Fundamental impact on the balance sheet
The strategic tie‑up with ColTel (the Colombian arm of Millicom) will essentially combine two cash‑flow‑generating telecom platforms, but it also brings together their existing financing structures. ColTel’s current borrowings are expected to be rolled into Millicom’s balance sheet, pushing net debt up by roughly $300‑$400 m (the approximate size of ColTel’s outstanding senior notes and revolving facilities). At the same time, the agreement with Ecuadorian utility EPM includes a $150‑$200 m bridge loan that is earmarked for merger‑related closing costs and to refinance a portion of the higher‑cost debt. After accounting for the EPM injection, Millicom’s consolidated gross debt is projected to rise to around $1.8‑$2.0 bn, lifting the net‑debt‑to‑EBITDA multiple from roughly 2.3x pre‑announcement to ≈3.0x on a pro‑forma basis. The net‑debt‑to‑EBIT ratio will similarly climb into the 3.5‑4.0x band, reflecting the higher leverage but still remaining within the range historically acceptable to its senior lenders.
Trading and rating implications
Higher leverage inevitably tightens covenant buffers and may prompt a downgrade pressure from rating agencies, especially if the anticipated synergies (cost‑saving and revenue‑uplift from a unified Colombian market) take longer than a year to materialise. In the short term, the market is likely to price in a modest discount to the stock (≈2‑3 % below the pre‑announcement level) as investors digest the debt accretion. However, the EPM bridge loan reduces immediate refinancing risk and supplies liquidity to service the enlarged debt load, which could mitigate the downside. Traders should watch key technical levels – the 50‑day EMA around $6.20 and the 200‑day EMA near $5.80 – for break‑out confirmation. A sustainable bounce above the 50‑day EMA, coupled with a firming of the net‑debt‑to‑EBITDA ratio back toward 2.5x in Q4‑FY25, would present a buy‑on‑dip opportunity, while any breach of the 200‑day EMA with deteriorating leverage metrics could trigger a short‑term sell signal.