Mobile services firm Millicom has seen its stock nose-dive after ending takeover talks.
In January Millicom undertook a strategic review and appointed Morgan Stanley as a financial adviser following the receipt of a number of unsolicited takeover approaches from established mobile operators looking to expand into emerging markets. Potential growth markets are highly desirable for established mobile operators struggling to cope with saturated markets and declining growth prospects.
At one stage possible bidders were thought to include Vodafone, Telefonica, Orange, Hutchison Whampoa, and possibly even Egyptian telecoms company Orascom Telecom Holdings.
However, China Mobile Ltd, formerly known as China Mobile (Hong Kong) Ltd, rapidly emerged (in the media at least) as a favorite, especially after the previous likely purchaser Investcom Holding pulled out of the running following its acquisition by MTN Group.
It was widely reported that the largest mobile operator in China would pay between $48 and $49 a share, valuing Millicom at between $5.2 billion and $5.3 billion.
Millicom has never revealed the identity of the potential purchaser, although it did admit in May that it was in advanced discussions with one potential buyer. However, it said it has now decided to terminate all discussion concerning a potential sale of the entire share capital of the company.
Although the board of directors remains confident in the independent future of the company, the news did not please the markets and Millicom’s share price on the Nasdaq plummeted 25% following the news.
Millicom has operations mostly in South East Asia, Central America, and sub-Saharan Africa. It has cellular operations and licenses in 16 countries, with 9.9 million subscribers across a population coverage of 391 million. Because it operates in emerging markets, it is achieving growth rates that would be the envy of established players. For example, in the fourth quarter of 2005 it added just over one million subscribers, and in the first quarter of 2006 it added another 963,000 subscribers, mostly thanks to the high subscriber growth in Latin America under its Tigo brand.
