Telefonica confirmed an agreement to sell its Movistar operations in Guatemala and El Salvador to America Movil for $648 million.
In a statement, Telefonica announced the sale, confirming local newspaper reports last week speculating a deal for the two units was edging closer.
America Movil has already completed the acquisition of 100 per cent of Telefonica’s Guatemala business, with a deal to purchase 99.3 per cent of the El Salvador operation still subject to regulatory review.
The price, which equates to €570 million (corresponding to a €293 million value for Guatemala and €277 million for El Salvador), represents a multiple of 9.7-times the estimated 2018 EBITDA of the two companies.
Telefonica added it expected to generate capital gains before taxes and minorities of around €120 million, mainly from El Salvador.
The operator explained the transaction is part of its asset portfolio management policy, “based on a strategy of value creation, improving return on capital and strategic positioning”. The move is also designed to cut net debt, which stood at €42.6 billion at the end of September 2018.
As well as Guatemala and El Salvador, Telefonica also has stakes in operations in Costa Rica, Nicaragua and Panama in Central America.
Reports in 2018 suggested the company could be open to selling its entire Central America operation.
For America Movil, the deal in El Salvador creates a new market leader, combining its Claro business which holds a 31 per cent market share and Telefonica Movistar (24 per cent), displacing Millicom’s Tigo (33 per cent), based on GSMA Intelligence figures for Q4 2018.
Telefonica and America Movil’s tie-up was secured on the same week that a mooted tie-up between Liberty Latin America and Millicom was dropped.Subscribe to our daily newsletter Back