Tigo-Une merger terms hammered out by MIC, EPM

23 Jul 2013

Millicom International Cellular (MIC) and Empresas Publicas de Medellin (EPM) have reached an in-principle agreement on the structure and key terms for the combination of their respective businesses, MIC’s cellco Tigo and EPM’s full-service telco Une-EPM. The integrated company would exploit the complementary geographic coverage of Une and Tigo and offer a comprehensive range of bundled digital services including mobile and fixed telephony, mobile and fixed broadband and pay-TV. A statement from Luxembourg-based MIC clarified that: ‘Tigo Colombia is the leading provider of mobile telephony in the Atlantic Coast region … [whilst] UNE is the provider of choice in … Antioquia. [Tigo’s] market share in mobile in Antioquia is well below UNE’s market share in broadband and fixed telephony in this region. The integrated company is therefore expected to have significant opportunities to cross-sell products and services in each other’s areas of strength, without undermining its own business.’

MIC and EPM expect the merger to create cost and CAPEX savings of USD600 million after integration costs, derived primarily from network and IT integration and procurement efficiencies. The cost of integration is estimated to amount to USD105 million over the first three years, USD45 million of which will be in the first year.

Under the terms of the deal, EPM would hold a majority equity interest in the enlarged telco, owning 50% plus one share whilst MIC would own the remaining shares. Despite this, MIC would assume operational and administrative control of the combined company, which will be fully consolidated. The companies expect to sign a definitive agreement by the end of Q3 2013, with the transaction to be completed by end-Q1 2014. The deal is subject to regulatory and governmental approvals.

EPM CEO Juan Esteban Calle commented on the announcement: ‘We are pleased that our discussions with Millicom have led to an agreement that is consistent with the terms of the authorisation we received from the City Council of Medellin. We believe that the proposed combination will lead Une-EPM to improve its competitive position in the telecommunications industry, a sector we consider strategic for the economic development of Medellin, Antioquia and Colombia. The integrated company will be headquartered in Medellin. Our and Millicom’s markets and strengths are naturally complementary and there is a close fit in corporate values such as transparency, social responsibility and customer focus.’