Millicom agreed a deal to acquire Telefonica’s operations in Panama, Costa Rica and Nicaragua for $1.7 billion, as it looks to increase its footprint in the region and diversify revenue sources.

In a statement, the company said the deal “represents a perfect complement” to its existing cable network operations in the three countries. It added the acquisitions will reinforce its market leadership in the region and build on a recent acquisition of Cable Onda in Panama.

Millicom added the move will diversify and balance its geographic footprint and sources of cash flow. It expects to generate annual run-rate opex and capex synergies of $35 million to $50 million, expected to be “largely realised by 2021 and fully realised by 2023.”

Telefonica is the mobile market leader in Panama and Nicaragua, and the second-largest in Costa Rica, Millicom said.

Reports in 2018 suggested Telefonics was open to selling its entire Central America operation. Last month, it confirmed an agreement to sell its Movistar operations in Guatemala and El Salvador to America Movil for $648 million.

In a statement about the Millicom deal, Telefonica said: “This transaction is part of the Telefonica Group’s asset portfolio management policy based on a strategy of value creation, improving return on capital and strategic positioning.”

“It also complements the objective of organic debt reduction and strengthening the balance sheet in a growing cash flow scenario, which allows us to maintain a sustainable and attractive shareholder remuneration.”

The Millicom deal is subject to regulatory approval in each market, and closings are expected during H2.