Telefonica to sell 40% of Central American assets to Guatemala’s CMI for $500 mn

Telefonica today agreed to sell 40 per cent of its assets in four Central American countries to Guatemala-based privately-held Corporacion Multi Inversiones (CMI) for $500 million, as part of the Spanish telecoms group's plan to reduce debt.

The deal also includes paying as much as $72 million depending on future development of the assets, the Madrid-based company said in a statement.

Under the deal, Telefonica will spin off its assets in Guatemala, El Salvador, Nicaragua and Panama into a new company, but maintain control of the joint venture.

Telefonica offers fixed telephone, broadband and mobile in Central America and generated revenues of €672 million last year.

Telefónica said that it has been operating in Central America since 1998, when it began the privatisation of the sector in El Salvador. Telefónica is one of the leading brands in the region, with high levels of 2G and 3G coverage.

CMI is one of the most important business groups in Latin America. It was established in 1920 and is a family-owned multinational corporation. It operates in 19 countries on three continents, and manages a selective and diversified portfolio of businesses.

''This agreement allows Telefónica to leverage its experience and global footprint with CMI's know-how and local expertise. This new business model offers the opportunity to continue business development in the markets where both companies will work together,'' Telefonica said in the statement.  

Telefónica, Europe's second-largest telecom company by market value after Vodafone, had in 2011 announced a major restructuring after spending a massive $85 billion in expansion over a decade that has left the company with debt of  €51 billion, which is more than its market capitilisation.

As part of the overhaul, the company began selling assets, suspended dividend payments and slashed costs.

It has since sold 4.56 per cent stake in China Unicom for $1.4 billion, its Atento call centre to US private equity firm Bain Capital for $1.3 billion and its UK's broadband and fixed-line telephony business to British Sky Broadcasting Group for $270 million.