America Movil and Liberty LatAm get cosy in Chile

America Movil and Liberty Latin America have agreed to merge their activities in Chile, a step clearly designed to help with fiber and 5G investments in the coming years.

The companies announced plans to merge America Movil’s Claro operation, which is predominantly a mobile operator, with Liberty’s VTR business, which offers fixed broadband and TV services. There is a lot of crossover – America Movil has e.g. Some fixed activities in Chile – but mainly the two companies have additional assets. The merged entity will be a 50:50 joint venture.

The deal will “create a larger-scale business, product diversification and a capital structure that will enable significant investment in expanding the firm footprint and lead 5G mobile delivery,” the telecommunications company said in a joint statement. “By 2025, the JV expects to pass 6 million homes through its fixed network, and the majority will have access to FTTH infrastructure,” they added.

They did not comment specifically on the 5G rollout, but it will certainly be helped by the development of the fiber footprint and the wider customer base of the merged entity.

The companies said they expect JV to deliver run-rate synergies of $ 180 million plus, 80% of which will come in the first three years after the deal is finalized. Most of the synergies will stem from cost savings driven by network and operational efficiencies as well as the development of additional revenue streams through cross-selling opportunities and larger scale, they said.

They expect the deal to close in the second half of next year, subject, of course, to regulatory approvals. Although the companies are mostly complementary, the supervisory authorities will take a closer look at this.

According to the telecommunications regulator Subtel, Claro was Chile’s third largest MNO with a market share of just over 21% earlier this year. Seated Entel still leads with just under a third of the market, while Telefonica’s Movistar and WOM (formerly Nextel) claim around 25% and 20% respectively. It’s pretty tight in there.

The companies have already highlighted a potential problem in the video room.

“Claro Chile owns a DTH business that VTR would not be able to operate under restrictions imposed by the Chilean antitrust courts following the acquisition of Metrópolis in 2005,” they noted. “If these restrictions remain in place at the time of termination, both parties have agreed to take all necessary steps to comply with such restrictions.” Presumably this could mean the sale of Clara’s DTH business.

There is also another exclusion from the trade: America Movil’s towers in Chile.

Telecommunications is spinning its towers across Latin America, and on Thursday its shareholders voted overwhelmingly for the move. The new tower will be known as Sitios Latinoamérica and will house 36,000 telecommunication towers and associated passive infrastructure in Argentina, Brazil, Chile, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Dominican Republic and Uruguay.

It’s a busy time for America Movil, that is, when it comes to making money on assets. This latest agreement with Liberty Latin America comes less than fourteen days after it accepted it sell its activities in Panama for the same outfit for $ 200 million.

There’s a serious form of transformation going on here that should all affect America Movil’s balance.


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