Liberty LatAm spends $200m on America Movil’s Panama ops

Liberty Latin America has agreed to acquire America Movil’s operations in Panama for US$200 million, boosting its existing presence in the country.

The deal was brokered via Cable & Wireless Panama, part of the Liberty Latin America group. It will provide the telco with improved mobile coverage in a market which it describes as an important digital hub for the Central American region.

It is an all-cash transaction that gives Claro Panama an enterprise value of $200 million on a cash- and debt-free basis. Liberty said that equates to a mid-single-digit multiple of the firm’s adjusted OIBDA for 2020, including projected run-rate synergies by 2024. As America Movil does not split out the unit’s financials, wrapping it into its Central America segment, we can’t tease out any further detail on that point.

According to Liberty, Claro Panamá generated $157 million in revenue last year and had a mobile customer base of 760,000 as of the end of June.

“The valuation for the acquisition is consistent with our disciplined approach towards M&A and will be free cash flow accretive on a per share basis,” said Balan Nair, President and CEO of Liberty Latin America, without giving much away.

However, the executive was more effusive about the deal from an operational point of view.

“We are delighted to further increase our commitment to Panama through today’s announced acquisition of Claro Panamá. The integrated business will operate over a network with extensive coverage and invest to deliver innovative mobile products and services for Panamanian consumers and B2B customers, including via leading technologies such as 5G,” he said.

“We at Liberty Latin America have established our group Operations Center in Panama and see the country as an important digital hub for the region, which we expect to drive growing demand for our full suite of mobile and fixed connectivity solutions,” Nair added.

All of which perhaps raises the question of why America Movil is selling. But the Mexican giant is not keen to tell us.

It issued a short statement confirming the sale of 100% of the Panamanian business. The only additional information it provided was the disclosure that its indirectly-owned telecoms towers in the country are not included in the transaction, nor is the Claro brand.

The only comment the company made about the Panama business in its most recent results announcement was to note that the country had stronger mobility restrictions in place than the other markets in the region, the implication being that this had an impact on its numbers. In its latest annual report though, America Movil revealed a hefty slide in operating margin in Central America on the back of a fall in income, “particularly in Panama.”

There is clearly an issue at Claro Panama, Covid-related or otherwise. But perhaps Liberty Latin America believes building some scale in the market will help. Incidentally, Liberty reported growth at C&W Panama in Q2, as the business bounces back from the impact of the pandemic.

Liberty shouldn’t have too long to wait to get its hands on Claro Panama. The firms expect the deal to close in the first half of next year, subject to the regulatory green light, of course.

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