Millicom Wins Control Of Colombia's Mobile Ola
BOGOTA -(Dow Jones)- Luxembourg-based Millicom International Cellular won control of Colombian mobile operator Ola with a revised bid of 1.15 trillion Colombian pesos ($478.5 million) at an auction Thursday.
Millicom's bid equaled the minimum price set by the firm's current owners, state-controlled Empresa de Telecomunicaciones de Bogota, or ETB, and public utility Empresas Publicas de Medellin, or EPM.
Millicom's initial bid for the 50% plus one share stake in Ola was COP1.14 trillion, just short of the minimum price. The company then raised its bid to the minimum price at the request of the two government-owned shareholders.
Jamaica mobile operator Digicel Ltd., the only other qualified participant, didn't present a bid.
Mario Zanotti, Millicom's vice president for Central America, said the company will finance the purchase with loans from international banks, while some of the 16 Millicom's units will also provide cash.
Ola is the smallest mobile telephone operator in Colombia and competes with the local units of Mexico's America Movil and Spain's Telefonica.
Ola posted losses every year since its creation in 2003. Both shareholders invested $658.5 million since Ola's creation. Last year, the company reported a net loss of COP284 billion, widening from a COP189 billion loss in 2004.
"Competition doesn't scare us. We believe the country has great potential for opportunities," Zanotti told reporters in a press conference following the auction. Zanotti promised to offer lower rates than its rivals.
Millicom committed to invest an additional COP840 billion of fresh capital in Ola.
Zanotti said his company plans to sell shares of Ola on the Colombian stock market no later than next year. ETB and EPM had said last year they planned to take Ola public.
"That's an obligation and we will respect it," Zanotti added.
Millicom is in a good position to compete with Telefonica and America Movil as it already knows the Colombian market and already faces them in Central America, Juan Gnius, vice president of the telecommunication consulting company Signals Consulting.
In 1994, Millicom created Celcaribe, a mobile phone operator that covered the Colombian Caribbean region, before selling it nine years later to America Movil for $98 million.
Millicom is already present in El Salvador, Guatemala and Honduras where it competes with either Telefonica or America Movil or both.
"Millicom knows its rivals, that is why it will bring an intelligent strategy that will include roaming services for prepaid mobiles and better prices," Gnius added.
Millicom's entry in Colombia won't be that easy as the market is maturing after three years of explosive growth, said Elizabeth Arias, Latin American analyst with the Boston-based consulting firm Pyramid Research.
The number of mobile telephone subscribers in Colombia rose 11% in the first half of the year to 27.96 million in a country of 41 million people. The current expansion slowed dramatically compared with a 200% growth reported between 2003 and 2005.
"I definitely see continuing growth in Colombia but it will be slowing down in the future," Arias said.
Comcel, America Movil's local unit, controls the biggest slice of the Colombian market, with 17.97 million customers, followed by Telefonica with 6 million as of the end of June, according to the Superintendency of Trade and Industry.
Ola said it had 2.5 million customers at the end of June, 52% more than a year ago.
In 2005, Millicom reached 4.07 million subscribers in Latin America and about 2 million in Africa. The company also operates in Pakistan, Sri Lanka, Cambodia and Laos.
-By Diana Delgado, Dow Jones Newswires; 571-600-1980, diana.delgado@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 1st September 2006