Telefónica, the Spanish multinational telecommunications company, has agreed to sell its mobile phone unit in El Salvador for USD 144 million, marking its exit from Central America following a series of disposals since its divestment strategy started in 2019.
The company agreed to sell a 99.3% stake in Telefónica Móviles El Salvador to General International Telecom Ltd, (“GIT”), a company registered at Baker Botts’ London office by William Pitman, General Counsel for Inversiones Atlántida (“INVATLAN”), one of the largest financial services groups in Honduras. The ultimate beneficial owner remains unclear but our sources reported the buyers are, “Salvadoran businessmen, with political relationships at the highest level.”
One source, who wished to remain completely anonymous, reported a rumour he had heard, “There is a rumour that the Bukele family is involved.” If this is the case, we predict that it won’t be long before GIT is granted frequency concessions to operate 4G and 5G services – Telefónica did not compete in a recent auction.
“There is a rumour that the Bukele family is involved.”
Another notable aspect of the transaction is the price. América Móvil tried to acquire the same asset for USD 315 million in 2019, but the regulator intervened and imposed multiple restrictions that América Móvil couldn’t agree to, so the deal fell over in September 2020. At USD 144 million, the deal agreed with General International Telecom Ltd is less than half the price! Perhaps América Móvil had a ‘strategic rationale’ to overpay? Perhaps Salvadorans stopped paying their phone bills in 2021? Either way, it seems Telefónica was getting desperate.
In recent months, Telefónica has sold assets in Costa Rica, Guatemala, Nicaragua and Panama to reduce its debt. The telco completed the sale of its operations in Costa Rica to Liberty Latin America in August, having already offloaded businesses in Panama and Nicaragua to Millicom, as well as the Guatemala sale to América Móvil.
“The transaction will most likely be completed in the next few months and the process should be fairly easy and expeditious.”
Telecommunications industry executive, El Salvador
As a new operator, our sources did not envisage any regulatory barriers to the completion of the sale, “The transaction will most likely be completed in the next few months and the process should be fairly easy and expeditious,” explained an industry executive,”there are unlikely to be any conditions imposed and the Superintendency of Competition won’t need to go through the entire authorisation process.”