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Carlos Slim Buys Telefonica Central America Assets PDF Print E-mail
Wednesday, 30 January 2019 07:45


Telefonica confirmed an agreement to sell its Movistar operations in Guatemala and El Salvador to America Movil for $648 million.

In a statement to Telecom Review, Telefonica announced the sale, confirming local newspaper reports last week speculating a deal for the two units was edging closer.

America Movil is controlled by the family of Mexican billionaire Carlos Slim. The transaction in Guatemala has closed, and the Salvadoran deal is pending regulatory approval.

America Movil has already completed the acquisition of 100 per cent of Telefonica’s Guatemala business, with a deal to purchase 99.3 per cent of the El Salvador operation still subject to regulatory review.

America Movil and Spain’s Telefonica have in a pitched battle for decades throughout Latin America, from Mexico, where America Movil has long dominated, to Brazil, where Telefonica rules. A landmark telecom reform passed under former Mexican president Enrique Pena Nieto was meant to make the landscape more competitive. Five years later, prices in Mexico are down significantly but America Movil’s market share still stands at about 60 percent. Telefonica has blamed regulators for its inability to gain traction in Mexico.

The price, which equates to €570 million (corresponding to a €293 million value for Guatemala and €277 million for El Salvador), represents a multiple of 9.7-times the estimated 2018 EBITDA of the two companies.

Telefonica added it expected to generate capital gains before taxes and minorities of around €120 million, mainly from El Salvador.

The operator explained the transaction is part of its asset portfolio management policy, “based on a strategy of value creation, improving return on capital and strategic positioning”. The move is also designed to cut net debt, which stood at €42.6 billion at the end of September 2018.

As well as Guatemala and El Salvador, Telefonica also has stakes in operations in Costa Rica, Nicaragua and Panama in Central America.

Reports in 2018 suggested the company could be open to selling its entire Central America operation.

For America Movil, the deal in El Salvador creates a new market leader, combining its Claro business which holds a 31 per cent market share and Telefonica Movistar (24 per cent), displacing Millicom’s Tigo (33 per cent), based on GSMA Intelligence figures for Q4 2018.