LUXEMBOURG - Millicom International Cellular S.A. (NASDAQ: TIGO) has entered into a definitive agreement with SBA Communications Corporation (NASDAQ: NASDAQ:SBAC) involving the sale and leaseback of approximately 7,000 towers across five Central American countries. The transaction, valued at about $975 million, also includes an additional earn-out contingent on meeting specific financial targets.
The countries involved in the deal are Guatemala, Honduras, Panama, El Salvador, and Nicaragua. This strategic move is part of Millicom's broader plan to optimize operational and capital efficiency, which is expected to position the company for sustainable growth and long-term shareholder value.
In tandem with the sale, the two companies have agreed to a build-to-suit arrangement, which will see SBA Communications construct up to 2,500 new sites, reinforcing the partnership. This expansion is anticipated to enhance Millicom's network coverage and connectivity capabilities in the region.
Marcelo Benitez, CEO of Millicom, highlighted the partnership as a "landmark tower transaction" and a critical component of Millicom's strategy to unlock shareholder value by monetizing non-core assets. SBA Communications, through this transaction, aims to become the leading tower company in Central America, expressed Brendan Cavanagh, President & CEO of SBA Communications.
The transaction is subject to customary regulatory approvals and closing conditions, with an expected completion in mid-2025. J.P. Morgan and Lazard (NYSE:LAZ) Freres served as Millicom's financial advisors, while Goldman Sachs & Co. LLC advised SBA Communications. Legal counsel for Millicom was provided by Winston & Strawn LLP, and SBA Communications was advised by Paul, Weiss, Rifkind, Wharton & Garrison LLP.
Millicom, a significant telecommunications service provider in Latin America, employs around 15,000 people and serves over 45 million customers with mobile and fiber-cable services. SBA Communications is an independent owner and operator of wireless communications infrastructure with a portfolio spanning across the Americas, Africa, and the Philippines.
This report is based on a press release statement.
In other recent news, Millicom International Cellular SA (NASDAQ:TIGO) has been the subject of several significant developments. The company reported a robust Q2 financial performance, with organic EBITDA increasing by 20% and equity free cash flow surging to $268 million. Service revenue rose by 5.5% YoY to $1.36 billion, and EBITDA grew to $634 million, marking a 23.1% YoY growth.
Scotiabank upgraded Millicom's stock from Sector Perform to Sector Outperform, raising the price target to $37.30, following a significant reduction in Millicom's funding costs and potential for an aggressive share buyback program. The bank's analysts also noted Millicom's ongoing $2.4 billion merger and acquisition deal in Colombia.
In leadership changes, Maxime Lombardini has been appointed as Interim Non-Executive Chair of the Board, following Mauricio Ramos's departure. The company also faced a takeover bid from Atlas (NYSE:ATCO) Luxco, which the independent committee of Millicom's board advised against, stating that the offer significantly undervalued the company. These are the latest developments in the company's recent history.
InvestingPro Insights
Millicom International Cellular S.A.'s (NASDAQ: TIGO) recent tower sale and leaseback agreement aligns well with the company's financial trajectory and market position. According to InvestingPro data, TIGO's market capitalization stands at $4.77 billion, reflecting its significant presence in the telecommunications sector.
The company's revenue growth of 5.68% over the last twelve months as of Q2 2024 indicates a steady expansion, which could be further bolstered by the strategic move to monetize non-core assets. This growth is complemented by a robust gross profit margin of 74.5%, showcasing TIGO's operational efficiency.
An InvestingPro Tip highlights that TIGO's net income is expected to grow this year, which aligns with the company's strategy to optimize operational and capital efficiency through transactions like the tower sale. Additionally, another InvestingPro Tip notes that the stock is trading near its 52-week high, suggesting investor confidence in TIGO's strategic decisions.
The deal's value of $975 million represents a significant portion of TIGO's market cap, underscoring the transaction's importance in unlocking shareholder value. This move could potentially improve TIGO's financial flexibility and support its focus on core operations and network expansion.
For investors seeking a deeper understanding of TIGO's financial health and future prospects, InvestingPro offers 10 additional tips, providing a comprehensive view of the company's potential in the evolving telecommunications landscape.
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