Tigo Colombia to sell towers to KKR
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Insights
The sale of wireless communication towers by Tigo Colombia to KKR signifies a strategic realignment within the telecommunications sector, particularly in Latin America. This move underscores a growing trend where telecom operators divest their physical infrastructure assets to specialized investment entities. By doing so, Tigo Colombia is likely aiming to unlock capital tied up in non-core assets, which can then be redirected towards enhancing their service offerings and competitive positioning in the market.
The transaction is indicative of a shift towards asset-light business models, allowing Tigo to potentially improve its operational efficiency and focus on core competencies such as customer service and network management. The long-term leaseback arrangement ensures Tigo Colombia retains essential operational capabilities without the capital burden of tower maintenance and upgrades, which can be substantial.
For KKR, the acquisition complements its existing digital infrastructure investments in the region, reflecting a broader investment thesis that digital infrastructure assets offer stable, long-term cash flows. This is particularly relevant in emerging markets like Colombia, where wireless communication is critical for both economic development and consumer demand.
The financial implications of this transaction for Millicom and its subsidiary Tigo Colombia are multifaceted. Firstly, the sale of approximately 1,100 towers will likely result in a significant one-time infusion of capital. This capital inflow can be leveraged to reduce debt, fund strategic initiatives, or improve the company's balance sheet liquidity.
Secondly, the long-term lease obligations denominated in Colombian pesos align with Millicom's strategic objective of local currency financing. This approach mitigates foreign exchange risk, which is a significant consideration for multinational corporations operating in volatile currency markets. The leaseback agreement also provides predictability in operational expenses related to the towers, which is beneficial for financial planning and forecasting.
From an investor's perspective, this deal may be seen as a positive signal, as it demonstrates Millicom's proactive management and commitment to operational efficiency. However, investors will also be keen to monitor the return on investment from the capital released through this transaction, as well as the potential impact on Tigo Colombia's competitive edge in the market.
The transaction between Tigo Colombia and KKR has broader economic implications for the telecommunications industry and the Latin American market. It reflects increasing foreign direct investment (FDI) in the region's digital infrastructure, which is a critical component for economic growth and development. Enhanced telecommunications infrastructure can lead to increased connectivity, which is a catalyst for other sectors such as e-commerce, fintech and remote services.
Moreover, the partnership with KKR, a firm with substantial resources and expertise, could accelerate the deployment of advanced wireless technologies in Colombia, such as 5G. This, in turn, could have a multiplier effect on the economy by enabling new business models and improving productivity across various industries.
It is also noteworthy that such investments in digital infrastructure by private equity firms are becoming more common, reflecting a recognition of the sector's potential for stable returns in a world that is increasingly reliant on digital connectivity.
Tigo Colombia to sell towers to KKR
Luxembourg, January 24, 2024 - Millicom (NASDAQ: TIGO) announces today that its subsidiary Tigo Colombia has agreed to sell approximately 1,100 wireless communications towers to affiliates of investment funds managed by KKR, a leading global investment firm. KKR plans to work in partnership with NEXO LatAm, a digital infrastructure platform that supports the implementation of KKR's infrastructure strategy throughout Latin America.
As part of the transaction, Tigo Colombia and KKR have entered into a long-term agreement whereby KKR will lease wireless communications towers to Tigo Colombia to support its wireless networks. The exact number of towers will be determined once the various closings have taken place, which are subject to customary closing conditions.
Mauricio Ramos, CEO and Chairman of the Board of Millicom, said: “This transaction with KKR, a leading digital infrastructure franchise with deep sector expertise and commitment to the region, is another step towards crystallizing the value of our tower sites across Latin America, simplifying our business, and allowing us to focus on servicing our customers. This transaction enhances our operational and capital efficiency in Colombia, with long-term lease obligations denominated in Colombian pesos, consistent with our objective of increasing our proportion of financing in local currency.”
Waldemar Szlezak, a partner on KKR’s Infrastructure team, said: “KKR seeks to develop the telecommunications industry in Latin America through best-in-class mission-critical assets such as fiber, towers and small cells. This acquisition – along with KKR's fiber investments in Chile, Colombia and Peru – underscores KKR's commitment to its digital infrastructure platform in LatAm. This important agreement with Tigo is in line with our strategy of long-term partnerships with leading companies in the region.”
KKR is making the investment through its KKR Global Infrastructure Investors IV fund.
For further information, please contact:
| Press: Sofía Corral, Communications Director press@millicom.com KKR: Media@kkr.com | Investors: Michel Morin, VP Investor Relations investors@millicom.com |
About Millicom
Millicom (NASDAQ U.S.: TIGO, Nasdaq Stockholm: TIGO_SDB) is a leading provider of fixed and mobile telecommunications services in Latin America. Through our TIGO® and Tigo Business® brands, we provide a wide range of digital services and products, including TIGO Money for mobile financial services, TIGO Sports for local entertainment, TIGO ONEtv for pay TV, high-speed data, voice, and business-to-business solutions such as cloud and security. As of September 30, 2023, Millicom, including its Honduras Joint Venture, employed approximately 19,000 people and provided mobile and fiber-cable services through its digital highways to more than 45 million customers, with a fiber-cable footprint over 13 million homes passed. Founded in 1990, Millicom International Cellular S.A. is headquartered in Luxembourg.
About KKR
KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR’s insurance subsidiaries offer retirement, life and reinsurance products under the management of Global Atlantic Financial Group. References to KKR’s investments may include the activities of its sponsored funds and insurance subsidiaries. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR’s website at www.kkr.com. For additional information about Global Atlantic Financial Group, please visit Global Atlantic Financial Group’s website at www.globalatlantic.com.
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