It makes me wonder about the quality of the board.. why the board thinks the management is worth that much... and what the other C-levels/senior executives are getting paid at. It seems really high for an emerging market country executives. I live in Asia (similar GDP per capita), and the TIGO executives are earning a lot higher comp while running a smaller operation. Maybe I am wrong, but telco companies aren't the most complex industry to run... they have to have someone internal that is capable of running and willing to take a much cheaper compensation package.
I tried to look at the special report but the link opens an empty website, so I could not see the ranking.
For the write-up, I looked quite closely at compensation. To some extent I can second your point. Compensation certainly looks high. At the same time, I got comfortable with that because I found compensation very performance-based (details in the write-up). If the company does very well, I am fine with high salaries. TIGO has not done that so far, so a good portion of the potential pay lapsed. Also, the comp structure is described clearly in the annual report, so I do not think they are hiding something here.
In summary, I see your point but got comfortable on that aspect anyway.
It's a difficult industry. If you want something similar maybe even cheaper(EV/EBITDA 3.2x), look no further than Digi Communications (Digi Ro-bbg ticker). Problems here: dual share class, CAPEX intensive. Present in Romania (no 1 in fiber, challenger in mobile), Spain (mobile, data), Italy (small). They just sold Hungarian ops at a very good valuation. Digi was listed in 2017, flat from that point.
listed shares have just 1/10 of the voting rights of the unlisted shares. in principle I don't like such a capital structure. i know it's popular but not for me.
Great write up. Thanks! I like the management team a lot. I have 2 questions:
How do you think about the terminal value of cable these days? Liberty Global is seen as a melting ice cube and Charter is not adding subscribers anymore. I believe both is due to fiber competition. Could TIGO run into the same problem down the road?
How do you see the corruption and regulatory risk? The ex-partner in Guatemala was the former telco minister. Why shouldn't regulation revert towards something similar in Europe or the US with 3 to 4 player markets on the mobile side?
Thank you for the feedback, BRK92W. On your questions:
- I am not the ultimate industry expert but I think one needs to differentiate a bit. "Cable" comes as somewhat outdated, in particular in markets with a lot of and increasing competition. Charter's problems, as far as can tell, are do to competition eroding their position. On the other hand, across fibre/broadband connections are seen as business with a great future (see write-ups on Unidata/Planetel/Intred of Italy for example). So my counter would be that TIGO is different from Charter in the two respects of competition and broadband and I do not see terminal decline risk. This is probably a bit simplified and competition may at one point or in a market like Colombia become a problem.
- Corruption and regulatory is a risk here. In the podcast with Mauricio Ramos, he makes ist pretty clear how important government relations are for TIGO. Also, if you look at the marketing materials, they are very vocal about the ESG impact of their business (more than the traditional cable company). They may be true believers but I would suggest this is part of their government relations strategy. Also, customer satisfaction plays a surprisingly (?) big role in their strategy/targets. This may not just be because they love their customers so much but also to show to governments/regulators that not more competition is needed (customers are already treated well).
Finally, keepin mind that many of the countries have less inhabitants than the European countries you mention with 3-4 players. E.g. Guatemala has 17mm people, Costa Rica, Paraguay, El Salvador, Panama are all at 5-8mm. So it might make sense to have just 2 players in these markets.
its been a bumpy ride for most foreign telcos, so i feel that early investors who had been paying attention 'deserve' whatever the turnout from oversubscribing. the clincher was to invest using u.s. dollar around a peak.
and yes, the unfortunate comparison to liberty is overcompensation. hopefully never zaslav-level obscene.
Thanks for your comment. I think are are a number of reasons which are behind us:
- Company was not focused enough and active in subscale businesses/ markets
- Kinnevik spin created a major share overhang. In addition, Swedish/US listing of a LATAM business incorporated in Lexembourg and managed out of Miami feels a bit weird.
- Covid hit themharder than cable operators in DM and
- the rights issue was a bit drag on the stock price.
You may add more reasons but I think the above explain a significant part of the poor performance and have been overcome by now.
Thank you for the write up! It seems like a decent opportunity with the future spin-offs.
I didn't realize the management pay is that high for a much smaller company than companies like T and VZ. https://www.fiercewireless.com/special-report/25-highest-paid-execs-wireless-telecom-2019
It makes me wonder about the quality of the board.. why the board thinks the management is worth that much... and what the other C-levels/senior executives are getting paid at. It seems really high for an emerging market country executives. I live in Asia (similar GDP per capita), and the TIGO executives are earning a lot higher comp while running a smaller operation. Maybe I am wrong, but telco companies aren't the most complex industry to run... they have to have someone internal that is capable of running and willing to take a much cheaper compensation package.
Many thanks for your comment.
I tried to look at the special report but the link opens an empty website, so I could not see the ranking.
For the write-up, I looked quite closely at compensation. To some extent I can second your point. Compensation certainly looks high. At the same time, I got comfortable with that because I found compensation very performance-based (details in the write-up). If the company does very well, I am fine with high salaries. TIGO has not done that so far, so a good portion of the potential pay lapsed. Also, the comp structure is described clearly in the annual report, so I do not think they are hiding something here.
In summary, I see your point but got comfortable on that aspect anyway.
It's a difficult industry. If you want something similar maybe even cheaper(EV/EBITDA 3.2x), look no further than Digi Communications (Digi Ro-bbg ticker). Problems here: dual share class, CAPEX intensive. Present in Romania (no 1 in fiber, challenger in mobile), Spain (mobile, data), Italy (small). They just sold Hungarian ops at a very good valuation. Digi was listed in 2017, flat from that point.
Thank you mm. I have not looked at Digi but it sounds interesting. Does the dual share class structure create misincentives?
listed shares have just 1/10 of the voting rights of the unlisted shares. in principle I don't like such a capital structure. i know it's popular but not for me.
Great write up. Thanks! I like the management team a lot. I have 2 questions:
How do you think about the terminal value of cable these days? Liberty Global is seen as a melting ice cube and Charter is not adding subscribers anymore. I believe both is due to fiber competition. Could TIGO run into the same problem down the road?
How do you see the corruption and regulatory risk? The ex-partner in Guatemala was the former telco minister. Why shouldn't regulation revert towards something similar in Europe or the US with 3 to 4 player markets on the mobile side?
Thank you for the feedback, BRK92W. On your questions:
- I am not the ultimate industry expert but I think one needs to differentiate a bit. "Cable" comes as somewhat outdated, in particular in markets with a lot of and increasing competition. Charter's problems, as far as can tell, are do to competition eroding their position. On the other hand, across fibre/broadband connections are seen as business with a great future (see write-ups on Unidata/Planetel/Intred of Italy for example). So my counter would be that TIGO is different from Charter in the two respects of competition and broadband and I do not see terminal decline risk. This is probably a bit simplified and competition may at one point or in a market like Colombia become a problem.
- Corruption and regulatory is a risk here. In the podcast with Mauricio Ramos, he makes ist pretty clear how important government relations are for TIGO. Also, if you look at the marketing materials, they are very vocal about the ESG impact of their business (more than the traditional cable company). They may be true believers but I would suggest this is part of their government relations strategy. Also, customer satisfaction plays a surprisingly (?) big role in their strategy/targets. This may not just be because they love their customers so much but also to show to governments/regulators that not more competition is needed (customers are already treated well).
Finally, keepin mind that many of the countries have less inhabitants than the European countries you mention with 3-4 players. E.g. Guatemala has 17mm people, Costa Rica, Paraguay, El Salvador, Panama are all at 5-8mm. So it might make sense to have just 2 players in these markets.
its been a bumpy ride for most foreign telcos, so i feel that early investors who had been paying attention 'deserve' whatever the turnout from oversubscribing. the clincher was to invest using u.s. dollar around a peak.
and yes, the unfortunate comparison to liberty is overcompensation. hopefully never zaslav-level obscene.
I have been looking at Tigo for a while but struggle to answer why the share price performance has been so bad since listing.
Thanks for your comment. I think are are a number of reasons which are behind us:
- Company was not focused enough and active in subscale businesses/ markets
- Kinnevik spin created a major share overhang. In addition, Swedish/US listing of a LATAM business incorporated in Lexembourg and managed out of Miami feels a bit weird.
- Covid hit themharder than cable operators in DM and
- the rights issue was a bit drag on the stock price.
You may add more reasons but I think the above explain a significant part of the poor performance and have been overcome by now.