Telefonica to break up Central American operations for quick sale

23 Jan 2019

Spanish telecoms giant Telefonica is willing to break up its Central American operations into two distinct sets of assets to hasten the sale process, local business site Expansion reports. Last week Telefonica reportedly received a EUR530 million (USD604 million) offer for its units in Guatemala and El Salvador from regional heavyweight America Movil (AM), and a sale agreement is now said to be just days away.

Millicom International Cellular (MIC) has been named as the front-runner for the acquisition of the businesses in Nicaragua, Panama and Costa Rica – all complementary markets in which MIC already has a fixed line presence – although AT&T is also said to have registered its interest in these assets. Finally, Movistar Mexico has piqued the interest of Cerberus Capital Management, but the investment firm is currently unwilling to match Telefonica’s valuation of the business.

While Telefonica has stopped short of confirming the identities of the parties that it is in talks with, it has issued a statement to Spain’s National Securities Market Commission (Comision Nacional del Mercado de Valores, CNMV) confirming: ‘In relation to the news that appeared in the media today, Telefonica communicates that, within the framework of its portfolio management policy – based on a strategy of value creation and strategic positioning – it is in a negotiation process for the sale of its assets in Central America, which could derive in a transaction, both for the total, and for any of said assets. To date, no agreement has been reached.’

As previously reported by TeleGeography’s CommsUpdate, Telefonica has been considering the total or partial divestment of its Mexican and Central American subsidiaries since last Autumn. Telefonica Mexico is likely to be valued at between EUR1.1 billion and EUR1.9 billion, while the telco’s combined Central American units are valued at around EUR760 million. Telefonica holds a 60% stake in the units in Guatemala, El Salvador, Nicaragua and Panama (the other shareholder being Guatemala-based Corporacion Multi Inversiones [CMI]) but owns the entirety of Telefonica de Costa Rica (Movistar).

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