Millicom backs out of deal to buy Telefónica's Costa Rica unit

Telefónica's plan to offload its Costa Rica unit as part of a general slimming down of its portfolio came up against a major hurdle over the weekend, after Millicom said it had terminated the agreement.

The Luxembourg-based operator, which provides fixed and mobile services in Latin America and Africa under the Tigo brand, provided little information beyond indicating that Telefónica had failed to secure all regulatory approvals by the due date of May 1, 2020, granting it the right to pull out.

However, Telefónica said last week that all the conditions needed for completing the acquisition had been met, and it would sue Millicom if it failed to honor the deal. Reuters reported that the government told local media it had given the necessary authorizations.

In February 2019, Millicom agreed to acquire Telefónica mobile assets in Panama, Costa Rica and Nicaragua for $1.65 billion, with the Costa Rican deal accounting for $570 million of this amount. The other two deals are said to be unaffected.

The Spain-based operator has been offloading assets to fine tune its portfolio, reduce its debts and strengthen its balance sheet. Earlier in 2019, it offloaded two non-strategic operations in Central America, striking a deal to sell its operations in Guatemala and El Salvador to América Móvil for $648 million. (See {doclink 749048}.)

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A failure to complete the Costa Rica deal would be a blow to the Spanish operator's plan to focus on key markets in Europe and Latin America, and continue to reduce debt. Telefónica said the unit continued to perform well in 2019, reporting a 7% increase in organic operating income and a 21.3% rise in OIBDA (operating income before depreciation and amortization).

Meanwhile, Liberty Global and Telefónica are said to be in talks to combine their UK operations, culminating in an agreement that would effectively pair Virgin Media with Telefónica's O2 mobile business. (See Telefónica, Liberty Global in talks to combine UK ops – report.)

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— Anne Morris, contributing editor, special to Light Reading

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