Telefónica has sold its Argentine division to Telecom Argentina, marking another step in the Spanish giant's plan to scale back its Latin American operations. The $1.245 billion deal closed on Monday and continues Telefónica's efforts to reduce its debt and invest in 5G technologies.
Argentina's towerco market is competitive, with several active tower companies, including major players like American Tower, Telxius, and local firms such as Torresec. These companies have established significant portfolios of telecommunications infrastructure across the country, creating a more consolidated market that presents both challenges and opportunities.
On one hand, the presence of numerous towercos reduces the pool of potential tenants for each operator, as mobile network operators (MNOs) have more options for leasing infrastructure. However, this competitive environment also benefits the remaining towercos by fostering financial strength and scalability as they consolidate market share, streamline operations, and increase their leasing agreements. In this dynamic landscape, stronger towercos will be better positioned to invest in expanding coverage, improving network quality, and supporting the growing demand for 5G deployment.
A broader shift in Telefónica's Latin American strategy
The sale is part of a broader pattern in Telefónica's approach to Latin America. The company has been gradually exiting several regional markets, including recent moves in Peru and pending discussions regarding assets in Mexico and Colombia. These markets could attract interest from major players like América Móvil and local investors seeking to capitalise on expanding digital infrastructure.
Telecom Argentina seeks growth through acquisition
Telecom Argentina, partly owned by Clarín Group, emphasised that this acquisition aligns with its strategy to boost investments in 5G and fibre optic technology within the country. The company has a track record of strategic acquisitions, including its previous purchase of stakes from France's Orange in 2014.
Monopoly Concerns Raised in Argentina
Following the announcement, the Argentine government expressed concerns about the potential creation of a telecommunications monopoly. With around 70% of telecom services potentially controlled by one company, President Javier Milei’s office vowed to take measures to prevent excessive market dominance.
Stock market reaction
The market responded positively to the deal, with Telefónica’s shares rising 1.5% and Telecom Argentina seeing a 3.4% increase, reflecting investor confidence in the reshaping of the telecom landscape in Argentina.
What is next? Mexico operations
In Mexico, the company is reportedly accelerating its exit strategy by preparing to sell its subsidiary. This move is part of Telefónica's broader plan to divest from non-core markets in the region. The company has reportedly engaged JPMorgan to facilitate the sale, which could be finalised before the upcoming shareholders' meeting.
Potential buyers
While specific potential buyers have not been publicly disclosed, industry speculation suggests that major regional telecom players, such as América Móvil, could be interested in acquiring Telefónica's Mexican assets. América Móvil, controlled by Mexican billionaire Carlos Slim, has previously expanded its presence in Latin America through acquisitions, including the purchase of Telefónica's operations in Guatemala and El Salvador in 2019.
Additionally, other regional conglomerates with interests in the telecommunications sector, such as Grupo Werthein, have been mentioned as potential buyers. Grupo Werthein is a diversified conglomerate with businesses spanning media technology, entertainment, health, agriculture, food and beverages, property, and technology. In 2024, it agreed to acquire 100% of the capital of Vrio from AT&T, which provides live and on-demand content via DirectTV Latin America, SKY Brasil, and DirectTV GO
Telefonica's Peru operations
In Peru, Telefónica del Perú has initiated insolvency proceedings to restructure its finances and operations. The company serves over 13 million customers across the country and aims to protect the provision of telecommunications services during this process. Analysis: Telefónica's fibre venture setback amid pressure on Peru sale & Argentina exit talks
This decision follows a prolonged tax dispute with the Peruvian tax authority, SUNAT, over income tax payments for the years 1998, 2000, and 2001. The insolvency filing is intended to ensure the company's long-term viability and continued service to its customers.
