Millicom completes its 10,500 tower carve-out – everything you need to know to do business with LATAM’s youngest towerco
Millicom operates in Latin America under the Tigo brand and has now finalised the carve-out of its towers into a separate entity. The new company, named Lati, now owns and operate the estimated 10,500 towers across eight markets in Central and South America – Bolivia, Colombia, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Paraguay.
The unique portfolio of the new towerco
After rumours started swirling, Millicom confirmed plans in early 2022 to carve out its infrastructure across all of its LATAM operations where it retained its towers. By doing this Millicom hopes to crystallise the value of those assets and to significantly improve the carrier’s valuation in the coming years. What does the portfolio of the new towerco, the sixth largest in Latin America, look like?
Figure 1: Estimated Lati tower count by country
41% of the new company’s total portfolio sits in Guatemala, with Honduras and Bolivia each home to just under 20% of sites, with the remaining markets having several hundred towers each (see figure 2).
Figure 2: Percentage of the total tower stock owned by Lati market by market
Who will Millicom’s new towerco compete against?
Towercos operate in each of Millicom’s markets, from the listed players American Tower (present in Colombia and Paraguay), SBA Communications (Colombia, El Salvador, Guatemala, Nicaragua and Panama) and IHS Towers (Colombia); to Blackstone-backed Phoenix Tower International (Bolivia, Colombia, El Salvador, Guatemala and Panama), DigitalBridge owned Andean Telecom Partners (Colombia and Paraguay); and smaller independent players such as Torrecom (Colombia, El Salvador, Guatemala, Nicaragua, Panama, Paraguay), Continental Towers (Colombia, El Salvador, Guatemala, Honduras, Nicaragua, Panama), Balesia (Bolivia, Colombia, El Salvador, Guatemala, Paraguay) and TowerOne Wireless (Colombia) and QMC Telecom International (Colombia). Having commenced operations in the past quarter, América Móvil’s towerco carve out, Sites, operates in seven of Millicom’s eight markets (Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Paraguay). Up until recently these markets have been characterised by consolidation, but the creation of two MNO-backed towercos in short order could re-introduce more competition into these markets – if Lati and Sites operate independently and competitively.
Figure 3: Towercos operating in each of Millicom’s markets
How does the scale of Millicom’s towerco compare to its peers?
In Central and Latin America, Millicom’s new towerco will be the sixth largest towerco by tower count (see figure 4). Globally, Millicom’s towerco will come in just outside the top 30, a little behind Millicom’s last successful towerco investment, Helios Towers. Before Millicom exited Africa it had closed a series of deals with Helios Towers which saw Millicom acquire equity in the towerco. Since Helios Towers went public in 2019 Millicom has been able to realise good returns on that investment. This means that Millicom’s management team understand well the value of a good towerco investment.
Figure 4: LATAM tower counts of the region’s top 10 towercos (Q1 2023)
Re-focusing on the core business
The formation of Lati is a culmination of a multi-year strategy by the operator to re-focus on its core business in Latin American markets that it serves - the eight markets where Lati now operates, as well as Costa Rica. The Millicom group has 44 million mobile customers and 4 million home broadband customers across eight markets in Latin America. Over the last few years, the company has committed to spending nearly US$4 bn on upgrading infrastructure and expanding the existing business.
Millicom has in 2021 revealed plans to invest USD 135 million into modernising its mobile networks in Honduras, Paraguay and Bolivia, replacing Tigo’s current 4G packet core with dual mode 5G core, as well as expanding its network coverage in both urban and rural areas. In the previous years, the company invested nearly US$3 bn on upgrading infrastructure and expanding the existing business.
Millicom up for sale?
Over the last few years, the news of Millicom being a potential takeover target have regularly appeared in the headlines. A few years back, at the beginning of 2019, Liberty Latin America walked away from an acquisition negotiation after offering a non-binding bid of nearly US$7.6 bn. If the deal went ahead – and was given the green light by the regulators – it would have created another giant in Latin America, rivalled only by América Móvil. More recently, in Q1 2023, the rumours circulated of a buyout by Apollo Global Management and former SoftBank executive Marcelo Claure for about US$10 billion.
Simultaneously, the billionaire Xavier Niel increased his stake in Millicom to 19.6% through his investment company Atlas Investissement, becoming the company’s largest shareholder. The deal is estimated to have cost around US$700 million.
The would-be buyers are attempting to structure their bid in a way that would avoid them repaying or refinancing about $6.9 billion of Millicom’s existing debts. This because of the state of financial markets and a large increase in interest rates, which affect banks’ willingness to write large new loans.
Exit from African markets
In April 2022, Millicom finalised the sale of its Tanzanian unit to Axian for around US$100 mn, marking the end of its multi-year divestment plan from Africa. Millicom initiated its exit from the African markets back in 2016 and has previously exited Chad, the Democratic Republic of Congo, Ghana, Mauritius, Rwanda and Senegal.
Panama buy out
Panama, Latin America's fastest-growing economy, has a population of just over four million and disposable income levels here are among the highest in Latin America. However, penetration rates for digital services remain low – an opportunity for wireless and digital connectivity operators and infrastructure companies.
In June 2022, Millicom took full ownership of Tigo Panama, in which it previously only owned 80% of shares. This is a priority market for Millicom, which in 2021 pledged to invest US$250mn into its Panama business. The funds were allocated for modernisation and expansion of its fixed and mobile networks with the latest technology for increased capacity and speed, and expanded TV, fixed and mobile internet and phone services. This included building 221 new mobile network sites throughout the country.
A few years earlier, in 2018, Millicom entered the cable business in Panama, with an acquisition of a controlling 80% stake in Cable Onda, the largest cable and fixed telecommunications services provider in the country, serving more than 500,000 customers. The acquisition is part of Millicom’s strategy of accelerating the deployment of high-speed data networks in Central and South America.
The acquisitions in Panama complete Millicom’s Central America footprint – the company now has contiguous operations from Guatemala to Colombia.
Expansion in Colombia
In Colombia, Millicom has over the last decade been actively selling its tower portfolios to tower companies. In 2021, it sold 2,126 sites to American Tower, and in 2017, another 1,200 (the operator sold a portfolio of 1,400 towers in Paraguay to American Tower in the same year).
In January 2022, IDB Invest, an arm of Inter-American Development Bank that deals with investment in the private sector, announced that it will be financing Tigo Colombia’s mobile broadband service expansion. The US$140.02mn loan will allow the deployment and modernisation of telecommunications infrastructure in 177 localities that do not have access to mobile services with a broadband connection. In addition, the operator will be upgrading its mobile service from 2G and 3G to 4G in 340 municipalities in Colombia.
Interestingly, Colombia was also where Millicom made its first steps into the O-RAN area, back in 2021. The initial plan was to provide O-RAN solutions across 362 sites in Colombia utilising 700MHz spectrum, to enable connectivity in rural areas. The deployment is a part of the group’s pledged US$808.2mn investment in the 700MHz band. The introduction of O-RAN technology reduces costs and increases flexibility by diversifying supplier base, and Millicom plans to eventually bring this technology to more sites across all markets in Latin American where it operates.
Guatemala acquisition
In November 2021, Millicom, acquired the remaining 45% stake in Tigo Guatemala, previously run as a joint venture with a local partner Miffin Associates, becoming the sole owner. As part of this agreement, Millicom reportedly committed to investing US$1 billion in the country over the next five years.
Tigo is Guatemala’s leading mobile player with just under 12mn subscriptions, and 53% of the mobile market, the country’s leading fixed broadband provider with 392,000 subscriptions. The company employes more than 3,100 staff in the country and is the most profitable business within the Millicom Group, with an EBITDA margin above 51%. América Móvil’s Claro is the only other competitor on the market. With this transaction, Millicom consolidated its position as the leading telecommunication service provider in Central America.
The market also became the first in which Millicom ran a non-standalone 5G trial, in July 2022, taking advantage of their spectrum holdings and existing 4G LTE infrastructure. After lengthy delays, Guatemala’s regulator SIT announced a spectrum auction of unused frequencies in the 2.5GHz-2.6GHz range on 2 June 2023. These frequencies are used internationally for 5G services.
Investment into Central America
In June 2022, Millicom revealed plans to invest US$700mn into its Central American operations in response to a call to action from US Vice President Kamala Harris and the launched in 2021 the Partnership for Central America, a US-based organisation aiming to promote investment in the region. Millicom will spend the money on fixed and mobile broadband networks in Guatemala, Honduras and El Salvador over the next two years. The investment is in line with the United Nations-backed campaign Race to Zero which promotes zero-carbon recovery. Millicom clearly had its eye on further domination of the Central American markets. It has attempted buying Telefonica’s operations in Costa Rica, Nicaragua and Panama in 2019, but the deal didn’t go through due to regulatory hurdles. Telefonica's assets in Costa Rica were later bought by Liberty Latin America in mid-2020.
Around half of the population of Central America have a 4G smartphone, but adoption is rising due to coverage standing at nearly 90%. There has been a 10% increase in penetration of mobile broadband service. In February 2022, Millicom committed to increasing investments for the expansion of its fixed broadband network in Latin America by three million households by 2025, with a goal of reaching over 20 million passings in the medium term This makes this market particularly attractive for Millicom.
History of Millicom tower sales
2018 - Millicom sells 800 towers to SBA Communications in El Salvador
2017 - Millicom sells 1,400 towers to American Tower in Paraguay
2017 - Millicom sells 1,200 towers to American Tower in Colombia
2011 - Millicom sells 2,126 towers to American Tower in Colombia
