How the Tigo-Telefonica Colombia merger will affect towercos

Millicom and Telefonica are exploring a merger of their Colombian operations, Coltel and TigoUne. Millicom plans to acquire Telefonica's stake in Coltel for US$400mn and may purchase additional interests from minority shareholders. The carriers suggest the US$1bn linkup would create a stronger telecom entity in Colombia and enable significant network investments. The deal, subject to negotiations and approvals, would reshape Colombia's telecom landscape and lead to significant headwinds for Colombia's towercos as consolidation winnows down the number of operators in the market.

On July 31^st Millicom and Telefonica announced a plan to combine Telefonica Colombia’s Coltel and Millicom’s TigoUne (jointly owned with Empresas Públicas de Medellin (EPM)). The discussions include the potential acquisition by Millicom of Telefonica’s stake in Coltel for approximately US$400mn in cash, as well as other minority stakes. Millicom would also buy EPM’s 50% stake in TigoUne for cash at a comparable valuation multiple as the one implied by the Coltel acquisition.

The deal is by no means done, and remains subject to negotiation of all parties, including Telefonica, La Nación and EPM, as well as receipt of regulatory and antitrust approvals. Tigo and Telefonica insist there is no certainty the transaction will ultimately be consummated, but the deal follows a raft of other carrier consolidations around the world including Indoosat Ooredoo-Hutchison in Indonesia, T-Mobile-Sprint in the USA, Telenor-PTCL in Pakistan and the proposed Vodafone-3 merger in the United Kingdom.

The carriers suggest the combined entity would rejuvenate Colombia's telecom sector by creating a robust new carrier with the necessary scale and financial capacity to support significant network and spectrum investments, and to compete with America Movil’s Claro and WOM. Claro is the largest operator in Colombia by a significant margin: at present Claro serves 39.8mn of Colombia’s 87.7mn mobile subscribers, while Telefonica serve 20.7mn, Tigo 15.0mn and WOM 6.6mn (SOURCE).

The merger follows a network sharing agreement between the carriers which already made towercos active in Colombia nervous. Tigo and Telefonica had an agreement in place to establish a shared mobile access infrastructure company that would enhance the efficiency of current networks and serve as the driver for deploying new mobile technologies such as 5G.

The announcement also follows the bankruptcy proceedings of WOM, an operator which targeted rapid growth in promising LATAM markets like Chile and Colombia but which later ran into financial difficulties. WOM Chile entered bankruptcy earlier this year, then in April 2024 WOM Colombia followed. Local news service El Colombiano quoted legal expert Billy Escobar at the time who said the company needed an injection of 40 billion pesos (or US$10.3mn).

Colombia completed 5G auctions in December 2023 which the government had hoped would spur renewed network investment, both to rollout new 5G connectivity and expand networks through coverage obligations included with the new spectrum. Instead, the country has seen Tigo have to recapitalise its opco, WOM declare bankruptcy and Tigo-Telefonica propose a merger to muster the financial firepower required to continue competing.

Tigo, Movistar, WOM, Claro Colombia and Brazil’s Sociedad Futura Telecall Colombia participated in the spectrum auction but rollout plans will have to be redrawn should the merge go ahead. Newest operator Telecall is reportedly eyeing an investment of up to US$100mn in Colombia’s 5G, focusing on both traditional wireless 5G and fixed wireless access (FWA) solutions for underserved areas.

Colombia has one of the most active telecom tower markets in LATAM, but the 13 towercos now active there may face just three mobile operator tenants shortly, assuming WOM emerges from bankruptcy and the merger is approved.

Telefonica sold sites to both American Tower and Phoenix Tower International, the former back in 2011 and the later more recently in 2019. Millicom itself also sold towers in 2011 to American Tower, following up with another tranche of sites in 2017. However, the towerco most immediately affected by a potential merger would be Towernex, owned by KKR-backed NexoLatam, who acquired 1,100 sites from Tigo in January 2024.

A number of other build-to-suit towercos have built up sites throughout Colombia too, and Sites has recently announced its Colombia operations after taking possession of 8,000 sites in the country. Sites Colombia have taken possession of 8,000 sites in the country. The result has been a long tail of internationally active towercos with triple digit holdings in Colombia competing for build-to-suit. The viability of so many towercos is reliant on an accelerated rate of build-to-suit and lease-up from competing mobile operators.

TowerXchange has approached relevant parties for comment on the transaction and impact on the Colombian telecom tower market. Should it go ahead operators and towercos would need to negotiate a way forward as some sites may no longer be required to provide coverage or capacity where the merged entity has overlapping sites and tenancies.

Towercos have master lease agreements in place and exit clauses negotiated on sites to give them clear terms to begin negotiations over any site rationalisation, but win-wins may be possible if consolidation of existing sites is balanced with promises of new sites to support coverage expansion or 5G rollout. While some sites may overlap, they may also be seeing increased traffic and congestion which is better served by maintaining two overlapping sites.

Towercos were already expecting a period of consolidation due to the Coltel and Tigo network sharing agreement. Those headwinds would only accelerate with the full merger of two carriers. Digesting the change to network configuration to a single shared active and passive network will take time. However, additional decommissioning of sites is unavoidable should the merger go ahead.