Amid ongoing controversy surrounding the future of Colombian telecom Tigo UNE, the company’s two major shareholders agreed during a September 13 meeting that Luxembourg-based Millicom (Nasdaq: TIGO) would assume near-full ownership with 98% of shares while public utility Empresas Públicas de Medellín (EPM) would sell its stake down to just 2%.
With Tigo hit by a ratings downgrade and a looming debt crisis, the government determined that it needed to intervene to protect its mobile user base with some 15 million lines as well as its thousands of employees.
Despite the desire to safeguard consumers and connectivity, Mauricio Lizcano, minister of information and communications technology, ruled out any financial injection from the state, instead giving Millicom and EPM until October 9 to reach a solution.
Tigo’s shareholders effectively faced two options: finding an alternative way to recapitalize the firm or oversee the dissolution of Tigo, which meant that Millicom would have to buy the shares held by EPM.
The structure of the company has consisted of a near-split — with Millicom and EPM both holding 49.98% of Tigo’s shares — and each shareholder requiring the endorsement of the other one when it comes to making major decisions.
Amid these developments, Lizcano declared that the government had created a backup plan along with Colombian business oversight agency Superintendencia to guarantee the services provided by Tigo, which with 19% of the Colombian mobile phone market is the third largest player after Claro (46%) and Movistar (25%), per La Republica.
The short-term financial situation has been dire since Tigo UNE has major liabilities coming due, which include debts with banks such as Bancolombia, Davivienda and BBVA.
Medellín Mayor’s Strong Opposition to Millicon Management
Given EPM’s status as a public utility in Medellín, city Mayor Daniel Quintero has been a major voice weighing in on all the high-profile developments since the financial struggles began at Tigo.
He had been advocating the sale of EPM’s stake while highlighting that the company has been mired in its third consecutive year of losses with operators who should no longer be trusted as a steward for publicly tied funds.
“Millicom has had poor performance and bad management,” the mayor said to the local television station Telemedellín. “This company must demonstrate that the money will not be lost,“ and so far it has not been able to do so.”
In an interview with Blu Radio, Quintero added that there is a “history” of “theft of public resources” since the publicly controlled entity previously known as UNE EPM Telecomunicaciones saw Millicom take a major stake in 2014.
“Since then, many promises were made” about the profits that would be earned, he said, but those pledges went unfulfilled, in his eyes, which instead saw the telecom sell towers, lay off employees and, in recent years, accumulate losses.
“If there is no capitalization,” Quintero said on the radio, “the company is worth zero pesos and remains in bankruptcy.”
He continued: “There is no fight between partners. What there is here is a story of how public resources have been stolen; a story that begins in 2014, when a company that was public, UNE, which was a large company of the Antioquians, was privatized through a merger process in which control was handed over to a foreign company, Millicom.”
Specifically, the mayor is recounting the August 2013 merger between UNE EPM Telecomunicaciones and Millicom, a transaction that integrated their interests in the fixed and mobile businesses in Colombia, represented by UNE EPM Telecomunicaciones and its subsidiaries, and Colombia Móvil-Tigo.
Ever since he assumed office, Quintero has been trying to convince stakeholders to sell EPM’s shares, but the local council had been rejecting the plan.
Millicom Remains Optimistic About Colombian Market
On the other side of the coin is Millicom International Cellular, S.A., a telecommunications company based in the European country of Luxembourg that operates in the Americas and Africa. Currently, it provides mobile telephone, television and internet services in more than 16 countries.
Millicom entered the domestic market when it acquired Colombian mobile operator OLA in 2006 before rebranding to Tigo during the first quarter of 2007. Its growth really took off after the 2013 merger.
Per news website Las2orillas, Millicom has since maintained an effective control of Tigo UNE due to a share structure in while a small number of shares held by EPM, and thus overseen by the mayor’s office of Medellín, do not have voting rights, which allows Millicom to control over the board of directors and the management team.
Millicom CEO Mauricio Ramos explained to La República that Tigo’s financial crisis is the product of several factors, such as the investment plan, pandemic consequences, high inflation in Colombia, fierce competition, and high spectrum and compliance costs.
“It is a sector in which it is very difficult to compete and Tigo UNE has reached a situation in which, like many other companies, the company is very viable in the long term with a significant growth perspective, so it requires the support of its shareholders,” Ramos told the newspaper. “That is common, that happens in the history of companies, particularly companies that have the ambition that Tigo UNE has in Colombia.”
Despite the current turmoil, he remains optimistic about the company’s future in the market.
Ramos continued: “We are fully convinced that this capital solves the problem and gives viability to the company, because it opens up space for it to have equity strength, to have liquidity and that, in turn, gives peace of mind to the banks to provide debt resources, it gives peace of mind to the financial entities that provide these guarantee bonds and also allows the necessary transactions such as the merger of the networks with [Spanish telecom] Telefónica to be made viable and allows the company to participate, if it goes ahead, in the 5G auction.”
Global Securities Lenders specializes in custom liquidity solutions for those seeking to leverage concentrated market positions quickly, conveniently, and confidentially. We provide flexible terms and low interest rates specifically designed with your goals in mind. GSL recently announced our goal of working in Colombia to provide securities lending to companies and high net worth individuals.
Securities-based lending, or a stock loan, is the practice of using market investments such as stocks, ETF’s, warrants, bonds, or real estate investment trusts as collateral for a loan. If you own free-trading, non-restricted stock on a major world exchange that trades at a minimum volume of $30,000 USD daily, you can qualify for a non-recourse, collateralized stock loan from one of our valued lenders in record time! Get an instant quote to see if you qualify.
Original Article: Read More
Original Source: Finance Colombia
Categories: ICT, antioquia, daniel quintero, epm, luxembourg, Mauricio Lizcano, mauricio ramos, medellin, millicom, Ministry of Information and Communications Technology, telefonica, Tigo Une