Millicom bolsters strategy on unloved Central America with $3 billion investment

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Emerging markets telecommunications group Millicom plans to invest $3 billion in the expansion of 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 small countries in the region.

New York-listed Millicom is already one of the largest foreign investors in the so-called northern triangle countries of Guatemala, Honduras and El Salvador, having spent $5 billion on acquisitions over the past three years to become the main mobile phone company in these countries, as well as in Nicaragua and Panama.

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

“We are without a doubt the biggest European and American investor in these markets,” Ramos told the Financial Times in an interview, saying that beyond the money spent on closing deals, the group was making capital expenditures of about $750 million every year. “Our basic premise is this: these are growing economies, very stable currencies, largely backed by this growing amount of remittances,” he said.

Last year, Millicom, headquartered in Luxembourg, announced that it would sell its last operation in Africa in order to focus fully on the nine Latin American markets it serves. In addition to the six Central American countries, it is present 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 largest telecommunications companies.

Last November, Millicom spent $2.2 billion to buy out its joint venture partner in Guatemala and gain full control of its Tigo-branded mobile operation in a deal that was the largest foreign investment ever in this Central American country.

The group has 44 million mobile customers and 4 million home broadband customers and the $3 billion will mainly be spent on upgrading infrastructure and expanding existing business.

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

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

In 2021, Millicom increased its earnings before interest, taxes, depreciation and amortization by 6.7% to $2.5 billion and its operating profit for the full year by 47.5% to $659 million. Revenue rose 10.7% to $4.6 billion.

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

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