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Don't Hang Up On Millicom Just Yet

Inside Wall Street


For a company in the telecommunications business, Millicom isn't communicating that well with, of all places, Wall Street. Up as high as 26 a share in early 1990, its stock is now "unloved and almost unfollowed on the Street," notes Alf Humphries, an analyst at the investment banking firm Hanifen Imhoff, in Denver. The stock has continued to slide this year, from 10 in January to 7 5/8 on July 22. But don't count Millicom out. Things will get better soon, say some pros.

Here's why: Millicom, a provider of cellular telephones, personal-messaging (paging), and satellite-television services in 15 countries, is scheduled to take its Luxembourg-based joint venture, Millicom International Cellular (MIC), public in Europe. Millicom owns 46% of MIC, and Kinnevik, a Swedish conglomerate, controls 49.5%.

MIC will sell 14%, or 7 million shares, of its new 50 million shares at around 10 a share. With the offering, Millicom's stake will be cut to 39.5%, or nearly $200 million. Based on Millicom's 14.8 million shares outstanding, that 39.5% translates into an added value to the holding company's stock of $13.50 a share, estimates one New York money manager who attended a "due diligence" meeting on the deal held in New York on July 20. Millicom recently completed a series of "roadshows," or meetings with potential big investors, in Europe, where interest in the new stock is very high.

`HIDDEN ASSET.' This money manager says Millicom will definitely be worth much more after the MIC offering. Taking the unit public will "uncover the hidden asset" that MIC really is, he says. MIC owns, or has major stakes in, and operates cellular networks mostly in developing countries, including Costa Rica, Ghana, Mexico, Pakistan, Paraguay, and the Philippines. And it has plans to operate in at least 20 other countries, including India, Italy, and Turkey, says this pro.

MIC has about 25,000 subscribers and expects to more than triple this figure by yearend, says Hanifen Imhoff's Humphries. In 1991, cellular usage per subscriber averaged 270 minutes per month, vs. about 160 minutes in the U.S., with an average monthly bill of $115 (vs. about $85 in the U.S.). "Cellular phones give poor countries a quick, relatively cheap way to obtain late 20th century telecommunications technology, and MIC is well-positioned to provide it," he says. With the huge pent-up demand for phones in Third World countries, Humphries thinks MIC is worth $900 million. Adding that to Millicom's other operations, including two satellite TV stations that operate in the U.S. and overseas, a pay telephone joint venture in the U.S., and a mobile radio operator, he puts Millicom's breakup value at 29 a share.GENE G. MARCIAL

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