Argentina’s President Javier Milei has expressed concerns over Telefonica SA’s recent agreement to sell its Argentine operations to Telecom Argentina SA for $1.25 billion, citing potential violations of anti-monopoly regulations.
The deal between Telefonica SA and Telecom Argentina SA was finalized and closed on Monday, presenting a significant shift in Argentina’s telecommunications industry. However, the transaction is now under scrutiny from President Javier Milei’s administration, which is set to investigate the deal for breaches of anti-monopoly rules.
According to a government statement, the acquisition could result in a single entity controlling roughly 70% of the country’s telecommunications sector, sparking concerns over fair competition. The review signifies President Milei’s most substantial regulatory intervention since taking office, although he is known for his stance on reducing bureaucracy and advancing free markets.
Telefonica, a major player in Argentina since the early 1990s, has been attempting to reduce its exposure in Latin America since 2019. The Spanish carrier has faced various economic challenges in Argentina and is in the process of restructuring under Executive Chairman Marc Murtra, who was appointed by the Spanish government earlier this year.
The financial details indicate that Telecom Argentina financed this acquisition through a syndicated loan involving prominent banks such as Banco Bilbao Vizcaya Argentaria SA, Deutsche Bank AG, and Banco Santander SA, alongside a bilateral loan from the Industrial and Commercial Bank of China SAU’s local branch.
Complicating matters, Argentina’s Foreign Minister, Gerardo Werthein, a member of the Werthein family that previously vied for the deal, has stepped away from active participation in the family’s investments. This context adds an additional layer to the business dynamics and political interests concerning the transaction.
Additionally, Telecom Argentina is partly owned by Grupo Clarin, a major media player, which introduces further dimensions to the narrative, especially after President Milei publicly criticized a Clarin publication during a recent trip to Washington.
Despite Milei’s pro-business initiatives, his tenure has seen a number of multinational firms like Exxon Mobil Corp., HSBC Holdings Plc, and Mercedes-Benz Group AG exit the market, citing concerns over Argentina’s economic policies, including currency and capital controls.
Telefonica’s strategy includes a broader exit from Latin America, with ongoing negotiations to offload its assets in Mexico, Uruguay, and previously Colombia, where a $400 million deal, still in talks with Millicom International Cellular SA, was announced but has yet to close.
The telecommunications giant is simultaneously addressing issues elsewhere, such as its recent bankruptcy filing for its Peruvian branch due to longstanding tax disputes. Telefonica is scheduled to release its annual earnings report soon, with Chairman Marc Murtra expected to update stakeholders on the company’s restructuring efforts.
As Argentina gears up to assess the implications of Telefonica’s substantial sale, the outcome of this regulatory review could signal important changes within the country’s telecom sector. This development is crucial not only for the involved companies but also for the broader market landscape in Argentina, as it navigates complex challenges in a global economy.
