- Telefonica sells its 67.5% stake in Coltel to Millicom for $400 million.
- Regulatory approvals pending, raising concerns over market competition.
What happened: Telefonica sells Colombian unit to Millicom
Telefonica has reached an agreement to sell its Colombian operations to Millicom International Cellular for $400 million, finalising a transaction that has been in the works for nearly eight months. The deal involves the sale of Telefonica’s entire 67.5% shareholding in Colombia Telecomunicaciones (Coltel). However, the final price may be subject to adjustments related to net debt, working capital, and foreign exchange variations, with Millicom estimating an adjusted cost of $362 million as of September 2024.
Regulatory approval remains a significant hurdle, but the companies have already begun the approval process. Telefonica submitted the transaction to Colombia’s Superintendence of Industry and Commerce late last year. Millicom has framed the deal as beneficial to Colombia’s telecom landscape, emphasising that the combined entity will possess the scale and financial capacity to expand digital infrastructure and network investments.
However, the merger is expected to face intense scrutiny due to its impact on market competition. The consolidation would merge Colombia’s second and third-largest mobile operators, forming a stronger competitor against market leader Claro, which holds approximately 45% of the market. Post-merger, the combined entity would command around 43%, leaving just one smaller player, WOM, with only 7% market share. Regulators must decide whether this restructuring enhances competition or risks creating a near-duopoly that could harm consumer choice.
Adding to the complexity, the Colombian government holds a 32.5% stake in Coltel, while Millicom has indicated that it will offer to acquire these shares at the same valuation. Additionally, Millicom is pursuing the full acquisition of Tigo UNE, the Colombian telecom entity in which it currently holds a 50% stake alongside the City of Medellin’s Empresas Publicas de Medellin (EPM). These transactions could further influence the deal’s regulatory outcome and its impact on Colombia’s telecom landscape.
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Why it’s important
This deal marks a pivotal moment in Colombia’s telecom sector, with implications for market competition, regulatory oversight, and foreign investment. If approved, it would reshape the industry by consolidating two major players, Millicom’s Tigo UNE and Coltel, into a single, stronger competitor against Claro. With a combined market share of approximately 43%, the new entity would challenge Claro’s dominance, but it also raises concerns about market concentration.
Regulators face the task of ensuring that the deal fosters fair competition rather than reducing consumer choice. Access Partnership’s Head of LATAM, Emerging Markets Geusseppe Gonzalez has highlighted the risk of 88% of the market being controlled by just two players, potentially diminishing pricing competition and service innovation. If the deal proceeds, regulatory bodies may impose transition measures to mitigate anti-competitive risks.
The transaction also carries geopolitical significance, given the Colombian government’s stake in Coltel. Millicom has committed to offering the same valuation for the government’s shares, but even if the government retains its stake, Millicom could still achieve operational control. Additionally, Millicom’s ongoing negotiations to acquire the remaining half of Tigo UNE could further solidify its position in Colombia’s telecom sector.
For Telefonica, this sale is part of a broader strategy to exit less profitable Latin American markets. The Spanish telecom giant has been divesting assets in the region, focusing instead on its core European and Brazilian operations. This latest transaction underscores its retreat from the Hispam market, reinforcing its shift in strategic priorities.
