What's Happening?
Millicom, in partnership with French investment firm NJJ Holdings, has acquired Telefonica's Chilean operations. This acquisition follows Millicom's recent purchase of Telefonica's Colombian unit, Coltel. The deal involves NJJ and Millicom acquiring 100% of Telefonica's holding through a special purpose vehicle (SPV), with NJJ holding a 51% stake and Millicom a 49% stake. Despite initially holding the minority stake, Millicom will operate the business from the outset. The agreement includes a call option for Millicom to purchase NJJ's share after five to six years, based on market valuation with a 10% discount, payable in Millicom shares. Telefonica will receive an initial payment of $50 million and could earn up to $150 million through earn-out
payments based on value creation. The unit's debt, reported as €479 million ($568 million) in 2025, will be managed through its cash flows, not guaranteed by Millicom.
Why It's Important?
This acquisition is significant as it strengthens Millicom's position in the Latin American telecommunications market, a region where it already has a substantial presence. The deal allows Millicom to reposition a challenged asset in one of the region's largest markets at an attractive valuation, while maintaining financial flexibility. This move is part of a broader strategy by Millicom to capitalize on Telefonica's exit from several Latin American markets, having previously acquired Telefonica's Ecuadorian and Uruguayan units. The acquisition could potentially increase competition in the Chilean telecommunications sector, impacting other major players like Entel and America Movil, who were also interested in acquiring Telefonica Chile.
What's Next?
Millicom's operational control from day one suggests a swift integration of Telefonica Chile into its existing operations. The company will likely focus on leveraging its expertise to enhance service offerings and customer experience in Chile. The call option mechanism provides flexibility for Millicom to eventually consolidate full ownership, depending on market conditions and strategic priorities. The deal's structure, which avoids immediate financial strain on Millicom, indicates a cautious yet strategic approach to expansion. Stakeholders will be watching how Millicom navigates the competitive landscape in Chile and whether it can achieve the anticipated value creation to trigger the earn-out payments to Telefonica.
