Millicom  (Read 26346 times)

NotSoWise

  • Jr. Member
  • **
  • Posts: 67
Re: TIGO - Millicom
« Reply #80 on: November 23, 2020, 11:18:24 PM »
A point to consider is that Ramos mentioned that there wont be any price increases in 2020 and 2021 not to invite regulation (LILAK probably the same). With depreciating currencies in LATAM, it means some pressure on USD/ reporting currency ARPU. This was also visible in LILAK 3Q numbers, when USD ARPU declined. My expectation for USD organic growth is very low for 2021, they will announce some conservative projections due to the virus. LILAK will look nice with consolidated PR and CR, thou.

Short term LILAK/ TIGO strategy is to grow volume, in particular in broadband, but at some point they will have to raise local currency ARPUs. This is a disadvantage when comparing to CHTR, as CHTR does not have issues with ARPU due to USD operating currency. Organic growth for CHTR is somewhat comparable over the next few years. On the other hand LILAK and TIGO have lower valuations and more long term runway until saturation, but at currency/ political and potentially somewhat climate risk.

Having all three, it is not obvious for me which is the best of them at the current prices.... with CHTR being the least risky.

As for TIGO, my understanding from the call is there is not going to be any dividends or buybacks in 2021. I think he collects cash for a potential M&A deal (by repaying debt - holding large cash on BS would be questioned by shareholders). COVID gives him a good excuse to justify and accelerate building cash (or debt increase potential) - as no dividends and no buybacks.


alwaysinvert

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 928
    • värdeinvesteraren
Re: TIGO - Millicom
« Reply #81 on: November 23, 2020, 11:27:19 PM »
As for TIGO, my understanding from the call is there is not going to be any dividends or buybacks in 2021. I think he collects cash for a potential M&A deal (by repaying debt - holding large cash on BS would be questioned by shareholders). COVID gives him a good excuse to justify and accelerate building cash (or debt increase potential) - as no dividends and no buybacks.

This makes sense and was what I had in mind with the strategic angle. However, he has been categorically negative towards any M&A questions lately. He could have easily taken a somewhat softer stance if this was the idea (something like "right now is not the time, but we are open to possibilities in the future"). But who knows, he could be talking down his eventual interest in order to keep down prices too. After all, there aren't many buyers around for those assets.
« Last Edit: November 23, 2020, 11:29:15 PM by alwaysinvert »

alwaysinvert

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 928
    • värdeinvesteraren
Re: TIGO - Millicom
« Reply #82 on: November 30, 2020, 12:35:35 AM »
As for TIGO, my understanding from the call is there is not going to be any dividends or buybacks in 2021. I think he collects cash for a potential M&A deal (by repaying debt - holding large cash on BS would be questioned by shareholders). COVID gives him a good excuse to justify and accelerate building cash (or debt increase potential) - as no dividends and no buybacks.

This makes sense and was what I had in mind with the strategic angle. However, he has been categorically negative towards any M&A questions lately. He could have easily taken a somewhat softer stance if this was the idea (something like "right now is not the time, but we are open to possibilities in the future"). But who knows, he could be talking down his eventual interest in order to keep down prices too. After all, there aren't many buyers around for those assets.

This might be the explanation: https://www.valoraanalitik.com/2020/11/29/epm-vender-su-participaci-n-en-tigo-une/

No use in looking keen when a seller is looking for an out.

NotSoWise

  • Jr. Member
  • **
  • Posts: 67
Re: TIGO - Millicom
« Reply #83 on: November 30, 2020, 02:47:37 AM »
Good catch... worst case it should be done at a fair price, with base case price being attractive (e.g. ATT for LILAK - willing seller, not many other buyers). If you are an industry insider with local operations (and co-shareholder...), you usually know at least 3-6 months before things appear in the newspapers, so they have been preparing for this for quite some time. I would even say they have already agreed on the price. Deal should be quick and simple (no DD, etc). Good news overall.

alwaysinvert

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 928
    • värdeinvesteraren
Re: TIGO - Millicom
« Reply #84 on: December 01, 2020, 04:03:50 AM »
Here's some more detail on the the stake sale in UNE: https://www.larepublica.co/economia/la-venta-de-une-es-una-opcion-que-esta-sobre-la-mesa-y-es-lo-responsable-con-el-futuro-3095834

So seems like the sale is about a year out and subject to a parliamentary vote for approval. Sadly, I'm not up enough on the politics of Medellin to know if this vote is a mere formality or will prove meaningfully politically contentious.

NotSoWise

  • Jr. Member
  • **
  • Posts: 67
Re: TIGO - Millicom
« Reply #85 on: December 01, 2020, 05:12:17 AM »
You are right, does not look so easy or quick due to political decision process. Given deal timing, most likely no dividends and no buybacks in 2021.

alwaysinvert

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 928
    • värdeinvesteraren
Re: TIGO - Millicom
« Reply #86 on: December 01, 2020, 07:15:26 AM »
Probably correct and it would make perfect sense. But we might also be surprised at how well Tigo can further tap the debt markets in the near to mid term. Or at least I hope so. If also combined with more non-core asset sales they could have ton of liquidity going forward. I think they should really try and push the wide chasm between debt markets and equity in this area, whether they do that by buybacks or acquisitions doesn't matter to me, but they should take the chance to push the envelope now when they can get more long cheap financing and buy hopefully growing assets at 5x.

NotSoWise

  • Jr. Member
  • **
  • Posts: 67
Re: TIGO - Millicom
« Reply #87 on: December 03, 2020, 01:16:26 AM »
https://www.gsma.com/mobileeconomy/wp-content/uploads/2020/12/GSMA_MobileEconomy2020_LATAM_Eng.pdf

interesting report on mobile market in LATAM, from recent conference TIGO CEO participated (more info on TIGO IR page).