Millicom (Tigo) and Telefonica have announced a non-binding memorandum of understanding to potentially merge Telefonica Colombia (Coltel) with TigoUne, reducing the number of telecom operators in the country from four to three. Millicom plans to acquire Telefonica's stake in Coltel for approximately USD 400 million in cash and is also looking to purchase minority interests in Coltel, including those held by La Nacion, at the same valuation.
Also Read: Telefonica Movistar Surpasses One Million FTTH Subscriptions in Colombia
Proposed Merger
Colombia Telecomunicaciones (Telefonica Colombia), operating under the brand Movistar, focuses mainly on telephony and mobile connection businesses. It is a subsidiary of the Spanish telecom company Telefonica. A successful transaction could lead to a merger of Coltel with TigoUne, a joint venture between Millicom and Empresas Publicas de Medellín (EPM), a Colombian public utility company.
Details of the Financial Arrangement
Additionally, Millicom intends to offer to purchase EPM's 50 percent interest in TigoUne for cash at a comparable valuation multiple to that implied by the Coltel acquisition, the official release said.
Millicom plans to fund the proposed aggregate investment of approximately USD 1 billion in cash and assumed debt with equity free cash flow projected over the next 18 months, consistent with the company's long-range plan.
Also Read: Telefonica Colombia Launches CAT M1 Network for IoT
Impact on Colombia's Telecom Market
It is claimed that the proposed combined entity would rejuvenate Colombia's telecom sector by forming a robust telecom entity with the necessary scale and financial capacity to support the significant network and spectrum investments required to achieve Colombia's ambitious digital inclusion objectives.
However, the transaction remains subject to negotiation, regulatory approvals, and other closing conditions.
