América Móvil, Liberty LatAm combine Chilean ops
September 30, 2021
By Colin Mann
Communications and entertainment company Liberty Latin America and integrated telecommunications service provider América Móvil have agreed to combine their respective Chilean operations, VTR and Claro Chile, to form a 50:50 joint venture.
The proposed transaction combines the complementary operations of VTR, a leading provider of high-speed consumer fixed products, such as broadband and pay-TV services, where it connects close to 3 million subscribers nationwide, and Claro Chile, one of Chile’s leading telecommunications service providers with over 6.5 million mobile customers, to create a business with greater scale, product diversification, and a capital structure that will enable significant investment for fixed fibre footprint expansion and to be at the forefront of 5G mobile delivery. By 2025, the JV anticipates passing 6 million homes through its fixed network and the majority will have access to FTTH infrastructure.
The parties expect the JV will generate significant operating benefits and associated value creation, with estimated run-rate synergies of over $180 million (€155m) 80 per cent of which are expected to be achieved within three years post completion. Most of these benefits relate to cost savings, driven by network and operating efficiencies resulting from the combination. In addition, parties expect the JV to develop additional revenue streams through cross-selling opportunities and scale.
The pair bring significant experience in the integration and execution of identified synergies in the context of in-country consolidations and convergence transactions in the region.
Each has made a commitment to contribute businesses with net debt of CLP 1,095 billion (€1.3bn) and CLP 259 billion respectively. In addition, Liberty will make a balancing payment to América Móvil of CLP 73 billion.
Neither will consolidate the JV after the closing. The formation of the JV will not result in a change of control event for existing debtholders of VTR. The JV, as a whole, through organic growth and synergy realisation will target a long-term net leverage ratio of 2.8x to 3.5x EBITDA.
Executive leadership of the JV will be agreed prior to the closing. The board will consist of eight persons, with four representatives from each company. The role of Chairperson will rotate between the shareholders. Certain actions of the JV will be subject to the consent of both parties.
The transaction excludes all telecommunication towers owned indirectly by América Móvil in Chile.
Completion of the transaction is subject to certain customary closing conditions, including regulatory approvals, and is expected to close in the second half of 2022. The transaction is not subject to shareholder approvals from either party.
Claro Chile owns a DTH business which VTR would be unable to operate according to restrictions imposed by the Chilean Antitrust Courts, following its acquisition of Metrópolis in 2005. If these restrictions remain in place at the time of completion, both parties have agreed to take every necessary step to comply with such restrictions.