America Movil and Liberty Latin America (LLA) said they have reached an agreement to merge their respective Chilean operations – Claro Chile and VTR – in a joint venture targeting growth in the 5G and fibre markets. Under the proposed transaction, VTR’s 3 million fixed broadband and pay-TV subscribers will combine with Claro’s 6.5 million-plus mobile customers to create a business with greater scale, product diversification and a capital structure that will enable significant investment in FTTH footprint expansion and 5G mobile delivery, said the partners, adding that the aim is to reach 6 million fixed broadband homes by 2025.
LLA and America Movil said they expect the JV to generate significant operating benefits and associated value creation, with estimated run-rate synergies of over USD 180 million, 80 percent of which are expected to be achieved within three years post completion. Most of the related benefits cover cost savings, driven by network and operating efficiencies, together with additional revenue streams through cross-selling opportunities and scale.
The regional telecommunications giants have also committed to contributing businesses with net debt of USD 1.5 billion (LLA) and USD 400 million (America Movil). In addition, LLA will make a balancing payment to America Movil of USD 100 million.
The JV will target a long-term net leverage ratio of 2.8x to 3.5x EBITDA and the board will consist of eight persons, with four representatives from each of LLA and America Movil. The transaction is subject to regulatory approvals and is expected to close in the second half of 2022.
The deal comes less than two weeks after LLA agreed to acquire America Movil’s Claro operation in Panama for an enterprise value of USD 200 million. In August it completed its USD 500 million acquisition of Telefonica's wireless operations in Costa Rica, having bought AT&T's assets in Puerto Rico and the US Virgin Islands for USD 1.95 billion just under a year ago.
