Telefónica restructures its strategic plan towards BrazilBy Ion Jauregui - ActivTrades Analyst
Latin America divestment plan
Telefónica has put its subsidiary in Uruguay, valued at up to $400 million, up for sale. This move is in line with its divestment strategy in Latin America, where it also plans to sell assets in Argentina and Mexico. The Uruguayan subsidiary, based in Montevideo, is facing a loss of customers due to competition from Claro and state-owned Antel. The company hopes to attract bids for a small market with declining revenues but high investment demands.
Key assets and business value
Telefónica Uruguay's most valuable assets are its mobile frequency licenses, which cover the 850 MHz, 700 MHz and 1,900 MHz bands, essential for 2G, 3G, 4G and 5G services. Movistar Uruguay stands out as the largest private operator in the country, with 1.4 million customers and 97% coverage of the territory. Estimates suggest that the sale value would range between US$350 million and US$400 million, a figure similar to the offer it received three years ago from Supercanal-Arlink (now Super), although unsuccessful at the time.
Fierce competition and loss of customers.
Movistar Uruguay faces strong competition. In recent months, it has lost 32,750 net lines, while Claro has gained 38,000 lines and Antel, although with a slight negative balance, maintains its market leadership. According to URSEC data, Movistar ranks second in the Uruguayan mobile market with a 29% share, compared to 49% for Antel and 22% for Claro.
Declining revenues and market challenges
The Uruguayan mobile market is experiencing a slowdown, with subscriptions stagnating since the end of 2023. Movistar Uruguay also offers business services, backed by more than 70 stores, 1,300 employees and more than 5,000 suppliers and partners. However, competitive pressures and high investment costs limit growth.
Regional outlook and next steps
Beyond Uruguay, Telefónica faces similar challenges in other Latin American markets. In Mexico, the company is looking for a buyer for a business that generates 960 million euros, but with low profit margins due to the high proportion of prepaid customers. In Colombia, the sale process is in its final phase, with Millicom as the main interested party. In addition, the situation in Peru is critical after Movistar Peru filed for insolvency proceedings, forcing Telefónica to guarantee services for 13 million customers.
Telefónica continues to consolidate its position in key markets such as Brazil, while redefining its strategy in other Latin American territories to optimize its profitability and business focus.
Telefónica Analysis
Since the end of 2022 the company has been looking to recover its share price by having an upward cycle. June and October 2024 were two occasions where it sought to pierce the 4.6 euros without success. This data with the RSI currently at 60.87% overbought indicates that the price could bounce towards the current control point (POC) at 3.960 euros. If the company continues to recover positions we could see another new attempt to reach 4.6 in this quarter's income statement.
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