Half-time victory lap in $TIGO
I have invested in and followed TIGO 0.00%↑ since 2019 and it has been an at times bumpy ride. In the fall of 2021, shortly before the deal to buy out the minority in Guatemala was struck, I gave up on the stock and sold out. While I found the buy-out of the minority a positive event (and it did explain the passivity in capital allocation immediately preceding it), I suspected the financing via rights offering would be a big issue for stock performance until it was resolved.
The stock did perform poorly in the following months, with the Ukraine war, inflation shock and a freezing of capital markets happening in the interim. Getting back in as the rights offering was concluding would have been a good decision, but I stayed on the sidelines all the way until early 2023, when the infamous takeover leak was reported in the Financial Times.
I knew all about the value that was embedded in the company, from infrastructure assets to opportunities for consolidation, so the risk-reward skew was rather obvious at that point. The small rise in stock price from the takeover rumours didn’t at all take enough account for the fact that this company was now “in play” and values were about to be unlocked in one way or another. The minority rights situation was also something I was keenly aware of and which mattered greatly at this point in time.
So I pounced, and then I pounced some more — and then I pounced some more. And some more. The stock slided for the rest of the year, despite it being quite obvious that the large cost saving programmes would have major effects. But I’m getting ahead of myself.
Obviously, I had numerous guesses as to what was going to happen and what the dynamics of the situation were. I suppose the guesses improved a bit over time, as I learned more and more about the complete situation with Atlas and Iliad, their other possible uses for capital and their capital allocation philosophy. You can trace those thoughts in my earlier posts; they’re imperfect, but investing happens in real time, not with the benefit of hindsight.
The burst of activity I had around TIGO 0.00%↑ in 2023 and 2024 might have struck some people as monomaniacal. That’s because it was. Outside of market crashes I have never seen a situation as asymmetric as this and with downside protection. It went from an asymmetric trade with some kind of unknown catalyst to an even better proposition as I started to truly learn what Xavier Niel and Iliad was about. In taking more thorough stock of where the telco sector was in its capital cycle and the international consolidation trends, the idea only increased in strength, even though other names were perhaps even purer plays on only those themes. Some might deride this kind of developing investment and call it a thesis drift. From my perspective it really all amounted to a thesis supercharge.
For a while it was rather lonely, just me and @leonardo_1452_ talking almost every day about what might happen and when. The few punters who had bet on a quick takeover merger arb style quietly left and sought new opportunities with a faster timeline. Other investors that I know who weren’t involved at that point or had been burned by TIGO 0.00%↑ earlier were thoroughly and decidedly uninterested. From mid-2023, I started hearing from disappointed people quite regularly about how wrong I was and how everybody would be screwed. The stock wasn’t down all that much really, about flat for the year, but that was the sentiment — really rotten. Somehow their target prices were always 5-10% down from wherever the stock was trading at the time. Due entirely to faults of my own, I never managed to achieve that kind of accuracy in my predictions.
Meanwhile, I got increasingly more bullish as I learnt more about Xavier Niel. It was really a rather odd situation — a person who is a legendary entrepreneur in France, probably the most famous business person in the country and a kind of larger than life cult figure, is buying stock on the Swedish exchange and the sellers just keep giving it away. There was no secret there. Similar turnarounds with deep cost cuts were made at outfits like Alice (a French ISP which Iliad bought from Telecom Italia in 2003) and this little-known provincial paper called Le Monde, just to name two examples. Following them numerous telecom operations had been taken over and right-sized. Not to speak of all the other corporate events — the bid for TMUS 0.00%↑, the launch in Italy, the boardroom coup in $URW.PA, just to name a few. All showing an impressive range of strategical depth from the Iliad team.
The narrative in Sweden only really started to change when my friend, and the best Swedish finance journalist of this millennium, Richard Bråse (now working with his own mutual fund which has had a flying start) wrote a couple of pieces in Sweden’s largest business daily Dagens Industri. I could have smashed my hands against the keyboard until they bled without achieving 1% of what he did in succinctly explaining the situation to a wider audience.
If we fast forward into the present, in the middle of 2025, the Swedish investment community seems acutely aware of the French telco miracle. Certainly, Iliad’s entry into Tele2 and Jean-Marc Harion’s deeds there have helped things along well.
Ref blows the whistle for half-time…
However, since TIGO 0.00%↑ is now only listed in the US, this problem of knowledge has been actualized again. The Americans have a very different market structure in connectivity and their local stocks have performed poorly overall for the last decade. They think this sector is more structurally challenged than before and is on downward slope and they’re right — it is, over there, for them in the United States, at least for the cablecos. In many other markets, telcos bottomed out in 2023, had a wash-out of competition or are in the process of it and are entering an upward climb.
I have tried to prod our friends on the other side of the Atlantic into thinking about the true dynamics of pricing and competitive structure and appreciate how it differs between, say, the US and Latin America. It is an impossibly difficult task to challenge investors on the status quo wisdom and try to get them to, as a group, think differently about it. And quite naturally so — if it wasn’t, the pricing would be higher. If so, hopefully I wouldn’t think it was cheap, because then I would be wrong.
Another hurdle is that international stocks have been a big money sink almost forever for Americans. Strong USD has murdered EM and Europe for about three American investor lifetimes, and it only eased somewhat in the last half a year or so. Which is not enough time to for a change to filter down into the category of received knowledge in the market. Especially not with trends that have been moving one direction for so long that they depressed sentiment down to the Mariana trench. Additionally, Americans have no reason whatsoever to know about French telecom magnates. So in a sense we are now starting over in this journey of discovery.
Only the first half has been played.
My belief is that at the end of it, this stock should get a compounder/serial acquirer premium, at least against the sector. The acquisitions in Uruguay and Ecuador and the in-market consolidation in Colombia should be able to get this off to a great start. Mind you, none of these deals have closed yet.
Appropriately sized acquisitions done with price discipline are a fantastic beginning to this new story arc for the company.
The cash-flow story is already in the process of being proven beyond any reasonable doubt with the large regular dividends of $0.75 quarterly. This will now be padded with extraordinary dividends of $2.50 stemming from the tower sales proceeds.
My hope and belief is that the company will get the acquisition flywheel going with internally generated funds and increase borrowing capacity from steadily higher earnings. As they apply the Iliad operating model to these newly acquired businesses, earnings go up even more and the market may just start to appreciate this as not only a cash cow but also a growth company. At the very least I will say that with a well covered regular dividend yield of 7.5%, we aren’t paying up in the slightest to see out that potential future.
The most important acknowledgements
This is an investment blog and I’m only an investor and a (very) part-time writer. I have to acknowledge that no results for an investor — much more so a minority investor — are possible without the employees, and managers, doing the actual real work. In addition to all the great people at TIGO 0.00%↑ from Marcelo Benitez and Bart Vanhaeren and on, the people at Atlas have done absolutely crucial work without which the upside would be way lower in being a shareholder.
Now-chairman Maxime Lombardini was the public face of the initial push after Atlas entered the picture, but I think board members Pierre-Emmanuel Durand and Jules Niel have also done major work behind the scenes and deserve their fair share of plaudits, even though they have not sought them. As, I’m sure, do many others with a lower public profile both in Paris, Florida and of course at the country level where all the operational toil is done.
The company has always had good qualities, but they have now been truly allowed to shine through for public markets to see.
Finally
I am keenly following the moves towards consolidation in numerous European markets and the role Iliad might or might not be playing. The split-up of Patrick Drahi’s SFR is now just around the corner, which means that the three remaining players in France will accrue size. Scale synergies increase their values and more rational pricing will also likely result down the line.
Italian consolidation may be on hold awaiting the outcome in France, but I think it’s only a question of time there too, and TIM CEO Pietro Labriola has been as clear about the outlines as anyone can be in public markets before things happen for real. Obviously, as TIGO 0.00%↑ investors the analogous situation for us is Colombia, where many great things still lie ahead.
As illustrated above, Iliad will in all likelihood be a significantly stronger company a year from now, which is great for TIGO 0.00%↑ too. I’m positive that we will have a chance to see more accretive acquisitions in Latin America as time goes by. A short to intermediate term priority in order to manage risk is to keep increasing the use of local debt to the maximum extent possible. Here Iliad’s competence and carefully burnished reputation with ratings agencies and debt investors will be a help.
All in all, it has been a truly amazing learning experience to have been involved in this investment for the last 2.5 years (and earlier!) and I’m grateful for it.
But it’s only half-time yet. 45 more minutes to go. And we all know it’s the last trembling minutes at the very end — Fergie Time — that really matter.
P.S. Happy friday!
Our research firm keeps its rating at BUY and reiterates a time-adjusted target price of $80