Latin America News (Aug 2014)

Mexico: Mexican telecom reform approved

Both the Mexican Senate and Chamber of Deputies approved the secondary laws on telecommunications and broadcasting. The upper house approved the bill 85 to 12 in favour while 340 votes in favour were reached by the deputies.

Mexico: América Móvil to spinoff Mexican towerco? 

América Móvil is analysing how to restructure its businesses in Mexico to comply with the ongoing regulatory changes occurring in the country. As a result, the company has said it is planning a spinoff of its Mexican towers, potentially creating an operator-led towerco owning an estimated 28,000 towers in Mexico.

On July 8, we (América Móvil) were instructed by our Board of Directors to implement various measures to reduce our national market share in the Mexican telecommunications market to under 50% in order to cease to be a preponderant economic agent. It is desired that the assets be sold to a strong player, willing to invest and compete in the Mexican market. The sale of Telcel’s and Telmex’s assets is contingent upon América Móvil receiving the necessary assurances from the Mexican regulator to the effect that it would no longer be subject to specific asymmetric regulation and that it would be allowed to provide convergent services. It is also contingent upon the assets being sold at market prices. The Board also decided that all cellular sites, including towers and related passive infrastructure, be separated from Telcel for their corresponding operation and commercialization to all interested parties

“It’s not going to be a sale, it’s going to be a spin-off”

Hajj indicated that the preferred strategy was to spin off, rather than sell the towers, while still opening the “towers to rent to everybody.” América Móvil recognise that tower assets often attract a higher valuation, and thus deliver more value to shareholders, when held on a separate balance sheet from the retail telecom company.

Tower strategy may not be clarified for two to five months

To be fair, América Móvil were instructed to reduce their national market share in Mexico to under 50% in order to cease being a preponderant economic agent on July 8, although had doubtless anticipated regulatory reform in Mexico would eventually result in pressure to restructure, so it is unsurprising that Hajj was non-committal about the details and timeline for a potential tower spin-off. “We need to present our plan, but maybe (in) two months we can have a decision, but it’s important because you need to have (the) authorization to do the spin-off and it’s going to take time… I think before the end of the year we are going to have much more clarity on the spin-off.”

Would América Móvil consider expanding the business strategy to separate towers and monetise them also in other Latin American countries?

CFO Carlos García Moreno Elizondo again alluded to the importance of giving “our shareholders value… some of the assets that we have buried in our balance sheet (are) not being assigned the real value that they have in the market. So we’ll be looking at ways of… showing the value of some of the assets that we currently have.” To which Hajj added “we are going to do it in other countries in Latin America”.

TowerXchange commentary

Any development which improves current and prospective new entrant operator’s changes of co-locating on Mexico’s largest tower network is to be welcomed.

TowerXchange is are not regulatory analysts, so we’ll make no comment as to whether the spin-off of a majority-owned towerco would significantly affect the dominance of América Móvil in Mexico. What is clear is that América Móvil does not need cash, so unless directly required to do so, they remain highly unlikely to sell their towers in Mexico, Colombia or any other market in which they are dominant. Therefore it’s not in their interests to cede control of those assets to a third party tower company whose independence might maximise competitive carriers’ confidence in co-location. The net effect of all this could be minimal. The net effect could be to stimulate the creation of a pan-Latin American operator-led towerco of a scale not seen outside of India.

Until América Móvil makes clear the structure, ownership and governance of their proposed spin-off, and until the regulator is satisfied, then few conclusions can be drawn. The Mexican tower industry was one of the top five most investible emerging market tower industries in the world before this announcement, and it still is afterwards. Keep reading TowerXchange – we’ll keep you informed!

Guatemala: Movistar schedules 4G LTE launch

Movistar is planning to launch 4G LTE services in Q3 2014 and will initially cover 50% of Guatemala City.

Costa Rica: Movistar enters 4G LTE market

Spanish carrier Movistar has launched 4G LTE services in Costa Rica for both its post-paid and prepaid customers. Movistar joins state-backed ICE and Claro Costa Rica which have already launched LTE services.

Colombia: Avantel planning 4G LTE launch

Avantel will launch its LTE services by the end of Q3 2014. The company acquired the 4G license back in June 2013, but reportedly experienced difficulties in securing access to the networks of existing carriers, despite the CRC encouraging infrastructure sharing with new players entering the wireless market.

Colombia: Une-EPM and Tigo Colombia one step closer to merger

The merger between the two carriers has been approved by the antitrust authority Superintendencia Industria y Comercio and the Asociacion Nacional de TV – the broadcasting watchdog. The companies are still waiting for the authorisation from the financial watchdog Superintendencia Financiera de Colombia.

Brazil: Brazilian telecom regulators push bidders for 700MHz 4G auction

Paulo Bernardo, Brazilian Minister of Communications, and João Batista de Rezende, President of Anatel, gathered in central London in June during the 700MHz 4G auction roadshow. The roadshow was organised with the goal to attract new bidders to join the four national incumbents.

In the meantime, Anatel has recently approved the terms for the auction which is likely to take place in September.

Brazil: TIM Brasil towers attract towercos 

While Telecom Italia has recently announced its intention to retain its stake in TIM Brasil, the potential sale of the carriers Brazilian towers has gained the interest of several players such as Cell Site Solutions and American Tower Corp.

According to local rumours, both companies have already sent to Telecom Italia formal letters of interest to participate in the bid to acquire approximately 6,000 towers – with a valuation around USD 1 billion. TIM Brasil’s CEO, Rodrigo Abreu, has denied that the company itself is for sale. TIM Brasil currently owns 8,500 towers across the country.

While TIM Brasil might be selling its towers, rumours persist that Telefonica is planning to sell its shares in Telecom Italia in order to solve regulatory issues regarding shareholdings in Brazil.

Brazil: Shaky grounds for the PT-Oi deal 

Portugal Telecom is currently engaged in reassuring Oi in light of its acquisition of US$1.2bn in debt from Rioforte, held by one of PT’s shareholder, Espirito Santo. The investment in debt is currently under investigation in Luxembourg for possible financial irregularities.

The merger between the two carriers is in its final phase but PT’s legal issue could potentially delay the successful conclusion of the deal.

In the meantime, TIM Brasil has denied it is holding negotiations with Oi and GVT for a possible merger.

Brazil: Oi and SBA Communications ink third deal in 12 months

Oi has sold 1,641 telecom towers to SBA Communications for a reported US$527.6mn. The deal includes a leasing agreement for the use of antenna space on each site and is the third between the two companies.

Brazil: American Tower acquires BR Towers

AMT has acquired privately owned towerco BR Towers for approximately US$978 million in a cash and debt deal. Through the deal, AMT gains ownership of 2,530 towers and exclusive rights to an additional 2,110.

Regulatory approvals and T&Cs will delay the official close of the deal until the end of 2014. For further insights into this deal, see TowerXchange’s exclusive interview with Olivier Puech, CEO LatAm for American Tower, later in this edition.

Brazil: Grupo TorreSur looking for buyers?

Grupo TorreSur has reportedly hired Credit Suisse Group AG to find a U.S. buyer. The company owns and operates 6,000 telecom towers in Brazil and could be valued around US$2bn.

Peru: Local authorities requested to ease tower deployment

The Ministry of Transport & Communications is demanding that local authorities facilitate the deployment process for towercos and carriers involved in greenfield projects across the country. Municipal permits to install towers have been hard to obtain, as reported by several local players.

Paraguay: Paraguay to run 4G LTE auction in 2014

Paraguayan news sources report that the national government is likely to award spectrum for 4G LTE during the course of this year. Details of the auction’s date and characteristics haven’t been made public yet.

Chile/Argentina: NII Holdings potentially selling its Argentinian and Chilean units

US carrier NII Holdings, operating in Latin America under the brand Nextel, is reportedly close to selling its Argentinian and Chilean units for around US$250mn.

Rumours report the media group Grupo Veintitres to be negotiating with the US company.

Argentina: Argentina plans 4G spectrum auction in October

The Argentinian government is organising a high speed wireless auction with the goal to attract international investments in 4G networks. The auction, scheduled for October 31, also aims at assigning the remaining 3G spectrum. The current mobile networks run with 2G and 3G technologies.

Bidders can acquire the documentation from 24 July to 17 September and the pre-qualification stage is expected to take place on September 18.

Argentina: Argentina hit by second default in thirteen years

Argentina and U.S. creditors failed to reach an agreement on the repayment of US$1.3bn in debts. The breakdown in talks resulted in the country tumbling into its second default in thirteen years.

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