VTR and Claro to merge their Chile operations

Liberty Latin America and America Móvil will combine their operations in Chile and create a convergent operator.

Each operator will have a 50% stake in the joint venture.

Liberty Latin America will pay Claro 73bn pesos (US$91mn) for the operation and contribute businesses with net debt of US$1.5bn while Claro will contribute businesses with net debt of US$400mn.

Consultant and former Chilean telecommunications undersecretary Pamela Gidi told BNamericas that the joint venture is "very good news for the Chilean market," highlighting the synergies between the two companies. "They are two companies with different strengths and different products and I think they can complement each other in a very good way," she said.

The news comes after the companies announced a purchase agreement in Panama whereby C&W Panama (Liberty Latin America) will buy the América Móvil operation.

The transaction in Chile will combine the fixed operations of VTR (broadband and pay TV) and Claro Chile's mobile services. The operation includes América Móvil's telecommunications towers, even though the group plans to create a Latin American tower unit.

The joint venture will generate synergies of US$180mn, of which 80% will be completed within three years after the closing of the transaction, Liberty Latin America and America Móvil said in a statement.

The JV board will comprise eight representatives, four from each company, the chair being a rotating position.

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VTR has close to 3mn fixed subscribers and Claro Chile about 6.5mn mobile clients.

The companies said the combination will enable a large-scale business, diversify products and create a capital structure that facilitates investments in fiber optics network expansion, also putting fifth generation mobile services to the fore.

In the last 5G tender, Claro acquired spectrum in the 26GHz band for Metropolitan, Antofagasta, Valparaíso and Biobío regions. In addition, the company will combine the spectrum it now uses for 4G.

VTR, meanwhile, has spectrum in the AWS band and 200,000 clients as a virtual mobile operator.

Additionally, the companies aim to boost fiber optics deployment and anticipate 6mn homes passed by 2025.

"I think there are many efficiencies when deploying fiber optics together and hopefully this will result in fiber deployment at unconnected sites," Gidi said.

About 100 Chilean localities don’t have fiber optics coverage, while 45% of households do not have a fixed provider with networks that allow quality broadband services, according to Gidi.

In early September, VTR CEO Vivek Khemka told BNamericas that the company expects to reach 400,000 homes passed with fiber this year.

Liberty Latin America and America Móvil emphasized that the joint venture will reduce costs and generate additional income from cross-selling opportunities and scale.

The companies said the DTH business owned by Claro Chile cannot be operated by VTR due to competition regulations, so the companies are taking action to comply with the rules.

The JV requires approval by the economic prosecutor’s office, but the operation is scheduled to be completed in the second half of 2022.