Author Topic: TIGO - Millicom  (Read 16905 times)

alwaysinvert

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Re: TIGO - Millicom
« Reply #30 on: December 02, 2019, 06:58:27 AM »
This news from last week is major for the sector: https://www.reuters.com/article/us-telefonica-meeting-plan/we-need-to-reinvent-spains-telefonica-eyes-2-2-billion-sales-boost-idUSKBN1Y129Q

Millicom most significantly overlaps with Telefónica in Colombia, where they are #2 and #3 respectively behind America Movíl (Claro). Colombia is right now a structurally less profitable market than Millicom's other markets and consolidation there would be a major positive, most especially in light of the huge cable rollout which Millicom has ongoing in the country. This would be pretty much the final puzzle piece in the merger story transformation which has been playing out in the last year.

Also note that Telefónica splits its new Hispam division in a North and South part, where the first in its entirety could be good fit for a mega merger with Millicom. Although, that would be heavily price dependent since it also contains some real turnaround dogs (Mexico, Peru, Venezuela). Here's a good graphic overview:     


alwaysinvert

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Re: TIGO - Millicom
« Reply #31 on: December 03, 2019, 09:20:55 AM »
The Stenbeck family office (controlling shareholder in Kinnevik) has bought an additional 350.000 shares in Millicom. If I'm adding it up correctly, this would make them a 3.3% holder in the stock across their vehicles once the distribution shares are merged in on Thursday.

https://www.di.se/live/stenbeck-okar-sitt-privata-agande-i-millicom-genom-storkop/

Even if it is not a major purchase this is still a bit surprising. They were likely a driving force for the Liberty transaction (which Kinnevik is said to have been positive towards) and have certainly greenlighted the plans of separating Millicom from Kinnevik.

jgyetzer

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Re: TIGO - Millicom
« Reply #32 on: December 10, 2019, 03:01:57 PM »
Has Kinnevik already executed the distribution of TIGO shares?

alwaysinvert

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Re: TIGO - Millicom
« Reply #33 on: December 10, 2019, 03:29:35 PM »
Has Kinnevik already executed the distribution of TIGO shares?

Yes.

alwaysinvert

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Re: TIGO - Millicom
« Reply #34 on: December 18, 2019, 03:14:28 PM »
Colombia is a very interesting market and some kind of change to the market structure there would be immensely valuable to Millicom.

ETB is publicly owned by the city of Bogotá. They are a fiber player with some legacy copper and would naturally make for great synergies in a full integration with Tigo, which is the most natural buyer.

The former mayor of Bogotá has tried to sell ETB throughout his term (ostensibly to finance hospitals and daycare) but gave up early this year. His successor, the newly elected Claudia López ran on a promise not to sell out ETB. However, curiously enough her and her party voted for a sale a couple of years ago (which was later stopped in courts). All in all, if there is no huge about-face, it seems like this opportunity is lost for the next couple of years.

Likewise, there seems to be no real movement towards a purchase of the other half of Tigo Colombia, which is owned by state-controlled EPM (Empresas Públicas de Medellín). This is a real shame since Millicom could really do with cleaning up their corporate structure in order to get a better stock market valuation.

________

https://www.larepublica.co/empresas/numero-de-operadores-actual-deja-ver-como-esta-el-mercado-colombiano-2941618

On the mobile side, there is a spectrum sale imminent in Colombia, set for Dec 20. Only three incumbent players have entered (Claro, Movistar and Tigo - the big three). A fourth player, Novator Group (owner of Chilean WOM), is also in, though. The speculation seems to be that they are angling to take over Avantel, which is a smaller player that has been in a dispute with Tigo and the two others over roaming fees which they have failed to pay for use of their networks. This is the bad debt charge Millicom took in Q3, which had a role in making the Colombia figures look so bad. Here's what Mauricio Ramos said about that in the Q3 conference call:

Quote
And lastly on the Colombia MVNO situation, the answer is very simple. We disconnected an MVNO that was simply not paying the bills that we hosted. And there's no more to it than that.

When and if they pay, we will reconnect them. The loss of that revenue has had an effect on our numbers in this quarter. It does have an effect on our outlook for the rest of the year, and that's why you've seen us correct that. And the last comment I'll make is that of course this is MVNO revenue.

It's not part of our strategic design going forward. And perhaps part of what's going on here is that the industry structure in Colombia simply needs to be reshaken because there's just no room for everybody.

Here is Avantel's version of the dispute: https://www.rcnradio.com/economia/avantel-responde-usuarios-por-decision-de-tigo-de-suspender-redes

After disconnecting voice service back in October, Tigo also disconnected data service last week: https://www.telesemana.com/blog/2019/12/12/tigo-colombia-tambien-desconecta-ran-de-datos-a-un-avantel-en-problemas/

Avantel is now being forced into restructuring: https://www.valoraanalitik.com/2019/12/18/reorganizacion-de-avantel-no-afectara-a-usuarios-refinanciara-deuda-a-17-anos/ 

But for a restructuring to be feasible at all, the roaming expenditures will have to come down. It seems like Avantel has been aggressively pricing for customer growth and if that is now coming to an end, margins will rise for the big three. Avantel's whole strategy seems untenable from the very beginning. However, I'm not going to pretend that I understand all the intricacies and dynamics at play here - I'm just sittting on the other side of the world googling and using some minor Spanish skills and translate tools to try to get a grip on the situation. Maybe there is someone out there with more on the ground insight into the situation.
« Last Edit: December 18, 2019, 03:22:00 PM by alwaysinvert »

alwaysinvert

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Re: TIGO - Millicom
« Reply #35 on: December 18, 2019, 11:30:48 PM »
Likewise, there seems to be no real movement towards a purchase of the other half of Tigo Colombia, which is owned by state-controlled EPM (Empresas Públicas de Medellín). This is a real shame since Millicom could really do with cleaning up their corporate structure in order to get a better stock market valuation.

On the other hand, this public part-ownership may possibly be what has allowed Tigo to play hardball with Avantel, something the two others didn't choose to do. The ownership situation can have possible drawbacks with for example employee costs but seems pretty likely to be a net benefit from a competitive standpoint.

dwy000

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Re: TIGO - Millicom
« Reply #36 on: December 19, 2019, 08:09:20 AM »
Love your research and insight AlwaysInvert. Keep it up!!

alwaysinvert

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Re: TIGO - Millicom
« Reply #37 on: December 22, 2019, 06:46:27 AM »

alwaysinvert

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Re: TIGO - Millicom
« Reply #38 on: December 22, 2019, 10:22:42 AM »
A logical merger from the spectrum auction results would seem to be Novator (WOM) taking over Movistar in Chile and Colombia, providing a partial exit for Telefonicá and allowing Novator the luxury of not starting from scratch in Colombia. But if it is not prohibited by antitrust concerns, Tigo should also be in the run for the Colombia business. Claro is most likely too big.

https://www.larepublica.co/empresas/el-multimillonario-islandes-que-peleara-con-claro-tigo-y-movistar-2940500

However, it might be that Movistar is too big to swallow for Novator and that their angle - as I indicated above - is to grab the corpse of Avantel on the cheap and develop it with their new spectrum access. If so, there is only one possible taker left for Movistar: Tigo. Either way, some kind of merger seems imminent.

alwaysinvert

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Re: TIGO - Millicom
« Reply #39 on: December 22, 2019, 10:51:01 AM »
I'll stop spamming for a while after this but some more relevant links

Former CEO of UNE, who was behind the sale of half of EPM to Tigo in 2014, argues that they should sell the other half to Tigo now in order to finance pressing infrastructure investments:

https://www.larepublica.co/analisis/marc-eichmann-505757/el-dilema-de-epm-2945079

Some further comments from different actors on the market structure in Colombia here:

https://www.elespectador.com/economia/colombia-tendra-un-nuevo-operador-movil-partners-articulo-896923