Millicom & Rocket Internet to Offer Online Services in Latin America & Africa
Millicom International Cellular S.A. announced the signing of an agreement with Rocket Internet GmbH (“Rocket Internet”) to jointly develop franchises in the online sector in Latin America and Africa.
Over a four year period, Millicom has the option to gradually acquire controlling stakes in two subsidiaries of Rocket Internet called Latin America Internet Holding (“LIH”) and Africa Internet Holding (“AIH”). LIH and AIH develop and offer services through franchises operating in 5 categories namely e-Commerce (such as “Kanui”), Marketplaces (such as “Airu”), Subscription (such as “YepDoc”), Lead Generation and Payments, in the largest markets in Latin America and Africa. As Millicom has a clearly defined path to control, these businesses will be fully consolidated from closing and reported as a sixth category called Online.
Currently LIH and AIH control 8 operating businesses with combined estimated revenues of circa EUR35 million in 2012. Both holdings are required to launch a number of new businesses in Latin America and Africa over the next 3 years. Accumulated start-up losses over the first three years of operation are expected to be below EUR250 million. Over time, Millicom expects to extend similar services to its existing markets, generating both additional revenues and costs synergies.
Upon closing, Millicom will acquire a 20% stake in both LIH and AIH, through two reserved capital increases. Millicom has been granted options to increase its stakes up to 50% without management rights over 24 months and a final option to acquire the remaining 50% of these two holdings with full management rights by no later than September 2016 at fair market value. The total consideration to be paid to acquire the first 50% will be EUR340 million in three instalments (EUR85 million upon closing expected in Q4 2012).
Mikael Grahne, Millicom’s President and CEO, commented: “We are pleased to partner with Rocket Internet to develop an online and e-commerce franchise in Latin America and Africa, where these promising sectors are nascent. Rocket Internet has a proven track record of rapidly developing successful operations in the online and e-commerce sectors. Millicom has a strong know-how of operating in the fast moving consumer goods industry in Latin America and Africa. In the same way as we have brought affordable mobile telephony services to emerging markets customers, with today’s deal, we will bring e-commerce and online services to people in Latin America and Africa. We believe that online services in emerging markets have the potential to go beyond the convenience they successfully brought in developed markets. Through Online we will enable access to a much more diversified product offering than what is currently available in emerging markets.
We expect to reinforce our growth profile with this further product/service and geographic diversification of our activity. This investment is fully in line with our objective to strike the right balance between growth and returns. The fact that we invest gradually and that we are partnering with proven experts in the online industry should facilitate speed of execution and likelihood of success while limiting risks.”
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