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Telefonica sells El Salvador, Guatemala units to America Movil

Telefonica sells El Salvador, Guatemala units to America Movil

America Movil is acquiring Telefonica’s Movistar units in El Salvador and Guatemala for $648 million.

The announcement follows speculation from local media that America Movil was interested in obtaining Telefonica’s operations in these markets, and indeed it has already closed its acquisition of 100% of Movistar Guatemala. It will acquire 99.3% of Telefonica’s El Salvador unit once it receives regulatory clearance.

Equivalent to around €570 million, the total sum is around 9.7x the estimated 2018 EBITDA of the two units. The deal values the Guatemala unit at €293 million and the El Salvador business at €277 million. Telefonica anticipates that the units will see capital gains of €120 million before taxes and minorities, although it acknowledged that this would largely be due to the El Salvador business.

Telefonica is seeking to manage its assets “based on a strategy of value creation, improving return on capital and strategic positioning”, but it is also looking to reduce its net debt, which was €42.6 billion at the end of September last year.

Last year, reports surfaced indicating that Telefonica was considering selling all of its Central American units. In addition to El Salvador and Guatemala, the group also has a presence in Costa Rica, Nicaragua and Panama.

Combining its El Salvador unit with Telefonica’s operations in the market will see America Movil’s Claro become the largest operator in the market, surpassing the previous market leader, Millicom’s Tigo. In the past week, a possible acquisition of Millicom by Liberty Latin America was revealed and then scrapped.

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