It was even better than I had dared to hope. Guatemala was a surprise to the upside on margin and they have taken more price increases in Q1 AND made more cost cutting that is not fully visible yet. Panama was amazingly strong with the B2B customer intake. Colombia was extra strong on margin while customer intake took a bit of a breather. Overall, the read-acrosses I had from competitors were quite instructive and the amazing cost cutting program is doing wonders in addition to that.
Forward guidance on operations was extremely bullish. However, if you account for one-offs and such it looks like they may still be too conservative with the updated guidance
No Lati announcement yet as I had hoped and thought, but I think there is no reason to worry about that.
All in all, both the results improving so quickly and the communication indicates that Atlas intends full alignment with the outside shareholders. This also make sense when considering the Tele2 purchase; antagonizing minority investors in Sweden (and elsewhere) seems like it would be a bad business decision when you are suddenly controlling two Swedish listed entities. Note that Iliad's CEO has already said that they are not looking to take out Tele2 and they structured the purchase of shares as to avoid tripping the mandatory bid threshold, while maximizing the economic interest.
The relatively large bond repurchases with long maturities and low rates point in the direction that there will not be a private takeover of Tigo any time soon. I think they are visualizing an extremely stable entity that can issue new bonds at good terms. Perhaps a combination with Tele2 would now instead make more sense and aid that goal? That way you can also eliminate double listing costs, the useless American listing, even more management layers and it could provide a faster way to unlock deferred tax assets. And mr Lombardini could review the costs at Tele2 when he is done with Tigo.
Even though they emphasized bond repurchases and the discounts help towards the deleveraging target, I would still expect them to find a way to make further stock buybacks in the coming months, if nothing major changes. Lati, other possible asset sales and some extra room against a conservative guidance should permit that.
On Iliad's and Xavier Niel's purchase of control in Tele2
I think the timing of the announcement of the Tele2 deal is not a complete coincidence. It has been unofficially for sale for a long time and officially since the chairman of Kinnevik "slipped up" a month ago or so and told Affärsvärlden. Either the chairman already knew they would sell and knew the buyer at that point or he was in far-along negotiations and tried to entice other possible buyers by his off-hand comment. So I think there is a strong possibility that Iliad wished for today specifically to be the announcement day. I don't think it's wise to elaborate further on that, but I wanted to state it for the record.
Strategically, it's interesting for all kinds of reasons. Tele2 is underleveraged and that will likely change. It opens up the possibility for M&A both in-market and in new markets. You can think of all kinds of permutations, both involving Niel's current business interests and possible new ones. Whatever happens structurally will have to satisfy criteria of capital efficiency and tax efficiency. Secondarily, I would of course assume that he has some view on the competitive vulnerabilities in Tele2's markets.
I don't know anything about those stocks. As a general rule, I think investing into a SOE/bureaucrat led telcos merits an unfathomably high hurdle rate. They are toast as soon as they have a properly capitalist competitor due to accumulated layers of cost and they tend to not want to highlight infra value, etc. I think they are absolute shareholder sink holes in the same way and for the same reasons as something like GM.
that has certainly been the case with these 2, especially TLK that funded ventures into every fad such as ride-sharing bikes, etc...
want to go insane...read the TLK annual reports and try to figure out how they have destroyed massive cash flow for a decade by what seems to a lot of managers with the same last names !
not nearly as bad, KT is actually trying to monetize peripheral businesses while they can get a premium, and i suspect s.korea follows japan in public listing reforms.
hope to see more on really weird companies in your blog.
One take i have is that it feels very strategic to have both Millicom and Tele 2 in the portfolio again given the history. Very interesting moves by Iliad.
Think one should abandon the hope of a quick takeover of Millicom in the near term (1-2yrs) after today's news. XN's main focus seems to be on some sort of consolidation in Europe. Highly doubt they've given up on Vodafone Italy completely. Only so much one man can do at the same time. Though in Tele2's case Thomas Reynaud said they're not planning on bidding for the whole company, and will remain as long term shareholders. Most probable that they see Millicom in the same way.
The absence of saying he wouldn't buy all of Tigo for 1.5 years means that he has wanted to keep the possibility open throughout that time. Otherwise he has needlessly cost himself money with a higher average purchase price. Timing is another issue.
Sure, but he hasn't directly gotten the question in the same way a CEO, like Reynaud, gets it after news like today's. Might be that we read too much into the absence of such a statement from XN, even though it is custom to make some sort of hint about it if you're not planning to bid for the whole thing, but surely not required.
It's not exactly the special sit it was anymore. Too much has changed. More a bet on fundamentals and XN:s ability to turn the company around now.
And does one really believe that the company will live up to it's FCF goal for 2024? The bar is set quite high. What is going on with the, now obvious, delay in the sale of Lati, again?
Though XN will, just as likely as not, take the company private in the coming years, I don't see it happening in the near term anymore. Don't see a reason for him to hurry.
The opportunity cost of remaining invested in the company seems quite high with a likely capped return set against the risk of some years with continued lacklustre performance. Another warning sign, and to me surprising thing, is the fact that several large shareholders have decreased their positions the past year. One has to assume that they have a better view of the situation regarding XN, and the whole Apollo affair of last year. If things were as many of us have thought, why aren't more owners increasing positions, or at the very least not selling?
Though it might be more interesting as a RV with a short on Lilak.
I don't know what to tell you. There is nothing accidental about what is communicated, or not, to the market in these cases. In Tele2, in Vodafone, and in Unibail he has said that they are not aiming for the entire asset but not here. Now, he might come out tomorrow and say otherwise, but if so that would be because things have changed from the initial calculus in some way.
As for the other points, I have stated my opinions on them elsewhere and I don't think a long back and forth is fruitful. You could very well be correct about the outcome, but I don't agree with your reasoning. We are always dealing with probabilities in markets.
On the Q4:
It was even better than I had dared to hope. Guatemala was a surprise to the upside on margin and they have taken more price increases in Q1 AND made more cost cutting that is not fully visible yet. Panama was amazingly strong with the B2B customer intake. Colombia was extra strong on margin while customer intake took a bit of a breather. Overall, the read-acrosses I had from competitors were quite instructive and the amazing cost cutting program is doing wonders in addition to that.
Forward guidance on operations was extremely bullish. However, if you account for one-offs and such it looks like they may still be too conservative with the updated guidance
No Lati announcement yet as I had hoped and thought, but I think there is no reason to worry about that.
All in all, both the results improving so quickly and the communication indicates that Atlas intends full alignment with the outside shareholders. This also make sense when considering the Tele2 purchase; antagonizing minority investors in Sweden (and elsewhere) seems like it would be a bad business decision when you are suddenly controlling two Swedish listed entities. Note that Iliad's CEO has already said that they are not looking to take out Tele2 and they structured the purchase of shares as to avoid tripping the mandatory bid threshold, while maximizing the economic interest.
The relatively large bond repurchases with long maturities and low rates point in the direction that there will not be a private takeover of Tigo any time soon. I think they are visualizing an extremely stable entity that can issue new bonds at good terms. Perhaps a combination with Tele2 would now instead make more sense and aid that goal? That way you can also eliminate double listing costs, the useless American listing, even more management layers and it could provide a faster way to unlock deferred tax assets. And mr Lombardini could review the costs at Tele2 when he is done with Tigo.
Even though they emphasized bond repurchases and the discounts help towards the deleveraging target, I would still expect them to find a way to make further stock buybacks in the coming months, if nothing major changes. Lati, other possible asset sales and some extra room against a conservative guidance should permit that.
On Iliad's and Xavier Niel's purchase of control in Tele2
I think the timing of the announcement of the Tele2 deal is not a complete coincidence. It has been unofficially for sale for a long time and officially since the chairman of Kinnevik "slipped up" a month ago or so and told Affärsvärlden. Either the chairman already knew they would sell and knew the buyer at that point or he was in far-along negotiations and tried to entice other possible buyers by his off-hand comment. So I think there is a strong possibility that Iliad wished for today specifically to be the announcement day. I don't think it's wise to elaborate further on that, but I wanted to state it for the record.
Strategically, it's interesting for all kinds of reasons. Tele2 is underleveraged and that will likely change. It opens up the possibility for M&A both in-market and in new markets. You can think of all kinds of permutations, both involving Niel's current business interests and possible new ones. Whatever happens structurally will have to satisfy criteria of capital efficiency and tax efficiency. Secondarily, I would of course assume that he has some view on the competitive vulnerabilities in Tele2's markets.
Private and Confidential
very useful to read your update and even more fun to follow into the tangential areas.
global telecom is still in a long slump, what do you think about majors far outside the G7 ?
although a takeover premium will never exist, KT and TLK look the most interesting.
Thanks.
I don't know anything about those stocks. As a general rule, I think investing into a SOE/bureaucrat led telcos merits an unfathomably high hurdle rate. They are toast as soon as they have a properly capitalist competitor due to accumulated layers of cost and they tend to not want to highlight infra value, etc. I think they are absolute shareholder sink holes in the same way and for the same reasons as something like GM.
that has certainly been the case with these 2, especially TLK that funded ventures into every fad such as ride-sharing bikes, etc...
want to go insane...read the TLK annual reports and try to figure out how they have destroyed massive cash flow for a decade by what seems to a lot of managers with the same last names !
not nearly as bad, KT is actually trying to monetize peripheral businesses while they can get a premium, and i suspect s.korea follows japan in public listing reforms.
hope to see more on really weird companies in your blog.
How do you think the stake in Tele 2 affects this thesis and possible outcomes in Millicoms case?
Thanks for another great post
One take i have is that it feels very strategic to have both Millicom and Tele 2 in the portfolio again given the history. Very interesting moves by Iliad.
Think one should abandon the hope of a quick takeover of Millicom in the near term (1-2yrs) after today's news. XN's main focus seems to be on some sort of consolidation in Europe. Highly doubt they've given up on Vodafone Italy completely. Only so much one man can do at the same time. Though in Tele2's case Thomas Reynaud said they're not planning on bidding for the whole company, and will remain as long term shareholders. Most probable that they see Millicom in the same way.
The absence of saying he wouldn't buy all of Tigo for 1.5 years means that he has wanted to keep the possibility open throughout that time. Otherwise he has needlessly cost himself money with a higher average purchase price. Timing is another issue.
Sure, but he hasn't directly gotten the question in the same way a CEO, like Reynaud, gets it after news like today's. Might be that we read too much into the absence of such a statement from XN, even though it is custom to make some sort of hint about it if you're not planning to bid for the whole thing, but surely not required.
It's not exactly the special sit it was anymore. Too much has changed. More a bet on fundamentals and XN:s ability to turn the company around now.
And does one really believe that the company will live up to it's FCF goal for 2024? The bar is set quite high. What is going on with the, now obvious, delay in the sale of Lati, again?
Though XN will, just as likely as not, take the company private in the coming years, I don't see it happening in the near term anymore. Don't see a reason for him to hurry.
The opportunity cost of remaining invested in the company seems quite high with a likely capped return set against the risk of some years with continued lacklustre performance. Another warning sign, and to me surprising thing, is the fact that several large shareholders have decreased their positions the past year. One has to assume that they have a better view of the situation regarding XN, and the whole Apollo affair of last year. If things were as many of us have thought, why aren't more owners increasing positions, or at the very least not selling?
Though it might be more interesting as a RV with a short on Lilak.
I don't know what to tell you. There is nothing accidental about what is communicated, or not, to the market in these cases. In Tele2, in Vodafone, and in Unibail he has said that they are not aiming for the entire asset but not here. Now, he might come out tomorrow and say otherwise, but if so that would be because things have changed from the initial calculus in some way.
As for the other points, I have stated my opinions on them elsewhere and I don't think a long back and forth is fruitful. You could very well be correct about the outcome, but I don't agree with your reasoning. We are always dealing with probabilities in markets.