Telecoms company Millicom said on Thursday it will buy out its venture partner in Guatemala and take full control of its operations in a $2.2bn deal, the largest ever single foreign investment in the Central American country.
Millicom, which sells mobile and broadband services in Latin America and Africa, previously owned 55 per cent of its Guatemala operation. The deal will see it take sole control, buying out its partner, Panama-based Miffin Associates, which is controlled by Mario López Estrada, one of Guatemala’s richest men.
The transaction will boost free cash flow to equity by about $200m in 2021, and give it more exposure to a country with a stable economy and currency, said Mauricio Ramos, Millicom chief executive.
“We all hear so very much about politics and immigration and corruption but underneath that there is a growing economy, a very young population and digital adoption rates that are like none you see anywhere around the world,” Ramos told the Financial Times.
A group of international banks would provide bridge financing for the deal, which would then be refinanced by debt and a new equity rights offering in the first quarter of 2022, the company said.
The $2.2bn deal is larger than total annual foreign direct investment in Guatemala for any year since at least 1970, World Bank data show.
Millicom, which is headquartered in Luxembourg and publicly listed in New York and Stockholm, said earlier this year that it would sell its last Africa operation, as it shifts to focus squarely on its nine markets in Latin America. That sale is still subject to regulatory approvals.
Tigo, Millicom’s brand in Guatemala, is the largest mobile provider in the country, ahead of Mexican billionaire Carlos Slim’s América Móvil, with which it competes across the region.
“We see them on the street every day, fighting for every single consumer out there,” Ramos said of his competitor. “We certainly hold our own and we will continue to do so.”
The purchase is also a vote of confidence in the economy of Guatemala at a time when the US government is trying to encourage development to stop its citizens migrating north.
Guatemala’s gross domestic product is expected to grow 5 per cent this year. The country has a population of about 18m and the largest economy in Central America, according to the World Bank. Despite its relative economic stability, more than 45 per cent of its people live in poverty.