Value in emerging markets telecoms ?


The large telco conglomerates such as Deutsche Telekom, Telefonica-O2, France Telecom & Vodafone are always grabbing headlines with regards to acquisitions in new markets, as detailed in yesterdays post on Turkcell & the Balkans. I thought it may be quite interesting to look outside the traditional fold & put a little focus onto a little known player in the emerging markets telco scene.

Millicom International (NASDAQ – MICC)  is a Luxembourg based holding company with a variety of assets spread across 16 emerging markets in Central & Latin America, Africa & Asia.  Millicom serves 20M customers with pre-paid services via its Tigo brand &  cable TV & broadband in Central America via its Amnet fixed line operations. The Group’s mobile operations have a combined population under license of approximately 291 million people.

As with any other publicly traded compan, Millicom has seen some troubled waters in 2008, however looks to be reversing the trend lately, as the following chart shows







Having lost roughly 60% in value in the last six months, Millicom has been making some serious gains in the last month, bucking the overall trend & winning back 10% or thereabouts in the last 4 weeks of trading. Marc Beuls, President & CEO  presented to investors at the Morgan Stanley 8th Annual Technology, Media and Telecoms Conference in Barcelona in mid – November, his presentation can be downloaded here : Millcom Corp Website

What is clear having looked through the presentation is that Millcom is operating in some interesting markets, which at present have very low penetration of fixed telecoms infrastructure & a burgeoning desire to be connected in some way. Mobile, whether GSM or CDMA is the obvious answer, Digicel Carribean is probably the best example of this & Millicom seem to be following a similar business model, focussing on pre-pay to emerging markets.

With the recent acquisition of Amnet, Millicom now has invaluable in-house expertise to provide fixed broadband services, which have seen a CAGR in 2008 of roughly 24%, this coupled with a much lower CAPEX deployment ratio of 12% than that enjoyed in developed markets, will allow Millicom / Amnet to deploy quicker & to a much wider audience than previously experienced. Amnet is achieving  blended ARPU of $1,807 & at present have a subscriber base of 150,000 users across the three active territories (Costa Rica, El Salvador & Honduras).

By coupling the trusted Tigo brand with the expertise of Amnet, Millicom have a very good chance of penetrating their other 13 markets with new services, fixed / mobile broadband & pay TV services being the obvious contenders. Beuls stated aim is to provide services under a 3 pronged approach to provide the widest possible connectivity choice for potential & existing customers, with plans to integrate WiMAX technologies into its core offering & also as a backhaul component for metro scale deployments.

The recent acquisition of a license to operate in Rwanda, providing synergies with existing operations in Democratic Republic of Congo & also Tanzania, is another string to the Millicom bow. Beuls is looking for futher growth in the region as it goes head to head with other players in emerging markets telecoms, such as MTN Group.

For me a good solid play & one to pick for a long term portfolio.

3 responses to this post.

  1. […] a comment » As requested in the comments section on a previous post on emerging markets telecoms, I thought I would follow up on the lead & see what is going on in the Zambian telecoms […]

  2. […] Company (OCC) is a joint venture between local partners, Verizon (NYSE – VZ) & MSV favourite Millicom International, with other franchises being put together by Hong Kong’s PCCW  (HK – 0008) & regional […]

  3. […] Company (OCC) is a joint venture between local partners, Verizon (NYSE – VZ) & MSV favourite Millicom International, with other franchises being put together by Hong Kong’s PCCW  (HK – 0008) & regional […]

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