Agreement with BellSouth
March 08 2004 - 8:59AM
UK Regulatory
RNS Number:2582W
Telefonica SA
08 March 2004
ANTONIO J. ALONSO UREBA
Director, General Secretary
and Secretary to the Board of Directors
TELEFONICA, S.A.
Further to the significant event dated March 4th, 2004, Telefonica, S.A., as
provided in article 82 of the Spanish Stock Market Act (Ley del Mercado de
Valores), hereby report the following
SIGNIFICANT EVENT
Telefonica, S.A. inform that its subsidiary Telefonica Moviles S.A. and
BellSouth Corporation have reached an agreement for the acquisition of the
wireless communications assets of BellSouth in Latin America.
By signing an Stock Purchase Agreement, Telefonica Moviles, S.A. will acquire
100% of the equity of BellSouth in the Latin America companies in Argentina,
Chile, Peru, Venezuela, Colombia, Ecuador, Uruguay, Guatemala, Nicaragua and
Panama.
We attach to this official statement press release announced to the media in
relation with the signing of the contract already mentioned and that will be
made available to the shareholders on the company website (www.telefonica.es/
www.telefonica.com).
In Madrid, March 8th 2004.
PRESS RELEASE
03/08/2004
Telefonica, the world's sixth largest telecoms company, reinforces its
leadership in Latin America with the addition of 10.5 million new customers
TELEFONICA REACHES AN AGREEMENT TO ACQUIRE BELLSOUTH'S LATIN AMERICAN
CELLULAR OPERATIONS
* The transaction will be conducted by Telefonica Moviles, which will become
the world's fourth largest wireless operator, with 62.5 million managed
customers.
* With this agreement, adding 10 companies in 10 countries, Telefonica
Moviles, which was already a leading player in Latin America's two largest
markets (Brazil and Mexico):
* consolidates its leadership position in key Latin American markets where
it is already present (Argentina, Chile and Peru).
* gains a strong footprint in high-growth markets where it did not have a
presence before (Venezuela, Colombia, Ecuador and Uruguay).
* and achieves a critical mass in Central America (Guatemala, El Salvador,
Panama and Nicaragua).
* The transaction increases Telefonica Moviles' Latin American managed
customer base to 41 million in 14 countries, consolidating its leadership in
the region. It also raises its shares of the Spanish- and
Portuguese-speaking mobile market to 40%, and to 35% in the cellular market
in Latin America, one of Telefonica's geographical and strategic areas with
lower wireless market penetration.
* The assets now acquired had combined revenues exceeding 2,500 million US
dollars, with EBITDA of 867 million US dollars in 2003.
* The agreement implies a total value for the 100% of the companies (firm
value) of 5,850 million US dollars.
* In addition to tapping the potential growth of markets where it is already
present, Telefonica aims to capture considerable synergies by reinforcing
its position in Argentina, Chile, Peru and Guatemala.
Madrid, March 8th2004.- Telefonica, the world's sixth largest
telecommunications company, has reached an agreement with BellSouth to acquire
all its cellular assets in Latin America, which have a total of more than 10.5
million customers.
With the transaction, still subject to due diligence and the pertinent
regulatory and governmental approvals, Telefonica will strengthen its leadership
in Latin America, where it manages 21.6 million fixed lines and nearly 41
million wireless customers.
Telefonica's executive chairman Cesar Alierta expressed his satisfaction over
the agreement, saying "it is in line with the Company's policy of profitable
growth, it creates shareholder value and adds a new potential market of nearly
90 million customers for the Group".
Price and financing of the transaction
Under the signed agreement, the transaction values 100% of the companies
acquired (firm value) at 5.850 million US dollars and will be financed from cash
generated by Telefonica Moviles and debt. Telefonica and its mobile subsidiary
shall both maintain solid credit ratios. Telefonica Moviles will assume the
companies' net debt and it will acquire the shareholdings of BellSouth, offering
minority shareholders the possibility of selling theirstakes for an identical
price. The acquisition in each country is subject to the respective regulatory
approvals.
This agreement will bring Telefonica's customer base to well over 100 million
customers worldwide, with an active presence in 14 countries in Latin America,
making it the leader in both fixed and mobile telephony, with a 40% share of the
Spanish- and Portuguese-speaking and 35% of the Latin American cellular markets.
Meanwhile, Telefonica Moviles' total customer base will increase to 62.5 million
-41 million in Latin America- cementing its leadership position in the Spanish-
and Portuguese-speaking market and making it the fourth largest wireless
operator in the world.
For Antonio Viana-Baptista, chairman of Telefonica Moviles: "The operation not
only reinforces our position in key markets, it also generates opex and capex
synergies with an estimated present value of 1,000 million US dollars and will
bring compelling benefits for customers and shareholders".
Assets wth growth potential
Telefonica Moviles will acquire 100% of BellSouth's stakes in its operators in
Argentina, Chile, Peru, Venezuela, Colombia, Ecuador, Uruguay, Guatemala,
Nicaragua and Panama, making it the only cellular operator in all the key Latin
American markets (population over 421 million) and leaving it an excellent
position to capture the region's strong growth potential.
Telefonica is acquiring companies with combined revenues in excess of 2,500
million US dollars, EBITDA of 867 million and an EBITDA margin of 35% in 2003.
With this, Telefonica Moviles would have posted total aggregate revenues in 2003
of 5,401 million US dollars and EBITDA of 1,521 million US dollars in Latin
America.
The purchase of these companies leaves scope for synergies with Telefonica
Moviles's undisputed leadership in management, product and service offering and
the development of cutting-edge technologies deriving from its track record in
operations' integration (as it has demonstrated in markets like Brazil and
Mexico). These synergies should be reflected in areas such as handset purchases,
advertising, network maintenance and rationalisation, the transfer of portfolio
products and services and integrated management in some areas.
Regarding the calendar, the regulatory authorities of several of the countries
in which these companies operate must approve, if it is the case, some of these
acquisitions, so that it is not possible to determine precisely the effective
date of the acquisition.
As of today, it is not possible to quantify the amount of goodwill which would
be generated as the dates of the acquisition of each one of the assets will be
different according to the authorizations requested.
At the same time, this transaction does not suppose for Telefonica Moviles any
change in the dividend payment announced against 2003 results.
Clients. Leadership in Latin America
Telefonica Moviles has a strong positioning in the two largest markets in Latin
America, Brazil and Mexico.
* In Brazil, the Vivo subsidiary is by far the market leader. The company
ended 2003 with more than 20.6 million customers, capturing more than 2.2
million in the year's fourth quarter. This gives it an estimated 56% share
of the markets in which it operates.
* In Mexico, Telefonica Moviles ranks second, with more than 3.5 million
customers. It is strongly positioned to capture a large part of the Mexican
market's potential growth, with a GSM network covering 96 cities and a
distribution network comprising 6,200 points of sale.
At the same time, it strengthens Telefonica Moviles' leadership in other rapidly
growing Latin American markets in which it already had operations.
* Argentina. Telefonica Moviles ended 2003 with more than 1.8 million
customers in Argentina. The acquisition of Movicom makes it the country's
largest cellular operator, with more than 3.3 million customers in a market
with 37 million inhabitants. Moreover, it has a leading market share in the
Metropolitan Area of Buenos Aires.
* Chile. Telefonica Movil, a subsidiary of CTC Chile and managed by
Telefonica Moviles, ended last year with more than 2.27 million customers.
After this operation, the Telefonica Group will become the Chilean market
leader, with more than 3.57 million customers in a market of 15.4 million
inhabitants.
* Peru. Telefonica Moviles Peru was already leader in the Peruvian market
(with more than 1.5 million customers at end-2003), but will be even more so
thanks to this transaction. Together with the operator it is acquiring, it
has a total of more than 2.14 million customers in a market with a total
population of 27.3 million.
The company acquires a strong footprint in key markets in the region in which it
was not present before.
* Venezuela. Telefonica Moviles will become the leader of the Venezuelan
market, with more than 3.3 million customers in a market with a total of 24
million inhabitants.
* Colombia. It acquires Colombia's number two operator, with nearly 2
million customers, giving it a 32% share of a market with a population of
40.3 million.
* Ecuador. It acquires Ecuador's second largest wireless operator, with
816,000 customers and a 35% share of a market with a total of 13.2 million
inhabitants.
* Uruguay. It becomes Uruguay's number two operator, with 146,000 customers,
giving it a 30% share of a market with a total of 2.1 million inhabitants.
Lastly, it gives the company a critical mass in the Central America market,
which will be following an integrated management model.
*Panama. It acquires the Panamanian market leader, with 420,000 customers
in a market with 2.8 million inhabitants.
* Nicaragua. It becomes leader of the Nicaraguan market by acquiring an
operator with 229,000 customers in a market witha total of 2.9 million
inhabitants.
* Guatemala. Telefonica Moviles was already present in Guatemala, through a
subsidiary with 157,000 customers. Now it will have 409,000 in a market with
a total of 11.5 million inhabitants.
* El Salvador. Telefonica Moviles ended 2003 with 248,000 customers in El
Salvador, ranking second in a market with a total of 6.6 million
inhabitants.
Para mas informacion / For further information
Direccion de Comunicacion Corporativa Tel: +34 91 584 09 20
Press Office Fax: +34 91 532 71 18
Gran Via, 28 - 3 Planta e-mail: prensa@telefonica.es
28013 - MADRID http://www.telefonica.es/saladeprensa
This information is provided by RNS
The company news service from the London Stock Exchange
END
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