America Movil and Liberty LatAm get cosy in Chile

America Movil and Liberty Latin America have agreed to merge their operations in Chile, a move clearly designed to help with fibre and 5G investments in the coming years.

The companies announced plans to bring together America Movil’s Claro operation, which is predominantly a mobile operator, with Liberty’s VTR business, a provider of fixed broadband and TV services. There is some crossover – America Movil has some fixed operations in Chile, for example – but essentially the two companies have complementary assets. The merged entity will be a 50:50 joint venture.

The deal will “create a business with greater scale, product diversification, and a capital structure that will enable significant investment for fixed fibre footprint expansion and to be at the forefront of 5G mobile delivery,” the telcos said, in a joint statement. “By 2025, the JV anticipates passing 6 million homes through its fixed network and the majority will have access to FTTH infrastructure,” they added.

They did not provide a specific comment on 5G rollout, but that will certainly be aided by the development of the fibre footprint, and the merged entity’s broader customer base.

The companies said they expect the JV to deliver run-rate synergies of $180 million-plus, 80% of which will come in the first three years after the deal closes. Most of the synergies will stem from cost-savings driven by network and operating efficiencies, as well as the development of additional revenue streams through cross-selling opportunities and greater scale, they said.

They expect the deal to close in the second half of next year, subject of course to regulatory approvals. While the businesses are for the most part complementary, the regulators will take a very close look at this one.

According to telecoms regulator Subtel, Claro was Chile’s third largest MNO with a market share of just over 21% earlier this year. Incumbent Entel still leads with just under a third of the market, while Telefonica’s Movistar and WOM (formerly Nextel) claim around 25% and 20% respectively. It’s pretty tight in there.

The companies have already highlighted a potential problem in the video space.

“Claro Chile owns a DTH business which VTR would be unable to operate according to restrictions imposed by the Chilean Antitrust Courts, following its acquisition of Metrópolis in 2005,” they noted. “If these restrictions remain in place at the time of completion, both parties have agreed to take every necessary step to comply with such restrictions.” Presumably, this could mean selling Claro’s DTH business.

There is also another exclusion from the deal: America Movil’s towers in Chile.

The telco is in the process of spinning off its towers across Latin America, and on Thursday its shareholders voted overwhelmingly in favour of the move. The new towers entity will be known as Sitios Latinoamérica and will house 36,000 telecommunications towers and related passive infrastructure in Argentina, Brazil, Chile, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, the Dominican Republic and Uruguay.

It is a busy time for America Movil, when it comes to monetising assets, that is. This latest deal with Liberty Latin America comes less than a fortnight after it agreed to sell its operations in Panama to the same outfit for US$200 million.

There’s some serious asset reshaping going on here, all of which should have an impact on America Movil’s balance sheet.