Telefonica could launch a legal challenge against Millicom if the latter operator fails to honor its planned $570 million acquisition of Telefonica Costa Rica (Movistar).
Millicom’s purchase of the unit is part of a broader US$1.65 billion deal covering a number of Telefonica’s operations across Latin America, including Nicaragua and Panama. The agreement was struck in February 2019 and cleared in September that year by Costa Rican regulator Sutel.
However, Millicom’s lack of action on the deal has prompted Telefonica to force its hand. To this end, Telefonica has informed Millicom that it will take legal action in the courts of the State of New York to ensure that the deal goes through, or otherwise pursue “all the damages that this unjustified breach could cause Telefonica”.
In a filing to the Spanish National Securities Market Commission, Telefonica argues that Millicom’s refusal to close the transaction places it in violation of the February 2019 sales agreement. Telefonica has stated that it will pursue the matter once the courts reopen for non-emergency actions (they are currently suspended due to the Covid-19 pandemic).
However, Millicom has pushed back against Telefonica’s assertion, claiming that the regulatory approvals required for the deal to close were due to be issued on 1st May. Millicom added that it if the approvals are not received by this date “it intends to terminate the SPA in accordance with the terms of the agreement”, adding that it “will vigorously defend any action brought by Telefonica in this matter.”
Millicom closed its acquisitions of Telefonica’s Nicaragua and Panama units for US$430 million and US$650 million respectively in May 2019 and August 2019. It conducted the purchases via its Latin American ISP unit Tigo (Millicom Cable Costa Rica).