Phoenix Tower International
Convergencia Research
Wednesday, November 06, 2019

Regional Players Map 2019

Big players stay with countries where they play the best

Regional Players Map 2019 - Credit: © 2019 Convergencialatina
Regional Players Map 2019 - Credit: © 2019 Convergencialatina

Recipes for acquiring economies of scale in the era of convergence and in a territory with fragmented socio-economic and political realities change from one decade to the next one, or even at the speed of technological changes, at least in terms of mergers and acquisitions.

Movements recorded during last year seem to shape an environment in which everyone stays with the countries in which they play the best. As if it were more profitable to know how to be dominant over the particular socio-economic contexts of each country rather than the number of subscribers that can be added trough companies' mergers or acquisitions.

Central America and the Caribbean were the areas targeted by purchase and sale transactions recorded in the last twelve months. Telefónica is departing from Central America, a region it never managed to dominate, and although just a few predicted said departure, it was a simple exit option in order to reduce its debt (€ 40.230 billion as of the end of June, after recording a fall in revenue for nine consecutive months). Everything adds to the plan of the Spanish company, that in 2019 sold its operations in Nicaragua and Panama to Millicom, and waits for the transaction in Costa Rica to be completed before year-end. Meanwhile, América Móvil acquired Telefónica Guatemala and the regulatory endorsement is expected so that it also stays with the subsidiary of El Salvador.

With these changes, América Móvil would be the only operator in all sub-regions, while Telefónica stays only in South America (Brazil, Argentina, Peru, Venezuela, Colombia, Ecuador, Chile, Uruguay, Venezuela) and Mexico, playing quadruple play in most countries, except Ecuador, Uruguay and Mexico. Speculations abounded on the sale of Colombia, where it is a State partner, and Millicom would be the stakeholder. The old rumors about departing from Argentina seem to have been dismissed, at least when considering the bet on fiber they are making in the country. Venezuela could be another exit door, but this will not happen until the country is seen as attractive by the international financial community. Meanwhile, Telefónica will continue supporting that territory.

Millicom strengthened its position in Central America and paid particular attention to the Panamanian market: at the end of 2018 it acquired 80% of Cable Onda and for the next five years it plans to allocate investments for US$750 million for network infrastructure, data centers, spectrum and others services.

Another company that increases its presence in Central America and the Caribbean through acquisitions is Liberty Latin America. Even in early 2019 there were conversations for it to buy Millicom, but finally no decision was achieved on said regard. In the last year, Liberty acquired 80% of the pay TV operator in Costa Rica, Cabletica, and 100% of UTS –which provides fixed and mobile services in the Caribbean islands-. And it awaits regulatory approval to add AT&T operations in Puerto Rico and the Virgin Islands (excluding Directv). Liberty's presence in South America is limited to Chile, which gives it volume on pay TV and broadband.

The US company AT&T remains targeted for upcoming buying and selling operations in Latin America. The most recent step was the aforementioned divest in the Caribbean in favor of Liberty, which takes place amid sales versions of its operation in Mexico, and that of Directv (Vrio). These movements are part of a divestment plan faced by AT&T to reduce debt: by the end of 2019 it estimates to have sold the equivalent to US$11 billion in assets. And also for the pressure of the Elliott Management fund, of Paul Singer, which bought 1.1% of AT&T shares and immediately demanded to set aside non-strategic operations.

In view of the low probability for DirecTV to be bought by a regional operator, Dish should not be ruled out, or even considering the importance of Turner Media in the provision of pay TV content, that AT&T manages to turn towards SVOD which nobody has done, and kicks off the competition between video OTTs not linked to distribution contracts through pay TV providers.

 In Brazil, Nextel will be taken over by América Móvil at the end of 2019, putting an end to the presence of NII Holdings in Latin America. Brazil is one of the few countries with 4 mobile operators: in an environment where it is usually stated that the mobile business is enough just for two or three operators, the next chapter in the history of mergers and acquisitions in the region, Oi plays the leading role. After filing for bankruptcy proceedings in 2016, all kinds of alternatives for the Brazilian operator have been considered, from a joint purchase by Telefónica and América Móvil, to the entry of stakeholders such as China Mobile, Huawei and AT&T.

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