Millicom backs out of $570 million deal for Telefonica’s Costa Rica unit

MADRID (Reuters) – Millicom International Cellular said on Saturday it would back out of a $570 million deal to buy Telefonica’s Costa Rica business, creating a headache for the Spanish company as it looks to sharpen its focus on core markets in Europe and Brazil.

Luxembourg-based Millicom said Telefonica had failed to secure regulatory approvals needed for the sale to go ahead by May 1, granting it the right to pull out.

Telefonica said on Wednesday that all the conditions needed for closing had been met and that it would sue Millicom if it failed to honour the deal.

Neither company immediately responded to a request for comment.

The Costa Rica unit formed part of a broader package of Central American operations, which Telefonica agreed to sell to Millicom in February 2019 for $1.65 billion.

Telefonica subsequently announced a turnaround plan to bring in 2 billion euros ($2.2 billion) a year in extra revenue by hiving off more of its Latin American businesses and focusing on its core markets of Spain, the United Kingdom, Brazil and Germany.

On Friday, Reuters reported that Telefonica was exploring a merger of its British mobile business O2 with Liberty Global’s Virgin Media cable network.

($1 = 0.9105 euros)

(Reporting by Nathan Allen and Ismail Shakil; Editing by James Drummond)