TEM closes BellSouth acquisition

Spain's Telefónica Móviles (NYSE: TEM) has closed its acquisition of BellSouth Chile in a transaction worth US$532mn, after the company received authorization from the Chilean authorities, TEM said in a statement. "The market was expecting this merger to go through, and [the process] is similar to Argentina, especially as Telefónica Móviles has to sell a portion of its licenses to balance the industry. There are no real surprises in the decision," Brian Chase, an analyst at local fund manager Celfin told BNamericas. BellSouth Chile closed 2004 with a total client base of 1.43 million users, which will now boost TEM subsidiary Telefónica Móvil's client base to nearly 4.7 million, equivalent to a 48.5% share of the market. "With the consolidation, there are basically two primary companies, Entel and Telefónica, and they control over 80% of the market. There is also Smartcom on the side trying to fight for some space. There will be a big war for the remaining subscribers as well as moves to steal subscribers from each other. For me that means more marketing expenses and greater marketing campaigns," Chase added. Even though BellSouth Chile is under the management of Telefónica Móviles as of Friday (Jan 7), the company will continue to operate with its brand and commercial strategy for a transitory period ending upon full integration process. Oliver Flógel has been appointed as Telefónica Móviles Chile CEO. Clients from both companies will maintain their current benefits, telephone numbers, prices and commercial conditions without any changes. Commenting on the technological implications, Chase said, "there is a general movement towards GSM. Entel is already using GSM and Telefónica has a regional concept of trying to convert all of its clients from CDMA to GSM. Once those switches are made they will not affect consumers too much, other than receiving a better service." This merger is part of a March 2004 agreement, whereby TEM was to buy all 10 of BellSouth's Latin American operations for US$5.85bn. TEM has already closed the merger in nine countries (Venezuela, Colombia, Ecuador, Panama, Peru, Guatemala, Uruguay, Nicaragua and Chile) and expects to close the acquisition of BellSouth Argentina this month. With the merger, Telefónica Móviles becomes the world's second largest mobile operator and number one in Latin America, with over 50.6 million clients based of figures at the end of third quarter 2004.