NotSoWise

You are right. Thanks for pointing this out.

Talking up share price would not have worked over the past 12 months with deteriorating numbers, so he didnt bother. However, now that the numbers have started growing, he could actually succeed in TIGO multiple re-rating (maybe even +1x by the end of year). I think they have already started buybacks 2-3 weeks ago, but I would not bet my house on this. Like you said, this might come in handy for M&A. PS. Maybe LILAK CEO should also do an interview for this Swedish newspaper...

Most likely, in 6 months we will have 3 consecutive quarters of customer growth, higher reve, EBITDA, FCF and probably buybacks in place, this should be enough for multiple re-rate. With higher valuations of blue chips, at some point people will start to look for cheaper and growing businesses, even smaller ones. On the other hand, with so much money in index funds vs active funds, I also think there is a risk it may take a bit longer than usual for the price to go up. As for ARPU in USD, which may be concerning, I think its not yet CEO's main focus point plus its hard to manage, due to: 1. CEO plays CHTR tried playbook – have good quality network, full product offer, get customers/ market share and lower churn. CHTR so far hasn’t been focusing on raising prices. 2. ARPU in USD fluctuates due to FX, CEO cant change pricing in local currency on a monthly or quarterly basis back and forth 3. Also politically not ideal time to raise prices I see TIGO as 2x-3x in 5 years from the current level, the upper part of returns depending on the extent of multiple re-rate. CEO was buying large amounts pre-COVID at around +/- USD 60 (also with credit, as when price went down he had a margin call and had to sell some). Buying at USD 60, I think his number was at least USD 120, maybe even USD 150. Otherwise why buy at margin?

After reading the results I have similar view. Great operating performance but somewhat muted price reaction. Nevertheless I think the price will catch up over the next 6-8 months (multiple re-rate, more EBITDA, less debt and possibly buybacks).

Overall, 4Q results were quite good. When you read the transcript, you get the impression that there is a good chance for an upside to guidance. Given more debt repayment and possibly buybacks in 2H 2021, TIGO price should do well this year (assuming Covid situation improves).

Rutledge hasnt sold his large package after full vesting, so I guess he continues with his positive view on CHTR vs. sat internet (and 5G). If it was a serious threat over the next 5 years (his investment horizon I guess), then wouldnt he sell by now or wouldnt the CHTR price drop to e.g. USD 400-500 or less? 5G threat was raised and seriously discussed on this forum over the past few years and it hasnt affected CHTR in any significant way, yet. Even at the same price per service, CHTR for sure offers a more stable and faster connection (if needed they can get to 10 gbps easily). However, at some point in the future, there may be a real threat to broadband business/ technology, but I just dont think its over the next few years.

Spek, you are right in all above. As for reve mix it is improving very slowly as long term prepaids will decline and cable will increase, but slowly. Then you have the wireless and fixed internet convergence to somewhat improve the situation. However, what CHTR does with MVNO mobile is better as its much less capex. LILAK will not escape mobile capex, so the economics will be worse. Fortunately 5G is 3-5 years away for LILAK as they are not yet 100% 4G. Still, when you plug in 3% organic growth in the model plus buybacks, it quickly becomes USD 30-60 stock in 5 years, depending on the exit multiple you use. Looks crazy high from todays price perspective (and given 50% price decline over past 4 years), but it is how the model works. Under 0% organic growth, it looks to me like USD 20 maybe even USD 25 stock in 5 years (FCF to M&A or buybacks, plus some multiple re-rate after COVID is done) So not much downside from the current price with a good chance for significant upside. This is why I still hold. But if I am wrong and see they cant grow (like LBTYK) then will sell along Zinterhofer. He has it as a PE investment, so he will need to exit at some point and will pick a good timing for sure.

What you wrote is true about e.g. CHTR, but for LILAK it worked a bit differently, due to the following: 1. Revenue mix - less cable than e.g. CHTR and much more mobile revenue. There were heavy losses in mobile prepaids, people were staying home so could use wifi for calling, they could cut mobile bills. 2. Tourism - Some LILAK countries have high exposure to tourism. Due to loss of visitors, several people temporarily lost jobs in tourism and had problems with paying bills, also SMEs had some issues. 3. Poorer customers - As LATAM countries are much poorer than e.g. US, LILAK introduced some cheap, basic internet packages so children could continue education online, even if their parents lost their jobs and couldnt pay normal internet bills as per contract. This was to show a goodwill to governments and regulators, but decreased revenue for some time. 4. Currency/ FX, as they report in USD Taking aside Chile fuc... up (network collapse due to high traffic and broadband customer losses), overall broadband was doing reasonably ok given circumstances/ shutdowns (new builds, new connects). Points 1-3 seem to be temporary losses and the reve should bounce back, but it takes time. I think Covid took away 1-1,5 years from the investment thesis. Overall my learning is that even "stable" business are much more risky in emerging markets. The additional risk in emerging markets (FX, politics) is not compensated by higher potential growth in my view.

What LILAK needs the most is the organic growth. It will allow for the multiple to re-rate up by 1-2 turns. The growth was just about to come before COVID (insiders bought a lot of stock in hope of good numbers coming soon), but then COVID hit and delayed organic growth by 1-1,5 years. However, they should be able to show some organic growth in 2H2021. Selling assets would be foolish for them. Quite the opposite, they need to buy more to benefit from scale/ wider products offer/ stronger local market position, etc (but not overpay). Its worth to do a simple model (about 50 lines is enough) - and then you will see the logic behind what they are doing. In short: organic growth at constant leverage with excess cash for new broadband lines, M&A and buybacks. As we know, for CHTR it worked but for LBTYK it didnt. I think the odds are good for LILAK and the price is low, so I still hold it until the situation clarifies. So far a pretty bad investment (4 years), but we will see how it develops. I wouldnt sell before Zinterhofer/ his PE fund exits, there might be some upside left.

Huge dilution is not obvious. If you pay 5,5x at 4,5x debt, then you pay 1x EBITDA, which is manageable for LILAK (cash left from recent cap. raise plus USD 100-200m generated in 2020). So it all depends hugely on price paid, with good chance of it being reasonable, given distressed seller. One acquisition they can do, two probably not. Then you have TIGO, with huge cash capacity, so the solution can be worked out re both deals. On the other hand, Malone+Zinterhofer may be interested in adding more at USD 6... so the outcome is not obvious. Hard to take any view here, given limited public information.

I wonder if they would have enough money left from previous capital raise + cash generated/ new debt, or there is another capital raise coming at lets say USD 6 or less...

https://www.gsma.com/mobileeconomy/wp-content/uploads/2020/12/GSMA_MobileEconomy2020_LATAM_Eng.pdf interesting report on mobile market in LATAM, from recent conference TIGO CEO participated (more info on TIGO IR page).

You are right, does not look so easy or quick due to political decision process. Given deal timing, most likely no dividends and no buybacks in 2021.

Good catch... worst case it should be done at a fair price, with base case price being attractive (e.g. ATT for LILAK - willing seller, not many other buyers). If you are an industry insider with local operations (and co-shareholder...), you usually know at least 3-6 months before things appear in the newspapers, so they have been preparing for this for quite some time. I would even say they have already agreed on the price. Deal should be quick and simple (no DD, etc). Good news overall.

A point to consider is that Ramos mentioned that there wont be any price increases in 2020 and 2021 not to invite regulation (LILAK probably the same). With depreciating currencies in LATAM, it means some pressure on USD/ reporting currency ARPU. This was also visible in LILAK 3Q numbers, when USD ARPU declined. My expectation for USD organic growth is very low for 2021, they will announce some conservative projections due to the virus. LILAK will look nice with consolidated PR and CR, thou. Short term LILAK/ TIGO strategy is to grow volume, in particular in broadband, but at some point they will have to raise local currency ARPUs. This is a disadvantage when comparing to CHTR, as CHTR does not have issues with ARPU due to USD operating currency. Organic growth for CHTR is somewhat comparable over the next few years. On the other hand LILAK and TIGO have lower valuations and more long term runway until saturation, but at currency/ political and potentially somewhat climate risk. Having all three, it is not obvious for me which is the best of them at the current prices.... with CHTR being the least risky. As for TIGO, my understanding from the call is there is not going to be any dividends or buybacks in 2021. I think he collects cash for a potential M&A deal (by repaying debt - holding large cash on BS would be questioned by shareholders). COVID gives him a good excuse to justify and accelerate building cash (or debt increase potential) - as no dividends and no buybacks.