29 SEP 2021

América Móvil and Liberty Latin America to Combine their Chilean Operations

The new company will combine VTR's complementary operations - broadband and pay TV services - with Claro Chile's services to create a larger scale business.

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Liberty Latin America Ltd. (LLA) and América Móvil (AMX) announced an agreement to combine their respective Chilean operations, VTR and Claro Chile, to form a 50:50 joint venture (the “JV”).

The proposed transaction combines the complementary operations of VTR, a leading provider of high-speed consumer fixed products, such as broadband and Pay TV services, where it connects close to 3 million subscribers nationwide, and Claro Chile, one of Chile’s leading telecommunications service providers with over 6.5 million mobile customers, to create a business with greater scale, product diversification, and a capital structure that will enable significant investment for fixed fiber footprint expansion and to be at the forefront of 5G mobile delivery. By 2025, the JV anticipates passing 6 million homes through its fixed network and the majority will have access to FTTH infrastructure.

The parties expect the JV will generate significant operating benefits and associated value creation, with estimated run-rate synergies of over $180 million, 80% of which are expected to be achieved within three years post completion. Most of these benefits relate to cost savings, driven by network and operating efficiencies resulting from the combination. In addition, parties expect the JV to develop additional revenue streams through cross-selling opportunities and scale.

LLA and AMX bring significant experience in the integration and execution of identified synergies in the context of in-country consolidations and convergence transactions in the region.

Transaction Structure & Governance

Each of LLA and AMX made a commitment to contribute businesses with net debt of CLP 1,095 billion ($1.5 billion) and CLP 259 billion ($0.4 billion), respectively. In addition, LLA will make a balancing payment to AMX of CLP 73 billion ($0.1 billion).

Neither LLA nor AMX will consolidate the JV after the closing. The formation of the JV will not result in a change of control event for existing debtholders of VTR. The JV, as a whole, through organic growth and synergy realization will target a long-term net leverage ratio of 2.8x to 3.5x EBITDA.

Executive leadership of the JV will be agreed prior to the closing. The board will consist of eight persons, with four representatives from each of LLA and AMX. The role of Chairperson will rotate between the shareholders. Certain actions of the JV will be subject to the consent of both parties. The transaction excludes all telecommunication towers owned indirectly by AMX in Chile.

Conditions to Completion and Indicative Timetable

Completion of the transaction is subject to certain customary closing conditions, including regulatory approvals, and is expected to close in the second half of 2022. The transaction is not subject to LLA or AMX shareholder approvals.

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. 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.