Millicom International Cellular SA, along with its main stakeholder, the magnate Xavier Niel, have concurred to collectively procure Telefónica SA’s Chilean segment, aiming to broaden their reach in the Latin American telecom industry.
As declared by the firms on Tuesday, the purchasers will initially disburse $50 million, accompanied by the potential for further conditional installments amounting to $150 million based on the asset’s valuation. The subunit possessed around $571 million in liabilities by the close of 2025, which shall be settled via cash generation and isn’t backed by Millicom, according to the buyers.
Millicom, which has been active in Latin America under the Tigo trademark for many years, has previously secured Telefónica’s resources in additional nations within the area as the Spanish firm curtails its footprint outside Brazil. During the previous year, Millicom, headquartered in Luxembourg, reached agreements to obtain Telefónica’s divisions in Colombia, Ecuador, and Uruguay.
As per a regulatory filing, Carolina Vallejo Londono is set to assume the role of CEO for Millicom in Chile. A representative from Millicom verified her designation.
Millicom will evolve into a junior associate in the Chilean subdivision with a 49% equity, whereas NJJ Holding SAS, owned by Niel, will procure the remaining portion. Millicom will be granted a choice to buy Niel's interest in either the fifth or sixth year following the transaction’s completion.
Millicom CEO Marcelo Benitez stated, “This affords NJJ and Millicom operational command from the outset, alongside the prospect to seize enduring development prospects at a compelling appraisal, all without compromising our fiscal strength.”
Telefónica conveyed in a separate announcement that the arrangement signifies a “firm value” of $1.22 billion, while refraining from detailing the calculation’s framework. Supplementing the $150 million contingency, the pact incorporates a $340 million postponed payment, contingent upon the subunit’s economic outcomes.
Concurrently, Telefónica must furnish 79 billion Chilean pesos ($92 million) upon the deal’s conclusion to offset a segment of the disbursements.
Millicom’s shares decreased by 5.2% to $64.73 in New York, while Telefónica’s shares exhibited minimal fluctuation. Telefónica Moviles Chile's bonds, denoted in dollars and maturing in 2031, augmented by 5 cents, reaching 82 cents on the dollar.
Among the entities displaying interest in the asset were America Movil SAB, owned by Mexican billionaire Carlos Slim, along with Chilean mobile network providers WOM and Entel SA. The anticipation surrounding a sale received a boost last month when Telefónica Moviles divested its stake in the fiber-optic network enterprise Onnet to another Telefónica subdivision for $350 million.
In contrast to other competitors, Millicom will encounter fewer regulatory obstacles as a fresh market participant. Nevertheless, the count of prominent operators will remain constant, thereby underwhelming investors who had foreseen consolidation within the intensely competitive domestic landscape. Entel’s shares plummeted by 11% in Santiago, emerging as the weakest performer on the IPSA index.
Millicom pointed out that Telefónica Chile's business will not be incorporated into the company’s accounting records during the period of shared ownership.
Source: Bloomberg