The LatAm telcos sending distress signals

Financial sustainability has become a priority for telecom operators in Latin America as margins continue to shrink but investments are required to meet rising traffic demand.

Ebitda margins fell from an average of 30% to currently 20%, José Juan Haro, director of wholesale business and public affairs for the Latin American region at Telefónica, told BNamericas in a recent interview, adding that this drop is posing risks to investments and sustainability.

In recent years, operations have been sold, markets consolidated, infrastructure sharing alliances were implemented and companies developed efficiency strategies.

A significant number of companies are still experiencing serious financial crises, seeking private investment to survive or facing bankruptcy protection processes.

BNamericas takes a look at the situation of the main companies in trouble.

WOM

WOM, the telecoms company of investment group Novator Partners, is facing bankruptcy protection processes in its two markets, Chile and Colombia.

The Chilean operation could be sold, but in Colombia, the company might be liquidated.

In Chile, a search for investors as part of the Chapter 11 bankruptcy process underway in Delaware yielded five offers, local newspaper La Tercera reported.

Although this process is handled confidentially, América Móvil and Telefónica made public that they were interested in buying the entire company, similar to the process in which three mobile competitors acquired the assets of telco Oi in Brazil.

Entel and DigitalBridge signaled interest in WOM's fiber assets, according to La Tercera.

Entel has just sold its fiber optics network to wholesale vehicle On Net as part of an efficiency strategy.

DigitalBridge participates in the Chilean market through Mundo, a fiber optics operator with significant presence in the country's interior and which is looking to expand into urban areas.

Another offer came from a group that represents around 60% of WOM's creditors and involves a US$350mn cash injection. The offer would value the company at around US$1.5bn.

The results of the analysis of the proposals are expected to be announced on November 1.

Meanwhile, in Colombia, the insolvency process is following local law. ICT minister Mauricio Lizcano told local press that efforts to find foreign investors to save the company are underway. But the ICT ministry is also not ruling out liquidation.

WOM has significant 5G deployment commitments after acquiring spectrum in December 2023. However, the rollout has not started but is planned for 2025, according to Colombian newspaper Portafolio.

COPACO

Paraguay's state telco, which mainly provides fixed telephone services, is grappling with a US$112mn debt and is "practically bankrupt," President Santiago Peña said, according to the government’s news service.

Its mobile peer, Vox, is also facing problems and liabilities of US$50mn, local newspaper ABC reported.

Copaco operates 116,000 fixed telephone lines, a number which is steadily declining.

Chairman Oscar Stark estimates the company needs US$30mn to stabilize and another US$100mn to regain sustainability.

According to local press, 12 companies signaled interest, and three of these would buy up to 50% of the shares or sign joint venture agreements.

HONDUTEL

Honduran state telco Hondutel has not been able to solve its years-long financial crisis, causing problems for several national administrations. The firm mainly operates fixed telephone lines.

In Q3, Hondutel reported losses of 100mn lempiras (US$3.9mn), although it said they narrowed compared to 2023.

Employees said this month that they have not been paid since July.

Last year, Hondutel achieved a 191mn-lempira profit due to transfers from the government to meet salary commitments and pay suppliers.

The company has received support from the UN Development Programme to become profitable, increase capacity and strengthen its presence in the broadband market.

Oi

After selling its mobile infrastructure, Brazilian company Oi is facing its second judicial reorganization process.

Neutral network V.tal is on track to acquire Oi's portfolio of around 4.5mn fiber broadband customers for US$1bn.

V.tal emerged from the sale of Oi's fiber networks three years ago.

Oi sold its datacenters, towers, properties and other assets as part of its first judicial recovery process.

It recently closed a 41mn-real (US$7.2mn) deal to transfer towers and properties to American Tower.

The company expects to soon complete the process of migrating its fixed telephony concessions to the authorization regime, which would enable infrastructure and connectivity investments of 6bn reais.

COTEL AND COMTECO

Bolivian telecoms cooperatives Cotel and Comteco are facing crises that threaten the continuity of operations, although the entire cooperative sector is in shambles as it cannot compete with larger companies.

Cotel owes 21 salaries to each of its nearly 600 workers, who went on an indefinite strike weeks ago.

Meanwhile, Cochabamba's Comteco was affected by corruption that resulted in losses of 40mn bolivianos (US$5.8mn), according to local newspaper Los Tiempos.

Comteco also has debts with the treasury and suppliers, affecting its capacity to invest in new projects.