Tigo Now Sets Its Focus on Africa After Asian Exit

Millicom's exit from Asia makes the wireless company's growth more reliant on Africa, where competition is heating up.

 

Millicom International Cellular this month said it will sell its Cambodian operations to Royal Group for $346 million. It also plans to sell its wireless assets in Laos and Sri Lanka.

 

The Luxembourg-based carrier, whose U.S. shares have risen 61% this year, decided it couldn't get a leading market share in Asia. Instead, it will put more emphasis on Africa, where it has better assets and where competition isn't yet quite as aggressive.

 

"In most of Millicom's markets (in Africa) there are only three strong operators, compared to five or six in Asian markets," said David Kestenbaum, an analyst at brokerage Morgan Joseph.

 

Tigo Brand

 

Excluding Asia, about two-thirds of Millicom's 31 million subscribers are in Latin America and the rest in Africa. At the end of 2008, the company, which usually does business under the Tigo brand, had about 4.4 million customers in Asia.

 

Millicom's subscriber growth has slowed in South America, where it competes with America Movil and Telefonica. In Central America, Millicom has a strong rival in privately held Digicel.

 

Competition also is fierce in Africa, but that continent's wireless penetration is still low. In three of the markets where Millicom operates — Ghana, Senegal and Tanzania — only about half the population uses a mobile phone.

 

Still, Millicom faces much bigger rivals. They include South Africa's MTN Group, U.K.-based Vodafone, France Telecom and Zain.

 

Millicom has managed to prosper in Africa while some newer entrants to the region, such as Kuwait-based Zain, have struggled, Kestenbaum says. "They're growing fast," he said. "They're a very strong and aggressive marketer."

 

The carrier operates in seven African countries and plans to add Rwanda this year. Millicom makes a profit in all of its African markets except the Democratic Republic of Congo, analysts say.

 

The slowing global economy has slowed demand for commodities from natural-resource-rich countries like Africa's, hurting local economies and slowing mobile growth. Millicom added 762,000 subscribers in Africa in the second quarter, down from 1 million in the year-earlier period.

 

Also, Millicom's average revenue per user in Africa has dropped to $6.20 from $9.30 at the start of 2008, analysts say. Yet, in the first half of 2009, Millicom's African revenue rose 4% to $354 million and its number of subscribers rose 41% to 10.6 million from 7.5 million.