C&W Panamá expects the acquisition of Claro to benefit the entire market

Cable & Wireless Panamá (owned by Liberty Latin America and the state) is acquiring Claro Panamá from Mexico’s América Móvil for US$200mn.

This is the largest operation after Millicom's purchase of Movistar (Telefónica).

Liberty Latin America has been betting on the growth of the Panama operation with a new operations center for the entire region. Employing 300 professionals, the company manages its operations in Chile, Central America and the Caribbean from Panama.

With the acquisition of Claro, it plans to strengthen its position in the mobile market and compete with Tigo with an offer of packaged services.

BNamericas spoke with Julio Spiegel, chairman of C&W Panamá and vice president of government affairs of Liberty Latin America.

Spiegel expects to close the transaction early next year. He also talks about plans for Panama, fiber investments, and 5G.

BNamericas: Along with the Claro acquisition agreement, an investment of US$500mn was announced in Panama. Which opportunities do you target?

Spiegel: The first thing to understand is that law 36 was approved in 2018, which enabled the market to go from four operators to three. And the reason is that a country as small as Panama, having four operators simultaneously, did not create a good economic balance. In addition, another of the secondary benefits is better spectrum distribution, which is a limited resource and at this time it is very important to be able to adopt technologies such as 5G.

That definitely created the interaction between the different operators to understand what would be the alternatives we would have to do business with each other. Well, after a series of negotiations, we ended up approving, unanimously, the acquisition of Claro Panamá for US$200mn.

The first benefit for us, and for our clients, is that there are coverage areas that Claro has and we do not have, and there are coverage areas we have, but Claro does not. By joining, the immediate benefit would be that we will have much more coverage.

When we talk about the US$500mn, it is not just an investment to merge the networks, but we are going to transition to new technologies such as 5G and focus on fulfilling the dream of connecting the unconnected.

BNamericas: The acquisition excludes the tower business. Are you going to rent passive infrastructure?

Spiegel: Yes, there is a worldwide trend of infrastructure decoupling that gives us more profitable economic models that result in cheaper prices for customers. Of course, Claro was already in the process of selling its towers to a company … and that is why they are not part of the transaction.

We in Panama have a mixed model. There are some towers that are ours and others that we rent, so definitely, once the transaction is completed, there will be towers we will rent if we don't have a tower [in an area].

BNamericas: How is the spectrum situation and what does it take to migrate to 5G?

Spiegel: The AWS band has already been cleaned, and the regulator is ready to deliver. Here in Panama, what is done is not tendering but giving operators equal access to the spectrum. Now, the economy and finance ministry is in the process of valuing that spectrum and once that happens, it will be available.

With the acquisition, we would be adding Claro's frequencies. With the regulation of law 36, a limit was placed on the accumulation of spectrum and it was established that if the transaction exceeded 130MHz, frequencies should be returned to the state. This transaction does not exceed that cap, so luckily we will not have to return spectrum.

But what we are proposing as an industry is that, once this transaction is finalized, a reordering of the spectrum be carried out for better distribution of technological advances.

BNamericas: What do you mean by spectrum reordering?

Spiegel: There are pieces of spectrum we have that could be better used by another operator and vice versa. And, in addition, there are other bands, such as 2,300MHz or 2,600MHz that are used for other types of services, some of them obsolete, and it would be necessary to see how we could use them for mobile telephony.

BNamericas: When could 5G launch in Panama?

Spiegel: Well, as I said, the AWS band is now in the hands of the economy and finance ministry. The operators are ready. During the pandemic, we managed to get the government to lend us bands so that we could provide services to those who were at home without being able to work, so as soon as the band is under concession, 5G could be a reality. If you have to put a date on it, I think it could be sometime in 2022.

BNamericas: With the acquisition of Claro, Tigo and C&W will be the largest operators and Digicel will be in third place. Is further consolidation possible?

Spiegel: I think it is very premature to speak of new concentration. In fact, I think the transaction is positive for the three remaining operators in the market because competition will be much healthier.

In the models we have made, there is always a percentage of Claro users who are not going to stay with MásMóvil [the C&W Panama brand] and will look for other alternatives. Digicel is a company that competes with us throughout the region and knows how to do things very well, so I think it will be positive for them as well.

BNamericas: You trail Tigo, which will also increase investments in Panama. What does your competitive strategy entail?

Spiegel: In 2019, we relaunched our MásMóvil brand to integrate all our products and services because until then it was a fixed-services only brand. In 2019, we integrated fixed services, pay TV, fixed telephony and high-speed internet under that umbrella. So we offer a complete package with a single contract, discounts and unlimited mobile plans.

This comes with a migration of our copper and ADSL networks to fiber optics to the home and the launch of a box with Android operating system that allows a more multimodal format for television services and the possibility of downloading applications such as Netflix, Disney+ and YouTube.

The acquisition, more than anything, strengthens the mobile strategy.

BNamericas: How many homes passed with fiber do you have?

Spiegel: We reached about 250,000 homes. Now 100% of the construction is fiber-to-the-home. We are completing the process of replacing some points in the copper network and would eventually replace our entire fiber and coaxial (HFC) network.

Once we finish the copper replacement and the new coverage, we will begin the replacement of the HFC network.

BNamericas: And how many homes a passed with fiber and coaxial?

Spiegel: About 400,000.