In a move that could reshape the competitive landscape of Chile's telecommunications sector, Millicom International Cellular SA has expressed preliminary interest in acquiring Telefonica SA's operations in the country. This potential bid marks Millicom's latest attempt to expand its Latin American footprint under its well-known Tigo brand.
Millicom's Strategic Expansion in Latin America
Millicom, based in Luxembourg, is no stranger to acquiring Telefonica's assets in the region. Over the past year, the company has successfully agreed to purchase Telefonica's units in Colombia, Ecuador, and Uruguay. This pattern aligns with Telefonica's broader strategy to reduce its presence in Latin America outside of its key market, Brazil. The discussions regarding the Chilean unit are currently private, and sources caution that no final decision has been made, nor is it certain that Millicom will submit a formal offer.
Both companies have maintained a cautious public stance. Millicom has officially declined to comment on the matter, while Telefonica did not provide an immediate response. The sale process for Telefonica Chile has been ongoing since last year, attracting initial attention from other major regional players.
A Shifting Bidding Landscape
The auction for Telefonica Chile has seen significant evolution. Initially, competitors Entel SA and America Movil SAB showed interest and even explored a joint bid. However, that collaborative plan was later abandoned. By December, Entel stated it was evaluating options to stay in the bidding process independently, while America Movil confirmed its intention to proceed alone. As of now, Entel has not submitted any new bids.
The scrapped joint offer from America Movil and Entel was widely seen as the leading proposal. Market investors had viewed it favorably, as it promised consolidation in a sector where operators have faced financial strain, including one instance that led to a bankruptcy proceeding. Reducing the number of competitors was seen as a path to improved profitability for the remaining firms.
Regulatory Implications and Market Dynamics
A bid from Millicom presents a different outcome for the Chilean telecom market. Instead of consolidation from four to three major players, the entry of Millicom would keep the number of key competitors steady at four. This scenario might find more favor with antitrust regulators, whose mandate often includes preserving a competitive field to benefit consumers.
According to the latest regulatory data from September, Telefonica's mobile brand in Chile, Movistar, holds a 22.6% market share, making it the second-largest operator behind Entel. The introduction of Millicom's Tigo brand would inject a new competitor with deep regional experience, potentially intensifying competition in services and pricing. The final decision will hinge on the formal offers, regulatory approvals, and the strategic calculations of all involved parties.
