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Major Argentinian CSP Merger To Affect Almost Half The Market

A possible merger between Argentina's Cablevision and Telecom companies would create the largest telecommunications business in the country, responsible for 42 percent of telecom invoicing, reports the Buenos Aires Herald.

Moody’s credit rating agency had estimated that the Cablevisión and Telecom companies, that are anticipated to merge into the largest telecommunications company in the country, generated together US$5.9 billion in total billing in the past year, which represents 42 percent of invoicing in the Argentine telecommunication sector. The US credit ratings agency praised the merger between the two companies, considering the financial fundamentals solid. “It will create the largest and only integrated telecom operator in Argentina offering a wide array of services, while maintaining good liquidity and strong credit metrics,” states the document.

The telecommunications sector generated 201.8 billion pesos in 2016, and for the 12 months up to March, 2017 the companies proposed for the merger generated 88.5 billion pesos, representing an estimated US$5.9 billion in net invoicing.

Moody’s highlighted how the most comparable competitor in the sector, Telefónica, generated only 49 billion pesos in net invoicing in 2016 with its sources of revenue coming from almost the same areas as the merging companies: mobile, broadband and fixed telephone lines.

If the deal is approved, the new firm will have leading market shares of around 39 percent in Cable TV, 56 percent in Broadband, 47 percent in landlines, and 33 percent in mobile, predicted Moody’s.

The expert highlights how the merger was proposed after President Mauricio Macri’s administration issued Decree 1340 in January 2017, with the aim of regulating the convergence between audiovisual, information technology and communications services.

Moody’s considered that if the transaction ends up being approved by market regulators, it would make a more competitive marketplace. “If the transaction is approved, it will likely create pressure on competitors for investments in infrastructure and could drive additional M&A activity in the sector in Argentina,” the Credit agency stated.

Media experts such as Martín Becerra have been quite critical of the decree and merger stressing that it made the sector less competitive, making it easier to form monopolies that would dominate the sector. “The government policies are subordinate to the great actors in the industry ... especially for the Clarín group,” said Becerra in an interview with Página/12. He considered that after the dismantling of the Communications Ministry by Macri, the new merger would need a completely new type of regulation as the existing laws (decreed by Macri) would not permit the new telecommunications giant to legally exist.

If the transaction is finally approved, Telecom Argentina will issue 1,184 billion shares and leave Cablevision shareholders with 55 percent of the company. The exchange rate approved by the companies’ board of directors gives 9,871 shares of Telecom Argentina for each Cablevision share. The shareholders of Telecom Argentina will keep the remaining 45 percent share as a result of the merger.

The new conglomerate would keep the Telecom name and be the only company to offer the so-called “quadruple play” service as of January, 2018.

Many experts speculate that the firms will try to close the deal quickly, hoping to finish it before the upcoming October 22 midterms election.

The National Committee of the Defence of Competition (CDNC) that is led by Esteban Greco, must also approve the merger before it’s finalized, having the last word. It could possibly ask the new conglomerate to divest itself off some holdings. The resolution will take four to five months to arrive and if the merger is approved, it would likely be made effective on January 1, when by law telephone companies can legally start to offer paid-TV services.

Source: Buenos Aires Herald


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