Millicom International (NASDAQ: TIGO), a wireless carrier and fixed broadband provider in Latin America, which operates under the Tigo brand, today held its 2022 Virtual Investor Day, through which it announced its plan to create a tower company to carve-out its portfolio of owned towers. Specifically, Millicom owns over 10k towers throughout 8 countries in Central and South America.
Millicom (Tigo) – Tower Company Carve-Out
Millicom is “prioritizing towers” given it owns over 10k towers across Guatemala, Honduras, Bolivia, Colombia, Panama, Paraguay, El Salvador, and Nicaragua, as shown below:
| Country | # of Towers | % of Total |
| Guatemala | 4.4k | 42% |
| Honduras | 1.9k | 19% |
| Bolivia | 1.8k | 18% |
| Colombia | 0.6k | 6% |
| Panama | 0.4k | 4% |
| Paraguay | 0.4k | 4% |
| El Salvador | 0.4k | 4% |
| Nicaragua | 0.3k | 3% |
| Total | 10k+ | 100% |
Overall, Millicom’s 10k+ tower sites in Central and South America have a low average tenancy ratio of only ~1.1x. Indeed, this equates to ~11k tenants (mainly Millicom) with equipment on the company’s towers.
Importantly, Millicom notes that it has full ownership of its Guatemala tower portfolio, which represents 4.4k towers or 42% of the company’s total portfolio. At the same time, this statement implies that Millicom does not own 100% of its remaining 5.6k+ towers (e.g., Colombia).
Timeline
Millicom expects to complete the carve-out of its towers in the next 12 to 18 months. To-date, the company has completed the scope and data collection phase. Further, Millicom is in the process of forming a structuring blueprint and creating master lease agreement (MLA) definitions.
Subsequently, over the next 12 to 18 months, Millicom will form a separate tower company, while pursuing value creation and a strategic transaction.
Portfolio Scale
Millicom / Tigo’s tower portfolio has significant scale and compares favorably to publicly-traded emerging markets tower companies, as shown below:
Further details on these tower companies are as follows:
- IHS Holding: 31k towers primarily in Africa and Latin America with a 1.5x tenancy ratio. Pro forma for IHS’ acquisitions in South Africa and Brazil, the company’s total portfolio will grow to 38.3k owned and managed tower sites
- Mitratel: 28k towers in Indonesia with a 1.6x tenancy ratio
- Protelindo (Sarana Menara Nusantara): 22k towers in Indonesia with a 1.9x tenancy ratio. Pro forma for Protelindo’s acquisition of STP, the company will have 28.3k towers
- Tower Bersama: 20k towers in Indonesia with a 1.9x tenancy ratio
- Telesites: 19k towers in Mexico with a 1.2x tenancy ratio
- Helios Towers: 9k towers in Africa with a 2.0x tenancy ratio
Beyond these publicly-traded emerging markets tower companies, another relevant comparable to Millicom’s tower portfolio is América Móvil’s Sitios Latinoamérica. Notably, Sitios Latinoamérica’s 36k towers include significant holdings in the same markets as Millicom, namely Guatemala, Honduras, Panama, Paraguay, El Salvador, and Nicaragua.
Transaction Rationale – Millicom (Tigo)
Millicom’s “structural re-organization” to carve-out 10k+ towers will create operational independence for its tower company and is aimed at delivering shareholder value. Particularly, Millicom is focused on producing value in the following ways:
- Asset Utilization: enhance return on invested capital of the company’s tower infrastructure by increasing their utilization (i.e., tenancy ratio) from third-party tenants
- Capital Structure: optimize capital deployment towards i) return driven organic capital expenditures, ii) balance sheet debt paydown, and iii) shareholder remuneration through dividends or share buybacks
- Partners/Optionality: attract growth capital from new investors or combine tower portfolio with other similar assets
- Crystallize Value: value of the tower infrastructure is not fully recognized by investors. Therefore, a partial or full monetization of the towers can help unlock value
Digital Infrastructure
Beyond Millicom / Tigo’s 10k+ towers in Central and South America, the company also owns extensive digital infrastructure in the sub-sectors of data centers and fiber:
Data Centers
Millicom owns 13 data centers across Central and South America, including 3 facilities in Guatemala and 2 in Colombia.
Fiber
Millicom owns 93k miles (150k kilometers) of fiber throughout Central and South America. Of this total, the company has 31k miles (50k+ kilometers) in Colombia and 13k miles (21k+ kilometers) in Guatemala.
Presently, through its hybrid fiber-coaxial (HFC) and fiber-to-the-home (FTTH) networks, Millicom passes 12.4 million homes. Additionally, the company expects to pass >15 million homes by 2024, with a long-term potential to pass 20 million to 25 million homes.
