Medellin‘s city council on Thursday approved a controversial merger between local telecommunications company Une and Millecom from Sweden.
Before approval, controversy came to a boil inside of the council over the merger that opponents say could affect the public services offered by the public-private telecom provider.
After combing proposals for several years, local media reported that the prospect of a mixed public-private partnership between Medellin’s local operator and Millecom was approved by the Medellin City Council. The merger, though, is still fragile since questions over the integrity of UNE’s financial picture and whether or not public-financed social investment projects that have been directed by UNE will continue to reach disenfranchised communities in and around the city.
The chief executive of Medellin’s EPM (Medellin Public Enterprises), Juan Esteban Calle, reportedly declared that Millecom is the best option for the merger. “We’ve conducted an exhaustive search,” he said. “But we’re convinced that the candidate that we have had for six years and the one that will let us have the possibility to generate some $1 million dollars of synergy is the best option.”
Under the conditions of the merger with Millecom, UNE would maintain the majority of assets. Millecom in turn would gain access to Medellín’s telecommunications market and have the choice of who is appointed Chief Executive. UNE is set to choose the Director of the company’s board. A voluntary agreement has reportedly already been signed, yet the financial implications of the merger could take until late 2013 to finalize.
Not everyone on Medellín’s City council feels Medelln’s public telecom is ripe for a merger. One councilman, Juan Felipe Capuzano reportedly said UNE is in the “the worst financial condition.”
Going hand in hand with financial concerns for the merger’s outcome is what the transformation from a public company owned by the City of Medellín to a mixed company with more corporate leadership means for residents of Medellín’s lower classes, where telecommunications connectivity depends on social investment programs up until now carried out by public funding.
Calle sees a different threat though. “The threat is not over those who say ‘yes’ and those who say ‘no’ to the merger. The threat is in the major operator that has a dominant role in the market,” said Calle, referring to Mexico-based America Movil, which operates UNE’s greatest competitor, Claro.
Right now Colombia is an emerging market for cellular telecommunications. Millecom entered the market in 2006 with its TIGO services, which operate around Latin America and Africa. In 2012 it appointed a new chief executive, Hans-Holger Albrecht, and in 2013 it announced a new global strategy that aimed to double annual revenue to $9 billion by 2017.
Medellín’s EPM has a history of social investment. But how the public-private partnership merger intends to reinvest profits in EPM’s traditional social investment initiatives is a matter that is still yet to be hashed out by the two partners in the making.