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Morningstar | Millicom's Acquisition Activity Should Open Up Growth Opportunities

Millicom has long focused on smaller and more out-of-the way countries than its larger peers, notably in Latin America and Africa. Because of its long history in these markets, the firm often holds dominant wireless market share. More recently, Millicom has shifted its focus, expanding its presence in Latin America, shedding operations in Africa, and aggressively investing to build and acquire cable assets. We think this strategy makes sense, putting the firm in a position to generate solid growth as Internet adoptions expand across the region. Millicom has provided wireless service in Guatemala, El Salvador, Honduras, Bolivia, and Paraguay since the early 1990s, giving it the largest market share in each of these countries except Bolivia. The firm has invested heavily to build cable infrastructure in these markets in recent years, carving out solid market share in the fixed-line market as well--it is the Internet access leader in Bolivia and Paraguay and the second largest in Guatemala and El Salvador. Through acquisitions, Millicom is the largest pay-television operator in Costa Rica and Panama, with a large presence in Colombia as well. With the planned acquisition of Telefonica’s wireless assets in Panama, Nicaragua, and Costa Rica, Millicom will have the ability to offer converged fixed-line and wireless services in each of the nine Latin American countries where it operates.We think Millicom’s strategy provides significant growth opportunities. With combined Internet access penetration of around 30% across a population of nearly 120 million people, there’s a lot of growth yet to come in these markets. Millicom’s cable networks currently pass about 11 million homes, or about one third of the population, and the firm plans to build to around 1 million new homes each year for the foreseeable future. In addition, the adoption of wireless data services remains low in these countries. With about two thirds of its markets covered with LTE and Millicom shifting wireless customers to plans tied to data usage rather than traditional voice, growth in the wireless business should accelerate as well.