Snapshot: The latest LatAm telecom M&As

Consolidation in Latin America’s telecommunications market has intensified in recent months, with several M&As taking place.

Some processes were already underway before the pandemic while others began in the wake of a worsening economic scenario – and the impacts on more fragile telcos – due to the COVID-19 crisis.

BNamericas takes a look at some of the latest consolidation initiatives across the region.

COLOMBIA

In its first step outside the Chilean market, mobile operator WOM, controlled by UK-based fund Novator Partners, acquired a controlling stake in Colombia’s Avantel.

Financial details of the transaction were not disclosed. Market analysts estimate that a commercial plan could be launched in 2021.

Avantel has been in financial difficulties for some time already, but the prospects of a sale grew since December when the company filed for a corporate restructuring process.

Also in Colombia, the government is relaunching the sale of the state’s shares in Colombia Telecomunicaciones (Coltel), which has Telefónica’s Movistar as the controlling stakeholder.

Because Telefónica has been divesting its Latin America operationssince 2019, except for Brazil, the current context could lead to a coordination among both parties to sell their respective shares together, making the asset more attractive to the market. 

Colombia’s leading carriers are América Móvil's Claro (47.1% of the market at end-2019), Movistar (24.3%) and Millicom's Tigo (17.6%). Virgin Mobile and Avantel had 4.53% and 3.49% each.

ALSO READ: Duque's new attempt to get rid of Coltel

COSTA RICA

Telefónica reactivated the process to find a buyer for its mobile telecom assets in Costa Rica. The move comes only a couple of months after Millicom pulled out of a deal in a controversial move.

Millicom said the conditions to complete the US$570mn acquisition of Telefónica's Movistar were not met and that the share purchase agreement with Telefónica allowed termination of the deal in this case.

Telefónica claimed the arguments were excuses so Millicom could abandon the deal, and promised to pursue legal actions.

Now, according to a report in business daily El Economista, an unnamed buyer showed interest in Telefónica’s Costa Rican assets and even initiated a due diligence process ahead of a possible offer.

The list of potential buyers is topped by America Móvil but also includes Liberty Latin America, Chile's Entel, and WOM, as well as AT&T, the report said.

Costa Rica’s main operators are power utility firm ICE’s Kolbi service (53.6%), Movistar (26.6%) and Claro (19.2%). The regulator’s latest data is from the end of 2018.

CARIBBEAN

The sale of AT&T’s mobile business in Puerto Rico and the US Virgin Islands to Liberty Latin America is about to finish. The agreement was announced last October for US$1.95bn and was expected to be completed by the end of June.

With the takeover, Liberty will beef up its position on the islands. 

In Puerto Rico in particular, Liberty appears well-positioned in the high-speed broadband and pay TV sectors, and the combination with AT&T’s wireless assets could generate a multi-service player.

Under the terms of the agreement, AT&T will support Liberty Latin America for up to 36 months following the acquisition, enabling the efficient transition of services.

In terms of competition, América Móvil’s Claro and AT&T are neck-and-neck for leadership in the local market. 

The government does not publish specific market share data.

ALSO READ: Puerto Rico's mobile market

MEXICO

Grupo Televisa concluded in June the sale of a 50% equity participation in Sistema Radiópolis, which operates 17 radio stations in Mexico, to Corporativo Coral.

The total price for this transaction was 1.24bn pesos (US$56.5mn). Televisa also received the payment of a dividend of nearly 286mn pesos.

Televisa also announced in May its entry into the mobile market as an MVNO, offering mobile service to customers of its cable and home internet packages through renting Mexico’s wholesale telecom network, operated by Altan Redes.

The mobile market is dominated by América Móvil (nearly 70%), followed by AT&T (17%), and Telefónica (11.3%). The figures are the latest, from 3Q19.

BRAZIL

After the sale of Nextel to América Móvil’s Claro in 2019, the Brazilian market remains expectant on the next consolidation move.

Everything indicates it will involve Oi, which is in bankruptcy protection since 2016 and in June announced a structural separation plan, divesting four business units. 

Oi expects to raise 22.8bn reais (US$4.43bn) by selling the mobile division, datacenters, towers and (part of) its infrastructure units.

Provided creditors approve the plan, the first two units to be auctioned by October are towers and datacenters, followed by Oi Mobile in the fourth quarter. And the latter is drawing much attention right now.

The dispute for Oi Mobile ratcheted up with bids and counterbids, putting a telecom infrastructure company (Highline) and its financial backer, the US fund Digital Colony, on one side, and Oi’s three major rivals Telefônica Brasil, Claro and TIM with a joint bid on the other.

And among already announced M&As, consolidation is ramping up among small internet service providers (ISPs). Private equity fund Vinci Partners, through its Vero Internet subsidiary, concluded its acquisition of MKA Telecom last June. MKA is based in Santa Catarina and operates broadband services in 23 municipalities in the state. The acquisition increases Vero Internet's client base by a quarter to some 229,000 subscribers.

Also in Brazil, state-owned energy distributor Copel, from Paraná state, approved the sale of its stake in Copel Telecomunicações, its telecom arm. The operator has a 34,000km fiber network in the state. The minimum price for the sale has yet to be defined.

Another state-owned telecom company for sale, also in Paraná, is Sercomtel, of which Londrina city and Copel are shareholders. Two weeks ago Londrina published the terms of the sale of the company and scheduled the auction for August 18.

Londrina expects to receive 130mn reais from the sale.

Brazil’s mobile market is dominated by Telefônica (33%), Claro (25.9%), TIM (23.2%) and Oi (16.2%), according to data from May.