Orange has agreed to acquire Millicom’s operations in the Democratic Republic of Congo for US$160m in cash. If approved by regulators, the transaction would combine the country’s third and fourth players into a stronger competitor to leaders Vodacom and Airtel.
Orange (EPA:ORA) has agreed to acquire Millicom’s (STO:MIC) operations in the Democratic Republic of Congo (DRC) for US$160m in cash.
The combination of Orange, the fourth largest player, and Tigo, the number three, will create a stronger competitor to market leaders Vodacom and Airtel. Orange estimated that its DRC customers numbered around 5.3 million, and Tigo’s at 6.6 million, cautioning that these figures were likely to change given the tendency towards prepaid contracts and a government drive to follow Nigeria’s example of eradicating non-identified SIMs. The DRC had a population of 67.5 million as of 2013, according to the World Bank.
In January, TelecomFinance reported that Orange would likely eye Millicom as one of its “cluster” targets. TelecomFinance also noted that the only markets in which it did not hold a number one or two position were the DRC and Tunisia, where it is number three behind EIT and state-owned Tunisie Telecom and Ooredoo.
Other clusters include Ooredoo, present in Tunisia and Algeria; Comium, in Gambia, Sierra Leone, Liberia and Côte d’Ivoire; and Africell, in the DRC, Sierra Leone and Gambia.
Last month, Orange agreed to buy businesses in Burkina Faso and Sierra Leone from Bharti Airtel, and Cellcom Liberia from Cellcom Telecommunications. It has separately agreed to sell its 70% stake in Telkom Kenya to private equity firm Helios, a deal that may reportedly be complicated by government demands.
Millicom CEO Mauricio Ramos said: “The sale of Tigo DRC is in line with our strategy of supporting consolidation and concentrating our resources in our most promising markets. Proceeds from the sale will strengthen our balance sheet allowing us to reinvest in our existing Latin American and African markets, improving earnings and cash flow and reducing leverage.”
The Sweden-based company is also present in Chad, Rwanda, Senegal and Tanzania, and acquired Zantel from Etisalat last year. In its Q3 2015 results, Millicom reported revenue of US$241m for its African business, and US$1.4bn for Latin America.
It did not use external advisers on the deal. Orange was advised by Lazard and Lacourte Raquin & Tatar, with an audit by Deloitte.
The French company said: “The mobile market in the DRC is undergoing significant growth and is currently the largest mobile market in Central and West Africa after Nigeria with more than 40 million subscribers. Tigo DRC is a perfect fit for Orange given the complementarity of their operations both from a geographical and cultural standpoint. Through this deal, Orange would reinforce significantly its presence in the DRC, hence becoming one of the leading mobile operators in the country and will create positive synergies.”
The transaction is subject to regulatory approvals.