Telefonica is set to take legal action against Millicom in U.S. courts over the aborted sale of its subsidiary in Costa Rica, citing a submission to market securities regulator.
Millicom reached an agreement to acquire 100% of Telefonica’s mobile telecommunications assets in Costa Rica, Movistar, for US$570 million back in February 2019, a transaction approved by Costa Rica’s telecom regulator Sutel last September.
But the Spanish operator is now claiming that Millicom has refused to proceed with closing the deal, a delay it considers to be “a breach of the terms and conditions established in the contract.”
The report said Telefonica intends to file a lawsuit against Millicom as soon as US courts resume non-emergency procedures to demand compliance with the agreement and compensation for any damage caused.
However, Millicom subsequently issued a statement strongly refuting Telefonica’s allegations regarding the conditions for closing the Costa Rica deal. It added that “in the event that the pending regulatory approvals for the transaction are not issued by May 01, 2020″ it intends to terminate the agreement in accordance with the terms thereof.
Millicom also said it intends to vigorously defend itself against any action brought by Telefonica in the matter.
Millicom completed acquisitions of Telefonica’s operations in Panama and Nicaragua last year but is now claiming it needs the permission of Costa Rica’s Comptroller-General to finalize the acquisition.
Telefonica, headquartered in Madrid, Spain, one of the largest telephone operators and mobile network providers in the world, has been pulling back from its operations in the Americas since late last year, aiming to focus more closely on its European markets.
Millicom owns and operates under the Tigo brand in Costa Rica, Guatemala, El Salvador, Honduras, Nicaragua, Paraguay, Colombia and Bolivia.
TigoStar is Costa Rica’s leading pay TV operator with more than 30 years of service under different brand names dating back to Millicom’s acquisition of Amnet in 2008, at the time a leading Central American provider of broadband Internet and cable television, for US$510 million.
Millicom’s first venture in Costa Rica
Prior to the Amnet purchase, during the first administration of President Oscar Arias (1986-1990), Millicom was awarded a concession to exploit a radio frequency that allowed it to offer cell phone service outside the state monopoly (ICE).
Millicom left the country in 1995, two years after the Sala Constitucional (Costa Rica’s Constitutional Court) ruled that the original concession violated the constitutional provision that reserves for the state the exclusive right to operate telecommunications services.
The contract with Millicom was therefore nullified, and the company was forced out of business in Costa Rica in May 1995. ICE ended up taking over Millicom´s infrastructure.
Millicom sued the Costa Rican government for over US$400 million in a U.S. federal court in Washington, D.C., for monopolistic practices and unlawful expropriation. The court disagreed and rejected the plaintiffs’ jurisdictional argument. in February 1998.