Telecoms

Millicom fortifies strategy on unloved Central America with $3bn investment

Emerging markets telecoms group Millicom plans to invest $3bn on expanding its mobile and broadband networks in Central and South America over the next three years in a rare bet by an international company on the region’s smaller countries.

New York-listed Millicom is already one of the biggest foreign investors in the so-called northern triangle countries of Guatemala, Honduras and El Salvador, after spending $5bn on acquisitions in the past three years to become the leading mobile company in those nations, as well as in Nicaragua and Panama.

Chief executive Mauricio Ramos believes the headlines about poverty, migration and political instability in Central America ignore the strengths of economies which are mostly growing faster than the Latin American average, underpinned by record flows of dollar remittances which keep the currencies stable.

“We’re definitely the largest European and American investor in those markets,” Ramos told the Financial Times in an interview, saying that beyond sums spent on dealmaking the group made capital expenditure of about $750mn each year. “Our basic premise is: these are growing economies, very stable FX, significantly underpinned by this increasing amount of remittances,” he said.

Luxembourg-headquartered Millicom last year said it would sell its last Africa operation in order to focus fully on the nine Latin American markets it serves. As well as the six central American nations, it has operations in Paraguay, Bolivia and Colombia.

In eight of those nine markets, its main competitor is Mexican billionaire Carlos Slim’s América Móvil, one of the world’s biggest telecoms companies.

Last November, Millicom spent $2.2bn to buy out its joint venture partner in Guatemala and take full control of its Tigo-branded mobile operation there in a transaction which was the largest ever single foreign investment in the central American nation.

The group has 44mn mobile customers and 4mn home broadband customers and the $3bn will primarily be spent on upgrading infrastructure and expanding the existing business.

As part of its fresh expansion, Millicom plans to increase the size of its fixed broadband network to cover an additional 3mn homes in the region over the next three years, up from 12.4mn today. Ramos said that in the longer term, the company wanted to increase its network to pass 20mn homes.

Capital expenditure over the next three years would be covered by internally generated cash flow, he added, and the company was aiming for 10 per cent annual growth in operating cash flow from existing businesses.

Millicom in 2021 increased earnings before interest, tax, depreciation and amortisation by 6.7 per cent to $2.5bn and increased full-year operating profit by 47.5 per cent to $659mn. Revenues rose 10.7 per cent to $4.6bn.

The company also announced plans over the next two years to spin off its more than 10,000 mobile towers and its growing fintech business Tigo Money, which has more than 5mn active users, into separate companies to attract outside investors and expertise.

hello, I am Flora Khan and i work journalist in allnewshouse website i work in other sites like forbes and washington post with 5 years in experience.

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