Telefónica sells Guatemala and El Salvador units to América Móvil for €570m

Telefónica sells Guatemala and El Salvador units to América Móvil for €570m

Guatemala and El Salvador map NEW_b24272.jpeg

Telefónica Centroamérica Inversiones, a subsidiary of Telefónica, has sold its business units in Guatemala and El Salvador to América Móvil for €570 million.

The agreement with Carlos Slim’s América Móvil is for the entire share capital Telefónica Móviles Guatemala (Telefónica Guatemala) and 99.3% of Telefónica Móviles El Salvador (Telefónica El Salvador).

Broken down, the €570 million ($648 million) enterprise value of the two business units translates to approximately €293 million for Telefónica Guatemala and €277 million for Telefónica El Salvador. According to the official statement by Telefónica, these figures are based on 9.7 times the estimated 2018 EBITDA of the two companies. The deal is also expected to generate capital gains before taxes and minorities of approximately €120 million, largely from Telefónica El Salvador.

The sale of Telefónica Guatemala has already closed while the Telefónica El Salvador transaction is subject to regulatory conditions.

The decision to sell is based on Telefónica’s goal organically reducing its debt and strengthening its balance sheet “in a growing cash flow scenario” enabling it to deliver an attractive remuneration package to its shareholders.

The news comes as earlier this week Telefónica confirmed with a statement to CNMV that it was in the process of negotiating the sale of its assets in Central America, which may result in the a transaction for either all or some of those assets.

América Móvil and Telefónica have long been rivals in the Latin America region with América Móvil dominating in Mexico to Brazil where Telefónica is the market leader.

In related news, Liberty Latin America and Millicom, other regional competitors, called off discussions for a potential merger.

In a statement published on its website, LLA said that it has “terminated conversations with Millicom International Cellular SA (Millicom) regarding a potential transaction.” Adding that the company is “focused on its growth strategy to deliver value for shareholders and provide market leading products and services to its customers.”

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