The latest ICT M&As in Latin America

Amid cost-cutting pushes, reduction of inefficiencies, the search for liquidity, preserving market share or focusing on core business, there remains a high level of activity in ICT mergers and acquisitions, asset acquisitions and equity investments in Latin America.

Although largely influenced by startup dealmaking, Boston Consulting Group (BCG) tracked 2,143 M&A deals in the region’s tech, media and telecommunications segment last year – nearly double those in the second-placed segment, financials and real estate.

But even beyond the traditionally active startup landscape, a series of ICT deals in the last few days involving telecom operators, tower companies and even large local software groups show that the trend is widespread.

Driven by various factors, some of these transactions involve full takeover of control or partial equity stakes and others an intention to invest, while in some cases they come as the conclusion of a previously announced transaction. 

BNamericas looks at some of the latest moves – and at what could come next.

Selling and leasing back towers

In the tower sector, sale-and-leaseback agreements between operators and infrastructure providers as a way of reducing costs for the former have not lost momentum after a boom in 2018-21.

Last week, Millicom closed such an agreement with SBA involving roughly 7,000 of its towers in Guatemala, Honduras, Panama, El Salvador and Nicaragua.

Worth US$975mn, the deal also includes a build-to-suit agreement under which SBA will build a further 2,500 sites for Millicom’s lease.

The transaction is expected to close in mid-2025. Winston & Strawn was the legal advisor to Millicom in the deal, while JP Morgan and Lazard Freres acted as financial advisors.

Goldman Sachs acted as financial advisor to SBA, and Paul, Weiss, Rifkind, Wharton & Garrison as legal advisor.

Millicom has been particularly active in tower divestments, notably after it finished the carve-out of its tower business, Lati, at the end of 2023.

In January this year, the telco signed a deal with KKR for the sale of 1,100 towers of its Tigo Colombian subsidiary.

WOM’s lifeline

Among the Latin American carriers in financial trouble, Chile’s WOM announced on November 2 that it received a binding offer from an undisclosed stalking horse bidder for a “restructuring transaction,” the financial terms of which are currently being negotiated.

The terms contemplate fresh investment of US$500mn through a fully underwritten rights offering. According to WOM, the offer values the company at around US$1.6bn.

The operator is owned by UK-based fund Novator and filed for Chapter 11 bankruptcy protection in Delaware this year after failing to refinance US$348mn in debt.

In September, América Móvil confirmed that it had signed a non-binding agreement with Telefónica to explore joint participation in WOM. Local telco Entel, KKR and US fund DigitalBridge, which owns Chilean fiber telco Mundo, were also reported as being potential bidders for WOM.

According to reports, a special committee is currently evaluating the proposals submitted, with November 15 set as the deadline for binding offers. 

Chilean telecoms watchdog Subtel recently threatened to initiate proceedings to revoke WOM's license for failing to meet coverage requirements under the country's first 5G tender in 2021.

América Móvil in Chile

Also in Chile, América Móvil (AMX) continues to build up its local presence after completing the acquisition of ClaroVTR, the JV it operated with Liberty Latin America.

The deal involved the conversion into equity of América Móvil’s outstanding loans to ClaroVTR. The Mexican group now owns approximately 91% of ClaroVTR.

"With this transaction, AMX consolidates its position as one of the leading telecommunications service providers in Chile, by offering world-class integrated services and products, and positions itself to provide next-generation services through its 5G network," the group said in a statement.

América Móvil is among the major telecom groups with the lowest leverage, greatest capillarity and diversity of businesses and operations, and best cash structure, which has put the company in an advantageous position to lead consolidation processes.

Team-up of rivals

In Brazil, Latin America’s largest software company Totvs is again considering the acquisition of its competitor, the retail-focused Linx.

According to market reports, the ERP leader hired Itaú BBA to assess Linx's acquisition. Totvs tried to acquire the company in 2020 but technology and payment method company Stone ended up taking over the company for 6.7bn reais (currently US$1.16bn).

The purchase was controversial and contentious and, in September this year Stone put the operation up for sale, with Morgan Stanley and JP Morgan as advisors.

Totvs expanded strongly on the back of acquisitions and has always admitted interest in acquiring Linx to gain more muscle, especially in the retail vertical. The current CEO of Totvs, Dennis Herszkowicz, was CFO at Linx. 

Among Totvs' latest acquisitions are the IP franchise for 138mn reais and the human resources startup Ahgora for 380mn reais, both announced in the last quarter of 2023.

Potential obstacles to buying Linx include antitrust limitations, due to a possible horizontal market overlap, Totvs' leverage and the price of the asset.

ISPs ongoing consolidation

Also in Brazil, the consolidation of internet service providers continues at full steam.

In the most recent transaction, northeast-focused Proxxima Telecomunicações announced the acquisition of ISP MGNet, with operations concentrated in Rio Grande do Norte state.

Proxxima said in a market filing that the deal involves the incorporation of operational assets and the client base.

MGNet has approximately 28,000 broadband accesses, of which 26,000 are via fiber. With the deal, Proxxima's base would reach some 238,000 users. Transaction values were not disclosed.

What’s next? 

BNamericas has been tracking movements and investment intentions in the edge computing, datacenter and fiber optics segments in countries such as Brazil, Chile and Mexico.

There is an expectation, for example, that new investment funds, especially from the US, will buy stakes or even acquire control of hyperscale datacenter operators.

The appetite of these investors includes the formation of financial and funding pools for the launch of new companies, as recently occurred with newcomer 247 Datacenters.

In Brazil, the anticipated approval of Oi Fibra's sale to V.tal is expected to raise concerns from other companies that also lease V.tal's neutral network and compete with Oi in the retail sector.

Certain sources believe that V.tal, which currently intends to create a separate unit for Oi Fibra's retail operations, could eventually put the business up for sale, either in its entirety or in parts.

Large and medium-sized telecom operators seeking to grow in fiber-to-the-home have already expressed interest in the asset, albeit privately.

Across Latin America, the MiIlicom group should see a new bid for its regional operations, while WOM Colombia could follow in the footsteps of its Chilean sister and receive a non-binding offer.