A Timeline of $TIGO

Making sense of the $24 bid

I feel like timelines often help to put corporate actions into proper perspective. Of course, it depends on the biases and the knowledge of the person interpreting the facts. Another matter is the editing necessary in putting together a timeline.

What is potentially important and what is not? I can't positively know this. But here is an attempt to chronologically sort the most important events relevant to the possible bid from Xavier Niel’s holding company Atlas.

FEBRUARY

1 Feb

TIGO 0.00%↑ Colombia (50% owned by TIGO 0.00%↑, 50% owned by the city of Medellin through its public utility company EPM) sells towers to KKR for a preliminary price equivalent to $76m.

26 Feb

Iliad, Xavier Niel's European telco champion, becomes the controlling shareholder in Tele2 with a deal that minimizes equity capital used for control while still avoiding the need for a mandatory bid.

27 Feb

TIGO 0.00%↑ releases excellent Q4 results, showing lots of early effects from cost cutting and operational turnarounds in the most important countries.

Leverage ratio now seems unproblematic in light of operational deleveraging plus upcoming infra sales.

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MARCH

7 March

EPM, TIGO 0.00%↑'s Colombian partner, says it sees no strategic value in its stake in the telecom business.

23 March

Xavier Niel is interviewed in the Sunday Times. The overall purpose of the interview seems to be to make clear that Niel is disappointed with Vodafone and wants to be rid of his stake in the company, especially after Iliad’s Italian deal fell through. Key quote:

In Niel’s mind, there are two types of telecoms operators: sellers, like Vodafone; and buyers, like him. As he puts it: “We are buyers because we think we know how to manage telecoms operations. And I want to make cash.”

25 March

TIGO 0.00%↑ wants to issue 8 year bonds and push out average maturities

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APRIL

2 April

WOM Chile enters American chapter 11 bankruptcy proceedings due to imminent default on their bonds.

2 April

TIGO 0.00%↑issues $450m of 2032 notes at 7.375% interest

4 April

Fitch upgrades UNE EPM (Tigo Colombia) to BB on improved liquidity after tower sales and equity injection. This reverses a downgrade in the fall during political drama surrounding the equity raise.

5 April

"Uncle WOM", Chris Bannister, leaves WOM Chile citing broken promises of equity injection from the main shareholder.

11 April

WOM Colombia, a separate entity, but with WOM Chile as a large (?) shareholder through a $16m capital injection in 2023, enters local restructuring

13 April

Fico Gutierrrez, the new Mayor of the city of Medellin, which controls EPM, says he can't yet speak about the stake in Tigo Colombia but that important news is coming.

16 April

Xavier Niel's lawyers ask the Secretariat of the Swedish Securities Council if Luxembourg threshold (33.3%) or Swedish threshold (30%) apply to a mandatory bid

17 April

Convening notice for TIGO 0.00%↑'s AGM goes out.

17 April

Iliad is shown to have filed a Universal Registration Document without prior approval for the first time (after two consecutive years of filing).

For some reason they are doing this with the CSSF in Luxembourg, where Iliad is not domiciled but T 0.00%↑ IGO is. A Universal Registration Document is a precursor to a public offer of securities in the EU.

Iliad filed this document for the first time concurrently with the equity raise TIGO 0.00%↑ made in mid-2022 for the Guatemala purchase completed in late 2021. Xavier Niel took advantage of price action around the rights offering to start building his stake.

22 April

Iliad Group issues €500m 7 year bonds at 5.375% interest.

23 April

The Secretariat of the Swedish Securities Council says Luxembourg rules apply for mandatory bid, meaning Atlas is roughly 4% away from triggering it instead of just below 1%. This means that Atlas cannot quickly cross the threshold and trigger a mandatory by doing over the market purchases. Stock trades at 220 SEK/$20.

23 April, 22:30 CET

TIGO 0.00%↑ re-issues convening notice correcting dates from last year's notice in the share repurchase mandate of up to 10% of shares outstanding.

Added to this year's mandate is the ability for the company to pay for M&A and partner buy-ins with treasury stock.

The ability to do a directed new share issue is also again suggested under the new controlling shareholder.

Last year, this board mandate was voted down at the AGM. Presumably by Xavier Niel as a precautionary move before he established more control of the company.

25 Apr

Tigo Colombia issues local 3 year bonds, COP 160 billion ($41m) at 18% interest. Central bank rate is 12.25% at time of issuance, but the cutting cycle has slowly started.

29 Apr

Iliad Holding issues bonds partly as financing for the purchase of Tele2 shares.

MAY

2 May

Iliad Holding completes a total of €1.3B of 7 year bonds at 6.875% and 8.5%

4 May

Leaks of interested parties in taking over WOM Chile are TIGO 0.00%↑, STC and VTR/Claro ( LILA 0.00%↑/AMX 0.00%↑ ).

8 May

TIGO 0.00%↑ releases a complete knockout Q1 report, furthering instilling market confidence in the deleveraging story and sustainability of the business turnaround.

14 May

Iliad Holding prices tap offering for the 2 May issue of €150m+€200 of 2031 notes at 6.875% and 8.5% at 100.750%.

15 May

Pillofon, a new MVNO supported by Youtube travel vlogger Luisito Comunica enters the Colombian market, using Tigo Colombia’s network. With 42 million subscribers, he is one of the largest Spanish language youtubers.

Tigo Colombia, which has 8 of 9 MVNOs in the market on their network, says that this business model allows the MVNOs to focus on marketing and cheap prices to specific market niches. How WOM feels about this situation is unclear.

20 May

Credit meeting for WOM Chile is either inconclusive or delayed. Next date 20 June.

23 May, 11:24 AM, CET

Leaks to Bloomberg that Xavier Niel's holding company Atlas wants to bid for the entirety of TIGO 0.00%↑, on the day of their AGM. Niel has been sounding out banks since April. Stock trades briefly up near 290 SEK/$28, before being halted.

23 May, lunch time to early PM, CET

Atlas confirms interest in bidding $24 per share (below where it traded before the leak), stock reopens closer to this level but still at a premium to the bid level.

Bid looks a lot like a mandatory bid with no premium despite being a voluntary bid.

23 May, later in the day

Xavier Niel sends a letter to TIGO 0.00%↑'s board of directors, detailing his intent to launch a bid.

Gives himself a few weeks to sort out financing, despite bid having been in the works since at least early April.

Cites low trading liquidity as reason for minority shareholders to sell. Also cites need for "additional information that we will require from the Company in order to proceed...".

Could apply to Lati transaction and/or M&A.

23 May

All proposals, including the new share repurchase plan and ability to issue new shares, are approved at the AGM.

30 May

Bloomberg reports that VTR 2028 bonds have made a comeback in the second half of May from extremely distressed levels to "only" highly distressed. This might reflect increased possibilities of market consolidation.

30 May

Iliad releases Q1 numbers, showing strong performance as usual. Iliad Group now has leverage below 3x and Holding below 4x, in spite of buying a controlling stake in Tele2 in the quarter.

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JUNE

1 June

Mauricio Ramos steps down as CEO. However, in his new role as chairman he brings with him the full M&A responsibilities, a somewhat unusual move.

Will his extensive M&A experience and great familiarity with the Chilean telecom market from his 15 year experience with LILA 0.00%↑ prove valuable in this new capacity?

4 June

Mauricio Lizcano, the top telecom regulator in Colombia, gives an interview where he talks about WOM’s issues and the lack of profitability generally in the mobile sector. He acknowledges that Colombia has very cheap prices for connectivity. The implication seems to be that he is open to market consolidation.

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Note 1

LILA 0.00%↑ seems to be awaiting more clarity on WOM Chile before deciding if they want to defend their stake in VTR/Claro or completely hand reins to AMX 0.00%↑. Deadline 20 August.

Note 2

Chris Bannister keeps regularly commenting on WOM and the Chilean telecom market on LinkedIn after leaving as CEO.

His value to the WOM brand is great, and he also seems to want to emphasize this publicly. I wouldn't rule out a comeback under new ownership.

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In conclusion, a lot seems to point towards M&A being a priority for TIGO 0.00%↑ in the near to midterm. I see indications that they are prepared to use equity to fund this M&A, possibly to acquire assets at discounts to TIGO 0.00%↑ 's own valuation but also to achieve extremely important synergies with in-market consolidation, while still being able to swallow entities with high leverage ratios.

I think there is significant possibility that Atlas' potential no premium bid should be viewed in light of this; as guaranteed exit liquidity for "accidental" shareholders. This can achieve strategic goals for TIGO 0.00%↑ and help to make a deal feasible from a balance sheet perspective, while also giving Atlas the opportunity to clean away the mandatory bid threshold. Atlas is then freed up to, potentially, buy more shares over the market as TIGO 0.00%↑’s deleveraging journey restarts again. Minority shareholders will get a choice to join Xavier Niel in building out this new Latam telco champion — or exit at a defined price.

In my humble opinion everybody should be extremely excited for a continued opportunity to partner with the best telecom operators in the world at a still extremely low valuation. This company right now has more potential than it ever had in the preceding 22 years since the untimely death of its founder Jan Stenbeck. Shareholders should be thinking in terms of multiples of the current market price in a couple of years instead of a few percent extra in a couple of weeks.

That said, I can understand if owners who expected a fast pivot to capital returns would think otherwise. No economically rational shareholder should be a willing seller at levels anywhere close to $24, if that is indeed the final price. But shareholders aren’t always rational, equally long-term oriented or able to act in an unconstrained manner.

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Last year I wrote a post saying the company is worth at least $40 per share. Since then — and largely thanks to Maxime Lombardini and Xavier Niel’s team — the value of the company has increased significantly. Additionally, the deferred tax assets of about $5 billion on the balance sheet of TIGO 0.00%↑ currently makes the company a lot more valuable to Xavier Niel personally than to a public market investor.

Anyhow, the longer it takes for a bid to materialize as WOM’s bankruptcy proceedings continue, the more I would associate the goings-on with WOM to this bid, as the question “what are we actually waiting for?” increases in salience. Also, we should not forget about the possible partner stake sale in Colombia.