Millicom to plough $700m into Central America networks

Latin American operator Millicom will spend $700 million over the next two years to maintain and expand its fixed and mobile networks in Guatemala, Honduras, and El Salvador.

The three markets, together known as the Northern Triangle, are the subject of a US-led initiative to stimulate economic development as a means of curbing migration. It was launched as a call to action by vice president Kamala Harris last May and has since morphed into an independent organisation called the Partnership for Central America (PCA). The idea is that with stronger economies, less corruption, better public services and more opportunities to earn, fewer people will be forced to leave for sunnier climes.

Broadband availability has a role to play here, which is why Millicom – which offers services throughout the region under the Tigo brand – has answered the call.

“As a member of the PCA, and as part of our ongoing commitment to the region, we announced that we will invest $700 million to expand and maintain our fixed and mobile broadband networks in Guatemala, Honduras and El Salvador over the next two years. This investment will advance our efforts to accelerate economic growth via increased connectivity, as penetration rates for broadband in these markets are still below regional averages,” said Karim Lesina, Millicom’s chief external affairs officer, in a blog post on Tuesday.

Millicom said that only 30-40 percent of households in its operating footprint have reliable access to home broadband and only half the population uses 4G data on a smartphone. Adoption and availability are improving though. According to Millicom, for the last five years, 1 million premises per year have been connected to full fibre networks. Furthermore, the telco said 4G coverage now stands at 80-90 percent, adding that a 10 percent increase in mobile broadband penetration contributes nearly a 2 percent increase in GDP.

How does investment of $700 million over two years stack up then? Well, some educated guessing is required here because Millicom doesn’t divulge capex on a per market basis. In 2021, the company’s LatAm capex totalled $1.11 billion, which equates to 17.9 percent of revenue. Taking that percentage and applying it to revenue generated in Guatemala, Honduras and El Salvador – which came in at a combined $2.64 billion last year – equals $472 million.

All of a sudden that $700 million over two years doesn’t look quite as impressive. However, it’s important to remember this is only a very rough estimate, and that capex is not evenly distributed between markets, of course. Millicom spent heavily last year on expanding its mobile and fixed networks in Colombia, as well as its fixed networks in Paraguay and Bolivia, for instance. Therefore that $700 million could well represent a significant increase for Guatemala, Honduras and El Salvador. What’s more, Millicom gets the added PR benefit of associating itself with the PCA initiative, and it’s hard to put a price on that, right?

The Northern Triangle has “great potential for growth and development – one of the hidden gems of Latin America,” said Lesina. “The right infrastructure, or digital highway as we call it, can have an incredible impact on the future of the region and its cities.”

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