Millicom returns, buys Amnet

July 18, 2008

Telecom giant Millicom International Cellular announced Tuesday that it would acquire Amnet Telecommunications Holding Limited, a leading Central American provider of broadband Internet and cable television, for $510 million.

“This transaction is an important step in the development of our strategy for Central America,” said Marc Beuls, president and CEO of Millicom. “There is a lack of fixed line infrastructure to carry broadband services but customers in these markets are increasingly demanding access to broadband services, and in order to satisfy the demand we are launching 3G services across the region in the second half of 2008.”

The acquisition is expected to be completed within three months, according to Millicom.

Amnet is Costa Rica´s leading cable provider and a major provider of high-speed Internet through a partnership with state-owned Internet provider Radiográfica Costarricense (RACSA).

Previously known as Cable Color Televisión, Amnet became Costa Rica´s first cable television provider in 1982. The company was given its current name after being acquired by Chicago-based Amzak International in 1997. Amnet opened in El Salvador in 1999 and has since expanded throughout the region.

Amnet provides cable, broadband and fixed telephony in El Salvador and Honduras, as well as private data services in those countries and Guatemala and Nicaragua. The company also has operations in the Dutch Antilles, Ecuador, and Trinidad and Tobago. Overall, Amnet has some 350,000 corporate and residential customers. Last year, the company generated $143 million in revenues.

The Luxembourg-based Millicom already has a strong presence in the region. Operating under the Tigo brand, the company is currently the leading cell phone operator in El Salvador, Guatemala and Honduras.

Central America is Millicom´s most important market, accounting for 43 percent of its worldwide revenue, 55 percent of its before-tax earnings and 38 percent of its subscribers. Last year, Millicom´s Central American operations had 8.8 million subscribers and generated $1.2 billion in revenues. Worldwide, Millicom operates in 16 countries in Asia, Africa and Latin America, servicing 287 million customers.

Millicom will be able to expand its services in Costa Rica beyond those offered by Amnet once the state-owned Costa Rican Electricity Institute´s (ICE) telecom monopoly is opened to competition. Under the Central American Free-Trade Agreement with the United States (CAFTA), Costa Rica agreed to open to private competition cell phone, broadband Internet and private data services.

This will be Millicom´s second venture into Costa Rica. During the first administration of president Oscar Arias (1986-1990), the company was awarded a concession to exploit a radio frequency that allowed it to offer cell phone service outside ICE´s monopoly from 1989 to 1995.

Millicom left the country in 1995, two years after the Constitutional Chamber of the Supreme Court (Sala IV) declared illegal the way in which the company was awarded control over part of the country´s electromagnetic spectrum and ruled that only the state could provide mobile phone services.

ICE ended up taking over Millicom´s infrastructure, and Millicom sued the Costa Rican government for over $400 million in a U.S. federal court in Washington, D.C., for monopolistic practices and unlawful expropriation. The court rejected the trial in February 1998.

Last week, Sala IV okayed one of two bills aimed at opening the market. The bill will now return to the Legislative Assembly for a second vote.

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