Nasdaq-listed Millicom International Cellular (MICC) is a $4.6 billion market cap global telecommunications company with cellular operations across Asia, Latin America and Africa. Its licenses cover approximately 392 million people across 16 countries. That’s 30% more than the population of the entire United States, and on par with the coverage of $59 billion market cap Latin American cell phone giant (and previous Global Bull Market Alert pick) America Movil.
So why is Millicom so little known, and yet attracting so much attention from potential suitors? Like Indiana Jones, Millicom is willing to go where most others fear to tread. Its portfolio of markets includes some countries that are far off the radar screen of the Verizons of the world, including Ghana, Mauritius, Senegal, Sierra Leone and Tanzania. Last year, Millicom even acquired a GSM mobile operation in Congo.
The secret to Millicom’s success — including a total of over 9 million subscribers and 35% EBITDA growth last year — is its strategy of being the low-cost provider of prepaid services. That means high-growth, high operating profitability, and no worries about collecting bills in bad neighborhoods. And with a virtually airtight business model like that, Millicom and its assets are attracting a lot of attention.
Indeed, following a high number of unsolicited approaches, Millicom’s board in January decided to conduct a review of strategic options for the company, and even appointed investment bank Morgan Stanley to advise it on how to maximize returns for shareholders.
Scenario A is that Millicom accepts one of the unsolicited offers of between $49 and $51 per share that are already on the table. That’s a nice 8-10% premium over its closing price of $46.50 this past Friday. There are reports that a deal like this may be completed by mid-April, though the process could drag out a little longer. With a reported six bidders left in the process, the price could be pushed closer to $55.
Scenario B is a breakup of Millicom — that is, a sale of its individual assets. That way Millicom could fetch as high as $60 to $70 per share and generate the highest returns for investors. A price of $70 would mean a premium of more than 50% over Millicom’s current price.
The breakup scenario is a real possibility. The CEO of fellow pan-African mobile operator Celtel, Martin Pieters, has admitted that it might be difficult to swallow Millicom whole. "To be honest I do not see a real fit for the whole portfolio with another operator," he said, adding that if it were to be sold in separate pieces, it could be of interest to Celtel. Millicom’s African assets could be attractive to Celtel and South Africa’s MTN, who are all looking to expand their footprints across Africa.
So buy Millicom (MICC) today and place your stop at $40.50. To take advantage of both scenarios in the options market, buy the July $50 calls (CQDGJ.X).
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