January 15, 2019
Liberty Latin America is in talks to acquire Millicom in a deal that would create a major telecom force in the Latin American market, the two companies have confirmed in separate statements.
Backed by US cable tycoon John Malone, Liberty Latin America said it had submitted a "preliminary, highly conditional, non-binding proposal regarding a possible transaction," without disclosing any financial details.
A merger would give rise to one of Latin America's biggest telcos and help the companies withstand competition from major regional players such as Telefónica and América Móvil.
Spun off from Liberty Global last year, Liberty Latin America currently operates in 20 countries in Latin America and the Caribbean. It generated about $2.8 billion in revenues, and $361 million in operating income, for the first nine months of 2018.
Headquartered in Luxembourg, Millicom International Cellular SA (Nasdaq: MICC) has a presence in nine Latin American countries as well as the African markets of Chad and Tanzania, serving 51 million customers in total last year. It generated revenues of $4.5 billion for the first nine months of 2018 and earnings (before interest, tax, depreciation and amortization) of about $1.6 billion.
Confirming its receipt of a bid from Liberty, Millicom said: "There is no certainty that a transaction will materialize nor as to the terms, timing or any form of any possible transaction."
Any deal would mark a continuation of the M&A trend that has swept the global telecom market in past few years, as operators look to build scale amid numerous business and regulatory challenges.
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But a merger would also threaten job losses as the companies worked to reduce costs by removing duplicate roles. Liberty had around 10,300 employees at the end of 2017, according to a filing with the Securities and Exchange Commission, while Millicom employed 19,127 workers on the same date and has seen its headcount rise in the past few years, in contrast to many of its international peers. (See AT&T, Time Warner Shed 11K Workers in First 9 Months of 2018.)
The big five European incumbents of BT (UK), Deutsche Telekom (Germany), Orange (France), Telecom Italia and Telefónica (Spain) cut nearly 33,000 jobs between 2015 and September last year, or nearly 5% of total headcount, according to research carried out by Light Reading. US telco giant AT&T slashed around 38,000 jobs over the same period, while Verizon has cut 25,400.
In markets where both Liberty and Millicom have a presence, the takeover could face opposition from regulatory authorities concerned about its impact on competition. Authorities have frequently blocked M&A activity in Europe because of similar competition concerns.
— Iain Morris, International Editor, Light Reading
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